The Confederate States of America (CSA), had it survived the Civil War, would have been a de facto tributary state of the British empire—formally independent, but in practice an economic colony of industrial Britain. Apologists for the Confederacy who claim that the secession of the Southern states was motivated by fear of tariffs rather than the defense of slavery have always been unpersuasive. Nevertheless, it is true that the Confederate planter class planned for their agrarian economy to complement, rather than compete with, industrializing countries—including the United States as well as Britain, France, and Germany. In his First Inaugural Address, Confederate President Jefferson Davis made it explicit that the CSA would specialize in exporting cotton to the factories of Britain and the shrunken remnant of the United States, rather than seek to compete with them in manufacturing:

An agricultural people, whose chief interest is the export of a commodity required in every manufacturing country, our true policy is peace, and the freest trade which our necessities will permit. It is alike our interest, and that of all those to whom we would sell and from whom we would buy, that there should be the fewest practicable restrictions upon the interchange of commodities. There can be but little rivalry between ours and any manufacturing or navigating community, such as the Northeastern States of the American Union.

The South’s lack of the military-industrial capacity of the Northern state meant that an ignominious defeat was all but inevitable in the absence of British intervention. By the end of the Civil War, the Confederate elite was confronted with a stark choice: it could maintain its independence by centralizing power in the new national government, engaging in a crash program of state-sponsored industrialization from above, and perhaps freeing and arming Southern slaves—in other words, by revolutionizing the very social order that secession was supposed to preserve. In any event, following Reconstruction, the Southern oligarchy, through anti-Black terrorism and the repression of white populists, managed to restore and maintain a privileged position that was only undermined generations later by the mechanization of agriculture, the industrialization of the Sun Belt, and federal civil rights enforcement in the second half of the twentieth century.

Like the Southern planter class, many oligarchies in Latin America have preferred to be the dominant elites in de facto resource colonies that export commodities to the industrial nations rather than risk the loss of their own social positions that might result from the enrichment of the majorities in their countries by state-sponsored programs of national industrial modernization. And as Roberto Unger has pointed out, the refusal of Latin American countries to participate in the world wars, except at the margins, forestalled the danger that armed and mobilized masses would demand more political power and a greater share of the wealth in return for wartime sacrifice. A similar pattern can be seen in post-colonial regimes in the Middle East, Africa, and elsewhere, in which reliance on exporting commodities like oil and gas allows local oligarchies to avoid empowering their subjects. In the case of the petrostates of the Persian Gulf, despotic monarchies like that of Saudi Arabia and Qatar do not even have to arm and enfranchise their own people to defend their countries; they can depend on the U.S. military to protect them.

THE FACT that socio-economic elites, not states, are the actual actors in world politics explains two puzzling historical episodes: the failure of Britain in the 1900s to respond to the rising industrial power of Germany and the United States, and the latter’s massive offshoring of its own manufacturing capability to Communist China from the 1990s to the 2010s. In each case, a powerful bloc of economic interests chose to sacrifice the national military power and independence of their own country to maximize their short-term personal profits.

Between the sixteenth century and the nineteenth, Britain became the first industrial nation in the world by pursuing a sophisticated program of national development, based on protectionism, bans on the export of technology, skilled immigration, and laws requiring its North American and Indian colonies to buy British manufactured goods rather than manufacturing for themselves. In the 1840s and 1850s, no longer needing to protect its domestic industries and seeking to open up export markets, the British abruptly abandoned protectionism and began to preach global free trade. Free trade, they hoped, would help to lock in Britain’s lead in manufacturing by encouraging Britain’s trading partners to forego manufacturing for themselves, while competing with each other to provide British factories with cheap inputs like cotton and other raw materials and British factory workers with cheap food.

Most Latin American countries, along with the short-lived Confederate States of America, accepted the offer to function as resource colonies for industrial Britain. But the British offer was rejected by the United States during and after the Civil War and by Imperial Germany after it was consolidated in 1871. Abraham Lincoln’s America and Otto von Bismarck’s Germany used protectionism and other policies to build up their own industries to compete with those of the United Kingdom. 

By the late nineteenth century, British manufacturers were being driven out of their home market as well as global markets by floods of American and German imports. Members of the British “national efficiency school”—a diverse coalition of liberal nationalists like Joseph Chamberlain, hawkish conservative imperialists and technocratic collectivists like Sidney and Beatrice Webb, H.G. Wells, and George Bernard Shaw—called upon Britain to defend its industrial might by consolidating the entire British empire, or perhaps only the home islands and “white dominions” like Canada and Australia, into a single protected market.

Instead, Britain clung to the unilateral free trade policy which it had adopted in the mid-nineteenth century, and which had made sense only when Britain had no major industrial rivals. The warnings of the national efficiency school were vindicated when Britain was subjected to attack by technologically-advanced Germany in the two world wars, while losing even industries it helped to invent like the jet airliner and television and computer industries to the United States. Today, post-imperial Britain is, in effect, a tributary state of the United States.

Why did Britain spurn the protectionist industrial policies that might have preserved more of its manufacturing leadership and military power a century ago? The reason is simple—the British elites which benefited from free trade, chiefly the financial interests of the City of London, had more influence over British policy than British manufacturers. British investors were not threatened by the American imports that wiped out factories in the British midlands. Indeed, while high tariffs kept out American manufactured goods, American industry welcomed British investment. British rentiers were enriched by their overseas investments even as British industry declined.

The pattern has been recapitulated in the United States, from the end of the Cold War to the present. In one industry after another, American corporations have offshored production to China since the 1990s, rendering the U.S. dependent on Chinese factories for many critical supply chains and manufactured goods, from iPhones to drugs and personal protective equipment that were essential in the Covid-19 pandemic. The toleration by the Clinton, Bush, and Obama administrations of this massive transfer of industrial power from the United States to the Chinese dictatorship, a regime seeking to eliminate U.S. hegemony in Asia and the world, is an even more remarkable case of national military-industrial suicide than that of Britain a century earlier. It is as though the British parliament in the 1900s had encouraged the offshoring of British industry to Imperial Germany, even while engaging in the Anglo-German arms race.

As in Britain in the 1900s, in the United States in the 2000s capitalist elites with no interest in the health of the national industrial base—the managers and shareholders of Silicon Valley companies like Apple that were offered cheap labor and subsidies by the Chinese dictatorship, Wall Street firms salivating at the prospect of access to Chinese financial markets, and agribusiness corporations that are content to export foodstuffs to China in return for manufactured imports—defeated the U.S. military elites and America’s national manufacturers who viewed China as a threat. The struggle between these domestic coalitions explains the paradox of American policy toward China. America’s financial and commercial elites for the most part welcome the role of the United States as a deindustrialized resource colony of industrial China, as long as they can make money accessing China’s vast domestic market and pool of cheap, unfree labor, while American military hawks and populists and the remnant of private organized labor seek to decouple the U.S. and Chinese economies and rebuild American manufacturing. Paradoxically, given the ostentatious social liberalism of Silicon Valley and Wall Street, America’s tech elites and financial elites have adopted something like the voluntary tributary state strategy of Jefferson Davis and the other Confederate leaders, with twenty-first-century industrial China replacing nineteenth-century industrial Britain as a source of manufactured imports, and a post-industrial United States which exports farm products, raw materials, and tourist and professional services to industrial Asia and Europe playing the role of the cotton-exporting Confederacy.