# Capitalist Crisis, Colonialism and Imperialism

History II · Contemporary History · https://tryals.app/learn/history-ii/capitalist-crisis-colonialism-and-imperialism

## Where the Money Actually Went

The long expansion broke in **1873**. Banking crashes hit Vienna and New York. This began the **Long Depression** (1873–1896).

Output still grew, but **prices** fell. Three main responses followed:

* **Protection**: tariffs returned across Europe, though Britain remained an exception.
* **Concentration**: cartels formed in Germany, and trusts arose in the United States.
* **Second Industrial Revolution**: heavy industry, chemicals and electricity expanded rapidly.

Alongside these shifts came the **New Imperialism**. Between 1870 and 1914, European powers seized nearly all of Africa and large parts of the South Pacific.

Several thinkers proposed explanations:

| Author | Date | Mechanism proposed |
|---|---|---|
| Hobson | 1902 | Surplus capital seeking overseas outlets |
| Lenin | 1916 | Monopoly finance capital |
| Gallagher & Robinson | 1953 | Crises on the periphery pulling in states |
| Cain & Hopkins | 1980s | **Gentlemanly** capitalism led by the City |

However, British capital mainly flowed into the United States, Canada, Australia and Argentina. Britain often preferred **informal** rule, intervening directly only to secure routes to India.

Colonial rule caused immense violence. Leopold II ran the **Congo Free State** from 1885 until Belgium annexed it in 1908. Germany also conducted a brutal genocide against the **Herero and Nama**.

> **Common pitfall:** assuming Hobson and Lenin must be right because empire involved money. Their specific claims about capital flows are largely unproven.

## Practice questions

10 of this lesson's 15 practice questions, with answers. The full set is in the app.

### 1. If imperialism were driven by surplus capital seeking outlets, British investment should have flowed into newly annexed tropical colonies. It went mostly to the United States, Canada, Australia and Argentina. What follows?

A. The Scramble for Africa was driven solely by prestige, lacking an economic basis
B. Colonies generated immediate surpluses, removing the need for external financing
C. The Long Depression halted British overseas investment before colonies were funded
D. Hobson’s predicted mechanism made claims that the actual capital flows contradict

**Answer:** D. Hobson’s predicted mechanism made claims that the actual capital flows contradict

**Why:** The test is a fair one because Hobson made a claim about flows, not merely about motives. Capital went where railways were being built under reliable law, which was mostly outside the new tropical empire. That contemporaries believed the theory still matters, belief shaped policy, but belief is not the mechanism the theory proposed.

Page: https://tryals.app/practice/history-ii/capitalist-crisis-colonialism-and-imperialism/if-imperialism-were-driven-by-surplus-capital-seeking-outlets

### 2. Which statements about the Long Depression of roughly 1873 to 1896 are accurate?

A. Output in most industrial economies continued to grow
B. Industrial production collapsed across Europe for two decades
C. It began with financial crashes in Vienna and New York in 1873
D. Prices fell across the period in most industrial economies

**Answer:** A. Output in most industrial economies continued to grow; C. It began with financial crashes in Vienna and New York in 1873; D. Prices fell across the period in most industrial economies

**Why:** It was a price depression, not an output depression, which is why the name causes so much confusion. Falling prices squeezed profits and debtors’ creditors in ways that felt catastrophic to producers, and generated tariffs, cartels and a search for secure markets, while the volume of goods produced kept rising.

Page: https://tryals.app/practice/history-ii/capitalist-crisis-colonialism-and-imperialism/which-statements-about-the-long-depression-of-roughly-1873-to-1896

### 3. Britain abandoned free trade along with the other great powers during the tariff revival of the 1870s and 1880s.

**Answer:** False

**Why:** **False.** Germany raised tariffs in 1879, France with the Méline tariff of 1892, and the United States repeatedly; Britain did not, and held to free trade until the 1930s. That divergence is itself an argument used by historians who see British imperial policy as driven by finance and services rather than by protecting manufacturers.

Page: https://tryals.app/practice/history-ii/capitalist-crisis-colonialism-and-imperialism/britain-abandoned-free-trade-along-with-the-other-great-powers-during

### 4. Complete the account of the Second Industrial Revolution.

**Answer:** The new leading sectors were steel, chemicals, **electricity** and oil, and they required large capital and trained **scientists** rather than ingenious artisans. Germany and the **United States** overtook Britain in these industries. Firms concentrated into cartels and **trusts**, often tied closely to investment banks.

**Why:** The shift in what an industry requires is what redistributes leadership. Britain’s advantage lay in accumulated craft skill and early machinery; the new sectors rewarded laboratories, technical education and banks willing to fund long projects, all of which Germany had built deliberately in the previous thirty years.

Page: https://tryals.app/practice/history-ii/capitalist-crisis-colonialism-and-imperialism/complete-the-account-of-the-second-industrial-revolution

### 5. Match each writer to the mechanism of imperialism they proposed.

**Answer:**

- Hobson → Under-consumption at home and surplus capital abroad
- Lenin → Monopoly finance capital at capitalism’s highest stage
- Schumpeter → An atavistic warrior disposition among old elites
- Robinson and Gallagher → Peripheral crises drawing in reluctant governments

**Why:** Schumpeter is the odd one out and the most easily forgotten: his claim is that imperialism is not capitalist at all but a hangover from aristocratic and military castes that capitalism had not yet dissolved. It predicts that a fully commercial society would be pacific, a prediction 1914 did not treat kindly.

Page: https://tryals.app/practice/history-ii/capitalist-crisis-colonialism-and-imperialism/match-each-writer-to-the-mechanism-of-imperialism-they-proposed

### 6. Arrange the steps of the Robinson and Gallagher account of British expansion.

**Answer:**

1. Britain prefers informal influence through trade, credit and occasional force
2. A crisis on the periphery threatens the security of that influence
3. Officials in London judge that strategic interests, especially the route to India, are at risk
4. Formal annexation is undertaken as a reluctant solution
5. The new territory is administered at cost with little capital inflow

**Why:** Their thesis is sometimes summarised as informal empire where possible, formal where necessary, and the last step is the evidential sting: territories acquired this way were often expensive and unremunerative, which fits reluctance driven by strategy better than eagerness driven by surplus capital.

Page: https://tryals.app/practice/history-ii/capitalist-crisis-colonialism-and-imperialism/arrange-the-steps-of-the-robinson-and-gallagher-account-of-british

### 7. In which year did J. A. Hobson publish Imperialism: A Study, the work that supplied the surplus-capital theory?

**Answer:** 1902

**Why:** **1902**, written in the aftermath of the South African War, which Hobson had covered as a correspondent and read as a war fought for financiers. Lenin drew on him directly in 1916, an unusual case of a liberal critic supplying the framework for the most influential Marxist account of the subject.

Page: https://tryals.app/practice/history-ii/capitalist-crisis-colonialism-and-imperialism/in-which-year-did-j-a-hobson-publish-imperialism-a-study-the-work

### 8. The theories of Hobson and Lenin were influential on policy and public argument even where their proposed mechanism does not fit the evidence.

**Answer:** True

**Why:** **True**, and the distinction matters. The surplus-capital account shaped how contemporaries and later anti-colonial movements understood empire, and beliefs about motives change what governments do. A historian can therefore treat the theory as an important historical object while judging its central prediction unsupported.

Page: https://tryals.app/practice/history-ii/capitalist-crisis-colonialism-and-imperialism/the-theories-of-hobson-and-lenin-were-influential-on-policy-and

### 9. Cain and Hopkins argue that British imperialism was driven by "gentlemanly capitalism", the City of London and the service sector rather than northern manufacturing. How would you test that claim?

A. Measure whether British industrial output and manufactured exports fell after 1873
B. Assess whether peripheral crises triggered military action over metropolitan demands
C. Compare raw material import values from formal colonies with non-colonial partners
D. Examine who lobbied for expansion, where returns went, and if finance guided policy

**Answer:** D. Examine who lobbied for expansion, where returns went, and if finance guided policy

**Why:** The thesis is testable because it names an interest and a mechanism: if it is right, expansion should track the concerns of finance, insurance and shipping, and policy should side with them when manufacturers dissent. Critics reply that City interests were themselves divided, and that the "gentlemanly" category blurs distinctions between very different kinds of wealth.

Page: https://tryals.app/practice/history-ii/capitalist-crisis-colonialism-and-imperialism/cain-and-hopkins-argue-that-british-imperialism-was-driven-by

### 10. The Long Depression (1873–1896) was marked by falling price levels rather than a collapse in overall output. What does this distinction reveal about the economic restructuring that followed?

A. Deflation squeezed profits, prompting cartelisation and protective tariffs
B. Falling output forced states to dismantle domestic industrial monopolies
C. Slumping productivity drove capital entirely into formal tropical colonies
D. Collapsing production required Britain to abandon its free-trade policy

**Answer:** A. Deflation squeezed profits, prompting cartelisation and protective tariffs

**Why:** Price declines eroded profit margins despite rising volumes, incentivising market concentration and defensive trade barriers. Conflating deflation with a decline in output obscures why industrial rationalisation occurred, while Britain uniquely retained free trade.

Page: https://tryals.app/practice/history-ii/capitalist-crisis-colonialism-and-imperialism/the-long-depression-1873-1896-was-marked-by-falling-price-levels