Page 3 of 5 CHINA'S DOLLAR MILLSTONE, Part 3 History of monetary imperialism
By Henry C K Liu
circulated. By prohibiting the acceptance of such privately issued token
coinages and by issuing sufficient amounts of official divisional coins, the
imperial treasurer managed to regain control of the monetary system before the
end of 1848.
Latin Monetary Union
The US Civil War (1861-65) led to demonetization of silver in the US and the
rise of the Republican Party of big finance. After blocking the Silver
Republicans from control of the party, the Grand Old Party established the gold
standard and became closely linked to British banking interests and shifted the
preserved union further from its founding focus of popular democracy.
As the US Civil War began to exercise upward pressure on the
market price of silver, Second Empire France (1852-70) under Napoleon III
launched a broad initiative to create monetary union in Europe based on
standardized silver coinage. It came to be called the Latin Monetary Union
(LMU), a forerunner of today's euro, which was established by the 1992
Maastricht Treaty on European Economic and Monetary Union. The LMU came into
being in 1865 between France, Italy, Belgium and Switzerland, setting the
silver/gold monetary ratio at 15.5/1. To conform to union standard, the
alloy/silver content in the French franc was increased from 1/10 to 1/6.
Thereafter silver and gold coins of LMU member countries were accepted as legal
tender in the whole union but token coins were legal only within countries of
origin. Greece joined the LMU in 1868, but Scandinavian countries withdrew in
1870 as a result of the Franco-Prussian War. Other countries fixed their
coinage to LMU standard without formal membership.
By 1873, the relatively high market value of silver in relation to gold in
Europe engineered by Britain's overvalue of the monetary value of gold in
England caused a wave of conversion from silver to gold at the LMU monetary
rate of 15.5 ounces of silver to one of gold for easy profit by shipping the
gold to England for silver to return to Europe to buy more gold to ship to
England. In 1873, 154 million francs were exchanged for gold for export to
England, over five times the amount exchanged in the previous year.
Fearing that a massive influx of silver coinage to Europe coupled with a
massive outflow of gold to Britain would destroy bimetallism, the LMU member
nations agreed in Paris on January 30, 1874, to limit the free conversion of
silver temporarily.
By 1878, with no stabilization in the commercial price of silver in sight,
minting of silver coinage was suspended entirely. From 1873 onwards, the LMU
was on a de facto gold standard under British monetary pressure. The LMU was
finally disbanded in 1927 since the gold standard had made it superfluous. Two
years later, the gold standard caused the crash of 1929 and brought on the
Great Depression and eventually World War l. Switzerland, a neutral nation
still with honest banking, continued to mint Swiss silver and gold coins set to
the LMU bimetal standard until 1967.
The silver/gold bimetal standard adopted by the LMU at first required little
government intervention in foreign exchange markets beyond setting commonly
agreed upon monetary standards among member states. This created a direct
conflict with British strategy to demonetize silver through the overvaluing of
the monetary ratio of gold to silver. After enough gold had flowed into
England, she began, as planned, to use the gold standard to finance the
expansion of the British Empire by expanding pound sterling money supply
without destabilizing international exchange rates. The LMU was standing in the
way of this strategy by keeping bimetallism operating.
England needed to destroy the LMU by causing the commercial price of silver in
Europe to rise against gold and above the monetary silver/gold ratio set by the
LMU bimetal regime, making seignoriage costly to LMU member governments.
French Second Empire
The French economy modernized during the Second Empire (1852-70) under Napoleon
III (1808-73), the bourgeois emperor who fashioned himself as a reformer and
social engineer. The industrialization of France during this period was
supported at first by both big business and workers. Yet Napoleon III mongered
fear of social radicalism where his heroic uncle promised the vision of a new
world order. Architecturally, he resurrected the baroque style of the
counter-reformation and infested it with the cultural obesity of vulgarity and
ostentatious exhibitionism of the Second Empire. Bonapartism, militarism,
clericalism, conservatism and liberalism were incorporated superficially in the
new bourgeois political culture. Napoleon III faced a delicate balancing act
between the legitimacy conferred by parliamentary liberalism and the need to
maintain a police state to control opposition. Napoleon III's populist
authoritarian style of empty substance, both political and esthetical, would
since be imitated by every subsequent pint-size dictator.
Some of the supporters of the Second Empire were Saint-Simonians who described
Napoleon III as the "socialist emperor". Saint-Simonians founded a new type of
banking institution, in the form of Credit Mobilier, which sold stock to the
public then used the money raised to invest in industrial enterprises in
France. This sparked a period of rapid economic development and became the
model for investment banking in modern times. The discovery of gold in
California in 1849 and in Australia soon afterwards greatly increased money
supply in Europe, which fitted in with the rise of new credit institutions. The
new investment banks built large-scale projects such as the Suez Canal at first
through state-owned enterprises. With the appearance of private banking, large
corporations followed to mobilize capital to build rail roads, the new
transportation system that allowed development of landed interior, breaking the
trade monopoly of coastal cities.
In 1863, a new law of limited liability was proclaimed by which a stockholder
would risk only the par value of his stock regardless of the scale of
insolvency and outstanding debt carried by the company. The public, even those
with no skill in business and finance, could now invest in enterprises that
could operate at a scale beyond what individual shareowners could otherwise do
separately. Financiers who were skilled in handling money, credit and
securities assumed a new prominence in society. Some became super rich to rival
dukes and princes of the feudal age. Industrial growth was accompanied by a
decline in deep-rooted morals. The purpose of life transformed into a
single-minded quest for easy money through speculation.
French capital went overseas to develop colonies. In the US, it took the form
of Credit Mobilier of America, the builder of the Union Pacific Railroad, which
was later engulfed in a major scandal involving the bribing of members of
congress with company stocks. The investment company charge $94 million for
construction that cost less than $50 million to pay dividends of 348%, a
hundred times more than convention. Four merchants with names that history
would immortalize: Leland Stanford (Stanford University), Collins P Huntington,
Charles Crocker (Crocker National Bank) and Mark Hopkins (Mark Hopkins Hotel in
San Francisco) were part of Credit Mobilier of America.
Conditions in the second half of the 19th century were favorable for industrial
expansion due to a confluence of factors. Technology took a big leap forward
from a sharp increase of the money supply to turn an eruption of scientific
discoveries into new industrial enterprises. The gold rush in California, and
later Australia, increased the global money supply operating under the gold
standard. The steady rise of prices caused by the increase of the money supply
encouraged the forming of joint stock companies that provided respectable
returns and prospered from domestic and overseas investments.
In France, the mileage of railways increased from 3,000 to 16,000 kilometers
during the 1850s, and this growth of a new form of land transportation allowed
inland mines and factories to operate at higher rates of productivity,
benefiting continental powers, while new iron steamships fueled by coal
replaced wooden sail ships. Between 1859 and 1869, a French joint stock company
with the government as the major share owner built the Suez Canal, opening a
new chapter in global transportation and trade with Asia.
French capitalism and imperialism
The connection of global finance with imperialistic expansion made Britain into
a superpower even before the railway age because of the long coastline of the
island nation. Following Britain's example, France under Napoleon III adopted
free trade in 1860 and took steps to establish an empire in Indochina.
In 1680, the French East India Company, which had been chartered by Louis XIV
in 1664 to compete with its British and Dutch counterparts, opened a trading
post in Pho Hien. In 1858, Napoleon III launched a punitive naval expedition
against the Vietnam kingdom with the pretext of punishing Buddhist Vietnamese
for their resistance to French Catholic missionaries and forced the Vietnam
king to accept a French presence in the country. An important factor in his
decision was the belief that France risked becoming a second-rate power by not
expanding its influence in East Asia.
Also, the idea that France had a civilizing mission spreading beyond Europe was
in the French psyche. This eventually led to a full-out invasion in 1861. By
1862, victory in war created the French Empire in Indochina with a federation
of four protectorates (Tonkin, Annam, Cambodia and Laos) and one directly-ruled
colony (Cochin-China), with Nanoi as capital. Three ports were opened
exclusively to French trade, with free passage of French warships up river,
freedom of action for French missionaries. France received a large war
indemnity.
In China, France took part in the Second Opium War in support of Britain, and
in 1860 French troops entered Peking alongside British troops. China was forced
to concede more trading rights, allow freedom of navigation of the Yangtze
River, permit Christian missionaries to operate on Chinese soil, and give
France and Britain huge war indemnities. This, combined with the intervention
in Vietnam, set the stage for further French influence in China leading up to a
sphere of influence over parts of southern China.
In 1866, French naval troops launched a failed attack on Korea in response to
the execution of French missionaries, which resulted in the eclipse of French
influence in the region. In 1867, a French military mission to Japan was sent,
which played a key role in modernizing the troops of the Shogun Tokugawa
Yoshinobu, and even participated on his side against Imperial troops during the
Boshin war.
In Europe, the Franco-Prussian War (1870-71) broke out over the issue of a
German Hohenzollern prince for the vacant Spanish throne, a vestige of the
Holly Roman Empire, following the deposition of Isabella II in 1868 against a
background of historic hostility dating back to the defeat of Napoleon I at
Waterloo by a British-Prussian coalition. The war gave Britain an opening to
force the demonetization of silver in Europe via its support of Prussia, whose
Crown Prince was married to a princess daughter of Queen Victoria. The liberal
democratic attempt to unify Germany had failed along with the 1848 democratic
revolutions. Prussian victory over France of Napoleon III paved the way for
German unification on January 23, 1871 through conservative politics of blood
and iron engineered by Otto von Bismarck, the welfare statesman who gladly paid
the price of demonetizing silver to buy British acquiescence. A unified Germany
would rise to challenge British hegemony, resulting in World War l in 1914.
The Paris Commune of 1871
The Second Empire political culture was a mixed bag of Bonapartism,
adventurism, militarism, expansionism, colonialism, clericalism, conservatism
and liberalism, particularly in trade and finance. It could only be sustained
by victory in foreign wars. The Franco-Prussian War was France's response to a
rising German challenge against French hegemony in continental Europe. The fate
of the Second Empire depended on a continuing train of victories in foreign
war, which was derailed by the better-led Prussian army.
On September 4, 1870, two days after Napoleon III surrendered to the Prussian
army at the disastrous Battle of Sedan and allowed himself to be taken
prisoner, the French emperor was deposed by republican forces in Paris. The end
to the Second Empire was proclaimed along with the creation of the Third
Republic of France headed by Louis-Adolphe Thiers.
On March 3, one month after the signing of the armistice with Germany by the
new Third Republic, and 70 days before the official end to the war, German
troops marched into a Paris of empty streets and shuttered windows, shut down
in silent protest by the indignant people of Paris. The Parisians elected a
municipal council - the Paris Commune - consisting of moderate republicans,
Proudhon anarchists, Blanqui putschists and Marxist worker association members.
On March 18, to regain control of Paris from Communards, Thiers attempted to
seize the cannons of the National Guard, an armed militia of some 260
battalions organized earlier by the fallen government of the Second Empire to
help defend Paris against the Prussian siege in the last days of the disastrous
Franco-Prussian War, and to use them against the Communards.
But the attempt was foiled by the Women of Montmartre who appealed to
government soldiers, many of whom refused to fire on the people of Paris and
turned their muskets against Third Republic government forces in a gesture of
solidarity with the Commune. Within hours Paris was in a state of insurrection,
and the Mairies of many arrondisements in the capital came under the control of
the National Guard. During these feverish hours, an angry mob seized two
commanding government generals, one of whom having been involved in trying to
capture the cannons against the people, and summarily executed them against the
wall of a garden in Montmartre. The firing squad included members of the
National Guard as well as disgruntled government troops.
Thiers and his provincial government fled to Versailles to join the National
Assembly under a majority of Monarchists from previous elections. The Central
Committee of the National Guard occupied the abandoned Hotel de Ville and
announced preparations for new municipal elections. On March 26, the left
coalition gained enough votes to establish a socialist-oriented "Commune" -
which lasted until May 28. On March 28, the Commune installed itself at the
Hotel de Ville, and for the next two months ran Paris to implement a program of
social reform while fending off a growing siege from the Versaillais, who
advanced closer and closer in a singularly brutal war fought on the western
edges of the capital.
During its short reign, the Paris Commune proclaimed the separation of church
and state and the nationalization of church property. On April 8, 1871, it
removed all representations of religion from the schools of Paris. The
Communards tried to introduce a series of radical social measures, such as
separation of church and state, establishing a lay education system, opening
professional education for women, provision of pensions to unmarried women
workers, and abolition of night-work for bakers.
On April 11, government troops sent by Thiers began a new siege of Paris.
Intense fighting continued into May. After the official end to the war with
Prussia on May 10, government troops, free from confronting a victorious enemy
that their former emperor had surrendered to, broke through the people's
defense and entered Paris on May 21, and for eight days they overwhelmed
Communard resistance street by street. This period was known in history as la
semaine sanglante - "the bloody week". In an orgy of reprisals, up to
20,000 workers and peasants, including children, were killed by a French army
under the direction of its most senior generals that had not shown similar elan
against foreign enemy soldiers in a foreign war.
Many have since viewed the Paris Commune as a monument of struggle for
liberation that provided a symbolic model for a political system based on
grass-root participatory democracy. Several Chinese revolutionaries, such as
Zhou Enlai and Deng Xiaoping, as young students in France in 1920 and inspired
by the Paris Commune, formed the nucleus of what later became the Communist
Party of China.
The collapse of the Paris Commune was another disappointment on top of the
failed revolutions of 1848 for revolutionaries worldwide, including Marx and
Engels. Reactionary hostility to revolution helped elect to the new National
Assembly delegates close to the church and in favor of restoring the monarchy,
and in 1873 a monarchist majority forced Thiers to resign. However, with
monarchists weakened by internal factional division, moderate Republicans won
enough support in France's parliament to frustrate monarchist aims, and the
Third French Republic was born in 1879 to survive until 1940.
Marx and class struggle
After the failures of the democratic revolutions of 1848, socialist movements
went into abeyance for two decades, until Karl Marx published his Das Kapital
in 1867 (first English translation was in 1887, four years after his death,
with Volume II and III, ed. by Engels 1884-94, English translation 1907-9). The
manuscript for the fourth volume was edited by Karl Kautsky and published in
German as Theroien uber den Mehrwert (three parts, 1905-10). The full
English translation of the first part, A History of Economic Theories,
was not published until 1952. Selected translations were published as Theories
of Surplus Value in 1951. Yet the spirit of 1848 echoed around the
world among the oppressed.
Marx rejected utopian socialism and introduced scientific socialism. Louis
Blanc (1811-82), in his Organization du Travail, published 1840, from
which sprung the famous "from each according to his ability, to each according
to his needs", advocated workers cooperatives supported by the state, provided
a link between utopian and scientific socialism. Breaking with the tradition of
natural rights as a basis for reform, Marx invoked "inevitable" laws of
historical premises. Through dialectic materialism, which presumes the primacy
of economic determinants in history, the premise of class struggle holds that a
specific class can rule only as long as it represents the productive forces of
society, and from this historical process, a classless society would eventually
emerge.
Class struggle has nothing to do with promoting hatred between classes, as
capitalist propaganda fear-mongering would have the world believe. Class
struggle leads to the demise of capitalism out of a scientific historical
process by the nature of economic
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