The Great Illusion · Chapter
The Great Illusion explained
This chapter argues that the economic security of small states is assured despite their political vulnerability, because modern wealth cannot be confiscated by conquest.
What happens
This chapter argues that the economic security of small states is assured despite their political vulnerability, because modern wealth cannot be confiscated by conquest. It critiques the notion that military power brings economic advantage, pointing to the higher credit ratings of small states and the futility of conquest for enrichment. The chapter also discusses the interdependence of finance, the impossibility of exacting tribute, and the irrelevance of political power to national prosperity.
Themes in this chapter
Economic Futility of War
The chapter demonstrates that conquest cannot enrich a nation because modern wealth cannot be confiscated, and indemnities are economically disadvantageous.
Interdependence of Nations
The chapter explains that the confiscation of property in one country would react on the finance of the invader, showing the interconnectedness of economies.
Illusion of Political Power
The chapter argues that political power does not translate into economic advantage, as evidenced by the prosperity of small states without military might.
Decline of Physical Force
The chapter suggests that military force is becoming less relevant in economic terms, as financiers favor the securities of undefended nations.
Characters to notice
- Frederic Harrison
Quoted as a proponent of the orthodox view that armaments protect commerce, which the chapter refutes.
- Admiral Mahan
Cited as an authority who argues that armaments are part of the industrial struggle, a claim contradicted by the prosperity of small states.
Key passages
“The political security of the small States is not assured; no man would take heavy odds on Holland being able to maintain complete political independence if Germany cared seriously to threaten it. But Holland’s economic security is assured.”
Even if a small state like Holland could be easily conquered, its wealth would remain safe because modern finance cannot be seized.
This highlights the distinction between political vulnerability and economic security.
“The only consideration of the financier is profit and security, and he has decided that the funds of the undefended nation are more secure than the funds of one defended by colossal armaments.”
Investors judge that the bonds of small, unarmed nations are safer than those of heavily armed great powers, indicating that military strength does not protect wealth.
This is used to refute the idea that armaments are necessary for economic security.
“The wealth, prosperity, and well-being of a nation depend in no way upon its political power; otherwise we should find the commercial prosperity and social well-being of the smaller nations, which exercise no political power, manifestly below that of the great nations which control Europe, whereas this is not the case.”
National prosperity is unrelated to political power, as small states are just as prosperous as great powers.
This is a central thesis of the chapter, challenging the assumption that political dominance leads to economic advantage.