urope.

As our preparations increase, however, and as we realise how
insufficient our force must be against a European coalition, we shall
be faced with the alternative of entering into agreements or alliances
(to make our defence real) or into some other policy, which might make
defence unnecessary. In either case we must face outward, must {59}
look at the world as it is and is to be, and define our relation to
Europe. We must substitute a positive for a negative policy.

This we are forced to do even though we may have no immediate friction
points with Europe. The economic interpenetration of all nations
involves us in conflicts of interest and adjustments, which require a
positive national policy.

It is our economic development that most strongly pushes us in this
direction. We are gradually destroying the complementary industrial
system which formerly held us to Europe; we are competing with European
countries for world markets and have even begun to compete for
investment opportunities in backward countries. We are exporting
manufactures, and this exportation is likely to increase. Of the six
chief requisites of a great manufacturing nation--coal, iron, copper,
wood, cotton and wool--we are the greatest single producer of all
except the last, and to this advantage of cheap raw materials, there is
added an efficient manufacturing organisation and a large manufacturing
capital. From 1880 to 1910 that capital increased six and a half fold
(from 2.8 to 18.4 billions of dollars). It is therefore no wonder that
we are exporting tools, sewing-machines, locomotives, typewriters,
automobiles and electrical apparatus. These products compete
increasingly with similar products from England and Germany and invade
the markets which Europe desires for herself. Our total exports to
Latin America, for example, have almost quadrupled in twenty-two years,
increasing from 77 millions of dollars in 1890 to 296 millions in 1912.

The significance of this competition, as it exists to-day and will
exist to-morrow, is greater for Europe than for us. Our fundamental
welfare does not absolutely depend {60} upon this exportation; we could
lose a part of this trade, as we lost our shipping, without fatal
results, for we should still have our cotton and many half-finished
products to exchange for our imports. Were Great Britain, however, to
lose her markets for manufactured goods, she would shrink into
insignificance, if she d