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PRICE ONE PENNY 
 
 The 
 
 German 
 
 BY 
 
 J. A-jHOBSON 
 
 With an Introduction by 
 The Right Hon. the EARL LOREBURN 
 
 Published by the COBDEN CLUB, Broadway Court, 
 
 Westminster, S.W., and 
 
 Printed by CA^SELL AND COMPANY, LTD 
 
 La Belle Sauvage, Ludgate Hill, London, E.C. 
 1913 
 
CoBDEN Club Publications. 
 
 The Revolt in Canada a^^ainst the New Feudalism. 
 
 Tariff History from the Revision of 1907 to the Uprising 
 of the Farmers and Graingrowers of the West in 19 10. 
 By Edward Porritt. Price is. net, bound in red cloth 
 and fully indexed. 
 
 The Collapse of Tariff Reform : Mr. Chamberlain's Case 
 Exposed. By J. M. Robertson, M.P., with an Introduction 
 by the Right Hon. Russell Rea, M.P. Price is. net, 
 bound in red cloth and fully indexed. 
 
 My '*Two Capitals" Theory: An Interpretation. By 
 
 Adam Smith, Redivivus. Price id. 
 
 The Revolt in Canada against Protection. Price id. 
 
 The Tariff Swindle. By John M. Robertson, M.P. 
 Price 6d. net. 
 
THE 
 
 GERMAN PANIC 
 
 BY 
 
 J. A. HOBSON 
 
 With an Introduction by 
 The Right Hon. the EARL LOREBURN 
 
 Published by the COBDEN CLUB, Broadway Court, 
 
 Westminster, S.W., and 
 
 Printed by CASSELL & COMPANY, LTD 
 
 La Belle Sauvage, Ludgate Hill, London, E.G. 
 1913 
 

 INTRODUCTION 
 
 The Cobden Club desire me to write a preface to this 
 interesting essay of Mr. Hobson. Some part of it seems 
 to call in question the recent policy of the British Govern- 
 ment, which indeed will be finally judged only when, in 
 time to come, the facts are all known and motives both at 
 home and abroad are fully disclosed. In any case, com- 
 ment or criticism on this part of the subject would be 
 obviously improper from one who has been a member of 
 the Cabinet. I wish very heartily to acknowledge the 
 fidelity with which Mr. Hobson has handled some of the 
 permanent difficulties which must always beset any Ad- 
 ministration in this country under the conditions of to-day. 
 The zeal of the Naval and Military Services in all 
 countries, whose duty it is to see that nations are not 
 caught unprepared, the pressure of inventors and con- 
 tractors for the engines and materials of war, of the Press 
 which they control, and of the Press which neither they 
 nor anyone else can control, are constant influences in 
 producing international unrest. 
 
 But of themselves they do not account for the uneasy 
 feeling which has existed for some time about our position 
 with Germany. 
 
 To the average Englishman it is a puzzle. He knows 
 little about Germany. He likes their Emperor, and has 
 no ill-will against Germans. The last thing he wants is 
 
a quarrel with them. He does not understand why they 
 think the British fleet is a menace to them, seeing that it 
 has never done them any injury for generations when 
 they had no fleet at all. But he is alarmed at the growth 
 of the German Navy, coupled with the enormous military 
 strength of that country. And many recall with some 
 misgivings language used in high quarters at the time 
 of the Jameson Raid, and the practical refusal in 1907 at 
 the Hague of Sir H. Campbell-Bannerman's overtures for 
 naval disarmament, together with other incidents, such as 
 the dispatch of a warship to Agadir, of which the full 
 history has still to be written. 
 
 This is no doubt a very short view, and very incom- 
 plete. We shall never take a sounder one till we realise 
 what our kinsmen on the other side of the North Sea 
 really feel and think. They have a history, not like 
 ours, of long security in our own island, of vast ex- 
 pansion, of world-wide empire, of undisturbed develop- 
 ment in the arts of peace, but a record of repeated 
 conquest and devastation in their own fatherland, 
 accompanied by scenes of misery and famine and 
 humiliation such as few civilised countries have experi- 
 enced. In those awful times they regarded France and 
 Russia as the principal authors of their sufferings. 
 
 I do not say that the German Sovereigns of those times 
 were blameless. Like other rulers, they have not refrained 
 from conquest. But there have been no such scenes ever 
 enacted by them in other countries, and the German people 
 themselves have not been aggressive. What their fore- 
 fathers went through has never been forgotten, and when 
 they consolidated their Empire in 187 1, though they found 
 the path of colonisation largely closed to them by earlier 
 occupation, yet they realised a comparative security 
 against any repetition of the calamities they had endured 
 
at home. It was a security only on condition of perpetual 
 vigilance. France and Russia were still on their borders. 
 Is it wonderful that the policy of Germany has been 
 directed toward obtaining safety by alliances, by arma- 
 ments, by understandings, and that they should be 
 peculiarly sensitive in regard to anything which seems to 
 threaten them with a coalition of unfriendly nations? 
 
 But, it will be said, why should these memories produce 
 any ill-feeling among Germans against Great Britain? 
 British power has never been used against them. We 
 fought alongside of Prussia when she was in desperate 
 straits under Frederic the Great. We fought for and 
 with Germans in their deadly struggle against Napoleon. 
 It is true the outcome of those wars was a great enlarge- 
 ment of the British Empire, as well as an immense 
 national debt, by w-hich we are burdened to this day, but 
 we took nothing from Germany, and even down to the 
 days of Bismarck Germans were averse to the acquisition 
 of colonies for themselves. It is a sore point among 
 educated Englishmen that there should be, as there has 
 been for a couple of generations, a school in Germany 
 who maintain that we take pleasure in seeing our neigh- 
 bours engaged in war, and seek to make a profit out of it 
 for ourselves. That is quite untrue historically, and is 
 most untrue to-day. But that again is only a minor 
 source of whatever ill-will there may be against us among 
 Germans. The true source is that they believe there is 
 some secret engagement or understanding between Great 
 Britain and France, similar to the avowed alliance between 
 France and Russia, which is supposed to involve our 
 giving military and naval assistance in the event of a 
 Franco-German war. Sir Edward Grey has categorically 
 denied that there is anything of the kind, and the Prime 
 Minister has repeated the assurance. The impolicy of any 
 
6 
 
 act of aggression on our part against Germany is so 
 glaring that the denial might well have been credited. 
 The impolicy of any German aggression against us is so 
 glaring that we might well believe their repeated repudia- 
 tions of any such designs. Both suspicions are, I firmly 
 believe, utterly without foundation, but the two taken 
 together are mainly accountable for the feeling that has 
 led to these inordinate naval armaments. No doubt there 
 have been mischief makers here and elsewhere to inflame 
 differences and misrepresent facts. They have tried to 
 make things worse. 
 
 However keenly we may appreciate the difficulties of 
 Germany, they ought not to blind any fair-minded man 
 to those of France. It is no longer the Napoleonic nation 
 against which our forefathers fought. The generation of 
 Frenchmen now living have not been responsible for any 
 interruption of peace in Europe. They, like the rest of 
 us, suffer for the faults of their forefathers. And it has 
 been a hard lot to live in fear of some renewed humilia- 
 tion or of another great war such as overwhelmed them 
 between forty and fifty years ago under the incompetent 
 and unprincipled tyranny to which they were then subject. 
 Since we came to an accommodation with France in 1904, 
 and with Russia a few years later, much misunderstand- 
 ing and not a few difficulties have been removed, owing 
 to the simple fact that they have been approached with a 
 desire for good relations upon both sides, instead of in a 
 spirit of suppressed antagonism. The spirit is everything. 
 Neither Germany nor any other nation can complain of 
 our establishing good relations with other Powers except 
 upon one of two grounds : either that they imply an 
 unfriendly attitude to herself, or that we refuse to establish 
 equally good relations with her should she desire it. 
 
 Now, I believe that in a little time, with patience and 
 
7 
 
 good sense, it will become clear that neither of these two 
 grounds has any existence. The steadying influence of 
 public opinion in this country will wear down the noisy 
 and often interested clamour of those who seem almost 
 to court a quarrel to-day, just as they courted other 
 quarrels in past time. But at this moment Europe is 
 making large additions to armaments already enormous. 
 The French President, speaking in reference to the con- 
 tingency of war, expressed confidence in the fidelity of 
 alliances and friendships. And Germans think we are 
 encouraging others against them. 
 
 Nothing is more to be desired than a clearing up of our 
 own attitude. That any British Government would be 
 so guilty toward our own country as to take up arms in a 
 foreign quarrel is more than I can believe. To say so 
 appears to me a duty, not less to ourselves than to 
 Continental Powers. The present generation, both in 
 France and in Germany, are heirs not only to the great 
 patrimony of their ancestors, but also to unhappy 
 memories. Most wars are soon forgotten and forgiven, 
 but memories of their wars have not passed aw^ay. We 
 had no part in the tragedy that led to them. We must 
 have no part in any second tragedy to which they might 
 possibly give rise. It would be a wrong to France if she 
 were left to think otherwise, and the shallow policy of 
 letting popular misapprehensions drift, which seems to 
 be acceptable to some writers, ought to be condemned by 
 every man. We have no right to allow expectations to 
 be formed which public opinion will not permit to be 
 realised. 
 
 Happily, w^e are on friendly terms with France, which 
 can best be preserved by frankness. We are, I hope, 
 also on friendly terms with Germany, which can best be 
 maintained in the same way. A good deal of well-meant 
 
8 
 
 ingenuity has been expended in devising forms of words 
 to express our good will or to define our relations as if 
 by treaty or exchange of notes, so as to banish these 
 mutually mischievous suspicions. I do not believe con- 
 fidence between nations is very much advanced by a verbal 
 formula. It requires also a little time and experience. 
 Quite lately we began, and are still continuing, a series 
 of friendly negotiations in common with Germany with 
 reference to the Balkan settlement. Let them go on and 
 prosper. We have some points of difference about such 
 things as the Bagdad Railway. It was by negotiations 
 about particular subjects in difference that we began our 
 good understanding with France and Russia. We can 
 enter upon that path, which often leads a long way, with 
 Germany also. When both nations have learned that 
 they are dealing not with a tricky and selfish adversary, 
 but with a straightforward and reasonable set of men 
 who can see other points of view besides their own, and 
 wish each other no harm, then a foundation of confidence 
 is laid. And when, after a little time, we begin to find 
 that Germany does not in fact act aggressively, and they 
 begin to find that we also try not to make but to smooth 
 difficulties, as I am sure would be the case on both sides 
 if we once began, then the unnatural atmosphere of 
 suspicion would be dissipated. Only do let public men in 
 the meantime refrain from provocative speeches, and our 
 friends in the Press realise their responsibility. Time 
 will show that Germans have no aggressive designs 
 against us, nor we against them ; and then foolish people 
 will cease to talk of a future war between us which will 
 never take place. 
 
 LOREBURN. 
 
THE GERMAN PANIC 
 
 For some time past a high tension of feeling, raised for 
 short periods almost to the panic point, has prevailed in 
 certain sections of our people regarding our relations with 
 Germany. The existence of this feeling among the more 
 excitable members of every class is easily intelligible. 
 There is a persistent tendency of the patriotic sentiment 
 to seek nourishment and self-expression in the real or 
 feigned opposition of our country to some other country. 
 This exclusive aspect of patriotism easily induces the 
 acceptance of any strong suggestion that the interests of 
 another nation are opposed to ours, that their disposition 
 and policy are hostile to us, and that we ought to consider 
 an attack by them upon some vital interest of our nation 
 a probable and imminent event. History shows this to be 
 a pretty constant state of mind in all nations endowed 
 with "a proper sense of pride" and having "great pos- 
 sessions." The shelter of her insularity no doubt gave 
 Great Britain for some centuries some immunity from the 
 fiercest inroads of this military passion. Tolerably secure 
 from fears of invasion and substantially self-supporting, 
 she was enabled to direct a larger share of her thought, 
 feeling and activity to those works of internal development 
 which are the wholesome food of patriotism than was the 
 case with Continental nations not so fortunately placed. 
 The acquisition of a gigantic widely dispersed empire 
 
and the increasing dependence of our nation upon foreign 
 commerce have, however, in recent generations immersed 
 us ever more deeply in the sea of international politics, 
 with its difficult and shifting currents and its tempestuous 
 alarms. Whatever views we may hold of the gains, 
 material or moral, which accrue to us or to "the cause of 
 civilisation " from the acquisition and maintenance of 
 "Greater Britain," we must recognise in this imperial 
 career a natural source of hostility of feelings between 
 us and other nations whose interests or ambitions are 
 limited or thwarted by our success. This assertion is not 
 designed to beg the question whether our great empire, 
 as indeed our great development of foreign trade and 
 economic enterprise, may not be conferring great benefits 
 upon those other nations through participation in the en- 
 larged security, accessibility and wealth which our imperial 
 mission has procured. What is alone germane to my 
 present argument is to insist that, given the ideas and 
 sentiments predominantly active in all nations, our modern 
 position as a world power tends to feed us with constantly 
 recurring fears of impending hostility on the part of 
 nations conceived by themselves and by us as our political 
 or economic rivals. To the irrationality of this sentiment 
 of rivalry I shall revert later. At present I refer to it as 
 an actual factor evoking in our "patriots " a fairly constant 
 feeling of suspicion directed now towards this, now towards 
 that, foreign nation conceived in the light of a hostile 
 competitor likely to attack or injure us. Accepting, then, 
 the general or widely prevalent belief in our people that 
 our nation is in possession of large valuable "properties," 
 in the shape of overseas territories and markets, of which 
 other "competing" nations would naturally be impelled 
 to dispossess us, if they thought they saw a good oppor- 
 tunity of doing so, we easily understand the continual 
 
II 
 
 existence of a state of feeling favourable to a war panic 
 when some particular direction and substance is injected 
 into it. 
 
 Now the history of the nineteenth century furnishes 
 plain instances of such particular directions. France, our 
 "traditional foe," the outstripped rival in our race for 
 empire, was commonly considered to be harbouring in the 
 background of her mind secret designs for our overthrow. 
 In his famous pamphlet, "The Three Panics," Cobden 
 set out in illuminating detail the story of this recurrent 
 madness in the middle of the century. Alike in personal 
 agency and in modes of fictitious agitation, it furnishes 
 an interesting analogy to our present panic. In the earliest 
 of the three fits it was the veteran Duke of Wellington 
 who, in 1847, roused the passion of the nation by his letter 
 upon our "National Defences," setting forth the menace 
 of a French invasion of our southern shore, and staking 
 his authority upon the statement that "there is not a spot 
 upon the coast on which infantry might not be thrown 
 on shore at any time of tide, with any wind and in any 
 weather." In vain all protests from naval men as to the 
 absurdity of the prediction. "The greatest military 
 authority," the more than Lord Roberts of that day, "had 
 proclaimed the country in danger." Ministers then, as 
 now, bowed to the storm. Lord John Russell proposed 
 to raise the income tax from sevenpence to one shilling in 
 order to provide the money for further increased expendi- 
 ture on armaments.* Needless to say, France neither made 
 nor contemplated any move : her expenditure on naval 
 preparations, as Cobden shows, had been actually reduced 
 in the year when the alarm was fabricated. But the panic 
 spirit inhibits memory, and the proved vacuity of the 
 invasion scare of 1847-48 did not prevent its renewal three 
 * Opposition in the House of Commons led to the dropping of the scheme. 
 
years later after the coup d'etat of Louis Napoleon. Fed 
 by the mihtary authorities and an inflammatory Press, 
 in which the Times distinguished itself by violent denun- 
 ciation of the French ruler, the flame of panic was kept 
 ablaze through 1852 and 1853. Statesmen then, as now, 
 easily yielded to the passion instead of bringing their 
 superior knowledge and judgment to its control. Lord 
 Palmerston openly proclaimed his belief that 50,000 or 
 60,000 men could be transported from Cherbourg to our 
 shores in a single night. "Men of the highest political and 
 social rank resigned themselves to the excitement. Two 
 Cabinet Ministers who had gone to their constituents for re- 
 election, on taking office in Lord Aberdeen's Government, 
 were afterwards called on by their opponents in the House 
 to explain the violent language uttered by them at the hust- 
 ings in allusion to the ruler and people of France." It 
 is significant that the classes who best kept their heads 
 were the bankers and merchants of London, who not only 
 convened a meeting of protest in the City, but took the 
 unusual step of dispatching a deputation to assure the 
 Emperor of the French of their pacific sentiments. 
 ^y Nothing happened except a large increase of our ex- 
 penditure on the army and the navy. Nay, within two 
 years a sudden shift in the current of hostile suspicions 
 converted us into the enthusiastic ally of our "natural foe " 
 in the wicked and wasteful war with Russia, the new Power 
 which was henceforth to compete with and for a while to 
 displace France as the object of our national animosity 
 and fear. But suspicion of France was so inveterate a 
 habit that the common enterprise against Russia had no 
 power to stay its early recurrence, and within three years 
 after the Treaty of Paris the third and fiercest of the 
 panics began to spread. Here Sir Charles Napier, a 
 veteran seaman, but with no claim to statesmanship, 
 
13 
 
 took the part of leading professional fanatic. "On 
 his return to the House of Commons," says Cobden, 
 "after being superseded in the command of the Baltic 
 fleet during the Crimean War, he became possessed 
 by a morbid apprehension, amounting almost to a state 
 of monomania, respecting the threatened attitude of France 
 and our insufficient means of defence." The life of the 
 professional fighting man, with its immense habitual 
 activity, tends, perhaps naturally, to some intolerance 
 of temper and an instability of judgment in old age or 
 retirement. The phantom fleet at Cherbourg, French boats 
 taking soundings along our shores, the early preparations 
 for an invasion, were all revived with the requisite minuti^ 
 of fictitious "evidences." The Ministry were once more 
 completely captured. As early as 1858 Sir John Paking- 
 ton. First Lord of the Admiralty, began the tricky process 
 of counting English and French ships, so as to show our 
 dangerous inferiority. Though all the familiar dodges of 
 omissions of subsidiary lines of ships, doctoring of dates, 
 no allowances for superior size and speed, with corre- 
 sponding mis-statements of French vessels, capacities and 
 intentions, were exposed by political critics, the open 
 espousal of the scare spirit by the Government carried all 
 before it. For there was one personal factor in that panic, 
 fortunately without exact parallel in the present case. 
 Lord Palmerston apparently had never dropped his earlier 
 suspicions of French perfidy, and now, as Prime Minister, 
 he threw his full personal force into the panic. The 
 language used by him in the House of Commons in i860, 
 indeed, bears so striking a resemblance to that recently 
 employed by gentlemen, fortunately not so highly placed, 
 as to deserve particular attention by students of the 
 psychology of panics. "The French make no secret of 
 their preparations; but when some well-intentioned gentle- 
 
man asks them if they really mean to invade this country, 
 if they really have any hostile intentions towards us, of 
 course they say, ' Not the least in the world; their feeling 
 is one of perfect sympathy and friendship with us, and that 
 all their preparations are for their own self-advancement.' " 
 
 Again : "Really, sir, it is shutting one's eyes to notori- 
 ous facts to go on contending that the policy of France — 
 of which I certainly do not complain — has not for a great 
 length of time been to get up a navy which shall be equal, 
 if not superior, to our own." When such circumstantial 
 statements were clinched by a practical policy of enhanced 
 taxation and increased expenditure on armaments, how 
 could the popular panic fail to spread ? How conclusive 
 is Cobden's commentary on the result, and how closely 
 relevant to our case to-day! "And did not successive 
 Governments make enormous additions to our Navy Esti- 
 mates? They were in a position to command exclusive 
 information; and was it likely unless they had positive 
 proofs of impending danger that they would have imposed 
 such unnecessary expense on the country? The last appeal 
 was quite irresistible; for the good British public defers 
 with a faith amounting to a superstition to the authority 
 of official men." * 
 
 The language I here italicise is of crucial significance. 
 Lord Palmerston and his Government were in a position 
 to command exclusive information, and the supposition 
 that they possessed it and were acting on it was the single 
 reasonable factor in the panic. But they did not possess 
 such information; they held no "positive proofs of im- 
 pending danger"; they were the light-headed dupes, not 
 so much of misinformation as of false hypotheses and 
 groundless imputation of motives. So soon as true in- 
 formation of the actual facts had time to emerge and 
 * "Political Writings of Richard Cobden," vol. ii. p. 631. 
 
15 
 
 circulate, so soon as the actual tenor of events belied 
 plainly the fictitious preparations and intentions imputed 
 to France, the panic evaporated. But the spirit of sus- 
 picion, fear and jealousy, though allayed, still continued 
 to furnish the raw material of future scares. 'The Franco- 
 German War, indeed, definitely broke the spell which 
 assigned France as our proper and exclusive enemy. The 
 supposed ambitions and plans of Russia began increas- 
 ingly to absorb our attention. For a quarter of a century 
 Russia was the enemy; each of her movements in the 
 Balkans or in Afghanistan was part of a scheme of con- 
 quest in which India was the goal. The name and certain 
 accessories of "Jingoism" date from the organised propa- 
 ganda of the later seventies against Russia. The secret 
 machinations of Russia, her growing military powder, the 
 avowal of her "destiny," her intrigues with frontier states, 
 her cynical disregard of treaty obligations, were all con- 
 vincing testimonies to her rooted hostility towards the 
 British Empire. But while Russia continued formally to 
 occupy the role of leading "villain " in our great patriotic 
 drama until the late nineties, there were various pre- 
 monitory signs of her displacement, first by France, and 
 then by Germany. The active part taken by both these 
 Powers in the great competitive partition of African 
 "spheres of influence" in the middle eighties, and later in 
 the premature allotment of areas .in "dissolving" China, 
 gave several anxious moments to our empire builders. 
 The sudden swift emergence of "the Fashoda incident" in 
 1895, and the German assertion of territorial claims on 
 Kiao-Chau in 1896, following close upon the famous 
 " Kriiger telegram," broke the monopoly of the Russian 
 menace. Though the peril of the Venezuelan affair with 
 the United States passed too quickly for full realisation 
 in the popular mind, it also served to remind us that a 
 
V 
 
 i6 
 
 new nation had ranged herself among the "Great Powers," 
 with poHtical and commercial interests and ambitions no 
 longer confined to her hemisphere, but pressing rapidly 
 into the Pacific, where the rivalry of .Western nations 
 threatened to become most embittered. 
 
 This brief recital of events is necessary in order that 
 we may confront the question, How has it come about that 
 within these last years Germany has more and more 
 absorbed the role of England's "natural enemy"? Now, 
 beginning with the assumption that traditional patriotism 
 desiderates an opponent, it is not difficult to understand 
 the process of selection which has assigned this role to 
 Germany. The growing political and economic strength 
 of Germany has been the most conspicuous and constant 
 feature in European history since 1870. France, with her 
 stationary population, her limited colonial aspirations, her 
 comparatively slight competition with our manufactures 
 and commerce; France, always visibly on the defensive 
 against Germany, ceased to occupy the central place in 
 our suspicions. The Russo-Turkish War showed Russia 
 less powerful as an aggressive force than we expected ; 
 her discomfiture in the conflict with Japan, accompanied 
 by many signs of internal weakness and incapacity, con- 
 tributed to relieve the apprehension with which we had 
 formerly regarded the early moves in her career as an 
 Asiatic Power. Germany, on the other hand, since 1870, 
 has achieved a political solidarity, a military strength, a 
 development of population, internal industry and foreign 
 commerce, which have enabled her to play a part of in- 
 creasing importance in the world of politics and business. 
 In two ways it is suggested that the enlarging career of 
 Germany may, or must, bring her into hostile competition 
 with our interests and aims. Germany, we are told, recog- 
 nises her need of territorial expansion, first in Europe by 
 
17 
 
 the absorption of Holland and Belgium, so as to command 
 the mouths of the Rhine, Meuse and Scheldt, for the 
 protection and furtherance of her commerce, and by the 
 peaceable or forcible annexation of the German portions 
 of Austria; secondly, by the acquisition of overseas coun- 
 tries for colonisation and for markets. Now this expansion 
 of Germany, so runs the contention, must of necessity 
 involve encroachments upon British territory and British 
 commercial interests. Her Continental expansion would 
 involve a European hegemony that would form a basis for 
 acquisitions and compensations in Asia and Africa and a 
 certain absorption of the Dutch colonies. Elsewhere, as 
 in Asia Minor, she would be crossing our communications 
 or pressing on our frontiers. A possibly successful war 
 with France would place her in the position of an in- 
 tolerably powerful neighbour. It is not surprising that 
 those who fashion for themselves with so much confidence 
 the process of German Real Politik should go farther and 
 impute to her the more secret design of invading England, 
 destroying our sea power and capturing our overseas pos- 
 sessions. What otherwise, they ask, can be the meaning 
 of the great efforts at shipbuilding during recent years? 
 And so we are led on to a state of mind which we 
 recognise as a close replica of the French panic of i860. 
 The veteran General, posing as political prophet, the in- 
 flammatory Press, the "services" infecting "society" with 
 the virus of anti-Teutonism, the Foreign Office presumed 
 to possess "positive proofs of impending danger," as in 
 the days of Palmerston, a succession of First Lords of 
 the Admiralty, eager to magnify their office and engaged 
 in continual counting of ships and gesticulating across 
 the seas ! The same extravagant expenditure on arma- 
 ments, the same failure to purchase security, each fresh 
 Dreadnought a fresh feeder of panic. 
 
i8 
 
 The most curious feature of the psychology of such a 
 panic consists in the fact that while its victims confidently 
 claim a power to read the thoughts and intentions of "the 
 enemy," detecting his most secret machinations, they be- 
 tray a complete inability to understand how that "enemy" 
 -must read our thoughts and intentions. Were they not 
 thus restricted in their understanding, they would recog- 
 nise that the panic-monger in Germany could use his 
 imagination to construct a far more specious case for 
 British hostility and British warlike intentions against 
 Germany than our panic-mongers have at their disposal. 
 Let the British panic-monger project his credulous, in- 
 flamed imagination into a German personality. How 
 would the policy of Britain then appear to him ? He 
 would then see Britain watching with suspicious eyes the 
 growing power and economic strength of Germany, resent- 
 ing as an impertinent encroachment upon "our" world 
 markets that increase of her foreign trade which seems 
 to him a necessary provision for her expanding population, 
 thwarting every attempt to secure a share of the few places 
 in "the sun" which remain as yet unclaimed, conspiring 
 with her great hereditary enemies to hem her in, openly 
 menacing the sea-power which has become an unavoidable 
 expense to a nation which is becoming every year increas- 
 ingly dependent upon oversea trade for supplies of foods 
 and materials and for the disposal of her surplus manu- 
 factures. To the German panic-monger, conscious of the 
 perfect innocence of German intentions, how wantonly 
 and brutally aggressive must our recent policy appear. 
 In the entente with France he was convinced that he 
 detected a pledge of military support, and the agreement 
 with Russia — so sharply criticised by many English 
 Liberals — meant in his eyes a malicious determination to 
 break the military and naval power of Germany when a 
 
19 
 
 favourable opportunity for joint action should present 
 itself. Our intervention in the Morocco settlement, in 
 contravention of our free-trading interests, the menacing 
 tone of some of our Ministerial speeches, the impatient, 
 somewhat masterful attitude of our diplomacy, accom- 
 panied by constant comparisons of British and German 
 naval strength, could only appear intelligible on the sup- 
 position that an early attack was contemplated in 
 the event of Germany attempting to build faster than 
 Great Britain thinks she ought to build. "But what a 
 complete falsification of the actual motives and intentions 
 of our policy ! " exclaims our Teutophobe. It does not 
 occur to him that he may be guilty of a tissue of mis- 
 interpretation corresponding closely to that which he 
 detects so clearly in the German Anglophobe; nay, that 
 there is a strong inherent likelihood that a two-sided 
 "panic" may be fashioned out of no more substantial 
 material than such mutual misreading of motives. 
 
 But, it may be objected, is it not a fantastic hypothesis 
 to suppose that the responsible go^'ernors of two great 
 educated civilised nations should so coincide in misrepre- 
 senting facts and in falsifying motives as to enter on a 
 course of policy so costly and so perilous to the existence 
 of the nations committed to their charge ? Is it reason- 
 able to regard the immense financial sacrifices Germany 
 is now undergoing for her naval programme as motived 
 purely by defensive considerations and aiming merely 
 at the possession of a fleet strong enough to protect her 
 growing commerce against the possible aggression of our 
 more numerous and powerful navy? Confident as we 
 are that no idea of such aggressive action could ever enter 
 the mind of any British statesman, it is doubtless difficult 
 for us to conceive that Germans may believe genuinely 
 in its possibility. And yet it ought not to be so difficult. 
 
20 
 
 when it seems so easy for us to impute a precisely similar 
 intention as a clear possibility of German policy. Here 
 we are back once more in the paralysing grip of the 
 psychological fallacy. 
 
 But, once more it will be urged upon us, are there 
 no facts and avowals of hostile intention to justify the 
 imputations of aggressive policy ? We freely admit there 
 are, but it is upon the dimensions and the character of 
 these definitely Jingo ingredients in both nations that we 
 rely for the essential accuracy of our diagnosis of the 
 panic. Although the general bonds of common interest, 
 commercial, financial, moral and intellectual, between the 
 populations of every great civilised State are growing 
 stronger and more numerous all the time, there exists 
 within the body of each nation certain nuclei of thought, 
 sentiment and economic interest in conflict with these 
 harmonising tendencies. Some of these are the poisonous 
 by-products of an imperfectly evolving modern industrial- 
 ism, others are survivors of an obsolescent age of 
 militarism and national isolation. The professions of 
 arms, with the industries subsidiary to their purposes, 
 naturally, though perhaps insensibly, incline to a 
 policy of force. The military and naval services, 
 with their close associations with the aristocratic and 
 the moneyed classes of society, are influences unfavour- 
 able to disarmament, both in the influential circles of 
 politics and diplomacy with which they have close personal 
 relations, and by a certain power which sentimental 
 traditions enable them to exercise upon the mind of the 
 multitude. The services naturally crave activity and are 
 restive under a career of futile preparation. But con- 
 siderably more important, as a direct promoter of dis- 
 cordant feelings between nations, are those businesses 
 engaged in supplyuig instruments of war to Governments. 
 
21 
 
 In each of the "great nations" the amount and the pro- 
 portion of the national expenditure upon armaments have 
 been rapidly increasing within the last generation, and 
 especially within the last decade. Great Britain stands 
 first in the amount of this expenditure, followed closely 
 by Germany and Russia. The recent growth of this 
 expenditure has absorbed an increasing share of the aggre- 
 gate income of our nation, and the proportion of our 
 industrial population engaged in industries dependent 
 upon this expenditure is continually growing. The annual 
 expenditure of a sum considerably over seventy millions,* 
 an increasing proportion of which passes through the 
 hands of a few great shipbuilding and arms manufacturing 
 firms in large and highly lucrative contracts, involves the 
 recognition of a group of well organised business firms 
 consciously dependent for profitable business upon the 
 maintenance of strained relations in foreign affairs. Con- 
 centrated in a few centres of industry, large bodies of 
 workmen find themselves dependent for employment and 
 wages upon the continuation or frequent recurrence of 
 "scares," which maintain their trades. These workmen, 
 as political units, organise in not a few constituencies to 
 bring pressure upon Parliament to maintain the industries 
 which are their livelihood, and help to undermine the 
 sounder principles of public economy among their com- 
 rades in the Trade Union movement and the Labour 
 Party. This danger grows incessantly with the growing 
 magnitude of the expenditure, the profits, and the number 
 of workers employed in making armaments. Though 
 from the business standpoint it is a matter of indifference 
 whether our national apprehensions and suspicions are 
 directed against Germany or some other Power, it is 
 
 * The cost of the Indian army must be added to the sums that figure in 
 our British estimates. 
 
evident that these business pressures will continually tend 
 to maintain and aggravate whatever national animosity 
 happens at the time to be keenest. The increasing millions 
 of money which pass each year through the British and 
 the German treasuries into the accounts of influential and 
 closely organised contracting firms, whose able, well- 
 informed directors can bring powerful influence to bear 
 upon politicians and the press, cannot be considered a 
 negligible factor in the maintenance of the strained 
 situation between England and Germany. Nor can 
 it be considered an unreasonable ground of comment 
 that more than one high official of the Govern- 
 ment departments have on retirement from the service 
 passed over to the directorates of the great contracting 
 firms. 
 
 But the play of these particular professional and com- 
 mercial interests could not suffice to inflame the passions 
 of two great peoples unless they were provided with wide- 
 spread material in the shape of popular misconceptions 
 regarding the political and economic relations between 
 I nations. Recorded history has always falsely over- 
 emphasised the wars and oppositions between nations, 
 ignoring or disparaging the growing contacts which com- 
 merce, travel and mutual aid in all the higher arts of 
 civilisation have been establishing and strengthening for 
 so many centuries. States and nations are still regarded 
 as naturally opposed alike in their political and economic 
 activities. A false philosophy of history, claiming support 
 from misapplied biology, has imposed on a large semi- 
 educated public the belief that a military and commercial 
 struggle for existence and for predominance is a whole- 
 some necessity in national life, that the limits of the area 
 of human co-operation are set by the conception of the 
 modern State or Empire, that a peaceful federation or 
 
23 
 
 society of civilised nations is an impracticable ideal, and 
 that in any case a nation like Germany, proudly conscious 
 of her rising power, will not consent to forgo the realisa- 
 tion of her large dreams of empire and hegemony in 
 order to take part in any such pacific union. The exist- 
 ence of this disbelief in the possibility or desirability of 
 stable friendly relations between nations is a constant 
 source of danger. It pervades and dominates the aristo- 
 cratic and traditionally fighting classes in each nation, 
 from which not only the military, but, a still more im- 
 portant consideration, the diplomatic services are recruited. 
 The arts of national diplomacy are poisoned with this 
 disbelief in the possibility of honest continuous friend- 
 ship between States, and with the suspicions and appre- 
 hensions which an atmosphere of such disbelief engenders. 
 The embassies of Europe appear to live in an atmosphere 
 of interacting suspicion and prejudice which, in those very 
 quarters from which Governments seek expert advice, 
 impairs the faculty of reasonable judgment. The irrational 
 anti-Teutonism, which has succeeded an equally irrational 
 anti-Gallicism and anti-Russicism in our Continental 
 embassies, has notoriously played a dangerous part in 
 influencing our recent foreign policy. The prejudices, 
 interests, the recklessness, or the sheer stupidity of men 
 upon the spot falsely accredited with the possession of 
 expert knowledge, have on many past occasions led this 
 country into disastrous courses. They still carry danger- 
 ous weight in determining our foreign policy, as a careful 
 perusal of the documents relating to the recent "Agadir" 
 crisis will indicate. 
 
 In these various ways it has come to pass that, though 
 nobody can point to any concrete ground of quarrel be- 
 tween Great Britain and Germany, a notion prevails that 
 Germany has ambitions and plans which involve danger 
 
24 
 
 to the British Empire and require us to maintain an 
 attitude of watchful hostility towards her. 
 
 But the number of persons in any class who concern 
 themselves with the distinctly political or imperial con- 
 siderations of their own and other nations is comparatively 
 few. The present German panic finds its chief popular 
 support in a belief that the commercial interests of 
 the two nations are antagonistic, and that the con- 
 spicuous advance made by German manufacturers and 
 merchants in the markets of the world inflicts an injury 
 upon our national trade. This notion has been sedulously 
 fostered by the Protectionist party in this country. The 
 revival of Protectionism was, indeed, closely coincident 
 with the rise of Germany as a great manufacturing and 
 exporting country. But the wider realisation of Germany 
 as our commercial enemy dates from the time of the Boer 
 War. It was in effect a sequela of the war. For the harsh 
 criticisms to which our conduct in that war subjected us 
 from Continental nations left in the breasts of "patriotic" 
 Britons a bitter legacy of anti-foreign feeling, which Mr. 
 Chamberlain found it easy to direct into economic channels 
 when he floated his Protectionist proposals. As the Pro- 
 tectionist campaign proceeded, Germany came to figure 
 more and more as our dreaded rival, the chief of 
 "dumpers," plotting incessantly to "steal" our home 
 markets or to "oust" us from the neutral markets of the 
 world. In glowing colours were portrayed her scientific 
 and technical efficiency, the industry, thrift, and prosperity 
 of her manufacturing classes, the highly organised, up-to- 
 date quality of her mills, the full employment of her in- 
 dustrial population. The superior efficiency of Germany 
 under the new conditions of the world-struggle for markets 
 was everywhere contrasted with the slackness and neglect 
 of science among our employers, the idleness and lack of 
 
25 
 
 discipline among our wage-earners. British supremacy 
 in commerce was doomed to fall before the attack of this 
 vigorous German rival, unless we were prepared to fight 
 her with her own weapons, the chief of which was a 
 protective tariff designed to exclude her goods from com- 
 petition in the markets of the British Empire. This in- 
 cessant parade of Germany as our commercial enemy, 
 maliciously engaged in plots to undermine our industry 
 and commerce, undoubtedly produced a state of feeling 
 prepared to accept the hostile political and military sug- 
 gestions of the last few years. The panics of the last 
 two years would have been impossible except for the anti- 
 German sentiment fostered by the long Protectionist 
 campaign. It is, therefore, of supreme importance to 
 designate quite clearly the nature of the delusion by which 
 a hostile significance has been imparted to the innocent 
 proceedings of international commerce in which English- 
 men and Germans have engaged. The delusion has two 
 main roots. The first is that foolish confusion of political 
 and economic entities which treats nations as commercial 
 units. The stress laid by both parties to the fiscal con- 
 troversy upon tables of import and export trade, in which 
 nations are represented as if they were trading firms buy- 
 ing from and selling to one another, has lent support to 
 this most injurious fallacy. This setting has served first 
 to give false severance and false prominence to a section 
 — and that the smaller section of most trades in each 
 country, viz. the export trade; and, secondly, to suggest 
 that Great Britain, France, Germany, America, etc., are 
 competing trading firms. Now this is a complete per- 
 version of the facts. Great Britain is not competing with 
 Germany for the sale of machinery in Canada, or with 
 the United States for the sale of cotton goods in China. 
 Some private English firms are competing with some 
 
26 
 
 private German or American firms in these lines of com- 
 merce. But a far closer, more constant, and more "cut- 
 throat " rivalry is maintained between the several English 
 firms competing with one another for this business 
 than between the English and the German or American 
 firms. For, normally, the competition must be keener 
 between firms well acquainted with each other and doing 
 their work under closely similar conditions by closely 
 similar methods. The treatment, therefore, of England 
 and Germany, or any other nations, as hostile trade com- 
 petitors is a complete falsification of the facts. If com- 
 plete Free Trade existed throughout the world the fallacy 
 would be too evident to deceive anyone. It only receives 
 a semblance of support from the interference which 
 Governments make with the full freedom of commercial 
 relations between their citizens and those of other countries 
 by imposing tariffs or conferring bounties, or by other 
 restrictions of a similar kind. But injurious as such 
 Governmental restrictions are, they cannot reasonably 
 afford the least support to the view which represents the 
 participation of German and British subjects in world 
 commerce as a relation of international hostility. Such 
 interferences are, after all, minor barriers and detractions 
 in the great process of co-operation which underlies all 
 processes of commerce, whether conducted within a 
 single political area or across the border of two political 
 areas. 
 
 But associated with this first fallacy is the even deeper 
 rooted one which assumes that the progress of German 
 manufacturers and traders in industrial and commercial 
 development has been, is, and will be, detrimental to the 
 interests of British manufacturers and traders. The basis 
 of this delusion is, of course, the conviction that there is 
 not enough world market for all the sellers of all nations 
 
27 
 
 to sell their wares, and that, therefore, a wise Government 
 will reserve the home market for its own traders, while 
 its foreign policy will be directed to securing for them 
 as large a share as possible of colonial and foreign markets. 
 Now, since all commerce consists essentially in the ex- 
 change of one sort of goods for another, the notion that 
 the number of sellers and the quantity of supply can in 
 general exceed the number of buyers and the quantity 
 of demand implies a misunderstanding of the elementary 
 logic of commerce. The delusion receives, no doubt, a 
 fictitious support from the miscalculations of certain groups 
 of traders, and from the rush of excessive quantities of 
 capital and labour into certain employments, which thus 
 turn out a rate of output larger than can secure a profit- 
 able market. But the belief that the aggregate trade of 
 this or any other country can be enhanced or made more 
 profitable, either by a protective governmental policy or 
 by the expensive and hazardous employment of public 
 force in securing exclusive or preferential markets in 
 foreign countries, has no foundations in reason or 
 experience. 
 
 Because some of the statesmen and commercial classes 
 in other nations, less experienced than ourselves in the 
 delicate and complex conditions of foreign trade, have 
 succumbed to this delusion, and have thereby inured their 
 minds to regard foreign commerce as a rivalry of nations 
 instead of an international co-operation of individual pro- 
 ducers and consumers, it is not wise or necessary that 
 we, having adopted and practised a more enlightened 
 policy, should allow ourselves to be sucked into so 
 injurious a vortex of fallacious thought and feeling. Until 
 w^e can substitute for the false conception of England and 
 Germany as rival merchants the true conception of 
 Englishmen and Germans as common participators in 
 
28 
 
 every improvement of technique, every development of a 
 new territory, every opening up of a new market in which 
 any one of them may be engaged, we shall not secure that 
 sense of amity and fellowship which is the proper spiritual 
 counterpart of international commerce. So long as we 
 remain shortsighted enough to resent the proposals of 
 Germany to develop territory in Asia Minor, or to get 
 her share of the business of road-making in China, as 
 detrimental to the economic interests of our countrymen, 
 we shall be called upon to undergo from time to time the 
 expense, the anxiety of mind and the moral degradation 
 of these anti-German scares, worked up to an inflam- 
 matory point by tihe activities, interests and fears of 
 particular professional, political and commercial groups 
 within the nation, which stand in perpetual conflict with 
 the welfare and the safety of the nation as a whole. 
 
 In conclusion, I would say that the use of the term 
 "panic" here in its application to the feelings of our 
 people towards Germany is liable to misapprehension. 
 There has been no popular panic. The irrational excite- 
 ment of feeling that deserves that name has always been 
 confined to certain grades of temper and intelligence in 
 I the various classes of which our nation is composed. Even 
 among those who profess to believe that Germany has 
 definite intentions of breaking the European peace as 
 soon as she feels strong enough, and that a British-German 
 war is inevitable, there is a large factor of make-believe. 
 The idea is entertained more as a stimulating possibility 
 useful for "waking up" England, or even for the agree- 
 able sensational reading it affords, than as a clear con- 
 viction which must dominate the mind and mould the 
 entire activities of the nation thus devoted to the supreme 
 task of self-defence. Those sincerely panic-stricken are 
 few in number, though those who talk of the early likeli- 
 
29 
 
 hood of such a d(^bacle are numerous enough. In the 
 general mind infected more weakly with the poison of 
 this anti-Teutonism a good deal of quiet scepticism 
 remains. The incitements even of the foremost party 
 politicians, the stimulative Jingoism of the presfe, the 
 "territorial" activities, the propaganda of the various 
 service leagues, are not taken in dead earnest. There 
 is, no doubt, among certain classes in this country an 
 unfriendly feeling towards Germany conceived as a 
 political, and still more as a commercial, nation, but 
 in no section of our commercial and industrial classes 
 does there lurk as yet any definite hostility of pur- 
 pose or any clear belief in the "inevitability" of con- 
 flict. Indeed, among our intelligent business classes, 
 never more prosperous than at the present time, a grow- 
 ing feeling of impatience is exhibited with the political 
 manufacturers of ill-will who disturb the confidence which 
 is so good for trade. The organised portion of the work- 
 ing classes, again, sees in the German scare nothing but 
 a familiar move in the high game of politics, by which 
 the employing and possessing classes endeavour to divert 
 the force of popular demands for drastic social reforms 
 by thrusting to the front of the political stage one of the 
 sensational issues of foreign policy kept for that purpose. 
 
 But, though the panic is thus confined in area and is 
 set in an atmosphere of half-belief or actual scepticism, 
 history shows it to contain real elements of peril. For 
 the hostility of feeling prevalent in certain confined 
 influential circles may be raised at any time to the true 
 panic point by some chance incident, and this inflam- 
 matory state of mind may kindle a wider sentiment of 
 popular excitement, which, once kindled, spreads almost 
 automatically over the lighter-minded masses. Much, 
 however, could be done to prevent these panics if those 
 
30 
 
 exposed to their inroads could be instructed in their origins 
 and methods, and if they could learn enough of history 
 to understand upon what slender evidences political and 
 military authorities have in the past based the fears and 
 suspicions which have formed the material of panics. 
 
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