Thorstein Veblen
An Outline of a Policy for the Control of the 'Economic Penetration' of 
Backward Countries and of Foreign Investments.
(Memorandum, originally written 1917)

The Political Science Quarterly, Vol. XLVII, No. 2. (Jun., 1932), pp. 189-203
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It is assumed as a major premise that the constant and controlling purpose 
in any arrangements entered into in the prospective settlement will be the 
keeping of the peace at large; that the need of peace is paramount; that 
any special interest which may come up for consideration must wait on this 
paramount exigence of such measures as seem necessary to the state of peace 
and security at large.
Evidently this paramount consideration will impose a limit and enforce a 
bias of its own at every point where any measure looking to another purpose 
is proposed, and wherever the continued expediency of any given item of law 
or custom is brought under advisement. If the claims of peace and security 
are to be allowed without reservation, the immediate consequence should be 
the disallowance and disclaimer of all such special interests and ambitions 
as may give rise to estrangement or dissension among the peoples associated 
together for the keeping of the peace.
But the case is not so simple. By tradition and ingrained conceit, all 
modern nations harbor certain interests and pretensions to which they 
attach a high value, whether this value is real or fancied. War is commonly 
entered on in defense or furtherance of some such national interest, real 
or fancied, tangible or intangible. The current war is an instance in 
point. And it is even yet a safe generalisation that no modern nation would 
be ready now, out of hand, to disclaim or disavow all such interests and 
pretensions tangible and intangible, commercial and patriotic, even after 
the national integrity had been duly safeguarded. Therefore it is to be 
presumed that the compact, league, or coalition of peoples for the keeping 
of the peace, which is expected to be set afoot in the terms of settlement, 
will take the line of a mutual concessive disclaimer and disallowance of 
such usages, claims, and pretensions as appear to be patently incompatible 
with the uninterrupted continuance of peace and security.
The "Pacific League" which is to come out of the prospective settlement may 
accordingly be anything, from a temporary treaty engagement between the 
pacific nations, to a close-knit and irrevocable coalition of peoples who 
have thrown in their fortunes together and have subordinated their national 
ambitions to the common good. And the contemplated "economic penetration," 
as well as the measures to be taken for its control, will take on a 
different character according to the complexion which the Pacific League 
will take on, and according to the degree of control which it will be in a 
position to exercise. Therefore it appears necessary, by way of a 
definition of premises, to indicate at the outset with what scope and 
manner of jurisdiction the League is here conceived to be invested, in so 
far as bears on the question in hand. Adequately to control such "economic 
penetration," the Pacific League will have to be vested with a relatively 
very large discretion; which in turn implies an extensive surrender of 
powers on the part of the associated peoples of the League.

PROVISIONAL OUTLINE OF A PROJECTED LEAGUE OF THE PACIFIC PEOPLES; SO FAR AS 
TOUCHES ITS CONTROL OF THE "ECONOMIC PENETRATION" OF BACKWARD COUNTRIES

The abiding purpose of the projected League is to be the keeping of the 
peace at large; not the furtherance of commercial enterprise, nor the 
pursuit of national ambitions. Therefore the latter are necessarily and 
unreservedly to be subordinated to the former. Dissension among nations 
commonly arises out of conflicting commercial aims and national 
pretensions; therefore it will be incumbent on the associated pacific 
peoples, so far as may be, to divest themselves of all commercial 
discrimination and national ambition. Therefore the projected League can 
comprise only such of the modern peoples as are content to put away so much 
of their self-direction and national rivalry as would be incompatible with 
the maintenance of peace under the League's collective surveillance. And 
unless a sufficiently large and consequential proportion of civilised 
mankind can be brought into a sufficiently close coalition, on such terms, 
the League will prove nugatory. Therefore it is here assumed that the 
avowedly pacific peoples will be found in such a tolerant frame of mind as 
will answer the purposes for which the Pacific League is to be formed. 
Otherwise the argument fails.
In the phrase of President Wilson, the end to be sought in the prospective 
settlement is to make the world safe for democracy. And within the meaning 
of the term as employed by the American Administration in its occasional 
pronouncements, Democracy may be described as that frame of mind by virtue 
of which a people chooses to be collectively fortunate rather than 
nationally formidable. The modern peoples partake of this animus in varying 
degrees; and the question of any given people's inclusion as a constituent 
factor in the projected League therefore becomes substantially a question 
of the degree in which they are imbued with this requisite frame of mind.
In the past, indeed in the recent past - in that recently past time when 
statesmen still placed their dependence on the Balance of Power - in this 
past out of which it is hopefully believed that the modern peoples are now 
emerging, it was an accepted principle underlying all effectual statecraft 
that no people could hope to be collectively fortunate except at the cost 
of being nationally formidable. But it is now proposed deliberately to 
shift the ground of policy from that ancient principle of worldly wisdom to 
a new principle of what may be called standardised forbearance, whereby it 
shall cease to be expedient for any nation to be formidable. Under this 
prospective régime any formidable nation would become a menace to itself 
and its neighbors alike, inasmuch as it would be a menace to that peace at 
large within which alone its people can hope to be collectively fortunate. 
Therefore, incidentally, it becomes the duty of the Pacific League to 
eliminate all formidable nations.
In varying degrees the modern nations meet these requirements; or it could 
perhaps rather be said that they are in varying degrees approaching such a 
frame of mind under the discipline of their war experience; and it may be 
added that they are due to make a closer approach to this required frame of 
mind in the further course of the like experience. The chief belligerents 
on the side of the Entente are already coming to the persuasion that no 
national aggrandisement and no profits of commercial enterprise are worth 
the hazard of a return to the status quo ante.
It is these chief belligerents, or rather it is such of these chief 
belligerents as are now in a way to achieve this required spirit of 
forbearance, that will by force of circumstance be elected to take the 
initiative, shape its policy, and continue to constitute the core of the 
Pacific League. There is, at any rate, no prospect that beginning can be 
made without them. And there is at the same time also no reason to put off 
this beginning until the close of hostilities. Indeed, the main lines of 
organisation and administration should best be designed, materialised, and 
tried out in actual work while the pressure of an urgent present common 
emergency can still be counted on to keep mutual jealousies and cupidity in 
abeyance; so that the League would then both serve as a means of conducting 
the war to a successful issue, and also be ready to enter on the settlement 
and further conduct of affairs as a going concern.
These chief belligerents that so may hopefully be looked to as the prime 
movers and the chief support of the projected coalition would be the French 
and the English-speaking peoples, together with the Chinese, and a more or 
less considerable group of like-minded accessories in Latin America and 
western Europe. Necessarily included in the League's jurisdiction would 
also be two further categories: the backward peoples of what are now the 
colonial possessions of these belligerents and of what have been the 
colonial possessions of their opponents in the war; and the undemocratic 
peoples at present comprised in the warlike coalition of the Centrals.
In outline, the forms of organisation, the fashion in which the several 
constituent peoples are to be articulated into a going concern, and the 
distribution of responsibilities and obligations among them - in all this 
it should seem the part of wisdom to draw on the experience of the United 
States and the British, who have been the chief successful pioneers in the 
extension of democratic institutions hitherto. Neither has reason to boast 
of work well done in this respect; the shortcomings of both are 
sufficiently grave and notorious; but the best, after all, is always better 
than something else, and between them these two are after all the most 
signal experiment in democratic pioneering, or rather the nearest approach 
to a democratic conduct of affairs on a modern scale and over a widely 
diversified range of peoples and countries. And it should be added that the 
defects and mistakes which have come to light in the course of these 
democratic experiments should prove no less instructive for the purposes 
now in hand.
For the immediate purpose - for an inquiry into the line of policy by which 
"economic penetration" and investment in foreign parts is best to be 
controlled - the features which the British and American experiments in 
democracy have in common are more to the point than their differences; 
although it may well be that the differences would be no less instructive 
in another connection. The two are more alike in the working parts of their 
structure than appears on the surface; the difference being, in good part, 
that the articulation of the working parts is more sharply defined and more 
visible in the American case. Loosely, and with a margin of disparities, 
the working organisation through which co-ordination is effected falls into 
a three-fold gradation of units in either case, but more obvious in the 
American case; chiefly a gradation in the scope of such self-direction as 
they are endowed with. There is in either case a substantial core of 
constituent communities, in which is finally vested the over-ruling 
initiative, discretion, and responsibility - the seat of sovereignty, as it 
would be called in political theory; in the American case this central body 
is the States of the Union. Then there are the Territories; held under 
surveillance and concessively vested with a degree of self-government; 
beyond which come the backward communities of the outlying possessions, who 
are wards of the Union, held in tutelage and administered under 
discretionary control. The parallel facts will be visible in the British 
case to any attentive observer, but they need scarcely be traced out here.
To follow the analogy, in the projected League the substantial core would 
be constituted, at the outset, by the chief democratic belligerents already 
spoken of; admission being free to any others possessed of the necessary 
qualifications. What these requisite qualifications are to be need not 
detain the argument here, since it does not greatly concern the topic of 
the memorandum. The second class or group of peoples under the League's 
jurisdiction-those who would answer to the Territories in the American 
scheme - would be made up, in the main, of nationalities which are now 
under German, Austrian, Bulgarian, or Turkish rule; to be held under 
surveillance, on probation, with so much of self-direction in their 
administrative affairs as the circumstances would admit, and with a view to 
their presently coming into standing as qualified members of the democratic 
federation of peoples. The third and outlying group, the wards of the 
League, would comprise those characteristically backward peoples that 
inhabit Colonial Possessions. By grace of fortune, the greater proportion 
of these pronouncedly backward peoples have now come under the hands of 
those nations who will presumably exercise the discretion in laying down 
the lines of the Pacific League's economic policy.
Drawn on these lines, then, the scheme contemplates a very appreciable 
number and variety of outstanding independent nations; standing outside of 
the League's jurisdiction by their own choice or because they do not fill 
the necessary qualifications for admission as democratic commonwealths; and 
ranging, in point of cultural status, all the way from barbarian Abyssinia 
to the pseudo-constitutional monarchy of civilised Spain.
Within the confines of the League, it is evident, a sane policy looking to 
the perpetuation of the peace at large should consistently incline to 
discard, or at least to disregard, distinctions of nationality, so far as 
the sentimental preconceptions of its constituent peoples will allow. The 
most fortunate outcome at this point would be the total obsolescence or 
obliteration of national demarcations; but the best that can be 
anticipated, in view of the present state of sentiment, would be a very 
dubious modicum of approach toward that end.
Abolition of national frontiers would go far to dispose of many questions 
of economic policy, particularly questions of penetration and trade. Any 
degree of coalition or federation among these pacific peoples will submerge 
national distinctions in some degree; and measures are doubtless due to be 
taken looking to the submergence of national divisions and national 
integrity wherever their maintenance visibly jeopardises the peace at 
large. Some appreciable disallowance of national discretion in commercial 
matters is reasonably to be expected; and an untempered insistence on the 
removal of whatever is likely to engender jealousy, distrust, and 
dissension would logically result in the discontinuance of all national 
establishments, as such. Their place and functions as political or civil 
units would then be supplied by a neutral scheme of administrative 
divisions, drawn without regard to present political frontiers and with an 
eye single to administrative convenience, as determined by the natural - 
topographical, climatic, or linguistic - parcelment of the countries to be 
taken care of.
The nationalities so drawn into the scheme of redistricting need not be 
disturbed in any other respect than that of their civil and political 
powers. They would cease to have any civil status, but their integrity or 
solidarity in the cultural and sentimental respect would be left 
undisturbed and, indeed, legally unnoticed; very much as is now formally 
the case with various minor nationalities in some parts of the Balkans and 
the Russian dominions; or, again, the Armenian nation; or the Jews in the 
English-speaking countries.
Failing that - and there need be no doubt of its failure - any degree of 
approach to such a measure of neutralisation would be a measure of relief 
from perplexity in all that concerns international trade relations.
Now, in view of the many-sided uncertainty of the prospective situation, 
which is still taking shape in ways that had not been foreseen, it is here 
proposed to argue the questions of "economic penetration" and foreign 
investments on the broad assumption that the prospective league will be 
free and competent to deal with all these matters on a footing of 
neutrality and plenary discretion. From the positions so arrived at it 
should be practicable to pursue the argument further, as shifting 
circumstances may dictate, by way of adaptation, reservations, and 
curtailment of these provisional positions at points where the plan of 
settlement eventually to be adopted may fall short of full discretionary 
power.
So also in case the settlement should unexpectedly take the form of a 
negotiated peace, with treaty agreements covering international trade and 
investment, the formulations arrived at on the assumption here made could 
still stand over as a formulation of desiderata to be aimed at by those 
negotiators with whom the keeping of the peace at large remains the 
paramount end of endeavor. It will serve as a point of departure for any 
expedient concession that may have to be made under pressure of stubborn 
nationalist preconceptions.
As touches the case, then, of such outlying backward peoples as will by 
force of circumstance come into the status of wards, and so will come under 
the guardianship of the Pacific League - or in the measure in which any 
given people comes into this relation-the league will of necessity arrogate 
to itself a plenary jurisdiction; somewhat after the fashion of that 
authority over the North American Indians which the United States 
government has arrogated to itself. In these cases, and they are large, 
many, and diverse, there is nothing for it but that the League must take 
over the administration of affairs quite unreservedly; and by the same 
token it becomes incumbent on the League, in its character as guardian, 
deliberately and consistently to conserve the natural resources of these 
countries - mineral, forest, grazing, and agricultural - with a view to the 
least practicable infraction or exhaustion of the resources that so are 
taken over in trust.
What will be the practicable minimum of infraction and usufruct in any 
given case can of course not be described in a general proposition. The 
circumstances vary widely. But some degree of administrative surveillance 
and direction will be unavoidable in nearly every case. Some measure of 
police surveillance becomes incumbent on the League by virtue of its 
responsibility as guardian; and in some measure these outlying resources 
will have to be turned to present account as a source of raw materials 
indispensable in modern industry - as, e.g., certain cabinet woods, fibers, 
rubber, and various materials used as drugs, pigments, oils, and varnishes, 
not otherwise obtainable - and the like holds true for certain fruits and 
foodstuffs.
On this head there is something due to be said by way of explaining and 
correcting certain uncritical preconceptions commonly met with; and the 
same considerations will also apply to "economic penetration" of 
undeveloped countries more at large, apart from the special case of those 
outlying virgin resources of the savage world. Popular discussion, in the 
press and elsewhere, commonly assumes as a matter of course that the 
speediest and most comprehensive "development" of all hitherto idle 
resources is altogether desirable and expedient, both for the present 
inhabitants of these outlying countries and for the nations at the hands of 
whose citizens the contemplated development is to be effected. On the other 
hand it is an easy generalisation out of the past history of colonisation 
that the rate of industrial penetration and conversion to use of any new 
country may readily be too swift for the continued wellbeing of the native 
population; and in taking over the direction of affairs the League will 
perforce become the guardian of these outlying peoples, and therefore the 
responsible keeper of their fortunes. At the same time, a Pacific League, 
whose paramount aim it is in peace and security to hold fast that which is 
good in democracy, cannot carry on an exploitation of its helpless wards 
and dependent neighbors, as a side line in its policy of peace and 
goodwill. Considered simply as a matter of moral profit and loss, 
dishonesty is not the best policy.
On these grounds of equity and of self-preservation from moral dry-rot, it 
should fairly be a matter of course that the line to be followed in any 
effectual industrial penetration of these outlying countries should be a 
policy of retardation and continence, rather than the reverse. A well-
advised and tenacious policy and moderation would appear to be the only 
salutary course, all the more since - contrary to the prevalent 
misconceptions-these outlying natural resources are not needed for present 
use of the civilised nations, apart from a certain special range of raw 
materials not conveniently to be had elsewhere.
As a general proposition, the natural resources already in hand among the 
modern nations are fully adequate to their current and their calculable 
future needs'; the reservations under this broad rule being that the 
strategy of competitive investment at present somewhat-hampers the use of 
resources otherwise available, and that a relatively slight supply of 
indispensable materials will necessarily have to be drawn from these 
outlying countries beyond the pale. Within the range of those raw materials 
which are afforded by the temperate latitudes there is no shortage, present 
or prospective, among the civilised countries, taken in the aggregate and 
in time of peace. The sole notable exception under this broad
statement is the timber supply; which, it happens, is also the particular 
one among the outlying natural resources that may be largely laid under 
contribution without danger of exhaustion and without unavoidable risk of 
cultural disaster to these outlying peoples of the lower civilisation.
There is, of course, an urgent and unremitting pressure for the headlong 
"Development," that is to say for commercial exploitation, of all these 
outlying natural resources; but this is a clamor for private gain, not for 
public use. The promoters and financiers are seeking profitable concessions 
and investment, and they are actuated uniformly by the businesslike motive 
of special advantages to themselves, not by considerations of material 
advantage to any one else or to the community at large; nor is it at all 
apparent that any net gain commonly accrues to any one else from 
enterprises of this kind. More frequently than not, the aim is a 
competitive advantage as against rival business concerns, or the 
monopolisation of materials with a view to the control of the market.
In those countries where this pursuit of private gain at the cost of the 
country's resources has been allowed freely to run its enthusiastic career, 
as, e.g., in America, the consequences have been a wasteful exhaustion of 
certain natural resources (e.g., the destruction of forests by the lumber 
interests); together with a hurried appropriation of the tillable land, 
followed up with a slovenly cultivation and impoverishment of the soil, 
resulting in low yields and high aggregate cost per unit of goods 
delivered; so also the speculative holding of natural resources out of 
present use with a view to a prospective unearned gain (as in American land 
speculation, rural and urban, and the monopolisations of transportation 
franchises, water-power, or mineral deposits); and, as will commonly, 
though it may be less patently, happen in the like case, the gravest 
mischief has been a pervasive deterioration of industrial enterprise into a 
collusive chicanery and a speculative traffic in unearned gains.
To such pressure for private gain under the shield of the League's 
countenance the League can on no account afford to yield; inasmuch as, 
among other things, all traffic of this kind is a fertile source of 
commercial jealousies and intrigue, and these habitually give rise to 
international difficulties and eventual grievances to be redressed. All of 
which would appear to dictate that these natural resources among the 
outlying peoples who so come under surveillance should in no case be 
alienated, that they should at the farthest concession be worked under 
lease, for a short term only, and under such control and power of revision 
and revocation as would lower the inducements offered to private enterprise 
to the practicable minimum. It follows also that permanent improvements and 
plant incident and necessary to the usufruct of these resources, as, e.g., 
docks, harbor works, roads, means of storage and transport, should be taken 
over by the common authority and held in common usufruct under 
surveillance. And, in general terms, no encouragement should be extended to 
private enterprise to enter this field, no discrimination is to be 
countenanced, and no vested interest must be allowed to take effect in 
these premises.
Larger and more complex and delicate questions of "economic penetration" 
will arise in connection with those backward peoples who are nominally 
independent nations and who are outside the jurisdiction of the Pacific 
League. This class of outstanding nations comprises such countries as, 
e.g., Abyssinia, Mesopotamia, Persia, and Afghanistan. The traffic between 
the federated peoples of the League and these outstanding nations will 
unavoidably be large, continued, highly diversified, and ever increasing 
with the passage of time and the growth of industry. In this intercourse 
the League will be dealing with these nations as outside parties; so that 
the question resolves itself into a matter of what regulations can be put 
into effect within the limits of tolerance drawn by the consent and 
goodwill of these outstanding nations. There are also vested interests 
which have already found lodgment in the countries in question, in the way 
of investments, concessions, and an established clientele; and there are 
further enterprising persons who are due incontinently to seek similar 
privileges and opportunities for commercial gain in these countries so soon 
as settled conditions return.
It should be recalled that the paramount aim of the League is to keep the 
peace on a footing of goodwill at large; and that the pacific peoples 
federated under the terms of the League, therefore, stand to claim no 
special or exceptional advantages of trade or investment, for themselves or 
their citizens. With this proviso in mind the logical course to be pursued 
should not be particularly obscure, in outline; although it may prove 
perplexing enough to follow out the simple logic of the case in the face of 
obstinate preconceptions and a partisan bias standing over out of the past. 
Insistence on national rights and obligations is as incompatible with a 
safe economic policy at this point as the primary aim of the Pacific League 
is incompatible with that status quo ante against a relapse into which the 
League is designed to provide.
The aim here must plainly be to avoid those conflicts of claims and 
jurisdiction out of which disputes arise. To this end, it is plain, all 
international discriminations among the associated peoples of the League 
are to be disallowed. It is with a view to avoiding jealousy and friction 
of this kind that it has been proposed in an earlier passage to submerge 
all national distinctions within the League and reapportion the several 
countries of the League into administrative and electoral districts without 
regard to previously existing national boundaries. At the same time, the 
details of usage and civil law vary greatly from one country to another, 
both among the peoples to be comprised in the Pacific League and among the 
outstanding nations, and there is little chance of doing away with such 
differences of use and wont and law within any moderate period of time.
Therefore, the expedient course in dealing with international relations of 
trade and investments should apparently be to disclaim and disallow all 
extra-territorial jurisdiction and all extra-territorial enforcement of 
pecuniary claims, both among the several peoples of the League and as 
between these peoples and the outstanding nations; in short, all pecuniary 
claims and obligations should be neutralised, with the effect of throwing 
their adjudication unreservedly under the local jurisdiction in whose 
territory they come up.
Commercial traffic and investment would under this rule be accounted a 
private venture, in pursuit of which the merchant or investor is acting on 
his own initiative, for his own ends, at his own risk; in which his 
compatriots share neither profit nor loss, and for the successful issue of 
which they assume no collective responsibility. What it comes to is that 
the community will no longer collectively promote or safeguard any private 
enterprise in pursuit of private gain beyond its own territorial bounds.
That such a plan of neutralisation and mutual disavowal of overlapping 
jurisdictions should govern trade and investment among the peoples of the 
League should be plain without argument, and so far it will probably 
commend itself on slight reflection to most of those concerned. That much 
would presumably be accepted as a corollary following immediately from the 
League's primary aim - to keep the peace at large on a footing of goodwill. 
That the same plan is good and reasonable also for the same kind of 
relations between the peoples of the League and the outstanding nations may 
at first sight seem more doubtful. The application of the principle may be 
more difficult in the latter case, where mutual consent may not readily be 
had, in the face of national jealousy and national self-interest. But this 
difficulty appears less formidable on a closer view of the circumstances of 
the case. The outstanding nations are small and commercially dependent, as 
compared with the League, and by so much they will be driven to accept
y reasonable conditions offered. The League will be in a position to 
disallow interference from outside in the case of any alien trader, 
traveler, or investor who has a grievance to present; as well as to 
disclaim all special rights and immunities of its own citizens in a like 
case. It may fairly be doubted if public sentiment in any of the pacific 
countries can be brought to countenance so radical a departure from the 
established order of national rights and obligations; but it should plainly 
be the wiser policy to move as far as practicable in this direction, and 
then to leave an avowed presumption in favor of non-interference in every 
case of doubt.
To this plan of neutralisation and disclaimer it will be objected that the 
country's trade and investment interests would suffer irreparably under 
such a policy, being left at the mercy of these habitually greedy alien 
nations. It is doubtless true that many an enterprise in the way of 
investments and concessions in foreign parts would find itself at a 
disadvantage in its pursuit of gain if it so lost the backing of its home 
government; but it is equally true that the cost to its home government of 
keeping such a business concern secure in its pursuit of gain in foreign 
parts will at an average exceed the advantage which such an enterprise will 
bring to the rest of the community, who have no share in the gains that may 
accrue to such an enterprising business concern.
Reduced to elementary terms, the economic effects and bearings of such 
foreign investments may be described as follows. Investment is made in the 
foreign country to get a higher rate of profits than at home; which draws a 
part of the available means of industry out of the country; which advances 
the rate of profits in the country, or keeps up the rate on home 
investments, by keeping the productiveness of the country's industry down; 
which enhances or keeps up prices, and the cost of living; which conduces 
to activity in industry so long as prices are advancing - in case there is 
such an advance, which is not always the case. So far the net result is a 
loss to the home community, though there may be a gain to the interested 
business concern, except for the (doubtful) gain that may come of enhanced 
activity - in case such an effect is had. Further, the gains which accrue 
to the investor from these foreign investments are presumed to be received 
in cash or its equivalent, by the investor, who is commonly well-to-do; 
this will then be spent chiefly for consumption, by the recipient or on his 
account, and largely on superfluities; which acts to advance prices at the 
same time that it diverts so much of the country's industry to the 
production of goods suitable for such consumption; which limits the 
production of goods to meet the ordinary needs of the community by that 
much; which acts to advance, or to keep up, the cost of necessary 
consumable goods and thereby to increase or keep up the cost of living. 
Certain remoter consequences, chiefly having to do with the availability of 
funds for warlike politics, have no interest in this immediate connection.
Analysis will readily show that the community has nothing substantial to 
gain in such a case; but it is not overlooked that all modern nations are 
possessed of a very grave sentimental conviction to the contrary. It is an 
article of patriotic faith and is accepted as a matter of course and of 
common-sense. Even the most judicially pacific among them will have great 
difficulty in persuading themselves to disclaim these presumed national 
advantages, however illusory they may be in fact. In favor of such a policy 
of renunciation it will probably be more to the point to urge that the 
policy can be put into effect at no prohibitive cost, and that something 
appreciable along this line is urgently needful as a means to the paramount 
end of keeping the peace at large.
Doubtless, one and another of the outstanding nations may be counted on to 
watch their chance and take advantage of such forbearance on the part of 
the League, and to abuse it so far as their short-sighted worldly wisdom 
will carry them - for they will remain outstanding nations only because and 
so long as they continue to be dominated by the old-fashioned principles of 
statecraft according to which a foreign people is always a potential enemy. 
But it is to be recalled that the Pacific League is designed to comprise 
the greater part of civilised mankind - at any rate the greater proportion 
as counted in terms of trade and industry - and that the greater part of 
the world's outlying resources are also to be held under the surveillance 
and administered at the discretion of this same coalition of pacific 
peoples; whereas the outstanding nations, whose mischievous national 
ambitions bar them out, are a relatively feeble and scattered lot of 
industrially immature peoples, each pursuing its own archaic illusions and 
exposed to the vicissitudes of their mutual political intrigue and 
commercial chicanery. There will, presumptively, be some two or three 
nations of some appreciable consequence among these outstanding ones - what 
would be called second-rate Powers, both politically and industrially; but 
when all allowance has been made, it remains a secure generalisation that 
the goodwill of the League will be indispensable to the continued 
prosperity of any one, or of any group, among these outstanding nations. 
And it follows no less unavoidably from the broad facts that the active 
goodwill of the peoples of the League will accrue to those among the 
outstanding nations who conduct their affairs most nearly in the same 
spirit that moves the peoples of the League.
Still, the limits of human presumption are not easy to define, and it may 
always come to pass that one and another among the outstanding nations will 
overpass the limits of tolerance, and so call for remedial attention at the 
hands of the Pacific League. In such a case, still following the line of 
neutrality and disallowance, the remedy logically to be sought would appear 
to be an interruption or curtailment of intercourse with the mischief-
making nation. Most conveniently and effectually this would take the form 
of an export duty on goods destined for the country in question, or in case 
of urgency, an embargo on traffic with nations who are found to be working 
at cross purposes with the policy of the League.
Such a Pacific League would, in effect, hold the balance of prosperity and 
of success between the outstanding nations. From which it follows that the 
League should be able effectually to govern traffic beyond its confines on 
much the same lines and by much the same methods as may be found wise and 
expeditious for the control of affairs among the peoples who are 
immediately amenable to its jurisdiction. The difficulties to be 
apprehended are difficulties in the way of its adoption rather than in the 
way of the successful administration of such a policy, once it has been 
adopted. What is proposed is little else than an unreserved extension of 
the principles of free trade, but with the inclusion of foreign investments 
as well as commercial traffic in the scope of this free-trade policy. The 
proposed scheme, therefore, has the merits and the defects that attach to 
any free-trade proposal.
It would be quite bootless to go into an argument here on the merits of a 
free-trade policy. The objections to such a policy are almost wholly a 
matter of interest, sentiment, and preconception, and are not amenable to 
reason. Although the novelty of such a proposal to apply to foreign 
investments, as contrasted with foreign commerce, may conceivably give it a 
slightly better chance of reasonable consideration.

What is expedient in the way of a collective policy among the pacific 
peoples, for the control of economic penetration, foreign commerce, and 
foreign investments, accordingly appears to be exceedingly simple in 
principle - so simple as to leave its advocates embarrassed for want of 
debatable ground. It comes, in principle, to nothing much more than a 
collusive disallowance of privileges and preference, with safeguarding of 
the weak and destitute and without respect of persons. How nearly such a 
single-minded policy could be approximated in any prospective settlement it 
is presumably not worth while to hazard a guess; but the nearer it comes to 
being realised, the more promising appears to be the chance of a lasting 
peace.
Under such a policy private enterprise is not to be supported or 
countenanced in making use of backward peoples or their resources; foreign 
investors will take their chances where they find them, without 
capitalising the support of their home government; justiciable questions 
will be decided under the law of the place where they arise, without 
prejudice by the litigants' domicile.
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