Imperialism and the era of falling prices

Underconsumption theory, especially Hobson's Imperialism (1902), offered a breakthrough in understanding imperialism as a macroeconomic system. But these views remained constrained by neoclassical attitudes toward debt, investment, and government spending. A Post Keynesian appreciation of the imperialist era sees the acquisition of economically nonperforming colonies as necessary to protect asset values of all overseas assets, whether colonial or non-colonial. Moreover, the arms race stimulated aggregate demand and at least partially compensated the deflationary bias of the gold standard and a penchant for balanced budgets. Imperialism thus emerges as an uncoordinated international response to deficient domestic demand and chronic price weakness.