TRAGEDY AND HOPE Chapters I-IV
by Dr. Carroll Quigley 
ISBN 0913022-14-4
CONTENTS
I. INTRODUCTION: WESTERN CIVILIZATION IN ITS WORLD SETTING
II. WESTERN CIVILIZATION TO 1914
III. THE RUSSIAN EMPIRE TO 1917
IV. THE BUFFER FRINGE
Back cover
     TRAGEDY AND HOPE is a lively, informed and always readable view 
of our not quite One World of today, seen in historical perspective. 
Quigley has already shown his command of the kind of historical 
perspective seen in the a world like that of Toynbee and Spengler; but 
unlike them he does not so much concern himself with projections from 
a distant past to a distant future as he does with what must interest 
us all much more closely - our own future and that of our immediate 
descendants. He uses the insights, but in full awareness of the 
limitations of our modern social sciences, and especially those of  
economics, sociology, and psychology. Not all readers will agree with 
what he sees ahead of us in the near future, nor with what he thinks 
we should do about it. But all will find this provocative and 
sometimes provoking book a stimulus to profitable reflection. 
David Brinton
Inside cover
     TRAGEDY AND HOPE shows the years 1895-1950 as a period of 
transition from the world dominated by Europe in the nineteenth 
century to the world of three blocs in the twentieth century. With 
clarity, perspective and cumulative impact, Professor Quigley examines 
the nature of that transition through two world wars and a worldwide 
economic depression. As an interpretative historian, he tries to show 
each event in the full complexity of its historical context. The 
result is a unique work, notable in several ways. It gives a picture 
of the world in terms of the influence of different cultures and 
outlooks upon each other; it shows, more completely than in any 
similar work, the influence of science and technology on human life; 
and it  explains, with unprecedented clarity, how the intricate 
financial and commercial patterns of the West prior to 1914 influenced 
the development of today's world. 
     Carroll Quigley, professor of history at the Foreign Service 
School of Georgetown University, formerly taught at Princeton and at 
Harvard. He has done research in the archives of France, Italy and 
England, and is the author  of the widely praised "Evolution of 
Civilizations." A member of the editorial board of the monthly Current 
History, he is a frequent lecturer and consultant for public and semi-
public agencies. He is a member of the American Association for the 
Advancement of Science, the American Anthropological Association, and 
the American Economic Association, as well as various historical 
associations. He has been lecturer on Russian history at the 
Industrial College of the Armed Forces since 1951 and on Africa at the 
Brookings Institution since 1961, and has lectured at many other other 
places including the U.S. Naval Weapons Laboratory, the Foreign 
Service Institute of the State Department, and the Naval College at 
Norfolk, Virginia. In 1958, he was a consultant to the Congressional 
Select Committee which set up the present national space agency. He 
was collaborator in history to the Smithsonian Institution after 1957, 
in connection with the establishment of its new Museum of History and 
Technology. In the summer of 1964 he went to the Navy Post-Graduate 
School, Monterey, California, as a consultant to project Seabed, which 
tried to visualize what American weapons systems would be like in 
twelve years. 
 
CHAPTER I: INTRODUCTION: WESTERN CIVILIZATION IN ITS WORLD SETTING
Page 3
     Each civilization is born in some inexplicable fashion and, after 
a slow start, enters a period of vigorous expansion, increasing its 
size and power, both internally and at the expense of its neighbors, 
until gradually a crisis of organization appears... It becomes 
stabilized and eventually stagnant. After a Golden Age of peace and 
prosperity, internal crises again arise. At this point, there appears 
for the first time, a moral and physical weakness. 
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     The passage from the Age of Expansion to the Age of Conflict is 
the most complex, most interesting and most critical of all periods of 
the life cycle of a civilization. It is marked by four chief 
characteristics: it is a period:
a) of declining rate of expansion;
b) of growing tensions and class conflicts;
c) of increasingly frequent and violent imperialist wars;
d) of growing irrationality.
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     When we consider the untold numbers of other societies, simpler 
than civilizations, which Western Civilization has destroyed or is now 
destroying, the full frightening power of Western Civilization becomes 
obvious.
     This shift from an Age of Conflict to an Age of Expansion is 
marked by a resumption of the investment of capital and the 
accumulation of capital on a large scale.
     In the new Western civilization, a small number of men, equipped 
and trained to fight, received dues and services from the overwhelming 
majority of men who were expected to till the soil. From this 
inequitable but effective defensive system emerged an inequitable 
distribution of political power and, in turn, an inequitable 
distribution of the social economic income. This, in time, resulted in 
an accumulation of capital, which, by giving rise to demand for luxury 
goods of remote origin, began to shift the whole economic emphasis of 
the society from its earlier organization in self-sufficient agrarian 
units to commercial interchange, economic specialization, and, a 
bourgeois class. 
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     At the end of the first period of expansion of Western 
Civilization covering the years 970-1270, the organization of society 
was becoming a petrified collection of vested interests and entered 
the Age of Conflict from 1270-1420. 
     In the new Age of Expansion, frequently called the period of 
commercial capitalism from 1440 to 1680, the real impetus to economic 
expansion came from efforts to obtain profits by the interchange of 
goods, especially semi-luxury or luxury goods, over long distances. In 
time, profits were sought by imposing restrictions on the production 
or interchange of goods rather than by encouraging these activities. 
     
Page 10
     The social organization of this third Age of Expansion from 1770-
1929 following upon the second Age of Conflict of 1690-1815 might be 
called "industrial capitalism." In the last of the nineteenth century, 
it began to become a structure of vested interests to which we might 
give the name "monopoly capitalism." 
     We shall undoubtedly get a Universal Empire in which the United 
States will rule most of the Western Civilization. This will be 
followed, as in other civilizations, by a period of decay and 
ultimately, as the civilizations grows weaker, by invasions and the 
total destruction of Western culture. 
EUROPE'S SHIFT TO THE TWENTIETH CENTURY
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     The belief in the innate goodness of man had its roots in the 
eighteenth century when it appeared to many that man was born good and 
free but was everywhere distorted, corrupted, and enslaved by bad 
institutions and conventions. As Rousseau said, "Man is born free yet 
everywhere he is in chains."
     Obviously, if man is is innately good and needs but to be freed 
from social restrictions, he is capable of tremendous achievements in 
this world of time, and does not need to postpone his hopes of 
personal salvation into eternity. 
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     To the nineteenth century mind, evil, or sin, was a negative 
conception. It merely indicated a lack or, at most, a distortion of 
good. Any idea of sin or evil as a malignant force opposed to good, 
and capable of existing by its own nature, was completely lacking in 
the typical nineteenth century mind. The only evil was frustration and 
the only sin, repression. 
     Just as the negative idea of the nature of evil flowed from the 
belief that human nature was good, so the idea of liberalism flowed 
from the belief that society was bad. For, if society was bad,the 
state,which was the organized coercive power of society, was doubly 
bad, and if man was good, he should be freed, above all, from the 
coercive power of the state. 
     "No government in business" was commonly called "laissez faire" 
and would have left society with little power beyond that required to 
prevent the strong from physically oppressing the weak.
     This strange, and unexamined, belief held that there really 
existed, in the long run, a "community of interests" between the 
members of a society. It maintained that, in the long run, what was 
good for one was bad for all. It believed that there did exist a 
possible social pattern in which each member would be secure, free and 
prosperous.
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     Capitalism was an economic system in which the motivating force 
was the desire for private profit as determined in a price system with 
the seeking of aggrandization of profits for each individual.  
     Nationalism served to bind persons of the same nationality 
together into a tight, emotionally satisfying, unit. On the other 
side, it served to divide persons of different nationalities into 
antagonistic groups, often to the injury of their real mutual 
political, economic or cultural advantages. 
     The event which destroyed the pretty dream world of 1919-1929 
were the stock market crash, the world depression, the world financial 
crisis. 
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     The twentieth century came to believe that human nature is, if 
not innately bad, at least capable of being very evil. Left to 
himself, man falls very easily to the level of the jungle or even 
lower and this result can be prevent only by the coercive power of 
society. Along with this change from good men and bad society to bad 
men and good society has appeared a reaction from optimism to 
pessimism. The horrors of Hitler's concentration camps and Stalin's 
slave-labor units are chiefly responsible for this change. 
CHAPTER II: WESTERN CIVILIZATION TO 1914
WESTERN CIVILIZATION TO 1914
Page 39
     The financial capitalist sought profits from the manipulation of 
claims on money; and the monopoly capitalist sought profits from 
manipulation of the market to make the market price and the amount 
sold such that his profits would be maximized. 
Page 41
     Karl Marx,about 1850, formed his ideas of an inevitable class 
struggle in which the groups of owners would become fewer and fewer 
and richer and richer while the mass of workers became poorer and 
poorer but more and more numerous. 
     Mass production required less labor. But mass production required 
mass consumption.
EUROPEAN ECONOMIC DEVELOPMENT
Page 42
     Investments in railroads, steel mills and so on could not be 
financed from the profits and private fortunes of individual 
proprietors. New instruments for financing industry came into 
existence in the form of limited-liability corporations and investment 
banks. These were soon in a position to control the chief parts of the 
industrial system since they provided the capital to it. This gave 
rise to financial capitalism. 
Page 43     
     Great industrial units, working together either directly or 
through cartels and trade associations, were in a position to exploit 
the majority of the people. The result was a great economic crisis 
which soon developed into a struggle for control of the state - the 
minority hoping to use the state to defend their privileged position, 
the majority hoping to use the state to curtail the power and 
privileges of the minority. 
     Capitalism, because it seems profits as its primary goal, is 
never primarily seeking to achieve prosperity, high production, high 
consumption, political power, patriotic improvement, or moral uplift. 
Page 44 
     Goods moved from low-price areas to high-price areas and money 
moved from high-price areas to low-price areas because goods were more 
valuable where prices were high and money was more valuable where 
prices were low. 
     Thus, clearly, money and goods are not the same thing but are, on 
the contrary, exactly opposite things. Most confusion in economic 
thinking arises from failure to recognize this fact. Goods are wealth 
which you have, while money is a claim on wealth which you do not 
have. Thus goods are an asset; money is a debt. If goods are wealth; 
money is non-wealth, or negative wealth, or even anti-wealth. 
Page 45
     In time, some merchants turned their attention from exchange of 
goods to the monetary side of the exchange. They became concerned with 
the lending of money to merchants to finance their ships and their 
activities, advancing money for both, at high interest rates, secured 
by claims on ships or goods as collateral for repayment and made it 
possible for people to concentrate on one portion of the process and, 
by maximizing that portion, to jeopardize the rest.
Page 46
     Three parts of the system, production, transfer, and consumption 
of goods were concrete and clearly visible so that almost anyone could 
grasp them simply examining them while the operations of banking and 
finance were concealed, scattered, and abstract so that they appeared 
to many to be difficult. To add to this, bankers themselves did 
everything they could to make their activities more secret and more 
esoteric. Their activities were reflected in mysterious marks in 
ledgers which were never opened to the curious outsider. 
     Changes of prices, whether inflationary or deflationary, have 
been major forces in history for the last six centuries at least. 
Page 47
     Hundreds of years ago, bankers began to specialize, with richer 
and more influential ones associated increasingly with foreign trade 
and foreign-exchange transactions. Since these were richer and more 
cosmopolitan and increasingly concerned with questions of political 
significance, such as stability and debasement of currencies, war and 
peace, dynastic marriages, and worldwide trading monopolies, they 
became financiers and financial advisers of governments. Moreover, 
they were always obsessed with the stability of monetary exchanges and 
used their power and influence to do two things:
1) to get all money and debts expressed in terms of strictly limited 
commodity - ultimately gold; and
2) to get all monetary matters out of the control of governments and 
political authority, on the ground that they would be handled better 
by private banking interests in terms of such a stable value of gold. 
INDUSTRIAL CAPITALISM, 1770-1850
Page 48
     Britain's victories had many causes such as its ability to 
control the sea and its ability to present itself to the world as the 
defender of the freedoms and rights of small nations and of diverse 
social and religious groups. Also, financially, England had discovered 
the secret of credit and economically, it had embarked on the 
Industrial Revolution. 
     Credit had been known to the Italians and Netherlanders long 
before it became one of the instruments of English world supremacy. 
Nevertheless, the founding of the Bank of England by William Paterson 
and his friends in 1694 is one of the great dates in world history. 
For generations, men had sought to avoid the one drawback of gold, its 
heaviness, by using pieces of paper to represent specific pieces of  
gold. Today, we call such pieces of paper gold certificates which 
entitles its bearer to exchange it for its piece ofgold on demand, but 
in view of the convenience of paper, only a small fraction of 
certificate holders ever did make such demands. It early became clear 
that gold need be held on hand only to the amount needed to cover the 
fraction of certificates likely to be presented for payment; 
accordingly, the rest of the gold could be used for business purposes, 
or, what amounts to the same thing, a volume of certificates could be 
issued greater than the volume of gold reserved for payment of demands 
against them. such an excess volume of paper claims against reserves 
we now call bank notes. 
     In effect, this creation of paper claims greater than the 
reserves available means that bankers were creating money out of 
nothing. The same thing could be done in another way, not by note-
issuing banks but by deposit banks. Deposit bankers discovered that 
orders and checks drawn against deposits by depositors and given to 
third persons were often not cashed by the latter but were deposited 
to their own accounts. Thus there were no actual movements of funds, 
and payments were made simply by bookkeeping transactions on the 
accounts. Accordingly, it was necessary for the banker to keep on hand 
in actual money (gold, certificates and notes) no more than the 
fraction of deposits likely to be drawn upon and cashed; the rest 
could be used for loans and if these loans were made by creating a 
deposit for the borrower, who in turn would draw checks upon it rather  
than withdraw it in money, such "created deposits" or loans could also 
be covered adequately by retaining reserves to only a fraction of 
their value. Such created deposits also were a creation of money out 
of nothing, although bankers usually refused to express their actions, 
either note issuing or deposit lending, in these terms. William 
Paterson, on obtaining the charter of the Bank of England, said "the 
Bank hath benefit of interest on all moneys it creates out of 
nothing." This is generally admitted today. 
     This organizational structure for creating means of payment out 
of nothing, which we call credit, was not invented by England but was 
developed by her to become one of her chief weapons in the victory 
over Napoleon in 1815. The emperor, could not see money in any but 
concrete terms, and was convinced that his efforts to fight wars on 
the basis of "sound money" by avoiding the creation of credit, would 
ultimately win him a victory by bankrupting England. He was wrong 
although the lesson has had to be relearned by modern financiers in 
the twentieth century. 
     
FINANCIAL CAPITALISM 1850-1931
Page 50
     The third stage of capitalism is of such overwhelming 
significance in the history of the twentieth century, and its 
ramifications and influences have been so subterranean and even 
occult, that we may be excused if we devote considerate attention to 
this organization and methods. 
     Essentially, what it did was to take the old disorganized and 
localized methods of handling money and credit and organize them into 
an integrated system, on an international basis, which worked with 
incredible and well-oiled facility for many decades. The center of 
that system was in London, with major offshoots in New York and Paris 
and it has left, as its greatest achievement, an integrated banking 
system and a heavily capitalized - if now largely obsolescent - 
framework of heavy industry, reflected in railroads, steel mills, coal 
mines and electrical utilities.
     This system had its center in London for four chief reasons. 
First was the great volume of savings in England. Second was England's 
oligarchic social structure which provided a very inequitable 
distribution of incomes with large surpluses coming to the control of 
a small, energetic upper class. Third was that this upper class was 
aristocratic but not noble, quite willing to recruit both money and 
ability from lower levels and even from outside the country, welcoming 
American heiresses and central-European Jews to its ranks almost as 
willingly as it welcomed monied, able and conformist recruits from the 
lower classes of Englishmen. Fourth (and by no means last) in 
significance was the skill in financial manipulation, especially on 
the international scene, which the small group of merchant bankers of 
London had acquired. 
     In time, they brought into their financial network the provincial 
banking centers as well as insurance companies to form all of these 
into a single financial system on an international scale which 
manipulated the quantity and flow of money so that they were able to 
influence, if not control, governments on one side and industries on 
the other.   
     The men who did this, looking backward toward the period of 
dynastic monarchy in which they had their own roots, aspired to 
establish dynasties of international bankers and were at least as 
successful at this as were many of the dynastic political rulers. The 
greatest of these dynasties, of course, were the descendants of Meyer 
Amschel Rothschild (1743-1812) whose male descendants for at least two 
generations, generally married first cousins or even nieces. 
Rothschild's five sons, established at branches in Vienna, London, 
Naples and Paris as well as Frankfort, cooperated together in ways 
which other international banking dynasties copied but rarely 
excelled. 
     In concentrating, as we must, on the financial or economic 
activities of international bankers, we must not totally ignore their 
other attributes. They were cosmopolitan rather than nationalistic; 
they were a constant, if weakening, influence for peace, a pattern 
established in 1830 and 1840 when the Rothschilds threw their whole 
tremendous influence successfully against European wars. 
     They were usually highly civilized, cultured gentlemen, patrons 
of education and of the arts, so that today, colleges, professorships, 
opera companies, symphonies, libraries, and museum collections still 
reflect their munificence. For these purposes they set a pattern of 
endowed foundations which still surround us today. 
     The names of some of these banking families are familiar to all 
of us and should be more so. They include Baring, Lazard, Erlanger, 
Warburg, Schroder, Seligman, Speyers, Mirabaud, Mallet, Fould and 
above all Rothschild and Morgan. Even after these banking families 
became fully involved in domestic industry by the emergence of 
financial capitalism, they remained different from ordinary bankers in 
distinctive ways:
1) they were cosmopolitan and international;
2) they were close to governments and were particularly concerned with 
questions of government debts, including foreign government debts, 
even in areas which seemed, at first glance, poor risks, like Egypt, 
Persia, Ottoman Turkey, Imperial China and Latin America;
3) their interests were almost exclusively in bonds and very rarely in 
goods since they admired "liquidity";
4) they were fanatical devotees of deflation (which they called 
"sound" money from its close association with high interest rates and 
a high value of money) and of the gold standard;
5) they were almost equally devoted to secrecy and the secret use of 
financial influence in political life. These bankers came to be called 
"international bankers" and were known as "merchant bankers" in 
England, "private bankers" in France and "investment bankers" in the  
United States. 
     Everywhere, they were sharply distinguishable from other, more 
obvious, kinds of banks, such as savings banks or commercial banks. 
     One of their less obvious characteristics was that they remained 
as private unincorporated firms offering no shares, no reports, and 
usually no advertising to the public until modern inheritance taxes 
made it essential to surround such family wealth with the immortality 
of corporate status for tax-avoidance purposes. This persistence as 
private firms continued because it ensured the maximum of anonymity 
and secrecy to persons of tremendous public power who dreaded public 
knowledge of their activities as an evil almost as great as inflation. 
Page 53
     Firms like Morgan, like others of the international banking 
fraternity, constantly operated through corporations and governments, 
yet remained itself an obscure private partnership. 
     The influence of financial capitalism and the international 
bankers who created it was exercised both on business and on 
governments, but could have neither if it had not been able to 
persuade both these to accept two "axioms" of its own ideology. Both 
of these were based on the assumption that politicians were too weak 
and too subject to temporary public pressures to be trusted with 
control of the money system; accordingly, the soundness of money must 
be protected in two ways: by basing the value of money on gold and by 
allowing bankers to control the money supply. To do this it was 
necessary to conceal, even mislead, both governments and people about
the nature of money and its methods of operation. 
Page 54
     Since it is quite impossible to understand the history of the 
twentieth century without some understanding of the role played by 
money in domestic affairs and in foreign affairs, as well as the role 
played by bankers in economic life and in political life, we must take 
a least a glance at each of these four subjects: 
DOMESTIC FINANCIAL PRACTICES
     In each country, the supply of money took the form of an inverted 
pyramid or cone balanced on its point. In the point was the supply of 
gold and its equivalent certificates; on the intermediate levels was a 
much larger supply of notes; and at the top, with an open and 
expandable upper surface, was an even greater supply of deposits. Each 
level used the levels below it as its reserves and these lower levels 
had smaller quantities of money, they were "sounder." 
     Notes were issued by "banks of emission" or "banks of issue" and 
were secured by reserves of gold or certificates held in some central 
reserve. The fraction held in reserve depended upon banking 
regulations or statute law. Such banks, even central banks, were 
private institutions, owned by shareholders who profited by their 
operations. 
     Deposits on the upper level of the pyramid were called by this 
name, with typical bankers' ambiguity, in spite of the fact that they 
consisted of two utterly different kinds of relationships: 
1) "lodged deposits" which were real claims left by a depositor in a 
bank on which a depositor might receive interest; and
2) "created deposits" which were claims created by the bank out of 
nothing as loans from the bank to "depositors" who had to pay interest 
on them. 
     Both form part of the money supply. Lodged deposits as a form of 
savings are deflationary while created deposits, being an addition to 
the money supply, are inflationary. 
Page 55
     The volume of deposits banks can create, like the amount of notes 
they can issue, depends upon the volume of reserves available to pay 
whatever fraction of checks are cashed rather than deposited. In the 
United States, deposits were traditionally limited to ten times 
reserves notes and gold. In Britain it was usually nearer twenty times 
such reserves. In most countries, the central bank was surrounded 
closely by the almost invisible private investment banking firms. 
These, like the planet Mercury, could hardly be seen in the dazzle 
emitted by the central bank, which they, in fact, often dominated. Yet 
a lost observer could hardly fail to notice the close private 
associations between these private, international bankers and the 
central bank itself. In France, in 1936, the Board of the Bank of 
France was still dominated by the names of the families who had 
originally set it up in 1800. 
     In England, a somewhat similar situation existed. In a secondary 
ring are the "joint stock banks." Outside this secondary ring are the 
savings banks, insurance firms, and trust companies. 
     In France and England the private bankers exercised their powers 
through the central bank and had much more influence on the government 
and foreign policy and less on industry. In the United States, much 
industry was financed by investment bankers directly and the power of 
these both on industry and government was very great. 
Page 57
     The various parts of the pyramid of money were but loosely 
related to each other. Much of this looseness arose from the fact that 
the controls were compulsive in a deflationary direction and were only 
permissive in an inflationary direction. This last point can be seen 
in the fact that the supply of gold could be decreased but could 
hardly be increased. If an ounce of gold was added to the point of the 
pyramid, it could permit an increase in deposits equivalent to $2067 
on the uppermost level. If such an ounce of gold were withdrawn from a 
fully expanded pyramid of money, this would compel a reduction of 
deposits by at least this amount, probably by a refusal to renew 
loans.
     Throughout modern history, the influence of the gold standard has 
been deflationary, because the natural output of gold each year, 
except in extraordinary times, has not kept pace with the increase in 
the output of goods. Only new supplies of gold or the development of 
new kinds of money have saved our civilization over the last couple of 
centuries. The three great periods of war ended with an extreme 
deflationary crisis (1819, 1873, 1921) as the influential Money Power 
persuaded governments to re-establish a deflationary monetary unit 
with a high gold content. 
     The obsession of the Money Power with deflation was partly a 
result of their concern with money rather than with goods but was also 
founded on other factors, one of which was paradoxical. The paradox 
arose from the fact that the basic economic conditions of the 
nineteenth century were deflationary, with a monetary system based on 
gold and an industrial system pouring out increasing supplies of goods 
but in spite of falling prices, the interest rate tended to fall 
rather than rise. Moreover, merchant banking continued to emphasize 
bonds rather than equity securities (stocks), to favor government 
issues rather than private offerings. 
     Another paradox of banking practice arose from the fact that 
bankers, who loved deflation, often acted in an inflationary fashion 
from their eagerness to lend money at interest. Since they make money 
out of loans, they are eager to increase the amounts of bank credit on 
loan. But this is inflationary. The conflict between the deflationary 
ideas and inflationary practices of bankers had profound repercussions 
on business. The bankers made loans to business so that the volume of 
money increased faster than the increase of goods. The result was 
inflation. When this became clearly noticeable, the bankers would flee 
to notes or specie by curtailing credit and raising discount rates. 
This was beneficial to the bankers in the short run (since it allowed 
them to foreclose on collateral for loans) but it could be disastrous 
to them in the long run (by forcing the value of the collateral below 
the amount of the loans it secured). But such bankers' deflation was 
destructive to business and industry in the short run as well as the 
long run. 
Page 59
     The resulting fluctuation in the supply of money, chiefly 
deposits, was a prominent aspect of the "business cycle." The quantity 
of money could be changed by changing reserve requirements or discount 
(interest) rates. Central banks can usually vary the amount of money 
in circulation by "open market operations" or by influencing the 
discount rates of lesser banks. In open market operations, a central 
bank buys or sells government bonds in the open market. If it buys, it 
releases money into the economic system; it if sells it reduces the 
amount of money in the community. If the Federal Reserve Bank buys, it 
pays for these by checks which are soon deposited in a bank. It thus 
increases this bank's reserves with the Federal Reserve Bank. Since 
banks are permitted to issue loans for several times the value of 
their reserves with the FED, such a transaction permits them to issue 
loans for a much larger sum. 
     Central banks can also change the quantity of money by raising 
the discount rate which forces the lesser banks to raise their 
discount rates; such a raise in interest rates tends to reduce the 
demand for credit and thus the amount of deposits (money). Lowering 
the discount rate permits an opposite result. 
     It is noted that the control of the central bank over the credit 
policies of local banks are permissive in one direction and compulsive 
in the other. They can compel these local banks to curtail credit and 
can only permit them to increase credit. This means that they have 
control powers against inflation and not deflation - a reflection of 
the old banking idea that inflation was bad and deflation was good. 
     
Page 60
     The powers of governments over the quantity of money are: 
a) control over a central bank;
b) control over public taxation;
c) control over public spending;
     Since most central banks have been (technically) private 
institutions, this control is frequently based on custom rather than 
on law. 
     Taxation tends to reduce the amount of money in a community and 
is usually a deflationary force. Government spending is usually an 
inflationary force. 
     On the whole, in the period up to 1931, bankers, especially the 
Money Power controlled by the international investment bankers, were 
able to dominate both business and government. They could dominate 
business because investment bankers had the ability to supply or 
refuse to supply such capital. Thus Rothschild interests came to 
dominate many of the railroads of Europe, while Morgan dominated at 
least 26,000 miles of American railroads. Such bankers took seats on 
the boards of directors of industrial firms, as they had already done 
on commercial banks, savings banks, insurance firms, and finance 
companies. From these lesser institutions, they funneled capital to 
enterprises which yielded control and away from those who resisted. 
These firms were controlled through interlocking directorships, 
holding companies, and lesser banks. 
Page 61
     As early as 1909,Walter Rathenau said, "Three hundred men, all of 
whom know one another, direct the economic destiny of Europe and 
choose their successors from among themselves."
     The power of investment bankers over governments rests on the 
need of governments to issue short-term treasury bills as well as 
long-term government bonds. Just as businessmen go to commercial banks 
for current capital advances, so a government has to go to merchant 
bankers to tide over the shallow places caused by irregular tax 
receipts. As experts in government bonds, the international bankers 
provided advice to government officials and, on many occasions, placed 
their own members in official posts. This was so widely accepted even 
today, that in 1961 a Republican investment banker became Secretary of 
the Treasury in a Democratic administration in Washington without 
significant comment from any direction. 
     Naturally, the influence of bankers over governments during the 
age of financial capitalism (roughly 1850-1931) was not something 
about which anyone talked about freely, but it has been admitted 
freely enough by those on the inside, especially in England. In 1842, 
Gladstone, chancellor of the Exchequer, declared "The hinge of the 
whole situation was this: the government itself was not to be the 
substantive power in matters of Finance, but was to leave the Money 
Power supreme and unquestioned." On Sept. 26, 1921, the Financial 
Times wrote, "Half a dozen men at the top of the Big Five Banks could 
upset the whole fabric of government finance by refraining from 
renewing Treasury Bills." In 1924, Sir Drummond Fraser, vice-president 
of the Institute of Bankers, stated, "The Governor of the Bank of 
England must be the autocrat who dictates the terms upon which alone 
the Government can obtain borrowed money." 
Page 62
     In addition to their power over government based on government 
financing and personal influence, bankers could steer governments in 
ways they wished them to go by other pressures. Since most government 
officials felt ignorant of finance, they sought advice from bankers 
whom they considered experts in the field. The history of the last 
century shows that the advice given to governments by bankers, like 
the advice they gave to industrialists, was consistently good for 
bankers but was often disastrous for governments, businessmen and the 
people generally. 
     Such advice could be enforced if necessary by manipulation of 
exchanges, gold flows, discount rates, and even levels of business 
activity. Thus Morgan dominated Cleveland's second administration by 
gold withdrawals, and in 1936-13 French foreign exchange manipulators 
paralyzed the Popular Front governments. The powers of these 
international bankers reached their peak in 1919-1931 when Montagu 
Norman and J.P. Morgan dominated not only the financial world but 
international relations and other matters as well. On Nov. 11, 1927, 
the Wall Street Journal called Mr. Norman "the currency dictator of 
Europe." This was admitted by Mr. Norman who said, "I hold the 
hegemony of the world." 
     The conflict of interests between bankers and industrialists has 
resulted in the subordination of the bankers (after 1931) to the 
latter by the adoption of "unorthodox financial policies" - that is, 
financial policies not in accordance with the short-run interests of 
the bankers. 
THE UNITED STATES TO 1917
Page 71
     The civil service reform began in the federal government with the 
Pendleton Bill of 1883. As a result, the government was controlled 
with varying degrees of completeness by the forces of investment 
banking and heavy industry from 1884 to 1933. Popularly known as 
"Society," or the "400," they lived a life of dazzling splendor.  
Page 72
     The structure of financial control created by the tycoons of "Big 
Banking" and "Big Business" in the period 1880-1933 was of 
extraordinary complexity, one business fief being built upon another, 
both being allied with semi-independent associates, the whole rearing 
upward into two pinnacles of economic and financial power, of which 
one, centered in New York, was headed by J.P. Morgan and Company, and 
the other, in Ohio, was headed by the Rockefeller family. When these 
two cooperated, as they generally did, they could influence the 
economic life of the country to a large degree and could almost 
control its political life, at least on the federal level. 
     The influence of these business leaders was so great that the 
Morgan and Rockefeller groups acting together, or even Morgan acting 
alone, could have wrecked the economic system of the country merely by 
throwing securities on the stock market for sale, and having 
precipitated a stock market panic, could then have bought back the 
securities they had sold but at a lower price. Naturally, they were 
not so foolish as to do this, although Morgan came very close to it in 
precipitating the "panic of 1907," but they did not hesitate to wreck 
individual corporations, at the expense of holders of common stock, by 
driving them to bankruptcy. In this way, Morgan wrecked the New York, 
New Haven and Hartford railroad before 1914 and William Rockefeller 
wrecked the Chicago, Milwaukee, St. Paul and Pacific Railroad before 
1925. 
Page 73
     The discovery by financial capitalists that they made money out 
of issuing and selling securities rather than out of production, 
distribution and consumption of goods accordingly led them to the 
point where they discovered that the exploiting of an operating 
company by excessive issuance of securities or the issuance of bonds 
rather than equity securities not only was profitable to them but made 
it possible for them to increase their profits by bankruptcy of the 
firm, providing fees and commission of reorganization as well as the 
opportunity to issue new securities. 
     When the business interests pushed through the first installment 
of the civil service reform in 1881, they expected to control both 
political parties equally. Some intended to contribute to both and to 
allow an alternation of the two parties in public office in order to  
conceal their own influence, inhibit any exhibition of independence by 
politicians, and allow the electorate to believe that they were 
exercising their own free choice. 
     The inability of the investment bankers to control the Democratic 
Party Convention of 1896 was a result of the agrarian discontent of 
the period 1868-1896. This discontent was based very largely on the 
monetary tactics of the banking oligarchy. The bankers were wedded to 
the gold standard and at the end of the Civil War, persuaded the Grant 
administration to curb the postwar inflation and go back on the gold 
standard (crash of 1873 and resumption of specie payment in 1875). 
Page 74
     This gave the bankers a control of the supply of money which they 
did not hesitate to use for their own  purposes. The bankers' 
affection for low prices was not shared by farmers, since each time 
prices of farm products went down, the burden of farmers' debts became 
greater. As farmers could not reduce their costs or modify their 
production plans, the result was a systematic exploitation of the 
agrarian sectors of the community by the financial and industrial 
sectors. This exploitation took the form of high industrial prices and 
discriminatory railroad rates, high interest charges, low farm prices 
and very low level of farm services. 
     Unable to resist by economic weapons, the farmers turned to 
political relief. They tried to work on the state political level 
through local legislation (so-called Granger Laws) and set up third-
party movements (like the Greenback Party of 1878 or the Populist 
Party in 1892). By 1896, the capture of the Democratic Party by the 
forces of discontent under William Jennings Bryant who was determined 
to obtain higher prices by increasing the supply of money on a 
bimetallic rather than a gold basis, presented the electorate with an 
election on a social and economic issue for the first time in a 
generation. Though the forces of high finance were in a state of near 
panic, by a mighty effort involving very large-scale spending they 
were successful in electing McKinley. 
     Though the plutocracy were unable to control the Democratic Party 
as they controlled the Republican Party, they did not cease their 
efforts to control both and in 1904 and 1924, Morgan was able to sit 
back with a feeling of satisfaction to watch presidential elections in 
which the candidates of both parties were in his sphere of influence. 
Page 75
     The agrarian discontent, the growth of monopolies, the oppression 
of labor, and the excesses of Wall Street financiers made the country 
very restless between 1890-1900. All this could have been alleviated 
merely by increasing the supply of money sufficiently to raise prices 
somewhat, but the financiers were determined to defend the gold 
standard no matter what happened. 
     In looking for some issue to distract public discontent from 
domestic issues, what better solution than a crisis in foreign 
affairs? Cleveland had stumbled upon this alternative in 1895 when he 
stirred up controversy with England over Venezuela. The great 
opportunity came with the Cuban revolt against Spain in 1895. While 
the "yellow press" roused public opinion, Henry Cabot Lodge and 
Theodore Roosevelt plotted how they could best get the United States 
into the fracas. They got the excuse they needed when the American 
battleship Maine was sunk by a mysterious explosion in Havana Harbor 
in 1898. In two months, the United States declared war on Spain to 
fight for Cuban independence. The resulting victory revealed the 
United States as a world naval power, established it as an imperialist 
power with possession of Puerto Rico, Guam, and the Philippines. 
     America's entrance upon the stage as a world power continued with 
the annexation of Hawaii in 1898, the intervention in the Boxer 
uprising in 1900, the seizure of the Panama canal in 1903, the 
diplomatic intervention in the Russo-Japanese war in 1905, the 
military occupation of Nicaragua in 1912, the military intervention in 
Mexico in 1916. 
Page 76
     As an example of the more idealistic impulse we might mention the 
creation of various Carnegie foundations to work for universal peace. 
As an example of the more practical point of view, we might mention 
the founding of "The New Republic," a liberal weekly paper, by an 
agent of Morgan financed with Whitney money (1914). 
     The combined forces of the liberal East and the agrarian West 
were able to capture the Presidency under Woodrow Wilson in 1912. 
Wilson roused a good deal of popular enthusiasm with his talk of "New 
Freedom" and the rights of the underdog, but his program amounted to 
little more than an amateur attempt to establish on a federal basis 
those reforms which agrarian and labor discontent had been seeking on 
a state basis for many years. Wilson was by no means a radical and 
there was a good deal of unconscious hypocrisy in many of his 
resounding public speeches. His political and administrative reforms 
were a good deal more effective than his economic or social reforms. 
The establishment of an income tax and the Federal Reserve System 
justified the support which Progressives had given to Wilson. Wilson 
did much to extend equality of opportunity to wider groups of American 
people. 
CHAPTER III: THE RUSSIAN EMPIRE TO 1917
Page 88
     The abolition of serfdom made it necessary for the landed 
nobility to cease to regard the peasants as private property. Peter 
the Great (1689-1725) and Catherine the Great (1762-1796) were 
supporters of westernization and reform. Paul I (1796-1801) was 
reactionary. Alexander I (1801-1825) and Alexander II (1855-1881) were 
reformers while Nicholas I (1825-1855) and Nicholas II (1855-1881) 
were reactionaries. By 1864, serfdom had been abolished, and a fairly 
modern system of law, of justice, and of education had been 
established; local government had been somewhat modernized; a fairly 
good financial and fiscal system had been established; and an army 
based on universal military service (but lacking in equipment) had 
been created. On the other hand, the autocracy continued in the hands 
of weak men and the freed serfs had no adequate lands. 
Page 93
     The first Russian railroad opened in 1838 but growth was slow 
until 1857. At that time, there were only 663 miles of railroads, but 
this figure went up over tenfold by 1871, doubled again by 1881 with 
14,000 miles, reached 37,000 by 1901 and 46,000 by 1915.
Page 94
     In 1900, Russia had 48% of the total world production of 
petroleum products. The State Bank was made a bank of issue in 1897 
and was required by law to redeem its notes in gold, thus placing 
Russia on the international gold standard. 
Page 97
     In 1902, a cartel created by a dozen iron and steel firms handled 
almost three-fourths of all Russian sales. It was controlled by four 
foreign banking groups. 
Page 100
     Until 1910, Stolypin continued his efforts to combine oppression 
with reform, especially agrarian reform. Rural credit banks were 
established; various measures were taken to place larger amounts of 
land in the hands of the peasants; restrictions of immigration of 
peasants, especially to Siberia, were removed; participation in local 
government was opened to lower social classes previously excluded; 
education, especially technical education, was made more accessible; 
and certain provisions for social insurance were enacted into law. He 
was assassinated in the presence of the Tsar in 1911. 
     The fourth duma (1912-1916) was elected by universal suffrage. 
CHAPTER IV: THE BUFFER FRINGE 
THE NEAR EAST TO 1914
Page 111
     The Ottoman Empire was divided into 21 governments and subdivided 
into seventy vilayets, each under a pasha. The supreme ruler in 
Constantinople was not only sultan (head of the empire) but was also 
caliph (defender of the Muslim creed). 
Page 121
     The Great Powers showed mild approval of the Baghdad Railway 
until about 1900. Then, for more than ten years, Russia, Britain and 
France showed violent disapproval and did all they could the obstruct 
the project. They described the Baghdad Railway as the emerging wedge 
of German imperialist aggression seeking to weaken and destroy the 
Ottoman Empire and the stakes of the other powers in the area. 
Page 122
     The Germans were not only favorably inclined toward Turkey; their 
conduct seems to have been completely fair in regard the 
administration of the railway itself. At a time when the American and 
other railways were practicing wholesale discrimination between 
customers, the Germans had the same rates and same treatment for all, 
including Germans and non-Germans. They worked to make the railroad 
efficient and profitable although their income from it was guaranteed 
by the Turkish government. In consequence, the Turkish payments to the 
railroad steadily declined, and the government was able to share in 
its profits to the extent of almost three million francs in 1914. 
Moreover, the Germans did not seek to monopolize control of the 
railroad, offering to share equally with France and England and 
eventually with the other Powers. France accepted this offer in 1899, 
but Britain continued to refuse and placed every obstacle in the path 
of the project. 
     When the Ottoman government sought to raise their customs duties 
from 11% to 14% in order to continue construction, Britain prevented 
this. In order to carry on the project, the Germans sold their 
railroad interests in the Balkans and gave the Ottoman building 
subsidy of $275,000 a kilometer. In striking contrast, the Russians 
demanded arrears of 57 million francs under the Treaty of 1878. The 
French, in spite of investments in Turkey, refused to allow Baghdad 
Railway securities to be handled on the Paris Stock Exchange. 
Page 123
     In 1903, Britain made an agreement for a joint German, French, 
and British control of the railroad. Within three weeks this agreement 
was repudiated because of newspaper protests against it. When the 
Turkish government tried to borrow, it was summarily rebuffed in Paris 
and London, but obtained the sum unhesitatingly in Berlin. The growth 
of German prestige and the decline in favor of the Western Powers at 
the sultan's court is not surprising and goes far to explain the 
Turkish intervention on the side of the Central powers in the war of 
1914-1919. 
     Britain withdrew her opposition to the Baghdad Railway in return 
for promises that:
1) it would not be extended to the Persian Gulf;
2) British capitalists would be given a monopoly on the navigation of 
the Euphrates and Tigris rivers and exclusive control over their 
irrigation projects;
3) 2 British subjects would be given seats on the Board of directors;
4) Britain would have exclusive control over commercial activities in 
Kuwait, the only good port on the upper Persian Gulf;
5) a monopoly over the oil resources given to a new corporation: Royal 
Dutch Shell Company in which British held half interest, the Germans 
and French a quarter interest each;
THE BRITISH IMPERIAL CRISIS TO 1926
Page 127
     In England, the landed class obtained control of the bar and the 
bench and were, thus, in a position to judge all disputes about real 
property in their favor. Control of the courts and of the Parliament 
made it possible for this ruling group to override the rights of 
peasants in land, to eject them from the land, to enclose the open 
fields of the medieval system, to deprive the cultivators of their 
manorial rights and thus reduce them to the condition of landless 
rural laborers or tenants. 
Page 130
     Until 1870, there was no professorships of Fine Arts at Oxford, 
but in that year, thanks to a bequest,John Ruskin was named to such a 
chair. He hit Oxford like an earthquake, not so much because he talked 
about fine arts but because he talked about the empire and England's 
downtrodden masses as moral issues. Until the end of the nineteenth 
century, the poverty-stricken masses in the cities lived in want, 
ignorance and crime much like described by Charles Dickens. Ruskin 
spoke to the Oxford undergraduates as members of the privileged ruling 
class. He told them that they were the possessors of a magnificent 
tradition of education, beauty, rule of law, freedom, decency, and 
self-discipline but that this tradition could not be saved and did not 
deserve to be saved, unless it could be extended to the lower classes 
and to the non-English masses throughout the world. If not extended to 
these classes, the minority upper-class would be submerged and the 
tradition lost. 
     Ruskin's message had a sensational impact. His inaugural lecture 
was copied out in longhand by one undergraduate, Cecil Rhodes. Rhodes 
feverishly exploited the diamond and gold fields of South Africa, rose 
to be prime minister of Cape Colony, contributed money to political 
parties, controlled parliamentary seats both in England and South 
Africa. 
     With financial support from Lord Rothschild, he was able to 
monopolize the diamond mines as De Beers Mines and Gold Fields. In the 
mid 1890s, Rhodes had a personal income of a least a million pounds 
(then five million dollars) a year which was spent so freely for his 
mysterious purposes that he was usually overdrawn on his account. 
These purposes centered on his desire to federate the English-speaking 
peoples and to bring all the habitable portions of the world under 
their control. 
Page 131
     Among Ruskin's most devoted disciples at Oxford were a group of 
intimate friends who devoted the rest of their lives to carrying out 
his ideas. They were remarkably successful in these aims. 
     In 1891, Rhodes organized a secret society with members in a 
"Circle of Initiates" and an outer circle known as the "Association of 
Helpers" later organized as the Round Table organization. 
Page 132
     In 1909-1913, they organized semi-secret groups know as Round 
Table Groups in the chief British dependencies and the United States. 
In 1919, they founded the Royal Institute of International Affairs. 
Similar Institutes of International Affairs were established in the 
chief British dominions and the United States where it is known as the 
Council on Foreign Relations. After 1925, the Institute of Pacific 
Relations was set up in twelve Pacific area countries. 
Page 133
     They were constantly harping on the lessons to be learned from 
the failure of the American Revolution and the success of the Canadian 
federation of 1867 and hoped to federate the various parts of the 
empire and then confederate the whole with the United Kingdom
EGYPT AND THE SUDAN TO 1922
     Disraeli's purchase, with Rothschild money, of 176,602 shares of 
Suez Canal stock for #3,680,000 from the Khedive of Egypt in 1875 was 
motivated by concern for communications with India just as the 
acquisition of the Cape of Good Hope in 1814 had resulted from the 
same concern. 
Page 135
     As a result of complex and secret negotiations in which Lord 
Rosebery was the chief figure, Britain kept Uganda, Rhodes was made a 
privy councilor, Rosebery replaced his father-in-law, Lord Rothschild, 
in Rhodes secret group and was made a trustee under Rhodes' next and 
last will. 
Page 137
     By 1895, the Transvaal Republic presented an acute problem. All 
political control was in the hands of a rural, backward, Bible-
reading, racist minority of Boers while all economic wealth was in the 
hands of a violent, aggressive majority of foreigners, (Utlanders) 
most of whom lived in Johannesburg. The Utlanders, who were twice as 
numerous and owned two thirds of the land and nine-tenths of the 
wealth of the country, were prevented from participating in political 
life or from becoming citizens (except after 14 years residence) and 
were irritated by President Paul Kruger's intriguing to obtain some 
kind of German intervention and protection. 
     At this point, Rhodes made his plans to overthrow Kruger's 
government by an uprising in Johannesburg, financed by himself and led 
by his brother Frank, followed by an invasion led by Frank Jameson 
from Rhodesia. Flora Shaw used The Times to prepare public opinion in 
England while others negotiated for the official support necessary. 
     When the revolt fizzled, Jameson raided anyway and was easily 
captured by the Boers. The public officials involved denounced the 
plot, loudly proclaimed their surprise at the event, and were able to 
whitewash most of the participants in the subsequent parliamentary 
inquiry. A telegram from the German Kaiser to Kruger congratulating 
him on his success "in preserving the independence of his country," 
was built up by The Times into an example of brazen German 
interference in British affairs, and almost eclipsed Jameson's 
aggression. 
     Rhodes was stopped only temporarily. For almost two years, he and 
his friends stayed quiet waiting for the storm to blow over. Then they 
began to act again. Propaganda, most of it true about the plight of 
the Utlanders flooded England from Flora Shaw. Milner was made British 
High Commissioner to South Africa; his friend Brett worked his way 
into the confidence of the monarchy to become its chief political 
advisor. Milner made provocative British troop movements on the Boer 
frontiers in spite of the vigorous protests of his commanding general 
in South Africa, who had to be removed; and finally, war was 
precipitated when Smuts drew up an ultimatum insisting that the 
British troop movements cease and when this was rejected by Milner. 
Page 138
     The Boer War (1899-1902) was one of the most important events in 
British imperial history. The ability of 40,000 Boer farmers to hold 
off ten times as many British for three years, inflicting a series of 
defeats on them over that period, destroyed faith in British power. 
Although the Boer republics were defeated and annexed in 1902, 
Britain's confidence was so shaken that it made a treaty with Japan 
providing that if either became engaged in war with two enemies in the 
Far East, the other would come to the  rescue. This treaty allowed 
Japan to attack Russia in 1904.
     
Page 138 
     Milner's group, known as "Milner's Kindergarten" reorganized the 
government. By 1914, the Smuts government passed a law excluding 
natives from most semi-skilled or skilled work or any high-paying 
positions. 
Page 139 
     By the Land Act of 1913, 7% was reserved for purchases by natives 
and the other 93% by whites. The wages of natives were about one tenth 
of those of whites. 
Page 141
     These natives lived on inadequate and eroded reserves or in 
horrible urban slums and were drastically restricted in movements, 
residence, or economic opportunities and had almost no political or 
even civil rights. By 1950 in Johannesburg, 90,000 Africans were 
crowded into 600 acres of shacks with no sanitation with almost no 
running water and denied all opportunity except for animal survival 
and reproduction. 
Page 142
     In 1908, the Milner Round Table group worked a scheme to reserve 
the tropical portions of Africa north of the Zambezi river for natives 
under such attractive conditions that the blacks south of that river 
would be enticed to migrate northward. Its policy would be to found a 
Negro dominion in which Blacks could own land, enter professions, and 
stand on a footing of equality with Whites. Although this project has 
not been achieved, it provides the key to Britain's native policies 
from 1917 onward. 
Page 143
     In 1903, when Milner took over the Boer states, he tried to 
follow the policy that native could vote. This was blocked by the 
Kindergarten because they considered reconciliation with the Boers to 
be more urgent. 
     In South Africa, the three native protectorates of Swaziland, 
Bechuanaland, and Basutoland were retained by the imperial authorities 
as areas where native rights were paramount and where tribal forms of 
living could be maintained at least partially. 
MAKING THE COMMONWEALTH 1910-1926
Page 144
     Back in London, they founded the Round Table and met in conclaves 
presided over by Milner to decide the fate of the empire. Curtis and 
others were sent around the world to organize Round Table groups in 
the chief British dependencies to give them, including India and 
Ireland, their complete independence. 
Page 146
     The creation of the Round Table groups was so secretive that, 
even today, many close students of the subject are not aware of its 
significance. 
Page 147
     Curtis said, "The task of preparing for freedom the races which 
cannot as yet govern themselves is the supreme duty of those who can. 
Personally, I regard this challenge to the long unquestioned claim of 
the white man to dominate the world as inevitable and wholesome, 
especially to ourselves. Our whole race has outgrown the merely 
national state and will pass either to a Commonwealth of Nations or 
else to an empire of slaves. And the issue of these agonies rests with 
us." 
EAST AFRICA 1910-1931
Page 149 
     Publicity for their views on civilizing the natives and training 
them for eventual self-government received wide dissemination. 
Page 150
     By 1950 Kenya had discontented and detribalized blacks working 
for low wages on lands owned by whites. It had about two million 
blacks and only 3,400 whites in 1910. Forty years later, it had about 
4 million blacks and only 30,000 whites. The healthful highlands were 
reserved for white ownership as early as 1908. The native reserves had 
five times as much land although they had 150 times as many people.
     The whites tried to increase the pressure on natives to work on 
white farms rather than to seek to make a living on their own lands 
within the reserves, by forcing them to pay taxes in cash, by 
curtailing the size or quality of the reserves, by restricting 
improvements in native agricultural techniques and by personal and  
political pressure and compulsion. 
     The real crux of the controversy before the Mau Mau uprising of 
1948-1955 was the problem of self-government; Pointing to South 
Africa, the settlers in Kenya demanded self-rule which would allow 
them to enforce restrictions on non-whites. 
Page 151
     From this controversy came a compromise which gave Kenya a 
Legislative Council containing representatives of the imperial 
government, the white settlers, the Indians, the Arabs, and a white 
missionary to represent the blacks. Most were nominated rather than 
elected but by 1949, only the official and Negro members were 
nominated. 
Page 152
     As a result of the 1923 continued encroachment of white settlers 
on native preserves, the 1930 Native Land Trust Ordinance guaranteed 
native reserves but these reserves remained inadequate. 
Page 153
     Efforts to extend the use of native courts, councils and to train 
natives for an administrative service were met with growing suspicion 
based on the conviction that the whites were hypocrites who taught a 
religion that they did not obey, were traitors to Christ's teachings, 
and were using these to control the natives and to betray their 
interests under cover of religious ideas which the whites themselves 
did not observe in practice. 
INDIA TO 1926
     Although the East India Company was a commercial firm, it had to 
intervene again and again to restore order, replacing one nominal 
ruler by another and even taking over the government of those areas 
where it was more immediately concerned and to divert to their own 
pockets some of the fabulous wealth they saw flowing by. Areas under 
rule expanded steadily until by 1858 they covered three-fifths of the 
country. 
Page 154
     In 1857-1858, a sudden, violent insurrection of native forces, 
known as the Great Mutiny, resulted in the end of the Mogul empire and 
of the East India Company, the British government taking over their 
political activities. 
Page 157
     Numerous legislative enactments sought to improve the conditions 
but were counterbalanced... by the growing burden of peasant debt at 
onerous terms and at high interest rates. Although slavery was 
abolished in 1843, many of the poor were reduced to peonage by 
contracting debts at unfair terms and binding themselves and their 
heirs to work for their creditors until the debt was paid. Such a debt 
could never be paid, in many cases, because the rate at which it was 
reduced was left to the creditor and could rarely be questioned by the 
illiterate debtor.
Page 158
     In spite of India's poverty, there was a considerable volume of 
savings arising chiefly from the inequitable distribution of income to 
the landlord class and to the moneylenders (if these two groups can be 
separated in this way).
Page 161
     Hinduism was influenced by Christianity and Islam so that the  
revived Hinduism was really a synthesis of these three religions. 
Played down was the old and basic Hindu idea of Karma where each would 
reappeared again and again in a different physical form and in a 
different social status, each difference being a reward or punishment 
for the soul's conduct in at it's previous appearance. There was no 
real hope of escape from this cycle, except by a gradual improvement 
through a long series of successive appearances to the ultimate goal 
of complete obliteration of personality (Nirvana) by ultimate mergence 
in the soul of the universe (Brahma). This release (moksha) from the 
endless cycle of existence could be achieved only by the suppression 
of all desire, of all individuality and of all will to live. 
IRELAND TO 1939
Page 173
     The Cromwellian conquest of Ireland in the seventeenth century 
had transferred much Irish land, as plunder of war, to absentee 
English landlords. In consequence, high rents, insecure tenure, lack 
of improvements and legalized economic exploitation, supported by 
English judges and English soldiers, gave rise to violent agrarian 
unrest and rural atrocities against English lives and properties. 
THE FAR EAST TO WORLD WAR I
THE COLLAPSE OF CINA TO 1920
Page 176
     The destruction of traditional Chinese culture under the impact 
of Western Civilization was considerably later than the similar 
destruction of Indian culture by Europeans
     The upper-most group derived its income as tribute and taxes from 
its possession of military and political power the middle group 
derived its incomes from sources such as interest on loans, rents from 
lands and the profits from commercial enterprises. Although the 
peasants were clearly an exploited group, this exploitation was 
impersonal and traditional and thus more easily borne. 
Page 179
     Only in the late nineteenth and early twentieth century did 
peasants in China come to regard their positions as so hopeless that 
violence became preferable to diligence or conformity. This change 
arose from the fact that the impact of Western culture on China did, 
in fact, make a peasant's position economically hopeless. 
     
Page 180
     Chinese society was too weak to defend itself against the West. 
When it tried to do so, as in the Opium Wars of 1840-1861 or in the 
Boxer uprising of 1900, such Chinese resistance to European 
penetration was crushed by armaments of the Western Powers and all 
kinds of concessions to these Powers were imposed on China. 
     Until 1841, Canton was the only port allowed for foreign imports 
and opium was illegal. As a consequence of Chinese destruction of 
illegal Indian opium and the commercial exactions of Cantonese 
authorities, Britain imposed on China the treaties of Nanking (1842) 
and of Tientsin (1858). These forced China to cede Hong Kong to 
Britain and to open sixteen ports to foreign trade, to impose a 
uniform import tariff of no more than 5%, to pay an indemnity of about 
$100 million, to permit foreign legations in Peking, to allow a 
British official to act as head of the Chinese customs service, and to 
legalize the import of opium. China lost Burma to Britain, Indochina 
to France. Also Formosa and the Pescadores to Japan, Macao to 
Portugal, Kiaochow to Germany, Liaotung (including Port Arthur) to 
Russia, France took Kwangchowan and Britain took Kowloon and 
Weihaiwei. Various Powers imposed on China a system of 
extraterritorial courts under which foreigners in judicial cases could 
not be tried in Chinese courts or under Chinese law. 

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