The Past Speaks

The “Hobson-Lenin Thesis”: inequality, ‘underconsumption’, capital exports, imperialism, and the Great War

In a small section in his new book, Branko Milanovic argues that the First World War was ultimately caused by income & wealth inequality within the belligerent countries, resurrecting ideas from John A. Hobson, Rosa Luxemburg, and Lenin. The basic argument: high domestic inequality => ‘underconsumption’ by the masses & ‘surplus’ savings by the elites => capital exports, i.e., search for overseas outlets for investment => the ‘scramble for colonies’ & imperialism => (a major cause of the) WAR.

I examine each element in this chain of logic and reject the “endogenous World War I” view.

[ Update 6 Dec. 2017: Thomas Hauner, Branko Milanovic, and Suresh Naidu have a new paper out, “Inequality, Foreign Investment, and Imperialism“, which argues in greater detail Milanovic’s argument from the book. See my brief comments at the end. Update 7 Dec. 2017:…