Immediate application of economic warfare by Britain and Germany in the European War did not come as a surprise because this method has been recognized as a most effective weapon ever since the World War. After the first 6 weeks of battle in the World War, the Allied forces put a brake on the rapid advance of the Central Powers and the conflict resolved itself into a siege, one of the phases of which was the imposition of a strong blockade to cut off Germany’s supplies.
Because of the vociferous references by the Nazi hierarchy to the Blitzkrieg, which had proved so effective in the cases of her weaker neighbors it was not at first realized that a similar state of beleaguerment was commenced virtually at the outbreak of the current hostilities.
Application of boycotts, sanctions, or blockades has frequently captured the public imagination—but the problem is not as simple as might at first appear. The first two cannot be imposed with material results without international co-operation, and should individual nations attempt to cripple another in this manner they might find that they had gripped a sharp weapon, but by the blade.
Because of Japan’s actions in China and her treatment of American citizens upon various occasions, there have been many who advocate the boycott of Japanese goods, while others envisage the 2-way cessation of trade by application of economic sanctions by the United States. Such a situation would undoubtedly be a terrific blow to the Land of the Rising Sun, but there would also be repercussions in America.
While Japan sells about 85 per cent of her raw silk exports to the United States, as well as important quantities of manufactured articles, she is also America’s greatest single customer for raw cotton. Trade between the two nations has been growing steadily, and normally the balance is decidedly in favor of the occidental country. Thus a cessation of such trade would fall on American workers and manufacturers, whereas the economic effect upon Japan would depend largely upon whether other nations also cut off trade with Japan. If they failed so to do, which is probable, many American raw materials would undoubtedly get to Japan by reshipment from other destinations.
Boycotts and sanctions can be imposed satisfactorily only if unanimous; otherwise the only manner in which they can be enforced is by blockade, which is an act of war. To date, experience would seem to indicate that action of this type causes more harm than it does good. Japan in Manchuria, and Italy in Abyssinia, established the precedent that an economic boycott was war and the answer to it is war. Fear of economic sanctions caused some alarm in each of these cases, but the respective governments were committed to a definite action and could not turn aside from their proclaimed objective.
However, the virus of fear was inoculated into the various powers, and the course of events during the past decade has led to an almost hysterical demand throughout the world for a policy of self- sufficiency in regard to sources of raw materials. The result has been that it is now even more difficult to foresee the successful application of economic measures.
The fear of war leads to expectation of war; and if war is expected, it is necessary to be ready for it; and in order to be ready for it, self-sufficiency must be achieved. Self-sufficiency does not arise from the idea of war so much as the idea of war originates in self-sufficiency. Addressing the Pan-American Conference at Buenos Aires, President Franklin D. Roosevelt declared:
It is no mere coincidence that the nations which have carried the process of self-sufficiency to the furthest extreme are those which declare most loudly that they regard war as an instrument of their policy.
From the broader aspect, boycotts and sanctions, or the threat of them, have driven many nations farther along the road to economic autarchy and tended to reduce international trade still more. Therefore, the peoples of the world should act rationally and organize for peace, not for war. If all the countries had their energies completely occupied in meeting the needs of greatly expanded trade, then they would not have time—not desire, nor interest—to think about war.
Because its importance in modern warfare is second to munitions, oil was the first raw material to receive consideration by the League of Nations Committee of Experts at the turn of 1936, when Italy was the nation due for punishment. The following is the list of subjects examined:
(1) Italian home and colonial consumption of petroleum products; (a) in normal times; (b) at present.
(2) Origin of supplies; (a) in normal times; (b) within the last few months; (c) the possibility of obtaining supplies directly and indirectly; (d) the share taken by the different states in supplying Italy with liquid fuels.
(3) Present stocks in Italy and her colonies and the possibility of storage in Italy and elsewhere.
(4) Means of transport—and how far transport could be controlled by the fleets under control of League members.
(5) The possibilities of substituting other fuels for gasoline.
The lengthy document which resulted from the studies of this committee gave the conclusions that even were an oil embargo universally applied (and not being a League member, America did not join in), it would take three or more months to become effective because of stored oil supplies: that Italian oil supplies would be diverted for war purposes and the civilian population would suffer; that substitute fuels were of sufficient potential use to Italy as temporary supplies that, without their control in equivalent degree, any sanction concerning petroleum alone would lose much of its effect; and that insufficient tankers could be controlled to more than inconvenience Italy.
Economic sanctions take some time to have their effect, and the delay in their effectiveness may be increased by previous knowledge on the part of potential aggressors that such measures may be adopted. Thus it is that synthetic production of oil has been stepped up in the last 5 years and from 1936 to 1938 governments were so busy accumulating secret war-time reserves (largely in underground storage) that there were virtually no idle tankers.
The research staff of an American committee on economic sanctions has pointed out that since the crude oil supplies of the world originate chiefly in America, the Soviet Union, or the British Empire, and in areas under their influence, no embargo could be effective without their participation.
Raw material embargoes are in some ways easiest to enforce, since all the really critical raw materials are needed in large tonnages, so that blockades are quite effective against them. For practical purposes, the embargo which will have most severe effects on the greatest number of countries will be an embargo against petroleum and petroleum products. This will essentially prevent naval offensives in the case of most countries in the world, and it will hamper land operations, though less conclusively.
However, even though such sanctions might be very effective, or even decisive, the experience of the Central Powers during the war of 1914-18 indicates
that by severe economy in use and by drawing on every possible source of current reserve within the country itself, it may easily be a number of years before military necessities fail to be met.
Such sanctions should only be contemplated if there is certainty that they can be carried out, as mere threat of application with no certainty or confidence in the outcome would only increase the economic nationalism of states contemplating aggression, without enabling the other countries to diminish their own nationalistic precautionary measures.
Great Britain and the United States control the largest shares of the world’s raw material resources, and together they could do much to make sanctions an effective instrument in support of a collective peace program.
Sanctions, of course, are but a system of collective security providing for penalties against an aggressor nation put into effect by neutral nations and applied selectively to have the maximum effect upon fighting power and cause the minimum of suffering on the part of civilian population. A general blockade, on the other hand, is proclaimed by belligerents and calls for the seizure of all contraband believed to be destined for the enemy. Definition of contraband has been broadened greatly so that from originally referring only to arms and munitions it now covers all raw materials which may be used in connection with the prosecution of war.
Such a blockade has been effectively established by the Allies since September, 1939, against Germany while the latter country has to a lesser extent attempted similar measures with submarines and merchant raiders. The task of creating the organization for Britain’s Ministry of Economic Warfare has been in progress for the past three years, and a complete staff, drawn partly from the Civil Service and partly from experts in business circles, was earmarked some months before war broke out. In all its initial work it acted in close collaboration with the corresponding French organization through a liaison mission in London.
MEW is a silent organization but a vital offensive arm, corresponding broadly to the Ministry of Blockade created during the World War. Its aim is to disorganize the economy of the enemy so as to prevent him from effectively carrying on the war, and its work is to initiate and co-ordinate all necessary measures in the economic, financial, and industrial spheres. Already many contraband control stations have been set up along the main trade routes to Europe and large quantities of raw materials have been seized.
Based on the known peace-time production and consumption figures for various raw materials, and the fact that imports have been virtually cut off, many statements have been made with regard to Germany being unable to meet her war-time requirements, which are presumed to be greatly in excess of normal demand.
However, too much credence should not be placed in the stated relation of peacetime consumption figures to the estimated increases effected by war-time military demands, for these frequently can be misleading. It must be remembered that the extent to which civilian wants can be cut during hostilities was one of the principal lessons of the last World War.
In 1914 Germany lacked sulphur, rubber, nitrates, mercury, and cotton, while she had inadequate supplies of petroleum, tin, chromium, manganese ore, nickel, aluminum, and copper. Yet, handicapped as she was, her overseas supplies cut off by British blockade and-hemmed in on two land fronts, she stood off the Allied forces for 4 years. By curtailing consumption and commercial manufacturing use, the requirements for many of these essentials for nonmilitary purposes were reduced to one-tenth of the peace-time amount—or less.
In time of peace an economic system tends to meet the demands of consumers as determined by their tastes and purchasing power; but for the authorities in charge of a war economy, the desires of the populace are important only to the extent that they might affect the fighting effectiveness of the Army through failure to produce munitions or through a lowered morale.
Thus it can readily be seen that Germany has an annual output, quite apart from the huge reserves she is reputed to have accumulated in storage during the past few years, which may enable her to last much longer than the widely published statements in the press might indicate.
Economic warfare may in the long run prove decisive, but without control of commerce lanes through a large Navy it is not likely to be very efficient.