Below you will find
excerpts from this 1300page+ masterpiece, a must
read book covering 64 years of world history, that
does not waste your time as it is written by the greatest
macro-historian of the modern era... You simply
cannot understand the world or yourself until you have
read this book.
This idea of "unfairness," or, on its
positive side, "fair play," is a concept which is
very largely Anglo-Saxon
and which is
largely based on the class structure of England as
it existed up to the early twentieth
structure was clearly envisioned in the minds of
Englishmen and was so
accepted that it was assumed without need to be
structure, Britain was regarded as divided into
two groups the "classes"
and the "masses".
were the ones who had LEISURE.
meant that they had property and income.
On this basis,
they did not need to
work for a living;
an education in a separate and expensive system;
within their own class; they had a distinctive
and above all,
they had a distinctive attitude.
was based on the training provided in the special
education system of the "classes."
It might be
summed up in the statement that "methods" are more
important than "goals"
this group regarded the methods and manners in
which they acted as goals or closely related to
educational system was based on three great
negatives, NOT easily understood by
Americans. These were:
- (a) education
must not be
vocational - that is, not aimed at assisting one
to make a living;
- (b) education
aimed directly at creating or
training the intelligence; and
- (c) education
aimed at finding the "TRUTH"
On its positive
side, the system of education of the "classes"
displayed its real nature on the school level
than on the
university level. It aimed at
developing a moral outlook, a respect for
traditions, qualities of leadership
cooperation, and above all, perhaps, that ability
for cooperation in competition best summed up in
idea of "sport"
and "playing the game."
Because of the
"restricted" numbers of the upper class in
Britain, these attitudes
applied chiefly to one another,
and did not
necessarily apply to foreigners or even to the
They applied to
people who "belonged", and not to
all human beings.
Quigely's - "Tragedy & Hope" pages 464-465
the ROBOTIC WAGELESS ECONOMY,
substitute, in the above blue passage, the
HUMANS" for "CLASSES",
the word "ROBOTS"
for each instance of the word "masses",
or its equivalent expression.
You then extend
the idea of "fair play" to ALL HUMANS, which is
the culmination of all previous and ongoing
We can all,
thank the elites for setting the great example,
& for blazing the trail; now we must extend
their great work to EVERYONE.
The FUTURE has
always been and forever is, ALREADY HERE, just
the future when you, participate in, & share
knowledge of, THE ONLY PLAN
that addresses every angle
We have the
technology, lets do it !!!
that wearies of technology is bound to turn to
Those who refuse
to use machines that move mountains will pray for a
faith that moves mountains..."
Hope: A History of the World in Our Time'
TRAGEDY AND HOPE Chapters I-IV
by Dr. Carroll Quigley
I. INTRODUCTION: WESTERN CIVILIZATION IN ITS WORLD
II. WESTERN CIVILIZATION TO 1914
III. THE RUSSIAN EMPIRE TO 1917
IV. THE BUFFER FRINGE
V. THE FIRST WORLD WAR
VI. THE VERSAILLES SYSTEM AND RETURN TO NORMALCY 1919-1929
VII. FINANCE, COMMERCIAL POLICY AND BUSINESS ACTIVITY
VIII. INTERNATIONAL SOCIALISM AND THE SOVIET CHALLENGE
IX. GERMANY FROM KAISER TO HITLER 1913-1945
X. BRITAIN: THE BACKGROUND TO APPEASEMENT 1900-1939
XI. CHANGING ECONOMIC PATTERNS
XII. THE POLICY OF APPEASEMENT 1931-1936
XIII. THE DISRUPTION OF EUROPE
XIV. WORLD WAR II: THE TIDE OF AGGRESSION 1939-1941
XV. WORLD WAR II: THE EBB OF AGGRESSION 1941-1945
XVI. THE NEW AGE
XVII. NUCLEAR RIVALRY AND COLD WAR, AMERICAN NUCLEAR
XVIII. NUCLEAR RIVALRY AND COLD WAR, RACE FOR THE H-BOMB
XIX. THE NEW ERA
XX. TRAGEDY AND HOPE: THE FUTURE IN PERSPECTIVE
I. INTRODUCTION: WESTERN CIVILIZATION IN ITS WORLD SETTING
II. WESTERN CIVILIZATION TO 1914
III. THE RUSSIAN EMPIRE TO 1917
IV. THE BUFFER FRINGE
TRAGEDY AND HOPE is a lively, informed and always
of our not quite One World of today, seen in historical
Quigley has already shown his command of the kind of
perspective seen in the a world like that of Toynbee and
unlike them he does not so much concern himself with
a distant past to a distant future as he does with what must
us all much more closely - our own future and that of our
descendants. He uses the insights, but in full awareness of
limitations of our modern social sciences, and especially
economics, sociology, and psychology. Not all readers will
what he sees ahead of us in the near future, nor with what he
we should do about it. But all will find this provocative and
sometimes provoking book a stimulus to profitable reflection.
TRAGEDY AND HOPE
shows the years 1895-1950 as a
transition from the world dominated by Europe in the
century to the world of three blocs in the twentieth century.
clarity, perspective and cumulative impact, Professor Quigley
the nature of that transition through two world wars and a
economic depression. As an interpretative historian, he tries
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each event in the full complexity of its historical context.
result is a unique work, notable in several ways. It gives a
of the world in terms of the influence of different cultures
outlooks upon each other; it shows, more completely than in
similar work, the influence of science and technology on human
and it explains, with unprecedented clarity, how the intricate
financial and commercial patterns of the West prior to 1914
the development of today's world.
Carroll Quigley, professor of history at the Foreign Service
School of Georgetown University, formerly taught at Princeton
Harvard. He has done research in the archives of France, Italy
England, and is the author of the widely praised "Evolution of
Civilizations." A member of the editorial board of the monthly
History, he is a frequent lecturer and consultant for public
agencies. He is a member of the American Association for the
Advancement of Science, the American Anthropological
the American Economic Association, as well as various
associations. He has been lecturer on Russian history at the
Industrial College of the Armed Forces since 1951 and on
Africa at the
Brookings Institution since 1961, and has lectured at many
places including the U.S. Naval Weapons Laboratory, the
Service Institute of the State Department, and the Naval
Norfolk, Virginia. In 1958, he was a consultant to the
Select Committee which set up the present national space
was collaborator in history to the Smithsonian Institution
in connection with the establishment of its new Museum of
Technology. In the summer of 1964 he went to the Navy
School, Monterey, California, as a consultant to project
tried to visualize what American weapons systems would be like
CHAPTER I: INTRODUCTION: WESTERN CIVILIZATION IN ITS WORLD
Each civilization is born in some inexplicable fashion
a slow start, enters a period of vigorous expansion,
size and power, both internally and at the expense of its
until gradually a crisis of organization appears... It becomes
stabilized and eventually stagnant. After a Golden Age of
prosperity, internal crises again arise. At this point, there
for the first time, a moral and physical weakness.
The passage from the Age of Expansion to the Age of Conflict
the most complex, most interesting and most critical of all
the life cycle of a civilization. It is marked by four chief
characteristics: it is a period:
a) of declining rate of expansion;
b) of growing tensions and class conflicts;
c) of increasingly frequent and violent imperialist wars;
d) of growing irrationality.
When we consider the untold numbers of other societies,
than civilizations, which Western Civilization has destroyed
or is now
destroying, the full frightening power of Western Civilization
This shift from an Age of Conflict to an Age of Expansion is
marked by a resumption of the investment of capital and the
accumulation of capital on a large scale.
In the new Western civilization, a small number of men,
and trained to fight, received dues and services from the
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majority of men who were expected to till the soil. From this
inequitable but effective defensive system emerged an
distribution of political power and, in turn, an inequitable
distribution of the social economic income. This, in time,
an accumulation of capital, which, by giving rise to demand
goods of remote origin, began to shift the whole economic
the society from its earlier organization in self-sufficient
units to commercial interchange, economic specialization, and,
At the end of the first period of expansion of Western
Civilization covering the years 970-1270, the organization of
was becoming a petrified collection of vested interests and
the Age of Conflict from 1270-1420.
In the new Age of Expansion, frequently called the period of
commercial capitalism from 1440 to 1680, the real impetus to
expansion came from efforts to obtain profits by the
goods, especially semi-luxury or luxury goods, over long
time, profits were sought by imposing restrictions on the
or interchange of goods rather than by encouraging these
The social organization of this third Age of Expansion from
1929 following upon the second Age of Conflict of 1690-1815
called "industrial capitalism." In the last of the nineteenth
it began to become a structure of vested interests to which we
give the name "monopoly capitalism."
We shall undoubtedly get a Universal Empire in which the
States will rule most of the Western Civilization. This will
followed, as in other civilizations, by a period of decay and
ultimately, as the civilizations grows weaker, by invasions
total destruction of Western culture.
EUROPE'S SHIFT TO THE TWENTIETH CENTURY
The belief in the innate goodness of man had its roots in the
eighteenth century when it appeared to many that man was born
free but was everywhere distorted, corrupted, and enslaved by
institutions and conventions. As Rousseau said, "Man is born
everywhere he is in chains."
Obviously, if man is is innately good and needs but to be
from social restrictions, he is capable of tremendous
this world of time, and does not need to postpone his hopes of
personal salvation into eternity.
To the nineteenth century mind, evil, or sin, was a negative
conception. It merely indicated a lack or, at most, a
good. Any idea of sin or evil as a malignant force opposed to
and capable of existing by its own nature, was completely
the typical nineteenth century mind. The only evil was
the only sin, repression.
Just as the negative idea of the nature of evil flowed from
belief that human nature was good, so the idea of liberalism
from the belief that society was bad. For, if society was
state,which was the organized coercive power of society, was
bad, and if man was good, he should be freed, above all, from
coercive power of the state.
"No government in business" was commonly called "laissez
and would have left society with little power beyond that
prevent the strong from physically oppressing the weak.
This strange, and unexamined, belief held that there really
existed, in the long run, a "community of interests" between
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members of a society. It maintained that, in the long run,
good for one was bad for all. It believed that there did exist
possible social pattern in which each member would be secure,
Capitalism was an economic system in which the motivating
was the desire for private profit as determined in a price
the seeking of aggrandization of profits for each individual.
Nationalism served to bind persons of the same nationality
together into a tight, emotionally satisfying, unit. On the
side, it served to divide persons of different nationalities
antagonistic groups, often to the injury of their real mutual
political, economic or cultural advantages.
The event which destroyed the pretty dream world of 1919-1929
were the stock market crash, the world depression, the world
The twentieth century came to believe that human nature is, if
not innately bad, at least capable of being very evil. Left to
himself, man falls very easily to the level of the jungle or
lower and this result can be prevent only by the coercive
society. Along with this change from good men and bad society
men and good society has appeared a reaction from optimism to
pessimism. The horrors of Hitler's concentration camps and
slave-labor units are chiefly responsible for this change.
CHAPTER II: WESTERN CIVILIZATION TO 1914
WESTERN CIVILIZATION TO 1914
The financial capitalist sought profits from the manipulation
claims on money; and the monopoly capitalist sought profits
manipulation of the market to make the market price and the
sold such that his profits would be maximized.
Karl Marx,about 1850, formed his ideas of an inevitable class
struggle in which the groups of owners would become fewer and
and richer and richer while the mass of workers became poorer
poorer but more and more numerous.
Mass production required less labor. But mass production
EUROPEAN ECONOMIC DEVELOPMENT
Investments in railroads, steel mills and so on could not be
financed from the profits and private fortunes of individual
proprietors. New instruments for financing industry came into
existence in the form of limited-liability corporations and
banks. These were soon in a position to control the chief
parts of the
industrial system since they provided the capital to it. This
rise to financial capitalism.
Great industrial units, working together either directly or
through cartels and trade associations, were in a position to
the majority of the people. The result was a great economic
which soon developed into a struggle for control of the state
minority hoping to use the state to defend their privileged
the majority hoping to use the state to curtail the power and
privileges of the minority.
Capitalism, because it seems profits as its primary goal, is
never primarily seeking to achieve prosperity, high
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consumption, political power, patriotic improvement, or moral
Goods moved from low-price areas to high-price areas and money
moved from high-price areas to low-price areas because goods
valuable where prices were high and money was more valuable
prices were low.
Thus, clearly, money and goods are not the same thing but are,
the contrary, exactly opposite things. Most confusion in
thinking arises from failure to recognize this fact. Goods are
which you have, while money is a claim on wealth which you do
have. Thus goods are an asset; money is a debt. If goods are
money is non-wealth, or negative wealth, or even anti-wealth.
In time, some merchants turned their attention from exchange
goods to the monetary side of the exchange. They became
the lending of money to merchants to finance their ships and
activities, advancing money for both, at high interest rates,
by claims on ships or goods as collateral for repayment and
possible for people to concentrate on one portion of the
by maximizing that portion, to jeopardize the rest.
Three parts of the system, production, transfer, and
of goods were concrete and clearly visible so that almost
grasp them simply examining them while the operations of
finance were concealed, scattered, and abstract so that they
to many to be difficult. To add to this, bankers themselves
everything they could to make their activities more secret and
esoteric. Their activities were reflected in mysterious marks
ledgers which were never opened to the curious outsider.
Changes of prices, whether inflationary or deflationary, have
been major forces in history for the last six centuries at
Hundreds of years ago, bankers began to specialize, with
and more influential ones associated increasingly with foreign
and foreign-exchange transactions. Since these were richer and
cosmopolitan and increasingly concerned with questions of
significance, such as stability and debasement of currencies,
peace, dynastic marriages, and worldwide trading monopolies,
became financiers and financial advisers of governments.
they were always obsessed with the stability of monetary
used their power and influence to do two things:
1) to get all money and debts expressed in terms of strictly
commodity - ultimately gold; and
2) to get all monetary matters out of the control of
political authority, on the ground that they would be handled
by private banking interests in terms of such a stable value
INDUSTRIAL CAPITALISM, 1770-1850
Britain's victories had many causes such as its ability to
control the sea and its ability to present itself to the world
defender of the freedoms and rights of small nations and of
social and religious groups. Also, financially, England had
the secret of credit and economically, it had embarked on the
Credit had been known to the Italians and Netherlanders long
before it became one of the instruments of English world
Nevertheless, the founding of the Bank of England by William
and his friends in 1694 is one of the great dates in world
For generations, men had sought to avoid the one drawback of
heaviness, by using pieces of paper to represent specific
gold. Today, we call such pieces of paper gold certificates
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entitles its bearer to exchange it for its piece of gold on
in view of the convenience of paper, only a small fraction of
certificate holders ever did make such demands. It early
that gold need be held on hand only to the amount needed to
fraction of certificates likely to be presented for payment;
accordingly, the rest of the gold could be used for business
or, what amounts to the same thing, a volume of certificates
issued greater than the volume of gold reserved for payment of
against them. such an excess volume of paper claims against
we now call bank notes.
In effect, this creation of paper claims greater than the
reserves available means that bankers were creating money out
nothing. The same thing could be done in another way, not by
banks but by deposit banks. Deposit bankers discovered that
orders and checks drawn against deposits by depositors and
third persons were often not cashed by the latter but were
to their own accounts. Thus there were no actual movements of
and payments were made simply by bookkeeping transactions on
accounts. Accordingly, it was necessary for the banker to keep
in actual money (gold, certificates and notes) no more than
fraction of deposits likely to be drawn upon and cashed; the
could be used for loans and if these loans were made by
deposit for the borrower, who in turn would draw checks upon
than withdraw it in money, such "created deposits" or loans
be covered adequately by retaining reserves to only a fraction
their value. Such created deposits also were a creation of
of nothing, although bankers usually refused to express their
either note issuing or deposit lending, in these terms.
Paterson, on obtaining the charter of the Bank of England,
Bank hath benefit of interest on all moneys it creates out of
nothing." This is generally admitted today.
This organizational structure for creating means of payment
of nothing, which we call credit, was not invented by England
developed by her to become one of her chief weapons in the
over Napoleon in 1815. The emperor, could not see money in any
concrete terms, and was convinced that his efforts to fight
the basis of "sound money" by avoiding the creation of credit,
ultimately win him a victory by bankrupting England. He was
although the lesson has had to be relearned by modern
the twentieth century.
FINANCIAL CAPITALISM 1850-1931
The third stage of capitalism is of such overwhelming
significance in the history of the twentieth century, and its
ramifications and influences have been so subterranean and
occult, that we may be excused if we devote considerate
this organization and methods.
Essentially, what it did was to take the old disorganized and
localized methods of handling money and credit and organize
an integrated system, on an international basis, which worked
incredible and well-oiled facility for many decades. The
that system was in London, with major offshoots in New York
and it has left, as its greatest achievement, an integrated
system and a heavily capitalized - if now largely obsolescent
framework of heavy industry, reflected in railroads, steel
mines and electrical utilities.
This system had its center in London for four chief reasons.
First was the great volume of savings in England. Second was
oligarchic social structure which provided a very inequitable
distribution of incomes with large surpluses coming to the
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a small, energetic upper class. Third was that this upper
aristocratic but not noble, quite willing to recruit both
ability from lower levels and even from outside the country,
American heiresses and central-European Jews to its ranks
willingly as it welcomed monied, able and conformist recruits
lower classes of Englishmen. Fourth (and by no means last) in
significance was the skill in financial manipulation,
the international scene, which the small group of merchant
London had acquired.
In time, they brought into their financial network the
banking centers as well as insurance companies to form all of
into a single financial system on an international scale which
manipulated the quantity and flow of money so that they were
influence, if not control, governments on one side and
The men who did this, looking backward toward the period of
dynastic monarchy in which they had their own roots, aspired
establish dynasties of international bankers and were at least
successful at this as were many of the dynastic political
greatest of these dynasties, of course, were the descendants
Amschel Rothschild (1743-1812) whose male descendants for at
generations, generally married first cousins or even nieces.
Rothschild's five sons, established at branches in Vienna,
Naples and Paris as well as Frankfort, cooperated together in
which other international banking dynasties copied but rarely
In concentrating, as we must, on the financial or economic
activities of international bankers, we must not totally
other attributes. They were cosmopolitan rather than
they were a constant, if weakening, influence for peace, a
established in 1830 and 1840 when the Rothschilds threw their
tremendous influence successfully against European wars.
They were usually highly civilized, cultured gentlemen,
of education and of the arts, so that today, colleges,
opera companies, symphonies, libraries, and museum collections
reflect their munificence. For these purposes they set a
endowed foundations which still surround us today.
The names of some of these banking families are familiar to
of us and should be more so. They include Baring, Lazard,
Warburg, Schroder, Seligman, Speyers, Mirabaud, Mallet, Fould
above all Rothschild and Morgan. Even after these banking
became fully involved in domestic industry by the emergence of
financial capitalism, they remained different from ordinary
1) they were cosmopolitan and international;
2) they were close to governments and were particularly
questions of government debts, including foreign government
even in areas which seemed, at first glance, poor risks, like
Persia, Ottoman Turkey, Imperial China and Latin America;
3) their interests were almost exclusively in bonds and very
goods since they admired "liquidity";
4) they were fanatical devotees of deflation (which they
"sound" money from its close association with high interest
a high value of money) and of the gold standard;
5) they were almost equally devoted to secrecy and the secret
financial influence in political life. These bankers came to
"international bankers" and were known as "merchant bankers"
England, "private bankers" in France and "investment bankers"
Everywhere, they were sharply distinguishable from other, more
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obvious, kinds of banks, such as savings banks or commercial
One of their less obvious characteristics was that they
as private unincorporated firms offering no shares, no
usually no advertising to the public until modern inheritance
made it essential to surround such family wealth with the
of corporate status for tax-avoidance purposes. This
private firms continued because it ensured the maximum of
and secrecy to persons of tremendous public power who dreaded
knowledge of their activities as an evil almost as great as
Firms like Morgan, like others of the international banking
fraternity, constantly operated through corporations and
yet remained itself an obscure private partnership.
The influence of financial capitalism and the international
bankers who created it was exercised both on business and on
governments, but could have neither if it had not been able to
persuade both these to accept two "axioms" of its own
of these were based on the assumption that politicians were
and too subject to temporary public pressures to be trusted
control of the money system; accordingly, the soundness of
be protected in two ways: by basing the value of money on gold
allowing bankers to control the money supply. To do this it
necessary to conceal, even mislead, both governments and
the nature of money and its methods of operation.
Since it is quite impossible to understand the history of the
twentieth century without some understanding of the role
money in domestic affairs and in foreign affairs, as well as
played by bankers in economic life and in political life, we
a least a glance at each of these four subjects:
DOMESTIC FINANCIAL PRACTICES
In each country, the supply of money took the form of an
pyramid or cone balanced on its point. In the point was the
gold and its equivalent certificates; on the intermediate
levels was a
much larger supply of notes; and at the top, with an open and
expandable upper surface, was an even greater supply of
level used the levels below it as its reserves and these lower
had smaller quantities of money, they were "sounder."
Notes were issued by "banks of emission" or "banks of issue"
were secured by reserves of gold or certificates held in some
reserve. The fraction held in reserve depended upon banking
regulations or statute law. Such banks, even central banks,
private institutions, owned by shareholders who profited by
Deposits on the upper level of the pyramid were called by this
name, with typical bankers' ambiguity, in spite of the fact
consisted of two utterly different kinds of relationships:
1) "lodged deposits" which were real claims left by a
depositor in a
bank on which a depositor might receive interest; and
2) "created deposits" which were claims created by the bank
nothing as loans from the bank to "depositors" who had to pay
Both form part of the money supply. Lodged deposits as a form
savings are deflationary while created deposits, being an
the money supply, are inflationary.
The volume of deposits banks can create, like the amount of
they can issue, depends upon the volume of reserves available
whatever fraction of checks are cashed rather than deposited.
United States, deposits were traditionally limited to ten
reserves notes and gold. In Britain it was usually nearer
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such reserves. In most countries, the central bank was
closely by the almost invisible private investment banking
These, like the planet Mercury, could hardly be seen in the
emitted by the central bank, which they, in fact, often
a lost observer could hardly fail to notice the close private
associations between these private, international bankers and
central bank itself. In France, in 1936, the Board of the Bank
France was still dominated by the names of the families who
originally set it up in 1800.
In England, a somewhat similar situation existed. In a
ring are the "joint stock banks." Outside this secondary ring
savings banks, insurance firms, and trust companies.
In France and England the private bankers exercised their
through the central bank and had much more influence on the
and foreign policy and less on industry. In the United States,
industry was financed by investment bankers directly and the
these both on industry and government was very great.
The various parts of the pyramid of money were but loosely
related to each other. Much of this looseness arose from the
the controls were compulsive in a deflationary direction and
permissive in an inflationary direction. This last point can
in the fact that the supply of gold could be decreased but
hardly be increased. If an ounce of gold was added to the
point of the
pyramid, it could permit an increase in deposits equivalent to
on the uppermost level. If such an ounce of gold were
withdrawn from a
fully expanded pyramid of money, this would compel a reduction
deposits by at least this amount, probably by a refusal to
Throughout modern history, the influence of the gold standard
been deflationary, because the natural output of gold each
except in extraordinary times, has not kept pace with the
the output of goods. Only new supplies of gold or the
new kinds of money have saved our civilization over the last
centuries. The three great periods of war ended with an
deflationary crisis (1819, 1873, 1921) as the influential
persuaded governments to re-establish a deflationary monetary
with a high gold content.
The obsession of the Money Power with deflation was partly a
result of their concern with money rather than with goods but
founded on other factors, one of which was paradoxical. The
arose from the fact that the basic economic conditions of the
nineteenth century were deflationary, with a monetary system
gold and an industrial system pouring out increasing supplies
but in spite of falling prices, the interest rate tended to
rather than rise. Moreover, merchant banking continued to
bonds rather than equity securities (stocks), to favor
issues rather than private offerings.
Another paradox of banking practice arose from the fact that
bankers, who loved deflation, often acted in an inflationary
from their eagerness to lend money at interest. Since they
out of loans, they are eager to increase the amounts of bank
loan. But this is inflationary. The conflict between the
ideas and inflationary practices of bankers had profound
on business. The bankers made loans to business so that the
money increased faster than the increase of goods. The result
inflation. When this became clearly noticeable, the bankers
to notes or specie by curtailing credit and raising discount
This was beneficial to the bankers in the short run (since it
them to foreclose on collateral for loans) but it could be
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to them in the long run (by forcing the value of the
the amount of the loans it secured). But such bankers'
destructive to business and industry in the short run as well
The resulting fluctuation in the supply of money, chiefly
deposits, was a prominent aspect of the "business cycle." The
of money could be changed by changing reserve requirements or
(interest) rates. Central banks can usually vary the amount of
in circulation by "open market operations" or by influencing
discount rates of lesser banks. In open market operations, a
bank buys or sells government bonds in the open market. If it
releases money into the economic system; it if sells it
amount of money in the community. If the Federal Reserve Bank
pays for these by checks which are soon deposited in a bank.
increases this bank's reserves with the Federal Reserve Bank.
banks are permitted to issue loans for several times the value
their reserves with the FED, such a transaction permits them
loans for a much larger sum.
Central banks can also change the quantity of money by raising
the discount rate which forces the lesser banks to raise their
discount rates; such a raise in interest rates tends to reduce
demand for credit and thus the amount of deposits (money).
the discount rate permits an opposite result.
It is noted that the control of the central bank over the
policies of local banks are permissive in one direction and
in the other. They can compel these local banks to curtail
can only permit them to increase credit. This means that they
control powers against inflation and not deflation - a
the old banking idea that inflation was bad and deflation was
The powers of governments over the quantity of money are:
a) control over a central bank;
b) control over public taxation;
c) control over public spending;
Since most central banks have been (technically) private
institutions, this control is frequently based on custom
Taxation tends to reduce the amount of money in a community
is usually a deflationary force. Government spending is
On the whole, in the period up to 1931, bankers, especially
Money Power controlled by the international investment
able to dominate both business and government. They could
business because investment bankers had the ability to supply
refuse to supply such capital. Thus Rothschild interests came
dominate many of the railroads of Europe, while Morgan
least 26,000 miles of American railroads. Such bankers took
the boards of directors of industrial firms, as they had
on commercial banks, savings banks, insurance firms, and
companies. From these lesser institutions, they funneled
enterprises which yielded control and away from those who
These firms were controlled through interlocking
holding companies, and lesser banks.
As early as 1909,Walter Rathenau said, "Three hundred men, all
whom know one another, direct the economic destiny of Europe
choose their successors from among themselves."
The power of investment bankers over governments rests on the
need of governments to issue short-term treasury bills as well
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long-term government bonds. Just as businessmen go to
for current capital advances, so a government has to go to
bankers to tide over the shallow places caused by irregular
receipts. As experts in government bonds, the international
provided advice to government officials and, on many
their own members in official posts. This was so widely
today, that in 1961 a Republican investment banker became
the Treasury in a Democratic administration in Washington
significant comment from any direction.
Naturally, the influence of bankers over governments during
age of financial capitalism (roughly 1850-1931) was not
about which anyone talked about freely, but it has been
freely enough by those on the inside, especially in England.
Gladstone, chancellor of the Exchequer, declared "The hinge of
whole situation was this: the government itself was not to be
substantive power in matters of Finance, but was to leave the
Power supreme and unquestioned." On Sept. 26, 1921, the
Times wrote, "Half a dozen men at the top of the Big Five
upset the whole fabric of government finance by refraining
renewing Treasury Bills." In 1924, Sir Drummond Fraser,
of the Institute of Bankers, stated, "The Governor of the Bank
England must be the autocrat who dictates the terms upon which
the Government can obtain borrowed money."
In addition to their power over government based on government
financing and personal influence, bankers could steer
ways they wished them to go by other pressures. Since most
officials felt ignorant of finance, they sought advice from
whom they considered experts in the field. The history of the
century shows that the advice given to governments by bankers,
the advice they gave to industrialists, was consistently good
bankers but was often disastrous for governments, businessmen
Such advice could be enforced if necessary by manipulation of
exchanges, gold flows, discount rates, and even levels of
activity. Thus Morgan dominated Cleveland's second
gold withdrawals, and in 1936-13 French foreign exchange
paralyzed the Popular Front governments. The powers of these
international bankers reached their peak in 1919-1931 when
Norman and J.P. Morgan dominated not only the financial world
international relations and other matters as well. On Nov. 11,
the Wall Street Journal called Mr. Norman "the currency
Europe." This was admitted by Mr. Norman who said, "I hold the
hegemony of the world."
The conflict of interests between bankers and industrialists
resulted in the subordination of the bankers (after 1931) to
latter by the adoption of "unorthodox financial policies" -
financial policies not in accordance with the short-run
THE UNITED STATES TO 1917
The civil service reform began in the federal government with
Pendleton Bill of 1883. As a result, the government was
with varying degrees of completeness by the forces of
banking and heavy industry from 1884 to 1933. Popularly known
"Society," or the "400," they lived a life of dazzling
The structure of financial control created by the tycoons of
Banking" and "Big Business" in the period 1880-1933 was of
extraordinary complexity, one business fief being built upon
both being allied with semi-independent associates, the whole
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upward into two pinnacles of economic and financial power, of
one, centered in New York, was headed by J.P. Morgan and
the other, in Ohio, was headed by the Rockefeller family. When
two cooperated, as they generally did, they could influence
economic life of the country to a large degree and could
control its political life, at least on the federal level.
The influence of these business leaders was so great that the
Morgan and Rockefeller groups acting together, or even Morgan
alone, could have wrecked the economic system of the country
throwing securities on the stock market for sale, and having
precipitated a stock market panic, could then have bought back
securities they had sold but at a lower price. Naturally, they
not so foolish as to do this, although Morgan came very close
to it in
precipitating the "panic of 1907," but they did not hesitate
individual corporations, at the expense of holders of common
driving them to bankruptcy. In this way, Morgan wrecked the
New Haven and Hartford railroad before 1914 and William
wrecked the Chicago, Milwaukee, St. Paul and Pacific Railroad
The discovery by financial capitalists that they made money
of issuing and selling securities rather than out of
distribution and consumption of goods accordingly led them to
point where they discovered that the exploiting of an
company by excessive issuance of securities or the issuance of
rather than equity securities not only was profitable to them
it possible for them to increase their profits by bankruptcy
firm, providing fees and commission of reorganization as well
opportunity to issue new securities.
When the business interests pushed through the first
of the civil service reform in 1881, they expected to control
political parties equally. Some intended to contribute to both
allow an alternation of the two parties in public office in
conceal their own influence, inhibit any exhibition of
politicians, and allow the electorate to believe that they
exercising their own free choice.
The inability of the investment bankers to control the
Party Convention of 1896 was a result of the agrarian
the period 1868-1896. This discontent was based very largely
monetary tactics of the banking oligarchy. The bankers were
the gold standard and at the end of the Civil War, persuaded
administration to curb the postwar inflation and go back on
standard (crash of 1873 and resumption of specie payment in
This gave the bankers a control of the supply of money which
did not hesitate to use for their own purposes. The bankers'
affection for low prices was not shared by farmers, since each
prices of farm products went down, the burden of farmers'
greater. As farmers could not reduce their costs or modify
production plans, the result was a systematic exploitation of
agrarian sectors of the community by the financial and
sectors. This exploitation took the form of high industrial
discriminatory railroad rates, high interest charges, low farm
and very low level of farm services.
Unable to resist by economic weapons, the farmers turned to
political relief. They tried to work on the state political
through local legislation (so-called Granger Laws) and set up
movements (like the Greenback Party of 1878 or the Populist
Party in 1892). By 1896, the capture of the Democratic Party
forces of discontent under William Jennings Bryant who was
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to obtain higher prices by increasing the supply of money on a
bimetallic rather than a gold basis, presented the electorate
election on a social and economic issue for the first time in
generation. Though the forces of high finance were in a state
panic, by a mighty effort involving very large-scale spending
were successful in electing McKinley.
Though the plutocracy were unable to control the Democratic
as they controlled the Republican Party, they did not cease
efforts to control both and in 1904 and 1924, Morgan was able
back with a feeling of satisfaction to watch presidential
which the candidates of both parties were in his sphere of
The agrarian discontent, the growth of monopolies, the
of labor, and the excesses of Wall Street financiers made the
very restless between 1890-1900. All this could have been
merely by increasing the supply of money sufficiently to raise
somewhat, but the financiers were determined to defend the
standard no matter what happened.
In looking for some issue to distract public discontent from
domestic issues, what better solution than a crisis in foreign
affairs? Cleveland had stumbled upon this alternative in 1895
stirred up controversy with England over Venezuela. The great
opportunity came with the Cuban revolt against Spain in 1895.
the "yellow press" roused public opinion, Henry Cabot Lodge
Theodore Roosevelt plotted how they could best get the United
into the fracas. They got the excuse they needed when the
battleship Maine was sunk by a mysterious explosion in Havana
in 1898. In two months, the United States declared war on
fight for Cuban independence. The resulting victory revealed
United States as a world naval power, established it as an
power with possession of Puerto Rico, Guam, and the
America's entrance upon the stage as a world power continued
the annexation of Hawaii in 1898, the intervention in the
uprising in 1900, the seizure of the Panama canal in 1903, the
diplomatic intervention in the Russo-Japanese war in 1905, the
military occupation of Nicaragua in 1912, the military
Mexico in 1916.
As an example of the more idealistic impulse we might mention
creation of various Carnegie foundations to work for universal
As an example of the more practical point of view, we might
the founding of "The New Republic," a liberal weekly paper, by
agent of Morgan financed with Whitney money (1914).
The combined forces of the liberal East and the agrarian West
were able to capture the Presidency under Woodrow Wilson in
Wilson roused a good deal of popular enthusiasm with his talk
Freedom" and the rights of the underdog, but his program
little more than an amateur attempt to establish on a federal
those reforms which agrarian and labor discontent had been
a state basis for many years. Wilson was by no means a radical
there was a good deal of unconscious hypocrisy in many of his
resounding public speeches. His political and administrative
were a good deal more effective than his economic or social
The establishment of an income tax and the Federal Reserve
justified the support which Progressives had given to Wilson.
did much to extend equality of opportunity to wider groups of
CHAPTER III: THE RUSSIAN EMPIRE TO 1917
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The abolition of serfdom made it necessary for the landed
nobility to cease to regard the peasants as private property.
the Great (1689-1725) and Catherine the Great (1762-1796) were
supporters of westernization and reform. Paul I (1796-1801)
reactionary. Alexander I (1801-1825) and Alexander II
reformers while Nicholas I (1825-1855) and Nicholas II
were reactionaries. By 1864, serfdom had been abolished, and a
modern system of law, of justice, and of education had been
established; local government had been somewhat modernized; a
good financial and fiscal system had been established; and an
based on universal military service (but lacking in equipment)
been created. On the other hand, the autocracy continued in
of weak men and the freed serfs had no adequate lands.
The first Russian railroad opened in 1838 but growth was slow
until 1857. At that time, there were only 663 miles of
this figure went up over tenfold by 1871, doubled again by
14,000 miles, reached 37,000 by 1901 and 46,000 by 1915.
In 1900, Russia had 48% of the total world production of
petroleum products. The State Bank was made a bank of issue in
and was required by law to redeem its notes in gold, thus
Russia on the international gold standard.
In 1902, a cartel created by a dozen iron and steel firms
almost three-fourths of all Russian sales. It was controlled
foreign banking groups.
Until 1910, Stolypin continued his efforts to combine
with reform, especially agrarian reform. Rural credit banks
established; various measures were taken to place larger
land in the hands of the peasants; restrictions of immigration
peasants, especially to Siberia, were removed; participation
government was opened to lower social classes previously
education, especially technical education, was made more
and certain provisions for social insurance were enacted into
was assassinated in the presence of the Tsar in 1911.
The fourth duma (1912-1916) was elected by universal suffrage.
CHAPTER IV: THE BUFFER FRINGE
THE NEAR EAST TO 1914
The Ottoman Empire was divided into 21 governments and
into seventy vilayets, each under a pasha. The supreme ruler
Constantinople was not only sultan (head of the empire) but
caliph (defender of the Muslim creed).
The Great Powers showed mild approval of the Baghdad Railway
until about 1900. Then, for more than ten years, Russia,
France showed violent disapproval and did all they could the
the project. They described the Baghdad Railway as the
of German imperialist aggression seeking to weaken and destroy
Ottoman Empire and the stakes of the other powers in the area.
The Germans were not only favorably inclined toward Turkey;
conduct seems to have been completely fair in regard the
administration of the railway itself. At a time when the
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other railways were practicing wholesale discrimination
customers, the Germans had the same rates and same treatment
including Germans and non-Germans. They worked to make the
efficient and profitable although their income from it was
by the Turkish government. In consequence, the Turkish
payments to the
railroad steadily declined, and the government was able to
its profits to the extent of almost three million francs in
Moreover, the Germans did not seek to monopolize control of
railroad, offering to share equally with France and England
eventually with the other Powers. France accepted this offer
but Britain continued to refuse and placed every obstacle in
of the project.
When the Ottoman government sought to raise their customs
from 11% to 14% in order to continue construction, Britain
this. In order to carry on the project, the Germans sold their
railroad interests in the Balkans and gave the Ottoman
subsidy of $275,000 a kilometer. In striking contrast, the
demanded arrears of 57 million francs under the Treaty of
French, in spite of investments in Turkey, refused to allow
Railway securities to be handled on the Paris Stock Exchange.
In 1903, Britain made an agreement for a joint German, French,
and British control of the railroad. Within three weeks this
was repudiated because of newspaper protests against it. When
Turkish government tried to borrow, it was summarily rebuffed
and London, but obtained the sum unhesitatingly in Berlin. The
of German prestige and the decline in favor of the Western
the sultan's court is not surprising and goes far to explain
Turkish intervention on the side of the Central powers in the
Britain withdrew her opposition to the Baghdad Railway in
for promises that:
1) it would not be extended to the Persian Gulf;
2) British capitalists would be given a monopoly on the
the Euphrates and Tigris rivers and exclusive control over
3) 2 British subjects would be given seats on the Board of
4) Britain would have exclusive control over commercial
Kuwait, the only good port on the upper Persian Gulf;
5) a monopoly over the oil resources given to a new
Dutch Shell Company in which British held half interest, the
and French a quarter interest each;
THE BRITISH IMPERIAL CRISIS TO 1926
In England, the landed class obtained control of the bar and
bench and were, thus, in a position to judge all disputes
property in their favor. Control of the courts and of the
made it possible for this ruling group to override the rights
peasants in land, to eject them from the land, to enclose the
fields of the medieval system, to deprive the cultivators of
manorial rights and thus reduce them to the condition of
rural laborers or tenants.
Until 1870, there was no professorships of Fine Arts at
but in that year, thanks to a bequest,John Ruskin was named to
chair. He hit Oxford like an earthquake, not so much because
about fine arts but because he talked about the empire and
downtrodden masses as moral issues. Until the end of the
century, the poverty-stricken masses in the cities lived in
ignorance and crime much like described by Charles Dickens.
spoke to the Oxford undergraduates as members of the
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class. He told them that they were the possessors of a
tradition of education, beauty, rule of law, freedom, decency,
self-discipline but that this tradition could not be saved and
deserve to be saved, unless it could be extended to the lower
and to the non-English masses throughout the world. If not
these classes, the minority upper-class would be submerged and
Ruskin's message had a sensational impact. His inaugural
was copied out in longhand by one undergraduate, Cecil Rhodes.
feverishly exploited the diamond and gold fields of South
to be prime minister of Cape Colony, contributed money to
parties, controlled parliamentary seats both in England and
With financial support from Lord Rothschild, he was able to
monopolize the diamond mines as De Beers Mines and Gold
Fields. In the
mid 1890s, Rhodes had a personal income of a least a million
(then five million dollars) a year which was spent so freely
mysterious purposes that he was usually overdrawn on his
These purposes centered on his desire to federate the
peoples and to bring all the habitable portions of the world
Among Ruskin's most devoted disciples at Oxford were a group
intimate friends who devoted the rest of their lives to
his ideas. They were remarkably successful in these aims.
In 1891, Rhodes organized a secret society with members in a
"Circle of Initiates" and an outer circle known as the
Helpers" later organized as the Round Table organization.
In 1909-1913, they organized semi-secret groups know as Round
Table Groups in the chief British dependencies and the United
In 1919, they founded the Royal Institute of International
Similar Institutes of International Affairs were established
chief British dominions and the United States where it is
known as the
Council on Foreign Relations. After 1925, the Institute of
Relations was set up in twelve Pacific area countries.
They were constantly harping on the lessons to be learned from
the failure of the American Revolution and the success of the
federation of 1867 and hoped to federate the various parts of
empire and then confederate the whole with the United Kingdom
EGYPT AND THE SUDAN TO 1922
Disraeli's purchase, with Rothschild money, of 176,602 shares
Suez Canal stock for #3,680,000 from the Khedive of Egypt in
motivated by concern for communications with India just as the
acquisition of the Cape of Good Hope in 1814 had resulted from
As a result of complex and secret negotiations in which Lord
Rosebery was the chief figure, Britain kept Uganda, Rhodes was
privy councilor, Rosebery replaced his father-in-law, Lord
in Rhodes secret group and was made a trustee under Rhodes'
By 1895, the Transvaal Republic presented an acute problem.
political control was in the hands of a rural, backward, Bible
racist minority of Boers while all economic wealth was in the
hands of a violent, aggressive majority of foreigners,
most of whom lived in Johannesburg. The Utlanders, who were
numerous and owned two thirds of the land and nine-tenths of
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wealth of the country, were prevented from participating in
life or from becoming citizens (except after 14 years
were irritated by President Paul Kruger's intriguing to obtain
kind of German intervention and protection.
At this point, Rhodes made his plans to overthrow Kruger's
government by an uprising in Johannesburg, financed by himself
by his brother Frank, followed by an invasion led by Frank
from Rhodesia. Flora Shaw used The Times to prepare public
England while others negotiated for the official support
When the revolt fizzled, Jameson raided anyway and was easily
captured by the Boers. The public officials involved denounced
plot, loudly proclaimed their surprise at the event, and were
whitewash most of the participants in the subsequent
inquiry. A telegram from the German Kaiser to Kruger
him on his success "in preserving the independence of his
was built up by The Times into an example of brazen German
interference in British affairs, and almost eclipsed Jameson's
Rhodes was stopped only temporarily. For almost two years, he
his friends stayed quiet waiting for the storm to blow over.
began to act again. Propaganda, most of it true about the
the Utlanders flooded England from Flora Shaw. Milner was made
High Commissioner to South Africa; his friend Brett worked his
into the confidence of the monarchy to become its chief
advisor. Milner made provocative British troop movements on
frontiers in spite of the vigorous protests of his commanding
in South Africa, who had to be removed; and finally, war was
precipitated when Smuts drew up an ultimatum insisting that
British troop movements cease and when this was rejected by
The Boer War (1899-1902) was one of the most important events
British imperial history. The ability of 40,000 Boer farmers
off ten times as many British for three years, inflicting a
defeats on them over that period, destroyed faith in British
Although the Boer republics were defeated and annexed in 1902,
Britain's confidence was so shaken that it made a treaty with
providing that if either became engaged in war with two
enemies in the
Far East, the other would come to the rescue. This treaty
Japan to attack Russia in 1904.
Milner's group, known as "Milner's Kindergarten" reorganized
government. By 1914, the Smuts government passed a law
natives from most semi-skilled or skilled work or any
By the Land Act of 1913, 7% was reserved for purchases by
and the other 93% by whites. The wages of natives were about
of those of whites.
These natives lived on inadequate and eroded reserves or in
horrible urban slums and were drastically restricted in
residence, or economic opportunities and had almost no
even civil rights. By 1950 in Johannesburg, 90,000 Africans
crowded into 600 acres of shacks with no sanitation with
running water and denied all opportunity except for animal
In 1908, the Milner Round Table group worked a scheme to
the tropical portions of Africa north of the Zambezi river for
under such attractive conditions that the blacks south of that
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would be enticed to migrate northward. Its policy would be to
Negro dominion in which Blacks could own land, enter
stand on a footing of equality with Whites. Although this
not been achieved, it provides the key to Britain's native
from 1917 onward.
In 1903, when Milner took over the Boer states, he tried to
follow the policy that native could vote. This was blocked by
Kindergarten because they considered reconciliation with the
be more urgent.
In South Africa, the three native protectorates of Swaziland,
Bechuanaland, and Basutoland were retained by the imperial
as areas where native rights were paramount and where tribal
living could be maintained at least partially.
MAKING THE COMMONWEALTH 1910-1926
Back in London, they founded the Round Table and met in
presided over by Milner to decide the fate of the empire.
others were sent around the world to organize Round Table
the chief British dependencies to give them, including India
Ireland, their complete independence.
The creation of the Round Table groups was so secretive that,
even today, many close students of the subject are not aware
Curtis said, "The task of preparing for freedom the races
cannot as yet govern themselves is the supreme duty of those
Personally, I regard this challenge to the long unquestioned
the white man to dominate the world as inevitable and
especially to ourselves. Our whole race has outgrown the
national state and will pass either to a Commonwealth of
else to an empire of slaves. And the issue of these agonies
EAST AFRICA 1910-1931
Publicity for their views on civilizing the natives and
them for eventual self-government received wide dissemination.
By 1950 Kenya had discontented and detribalized blacks working
for low wages on lands owned by whites. It had about two
blacks and only 3,400 whites in 1910. Forty years later, it
4 million blacks and only 30,000 whites. The healthful
reserved for white ownership as early as 1908. The native
five times as much land although they had 150 times as many
The whites tried to increase the pressure on natives to work
white farms rather than to seek to make a living on their own
within the reserves, by forcing them to pay taxes in cash, by
curtailing the size or quality of the reserves, by restricting
improvements in native agricultural techniques and by personal
political pressure and compulsion.
The real crux of the controversy before the Mau Mau uprising
1948-1955 was the problem of self-government; Pointing to
Africa, the settlers in Kenya demanded self-rule which would
them to enforce restrictions on non-whites.
From this controversy came a compromise which gave Kenya a
Legislative Council containing representatives of the imperial
government, the white settlers, the Indians, the Arabs, and a
missionary to represent the blacks. Most were nominated rather
elected but by 1949, only the official and Negro members were
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As a result of the 1923 continued encroachment of white
on native preserves, the 1930 Native Land Trust Ordinance
native reserves but these reserves remained inadequate.
Efforts to extend the use of native courts, councils and to
natives for an administrative service were met with growing
based on the conviction that the whites were hypocrites who
religion that they did not obey, were traitors to Christ's
and were using these to control the natives and to betray
interests under cover of religious ideas which the whites
did not observe in practice.
INDIA TO 1926
Although the East India Company was a commercial firm, it had
intervene again and again to restore order, replacing one
ruler by another and even taking over the government of those
where it was more immediately concerned and to divert to their
pockets some of the fabulous wealth they saw flowing by. Areas
rule expanded steadily until by 1858 they covered three-fifths
In 1857-1858, a sudden, violent insurrection of native forces,
known as the Great Mutiny, resulted in the end of the Mogul
of the East India Company, the British government taking over
Numerous legislative enactments sought to improve the
but were counterbalanced... by the growing burden of peasant
onerous terms and at high interest rates. Although slavery was
abolished in 1843, many of the poor were reduced to peonage by
contracting debts at unfair terms and binding themselves and
heirs to work for their creditors until the debt was paid.
Such a debt
could never be paid, in many cases, because the rate at which
reduced was left to the creditor and could rarely be
questioned by the
In spite of India's poverty, there was a considerable volume
savings arising chiefly from the inequitable distribution of
the landlord class and to the moneylenders (if these two
groups can be
separated in this way).
Hinduism was influenced by Christianity and Islam so that the
revived Hinduism was really a synthesis of these three
Played down was the old and basic Hindu idea of Karma where
reappeared again and again in a different physical form and in
different social status, each difference being a reward or
for the soul's conduct in at it's previous appearance. There
real hope of escape from this cycle, except by a gradual
through a long series of successive appearances to the
of complete obliteration of personality (Nirvana) by ultimate
in the soul of the universe (Brahma). This release (moksha)
endless cycle of existence could be achieved only by the
of all desire, of all individuality and of all will to live.
IRELAND TO 1939
The Cromwellian conquest of Ireland in the seventeenth century
had transferred much Irish land, as plunder of war, to
English landlords. In consequence, high rents, insecure
of improvements and legalized economic exploitation, supported
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English judges and English soldiers, gave rise to violent
unrest and rural atrocities against English lives and
THE FAR EAST TO WORLD WAR I
THE COLLAPSE OF CHINA TO 1920
The destruction of traditional Chinese culture under the
of Western Civilization was considerably later than the
destruction of Indian culture by Europeans
The upper-most group derived its income as tribute and taxes
its possession of military and political power the middle
derived its incomes from sources such as interest on loans,
lands and the profits from commercial enterprises. Although
peasants were clearly an exploited group, this exploitation
impersonal and traditional and thus more easily borne.
Only in the late nineteenth and early twentieth century did
peasants in China come to regard their positions as so
violence became preferable to diligence or conformity. This
arose from the fact that the impact of Western culture on
in fact, make a peasant's position economically hopeless.
Chinese society was too weak to defend itself against the
When it tried to do so, as in the Opium Wars of 1840-1861 or
Boxer uprising of 1900, such Chinese resistance to European
penetration was crushed by armaments of the Western Powers and
kinds of concessions to these Powers were imposed on China.
Until 1841, Canton was the only port allowed for foreign
and opium was illegal. As a consequence of Chinese destruction
illegal Indian opium and the commercial exactions of Cantonese
authorities, Britain imposed on China the treaties of Nanking
and of Tientsin (1858). These forced China to cede Hong Kong
Britain and to open sixteen ports to foreign trade, to impose
uniform import tariff of no more than 5%, to pay an indemnity
$100 million, to permit foreign legations in Peking, to allow
British official to act as head of the Chinese customs
service, and to
legalize the import of opium. China lost Burma to Britain,
to France. Also Formosa and the Pescadores to Japan, Macao to
Portugal, Kiaochow to Germany, Liaotung (including Port
Russia, France took Kwangchowan and Britain took Kowloon and
Weihaiwei. Various Powers imposed on China a system of
extraterritorial courts under which foreigners in judicial
not be tried in Chinese courts or under Chinese law.
TRAGEDY AND HOPE Chapters V-VIII
by Dr. Carroll Quigley
V. THE FIRST WORLD WAR
VI. THE VERSAILLES SYSTEM AND RETURN TO NORMALCY 1919-1929
VII. FINANCE, COMMERCIAL POLICY AND BUSINESS ACTIVITY
VIII. INTERNATIONAL SOCIALISM AND THE SOVIET CHALLENGE
CHAPTER V: THE FIRST WORLD WAR
THE GROWTH OF INTERNATIONAL TENSIONS 1871-1914
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Four chief reasons have been given for the intervention of the
United States in World War I.
1) to secure "freedom of the seas" from German submarine
3) a conspiracy by international bankers and munitions
either to protect their loans to the Entente Powers or their
profits from sales to these Powers;
4) Balance of Power principles to prevent Great Britain from
defeated by Germany
The fact that German submarines were acting in retaliation for
the illegal British blockades of the continent of Europe and
violations of international law and neutral rights on the high
Britain was close to defeat in April 1917 and on that basis
United States entered the war. The unconscious assumption by
leaders that an Entente victory was inevitable was at the
their failure to enforce the same rules of neutrality and
international law against Britain as against Germany. They
assumed that British violations of these rules could be
with monetary damages while German violations of these rules
must be resisted by force if necessary. Since they could not
this unconscious assumption or publicly defend the legitimate
international power politics on which it rested, they finally
war on an excuse which was legally weak, "the assertion of a
protect belligerent ships on which Americans saw fit to travel
treatment of armed belligerent merchantmen as peaceful
assumptions were contrary to reason and to settled law and no
professed neutral advanced them."
The Germans at first tried to use the established rules of
international law regarding destruction of merchant vessels.
proved so dangerous because the British instructions to
to attack submarines. American protests reached a peak when
Lusitania was sunk in 1915. The Lusitania was a British
vessel constructed as an auxiliary cruiser carrying a cargo of
cases of rifle cartridges and 1250 cases of shrapnel with
attack German submarines whenever possible. The incompetence
acting captain contributed to the heavy loss of life as did
mysterious second explosion after the German torpedo struck.
captain was on course he had orders to avoid; he was running
reduced speed, he had an inexperienced crew; the portholes had
left open; the lifeboats had not been swung out; and no
drills had been held.
The propaganda agencies of the Entente Powers made full use of
the occasion. The Times of London announced that 80% were
the US (actually 15.6%); the British manufactured and
medal which they pretended had been awarded to the submarine
the German government; a French paper published a picture of
crowds in Berlin at the outbreak of war in 1914 as a picture
Germans "rejoicing" at the news of the sinking of the
The US protested violently against the submarine warfare while
brushing aside German arguments based on the British blockade.
so irreconcilable in these protests that Germany sent Wilson a
which promised that "in the future merchant vessels within and
the war zone shall not be sunk without warning and without
safeguarding human lives unless these ships try to escape or
resistance. In return, the German government hoped that the US
put pressure on Britain to follow the established rules of
international law in regard to blockade and freedom of the
refused to do so. It became clear to the Germans that they
starved into defeat unless they could defeat Britain first by
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unrestricted submarine warfare. Since they were aware this
probably bring the US into the war against them, they made
effort to negotiate peace before resorting to it. It was
the Entente Powers on Dec. 27 and unrestricted submarine
resumed. Wilson broke off diplomatic relations and the
declared war on April 3, 1917.
Britain was unwilling to accept any peace which would leave
Germany supreme on the continent or in a position to resume
commercial, naval, and colonial rivalry which had existed
The Vatican, working through Cardinal Pacelli (later Pope Pius
XII) sought a negotiated peace.
On Oct 5, a German note to Wilson asked for an armistice based
the basis of the Fourteen Points which promised the end of
diplomacy, freedom of the seas; freedom of commerce;
fair settlement of colonial claims, with the interests of the
peoples receiving equal weight with the titles of the
Powers; the evacuation of Russia, the evacuation and
of Belgium, the evacuation of France and the restoration of
Alsace-Lorraine as in 1870.
The Entente Supreme War Council refused to accept the Fourteen
Points as the basis for peace until Colonel House threatened
US would make a separate peace with Germany.
Wilson had clearly promised that the peace treaty would be
negotiated and based on the Fourteen Points but the Treaty of
Versailles was imposed without negotiation and the Fourteen
fared very poorly in its provisions. The subsequent claim of
German militarists that the German Army was never defeated but
"stabbed in the back" by the home front through a combination
international Catholics, international Jews, and international
Socialists have no merit whatever.
On all fronts, almost 13 million men in the various armed
died and the war destroyed over $400 billion in property at a
when the value of every object in France and Belgium was not
over $75 billion.
In July 1914, the military men were confident that a decision
would be reached in six months. This belief was supported by
financial experts who, while greatly underestimating the cost
fighting, were confident financial resources would be
exhausted in six
months. By financial resources, they meant "gold reserves."
clearly limited; all the Great Powers were on the gold
However each country suspended the gold standard at the
war. This removed the automatic limitation on the supply of
money. The each country proceeded to pay for the war by
the banks. The banks created the money which they lent my
giving the government a deposit of any size against which the
government could draw checks. The banks were no longer limited
amount of credit they could create because they no longer had
out gold for checks on demand. This the creation of money in
of credit by the banks was limited only by the demands of its
borrowers. Naturally, as governments borrowed to pay for their
private businesses borrowed to be able to fill the
government's orders. The percentage of outstanding bank notes
by gold reserves steadily fell and the percentage of bank
covered by either gold or bank notes fell even further.
Naturally, when the supply of money was increased in this
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faster than the supply of goods, prices rose because a larger
of money was competing for a smaller supply of goods. People
money for making capital goods, consumer goods and munitions
could spend their money only to buy consumer goods. The
public debt became steadily worse because governments were
such a large part of their activities by bank credit. Public
rose by 1000 percent.
Governments began to regulate imports and exports to ensure
necessary materials stayed in the country and did not go to
states. This led to the British blockade of Europe.
The results of the blockade were devastating. Continued for
nine months after the armistice, it caused the deaths of
persons, reparations took 108,000 horses, 205,000 cattle,
sheep and 240,000 fowl.
Countries engaged in a variety of activities designed to
regulate the flow of information which involved censorship,
and curtailment of civil liberties.
The War Propaganda Bureau was able to control almost all
information going to the American press.
The Censorship and Propaganda bureaus worked together. The
concealed all stories of Entente violations of the laws of war
the rules of humanity while the Propaganda Bureau widely
the violations and crudities of the Central Powers. The German
violation of Belgian neutrality was constantly bewailed,while
was said of the Entente violation of Greek neutrality. A great
was made of the Austrian ultimatum to Serbia while the Russian
mobilization which had precipitated the war was hardly
the Central Powers a great deal was made of the Entente
while nothing was said of the Kaiser's demands for "a place in
sun" of the High Command's refusal to renounce annexation of
Manufacture of outright lies by propaganda agencies was
infrequent and the desired picture of the enemy was built up
process of selection and distortion of evidence until, by
the West regarded the Germans as bloodthirsty and sadistic
while the Germans regarded the Russians as "subhuman
great deal was made, especially by the British, of "atrocity"
propaganda; stories of German mutilation of bodies, violation
women, cutting off a children's hands, desecration of
crucifixions of Belgians were widely believed in the West by
1917, Henry Carter is created a story that the Germans were
human bodies to extract glycerin and produced pictures to
Again, photographs of mutilated bodies in a Russian
outrage in 1905 were circulated as pictures of Belgians in
were several reasons for the use of such atrocity stories:
a) to build up the fighting spirit of the mass army;
b) to stiffen civilian morale;
c) to encourage enlistments;
d) to increase subscriptions for war bonds;
e) to justify one's own breaches of international law;
f) to destroy the chances of negotiating peace or to justify a
g) to win the support of the neutrals.
The relative innocence and credulity of the average person who
was not yet immunized to propaganda assaults through mediums
communication in 1914 made the use of such stories relatively
effective. But the discovery in the period after 1919 that
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been hoaxed gave rise to a skepticism toward all government
communications which was especially noticeable in the Second
CHAPTER VI: THE VERSAILLES SYSTEM AND THE RETURN TO NORMALCY
THE PEACE SETTLEMENTS 1919-1923
The criticisms of the peace settlements was as ardent from the
victors as from the vanquished aimed at the terms which were
unfair nor ruthless. The causes of the discontent rested on
procedures which were used rather than the terms themselves.
all, there was discontent at the contrast between the
were used and the procedures which pretended to be used, as
between the high-minded principles which were supposed to be
and those which really were applied.
When it became clear that they were to be imposed rather than
negotiated, that the Fourteen Points had been lost in the
that the terms had been reached by a process of secret
from which the smaller nations had been excluded, there was a
revulsion against the treaties. By 1929, most of the Western
feelings of guilt and shame whenever they thought of the
Treaty. In England, the same groups, often the same people,
made the wartime propaganda and the peace settlements were
their complaint that the latter had fallen far below the
ideals of the
former while all the while their real aims were to use power
to the benefit of Britain.
The peace settlements were made by an organization which was
chaotic and by a procedure which was fraudulent. None of this
deliberate. It arose rather from weakness and ignorance, from
failure to decide on what principles it would be based.
]Since the Germans had been promised the right to negotiate,
became clear that the terms could not first be made the
public compromise. Unfortunately, by the time the victorious
Powers realized all this and decided to make the terms by
negotiations among themselves, invitations had already been
all the victorious powers to come to the conference. As a
this embarrassing situation, the peace treaty was made on two
On one level, in the full glare of publicity, the Inter-Allied
Conference became the Plenary Peace
Conference and with the considerable fanfare, did nothing. ON
the other level, the Great Powers worked out their peace terms
secret and when they were ready, imposed them simultaneously
conference and on the Germans. This had not been intended. It
clear to anyone just what was being done.
At all these meetings, as at the Peace Conference itself, the
political leaders were assisted by groups of experts and
persons. Many of the experts were members associates of the
international banking fraternity. In every case but one, where
committee of experts submitted a unanimous report, the Supreme
accepted its recommendation. The one case where a report was
accepted was concerned with the Polish corridor, the same
led to the Second World War where the experts were much
Germany than the final decision of the politicians.
The German delegation offered to accept the disarmament
sections and reparations if the Allies would withdraw any
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that Germany had, alone, caused the war and would re-admit
the world's markets.
The Allies answer accused the Germans of sole guilt in causing
the war and of inhuman practices during it. The Germans voted
if the articles on war guilt and war criminals could be struck
the treaty.. When the Allies refused these concessions, the
Center Party voted 64-14 not to sign. The High Command of the
army ordered the Cabinet to sign. The Treaty of Versailles was
by all the delegations except the Chinese in protest against
disposition of the prewar German concessions in Shantung.
No progress was possible in Hungary without some solution of
agrarian question and the peasant discontent arising from
monopolization of the land.
The French Ministry of Foreign Affairs (acting on behalf of
France's greatest industrialist, Eugene Schneider) made a deal
the Hungarians that if they would sign the Treaty of Trianon
Schneider control of the Hungarian state railways, the port of
Budapest and the Hungarian General Credit Bank, France would
eventually make Hungary one of the mainstays of its
in Eastern Europe and, at the proper time, obtain a drastic
of the Treaty of Trianon. Paleologue received his reward from
Schneider. He was made director of Schneider's personal
The Treaty of Sevres with Turkey was never signed because of
scandal caused by the Bolshevik publication of the secret
regarding the Ottoman Empire, since these treaties contrasted
sharply with the expressed war aims of the Allies.
The British felt that richer prospects were to be obtained
the Turkish sultan. In particular, the French were prepared to
the claims of Standard Oil to such concessions while the
prepared to support Royal Dutch Shell.
The chief territorial disputes arose over the Polish corridor.
France's Foch wanted to give all of East Prussia to Poland.
the experts gave Poland access to the sea by severing East
from the rest of Germany by creating a Polish corridor in the
of the Vistula. However, the city of Danzig was clearly a
and Lloyd George refused to give it to Poland. Instead, it was
a free city under the protection of the League of Nations.
The most violent controversies arose in regard to the
of Poland. Of these, only that with Germany was set by the
Versailles. The Poles refused to accept their other frontiers
1920 were at war with Lithuania over Vilna, with Russia over
eastern border, with the Ukrainians over Galaicia, and with
Czechoslovakia over Teschen.
These territorial disputes are of importance because they
continued to lacerate relationships between neighboring states
well into the period of World War II. There were 1,000,000
living in Poland, 550,000 in Hungary, 3,100,000 in
about 700,000 in Romania, 500,000 in Yugoslavia and 250,000 in
To protect these minorities, the Allied Powers forced the new
to sign treaties grating a certain minimum political rights
by the League of Nations with no power to enforce observation
The French were torn between a desire to obtain as large a
fraction as possible of Germany's payments and a desire to
Germany such a crushing burden of indebtedness that Germany
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ruined beyond the point where it could threaten French
A compromise originally suggested by John Foster Dulles was
adopted by which Germany was forced to admit an unlimited,
theoretical obligation to pay but was actually bound to pay
a limited list of ten categories of obligations with pensions
larger than the preceding nine categories together. All
were wiped out in the financial debacle of 1931-1932.
Britain had obtained all her chief ambitions. The German navy
at the bottom of Scapa Flow scuttled by the the Germans
the German merchant fleet was scattered, captured, destroyed;
German colonial rivalry was ended and its areas occupied; the
commercial rivalry was crippled by the loss of its patents and
industrial techniques, the destruction of all its commercial
and banking connections throughout the world, and the loss of
rapidly growing prewar markets. France on the other hand, had
obtained the one thing it wanted: security.
The British governments of the Right began to follow a double
policy: a public policy in which they spoke loudly in support
foreign policy of the Left; and a secret policy in which they
supported the foreign policy of the Right. Thus the stated
based on support of the League of Nations and of disarmament
real policy was quite different. While openly supporting Naval
disarmament, Britain signed a secret agreement with France
blocked disarmament and signed an agreement with Germany which
released her from her naval disarmament in 1935. After 1935,
contrast between the public and secret policy became so sharp
Lord Halifax called it "dyarchy."
The British Right forced France to give away every advantage
which it held over Germany. Germany was allowed to rearm in
allowed to remilitarize the Rhineland in 1936. Finally, when
been lost, public opinion forced the British government to
Right's policy of appeasement and adopt the old French policy
resistance made on a poor issue (Poland 1939)
In France, as in Britain, there appeared a double policy.
France continued to talk of collective security, this was
public consumption for in fact she had no policy independent
Britain's policy of appeasement.
War was not outlawed but merely subjected to certain
delays in making it, nor were peaceful procedures for settling
international disputes made compulsory.
The Covenant had been worded by a skillful British lawyer,
Hurst, who filled it with loopholes cleverly concealed under a
of impressive verbiage so that no state's freedom of action
The Locarno Pacts, which were presented at the time throughout
the English-speaking world as a sensational contribution to
and stability of Europe, really formed the background for the
of 1938 when Czechoslovakia was destroyed at Munich. When the
guarantee of Locarno became due in 1936, Britain dishonored
agreement, the Rhine was remilitarized and the way was open
Germany to move eastward.
Poland protested violently at the refusal to guarantee her
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France agreed to an extension of a multilateral agreement by
which all countries could renounce the use of war as an
national policy. The British government reserved certain
notably the Middle East, where it wished to be able to wage
could not be termed self-defense in a strict sense. The US
reservation preserving its right to make war under the Monroe
doctrine. The net result was that only aggressive war was to
renounced. The Kellogg-Briand Pact took one of the first steps
destroying the legal distinction between war and peace, since
Powers, having renounced the use of war, began towage wars
declaring them as was done by Japan in China in 1937, by Italy
Spain in 1936 and by everyone in Korea in 1950.
The outlawry of war was relatively meaningless without some
sanctions that could compel the use of peaceful methods.
this direction were nullified by Britain.
Disarmament suggestions of the Soviet representative,
providing for immediate and complete disarmament of every
denounced by all. A substitute draft provided that the most
armed states would disarm by 50%, the less heavily-armed by
the lightly armed by 25%, and the disarmed by 0%. That all
planes, gas and heavy artillery be completely prohibited was
rejected without discussion and Litvinoff was beseeched to
show a more
Once it was recognized that security was in acute danger,
financial considerations were ruthlessly subordinated to
giving rise to an economic boom which showed clearly what
been achieved earlier if financial consideration had been
to the world's economic and social needs earlier; such action
have provided prosperity and rising standards of living which
have made rearming unnecessary.
JCT: How true.
The preliminary payments were supposed to amount to a total of
billion marks by May 1921. Although the Entente Powers
that only 8 billion had been paid,the whole matter was dropped
the Germans were presented with a total reparations bill of
billion marks. Under pressure, Germany accepted this bill and
victors bonds of indebtedness. Of these, 82 billion were set
forgotten. Germany was to pay the other 50 billion at 2.5
year in interest and .5 billion a year to reduce the total
JCT: It would only take 200 years to pay off a total of 500
billion in interest and 50 billion in principal.
Germany could only pay if two conditions prevailed:
a) if it had a budgetary surplus and
b) if it sold abroad more than it bought abroad.
Since neither of these conditions generally existed in the
1921-1931, Germany could not, in fact, pay reparations.
The failure to obtain a budgetary surplus was solely the
responsibility of the government which refused to reduce its
expenditures or the standards of living off its own people or
them sufficiently heavily. The failure to obtain a favorable
of trade because foreign creditors refused to allow a free
German goods into their own countries. Thus creditors were
to accept payment in the only way in which payments could
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made, that is, by accepting German goods and services.
JCT: Notice they wanted money and not the goods they could buy
Germany could have paid in real goods and services if the
creditors had been willing to accept such goods and services.
government made up the deficits by borrowing from the
result was an acute inflation which was not injurious to the
influential groups though it was generally ruinous to the
classes and thus encouraged extremist elements.
On Jan 9,1923, the Reparations Committee voted 3 to 1 (Britain
opposing France, Belgium and Italy) that Germany was in
Armed forces of the three nations began to occupy the Ruhr two
days later. Germany declared a general strike in the area,
reparation payments, and adopted a program of passive
government supporting the strikers by printing more paper
The area occupied was no more than 60 miles long by 30 miles
but contained 10% of Germany's population and produced 80% of
Germany's coal, iron and steel and 70% of her freight traffic.
150,000 Germans were deported.
A compromise was reached by which Germany accepted the Dawes
for reparations and the Ruhr was evacuated. The Dawes Plan was
a J.P. Morgan production drawn up by an international
financial experts presided over by American banker Charles
Germany paid reparations for five years (1924-1929) and owed
the end than it had owed at the beginning. It is worthy of
this system was set up by the international bankers and that
subsequent lending of other people's money to Germany was very
profitable to these bankers.
Using these American loans, Germany's industry was largely
rebuilt to make it the second best in the world and to pay
By these loans Germany's creditors were able to pay their war
debts to England without sending goods or services. Foreign
went to Germany as loans, back to Italy, Belgium, France and
as reparations and finally back to the US as payments on war
that period, Germany paid 10.5 billion marks in reparations
borrowed 18.6 billion abroad. Nothing was settled by all this
international bankers sat in heaven under a rain of fees and
The Dawes Plan was replaced by the Young Plan, named after the
American Owen Young (a Morgan agent). A new private bank
Bank for International Settlements was established in
Owned by the chief central banks of the world and holding
each of them, "a Central Bankers' Bank," it allowed payments
made by merely shifting credits from one country's account to
on the books of the bank.
The Young Plan lasted for less than 18 months. The crash of
New York stock market in 1929 marked the end of the decade of
reconstruction and ended the American loans to Germany.
Germans and others had begun a "flight from the mark" which
created a great drain on the German gold reserve. As it
volume of money and credit erected on that reserve had to be
by raising the interest rate. Prices fell because of the
supply so that it became almost impossible for the banks to
collateral to obtain funds to meet the growing demand for
JCT: Here he thinks loans are savings and has forgotten that
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had earlier told us it was new credit.
On May 8, 1931, the largest Austrian bank, the Credit-Anstalt
Rothschild institution) which controlled 70% of Austria's
announced a $140 million schillings loss. The true loss was
billion and the bank had been insolvent for years. The
the Austrian government gave the Credit-Anstalt 160 million to
the loss but public confidence had been destroyed. A run began
bank. To meet this run,the Austrian banks called in all the
had in German banks. The German banks began to collapse. These
began to call in all their funds in London. The London banks
fall and gold flowed outward. On Sept.21, England was forced
gold standard. The Reichsbank lost 200 million marks of its
reserve in the first week of June and a billion in the second.
discount rate was raised step by step to 15% without stopping
of reserves but destroying the activities of the German
system almost completely.
Germany begged for relief on her reparations payments but her
creditors were reluctant unless they obtained similar relief
war-debt payments to the US. The President suggested a
one year if its debtors would extend the same privilege to
At the June 1932 Lausanne Conference, German reparations were
to a total of only 3 billion marks but the agreement was never
ratified because of the refusal of the US Congress to cut war
equally drastically. In 1933, Hitler repudiated all
CHAPTER VII: FINANCE, COMMERCIAL POLICY, AND BUSINESS POLICY
REFLATION AND INFLATION 1897-1925
A real understanding of the economic history of twentieth
Europe is imperative to any understanding of the events of the
Such an understanding will require a study of the history of
The outbreak of war in 1914 showed these financial capitalists
their worst, narrow in outlook, ignorant and selfish, while
proclaiming, as usual, their total devotion to the social
generally agreed that war could not go on for more than six to
months because of the "limited financial resources" of the
belligerents (by which they meant gold reserves).This idea
fundamental misunderstanding of the nature and of money on the
the very persons who were reputed to be experts on the
are not fought with gold or even with money but by proper
of real resources.
The attitudes of bakers were revealed most clearly in England,
where every move was dictated by efforts to protect their own
and to profit from it rather than by considerations of
economic mobilization for war or the welfare of the British
War found the British banking system insolvent in the sense
funds, created by the banking system for profit and rented out
economic system to permit it to operate, could not be covered
existing volume of gold reserves or collateral which could be
liquidated rapidly. Accordingly,the bankers secretly devised a
by which their obligations could be met by fiat money
Treasury Notes), but as soon as the crisis was over, they ten
that the government must pay for the war without recourse to
money (which was always damned by the bankers as immoral) but
taxation and by borrowing at high interest rates from the
decision to use Treasury Notes to fulfill the bankers'
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made on July 25, 1915 by Sir John Bradbury. the first Treasury
were run off the presses at Waterloo and Sons on July 28th. It
announced that the Treasury Notes, instead of gold, would be
bank payments. The discount rate was raised at the Bank of
from 3% to 10% to prevent inflation, a figure taken merely
traditional rule of the bank stated that a 10% bank rate would
gold out of the ground itself.
At the outbreak of war, most of the belligerent countries
suspended gold payments and accepted their bankers' advice
proper way to pay for the war was by a combination of bank
taxation of consumption. The governments paid for the war by
by fiat money, by borrowing from banks (which created credit
purpose) and by borrowing from the people by selling them war
Each of these methods had a different effect upon the two
consequences of the war: inflation and public debt.
a) Taxation gives no inflation and no debt.
b) Fiat money gives inflation and no debt.
c) Bank credit gives inflation and debt.
d) Sales of bonds give no inflation but give debt.
It would appear from this table that the best way to pay for
war would be by taxation and the worst way would be by bank
Probably the best way to finance war is a combination of the
In the period 1914-1918, the various belligerents used a
of these four methods but it was a mixture dictated by
false theories so that at the end of the war all countries
themselves with both public debts and inflation.
While the prices in most countries rose 200 to 300 percent and
public debts rose 1000%, the financial leaders tried to keep
pretense that the money was as valuable as it had ever been.
reason, they did not openly abandon the gold standard.
suspended certain attributes of the gold standard. In most
payments in gold and export of gold were suspended but every
was made to keep gold reserves up to a respectable percentage
notes. These attributes were achieved in some cases by
methods. In Britain, the gold reserves against notes fell from
18% in the month of July 1914; then the situation was
partly by moving assets of local banks into the Bank of
using them as reserves for both, partly by issuing a new kind
(Currency Notes) which had no real reserve and little gold
As soon as the war was over, governments began to turn their
attention to restoring the prewar financial system. Since the
essential element was believed to be the gold standard, this
was called "stabilization."
Productive capacity in both agriculture and industry had been
increased by the artificial demand of the war period to a
beyond the ability of normal domestic demand to buy the
JCT: But not to eat them.
The backwards areas had increased their outputs of raw
and food so greatly that the total could hardly have been
JCT: But no eaten.
The result was as situation where all countries were eager to
sell and reluctant to buy. The only sensible solution to this
of excessive productive capacity would have been a substantial
domestic standards of living but this would have required a
fundamental reapportionment of the national income so that
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this product of the excess capacity would go to those masses
consume, rather than continue to go to the minority desiring
Such reform was rejected by the ruling groups in both
"backwards" countries so that this solution was reached only
small degree in a relatively few countries (chiefly US and
The powers of financial capitalism had another far-reaching
aim, nothing less than to create a world system of financial
in private hands able to dominate the political system of each
and the economy of the world as a whole. This system was to be
controlled in a feudalist fashion by the central banks of the
acting in concert, by secret agreements arrived at in frequent
meetings and conferences. The apex of the system was to be the
for International Settlements in Basle, Switzerland, a private
owned and controlled by the world's central banks which were
themselves private corporations. Each central bank sought to
its government by its ability to control Treasury loans, to
foreign exchanges, to influence the level of economic activity
country, and to influence cooperative politicians by
economic rewards in the business world.
In each country, the power of the central bank rested largely
its control of credit and money supply. In the world as a
power of the central bankers rested very largely on their
of loans and the gold flows. They made agreements on all the
financial problems of the world, as well as on many of the
economic and political problems, especially in reference to
payments, and the economic future of the chief areas of the
The Bank of International Settlements, B.I.S. is generally
regarded as the apex of the structure of financial capitalism
remote origins go back to the creation of the Bank of England
It was set up to be the world cartel of every-growing national
financial powers by assembling the nominal heads of these
The commander in Chief of the world system of banking control
Montagu Norman, Governor of the Bank of England, who was built
the private bankers to a position where he was regarded as an
in all matters of government and business. In government, the
the Bank of England was a considerable restriction on
as early as 1819 but an effort to break this power by a
of the bank's charter in1844 failed. In 1852, Gladstone, then
chancellor of the Exchequer and later Prime Minister,
"The hinge of the whole situation was this: the government
not to be a substantive power in matters of Finance, but was
the Money Power supreme and unquestioned."
This power of the Bank of England was admitted in 1924 by
Reginald McKenna, who had been Chancellor of the Exchequer,
as Chairman, told the stockholders of the Midland bank, "I am
the ordinary citizen will not like to be told that the banks
do, create money. And they who control the credit of a nation
the policy if Governments and hold in the hollow of their
destiny of the people." In that same year, Sir Drummond
Fraser, vice president
of the Institute of Bankers stated, "The Governor must be
the autocrat who dictates the terms upon which alone the
can obtain borrowed money." On Sep. 26, 1921,
Vincent Vickers, director of the bank, the Financial Times
"Half a dozen meant the top of the Big Five Banks could upset
whole fabric of government by refraining from renewing
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Norman had no use for governments and feared democracy. Both
of these seemed to him to be threats to private banking and
all that was proper and precious to human life. He viewed his
a kind of cloak-and-dagger struggle with the forces of unsound
which were in league with anarchy and Communism. When he
Bank of England,he constructed it as a fortress prepared to
itself against any popular revolt. For much of his life, he
rushed about the world under the assumed name of "Professor
Norman had a devoted colleague in Benjamin Strong, the first
governor of the Federal Reserve Bank of New York. Strong owed
career to the favor of the Morgan bank.
In the 1920s, they were determined to use the financial power
Britain and the US to force all the major countries of the
world to go
on the gold standard and to operate it through central banks
all political control, with all questions of international
be settled by agreements by such central banks without
It must not be felt that these heads of the world's chief
central banks were themselves substantive powers in world
They were not. Rather, they were the technicians and agents of
dominant investment bankers of their own countries, who had
them up and were perfectly capable of throwing them down. The
substantive financial powers of the world were in the hands of
investment bankers (also called "international" or "merchant"
who remained largely behind the scenes in their own
These formed system of international cooperation and national
dominance which was more private,more powerful, and more
that of their agents in the central banks. This dominance of
investment bankers was based on their control over the flows
and investment funds in their own countries and throughout the
They could dominate the financial and industrial systems of
countries by their influence over the flow of current funds
bank loans,the discount rate,the rediscounting of commercial
they could dominate governments by their control over current
government loans and the play of the international exchanges.
Almost all of this power was exercised by the personal
and prestige men who had demonstrated their ability in the
bring off successful financial coups, to keep their word, to
cool in a crisis, and to share their winning opportunities
In this system, the Rothschilds had been preeminent during
of the nineteenth century, but, at the end of that century,
being replaced by J.P. Morgan in New York.
At the present stage, we must follow the efforts of the
bankers to compel the world to return to the gold standard of
The problem of public debts arose from the fact that as money
(credit) was created, it was usually made in such a way that
not in the control of the state but was in the control of
financial institutions which demanded real wealth at some
for the creation of claims on wealth in the present. The
public debt could have been met in one or more of several
a) by increasing the amount of real wealth...
b) by devaluation...
c) by repudiation...
d) by taxation...
e) by the issuance of fiat money and the payment of the debt
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Efforts to pay the public debt by fiat money would have made
inflation problem worse.
Orthodox theory rejected fiat money as solutions to the
In Britain, the currency notes which had been used to
bank notes were retired and credit was curtailed by raising
discount rate to panic level. The results were horrible.
activity fell drastically and unemployment rose to well over a
and a half. The outcome was a great wave of strikes and
To maintain the gold reserve at all, it was necessary to keep
the discount rate at a level so high (4.5% or more) that
activity was discouraged. As a result of this financial
Britain found herself faced with deflation and depression for
whole period of 1920-1923. The number of unemployed averaged
1.75 millions for each of the thirteen years of 1921-1932 and
3 million in 1931.
Belgium, France and Italy, accepted orthodox financial ideas
tried to deflate in 1920-1921 but after the depression which
they gave up the task.
The Dawes Plan provided the gold reserves which served to
Germany from the accepted principles of orthodox finance.
Financial capitalism had little interest in goods at all, but
concerned entirely with claims on wealth - stocks, bonds,
insurance, proxies, interest rates, and such. It built
order to sell securities, not to transport goods. Corporations
built upon corporations in the form of holding companies so
securities were issued in huge quantities bringing profitable
commissions to financial capitalists without any increase in
production whatever. Indeed, these financial capitalists
that they could not only make killings out of the issuing of
securities,they could also make killings out of the bankruptcy
corporations through the fees and commissions of
very pleasant cycle of flotation, bankruptcy, flotation,
began to be practiced by these financial capitalists. The more
excessive the flotation, the greater the profits and the more
the bankruptcy. The more frequent the bankruptcy, the greater
profits of reorganization and the sooner the opportunity of
The growth of financial capitalism made possible a
of world economic control and a use of this power for the
benefit of financiers and the indirect injury of all other
groups. Financial control could be exercised only imperfectly
credit control and interlocking directorates.
The real key rested on the control of money flows which were
by investment bankers in 1900.
THE PERIOD OF DEFLATION, 1927-1936
After 1929, deflation reached a degree which could be called
acute. In the first part of this period (1921-1925), the
economic implications of deflation were concealed by a
self-deception which pretended that a great period of economic
progress would be inaugurated as soon as the task of
been accomplished. This psychological optimism was completely
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unwarranted by the economic facts. After 1925, when deflation
more deep-rooted and economic conditions worsened, the danger
these conditions was concealed by a continuation of
THE CRASH OF 1929
When France stabilized the franc at a level at which it was
devalued, the Bank of France sold francs in return for foreign
exchange. The francs were created as credit in France thus
The financial results of the stock market book in the U
S was credit diverted from production to speculation and
amounts of funds being drained from the economic system into
market where they circulated around and around, building up
Early in 1929, the board of governors of the Federal Reserve
System became alarmed at the stock market speculations
from industrial production. To curtail this, they called upon
banks to reduce their loans on stock collateral to reduce the
of credit available for speculation. Instead, the available
went more and more to speculation and decreasingly to
business. Call money rates in New York which had reached 7% at
of 1928 were at 13% by June 1929.
To restore confidence among the wealthy (who were causing the
panic) an effort was made to balance the budget by cutting
expenditures drastically. This, by reducing purchasing power,
injurious effects on business activity and increased unrest
masses of the people.
Washington left gold in 1933 voluntarily in order to follow an
unorthodox financial program of inflation.
The Thomas Amendment to the Agricultural Adjustment Act (1933)
gave the president the power to devaluate the dollar up to
issue up to $3 billion fiat money,and to engage on an
program of public spending.
The economies of the different countries were so intertwined
one another that any policy of self-interest on the part of
be sure to injure others in the short run and the country in
long run. The international and domestic economic systems had
developed to the point where the customary methods of thought
procedure in regard to them were obsolete.
As a result of the crisis, regardless of the nature of its
primary impact, all countries began to pursue policies of
nationalism. This spread rapidly as a result of imitation and
The Bank of France raised its discount rate from 2.5% to 6% in
1935 with depressing economic results. In this way, the strain
was relieved at the cost of increased depression. The Right
that it could veto any actions of the Left government merely
exporting capital from France.
The franc passed through a series of depreciations and partial
devaluations which benefited no one except the speculators and
France torn for years by industrial unrest and class
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government was subjected to systematic blackmail by the
of the country because of the ability of these persons to
social reform, public spending, arming, or any policy of
The historical importance of the banker-engendered
crisis of 1927-1940 can hardly be overestimated. It gave a
democracy and to the parliamentary system and thus became a
cause of World War II. It so hampered the Powers which
democratic by its orthodox economic theories that these were
rearm for defence. It gave rise to a conflict between the
orthodox and unorthodox financial methods.
The bankers' formula for treating a depression was by clinging
the gold standard, by raising interest rates and seeking
and by insisting on a reduction in public spending, a fiscal
or at least a balanced budget.
These ideas were rejected totally, on a point by point basis,
the unorthodox economists, (somewhat mistakenly called
bankers' formula sought to encourage economic recovery by
confidence in the value of money," that is, their own
what was the primary concern of bankers.
The unorthodox theorists sought to restore purchasing power by
increasing, instead of reducing, the money supply and by
placing it in
the hands of potential consumers rather than in the banks or
hands of investors.
The whole relationship of money and resources remained a
to many and was still a subject of debate in the 1950s but at
great victory had been won by man in his control of his own
when the myths of orthodox financial theory were finally
REFLATION AND INFLATION 1933-1947
Except for Germany and Russia, most countries in the latter
of 1937 experienced sharp recession.
As a result of the failure of most countries (excepting
and Russia) to achieve full utilization of resources, it was
to devote increasing percentages of resources to armaments
suffering any decline in the standards of living.
It was discovered by Germany in 1932, by Italy in 1934, by
in 1936 and by the United States in 1938 that deflation could
prevented by rearming.
Britain made barter agreements with various countries,
one direct swap of rubber for wheat with the US.
The period of reflation after 1933 was caused by increases in
public spending on armaments. In most countries,the transition
reflation to inflation did not occur until after they had
war. Germany was the chief exception and possibly also Italy
Russia, since all of these were making fairly full utilization
their resources. In France and the other countries overrun by
Germany, such full mobilization of resources was not achieved
they were defeated.
The use of orthodox financing in the First World War had left
terrible burden of intergovernmental debts and ill-feeling...
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The Post Second World War economy was entirely different in
character from that of the 1920s following the First World
was most notable in the absence of a post-war depression which
widely expected but which did not arrive because there was no
to stabilize on a gold standard. The major difference was the
of the bankers who have been largely reduced in status from
masters to the servants of the economic system. This has been
about by the new concern with real economic factors instead of
financial counters, as previously. As part of this program,
been a great reduction in the economic role of gold.
CHAPTER VIII: INTERNATIONAL SOCIALISM AND THE SOVIET CHALLENGE
Industrialism, especially in its early years, brought with it
social and economic conditions which were admittedly horrible.
beings were brought together around factories to form great
which were sordid and unsanitary. In many cases, these persons
reduced to conditions of animality, which shock the
Crowded together in want and disease, with no leisure and no
completely dependent on weekly wage which was less than a
they worked twelve to fifteen hours a day for six days in the
among dusty and dangerous machines with no protection against
inevitable accidents, disease, or old age, and returned at
crowded rooms without adequate food and lacking light, fresh
heat, pure water, or sanitation. These conditions have been
for us in the writings of novelists such as Dickens in
or Zola in France.
The Socialist movement was a reaction against these deplorable
conditions to the working masses. It has been customary to
movement into two parts at the year 1848, the publication of
Communist Manifesto of Karl Marx. This work began with the
sentence, "A specter is haunting Europe - the specter of
and ended with the trumpet blast "Workers of the world,
In general, the former division believed that man was innately
good and that all coercive power was bad, with public
worst form of such coercive power. All the world's evils,
the anarchists, arose because man's innate goodness was
distorted by coercive power. The remedy, they felt, was to
state. The simplest way to destroy the state would be to
the chief of the state to ignite a wholesale uprising of
Syndicalism was a somewhat more realistic and later version of
anarchism. It was equally determined to abolish all public
The state would be destroyed by a general strike and replaced
flexible federation of free associations of workers.
The second group of radical social theorists wished to widen
power and scope of governments by giving them a dominant role
economic life. The group divided into two chief schools: The
Socialists and the Communists.
From Ricardo, Marx derived the theory that the value of
goods was based on the amount of labor put into them.
Marx built up a complicated theory which believed that all
history is the history of class struggles.
The money which the bourgeoisie took from the proletariat in
economic system made it possible for them to dominate the
system, including the police and the army. From such
bourgeoisie would become richer and richer and fewer and fewer
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numbers and acquire ownership of all property in the society
proletariat would become poorer and poorer and more and more
and be driven closer and closer to desperation. Eventually,
would rise up and take over.
In fact, what occurred was could be pictured as cooperative
effort by unionized workers and monopolized industry to
unorganized consumers by raising prices higher and higher,
contrary to the expectations of Marx. Where he had expected
impoverishment of the masses and concentration of ownership
gradual elimination of the middle classes, there occurred
rising standards of living, dispersal of ownership , a
decrease in the numbers of laborers, and a great increase in
middle classes. Due to income and inheritance taxes, the rich
poorer and poorer, relatively speaking.
THE BOLSHEVIK REVOLUTION TO 1924
The new government forced the abdication of the czar. The more
radical Socialists had been released from prison or had been
from exile (in some cases, such as Lenin, by German
JCT: And Rockefeller and Mackenzie King.
Lenin campaigned to replace the Provisional Government with a
system of Soviets and to adopt an immediate program of peace
distribution. The Bolshevik group seized the centers of
St. Petersburg and within 24 hours, issued a series of decrees
abolished the Provisional government, ordered the end of the
Germany and the distribution of large land holdings to the
By 1920 industrial production in general was about 13% of the
1913 figure. At the same time, paper money was printed so
pay for the costs of war, civil war, and the operation of the
government that prices rose rapidly and the ruble became
The secret police (Cheka) systematically murdered all real or
Various outsider Powers also intervened in the Russian chaos.
An allied expeditionary force invaded northern Russia from
and Archangel, while a force of Japanese and another of
landed at Vladivostok and pushed westward for hundreds of
British seized the oil fields of the Caspian region (late
the French occupied parts of the Ukraine about Odessa (March
By 1920, Russia was in complete confusion. Poland invaded
occupying much of the Ukraine.
As part of this system, not only were all agricultural crops
considered to be government property but all private trade and
commerce were also forbidden; the banks were nationalized
industrial plants of over five workers and all craft
over ten workers were nationalized. This culminated in peasant
uprisings and urban riots. Within a week, peasant
abandoned in favor of a "New Economic Policy" of free
activity in agriculture and other commodities, with the
re-establishment of the profit motive and of private ownership
small industries and in small landholding.
The Bolsheviks insisted that the distribution of income in a
capitalistic society would become so inequitable that the
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the people would not obtain sufficient income to buy the goods
produced by the industrial plants. As such unsold goods
with decreasing profits and deepening depression, there would
shift toward the production of armaments to provide profits
produce goods which could be sold and there would be an
aggressive foreign policy in order to obtain markets for
in backward and undeveloped countries. Such aggressive
would inevitably make Russia a target of aggression in order
prevent a successful Communist system there from becoming an
attractive model for the discontented proletariat in
Communism in Russia alone required that the country must be
industrialized with breakneck speed and must emphasize heavy
and armaments rather than rising standards of living. This
goods produced by the peasants must be taken from them by
duress, without any economic return, and that the ultimate in
authoritarian terror must be used to prevent the peasants from
their level of production. It was necessary to crush all kinds
foreign espionage, resistance to the Bolshevik state,
thought, or public discontent.
Stalin forced the peasants off their land. In the space of six
weeks, (Feb-Mar 1930) collective farms increased from 59,400
million families to 110,200 farms with 14.3 million families.
peasants who resisted were treated with violence; their
confiscated, they were beaten or sent into exile in remote
were killed. This process, known as "the liquidation of the
affected five million kulak families. Rather than give up
animals, many peasants killed them. The number of cattle was
from 30.7 million in 1928 to 19.6 million in 1933. The
season of 1930 was entirely disrupted. Three million peasants
starved in 1931-1933. Stalin told Churchill that 12 million
this reorganization of agriculture.
The privileged rulers and their favorites had the best of
everything obtained, however at a terrible price, at the cost
complete insecurity for even the highest party officials were
constant surveillance and would be inevitably purged to exile
The growth of inequality was embodied in law. All restrictions
maximum salaries were removed. Special stores were established
the privileged could obtain scarce goods at low prices;
with different menus were set up in industrial plants for
levels of employees; housing discrimination became steadily
As public discontent and social tensions grew, the use of
purges, torture and murder increased out of all proportion.
of discontent resulted in new waves of police activity.
thousands were killed while millions were arrested and exiled
Siberia or put into huge slave-labor camps. Estimates vary
million as high as twenty million.
For every leader who was publicly eliminated, thousands were
eliminated in secret. By 1939, all the leaders of Bolshivism
driven from public life and most had died violent deaths.
There were two networks of secret-police spies, unknown to
other, one serving the special department of the factory while
other reported to a high level of the secret police outside.
Whenever the secret police needed more money it could sweep
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numbers of persons, without trial or notice, into its wage
system or into its labor camps to be hired out. It would seem
secret police were the real rulers of Russia. This was true
the very top where Stalin could always liquidate the head by
him arrested by his second in command in return for Stalin's
to promote the arrester to the top position. In this way, the
of the secret police were successively eliminated.
TRAGEDY AND HOPE Chapters IX-XI
by Dr. Carroll Quigley
IX. GERMANY FROM KAISER TO HITLER 1913-1945
X. BRITAIN: THE BACKGROUND TO APPEASEMENT 1900-1939
XI. CHANGING ECONOMIC PATTERNS
CHAPTER IX: GERMANY FROM THE KAISER TO HITLER 1913-1945
The German thirst for the coziness of a totalitarian way of
is the key to German national character. Decision, which
evaluation of alternatives, drives man to individualism,
and rationalism, all hateful qualities to Germanism.
They wanted a cozy society which would so absorb the
in its structure that he would never need to make significant
decisions for himself. Held within a framework of known,
personal relationships, such an individual would be safe
would be surrounded by fellows equally satisfied with their
positions, each feeling important from his membership in the
The German abhors the need to make decisions. He feels it
necessary to proclaim his position by verbal loudness which
boastful to outsiders.
Germans are ill-at-ease with equality, democracy,
freedom, and other features of modern life. Their neurological
were a consequence of the coziness of German childhood, which,
contrary to popular impression, was not a condition of misery
personal cruelty (as it often is in England) but a warm,
and externally disciplined situation of secure relationships.
The Englishman is disciplined from within so that he takes his
self-discipline, embedded in his neurological system, with him
wherever he goes. The Englishman is the most socialized of
as the Frenchman is the most civilized, the Italian most
gregarious, or the Spaniard most completely individualistic.
German, by seeking external discipline, shows his unconscious
to recapture the externally disciplined world of his
such discipline he may be the best behaved of citizens, but
it, he may be a beast.
He sees no need to make any effort to see anything from any
of view other than his own. The consequence is a most damaging
inability to do this. His union, his neighborhood are the best
others may be denigrated. His myopic or narrow-angled vision
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universe must be universalized.
The precarious structure left by Bismarck was not managed but
merely hidden from public view by a facade of nationalistic,
anti foreign, anti-Semitic, imperialistic, and chauvinistic
of which the emperor was the center.
The monarchy represented the body, which was supported by four
legs: the army, the landlords, the bureaucracy and the
The revolution of 1918 was not really a revolution at all
removed the monarchy but it left the quartet of legs.
The German inflation, which was a great benefit to the
destroyed the economic position of the middle classes and
classes and permanently alienated them from the republic.
The Nationalist Party built up a pervasive propaganda campaign
show that all Germany's problems were caused by the democratic
laboring groups, by the internationalists, and by the Jews.
The Centre and Left shared this nationalistic poison
to abstain from any effort to give the German people the true
Germany's responsibility for the war and for her own
the Right was able to spread its own story of the war, that
had been overcome by a "stab in the back" from "the three
Internationals": the "Gold" International of the Jews, the
International of the Socialists, and the "Black" International
Catholics, an unholy triple alliance which was symbolized in
red, and black flag of the Weimar Republic. Every effort was
divert popular animosity at the defeat of 1918 and the
settlement from those who were really responsible to the
and republican groups. At the same time, German animosity
economic exploitation was directed away from the landlords and
industrialists by racist doctrines which blamed all such
bad Jewish international bankers and department store owners.
The Nazi drive to build up a mass following was kept alive by
financial contributions of the Quartet. The Nazis were
financed by the
Black Reichswehr from 1919-1923, then this support ceased but
compensated for by the support of the industrialists, who
Nazis from Hitler's exit from prison in 1924 to the end of
The destruction of the Weimar Republic has five stages:
1) Bruning: March 24 1930 - May 30 1932
2) Von Papen: May 31 1932 - November 14 1932
3) Schleicher: December 2 1932 - January 28 1933
4) Hitler: January 30 1933 - March 5 1933
5) Gleichschaltung: March 6 1933 - August 2 1934
When the economic crisis began in 1929, Germany had a
government of the Center and Social Democratic parties. The
resulted in a decrease in tax receipts and a parallel increase
demands for government welfare services. This brought to a
latent dispute over orthodox and unorthodox financing of a
Big business and big finance were determined to place the
the depression on the working classes by forcing the
adopt a policy of deflation - that is, by wage reductions and
curtailment of government expenditures. The Social Democrats
in their attitude but in general were opposed to this policy.
as president of the Reichsbank, was able to force the
Hilferding out of the position of minister of finance by
credit to the government until this was done.
In March 1930, the Center broke the coalition on the issue of
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reduction of unemployment benefits, the Socialists were thrown
the government, and Heinrich Bruning, leader of the Center
in as chancellor. Because he did not have a majority, he had
the deflationary policy into effect by the use of presidential
This marked the end of the Weimar Republic.
The Socialists permitted Bruning to remain in office by
to vote on a motion of no confidence. Left in office, Bruning
continued the deflationary policy by decrees.
Bruning's policy of deflation was a disaster. The suffering of
the people was terrible with almost eight million unemployed
twenty-five million employable.
President Hindenburg had no liking for any unorthodox economic
The Quartet, especially the industrialists, decided that
had learned a lesson and could safely be put into office as
figurehead of a Right government because he was growing
whole deal was arranged by Papen and was sealed in an
at the home of Cologne banker Baron Kurt Von Schroder in 1933.
THE NAZI REGIME 1933-1934
Adolf Hitler's life had been a succession of failures, the
years 1907-1914 being passed as a social derelict in Vienna
Munich. There he had become a fanatical Pan-German
attributing his own failures to the "intrigues of
During the Great War, he was an excellent soldier always
volunteering for the most dangerous tasks. Although he was
with the Iron Cross first class in 1918, he was never promoted
Private First Class. His regiment of 3,500 suffered 3,260
Hitler himself was wounded twice.
After the war, he stayed with the army and eventually became a
political spy for the Reichswehr. In the course of spying on
numerous political groups, Hitler became fascinated by the
Gottfried Feder against the "interest slavery of the Jews."
Hitler joined the National Socialist German Worker's Party
drew up a Twenty-five Point Program.
4) all Jews and other aliens eliminated;
5) all unearned incomes to be abolished;
6) to punish all war profiteers and usurers with death.
Prices were set at a level sufficient to give a profit to most
participants and quotas were based on assessments estimated by
farmers themselves. The autarky program gave them a stable
the products, shielding them from the vicissitudes which they
suffered under liberalism with its unstable markets and
prices. The prices fixed under Nazism were not high but were
especially in combination with other advantages.
Payments for interest and taxes were both reduced.
All farms of over family size were made secure in possession
their owner's family, with no possibility of alienation, by
the use of entail on great estates and by the Hereditary Farms
A law of December 28, 1939 stated, what had always been
understood, that in his civil service work a party member was
subject to party orders but only to the orders of the civil
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There was a statutory provision which made it illegal for
of the armed services to be simultaneously members of the
Maximum wage rates were set in June 1938. In return for
exploitation of labor, the worker received certain
of which the chief was the fact that he was no longer
the danger of mass unemployment. Increased economic activity
The threat to industry from depression was eliminated.
CHAPTER X: BRITAIN: THE BACKGROUND TO APPEASEMENT, 1900-1939
It is the Government that controls the House of Commons. This
control is exercised through the Cabinet's control of the
machinery. This power over the party machinery is exercised
control of party funds and of nominations to constituencies.
party candidates are named by an inner clique is of tremendous
importance and is the key to the control which the inner
exercises over the House of Commons, yet it is rarely
books on the English political system. The party control is
completely centralized in the hands of a largely
inner clique which has power of approval over all candidates.
can force the majority by using party discipline to pass
Britain can be divided into two groups, the "classes" and the
"masses." The "classes" were the ones who had leisure. This
they had property and income and did not need to work for a
they obtained an education in a separate and expensive system;
married within their own class; they had a distinctive accent;
they had a distinctive attitude based on the training provided
special educational system of the "classes."
This educational system was based on three great negatives:
a) education must not be vocational, not aimed at assisting
make a living;
b) education is not aimed directly at creating or training
c) education is not aimed at finding the "Truth."
It is aimed at developing a moral outlook, a respect for
traditions, qualities of leadership and cooperation, and that
for cooperation in competition summed up in the English idea
"sport" and "playing the game." Because of the restricted
the upper class, these attitudes applied chiefly to one
did not necessarily apply to foreigners or even to the masses.
applied to people who "belonged" and not to all human beings.
House members are expected to vote as their party whips tell
to and are not expected to understand the contents of the
which they are voting. Legislation originates in the meetings
clique of the party, acting as first chamber. If accepted by
Cabinet, it passes the House of Commons almost automatically.
situation is sometimes called "Cabinet dictatorship."
There have been restrictions on democracy in Britain almost
based on one criterion, the possession of wealth. Britain,
was the world's greatest plutocracy.
In political life, local government had a restricted suffrage.
Elected members were unpaid thus restricting these posts to
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had leisure (that is, wealth).
Members of Parliament were, for years, restricted to the
by the fact that Members were unpaid. In 1938, each candidate
post a deposit of #150 amounting to more than the total annual
of about three-quarters of all English families which is
he does not receive over one-eighth of the total vote. As a
these monetary barriers, the overwhelming mass of Englishmen
participate actively in politics unless they could find an
source of funds.
Until 1915, the two parties represented the same social class,
the small group known as "society." Both Conservatives and
were controlled by the same small clique consisting of no more
half-a-dozen chief families, their relatives and allies.
At the beginning of the 20th century, the inner clique of the
Conservative Party was made up almost completely of the Cecil
and their relatives.
This is quite different from the US where both major parties
middle-class parties and where geographic, religious and
influences are more important than class influences in
In eight years (1931-1939) thirteen directors of the "Big Five
Banks" and two directors of the Bank of England were raised to
peerage by the Conservative government. Of ninety peers
thirty five were directors of insurance companies. In 1935,
Runciman, as president of the Board of Trade, introduced a
grant a subsidy of #2 million to tramp merchant vessels and
#92,000 to his father's company in which he held 21,000
is relatively little objection to activities of this kind in
The Labour Party arose because of the discovery by the masses
the people that their vote did not avail them much so long as
choice of candidates was "Which of two rich people will you
The radio, the second most important instrument of publicity,
sometimes run very unfairly. In the election of 1931, the
allowed 15 period on the BBC for political campaigning, it
gave 3 to Labour and 1 to the Liberals.
France is in sharp contrast where the amount of education by a
student is limited only by his ability and willingness to
positions of importance in the civil service, the professions,
even business are available to those who do best in the
Britain, it is based largely on the ability to pay.
For admission to the bar in England, a man had to be a member
one of the four Inns of Court. These are private clubs to
admission was by nomination with large admission fees. Sons of
earners formed less than 1% of the admissions and members of
are almost entirely from the well-to-do classes. Since judges
appointed exclusively from barristers, the judicial system has
been monopolized by the upper classes. Obtaining justice has
complex, slow and above all, expensive. As a result, only the
well-to-do can defend their rights in a civil suit and if the
well-to-do go to court at all, they find themselves in an
completely dominated by members of the upper classes.
ordinary Englishman avoids litigation even when he has right
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The 1909 Liberal budget was aimed directly at Conservative
supporters by its taxation of unearned incomes, especially
properties. Its rejection by the House of Lords was denounced
Asquith as a breach of the constitution which gave control
bills to the House of Commons. The Lords refused to yield
Asquith threatened to create enough new peers to carry his
bill provided that the Lords could not veto a money bill and
prevent any other bill from becoming law if it was passed in
sessions of the Commons over a period of at least two years.
Liberal Lloyd George's effort to deflate prices after the
War in order to go back onto the gold standard was fatal to
and domestic order. Unemployment and strikes increased.
The Conservatives prevented any realistic attack on these
problems and passed the Emergency Power Act of 1920 which for
first time gave a peace-time government the right to proclaim
of siege (as was done in 1920, 1921, 1926).
In 1924, Winston Churchill, as chancellor of the Exchequer,
carried out a stabilization policy which put England on the
standard. This policy of deflation drove Britain into an
depression and a period of labour conflict and the policy was
bungled in its execution that Britain was doomed to
for almost a decade, to financial subjugation to France until
was driven closer to domestic rebellion than she had been at
since the Chartist movement of 1848.
The deflation of 1926 hit the mines with special impact since
prices could only be cut if wages were cut. The government
Emergency Powers Act and the Trade Unions Congress ordered a
Strike but soon ended it leaving the striking miners to shift
themselves. The miners stayed out for six months and then
drift back to work to escape starvation.
In 1931, the Macmillan Committee reported that the whole
financial structure was unsound and should be remedied by a
currency, controlled by the Bank of England. The crisis
incapacity of the Labour Party and the power of the bankers.
members had no understanding of economics. Snowden, the
expert" of the Cabinet, had financial views about the same as
Norman of the Bank of England.
As for the bankers, they were in control throughout the
While publicly they insisted on a balanced budget, privately,
refused to accept balancing by taxation and insisted on
cuts in relief payments. Working in close cooperation with
bankers, they were in a position to overthrow any government
not willing to crush them completely. While they refused
to the Labour government, they were able to obtain a loan of
million from the US and France for the National Government
was only four days old.
The National government at once attacked the financial crisis
with a typical bankers' weapon: deflation. It offered a budget
including higher taxes and drastic cuts in unemployment
public salaries. Riots, protests, and mutiny in the navy were
The domestic program of the National Government was to curtail
the personal freedom of individuals. On this, there was no
protest for the Labour opposition had a program which, in fact
in theory, tended in the same direction.
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The police of London were reorganized in 1933 to destroy their
obvious sympathy with the working classes by restricting all
above inspector to persons with an upper-class education.
A severe Incitement to Disaffection Act in 1934 threatened to
destroy the personal freedoms built up over centuries by
police searches of homes less restricted and making the simple
possession of material likely to disaffect the armed forces a
For the first time in three generations, personal freedom and
rights were restricted in time of peace. The Prevention of
Act of 1939 empowered a secretary of state to arrest without
and to deport without trial.
Neville Chamberlain was chiefly responsible for the National
government's fiscal policies. For the first time in almost a
there was an increase in the proportion of total tax paid by
working class. For the first time since 1846, there was a tax
There was a reversal in the trend to more education for the
The budget was kept balanced by at a considerable price in
suffering and in wastage of Britain's irreplaceable human
Hundreds of thousands had been unemployed for years and had
moral fiber completely destroyed by years of living on
dole. The capitalists of these areas were supported either by
government subsidy or were bought out by cartels and trade
associations from funds assessed on the more active members of
Chamberlain's Derating Act of 1929 exempted industry from
of three quarters of its taxes while many unemployed were
CHAPTER XI: CHANGING ECONOMIC PATTERNS
The economic system itself has become organized for expansion
if it does not expand, it tends to collapse. The basic reason
maladjustment is that investment has become an essential part
system and if investment falls off, consumers have
incomes to buy the consumers' goods which are being produced
another part of the system because part of the flow of
power created by the production of goods was diverted from
goods it had produced into savings, and all the goods produced
not be sold until those savings came back into the market by
If the groups in society who control the savings which are
necessary for progress are the same vested interests who
the existing way of doing things, they are in a position to
these vested interests and prevent progress merely by
use of surpluses to finance new inventions. The 20th century's
economic crisis was a situation of this type.
The element of secrecy is one of the outstanding features of
English business and financial life. The inner circle of
financial life remains a matter of "whom one knows," rather
one knows." Jobs are still obtained by family, marriage, or
connections and important positions are given to men who have
training, experience or knowledge to qualify them.
At the core of English financial life have been seventeen
firms of "merchant bankers" with a total of less than a
partners including Baring Brothers, N.M. Rothschild, J. Henry
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Schroder, Morgan Grenfell, Hambros and Lazard Brothers. These
bankers had a dominant position with the Bank of England and,
strangely enough, still have retained some of this, despite
nationalization of the Bank by the Labour government in 1946.
Financial capitalism was marked not only by a growing
control of industry but also by an increasing concentration of
control and by an increasing banking control of government.
The control of the Bank of England over business was exercised
indirectly through the joint-stock banks. This growth of a
trust" led to an investigation. A bill was drawn up to prevent
concentration but was withdrawn when the bankers made a
agreement" to ask Treasury permission for future
In 1931, financiers led by Montagu Norman and J.P. Morgan
the resignation of the British Labour government. But the
was already on the wall. The deflationary financial policy of
bankers had alienated politicians and industrialists and
monopolist trade unions to form a united front against the
Labour and industry were united in opposition to continuance
bankers' economic policy with its low prices and high
The decisive factor which caused the end of financial
Britain was the revolt of the British fleet in 1931 and not
abandonment of gold six days later. The mutiny made it clear
policy of deflations must be ended. As a result, no effort was
defend the gold standard.
The Coal Mines Act of 1930 allowed the National Shipbuilders
Security to buy up and destroy shipyards. By 1934, one quarter
Britain's shipbuilding capacity had been eliminated. The
Finance Company was set up to buy up and destroy flour mills.
over one-sixth of the flour mills in England had been
In Germany, capital was scarce when industrialism arrived and
industry found itself dependent upon banks almost at once. The
credit banks floated securities for industry by granting
credit to the
firm, taking securities in return. These securities were
to the public with the bank retaining enough stock to give it
and appointing its men as directors to give that control final
The importance of interlocking directorships can be seen from
fact that the same Dresdner Bank had its directors on the
over two hundred industrial concerns in 1913.
This banking control of industry was made even closer since
investors left their securities on deposit with the banks
all this stock for directorships and other control measures,
the stock-owners expressly forbade it. The banks also voted
left as collateral for loans and all stock bought on margin.
The control of German financial capitalism rested in the
banks. It was largely beyond the control of the government and
in private hands. Of the hundreds of German credit banks, the
so-called "Great Banks" were the masters of the German economy
1865 to 1915 and controlled 74% of the capital assets of all
I.G. Farbenindustrie made many individual cartel agreements
Du Pont and other American corporations.
In France, Britain and the US, the war played a significant
in demonstrating conclusively that economic stagnation and
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underemployment of resources were not necessary and could be
if the financial system were subordinated to the economic
Germany, this was not necessary since the Nazis had already
discovery in the 1930s.
Thus a surplus of labor, low wages, experience in unorthodox
financial operations and an immense task to be done all
the German revival.
With the founding of the Bank of France in 1800, financial
was in the hands of about ten or fifteen banking houses whose
founders, in most cases, had come from Switzerland. These
Protestant, were deeply involved in the agitations leading up
French Revolution. When it got out of the hand, they were the
forces behind the rise of Napoleon. As a reward for this
Napoleon gave these bankers a monopoly over French financial
giving them control of the new Bank of France.
By 1811, most of these bankers had gone over to the opposition
and survived the change in regime in 1815. As a result, the
bankers who had controlled financial life under the First
still the main figures on the board of regents of the Bank of
until 1936. The chief names were Mirabaud, Mallet, Neuflize,
In the course of the nineteenth century, a second group was
to French banking circles. This second group, largely Jewish,
non-French origin, the majority Germanic (like Rothschild,
Fould, Stern and Worms). A rivalry soon grew up between the
Protestant bankers and the newer Jewish bankers, largely along
political rather than religious lines which grew confused as
the Jewish group gave up their religion and moved over to the
The leadership of the Protestant group was exercised by
the leadership of the Jewish group was held by Rothschild.
wings were so close that Mirabaud and Rothschild together
the whole financial system and frequently cooperated together
when their groups as a whole were in competition.
After 1838, this simple picture was complicated by the slow
of a third group of bankers who were Catholics which soon
two halves and joined the other two groups.
The rivalry of these two great powers fills the pages of
history in the period 1884-1940. It paralyzed the French
system and economic system preventing economic recovery from
depression in 1935-1940.
From 1880-1925, the private bankers continued to exist and
in power. They were at first chiefly interested in government
obligations and the greatest bankers, like Mirabaud and
had intimate connections with governments and weak connections
the economic life of the country.
To finance railroads, the small savings of many were gathered
made available to the private banker to direct wherever he
fitting. Thus the private banker became a manager of other
funds rather than lender of his own. The private banker became
more influential and much less noticeable. He now controlled
where he formerly controlled millions and he did it
acting from the background, concealed from public view. The
not notice that the names of private bankers and their agents
graced the list of directors of new financial enterprises.
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The centre of the French economic system in the 20th century
not to be found, as some have believed, in the Bank of France,
instead, resided in a group of almost unknown institutions -
private banks. There were over a hundred of these private
two (Rothschild and Mirabaud) were more powerful than all the
combined. These private banks acted as the High Command of the
economic system. Their stock was closely held in the hands of
forty families. They were the same private banks which had set
Bank of France divided into a group of seven Jewish banks, a
seven Protestant banks and a group of five Catholic banks. The
groups continued to cooperate in the management of the Bank of
which was controlled until 1936, as it had been in 1813, by
handful of private banks which created it.
The state was influenced by the Treasury's need for funds from
the Bank of France.
These investment banks supplied long-term capital to industry
took stock and directorships in return. In 1931, Paribas held
the securities of 357 corporations and its own directors and
managers held 180 directorships in 120 of the more important
The Jewish bankers were allied to Standard Oil and Rockefeller
while the Catholic-Protestant bankers were allied to Royal
In 1936, there were about 800 important firms. Of these 800,
Paribas bloc controlled almost 400 and the Union-Comite bloc
The whole Paribas system in the 20th century was headed by
Edouard de Rothschild with the chief center of operation in
de Paris which controlled communications companies such as
Havas was a great monopolistic news agency. It could, and did,
suppress or spread both news and advertising. It received
subsidies from the government for almost a century. The
distribution of periodicals and books could be used to kill
which were regarded as objectionable.
After 1937, the Paribas bloc was badly split by the
over orthodox and unorthodox financial methods for dealing
depression. The Rothschild desire to form an alliance with
adopt a policy of resistance to Hitler, continuing orthodox
policies, collapsed from its own internal contradictions,
lack of faith in it, and the pressure of Great Britain.
The three prewar blocs have played no significant role in
since 1945 although Rene Mayer, active head of the Rothschild
interests was minister of finance in the early postwar
Later in 1962, De Gaulle made the director of the Rothschild
George Pompidou, prime minister.
UNITED STATES OF AMERICA
By the 1880s, the techniques of financial capitalism reached
levels of corruption which were never approached in Europe.
corruption sought to cheat the ordinary investor by flotations
manipulations of securities for the benefit of insiders. The
practitioners of these dishonesties were as socially
their wealth entitled them to be without animadversions on how
wealth was obtained.
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Corrupt techniques associated with the names Daniel Drew and
Gould were also practiced by Morgan and others who became
from longer sustained success.
Any reform of Wall Street practices came from pressure from
farming West and was long delayed by the close alliance of
with the two major political parties. By 1900, the influence
in the Republican party was dominant, his chief rivalry coming
Rockefeller of Ohio.
From 1880 to 1930, financial capitalism approximated a feudal
structure in which two great powers, centered in New York,
number of lesser powers. No description of this structure as
existed in the 1920s can be given in a brief compass, since it
infiltrated all aspects of American life and especially all
of economic life.
At the center were a group of less than dozen investment banks
which were still unincorporated partnerships at the height of
powers. These included J.P. Morgan, the Rockefeller family,
Loeb, Dillon, Read, Brown Brothers and Harriman, and others.
these was linked in organizational or personal relationships
various banks, insurance companies, railroads, utilities and
industrial firms. The result was to form a number of webs of
J.P. Morgan worked in close relationship with a group of banks
and insurance companies. The whole nexus dominated a network
business firms which included at least one-sixth of the two
largest non-financial corporations.
The Rockefeller group, investing only its own profits,
as a capitalist unit in close cooperation with Morgan and
over half the assets of the oil industry.
The economic power represented by these figures is almost
imagination to grasp. Morgan and Rockefeller together
dominated the national Republican Party while Morgan
extensive influence in the national Democratic Party. These
also powerful on the state level, especially Morgan in New
and Rockefeller in Ohio. Mellon was a power in Pennsylvania
Pont in Delaware.
In the 1920s, this system of economic and political power
a hierarchy headed by the Morgan interests and played a
both in political and business life. Morgan, operating on the
international level in cooperation with his allies abroad,
in England, influenced the events of history to a degree which
be specified in detail but which certainly was tremendous. The
deflationary financial policies on which these bankers
laying the foundations of the economic collapse into general
disaster by 1940. Unemployment which had reached 13 million
1933 was still at 10 million in 1940
The deflationary policies of the bankers were acceptable to
industry chiefly because it was not unionized. With
techniques financed by the bankers and unorganized labor, the
employers could rearrange, curtail, or terminate labor without
on a daily basis and could thus reduce labor costs to meet
prices from bankers' deflation.
The fact that reductions in wages and large lay-offs also
the volume of purchasing power as a whole, to the injury of
selling consumers' goods, was ignored by the makers of heavy
producers' goods. In this way, farmers and other segments of
society were injured by the deflationary policies of the
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by the employment policies of heavy industry, closely allied
When these policies became unbearable in the depression of
1933, these other interest blocs deserted the Republican party
remained subservient to high finance and heavy industry. The
the farm bloc to the Democratic Party in 1932 resulted in the
of Franklin D. Roosevelt and the New Deal.
The New Deal's actions against finance did not represent any
victory for unorthodox financing, the real key to either
capitalism or to a managed pluralist society. The reason for
that the New Deal was fundamentally orthodox in its ideas on
nature of money. Roosevelt was quite willing to unbalance the
and to spend in a depression in an unorthodox fashion because
grasped the idea that lack of purchasing power was the cause
lack of demand which made unsold goods and unemployment, but
he had no
idea of the causes of the depression and had quite orthodox
the nature of money. As a result, his administration treated
symptoms rather than the causes of the depression and, while
unorthodoxly to treat these symptoms, did so with money
the banks in the accepted fashion. The New Deal allowed
create the money, borrowed it from the banks,and spent it.
that the New Deal ran up the national debt to the credit of
and spent money in such a limited fashion that no drastic
of idle resources was possible.
One of the most significant facts about the New Deal was its
orthodoxy on money. For the whole 12 years he was in the White
Roosevelt had statutory power to issue fiat money in the form
greenbacks printed by the government without recourse to the
This authority was never used. As a result of such orthodoxy,
depression's symptoms of idle resources were overcome only
emergency of the war in 1942 made it possible to justify a
increase in the national debt by limitless borrowing from
persons and the banks. But the whole episode showed a failure
the nature of money and the function of the monetary system,
considerable traces remained in the postwar period.
One reason for the New Deal's readiness to continue with an
orthodox theory of the nature of money, along with an
practice in its use, arose from the failure of the Roosevelt
administration to recognize the nature of the economic crisis
This failure can be seen in Roosevelt's theory of "pump
sincerely believed, as did his Secretary of the Treasury, that
was nothing structurally wrong with the economy, that it was
temporarily stalled, and would keep going of its own powers if
could be restarted...
The inadequacy of this theory of the depression was shown in
when the New Deal, after four years of pump priming and a
election in 1936, stopped its spending. Instead of taking off,
economy collapsed in the steepest recession in history. The
had to resume its treatment of symptoms but now without hope
spending program could ever be ended, a hopeless prospect
administration lacked the knowledge of how to reform the
even how to escape from borrowing bank credit with its
debt, and the administration lacked the courage to adopt the
large-scale spending necessary to give full employment of
The administration was saved from this impasse by the need for
rearmament program followed by the war. Since 1947 the Cold
the space program have allowed the same situation to continue,
even today, prosperity is not the result of a properly
economic system but of government spending, and any drastic
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in such spending would give rise to an acute depression.
THE ECONOMIC FACTORS
There are a number of important elements in the economic
situation of the 20th century.
8. The increasing disparity in the distribution of income is
most controversial and least well-established characteristic
system. It would appear that the disparity in national income
In the US, the richest one-fifth receive 46% of the income in
1910, 51% in 1929 and 48% in 1937. In the same three years,
of the poorest one-fifth fell from 8% to 5.4% to 3.6%
If instead of one-fifth, we examine the richest and poorest
in 1910 the ratio was 10, in 1929 it was 21.7, in 1937, it was
34.4. This means that the rich were getting richer relatively
probably absolutely while the poor were getting poorer both
The progressives who insisted that the lack of investment was
caused by lack of consumer purchasing power were correct. But
conservatives who insisted that the lack of investment was
lack of confidence were also correct. Each was looking at the
side of a single continuous cycle:
a) purchasing power creates demand for goods;
b) demand for goods creates confidence in the minds of
c) confidence creates new investment;
d) new investment creates purchasing power which then creates
It would appear that the economic factors alone affected the
distribution of incomes in the direction of increasing
In Germany, Hitler's 1934 adoption of an unorthodox financial
policy which raised the standards of living of the
even more drastically (by shifting them from unemployment with
close to nothing into wage-earning positions in industry) was
acceptable to the high-income classes because it stopped the
revolution by the discontented masses and because it was
long-run benefit to them. This long-run benefit began to
capacity employment of capital and labor was achieved in 1937.
In the modern economic community, the sum total of goods and
services appearing in the market is at one and the same time
income of the community and the aggregate cost of producing
services in question. Aggregate costs, aggregate incomes and
prices are the same since they are merely opposite sides of
The purchasing power available in the community is equal to
income minus savings. If there are any savings, the available
purchasing power will be less than the aggregate prices being
for the products for sale and the amount of the savings. Thus,
goods and services produced cannot be sold as long as savings
back. In order for al the goods to be sold, it is necessary
savings to reappear in the market as purchasing power. The
disequilibrium between purchasing power and prices which are
by the act of saving is restored completely by the act of
and all the goods can be sold at the prices asked. But
investment is less than savings, the available supply of
power is inadequate by the same amount to by the goods being
This margin by which purchasing power is inadequate because of
excess of savings over investment may be called the
gap."This "deflationary gap" is the key to the twentieth
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economic crisis and one of the three central cores of the
tragedy of the century.
THE RESULTS OF THE ECONOMIC DEPRESSION
The deflationary gap arising from a failure of investment to
reach the level of savings can be closed either by lowering
of goods to the level of available purchasing power or by
supply of purchasing power to a level able to absorb the
supply of goods, or a combination of both. The first solution
give a stabilized economy on a low level of activity; the
give a stabilized economy on a high level of activity. Left to
the economic system under modern conditions would adopt the
procedure working as follows: The deflationary gap will result
falling prices, declining economic activity and rising
This will result in a fall in national income resulting in an
more rapid decline in the volume of savings. This decline
until the volume of savings reaches the level of investment at
point the fall is arrested and the economy becomes stabilized
at a low
This process did not work itself out in any industrial country
during the great depression because the disparity in national
was so great that a considerable portion of the population
been driven to zero incomes and absolute want before savings
richer segment fell to the level of investment. Under such
the masses of population would have been driven to revolution
stabilization, if reached, would have been on a level so low
considerable portion of the population would have been in
want. Because of this, governments took steps to arrest the
the depression before their citizens were driven to
The methods used to deal with the depression and close the
deflationary gap were all reducible to two fundamental types:
a) those which destroy goods, and
b) those which produce goods which do not enter the market.
The destruction of goods will close the deflationary gap by
reducing the supply of unsold goods through lowering the
goods to the level of the supply of purchasing power. It is
generally realized that this method is one of the chief ways
the gap is closed in a normal business cycle where goods are
by the simple expedient of not producing the goods which the
capable of producing. The failure to use full level of 1929
represented a loss of $100 billion in the US, Britain and
alone. This loss was equivalent to the destruction of such
Destruction of goods by failure to gather the harvest is a
phenomenon under modern conditions. When a farmer leaves his
unharvested because the price is too low to cover the expense
harvesting, he is destroying the goods. Outright destruction
already produced is not common and occurred for the first time
method of combating depression in the years 1930-1934. During
period, stores of coffee, sugar, and bananas were destroyed,
plowed under, and young livestock was slaughtered to reduce
on the market. The destruction of goods in warfare is another
of this method of overcoming deflationary conditions in the
The second method of filling the deflationary gap, namely, by
producing goods which do not enter the market, accomplishes
purpose by providing purchasing power in the market, since the
of production of such goods do enter the market as purchasing
while the goods themselves do not drain funds from the system
are not offered for sale. New investment was the usual way in
this was accomplished in the normal business cycle but it is
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normal way of filling the gap under modern conditions of
We have already seen the growing reluctance to invest and the
chance that the purchasing power necessary for prosperity will
provided by a constant stream of private investment. It this
the funds for producing goods which do not enter the market
sought in a program of public spending.
Any program of public spending at once runs into the problems
inflation and public debt. These are the same two problems
in connection with the efforts of government to pay for the
World War. The methods of paying for a depression are exactly
as the methods of paying for a war, except that the
methods used may be somewhat different because the goals are
different. In financing a war, we should seek to achieve a
which will provide a maximum of output with a minimum of
public debt. In dealing with a depression, since a chief aim
close the deflationary gap, the goal will be to provide a
output with a necessary degree of inflation and a minimum of
debt. Thus the use of fiat money is more justifiable in
depression than in financing a war. Moreover the selling of
private persons in wartime might well be aimed at the
groups in order to reduce consumption and release facilities
production, while in a depression (where low consumption is
problem) such sales of bonds to finance public spending would
be aimed at the savings of the upper-income groups.
These ideas on the role of government spending in combating
depression have been formally organized into the "theory of
compensatory economy." This theory advocates that government
and fiscal policies be organized so that they work exactly
the business cycle, with lower taxes and larger spending in
deflationary period and higher taxes with reduced spending in
period, the fiscal deficits of the down cycle being
the national budget by the surpluses of the up cycle.
This compensatory economy has not been applied with much
in any European country except Sweden. In a democratic
would take the control of taxing and spending away from the
representatives of the people and place this precious "power
purse" at the control of the automatic processes of the
as interpreted by bureaucratic (and representative) experts.
all these programs of deficit spending are in jeopardy in a
with a private banking system. In such a system, the creation
(or credit) is usually reserved for the private banking
and is deprecated as a government action. The argument that
creation of finds by the government is bad while creation of
the banks is salutary is very persuasive in a system based on
traditional laissez faire and in which the usual avenues of
communications (such as newspapers and radio) are under
even banker, control.
Public spending as a method of counteracting depression can
very greatly in character, depending on the purposes of the
Spending for destruction of goods or for restriction of
under the New Deal agricultural program, cannot be justified
in a democratic country with freedom of communications because
obviously results in a decline in national income and living
Spending for non-productive monuments is somewhat easier to
justify but is hardly a long-run solution.
Spending for investment in productive equipment (like the
Tennessee Valley Authority Dam) is obviously the best solution
it leads to an increase in national wealth and standards of
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is a long-run solution but it marks a permanent departure from
system of private capitalism and can be easily attacked in a
with a capitalistic ideology and a private banking system.
Spending on armaments and national defence is the last method
fighting depression and is the one most readily and most
adopted in the twentieth century.
A program of public expenditure on armaments is a method for
filling the deflationary gap and overcoming depression because
purchasing power to the market without drawing it out again
(since the armaments, once produced, are not put up for sale).
economic point of view, this method of combating depression is
much different from the method listed earlier under
goods, for, in this case also, economic resources are diverted
constructive activities or idleness to production for
appeal of this method for coping with the problem of
not rest on economic grounds at all, for, on such grounds,
no justification. It's appeal is rather to be found on other,
especially political, grounds.
The adoption of rearmament as a method of combating depression
does not have to be conscious. The country which adopts it may
honestly feel that it is adopting the policy for good reasons,
is threatened by aggression, and that a program of re-armament
necessary for political protection. It is very rare for a
consciously to adopt a program of aggression, for, in most
sides are convinced that their actions are defensive. It is
equally rare for a country to adopt a policy of re-armament as
solution for depression. If a country adopts re-armament
fear of another's arms and these last are the result of
fill a deflationary gap, it can also be said that the
the former has a basic economic cause.
In the 20th century, the vested interests usually sought to
prevent the reform of the economic system (a reform whose need
made evident by the long-drawn-out depression) by adopting an
program whose chief element was the effort to fill the
gap by re-armament.
THE PLURALIST ECONOMY AND WORLD BLOCS
The economic disasters of two wars, a world depression, and
post-war fluctuations showed clearly by 1960 that a new
organization of society was both needed and available. The
competitive system had destroyed itself and almost destroyed
civilization as well by its inability to distribute the goods
produce. The system of monopoly capitalism had helped in this
The almost simultaneous failure of laissez-faire, Fascism, and
Communism to satisfy the growing popular demand both for
standards of living and for spiritual liberty had forced the
century to seek some new economic organization.
Underdeveloped peoples have been struck by the conflicting
of the two great super-Powers.. The former offered the goods
peoples wanted (rising standards of living and freedom) while
latter seemed to offer methods of getting these goods (by
accumulation of capital, government direction of resources)
might tend to smother these goals. The net result has been a
convergence toward a common, if remote, system of the future
ultimate nature is not yet clear but which we might call the
CHAPTER XII: THE POLICY OF APPEASEMENT 1931-1936
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The structure of collective security was destroyed completely
under the assaults of Japan, Italy and Germany who were
whole nineteenth century way of life and some of the most
attributes of Western Civilization itself. They were in revolt
democracy, against the parliamentary system, against
the liberal outlook, against nationalism (although in the name
nationalism), against humanitarianism, against science and
respect for human dignity and human decency. It was recruited
dregs of society.
During the nineteenth century, goals were completely lost or
reduced to the most primitive level of obtaining more power
wealth. But the constant acquisition of power or wealth, like
narcotic for which the need grows as its use increases without
way satisfying the user, left man's "higher" nature
Germany could have made no aggression without the acquiescence
and even in some cases the actual encouragement of the
Powers, especially Britain.
THE JAPANESE ASSAULT, 1931-1941
The similarity between Germany and Japan was striking: each
completely cartelized industry, a militaristic tradition, a
population which respected authority and loved order, a facade
of parliamentary constitutionalism which barely concealed the
of power wielded by an alliance of army, landlords, and
The steady rise in tariffs against Japanese manufactured goods
after 1897 led by America served to increase the difficulties
Japan's position. The world depression and the financial
Japan a terrible blow. Under this impact, the reactionary and
aggressive forces were able to solidify their control and
that adventure of aggression and destruction that ultimately
the disasters of 1945.
Separate from the armed forces were the forces of monopoly
capitalism, the eight great economic complexes controlled as
units knows as "zaibatsu" which controlled 75% of the nation's
By 1930, the militarists and zaibatsu came together in their
Japan's unfavorable balance of trade was reflected in a heavy
outflow of gold in 1937-1938. It was clear that Japan was
financial and commercial ability to buy necessary materials of
origin. The steps taken by America, Australia, and others to
export of strategic or military materials to Japan made this
even more acute. The attack on China had been intended to
situation by removing the Chinese boycott on Japanese goods.
Under the pressure of the growing reluctance of neutral
to supply Japan with necessary strategic goods, the most vital
petroleum products and rubber, it seemed that the occupation
Dutch Indies and Malaya could do much to alleviate these
which would lead to an American war on Japan. They decided to
the United States first.
THE ITALIAN ASSAULT, 1934-1936
In 1922, the Fascists came to power in a parliamentary system;
1925 it was replaced by a political dictatorship while the
system remained that of orthodox financial capitalism; in 1927
orthodox and restrictive stabilization of the lira on the
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international gold standard led to such depressed economic
that Mussolini adopted a much more active foreign policy; in
Italy replaced orthodox economic measures by a totalitarian
functioning beneath a fraudulent corporate facade.
Italy was dissatisfied over its lack of colonial gains at
Versailles and the refusal of the League to accede to
request for a redistribution of the world's resources in
with population needs made in 1920.
In a series of agreements with Austria and Hungary known as
"Rome Protocols," the Austrian government under Engelbert
destroyed the democratic institutions of Austria, wiped out
Socialist and working-class organizations, and established a
dictatorial corporate state at Mussolini's behest in 1934.
advantage of this to attempt a Nazi coup in Austria, murdering
Dollfuss in July 1934 but he was prevented by the quick
of Italian troops on the Brenner frontier and a stern warning
Hitler's ascension to office in Germany in 1933 found French
foreign policy paralyzed by British opposition to any efforts
support collective security or to enforce German observation
treaty obligations by force. As a result, a suggestion from
1933 for joint armed intervention in Germany to remove Hitler
office was rejected by France. Poland at once made an
pact with Germany and extended a previous one with the Soviet
In 1934, France under Jean Louis Bathou, began to adopt a more
active policy against Hitler seeking to encircle Germany by
the Soviet Union and Italy into a revived alignment of France,
the Little Entente, Greece and Turkey.
France's Laval was convinced that Italy could be brought into
anti-German front only if its long-standing grievances and
ambitions in Africa could be met. Accordingly, he gave
Mussolini 7% of
the stock in the Djibouti-Addis Ababa Railway, a stretch of
114,000 square miles in extent but containing only a few
persons (sixty-two according to Mussolini) on the border of
small wedge of territory between French Somaliland and Italian
Eritrea, and the right to ask for concessions throughout
While Laval insisted that he had made no agreement which
jeopardized Ethiopia's independence or territorial integrity,
it equally clear that Italian support against Germany was more
important than the integrity of Ethiopia in his eyes. France
Ethiopia's only friend and had brought it into the League of
Italy had been prevented from conquering Ethiopia in 1896 only
decisive defeat of her invading forces at the hands of the
themselves, while in 1925, Britain and Italy had cut her up
economic spheres by an agreement which was annulled by a
to the League. Laval's renunciation of France's traditional
Ethiopian independence brought Italy, Britain and France into
agreement on this issue.
This point of view was not shared by public opinion in these
three countries. Stanley Baldwin (party leader and prime
erected one of the most astonishing examples of British "dual"
in the appeasement period. While publicly supporting
security and sanctions against Italian aggression, the
privately negotiated to destroy the League and to yield
Italy. They were completely successful in this secret policy.
The Italian invaders had no real fear of British military
sanctions when they put a major part of their forces in the
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separated from home by the British-controlled Suez canal. The
government's position was clearly stated in a secret report by
John Maffey which declared that Italian control of Ethiopia
would be a
"matter of indifference" to Britain. This opinion was shared
French government too.
Unfortunately, public opinion was insisting on collective
sanctions against the aggressor. To meet this demand, both
engaged in a public policy of unenforced or partially enforced
sanctions at wide variance with their real intentions.
Foreign Secretary Samuel Hoare delivered a smashing speech to
support sanctions against Italy. The day previously he and
Eden had secretly agreed with Pierre Laval to impose only
economic sanctions avoiding all actions such as blockade of
A number of governments including Belgium, Czechoslovakia,
and Britain had stopped all exports of munitions to Ethiopia
as May 1935 although Ethiopia's appeal to the League for help
made on March 17th while the Italian attack did not come until
October. The net result was that Ethiopia was left defenceless
appeal to the US for support was at once rejected.
Hoare's speech evoked such applause from the British public
Baldwin decided to hold a general election on that issue.
with ringing pledge to support collective security, the
government won an amazing victory and stayed in power until
general election ten years later (1945).
Although Article 16 of the League Covenant bound the signers
break off all trade with an aggressor, France and Britain
keep their economic sanctions partial and ineffective. The
of oil sanctions was put off again and again until the
Ethiopia was complete. The refusal to establish this sanction
from a joint British-French refusal on the grounds that an oil
sanction would be so effective that Italy would be compelled
of its was with Ethiopia and would, in desperation, make war
Britain and France. This, at least, was the amazing logic
the British government later.
Hoare and Laval worked out a secret deal which would have
Italy outright about one-sixth of Ethiopia. When news of this
broken to the public, there was a roar of protest on the
that this violated the election pledge made but a month
save his government, Baldwin had to sacrifice Hoare who
December 19 but returned to Cabinet on June 5 as soon as
decently buried. Laval fell from office and was succeeded by
Flandin who pursued the same policy.
Ethiopia was conquered on May 2 1936. Sanctions were removed
the next two months just as they were beginning to take
consequences of the Ethiopian fiasco were of the greatest
The Conservative Party in England was entrenched in office for
decade during which it carried out its policy of appeasement
the resulting war. The US passed a "Neutrality Act" which
aggression, at the outbreak of war, by cutting off supplies to
sides, to the aggressor who had armed at his leisure and to
as yet unarmed. Above all, it destroyed French efforts to
CIRCLES AND COUNTERCIRCLES, 1935-1939
The remilitarization of the Rhineland in violation of the
Versailles Treaty was the most important result of the
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In order to destroy the French and Soviet alliances with
Czechoslovakia, Britain and Germany sought to encircle France
Soviet Union in order to dissuade France from honoring its
with either Czechoslovakia or the Soviet Union and France,
itself encircled, dishonored its alliance with Czechoslovakia
came due in 1938.
The British attitude towards eastern Europe was made perfectly
clear when Sir John Simon demanded arms equality for Germany.
to the encirclement of France was the Anglo-German Naval
Parallel with the encirclement of France went the encirclement
the Soviet Union known as the anti-Comintern Pact, the union
Germany and Japan against Communism.
The last encirclement was that against Czechoslovakia. Hungary
and Germany were both opposed to Czechoslovakia as an
creation of the Versailles Conference. The Polish-German
1934 opened a campaign until the Polish invasion in 1938.
An analysis of the motivations of Britain in 1938-1939 is
to be difficult because the motives of government were clearly
same as the motives of the people and in no country has
anonymity been carried so has been been so well preserved as
Britain. In general, motives become vaguer and less secret as
our attention from the innermost circles of the government
if we were looking at the layers of an onion, we may discern
points of view:
1) the anti-Bolsheviks at the center;
2) the "three-bloc-world" supporters close to the center;
3) the supporters of "appeasement" and
4) the "peace at any price" group in peripheral position.
The chief figures in the anti-Bolshevik group were Lord
Curzon, Lord D'Abernon and General Smuts. They did what they
destroy reparations and permit German re-armament.
This point of view was supported by the second group, the
Table Group, and came later to be called the Clivenden Set
included Lord Milner, Lord Brand (managing director of Lazard
Brothers, international bankers). This group wielded great
because it controlled the Rhodes Trust and dominated the Royal
Institute of International Affairs. They sought to contain the
Union rather than destroy it as the anti-Bolsheviks wanted.
advocated a secret alliance of Britain with the German
leaders against the Soviet.
Abandoning Austria, Czechoslovakia and the Polish Corridor to
Germany was the aim of both the anti-Bolsheviks and the
From August 1935 to March 1939, the government built upon the
fears of the "peace at any price" group by steadily
Germany's armed might and belittling their own, by calculated
indiscretions like the statement that there were no real
guns in London, by constant hammering at the danger of air
without warning, by building ostentatious and quite useless
trenches in the streets and parks of London, and by insisting
daily warnings that everyone must be fitted with a gas mask
immediately (although the danger of a gas attack was nil). In
way, the government put London into a panic in 1938 and by
Chamberlain was able to get the people to accept the
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Czechoslovakia. Since he could not openly appeal on the anti-
Bolshevik basis, he had to adopt the expedient of pretending
resist (in order to satisfy the British public) while really
continuing to make every possible concession to Hitler which
bring Germany to a common frontier with the Soviet Union.
Chamberlain's motives were not really bad ones; he wanted
so he could devote Britain's limited resources to social
he was narrow and totally ignorant of the realities of power,
convinced that international politics could be conducted in
secret deals, as business was, and he was quite ruthless in
out his aims, especially in his readiness to sacrifice
persons who, in his eyes, did not count.
THE SPANISH TRAGEDY, 1931-1939
From the invasion of the Arabs in 711 to their final ejection
1492, Spanish life has been dominated by the struggle against
intruders. As a result of more than a thousand years of such
struggles, almost all elements of Spanish society have
fanatical intolerance, an uncompromising individualism, and a
belief that physical force is a solution to all problems,
The war of 1898, by depriving Spain of much of its empire,
its over-sized army with little to do and with a reduced area
to batten. Like a vampire octopus, the Spanish Army settled
drain the life-blood of Spain and, above all, Morocco. This
the army officers into alignment with conservative forces
of the Church (upper clergy), the landlords, and the
forces of the proletariat discontent consisted of the urban
and the much larger mass of exploited peasants.
In 1923, while most of Spain was suffering from malnutrition,
most of the land was untilled and the owners refused to use
facilities which had built by government. As a result,
yields were the poorest in western Europe. While 15 men owned
million acres and 15,000 men owned about the of all taxed
2 million owned the other half, frequently in plots too small
subsistence. About 2 million more, who were completely
worked 10 to 14 hours a day for about 2.5 pesetas (35 cents) a
only six months in the year and paid exorbitant rents without
security of tenure.
In the Church, while the ordinary priests share the poverty
tribulations of the people, the upper clergy were closely
government and supported by an annual grant. They had seats in
upper chamber, control of education, censorship, marriage. In
consequence of this alliance of the upper clergy with
the forces of reaction, all animosities built against the
to be directed against the former also. Although the people
universally and profoundly catholic, they also became
anticlerical reflected in the proclivity for burning churches.
All these groups, landlords, officers, upper clergy, and
monarchists, were interest groups seeking to utilize Spain for
own power and profit.
Alfonso XIII ordered municipal elections but in 46 out of 50
provincial capitals, the anti-monarchial forces were
Alfonso fled to France on April 14, 1931.
The republicans at once began to organize their victory,
a Constituent Assembly in June and establishing an ultramodern
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cameral, parliamentary government with universal suffrage,
of Church and State, secularization of education, local
separatist areas and power to socialize the great estates or
The republic lasted only five years before Civil War began in
1936 after being challenged constantly from the Right and the
Left. Because of shifting governments, the liberal program
enacted into law in 1931 was annulled or unenforced.
In an effort to reduce illiteracy (over 45% in 1930), the
republic created thousands of new schools and new teachers,
teachers' salaries, founded over a thousand libraries.
Army officers were reduced with the surplus being retired on
pay. The republican officers tended to retire, the monarchists
To assist the peasants and workers, mixed juries were
to hear rural rent disputes, importation of labor for
purposes was forbidden; and credit was provided for peasants
obtain land, seed, or fertilizers on favorable terms.
uncultivated lands were expropriated with compensation to
farms for a new class of peasant proprietors.
Most of these reforms went into effect only partially. Few of
abandoned estates could be expropriated because of the lack of
The conservative groups reacted violently. Three plots began
be formed against the new republic, the one monarchist led by
in parliament and by Goicoechea behind the scenes; the second
parliamentary alliance of landlords and clericals under
the last a conspiracy of officers under Generals Barrera and
In the meantime, the monarchist conspiracy was organized by
former King Alfonso from abroad. Goicoechea performed his task
great skill under the eyes of a government which refused to
preventative action because of its own liberal and legalistic
scruples. He organized an alliance of the officers, the
his own Alfonsist party. Four men from these three groups then
an agreement with Mussolini in 1934 who promised arms, money,
diplomatic support and 1.5 million pesetas, 10,000
grenades, and 200 machine guns. In return, the signers
sign a joint export policy with Italy.
The Robles coalition of Right parties with the clerical party
agrarian party of landlords was able to replace the Left
Azana by the Right Republican Lerroux as prime minister. It
called new elections, won victory and revoked many of the 1931
while allowing most of the rest to go unenforced and restored
This led to a violent agitation which burst into open revolt
the two separatist centers of the Basque country and
uprising in Asturias spearheaded by anarchist miners hurling
from slings, lasted for nine days. The government used the
Legion and Moors, brought to Morocco by sea, and crushed the
without mercy. The latter suffered at 5,000 casualties. After
uprising, 25,000 suspects were thrown into prison.
The uprising of October 1934, although crushed, split the
oligarchy. The demands of the army, monarchists and the
landlords for a ruthless dictatorship alarmed the leaders of
Church and president of the republic Zamora. Robles as
minister of war
encouraged reactionary control of the army and even put
in as his undersecretary of war.
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For the 1936 elections, the parties of the Left formed the
Popular Front with a published program promising a full
the constitution, amnesty for political crimes committed after
civil liberties, an independent judiciary, minimum wages,
for tenants, reform of taxation, credit, banking. It
Socialist program for nationalization of the land, the banks,
While all the Popular Front parties would support the
only the bourgeois parties would hold seats in the Cabinet
workers parties such as the Socialists would remain outside.
The Popular Front captured 266 of 473 seats while the Right
153, the Center 54, CEDA 96, Socialists 87, Republic Left 81,
The defeated forces of the Right refused to accept the
results and tried to persuade Valladeres to hand over the
to General Franco. That was rebuffed. On Feb. 20, the
and decided the time was not yet ripe. The new government
this meeting and transferred Franco to the Canary Islands. The
before he left Madrid, Franco met with the chief conspirators
completed their plans for a military revolt but fixed no date.
In the meantime, provocation, assassination, and retaliation
steadily with the verbal encouragement of the Right. Property
seized or destroyed and churches were burned on all sides. The
retaliated by assaults on monarchists and by burning churches.
Italian Air Force planes were painted over and went into
in support of the revolt which was a failure when the navy
loyal because the crews overthrew their officers; the Air
remained loyal; the army revolted with much of the police but
overcome. At the first news of the revolt, the people, led by
unions, demanded arms. Because arms were lacking, orders were
once to France. The recognized government in Madrid had the
buy arms abroad and was even bound to do so by treaty with
As a result of the failure of the revolt, the generals found
themselves isolated in several different parts of Spain with
The rebels held the extreme northwest, the north and the south
well as Morocco and the islands. They had the unlimited
Italy and Portugal and tentative support from Germany.
The French suggested an agreement not to intervene in Spain
it was clear that if there was no intervention, the Spanish
could suppress the rebels. Britain accept the French offer at
efforts to get Portugal, Italy, Germany and Russia into the
were difficult because Portugal and Italy were both helping
rebels. By August, all six Powers had agreed.
Efforts to establish some kind of supervision were rejected by
the rebels and by Portugal while Britain refused to permit any
restrictions to be placed on war material going to Portugal at
very moment when it was putting all kinds of pressure on
restrict any flow of supplies to the recognized government of
Portugal had delayed joining the agreement until it would hurt
Loyalist forces more than the rebels. Even then, there was no
intention of observing the agreements.
France did little to help the Madrid government while Britain
positively hostile to it. Both governments stopped all
war material to Spain. By its insistence on enforcing
against the Loyalists, while ignoring the systematic and
evasions of the agreement in behalf of the rebels, Britain was
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fair nor neutral, and had to engage in large-scale violations
international law. Britain refuse to permit any restrictions
placed on war material going to Portugal (to the rebels). It
to allow the Loyalist Spanish Navy to blockade the seaports
the rebels, and took immediate action against efforts by the
government to interfere with any kind of shipments to rebel
while wholesale assaults by the rebels on British and other
ships going to Loyalist areas drew little more than feeble
Britain was clearly seeking a rebel victory and instead of
to enforce nonintervention, was actively supporting the rebel
of Loyalist Spain when the British Navy began, in 1937, to
British ships headed for Loyalist ports and on some pretext,
by force, made them go elsewhere.
The rebel forces were fewer than the Loyalists but were
eventually successful because of their great superiority in
aviation, and tanks as a result of the one-sided enforcement
The failure of Franco to capture Madrid led to a joint
German meeting where it was decided to recognize the Franco
and withdraw their recognition from Madrid on Nov. 18, 1936.
recognized the Franco regime in December.
As a result, Franco received the full support of the aggressor
states while the Loyalist government was obstructed in every
the "peace-loving" Powers. Italy sent 100,000 men and suffered
casualties, Germany sent 20,000 men. On the other side, the
were cut off from foreign supplies almost at once because of
embargoes of the Great Powers and obtained only limited
chiefly from Mexico, Russia and the US until the
agreement cut these off. On Jan. 18, 1937, the American
was revised to apply to civil as well as international wars
invoked against Spain immediately but unofficial pressure from
American government prevented such exports to Spain even
The Madrid government made violent protests against the Axis
intervention both before the Non-intervention Committee in
before the League of Nations. These were denied by the Axis
investigation of these charges was made under Soviet pressure
Committee reported that these charges were unproved. Anthony
so far to say that so far as non-intervention was concerned,
were other governments more to blame tan either Germany or
Soviet intervention began Oct 7,1936, three and a half years
after Italian intervention and almost three months after both
and German units were fighting with the rebels. The Third
International recruited volunteers throughout the world to
Spain. This Soviet intervention in support of the Madrid
a time when it could find support almost nowhere else served
increase Communist influence in the government very greatly.
The Italian submarine fleet was waiting for Russian shipping
the Mediterranean and did not hesitate to sink it in the last
months of 1936.
Although the evidence for Axis intervention in Spain was
overwhelming and was admitted by the Powers themselves early
the British refused to admit it and refused to modify the
policy. Britain's attitude was so devious that it can
hardly be untangled although the results were clear enough.
sympathy of the London government clearly favored the rebels
it had to conceal the fact from public opinion since this
favored the Loyalists over Franco by 57% to 7% according to a
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On December 18, 1936, Eden admitted that the government had
exaggerated the danger of war four months earlier to get the
agreement accepted, and when Britain wanted to use force
to achieve its aims, as it did in the piracy of Italian
1937, it did so without risk of war. The non-intervention
as practiced, was neither an aid to peace nor an example of
neutrality, but was clearly enforced in such a way as to give
the rebels and place all possible obstacles in the way of the
government suppressing the rebellion.
The attitude of the British government could not be admitted
publicly and every effort was made to picture the actions of
Committee as one of even-handed neutrality. In fact, it
was used to throw dust in the eyes of the world, especially
British public. For months, the meaningless debates of this
were reported in detail to the world and charges,
proposals, counterproposals, investigations and inconclusive
conclusions were offered to the a confused world, thus
increasing its confusion. While debating and quibbling on
like belligerence, patrols, volunteers, etc., before the
London, the Franco forces, with their foreign contingents,
crushed the Loyalist forces.
The Loyalist forces surrendered on March 28th 1939. England
France had recognized the Franco government on February 17 and
Axis troops were evacuated from Spain after a triumphal march
Madrid in June.
When the war ended, much of Spain was wrecked, at least
Spaniards had been killed and an unpopular military
been imposed as a result of the actions of non-Spanish forces.
least 400,000 Spaniards were in prison and large numbers were
and destitute. Germany recognized this problem and tried to
to follow a path of conciliation, humanitarian reform, and
agricultural, and economic reform. This advice was rejected,
result that Spain has remained weak, apathetic, war-weary, and
discontented ever since.
TRAGEDY AND HOPE Chapters XIII-XVI
by Dr. Carroll Quigley
XII. THE POLICY OF APPEASEMENT 1931-1936
XIII. THE DISRUPTION OF EUROPE
XIV. WORLD WAR II: THE TIDE OF AGGRESSION 1939-1941
XV. WORLD WAR II: THE EBB OF AGGRESSION 1941-1945
XVI. THE NEW AGE
CHAPTER XIII: THE DISRUPTION OF EUROPE, 1937-1939
AUSTRIA INFELIX, 1933-1938
The Austria which was left after the Treaty of St. Germain
consisted of little more than the great city of Vienna
surrounded by a
huge but inadequate suburb whose population had been reduced
to 6.6 million.
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The Social Democrats were unable to reconcile their desire for
union with Germany (called Anschluss) with the need for
from the Entente Powers who opposed this.
The Social Democrats embarked on an amazing program of social
welfare by a system of direct taxes which bore heavily on the
Before 1914, the living conditions of the poor had been
maintained by a very undemocratic political system under which
83,000 persons, on a property basis, were allowed to vote and
the richest were allowed to choose one-third of all seats on
council. By 1933, the Social Democrats had built almost 60,000
dwellings so efficiently that the average cost per apartment
about $1,650 each with average rent of $2 per month. Thus the
Vienna had all kinds of free or cheap medical care, dental
education, libraries, amusements, sports, school lunches and
care provided by the city.
While this was going on in Vienna, the Christian
German federal government of Catholic priest Monsignor Ignaz
was sinking deeper into corruption, The diversion of public
banks and industries controlled by Seipel's supporters was
parliamentary investigations in spite of the government's
conceal the facts.
Seipel formed a "Unity List" of all the anti-Socialist parties
could muster but the election gave his party only 73 seats
71 for the Social Democrats, 12 for the pan-Germans, 9 for the
Agrarian League. He sought to change the Austrian constitution
presidential dictatorship which required a two-thirds vote. It
necessary to use illegal methods.
The secret documents published since 1945 make it quite clear
that Germany had no carefully laid plans to annex Austria and
encouraging violence by the Nazis in Austria. Instead, every
was made to restrict the Austrian Nazis to propaganda in order
a gradual peaceful extension of Nazi influence.
The invasion of Austria in 1938 was a pleasant surprise even
the Nazi leaders and arose from several unexpected favorable
circumstances. Secret documents now make it clear that in 1937
German and British governments made secret decisions which
fate of Austria and Czechoslovakia. It is evident from some of
Hitler's statements that he had already received certain
about the secret decisions being made by Chamberlain on the
The British government group controlling foreign policy had
reached a seven point decision regarding Germany:
1. Hitler's Germany was the front-line bulwark against the
Communism in Europe.
2. The aim was a four power pact including Britain, France,
Germany to exclude all Russian influence from Europe.
3. Britain had no objection to German acquisition of Austria,
Czechoslovakia, and Danzig.
4. Germany must not use force to achieve its aims as this
precipitate a war in which Britain would have to intervene.
For years before June 1938, the government insisted that
rearming was progressing in a satisfactory fashion. Churchill
questioned this and produced figures on German rearmament to
that Britain's own progress in this field was inadequate.
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figures (which were not correct) were denied by the
late as March 1938, Chamberlain said that British rearmament
as to make Britain an "almost terrifying power." But as the
on, the government adopted a quite different attitude. In
persuade public opinion that it was necessary to yield to
government pretended that its armaments were quite inadequate.
We now know that this was a gross exaggeration. Britain
almost 3000 "military" planes in 1938 and about 8,000 in 1939
to 3350 "combat" planes produced in Germany in 1938 and 4,733
It is quite clear that Britain did not yield to superior force
1938, as was stated at the time and has been stated since by
writers including Churchill. We have evidence that Chamberlain
these facts but consistently gave a contrary impression and
Halifax went so far as to call forth protests from the British
military attaches in Prague and Paris.
The British government made it clear to Germany both publicly
privately that they would not oppose Germany's projects.
to Ribbentrop on June 3 1928 "Anything which could be got
firing a shot can count upon the agreement of the British."
THE CZECHOSLOVAK CRISIS, 1937-1938
The economic discontent became stronger after the onset of the
world depression in 1929 and especially after Hitler
his policies could bring prosperity to Germany.
Within two weeks of Hitler's annexation of Austria, Britain
pressure on the Czechs to make concessions to the Germans; to
encourage France and Germany to do the same. All this was
the argument that Germany would be satisfied if it obtained
Sudetenland and the Polish Corridor. All these assumptions
Czechoslovakia was eliminated with the help of German
French indecision and war-weariness, and British public
and merciless secret pressure.
Five days after Anschluss, the Soviet government call for
collective actions to stop aggression and to eliminate the
danger of a new world slaughter was rejected by Lord Halifax.
It was necessary to impose the plan for Czechoslovakia on
opinion of the world by means of the slowly mounting war scare
reached the level of absolute panic on September 28th. The
horror of the relentless German mobilization was built up day
while Britain and France ordered the Czechs not to mobilize in
"not to provoke Germany."
We now know that all these statements and rumors were not true
and that the British government knew that they were not true
The Chamberlain government knew these facts but consistently
a contrary impression. Lord Halifax particularly distorted the
Just as the crisis was reaching the boiling point in September
1938, the British ambassador in Paris reported to London that
Lindbergh had just emerged from Germany with a report that
8,000 military planes and could manufacture 1,500 a month. We
that Germany had about 1,500 planes, manufactured 280 a month.
Lindbergh repeated his tale of woe daily both in Paris and in
London during the crisis. The British government began to fit
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people of London with gas masks, the prime minister and the
called on the people to dig trenches in the parks,
began to be evacuated. In general, every report or rumor which
add to the panic and defeatism was played up, and everything
might contribute to a strong or a united resistance to Germany
The Anglo-French decision was presented to the Czechoslovak
government at 2a.m. on September 19 to be accepted at once.
Czechoslovak government accepted at 5p.m. on September 21st.
Halifax at once ordered the Czech police to be withdrawn from
Sudeten districts, and expressed the wish that the German
in at once.
At Munich, Hitler, Chamberlain, Mussolini and Daladier carved
Czechoslovakia without consulting anyone, least of all the
Germany was supreme in Europe. Since this was exactly what
and his friends had wanted, they should have been satisfied.
THE YEAR OF DUPES, 1939
Concessions to Germany continued but now parallel with
concessions went a real effort to build up a strong front
The anti-Bolshevik and "three-bloc-world" groups had expected
Hitler would get the Sudetenland, Danzig, and perhaps the
Corridor and that he would then be stabilized between the
bloc" and the Soviet Union.
As a result of these hidden and conflicting forces, the
of international relations from September 1938 and September
even later is neither simple nor consistent. In general, the
everything was the position of Britain. As a result of Lord
"dyarchic" policy, there were not only two policies but two
carrying them out. Lord Halifax tried to satisfy the public
an end to appeasement while Chamberlain, Wilson, Simon and
sought to make secret concessions to Hitler in order to
general Anglo-German settlement. The one policy was public;
was secret. Since the Foreign Office knew of both, it tried to
up the "peace front" against Germany so that it would look
sufficiently imposing to satisfy public opinion and to drive
seek his desires by negotiation rather than by force so that
opinion in England would not force the government to declare a
that they did not want in order to remain in office. This
broke down because Hitler was determined to have a war merely
personal emotional thrill of wielding great power, while the
make a "peace front" sufficiently collapsible so that it could
aside if Hitler either obtained his goals by negotiation or
general settlement with Chamberlain merely resulted in making
front" which was so weak it could neither maintain peace by
force nor win a war when peace was lost.
On March 15th, Chamberlain told the Commons that he accepted
seizure of Czechoslovakia and refused to accuse Hitler of bad
But two days later, when the howls of rage from the British
showed that he had misjudged the electorate, he denounced the
However, nothing was done other than to recall Henderson from
for consultations and cancel a visit to Berlin by the
president of the
Board of Trade. The seizure was declared illegal but was
fact at once. Moreover, #6 million in Czech gold reserves in
were turned over to Germany with the puny and untrue excuse
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British government could not give orders to the Bank of
Germany opened its negotiations with Poland in a fairly
way on October 24, 1938. It asked for Danzig and a strip a
wide across the Polish Corridor to provide a highway and
railroad under German sovereignty. Poland's economic and
in Danzig were to be guaranteed and the "corridor across the
was to be isolated from Polish communications facilities by
or tunneling. Germany also wanted Poland to join an
Germany was prepared to guarantee the country's existing
extend the Non-aggression Pact of 1934 for 25 years, to
independence of Slovakia and to dispose of Ruthenia as Poland
These suggestions were rejected by Poland. About the same
Germans were using pressure on Romania to obtain an economic
which was signed on March 23rd.
On March 17, London received a false report of a German
to Romania. Lord Halifax lost his head and, without checking
information, sent telegrams to Greece, Turkey, Poland,
Soviet Union asking what each country was prepared to do in
of a German aggression against Romania. Four replied by asking
what it was prepared to do but Moscow suggested and immediate
conference which Halifax rebuffed, wanting nothing more than
agreement to consult in a crisis. Poland was reluctant to sign
agreement involving Russia. However, when news reached London
Hitler's demands on Poland, Britain suddenly issued a
guarantee of the latter state (March 31st).
"In the event of any action which clearly threatened Polish
independence and which the Polish government accordingly
vital to resist with their national forces, His Majesty's
would feel themselves bound at once to lend the Polish
support in their power."
This was an extraordinary assurance. The British government
since 1918 had resolutely refused any bilateral agreement
any state in western Europe. Now they were making a
declaration in "eastern" Europe and they were giving that
responsibility of deciding when that guarantee would take
something quite unprecedented. If Germany used force in
opinion in Britain would force Britain to declare war whether
was a guarantee or not.
If the chief purpose of the unilateral guarantee to Poland was
frighten Germany, it had precisely the opposite effect.
Hitler announced that the terms he had offered Poland had been
rejected, negotiations broken off. The crisis was intensified
provocative acts on both sides.
In 1939, there was talk of a British loan to Poland of #100
million in May; On August 1 Poland finally got a credit for $8
at a time when all London was buzzing about a secret loan of
billion from Britain to Germany.
In 1936, Poland was given 2 billion francs as a rearmament
and on May 19, 1939, an agreement was signed by which France
full air support to Poland on the first day of war, local
by the third day, and a full-scale offensive on the sixteenth
Aug. 23, General Gamelin informed his government that no
support could be given to Poland until the spring of 1940 and
full-scale offensive could not be made before 1941-1942.
never informed of this change and seems to have entered the
September 1st in the belief that a full-scale offensive would
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against Germany during September.
The failure to support Poland was probably deliberate in the
hope that this would force Poland to negotiate with Hitler. If
was a complete failure. Poland was so encouraged by the
guarantee that it not only refused to make concessions but
prevented the reopening of negotiations by one excuse after
until the last day of peace.
In light of these facts, the British efforts to reach a
settlement with Hitler and their reluctance to make an
Russia, were very unrealistic. Nevertheless, they continued to
the Poles to reopen negotiations with Hitler, and continued to
the German government that the justice of their claims to
the Corridor were recognized but that these claims must be
by peaceful means and that force would inevitably be met with
The British continued to emphasize that the controversy was
Danzig when everyone else knew that Danzig was merely a
detail, and an
almost indefensible detail. Danzig was no issue on which to
world war, but it was an issue on which negotiation was almost
mandatory. This may have been why Britain insisted that it was
chief issue. But because it was not the chief issue, Poland
negotiate because it feared it would lead to partition of
Danzig was a free city under supervision of the League of
and while it was within the Polish customs and under Polish
control, it was already controlled politically under a German
Gauleiter and would at any moment vote to join Germany if
Lord Halifax's report reads: "Herr Hitler asked whether
would be willing to accept an alliance with Germany. I said I
exclude such a possibility provided the development of events
The theory that Russia learned of these British approaches to
Germany in July 1939 is supported by the fact that the
delays in the path of a British-Russian agreement were made by
from the middle of April to the second week of July but were
Russia from the second week in July to the end on August 21st.
The Russians probably regarded the first British suggestion
that the Soviet Union should give unilateral guarantees to
similar to those of Britain as a trap to get them into a war
Germany in which Britain would do little or nothing or even
to Germany. That this last possibility was not completely
reality is clear from the fact that Britain did prepare an
expeditionary force to attack Russia in March 1940 when
technically at war with Germany but was doing nothing to fight
Russia offered the guarantee if it were extended to all states
their western frontier including Finland, Estonia, Latvia,
Poland and Romania. This offer meant that Russia was
renunciation of all the territory in these six states which it
lost to them since 1917.
Instead of accepting the offer, the British began to quibble.
They refused to guarantee the Baltic States on the ground that
states did not want to be guaranteed although they had
Poland on March 31st when Jozef Beck did not want it and had
asked the Soviet Union to guarantee Poland and Romania,
whom wanted a Soviet guarantee. When the Russians insisted,
British countered by insisting that Greece, Turkey, Holland,
and Switzerland must also be guaranteed.
France and Russia were both pushing Britain to form a Triple
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Alliance but Britain was reluctant and delayed the discussions
great irritation of the Soviet leaders. To show its
Soviet Union on May 3rd replaced Litvinov with Molotov as
minister. This would have been a warning, Litvinov knew the
was favorable to democracy and to the Western Powers. As a
Jew, he was
anti-Hitler. Molotov was a contrast from every point of view.
On May 19th, Chamberlain refused an alliance and pointed with
satisfaction to "that great virile nation on the borders of
which under this agreement (of April 6th) is bound to give us
aid and assistance it can." He was talking about Poland!
The members of the military mission took a slow ship (speed
thirteen knots) and did not reach Moscow until August 11th.
again negotiators of second rank. In London, according to
rumor, neither side wanted an agreement. Considering
secret efforts to make a settlement with Germany, there is no
to believe that he wanted an agreement with Russia.
The Russians demanded an exact military commitment as to what
forces would be used against Germany; they wanted guarantees
the states concerned accepted or not; they wanted specific
to fight across a territory such as Poland. These demands were
rejected by Poland on August 19th. On the same day, Russia
commercial treaty with Germany. Two days later, France ordered
negotiators to sign the right to cross Poland but Russia
accept this until Poland consented as well.
On Aug. 23, Ribbentrop and Molotov signed an agreement which
provided that neither signer would take any aggressive action
the other signer or give any support to a third Power in such
The secret protocol delimited spheres of interest in eastern
The line followed the northern boundary of Lithuania and the
Vistula, and San rivers in Poland and Germany gave Russia a
in Bessarabia. This agreement was greeted as a stunning
the Entente countries. There was no reason why it should have
The British begged the Poles and the Germans to negotiate; the
Italians tried to arrange another four-Power conference;
outsiders issued public and private appeals for peace; secret
emissaries flew back and forth between London and Germany.
All this was in vain because Hitler was determined on war and
his attention was devoted to manufacturing incidents to
approaching attack. Political prisoners were taken from
camps, dressed in German uniforms, and killed on the Polish
as "evidence" of Polish aggression. A fraudulent ultimatum
sixteen superficially reasonable demands on Poland was
the British ambassador when the time limit had elapsed. It was
presented to the Poles because the Polish ambassador in Berlin
been ordered by Beck not to accept any document from the
The German invasion of Poland at 4:45a.m. on September 1,
did not end the negotiations to make peace, nor did the
collapse of Polish resistance on September 16. Since these
were futile, little need be said of them except that France
Britain did not declare war on Germany until more than two
elapsed. During this time, no ultimatums were sent to Germany.
September 3 at 9a.m., Britain presented an ultimatum which
11a.m. In a similar fashion, France entered the war at 6p.m.
CHAPTER XIV: WORLD WAR II: THE TIDE OF AGGRESSION, 1939-1941
The Second World War lasted exactly six years. It was fought
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every continent and on every sea. Deaths of civilians exceeded
of combatants and many of both were killed without any
justification as victims of sheer brutality, largely through
savagery by Germans, and to a lesser extent by Japanese and
Russians, although British and American attacks from the air
civilian populations and on non-military targets contributed
total. The distinctions between civilians and military
between neutrals and combatants which had been blurred in the
World War were almost completely lost in the second. Civilians
reached 17 millions.
The armies had no new weapons which had not been possessed in
1918 but the proportions of these and the ways in which they
cooperated with one another had been greatly modified.
The chief reason the Germans had sufficient military resources
was not based, as is so often believed, on the fact that
highly mobilized for war, but on other factors. In the first
Hitler's economic revolution in Germany had reduced financial
considerations to a point where they played no role in
political decisions. When decisions were made, on other
was provided through completely unorthodox methods of finance,
carry them out. In France and England, on the other hand,
financial principles, especially balanced budgets and stable
rates, played a major role in all decisions and was one of the
reasons why these countries did not mobilize or why, having
they had totally inadequate numbers of airplanes, tanks, etc.
Strategic bombing used long-range planes against industrial
targets and other civilian objectives. The upholders of
bombing received little encouragement in Germany, in Russia,
THE BATTLE OF POLAND, SEPTEMBER 1939
Although Britain and France declared war on Germany on
3rd 1939, it cannot be said that they made war during the next
weeks in which fighting raged in Poland. British airplanes
Germany, dropping leaflets for propaganda purposes but no
given to Poland. No attack was made by France and strict
issued to the British Air Force not to bomb any German land
until April 1940. Similar orders to the Luftwaffe by Hitler
maintained for part of this same period. When some British
Parliament put pressure to drop bombs on German munition
stores in the
Black Forest, Sir Kingsley Wood rejected the suggestion
"Are you aware it is private property? Why, you will be asking
bomb Essen next." Essen was the home of Krupp Munitions
Blockade of Germany was established in such a perfunctory
that large quantities of French iron ore continued to go to
through the neutral Low Countries in return for German coal
the same route. Hitler issued orders to his air force not to
Western frontier except for reconnaissance, to his navy not to
the French, and to his submarines not to molest passenger
to treat unarmed merchant ships according to established rules
international prize law. In open disobedience of these orders,
German submarine sank the liner Athenia on September 3rd.
The Soviet Union was invited by Hitler to invade Poland from
east and occupy the areas which had been granted to it in the
German agreement of August 23rd. The Russians were afraid the
Powers might declare war on Russia in support of their
When the Polish government moved to Romania, the Soviet Union
felt that it could not be accused of aggression against Poland
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Polish state still existed on Polish soil and justified their
with the excuse that they must restore order. On September 28,
divided Poland between them.
THE SITZKRIEG, September 1939 - May 1940
The period from the end of the Polish campaign to the German
attack on Denmark and Norway on April 9, 1940 is frequently
Sitzkrieg (sitting war) or even "phony war" because Western
made no real effort to fight Germany, eager to use the slow
Early in October, Hitler made a tentative offer to negotiate
peace with the Western Powers on the grounds that the cause of
fighting for Poland no longer existed. This offer was rejected
Western Powers with the public declaration that they were
to destroy Hitler's regime. This meant that war must continue.
British and French answers were not based on a desire to
but more on the belief that Hitler's rule in Germany was
that the best way to reach peace would be to encourage some
Hitler movement within Germany itself.
Germany was vulnerable to a blockade but there was no real
toward economic mobilization by Germany before 1943. Contrary
general opinion, Germany was neither armed to the teeth nor
mobilized in this period. In each of the four years 1939-1942,
Britain's production of tanks, self-propelled guns, and planes
higher tan Germany's. As late as September 1941, Hitler issued
order for substantial reduction in armaments production. In
33% of Germany's output went for direct war purposes compared
in the U.S. and almost 45% in Britain.
In order to reduce the enemy's ability to buy abroad,
connections were cut, his funds abroad were frozen, and his
were blocked. The U.S. cooperated as well, freezing the
assets of various nations as they were conquered by the
Powers and finally the assets of the aggressors themselves in
At the same time, pre-emptive buying of vital commodities at
their source to prevent Germany and its allies from obtaining
began. Because of limited British funds, most of this task of
pre-emptive buying was taken over by the U.S., almost
The blockade was enforced by Britain with little regard for
international law or for neutral rights there was relatively
the neutrals. The U.S. openly favored Britain while Italy and
equally openly favored Germany. On the whole, the blockade had
decisive effect on Germany's ability to wage war until 1945.
food supply was at the pre-war level until the very last
months of the
war by starving the enslaved peoples of Poland,
and other countries.
During the "phony war" there were persons in Britain, France
Germany who were eager to make war or peace. Such persons
extensive intrigues in order to negotiate peace or to prevent
There were a number of unsuccessful efforts to make peace
Western Powers and Germany in the six months following the
Hitler had no political ambition with respect to the Balkans
the Soviet Union. From both he wanted nothing more than the
supply of raw materials and a political peace which would
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goods to flow.
It is not yet clear why Finland rejected the Russian demands
October 1939. The Germans and Russians believed that it was
British influence. For some unexplained reason the Finns seem
felt that the Russians would not attack their country but the
attacked at several points November 29th.
In early 1939, the Anglo-French leaders now prepared to attack
the Soviet Union both from Finland and from Syria. On February
1940, the Supreme War Council decided to send to Finland an
expeditionary force of 100,000 heavily armed troops to fight
Soviet hordes. Germany at once warned Norway and Sweden that
take action against them if the two Scandinavian countries
passage of this force. Germany feared the Anglo-French forces
able to stop shipments of Swedish iron ore across Norway to
The evidence supports these fears because the high quality of
iron ore was essential to the German steel industry. As early
September 1939, the British were discussing a project to
Swedish shipments either by an invasion of Norway of by mining
Norwegian territorial waters. When Germany heard of the
expeditionary force, it began to prepare its own plans to
THE FALL OF FRANCE (MAY-JUNE 1940) AND THE VICHY REGIME.
Hitler was so convinced that Britain would also make peace
he gave lenient terms to France. France did not give up any
territories or any ports on the Mediterranean, no naval
vessels or any
airplanes or armaments. Northern France and all the western
the Pyrenees came under occupation but the rest was left
ruled by a government free from direct German control.
Operation Barbarossa was based on the consideration that only
destroying Russia and all Britain's hopes based on Russia
Britain be forced to ask for peace.
AMERICAN NEUTRALITY AND AID TO BRITAIN
In buying supplies, chiefly from the U.S., Britain had used
by June 1941, almost two-thirds of its dollars assets, gold
and marketable U.S. certificates.
When the war began, American public opinion was united in its
determination to stay out. The isolationist reaction following
American intervention in the First World War had become
the 1930s. Historian were writing extensively to show that
not been solely guilty of beginning the war in 1914 and that
Entente Powers had made more than their share of secret
seeking selfish territorialism, both before the war and during
In 1934, a committee of the U.S. Senate investigated the role
played by foreign loans and munition sales to belligerents in
the U.S. involved in World War I. Through the carelessness of
Roosevelt administration, this committee fell under the
isolationists led by Republican Senator Gerald Nye. As a
evidence was mobilized to show that American intervention in
been pushed by bankers and munitions manufacturers ("merchants
death") to protect their profits and their interests in an
victory. American public opinion had the uncomfortable feeling
American youths had been sent to die for selfish purposes
behind propaganda slogans about "the rights of small nations,"
"freedom of the seas," or "making the world safe for
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this created a widespread determination to keep out of
constant quarrels and avoid what was regarded as the "error of
The isolationist point of view had been enacted into the
Neutrality Act curtailing loans and munitions sales to
belligerent countries. Materials had to be sold on a "cash and
basis and had to be transported on foreign ships. Also, loans
belligerents were forbidden.
These laws gave a great advantage to a state like Italy which
ships to carry supplies from the U.S. or which had cash to buy
here in contrast to a country like Ethiopia which had no ships
Roosevelt called a special session of Congress to revise the
neutrality laws so that the Entente powers could obtain
the U.S. The embargo on munitions was repealed. American ships
not to be armed, to carry munitions, or to go to any areas the
President had proclaimed as combat zones.
The extremes ranged from the advocates of immediate
into the war on the side of Britain to the defenders of
isolation. Most American opinion was somewhere between the two
In order to unify America's political front, Roosevelt took
interventionists into his cabinet as Secretaries of War and
Roosevelt himself was sympathetic to this point of view.
Wendell Wilkie assured the American people that Roosevelt's
in 1940 meant that "we will be at war." Roosevelt replied
with assurances that "We will not sent our army, navy, or air
to fight in foreign lands except in case of attack. Your boys
going to be sent into any foreign wars." This campaign oratory
based on the general recognition that the overwhelming
determined to stay out of war.
Strategic plans were drawn up deciding that Germany was the
danger, with Japan of secondary importance, and that every
including actual warfare, should be used. Germany's
declaration of war
on the U.S. four days after Pearl Harbor saved the U.S. from
to attempt something which American public opinion would have
condoned, an attack on Germany after we had been attacked by
Roosevelt improvised a policy which consisted in almost equal
measure of propagandist public statements, tactical
hesitant half-steps. In September 1940, Roosevelt gave fifty
destroyers to Britain in return for 99 year leases of naval
bases in this hemisphere.
Loans were forbidden by the Neutrality Act. To Roosevelt, it
seemed foolish to allow monetary considerations to stand as an
obstacle in the way of self-defence (as he regarded the
Opponents argued that Britain had tens of billions in
assets and that Lend-Lease was merely a clever trick for
costs of Britain's war onto the backs of American tax-payers.
others insisted that Lend-Lease was an unneutral act which
arouse German rage and eventually involved the American people
war they had no need to get in. The bill passed and provided
president could "sell, transfer title to, exchange, lease,
dispose of any defence article" to any nation whose defence he
vital to the defence of the U.S.
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Behind this whole effort toward economic mobilization was a
secret decision of Roosevelt's military advisers in 1941 that
could not be won unless the U.S. planned eventually to raise
number of men in its armed forces to eight million. At once,
isolationists were in full cry and an ACt extending
training passed 203-202.
The British had no plans for an invasion of Europe and hoped
Germany could be worn down by blockade. No one pointed out
Germany defeat by British methods would leave the Soviet
supreme in all Europe with no forces to oppose them.
At the same time he gave Britain ten coast-guard cutters,
Roosevelt seized possession of 65 Axis and Danish ships in
harbors. The financial assets of the Axis Powers were frozen.
flying schools were made available to train British aviators.
presidential proclamation, the American Neutrality Zone was
to Iceland. The U.S. navy was ordered to follow all Axis
submarines west of this meridian broadcasting their positions
American naval escort of British convoys could not fail to
to a "shooting war" with Germany. The Roosevelt administration
shrink from this possibility. Fortunately for the
plans, Hitler played right into its hands by declaring war on
U.S. By that date, incidents were becoming more frequent.
On Oct. 17, the U.S. destroyer Kearney was torpedoed; two
later, the destroyer Rueben James was blown to pieces. On Nov.
American escort of 11 vessels picked up a convoy of six
including America's three largest ocean liners with 20,000
troops and guarded them from Halifax to India and Singapore.
Many of the activities of the American Navy in the summer of
were known not at all or were known only very imperfectly to
American public but it would seem that public opinion
supported the Administration's actions. In September,
to repeal the Neutrality Act forbidding the arming of merchant
which was done on Oct. 17. Two weeks later, all the essential
of the Neutrality Act were repealed. This meant that open
Germany was in the immediate future.
THE NAZI ATTACK ON SOVIET RUSSIA 1941-1942
Large numbers of anti-Stalinist Russians began to surrender to
the Nazis. Most of these were Ukranians and eager to fight
Nazis against the Stalinist regime. Anti-Stalinist deserters
in the Nazi forces reached 900,000 in June 1944 under Soviet
A. A. Vlasov. At the end of the war, hundreds of thousands of
supporters fled westward to the American and British armies
from Stalin's vengeance but were handed over to the Soviet
Union to be
murdered out of and or sent to slave-labor camps in Siberia.
dimensions of the human suffering involved in this whole
beyond the human imagination.
CHAPTER XV: WORLD WAR II: THE EBB OF AGGRESSION,1941-1945
THE RISING SUN IN THE PACIFIC, TO 1942
Japanese aggressions of 1941 which culminated in the attack on
Pearl Harbor were based on fear and weakness and not on
By 1939, the Japanese economy was beginning to totter under
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growing restrictions on Japanese trade imposed by Western
and acute material shortages. Problems such as these might
many nations, even the West, to desperate action.
The world depression made it very difficult to increase
exports. The excessively high American tariff, although no so
intended, seemed to the Japanese to be an aggressive
on their ability to live. The "imperial preference"
regulations of the
British Commonwealth had a similar consequence. Since Japan
defend itself against such economic measures, it resorted to
measures and the Western Powers would inevitably defend
with even greater economic restrictions driving Japan to open
The American government began to tighten the economic pincers
Japan just as Japan was seeking to tighten its military
China. Japan was able to close all routes to China. The
government retaliated with economic warfare. In 1938, it
"moral embargo" on the shipment of aircraft or their parts and
to Japan. In 1939, large U.S. and British loans to China
strengthen its collapsing financial system and Washington gave
notice to cancel the 1911 commercial treaty with Japan opening
door to all kinds of economic pressure. The "moral embargo"
extended to cover light metals and all machinery or plans for
Such a policy was opposed by isolationists insisting such
economic sanctions could only be enforced, in the long run, by
Japan could not get petroleum, bauxite, rubber and tin by
could be prevented from seizing these areas producing these
only by force. To avoid this obvious inference,l Cordell Hull
to make America's economic policy ambiguous so that Japan
deterred by fear of sanctions not yet imposed and won by hopes
concessions not yet granted. Such a policy was a mistake but
obtained Roosevelt's explicit approval since it allowed more
aggressive elements of Japanese to take control and any
seeking to end the strain became welcome.
The ambiguity of American commercial policy slowly resolved in
the direction of increasing economic sanctions. There was a
increase in America's economic pressure by the growth of
obstacles and by increasing purchasing difficulties.
From Hull's doctrinaire refusal to encourage any Japanese hope
that they could win worthwhile American concessions, the
extremism gained influence.
The President ordered the embargo of many goods which Japan
needed, including aluminum, airplane parts, all arms and
optical supplies, and various "strategic" materials but left
and scrap iron unhindered.
American diplomatic pressure on Japan must be timed to avoid
pushing Japan into desperate action before American-German
had passed the breaking point.
On July 26, 1941, the U.S. froze all Japanese financial assets
the U.S. virtually ending trade between the two countries.
the British Commonwealth issued similar orders. As a result of
pressures, Japan found itself in a position where its oil
would be exhausted in two years, its aluminum reserves in
months. The chief of the Navy told the emperor that if Japan
to war, it would be very doubtful that it could win. It was
that if war came, economic pressure was too damaging to allow
postpone such operations until 1942. The decision was made to
negotiate until late October. If an agreement could be
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preparations for war could be suspended, otherwise the
would be ended and the advance to open war continued. The
sought desperately to reach an agreement in Washington.
The Japanese misjudged American psychology. Nomura found it
impossible to reach an agreement because Hull's demands were
The Americans had broken the secret Japanese codes and knew
would begin if Nomura failed to obtain relaxation of the
embargo. They did not however have the plans for the attack on
On November 27th, a war warning was sent from Washington to
Harbor but no increased precautions were made. On December 7,
enlisted man, using radar, detected a group of strange planes
coming down from the north 132 miles away but his report was
disregarded. The American losses included 2,400 killed, 1,200
Japanese losses amounted to a couple of dozen planes.
TURNING THE TIDE, 1942-1943
At Casablanca, the political decision of Roosevelt and
on unconditional surrender was published with great fanfare,
once initiated a controversy which still continues based on
that it had an adverse influence by discouraging any hopes
countries that they could find a way out by slackening their
by revolting against their governments, or by negotiations
some kind of of "conditional" surrender. There seems little
it solidified our enemies and prolonged their resistance where
opposition to the war was widespread and active.
In May 1943, Sicily was overrun and in September,Italy
surrendered and the German armies were pushed backward from
Europe. Major decisions were made in 1943 which played a major
determining the nature of the postwar world.
Although Soviet demands were clearly in conflict with the high
purposes of the Atlantic charter, Churchill was not averse to
accepting them on the grounds of physical necessity but
objections to discussions of territorial questions while the
still going on forced him to refuse Stalin's requests. The
found themselves between the high and proclaimed principles of
Americans and the low and secret interests of the Russians.
At the American centers of power, there was complete
in the value of unrestricted aid to Russia. These aims were
by men like Harry Hopkins, General Marshall, and Roosevelt
The Americans decided to choke off the Italian offensive in
to concentrate on the cross-channel attack. The attack on
was a substitute for an attack on Germany from Italy.
Once ashore, the Sicilian campaign was ineptly carried on
occupation of territory was given precedence over destruction
enemy. No efforts were made to close the Straits of Messina so
Germans were able to send almost two divisions as
Italy and later, when the island had to be abandoned, they
equally free to evacuate it in seven days without the loss a
The history of Italy in 1943 is a history of lost
Italy might have got out in the summer and the Germans might
ejected shortly afterward. Instead, Italy was torn to pieces
out of the war so slowly that Germans were still fighting on
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soil at the final surrender in 1945.
These great misfortunes were the result of a number of forces:
1) weakness of Italy relative to Germany;
2) weakness of Allies after diversion of power to Britain;
3) mistrust of Italians by Allies;
4) the inflexible Allied insistence on unconditional surrender
left the Italians helpless to resist the Germans.
When the Italian government offered the join the Allies in
fighting the Germans, they insisted that the publication of
armistice and a tentative paratrooper drop in Rome be put off
sufficient Allied forces were within striking distance to
city from the German troops nearby. Eisenhower refused and
the Italian surrender one day before the American Army landed
Salerno. The Germans reacted to the news of the Italian
with characteristic speed. Available forces converged on the
beachhead, an armored division fought its way into Rome,
troops were disarmed everywhere, and the Italian government
flee. Numerous vessels were sunk by the Germans.
As Allied forces slowly recovered Italian territory from the
tenacious grasp of the Germans, the royal government remained
subservient to its conquerors. Civilian affairs were
military hands under and organization known as Allied Military
Government of Occupied Territories. The creation of these
organizations on a purely Anglo-American basis,to rule the
territory to be "liberated" became a very important precedent
Soviet behavior wen their armies began to occupy enemy
eastern Europe who were able to argue that they could exclude
Anglo-Americans from active participation in military
the east since they had earlier been excluded in the west.
While these political events were taking place, the military
advance was moving like a snail. The Allied invasion of Italy
given very limited resources for a very large task.. It was
such limitations of resources, explicitly stated, that the
accepted the British suggestion for an invasion of Italy at
It was suggested that German success in holding the Rapido was
due to the accuracy of their artillery fire and that this was
being spotted from the ancient monastery founded by St.
529 A.D. on the top of Monte Cassino. It was further suggested
General Clark should have obliterated the monastery with
bombardment but had failed to do so because he was a Roman
After Feb. 15, 1944, General Clark did destroy the site
without helping the situation a bit. We now know that the
not been using the monastery; but once it was destroyed by us,
dug into the rubble to make a stronger defence.
On May 16th, a Polish Division captured Monte Cassino.
Efforts to create a new Polish army were hampered by the fact
that about 10,000 POlish officers along with 5,000
professional persons, all of whom had been held in three camps
western Russia, could not be found. At least 100,000 Polish
of war, out of 320,000 captured in 1939, had been
The German radio suddenly announced on April 13, 1943, that
German forces in occupied Russia had discovered, at Katyn,
Smolensk, Russia, mass graves containing the bodies of 5,000
officers who had been murdered by the Soviet authorities in
Moscow called this a Nazi propaganda trick and declared that
Polish officers had been murdered and buried by the Nazis
when they captured the officers and this Soviet territory.
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The strategic decision of September 1943 to reject Churchill's
plans for a Balkan campaign in order to concentrate on a
offensive in 1944 were of vital importance in setting the form
postwar Europe would take. If it had been decided to postpone
cross-Channel attack and concentrate on an assault from the
across Bulgaria and Romania toward Poland and Slovakia, the
situation would have been quite different.
It has been argued that failure to reach agreement on the
territorial settlement of eastern Europe while the war was
progress meant that Soviet armies would undoubtedly dominate
Germany was defeated. This assumption implies that America
threatened to reduce of to cut off Lend-Lease supplies going
we could obtain Soviet agreement to the kind of eastern
settlement we wanted.
The Soviet advance became a race with the Western Powers even
though Eisenhower's orders held back their advance at many
(such as Prague) to allow the Russians to occupy areas the
could easily have taken first.
Roosevelt's sense of the realities of power were quite as
as Churchill's or Stalin's but he concealed that sense much
deliberately and much more completely under a screen of
Polish ministers rushed from London to Moscow to negotiate.
they were still talking and when the Soviet army was only six
from Warsaw, the Polish underground forces in the city, at a
invitation, rose up against the Germans. A force of 40,000
to the suggestion but the Russian armies stopped their advance
obstructed supplies to the rebels in spite of appeals from all
of the world. After sixty-three days of hopeless fighting, the
Home Army had to surrender to the Germans. This Soviet
removed their chief obstacle to Communist rule in Poland and
London government in London was accordingly ignored.
When victorious armies broke into Germany, late in 1944, the
Nazis were still holding the survivors of 8 million enslaved
10 million Jews, 6 million Russian prisoners of war and
prisoners from other armies. Over half of the Jews and
possibly 12 million, were killed before final victory in 1945.
The ideas that strategic air attacks must be directed at
civilians in enemy cities were almost wholly ignored in the
Union, largely rejected in Germany, created great controversy
France, but were accepted to a large extent among airmen in
and the U.S.
The contribution by strategic bombing to the defeat of Germany
was relatively incidental, in spite of the terrible losses
the effort. The shift to city bombing was more or less
spite of the erroneous ideas of Chamberlain, Baldwin,
war opened and continued for months with no city bombing at
the simple reason that the Germans had no intentions, no
no equipment for strategic bombing.
The attack on cities began by accident when a group of German
planes which were lost dumped their bomb loads, contrary to
London on August 1940. The RAF retaliated by bombing Berlin
night. Goring in counter-retaliation. British efforts to
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by daylight raids on military objectives resulted in such
the air offensive was shifted to night attacks. This entailed
from industrial targets to indiscriminate bombing of urban
was justified with the wholly mistaken argument that civilian
was a German weak point and that the destruction of workers'
would break this morale. The evidence shows that the German
was not weakened in any way by lowering civilian morale in
the horrors heaped on it.
The most extraordinary example of this suffering occurred in
British fire raids on Hamburg in 1943 which was attacked for
a week with a mixture of high-explosive and incendiary bombs
persistently that fire-storms appeared. The air in the city
over a thousand degrees began to rise rapidly with the result
winds of hurricane force rushed into the city. The water
destroyed and the flames were too hot for water to be
figures for the destruction were set at 40,000 dead, 250,000
destroyed with over a million made homeless. This as the
destruction by air attacks on a city until the fire raid on
March 9 1945 which still stands today as the most devastating
attack in human history.
General Eisenhower ignored Berlin and drove directly eastward
toward Dresden. Eisenhower's decisions permitted the Soviet
"liberate" all the capital cities of central Europe. As late
4th, when the American forces were sixty miles from Prague and
Soviet armies more than a hundred, an effort by the former to
to the city was stopped at the request of the Soviet
despite a vain message from Churchill to Eisenhower to take
capital for political bargaining purposes.
Soon the names Buchenwald, Dachau, and Belsen were repeated
horror throughout the world. At Belsen, 35,000 dead bodies and
still breathing were found. The world was surprised and
was no reason for the world's press to be surprised at Nazi
in 1945 since the evidence had been fully available in 1938.
CLOSING IN ON JAPAN, 1943-1945
When Germany surrendered on May 8, 1945, Japan was already
defeated but could not make itself accept unconditional
Even American strategic bombing was different in the Pacific
using B-29s, unknown in Europe, for area bombing of civilians
cities, something we disapproved in Europe.
279 B-29s carrying 1,900 tons of fire bombs were sent on a
attack on Tokyo. The result was the most devastating air
in all history. With the loss of only 3 planes, 16 square
central Tokyo were burned out; 250,000 houses were destroyed,
million persons were made homeless and 84,793 were killed.
more destructive than the first atomic bomb over Hiroshima
American leaders shuddered to think of the results if such
Kamikaze attacks were hurled at troop transports and American
estimates of casualties were over half a million. These
form the background to the Yalta and Potsdam conferences and
decision to use to atom bomb on Japan.
The nature and decisions taken at the conference of Roosevelt,
Churchill and Stalin held at Yalta in February 1945 has been
distorted by partisan propaganda that it is difficult for any
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historian to reconstruct the situation as it seemed at the
In China,90%of the railroads were out of operation. The
Kuomintang Party's chief aim seemed to be to maintain its
blockade of the Communist forces operating out of Yenan in
northwestern China where the highly-disciplined Communist
gained some degree of local support.
American hopes of fusing the two parties into a common Chinese
government broke down on the refusals of the Kuomintang and
remoteness of the Communists. In September 1944, Roosevelt
that General Stillwell be given command of all Chinese forces
the Japanese. General Chiang answered with a demand that
removed from China.
It is extremely likely that the frantic and otherwise
inexplicable haste to use the second and third bombs, 21 and
after Alamagordo arose from the desire to force the Japanese
before any effective Soviet intervention.
On the economic side was a somewhat modified version of the
Morgenthau scheme (which had sought the complete ruralization
German economic life to an agrarian basis) which was modified
at once by a number of factors.
The first modifying factor was a desire for reparations. The
Americans insisted that reparations betaken from existing
plants rather than from future production in order to avoid
of the 1919-1933 period, the overbuilding of German capital
and American financing of reparations into the indefinite
was provided that all reparations come from Germany as a whole
credited to the victors on a percentage basis.
On August 10th, a message accepting the Potsdam terms was
Thus ended six years of world war in which 70 million men had
mobilized and 17 million killed in battle. At least 18 million
civilians had been killed. The Soviet Union had lost 6.1
soldiers and 14 million wounded and over 10 million civilians
Germany lost 6.6 million servicemen with 7.2 million wounded
million missing. Japan had 1.9 million dead. Britain war dead
357,000 and America's were 294,000.
All this personal tragedy and material damage of untold
was needed to demonstrate that Germany could not establish and
continental bloc in Europe nor could Japan dominate an
Prosperity Sphere. This is the chief function of war: to
as conclusively as possible to mistaken minds that they are
in regard to power relationships. But as we shall see, war
changes most drastically the objective facts themselves.
CHAPTER XVI: THE NEW AGE
World War II transformed a system where man's greatest
were the material ones of man's helplessness in the face of
threats of disease, starvation, and natural catastrophes to
totally different system of the 1960s and 1970s where the
threat to man is man himself and where his greatest problems
social (and non-material) ones of what his true goals of
and what use he should make of his immense power of the
For thousands of years, some men had viewed themselves as
creatures a little lower than angels, or even God, and a
than the beasts. Now, in the 20th century, man has acquired
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divine powers and it has become increasingly clear that he can
longer regard himself as an animal but must regard himself as
a man if not obligated to act like an angel or even a god.
The whole trend of the 19th century had been to emphasize
animal nature and seek to increase his supply of material
The great achievements of the 19th century and the great
of the 20th century are both related to the Puritan tradition
17th century which regarded the body and the material as
dangerous and something which must be sternly controlled.
These methods appeared in a number of ways, notably in an
emphasis on self-discipline for future benefits, on restricted
consumption and on saving in a devotion to work, and in a
of enjoyment to a future which never arrived. A typical
be John D. Rockefeller: great saver, great worker, and great
of any self-centered action, even death. To such people, the
adverse comments which could be made about a failure to
from a "successful" man were that he was a "saltrel," a
"sensualist," and "self-indulgent." These terms reflected the
that the middle classes placed on work, saving, self-denial
The nineteenth century's emphasis on acquisitive behavior, on
achievement, and on infinitely expansible demand is equally
with the middle-class outlook. These basic features are
lacking in backward, tribal, underdeveloped peasant societies
groups, not only in Africa and Asia but also in much of the
Mediterranean, Latin America, central France, in the Mennonite
communities of Pennsylvania and elsewhere. The lack of future
preference and expansible material demands in other areas are
essential features of the 20th century crisis.
George Sorel (Reflections on Violence, 1908) sought a solution
this crisis in irrationalism, in action for its own sake. The
tendency sought a solution in rationalization, science,
cosmopolitanism and the continued pursuit of truth. The war
struggle between the forces of irrationality represented by
and the forces of Western science and rationalization
the Allied nations.
RATIONALIZATION AND SCIENCE
Rationalization gradually spread into the more dominant
of business. From maximizing production, it shifted to
The introduction of rationalization into war was attributed to
the efforts of Professor P.M.S. Blackett (Nobel Prize 1948) to
radar to antiaircraft guns. From there, Blackett took the
into antisubmarine defence whence it spread under the name
"Operational Research" (OP).
Operational research, unlike science, made its greatest
contribution in regard to the use of existing equipment rather
the effort to invent new equipment. It often game specific
recommendations, reached through techniques of mathematical
probability, which directly contradicted the established
procedures. A simple case concerned the problem of air attack
submarines: For what depth should the bomb fuse be set? In
set its fuses at 100 feet. based on three factors:
1) the time interval between the moments when the submarine
the plane and the plane sighted the submarine;
2) the speed of approach of the plane; and
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3) the speed of submergence of the submarine.
The submarine was unlikely to be sunk if the bomb exploded
than 20 feet away. Operational Research added an additional
near was the bomber to judging the exact spot where the
down? since this error increased rapidly with the distance of
original sighting, a submarine which had time to submerge
almost inevitably be missed by the bomb in position if not in
but with 100 foot fuses, submarines which had little time to
were missed because the fuse was too deep even when the
correct. OP recommended setting fuses at 25 feet to sink the
sightings and practically conceded the escape of all distant
sightings. When fuses were set at 35 feet, successful attacks
submarines increased 400 percent with the same equipment.
The British applied OP to many similar problems.
1) With an inadequate3 number of A.A. guns, is it better to
concentrate them to protect part of a city thoroughly or to
them to protect all of the city inadequately? (The former is
2) Repainting night bombers from black to white when used on
patrol increased sightings of submarines 30%.
3) Are small convoys safer for merchant ships than large ones
(No by a
4) With an inadequate number of patrol planes, was it better
the whole patrol area some days (as was the practice) or to
part of it ever day with whatever planes were available? (the
OP calculated the number of people killed per ton of bombs
dropped showing that the casualties inflicted on Germany were
400 civilians killed per month - about half the German
accident death rate - while 200 RAF crewmen were killed per
doing the bombing. Later it was discovered the raids were
killing 200 German civilians contributing little to the war
the cost of the 200 RAF men each month and thus were a
the German victory. These estimates made it advisable to shift
to U-boat patrol. A bomber in its average life of 30 missions,
100 tons of bombs killing 20 Germans and destroying a few
same plane in 30 missions of submarine patrol saved 6 loaded
ships and their crews from submarines. This discovery was
resisted by the head of the RAF, Sir Arthur (Bomber) Harris.
In 1938, Vannevar Bush, professor of electrical engineering
vice-president of the Massachusetts Institute of Technology
Roosevelt to create the National Defence Research Committee
as Chairman. When money ran short, they obtained half from MIT
equal sum from John D. Rockefeller.
First news of the success of Operations Research in Britain
brought to the U.S. by Conant in 1940 and was formally
Bush. With the arrival of peace, it became an established
The rationalizing of society used the tremendous advances in
mathematics of the 19th century but a good deal came from new
developments. Amlong these have been applications of game
information theory, symbolic logic, cybernetics, and
computing. The newest of these was probably game theory,
worked out by
a Hungarian refugee mathematician, John von Neumann, at the
for Advanced Study. This applied mathematical techniques to
in which persons sought conflicting goals in a nexus of
governed by rules. The basic work was "Theory of Games and
Behavior" by John von Neumann and Oskar Morgenstern (Princeton
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A flood of books all sought to apply mathematical methods to
information, communications, and control systems.
THE TWENTIETH-CENTURY PATTERN
The decision to use the bomb against Japan marks one of the
turning points in history of our times. The scientists who
consulted had no information on the status of the war itself,
idea how close to the end Japan already was. Some people like
Groves wanted it to be used to justify the two billion they
After it was all over, Director of Military Intelligence for
Pacific theatre of War Alfred McCormack, who was probably in
position as anyone to for judging the situation, felt that the
Japanese surrender could have been obtained in a few weeks by
alone. "The Japanese had no longer enough food in stock, and
fuel reserves were practically exhausted. We were mining all
harbors and if we had brought this operation to its logical
conclusion, the destruction of Japanese cities with incendiary
other bombs would have been quite unnecessary. But General
declared at Washington that this blockading action was a
proceeding unworthy of the Air Force. It was therefore
IT was equally clear that the defeat of Japan did not require
A-bomb just as it did not require the Russian entry into the
war or an
American invasion of the Japanese home islands. But again,
factors involving interests and nonrational considerations
powerful. However, if the U.S. had not finished the bomb
had not used it, it seems most unlikely that the Soviet Union
have made its postwar efforts to get the bomb.
The Russian leaders would almost certainly not have made the
effort to get the bomb if we had not used it on Japan. On the
hand, if we had not used the bomb on Japan, we would have been
incapable of preventing the Soviet forces from expanding
were ordered in Eurasia in 1946.
The growth of the army of specialists destroys one of the
basic foundations of political democracy. These three bases
1) that men are relatively equal in factual power;
2) that men have relatively equal access to the information
make a government's decisions;
3) that men have a psychological readiness to accept majority
return for those civil rights which will allow any minority to
build itself up to become a majority.
It is increasingly clear that in the 20th century, the expert
will replace the industrial tycoon in control of the economic
even as he will replace the democratic voter in control of the
political system. This is because planning will inevitably
laissez-faire in the relationships between the two systems.
Hopefully, the elements of choice and freedom may survive for
ordinary individual in that he may be free to make a choice
two opposing political groups (even if these groups have
choice within the parameters of policy established by the
he may have the choice to switch his economic support from one
unit to another. But in general, his freedom and choice will
controlled within very narrow alternatives by the fact that he
numbered from birth and followed, as a number, through his
training, his required military and other public service, his
contributions, his health and medical requirements, and his
retirement and death benefits.
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One consequence of the nuclear rivalry has been the almost
destruction of international law as existed from the middle of
17th century to the end of the 19th. That old international
based on distinctions which no longer exist including the
between war and peace, the rights of neutrals, the distinction
public and private authority. These are now destroyed or in
The post-war balance of terror reached its peak of total
disregard both of noncombatants and of neutrals in the
John Foster Dulles who combined sanctimonious religion with
retaliation wherever and whenever we judge fit" to the
destruction of any non-combatant or neutral status.
As a result, all kinds of groups could destroy law and order
suffering retaliation by ordinary powers and could become
as states when they were totally lacking in the traditional
of statehood. For example, the Leopoldville group were
the real government of the whole Congo in spite of the fact
were incapable of maintaining law and order over the area.
a gang of rebels in Yemen in 1962 were instantly recognized
they gave any evidence whatever of ability to maintain control
readiness to assume the existing international obligations of
Yemen state and before it was established that their claims to
killed the king were true.
Under the umbrella of nuclear stalemate, outside governments
subsidize murders or revolts as the Russians did in Iraq and
American CIA did in several places, successfully in Iran in
in Guatemala in 1954 or very unsuccessfully as in the Cuban
of 1961. Under the Cold War umbrella, small groups can obtain
recognition as states by securing the intervention (usually
some outside Power.
TRAGEDY AND HOPE Chapters XVII-XVIII
by Dr. Carroll Quigley
XVII. NUCLEAR RIVALRY AND COLD WAR, AMERICAN NUCLEAR
XVIII. NUCLEAR RIVALRY AND COLD WAR, RACE FOR THE H-BOMB
CHAPTER XVII: NUCLEAR RIVALRY AND THE COLD WAR:
AMERICAN ATOMIC SUPREMACY 1945-1950
The period 1945 to early 1963 forms a unity during which a
of factors interacted upon one another to present a very
and extraordinarily dangerous series of events. That mankind
civilized life got through the period may be attributed to a
lucky chances rather than to any particular skill among the
opposing political blocs.
The Cold War is almost always described in terms which put
emphasis or even neglect the role of technological rivalry
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most historians do not feel competent to discuss it but
because much of the evidence is secret. Because of such
story of this rivalry falls into two quite distinct and even
1) what the real situation was; and
2) what prevalent public opinion believed the situation to be.
For example, the Soviet Union had an H-bomb many months before
did when public opinion believed the opposite; the 1960
throughout the world of a so-called "missile gap" or American
inferiority in nuclear missiles when no such inferiority
The balance of nuclear weapons was the central factor in the
War. Cessation on nuclear testing came close to achievement in
when both sides had atomic weapons but was destroyed at that
President Truman's order to proceed with the development of
hydrogen bomb. By 1963, both sides had these weapons and the
of terror had been achieved.
The party struggle in the U.S. found the intellectuals
scientists), the internationalists, the minorities and the
cosmopolitans in the Democratic Party with the businessmen,
and clerks in the Republican Party. The Republicans had fallen
the control (represented by Senators Taft, Wherry, Bridges and
of those who were most ignorant of the real issues and were
remote from any conceptions of national political
This group, to whom we often give the name "neo-isolationist,"
knew nothing of the world outside the U.S., and generally
Thus, they gave no consideration to our allies or neutrals,
and saw no
reason to know or to study Russia, since it could be hated
without need for accurate knowledge. All foreigners were
unprincipled, weak, poor, ignorant and evil, with only one aim
life, namely, to prey on the United States. These
and unilateralists were equally filled with suspicion or
hatred of any
American intellectuals, including scientists, because they had
conception of any man who placed objective truth higher than
subjective interests since such an attitude was a complete
to the American businessman's assumption that all men are and
be concerned with the pursuit of self-interest and profit.
Neo-isolationism had a series of assumptions which could not
held by anyone who had any knowledge of the world outside U.S.
business circles. These beliefs were seven in number:
1) Unilateralism: that the U.S. should and could act by itself
need to consider allies, neutrals or the Soviet Union;
2) National omnipotence: that the U.S. is so rich and powerful
one else counts and that there is no need to study foreign
3) Unlimited goals (or utopianism): the belief that there are
solutions to the world's problems. Upholders of this view
accept that constant danger and constant problems were a
condition of human life except in brief and unusual
Dulles insisted that the Truman policy of containment must be
by a policy of "liberation." These policies were not designed
conclusively and did not seek to solve the problem of the
but to live with it, "presumably forever." He did accept
war in the form of massive retaliation if the Communists made
4) The neo-isolationist belief that continuance of the Soviet
arose from internal treason within America.
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5) Since the chief "high moral principle" which motivated the
insisted that Soviet Russia and Democrats were engaged
in a joint tacit conspiracy to destroy America by high taxes
the Cold War to tax America into bankruptcy
6) Since neo-isolationists rejected all partial solutions,
little they could do but talk loudly and sign anti-communist
7) The unrealistic and unhistoric nature of neo-isolationism
that it could not actually be pursued as a policy. It was
John Foster Dulles with permanent injury to our allies. When
McCarthy turned his extravagant charges of subversion and
the State Department to the army, his downfall began. The
forces still continue in an increasingly irresponsible
form under a variety of names including John Birch Society
more generally as the "Radical Right."
Robert Oppenheimer was on a total of thirty five government
committees. There was a shadow on Oppenheimer's past. In his
and more naive days, he had been closely associated with
Certainly never a Communist himself, and never, at any time,
to the U.S., he had nonetheless associated with Communists.
brother Frank and his wife were Communist Party workers while
Oppenheimer's own wife was an ex-Communist, widow of a
had been killed fighting Fascism in Spain in 1937. The
continued to have friends who were Communists and contributed
until the end of 1941.
All this derogatory information was known to General Groves
to Army Intelligence and used in 1953-1954 to destroy his
It was an essential element in the neo-isolationist
Dulles interregnum of 1953-1957.
THE ORIGINS OF THE COLD WAR, 1945-1949
IN the Soviet system, while most Russians lived in poverty, a
privileged minority, buying in special stores with special
special ration cards, had access to luxuries undreamed of by
In 1944, Secretary of the Treasury Morgenthau took advantage
his close personal friendship with Roosevelt to push forward
pet scheme to reduce Germany to a purely agricultural state by
total destruction of her industry, the millions of surplus
to be, if necessary, deported to Africa. The secretary,
his assistant secretary, Harry Dexter White, was deeply
Germany's history of aggression. The only way to prevent it
reduce Germany's industry and thus her warmaking capacity as
nothing as possible. The resulting chaos, inflation, and
be but slight repayment for the horrors Germany had inflicted
others over many years.
By personal influence, Morgenthau obtained acceptance of a
somewhat modified version of this plan by both Roosevelt and
at the Quebec conference of September 1944. The error at
quickly repudiated but no real planning was done and the
Plan played a considerable role in the JCS 1067, the directive
to guide the American military occupation of Germany. It
reparations be obtained by dismantling Germany industry. The
directive ordered that Germany be treated as a defeated enemy
as a liberated country. No steps were taken to secure its
At the Potsdam conference, it was agreed that the German
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should not be permitted should not be permitted to recover
the standard of living of 1932, at the bottom of the
level, in fact, which had brought Hitler to power in 1933.
It took more than two years of misery for Germany to secure
changes in these American objectives. Hunger and cold took a
considerable toll, and the Germans, for two years, experienced
the misery they had inflicted on others in the preceding dozen
The Germany currency reform of 1948 is the fiscal miracle of
post-war world. From it came
(1) an explosion of industrial expansion and economic
(2) they tying of the West Germany economy to the West;
(3) an example for other western European in economic
(4) a wave of prosperity for western Europe as a whole.
AMERICAN CONFUSIONS, 1945-1950
The American response to the Soviet refusal of postwar
cooperation was confused and tentative.
Winston Churchill in June 1946 spoke of the "Iron Curtain"
Staling was lowering between the Soviet bloc and the West.
Lasting from 1947-1953, the chief characteristics of
"containment" were economic and financial aid to other nations
eliminate the misery and ignorance which fosters communism.
Americans, when goals are established as they are in war, work
together very effectively, but political work in peacetime,
ambiguous goals, is relegated to rivalry, bickering, and total
inability to relate means to goals. As a result, the means
tend to become goals.
Each service has alliances with the industrial complexes which
supply their equipment. These complexes not only supply funds
service to carry its message to the Congress but also exert
influence to retain equipment by dangling before the high
can influence contracts, offers of future well-paying
positions with the industrial firms concerned. Most high
retired and then took consultant jobs with those firms.
Four-star general Somervell retired on a disability salary of
$16,000 to join a number of firms which paid him R$125,000 a
three-star general Campbell retired on a disability salary of
and became an executive at $50,000 a year of firms from whom
previously purchased $3 billion in armaments; four-star
retired on $16,000 a year but signed up at over $100,000 a
These are but a few of more than a hundred general officers
post retirement alliances with industrial firms encouraged
successors, still on active service, to remain on friendly
such appreciative business corporations.
Pearl Harbor was a total surprise. This last point was so hard
believe, once the evidence was available, that the same groups
were howling about Soviet espionage in 1948-1955 were also
that Roosevelt expected and wanted Pearl Harbor. Both these
if they were believed, were based on gigantic ignorance and
misconceptions about the nature of intelligence.
A great deal of nuclear information (whether secret or not is
unknown) as well as uranium metal, went to the Soviet Union as
Lend-Lease in 1943. Major George Racey Jordan, USAAF, tried in
disrupt these shipments at the time. While most of Jordan's
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is unreliable, the shipment of uranium to Russia is
other sources. The export licenses for such shipments were
the request of General Groves. Jordan's other evidence, most
was very discreditable to the New Deal (since he testified
Groves, and others were under direct pressure from Harry
allow export of nuclear materials) was subsequently shown to
Much of the evidence on the Communist movement came from ex-
Communists such as Elizabeth Bentley, Louis Budenz, Whittaker
Chambers, John Lautner and others. The first three names
known because they dramatized, distorted and manipulated
their own private purposes. This is particularly true of
Bentley who exaggerated her role.
The House Un-American Committee was aimed more at partisan
advantage than ascertaining the nature of the Communist
the truth cannot now be ascertained. Numerous other accused
Communists, both in government and out, whose names were given
committee in the same breath as Hiss or Lattimore were almost
Others called before the committee who refused to give
under the Fifth Amendment which protects against
were in fact Communists and Bentley and Chambers knew them as
The revelation of Communist influence in the U.S. was
valuable but the cost in damage to reputations of innocent
very high. Much of this damage came from the efforts of
McCarthy, Republican, of Wisconsin to prove that the State
and the army were widely infiltrated with Communists.
McCarthy was not a conservative, still less a reactionary. He
a fragment of elemental force, a throwback to primeval chaos.
the enemy of all order and all authority, with no respect, or
understanding, for principles, laws, regulations, or rules. As
he had nothing to do with rationality or generality. Concepts,
distinctions of categories were completely outside his world.
clear he did not have any idea what a Communist was, still
Communism itself, and he did not care. This was simply a term
in his game of personal power. Most of the terms which have
applied to him, such as "truculent," "brutal," "ignorant,"
"foul-mouthed," "brash," are quite correct but not quite in
that his enemies applied them, because they assumed that these
qualities and distinctions had meaning in his world as they
their own. They did not, because his behavior was all an act,
things he did to gain the experience he wanted, that is, the
of power, of creating fear, of destroying the rules, and of
attention and admiration for doing so. His act was that of
Boy but on a colossal scale. He sought fame and acclaim by
admiring world of schoolmates what a tough guy he was, defying
rules, even the rules of decency and ordinary civilized
like the bad boy of the schoolyard, he had no conception of
anything established, and once he had found his act, it was
to demonstrate it every day. His thirst for power, the power
acclaim and publicity, reached the public scene at the same
television, and he was the first to realize what could be done
using the new instrument for reaching millions.
His thirst for power was insatiable because like hunger, it
daily need. It had nothing to do with the power of authority
regulated discipline, but the personal power of a sadist. All
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destructive instincts were against anything established, the
the educated, the well-mannered, the rules of the Senate, the
party system, the rules of fair play. As such, he had no
truth or the distinction between it and falsehood, just as he
conception of yesterday, today, tomorrow as distinct entities.
simply said whatever would satisfy, momentarily, his yearning
the center of the stage surrounded by admiring, fearful,
amazed people. He did not even care if their reaction was
fear, shock, or amazement and he did not care if they, as
the same reaction or a different one the next day or even a
later. He was exactly like an actor in a drama, one in which
made the script as he went along, full of falsehoods and
inconsistencies, and he was genuinely surprised and hurt if a
whom he had abused and insulted for hours at a hearing did not
out with him to a bar or even to dinner the moment the hearing
was over. He knew it was an act; he expected you to know it
act. There was really no hypocrisy in it, no cynicism, no
as far as he was concerned, because he was convinced that this
way the world was. Everyone he was convinced, had a racket;
happened to be his, and he expected people to realize this and
Of course, to the observant outsider who did not share his
amorality, it was all false, invented as he went along, and
changed, everything substantiated by documents pulled from his
briefcase and waved about too rapidly to be read. Mostly these
documents had nothing to do with what he was saying; mostly he
never looked at them himself; they were merely props for the
performance, and to him, it was as silly for his audience to
such documents to be relevant as it would be for the audience
theater to expect the food that is being eaten, the whiskey
being drunk, or the documents which are read in that play to
relevant to what the actor is saying.
Every time he spoke, with each version he became a larger more
nonchalant hero. In 1952, he intimidated the Air Force into
him the Distinguished Flying (given for twenty five combat
although he had been a grounded intelligence officer who took
occasional rides in planes.
Since laws and regulations were, for McCarthy, nonexistent,
business and financial affairs are, like his life, a chaos of
He seized upon Communism. "That's it," he said. "The
is full of communists. We can hammer away at them." Without
conception of what he was doing, and without any research or
of the subject, on February 9, McCarthy waved a piece of paper
said "I have here in my hand a list of 205 members of the
Party still working and shaping the policy of the State
On Feb 20th, in an incoherent speech in the Senate was six
of bedlam, as case after case was presented filled with
and irrelevancies. According to Senate Republican Leader Taft,
a perfectly reckless performance." Nevertheless, Taft and his
colleagues determined to accept and support these charges
would injure the Administration. Few people realize that in
of accusations, McCarthy never turned up a Communist in the
Department although undoubtedly there must have been some.
He claimed that "the top Russian espionage agent" in the U.S.,
Alger Hiss's boss in the State Department, "the chief
architect of our
Far Eastern policy" was Professor Owen Lattimore. The trouble
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Lattimore was not a Communist, not a spy, and not employed by
In July, the Tydings subcommittee condemned McCarthy for a
and a hoax." McCarthy had the power of an inflamed and misled
opinion. Tydings was beaten in Maryland in 1950. Benton from
Connecticut who introduced the resolution to expel McCarthy
Senate in 1951 and whose charges were fully supported by the
investigation of McCarthy's private finances, was defeated in
During this period, McCarthy violated more laws and
any previous senator in history. When a reporter once said
a classified document?" McCarthy said, "It was. I just
Eisenhower was soon boasting that 1,456 Federal workers had
"separated" in the first four months of the Eisenhower
program. 2,200 at the end of the first year. Nixon said "We're
the Communists and fellow travellers and security risks out of
Government by the thousands." It was soon clear that no
were kicked out and that security risks included all kinds of
For a while, the Administration tried to outdo McCarthy by
demonstrating in hearings that China had been "lost" to the
because of the careful planning and intrigue of Communists in
State Department. But they failed to prove their contention.
There is considerable truth in the China Lobby's contention
the American experts on China were organized into a single
interlocking group which had a general consensus of a Leftish
character. It is also true that this group, from its control
academic recommendations, and research of publication
could favor persons who accepted the established consensus and
injure, financial or in professional advancement, persons who
accept it. It is also true that the established group, by its
influence on book reviewing in the New York Times, the Herald
and the Saturday Review, a few magazines including the
weeklies" and in the professional journals, could advance or
any specialist's career. It is also true that these things
in the United States by the Institute of Pacific Relations,
organization had been infiltrated by Communists, and by
sympathizers, and that much of this group's influence arose
access to and control over the flow of funds from financial
foundations to scholarly activities. All these things were
they would have been true of many other areas of American
research and academic administration.
On the other hand, the charges of the China Lobby that China
"lost" because of this group is not true. Yet the whole
subject is of
major importance in understanding the twentieth century.
Lattimore, because he knew Mongolian, tended to become
everybody's expert. Many of these experts which were favored
Far East "establishment" in the Institute of Pacific RElations
captured by Communist ideology. Under its influence, they
propagandized, as experts, erroneous ideas and sought to
policy in mistaken directions.
Behind this unfortunate situation lies another, more profound,
relationship, which influences matters much broader than Far
policy. It involves the organization of tax-exempt fortunes of
international financiers into foundations to be used for
scientific, and "other public purposes." Sixty or more years
public life in the East was dominated by the influence of
Street" referring to international financial capitalism deeply
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involved in the gold standard, foreign exchange
of fixed-interest securities and shares for stock-exchange
This group, which in the United States, was completely
by J.P. Morgan and Company from the 1880s to the 1930s was
cosmopolitan, Anglophile, internationalist, Ivy League,
seaboard, high Episcopalian and European-culture conscious.
connection with the Ivy League colleges rested on the fact
endowments of these institutions required constant
the financiers of Wall Street and was reflected in the fact
endowments were largely in bonds rather than in real estate or
stocks. As a consequence of these influences, J.P. Morgan and
associates were the most significant figures in policy making
Harvard, Columbia and Yale while the Whitneys and Prudential
Company dominated Princeton. The chief officials of these
were beholden to these financial powers and usually owed their
The significant influence of "Wall Street" (meaning Morgan)
in the Ivy League and in Washington explains the constant
between the Ivy League and the Federal Government, and
which undoubtedly aroused a good deal of resentment in
circles who were more than satiated with the accents, tweeds,
Episcopal Anglophilia of these peoples. Poor Dean Acheson, in
(or perhaps because of) his remarkable qualities of intellect
character, took the full brunt of this resentment from
his allies. The same feeling did no good to pseudo-Ivy League
like Alger Hiss.
In spite of the great influence of this "Wall Street"
an influence great enough to merit the name of the "American
Establishment," this group could not control the Federal
and, in consequence, had to adjust to a good many government
thoroughly distasteful to the group. The chief of these were
taxation law, beginning with the graduated income tax in 1913,
culminating above all else with the inheritance tax. These tax
drove the great private fortunes dominated by Wall Street into
foundations which became the major link in the Establishment
network between Wall Street, the Ivy League and the Federal
government. Dean Rusk, Secretary of State after 1961, formerly
president of the Rockefeller Foundations, is as much a member
nexus as Alger Hiss, the Dulles brothers, Jerome Green, etc.
More than fifty years ago, the Morgan firm decided to
the Left-wing political movements of the United States. This
relatively easy to do since these groups were starved for
eager for a voice to reach the people. Wall Street supplied
purpose was not to destroy, dominate, or take over but was
1) to keep informed about the Left-wing or liberal groups;
2) to provide them with a mouthpiece so they could blow off
3) to have a final "veto" on their actions if they ever went
There was nothing really new about this decision, since other
financiers had talked about it and even attempted it earlier.
The best example of the alliance of Wall Street and Left-wing
publication was "The New Republic" a magazine founded in 1914
Willard Straight using Payne Whitney money. The original
establishing the paper was to provide an outlet for the
Left and to guide it in an Anglophile direction. This latter
entrusted to Walter Lippmann.
Willard Straight, like many Morgan agents, was present at the
Paris Peace Conference in 1919.
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The first New Republic editor,Herbert Croly wrote, "Of course,
the Straights could always withdraw their financial support if
ceased to approve of the policy of the paper;and in that
would go out of existence as a consequence of their
chief achievement of The New Republic in 1914-1918 and again
1948 was for interventionism in Europe.
Straight allowed the Communists to come into the New Republic.
The first to arrive was Lew Frank.
Frank joined a "Communist Research Group" which met in the
Manhattan home of the wealthy "Wall Street Red," Frederick
To Morgan, all political parties were simply organizations to
used, and the firm always was careful to keep a foot in all
Like the Morgan interest libraries, museums and art, its
recognition of the need for social work among the poor went
the original founder of the firm, George Peabody. To this same
may be attributed the use of tax-exempt foundations for
these activities as in the use of Peabody foundations to
Peabody libraries and museums. Unfortunately, we do not have
here for this great and untold story, but it must be
what we do say is part of a much larger picture.
Our concern at the moment is with the links between Wall
and the Left, especially the Communists. Here the chief link
Thomas W. Lamont family. Tom Lamont was brought into the
as Straight several years later, by Henry P. Davison, a Morgan
partner. Each had a wife who became a patroness of Leftish
two sons, of which the elder was a conventional banker, and
youngest was a Left-wing sympathizer and sponsor.
HUAC files show Tom Lamont, his wife Flora, and his son
as sponsors and financial angels to almost twenty extreme Left
organizations, including the Communist Party itself.
In 1951, the McCarran Committee sought to show that China had
been lost to the Communists by the deliberate actions of a
academic experts on the Far East and Communist fellow
work in that direction was controlled and coordinated by the
of Pacific Relations (IPR). The influence of the Communists in
is well established but the patronage of Wall Street is less
The IPR was a private association of ten independent national
councils in ten countries concerned with affairs in the
for the American Council of the IPR came from the Carnegie
and the Rockefeller Foundation. The financial deficits which
each year were picked up by financial angels, almost all with
Wall Street connections. There can be little doubt that the
had many points in common both with the Kremlin's party line
Far East and with the State Department's police line in the
Clearly there were some Communists, even party members,
it is much less clear that there was any disloyalty to the
was a great deal of intrigue both to help those who agreed
IPR line and to influence U.S. government policy in this
but there is no evidence of which I am aware of any explicit
conspiracy to direct American policy in a direction favorable
to the Soviet Union or to international Communism.
It must be confessed that the IPR had many of the marks of a
fellow traveller or Communist "captive" organization. But this
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not mean that the Radical Right version of these events is
For example, Elizabeth Bentley testified on the IPR and
almost every person associated with the organization as a
This Radical Right fairy tale, which is not an accepted folk
in many groups in America, pictured the recent history of the
States as a well-organized plot of extreme Left-wing elements,
operating from the White House itself and controlling all the
avenues of publicity in the United States. This plot, if we
believe the myth, worked through such avenues as the New York
Herald Tribute, Christian Science Monitor, Washington Post,
Monthly, and Harper's Magazine and had at its core the
bushy-haired theoreticians of Socialist Harvard and the London
of Economics. It was determined to bring the U.S. into World
War II on
the side of England (Roosevelt's first love) and Soviet Russia
second love) and, as part of this consciously planned scheme,
Japan to attack Pearl Harbor all the while undermining
strength by excessive spending and unbalanced budgets.
This myth, like all fables, does in fact have a modicum of
There does exist and has existed for a generation, an
Anglophile network which operates to some extent in the way
Radical Right believes the Communists act. In fact, this
which we may identify as the Round Table Groups, has no
cooperating with the Communists, or any other groups, and
does so. I know of the operations of this network because I
studied it for twenty years and was permitted for two years,
early 1960s, to examine its papers and secret records. I have
aversion to it or to most of its aims and have, for much of my
been close to it and to many of its instruments. I have
in the past and recently, to a few of its policies but in
chief difference of opinion is that it wishes to remain
unknown, and I
believe its role in history is significant enough to be known.
The Round Table Groups have already been mentioned several
At the risk of some repetition, the story will be summarized
because the American branch of this organization (sometimes
"Eastern Establishment) has played a very significant role in
history of the United States in the last generation.
The Round Table Groups were semi-secret discussion and
groups whose original purpose was to federate the
world along lines laid down by Cecil Rhodes. By 1915, Round
groups existed in seven countries including England, South
Canada, Australia, New Zealand, India and the United States.
Money for their activities originally came from Cecil Rhodes,
J.P. Morgan, the Rockefeller and Whitney families and
bankers Lazard Brothers and Morgan, Grenfell and Company.
The chief backbone of this organization grew up along the
existing financial cooperation running from the Morgan Bank in
York to a group of international financiers in London led by
Lionel Curtis established in England and each dominion a front
organization to the existing local Round Table Group. This
organization called the Royal Institute of Public Affairs, had
nucleus in each area the existing submerged Round Table Group.
In New York, it was known as the Council on Foreign Relations
was a front for J.P. Morgan and Company in association with
small American Round Table Group. The American organizers were
dominated by the large number of Morgan "experts" including
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Beer, who had gone to the Paris Peace Conference and there
close friends with the similar group of English "experts"
been recruited by the Milner group. In fact, the original
the Royal Institute and the Council on Foreign Relations.
In 1928, the Council on Foreign Relations was dominated by the
associates of the Morgan bank. Closely allied with this Morgan
influence were a small group of Wall Street lawyers whose
figures were Elihu Root, John W. Davis, the Dulles Brothers,
On this basis, there grew up in the 20th century a power
structure between London and New York which penetrated deeply
university life, the press, and the practice of foreign
The American branch of this "English Establishment" exerted
of its influence through five American newspapers (New York
Herald Tribune, Christian Science Monitor, Washington Post,
Evening Transcript). It might be pointed out that the
this Wall Street Anglo-American axis is quite obvious once it
pointed out. It is reflected by the fact that such Wall Street
luminaries such as John W. Davis, Lewis Douglas, Jock Whitney
Douglas Dillon were appointed to be American ambassadors in
This double international network in which the Round Table
formed the semi-secret or secret nuclei of the Institutes of
International Affairs was extended into a third network for
Affairs in 1925 by the same people for the same motives.
The chief aims of this elaborate, semi-secret organization
largely commendable: to coordinate the international
outlooks of all the English-speaking world into one; to work
maintain peace; to help backward, colonial, and underdeveloped
toward prosperity along the lines somewhat similar to those
Oxford and the University of London.
These organizations and their financial backers were in no
reactionary or Fascistic persons, as Communist propaganda
to depict them. Quite the contrary, they were gracious and
gentlemen who were much concerned with the freedom of
minorities and the rule of law for all and who were convinced
they could forcefully civilize the Boers, the Irish, the
the Hindus, and who are largely responsible for the partitions
Ireland, Palestine, and India. If their failures now loom
their successes, this should not be allowed to conceal the
motives with which they attempted both.
It was this group of people, whose wealth and influence so
exceeded their experience and understanding, who provided much
framework of influence which the Communist sympathizers and
travellers took over in the United States in the 1930s. It
recognized that the power of these energetic Left-wingers
was never their own power or Communist power but was
power of the international financial coterie, and, once the
suspicions of the American people were aroused as they were in
1950s, it was a fairly simple matter to get rid of the Red
sympathizers. Before this could be done, however, a
committee, following backward to their source the threads
from the admitted Communists like Whittaker Chambers, through
Hiss, and the Carnegie Endowment to Thomas Lamont and the
fell into the whole complicated network of the interlocking
foundations. The Eighty-third Congress set up in 1953 a
Committee to investigate Tax-Exempt Foundations. It soon
that people of immense wealth would be unhappy if the
went too far and that the "most respected" newspapers in the
closely allied with these men of wealth, would not get excited
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about any revelations to make the publicity worthwhile. An
report showing the Left-wing associations of interlocking
tax-exempt foundations was issued in 1954 rather quietly..
later, the Reece Committee's general counsel, Rene A Wormser,
shocked, but not shocking, book on the subject called
Their Power and Influence."
Jerome Green is a symbol of much more than the Wall Street
influence in the IPR. He is also a symbol of the relationship
the financial circles of London and those of the eastern U.S.
reflects one of the most powerful influences in 20th century
and world history. The two ends of this English-speaking axis
sometimes been called, perhaps facetiously, the English and
Establishments. There is, however, a considerable degree of
behind the joke, a truth which reflects a very real power
It is this power structure which the Radical Right in the U.S.
been attacking for years in the belief they are attacking the
Communists. These misdirected attacks did much to confuse the
people in 1948-1955. By 1953 most of these attacks had run
course. The American people, thoroughly bewildered at the
charges of twenty years of treason and subversion, had
Democrats and put into the White House a war hero, Eisenhower.
time,two events, one public and one secret, were still in
public one was the Korean War; the secret one was the race for
CHAPTER XVIII: NUCLEAR RIVALRY AND COLD WAR,
RACE FOR THE H-BOMB 1950-1957
On March 1, 1954, we exploded our first real thermonuclear
at Bikini atoll. It was a horrifying device which spread
radioactive contamination over more than 8,000 square miles
injurious radiation over much of the world.
To prepare public opinion to accept use of the H-bomb, if it
became necessary, Strauss sponsored a study of radioactive
whose conclusion was prejudged by calling it "Project
selective release of some evidence and strict secrecy of other
information, they tried to establish in public opinion that
no real danger to anyone from nuclear fallout even in all-out
war. This gave rise to controversy between the scientists and
Administration on the danger of fallout.
The Eisenhower through the Dulles doctrine of "massive
retaliation" was so deeply committed to nuclear war that it
permit the growth of public opinion which would refuse to
use of nuclear weapons because of objections to the danger of
to neutrals and non-combatants. By 1953, this struggle became
intense that supporters of massive retaliation decided they
destroy the public image and public career of Oppenheimer.
THE KOREAN WAR AND ITS AFTERMATH, 1950-1954
The emphasis on nuclear retaliation to Communist aggression
anywhere in the world made it necessary to draw a defence
over which such aggression would trigger retaliation. At the
insistence of MacArthur, that perimeter was drawn to exclude
Formosa and Mainland China; accordingly, all American forces
evacuated from South Korea in June 1949.
The Soviet Union interpreted this to mean that the U.S. would
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allow South Korea to be conquered by the North. Instead, when
through its satellite North Korea, sought to take Korea, this
rise to an American counteraction.
For forty-eight hours after the Korean attack, the world
hesitated, awaiting America's reaction. Truman immediately
American air and sea forces in the area south of 38 degrees
demanded a UN condemnation of the aggression. Thus, for the
in history, a world organization voted to use collective force
armed aggression. This was possible because the North Korean
occurred at a time when the Soviet delegation was absent from
Security Council, boycotting it as a protest at the presence
delegation from Nationalist China. Accordingly, the much-used
veto was unavailable.
The frontier was reached by UN forces as the month ended. The
Chinese decision to intervene was made nine days after
crossed the 38th parallel into North Korea. It was inevitable
China could hardly be expected to allow the buffer North
to be destroyed and American troops to occupy the line of the
soon as it became clear that American forces would continue
38th parallel to the Yalu, the Chinese intervened, not to
38th parallel frontier but to clear the U.N. forces from Asia
The Truman Administration, after the victory at Inchon, did
intend to stop at the 38th parallel and hoped to reunite the
under the Seoul government. It is probable that this alone
the Chinese intervention.
On October 9, 1950, two of MacArthur's planes attacked a
air base sixty-two miles inside Russian territory.
After Truman removed MacArthur, Republican leaders spoke
of impeaching the President. Senator William Jenner said: This
today is in the hands of a secret inner coterie which is
agents of the Soviet Union. We must cut this whole cancerous
conspiracy out at once. Our only choice is to impeach the
and find out who is the secret invisible government which has
cleverly led our country down the road to destruction."
On the whole, neo-isolationist discontent was a revolt of the
ignorant against the informed or educated, of the nineteenth
against the insoluble problems of the twentieth, of the
Midwest of Tom
Sawyer against the cosmopolitan East of J.P. Morgan and
old Siwash against Harvard, of the Chicago Tribune against the
Washington Post or New York Times, of simple absolutes against
relativisms, of immediate final solutions against long-range
alleviations, of frontier activism against European though, a
rejection, out of hand, of all the complexities of life which
arisen since 1915 in favor of a nostalgic return to the
of 1905, and above all a desire to get back to the
thoughtless, and irresponsible international security of 1880.
This neurotic impulse swept over the U.S. in a great wave in
years 1948-1955, supported by hundreds of thousands of
individuals, especially peddlers of publicity and propaganda,
financed no longer by the relatively tied-up funds of
Street international finance, but by its successors, the
available winnings of self-financing industrial profits from
industrial activities as air power, electronics, chemicals,
pretended to themselves that their affluence was entirely due
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own cleverness. At the head of this list were the new
by the Texas oil pluggers whose fortunes were based on tricky
provisions and government-subsidized transportation systems.
The Kremlin was quite wiling to keep America's men, money, and
attention tied down in Korea.
During Truman's last four budgets, expenditures on national
security increased from $13 billion in 1950 to $50 billion in
THE EISENHOWER TEAM, 1952-1956
The Korean War disrupted the pleasures of the postwar economic
boom with military service, shortages, restrictions and
inflation which could not help but breed discontent. And
all the mobilized wealth of the country, in alliance with most
press, kept up a constant barrage of "Communists in
"twenty years of treason." In creating this picture, the
the Republican Party totally committed themselves to the myths
neo-isolationists and of the Radical Right.
In June 1951, Senator McCarthy delivered a speech in the
of 60,000 words attacking General Marshall as a man "steeped
falsehood" who has "recourse to the lie whenever it suits his
convenience," one of the architects of America's foreign
by "men high in Government who are concerting to deliver us to
disaster, a conspiracy so black that when it is finally
principals shall be forever deserving of the maledictions of
Eisenhower had no particular assets except a bland and amiable
disposition combined with his reputation as a victorious
also had a weakness, one which is frequently found in his
the conviction that anyone who has become a millionaire, even
inheritance, is an authoritative person on almost any subject.
If elected, he would go to Korea to make peace. Although
not a neo-isolationist or a reactionary, Eisenhower had few
personal convictions and was eager to be president. When his
told him that he must collaborate with the Radical Right, he
the way, even to the extent of condoning McCarthy's attack on
Marshall when he, under McCarthy's pressure, removed a
reference to Marshall from a Wisconsin speech.
Eisenhower allotted the functions of government to his Cabinet
members ("eight millionaires and a plumber").
Attorney General Herbert Brownell confided to a businessmen's
luncheon in Chicago that President Truman, knowing that Harry
White was a Russian spy, had promoted him from assistant
the treasury to executive director of the U.S. Mission to the
International Monetary Fund in 1946. The House Committee on
American activities at once issued a subpoena to the
testify which was ignored.
McCarthy's attacks on the U.S. Information Agency overseas
libraries led to burning of books like Tom Sawyer and Robin
subversive (Robin Hood stole from the rich and gave to the
clearly a Communist tactic).
Dulles publicly announced the conception of "massive
before the Council on Foreign Relations on January 12, 1954.
W.L. Borden wrote a letter to J. Edgar Hoover stating that "J.
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Robert Oppenheimer is an agent of the Soviet Union." This
supported by a biased rehash of all the derogatory stories
Oppenheimer and was made up of wild charges which no
person has ever been willing to defend." On the basis of this
and at the direct order of President Eisenhower, Chairman
suspended Oppenheimer's security clearance.
Broadest of the three narrowing circles of outlook was a
neurotic rebellion of harassed middle-class persons against a
challenge to middle-class values arising from depression, war,
insecurity, science, foreigners, and minority groups of all
Public opinion always supported large defence forces.
Public opinion gave much less support to foreign aid.
These statements based on public opinion polls.
THE RISE OF KHRUSHCHEV, 1953-1958
Immediately after Stalin's death, the "collective leadership"
headed by Malenkov, Beria and Molotov. Malenkov supported a
relaxation with increased emphasis on production of consumers
and rising standards of living, as well as increased efforts
any international crises which might lead to war; Beria
"thaw" in internal matters, with large-scale amnesties for
prisoners as well as rehabilitation of those already
Molotov continued to insist on the "hard" policies of Stalin
relaxation of domestic tyranny.
Wild rumors and and some relaxation, at Beria's behest, in
Germany, gave rise to false hopes and on June 16, 1953, these
rose up against the Communist government. These uprising were
with the full power of the Soviet occupation armored
this as an excuse, the Kremlin leaders suddenly arrested Beria
The overthrow of the master of terror was followed by an
extensive curtailment of the secret police and its powers.
courts were abolished.
The gradual elimination of Molotov found Khrushchev as the
champion of "thaw" in the Cold War.
Khrushchev's six-day visit to Tito is of great importance
it showed Russia in an apologetic role for a major past error
because it reversed Stalin's rule that all Communist parties
everywhere must follow the Kremlin's leadership such that
in the concrete application of Socialism are the exclusive
individual countries." En route home, he stopped in Sofia and
the fuse in another, even larger, stick of dynamite, by a
denunciation of Stalin personally as a bloodthirsty tyrant.
Moscow, Khrushchev won over the majority by arguing that the
of the satellites, and especially their vital economic
could be ensured better by a loose leash than by a club.
The Russians spoke favorably about disarmament which, to them,
meant total renunciation of nuclear weapons and drastic cuts
forces, a combination which would make the United States very
against Russia while leaving Russia still dominant in Europe.
The Geneva Conference discussions were conducted in an
unprecedented atmosphere of friendly cooperation which came to
known as the "Geneva spirit" and continued for several years
never completely overcome even when matters were at their
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following the U-2 incident of 1960 and the Cuban crisis of
At the Twentieth Party Congress in February 1956, the first
speech of 50,000 words delivered by Khrushchev over seven
the need for coexistence with the West and references to the
possibility of peaceful rather than revolutionary change from
capitalism to Socialism.
The real explosion came at a secret all-night session on July
in a 30,000 word speech where Khrushchev made a horrifying
Stalin as a bloodthirsty and demented tyrant who had destroyed
thousands of loyal party members on falsified evidence. The
nightmare of the Soviet system was revealed.
A few passages from this speech:
"This concept "enemy of the people" eliminated any possibility
rebuttal. Usually, the only evidence used, against all the
modern legal science, was the confession of the accused, and
subsequent investigation showed, such "confessions" were
physical pressure on the accused. The formula "enemy of the
was specifically introduced for the purpose of physically
How is it that a person confesses to crimes that he has not
committed? Only in one way - by application of physical
tortures, taking away of his human dignity.
The "secret speech" also destroyed Stalin's reputation as a
"Stalin said that the tragedy of the war resulted from the
unexpected attack by the Germans. This is completely untrue.
warned Stalin that the Germans were going to attack. Stalin
had and warned that no credence be given to information of
not to provoke a German invasion. Had our industry been
properly and in time to supply the army, our wartime losses
been decidedly smaller.
Very grievous consequences followed Stalin's destruction of
military commanders during 1937-1941 because of his
false accusations. During that time, leaders who had gained
experience in Spain and the Far East were almost completely
Stalin's 1948 "Short Biography" is an expression of most
dissolute flattery, making a man into a god, transforming him
infallible sage, "the greatest leader and most sublime
all times and nations." We need not give examples of the
adulation filling this book. They were all approved and edited
Stalin personally. He added "Although he performed his task of
of the people with consummate skill and enjoyed the unreserved
of the whole Soviet people, Stalin never allowed his work to
by the slightest hint of vanity, conceit, or self-adulation."
cite one more insertion by Stalin: "Comrade Stalin's genius
him to divine the enemy's plans and defeat them. The battles
Comrade Stalin directed the Soviet armies are brilliant
operational military skill." "
By directing all the criticism of Stalin personally, he
exculpated himself and the other Bolshevik survivors who were
guilty as Stalin was - guilty not merely because they
Stalin's atrocities from fear, as admitted in Khrushchev's
because they fully cooperated with him.
A study of Khrushchev's life shows that he defended Stalin's
which caused the deaths of millions. The fault was not merely
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Stalin; it was with the system, it was with Russia.
The more completely total and irresponsible power is
in one man's hands, the more frequently will a monster of
The very structure of Russian life drove Khrushchev, as it had
driven Stalin, to concentrate all power in his own hands.
could relax halfway to power for fear that someone else would
on, seeking the peak of power. The basis of the whole system
and like all neurotic drives in a neurotic system, such fear
be overcome even by achievement of total power. That is why it
into paranoia as it did with Ivan the Terrible, Peter the
I, Stalin and others.
Having failed to block Khrushchev's economic plans, his rivals
the Presidium were reduced to a last resort, they had to get
the man himself. At a Presidium meeting on June 18, 1957, the
was made to remove Khrushchev as the first party secretary.
discussion grew violent with Malenkov and Molotov attaching
Khrushchev defending himself. He was accused of practicing a
personality" and of economic mismanagement. The vote was 7-4
him with Mikoyan, Kirichenko and Suslov his only supporters.
offered the reduced position of minister of agriculture.
Khrushchev refused to accept the result, denying that the
Presidium had the authority to remove a first secretary, and
to the Central Committee. The members of this larger group
the discussions as they arrived while Khrushchev's supporters
to delay the vote until his men could come in from the
Marshall Zhukov provided planes to bring in the more distant
discussion became bitter when Zhukov threatened to produce
that Malenkov and Molotov had been deeply involved in the
purges of 1937. Madame Furtseva, an alternate member of the
filibustered with a speech for six hours. Eventually, there
members present. When the vote was finally taken, Khrushchev's
supporters voted for him solidly and his removal, already
voted by the
Presidium, was reversed. Khrushchev at once counterattacked.
and carried the expulsion from the Presidium of Malenkov,
Kaganovich and Shepilov for "anti-party" activities. Then came
election of a new Presidium with fifteen full members instead
previous eleven, and nine alternates instead of the previous
This change was Khrushchev's most smashing personal victory
the most significant event in Russia's internal history. It
Khrushchev to a position of political power more complete than
Stalin's had been although it was clear that Khrushchev would
allowed to abuse his power the way Stalin had done.
Khrushchev did not rest on his oars. During the summer of
he made notable concessions to the peasants (ending compulsory
deliveries from products of their personal plots), slammed
lid on freedom of writers and artists, pushed vigorously both
"virgin lands" scheme and the decentralization of industry,
to curtail the growing autonomy of the armed forces and
unions into the new regional economic councils.
Russian objection to city-bombing or to strategic terror of
V-2 kind as ineffective and a waste of resources was
The Soviet Union has no idea of being able to achieve military
victory over the United States simply because they have no
occupying the territory of the United States at any stage in a
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They are unlikely to use nuclear weapons first although fully
prepared to resort to them once they are used by an enemy.
However such a war is regarded by the Soviet leaders as highly
undesirable while they, in a period of almost endless cold
seek to destroy capitalist society by nonviolent means. This
"nibbling" the capitalist world to death is combined with a
which would resist "capitalist imperialism" by encouraging
Stalin and Dulles saw the world largely in black-and-white
who was not with them was obviously against them.
Stalin did not see the possibility of colonial areas becoming
non-Communist and non-colonial independent states and rebuffed
local native groups. Khrushchev did the opposite.
This shift in the Soviet attitude toward neutralism was helped
Dulles' refusal to accept the existence of neutralism. His
tended to drive those areas which wanted to be neutral into
of Russian because the new nations of the developing Buffer
valued their independence above all else. The Russian
neutralism may be dated about 1954 while Dulles still felt
adverse to neutralism four or five years later. This gave the
Union a chronological advantage to compensate for its many
disadvantages in the basic struggle to win the favor of the
THE COLD WAR IN EASTERN AND SOUTHERN ASIA, 1950-1957
By 1939, there was only one independent state in southeast
Siam. Thus all southeast Asia, except Thailand, was under the
domination of five Western states in 1939.
French Indochina emerged from Japanese occupation as the three
states of Vietnam, Laos, and Cambodia, each claiming
Efforts by the European Powers to restore their prewar rule
violent clashes with the supporters of independence. These
were brief and successful in Burma and Indonesia but were very
protracted in Indochina.
In all these areas, native nationalists were inclined to the
political Left, if for no other reason than the fact that the
difficulties of capital accumulation and investment to finance
economic improvements could be achieved only under state
some cases, such Communism may have been ideological but
it involved little more than the desire to play off the Soviet
and China against the Western imperialist Powers.
A communist revolt in the Philippines had already begun and
joined by similar uprisings in Burma, Indonesia, and Malaya.
these revolts took the form of agrarian agitations and armed
Communist guerrilla jungle fighters. Since the operated on a
basis and had to live off the local peasantry, their
of peasant life eventually made them decreasingly welcome to
group for whom they pretended to be fighting.
In the Philippines, the rebels were smashed in 1953. In
Indonesia, Sukarno repressed the insurrection and executed its
leaders. In Malaya, the Communists were systematically hunted
destroyed by British troops. In Burma, they weren't eliminated
The real problem was Indochina. There, the French Army was
uncompromising and Communist leadership was skillful. As a
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struggle became part of the Cold War. The Malay peninsula is
by a series of mountain ranges with their intervening rivers
southward from Chinese Yunnan. These rivers fan out into
alluvial deltas which produce surplus foods for undemanding
Indochina brought considerable wealth to France. After the
Japanese withdrawal, the Paris government was reluctant to see
wealth, chiefly from the tin mines, fall into native groups
1949, decided to use force to recover the area.
Opposed to the French effort was Ho Chi Minh, a member of the
French Communist Party. Ho had set up a coalition government
Viet Minh Party and proclaimed independence for Vietnam
Tonkin and Annam) in 1945, while French troops, in a surprise
seized Saigon in the south. Ho received no support from the
At first, Ho sought support from the United States but after
establishment of Red China in 1949, he turned to that new
state for help. Mao's government was the first state to give
diplomatic recognition (January 1950) and at once began to
military supplies and guidance. Since the U.S. was granting
aid to France, the struggle in Vietnam became, through
struggle between the United States and China. In world
made the U.S. the defender of European imperialism against
During this turmoil, independent neutralist governments came
existence in Laos and Cambodia. Both states accepted aid from
would give it and both were ruled by an unstable balance of
Communists, neutralists, and pro-Westerners, all with armed
supporters. On the whole, the neutralist group was largest and
pro-Western was the smallest but could obtain support from
wealth. The decisive influence was that the Communists were
to accept and support neutralism years before Dulles would
The readiness of Dulles and the French Army to force a
in Vietnam was unacceptable to the British and many in France.
this came a Soviet suggestion for a conference on Indochina in
By early 1954, the Communist guerrillas were in control of
of northern Indochina, were threatening Laos, and were
villages as far south as Saigon. About 200,000 French troops
300,000 Vietnamese militia were tied in knots by about 335,000
Minh guerrillas. France was being bled to death with nothing
By the end of March 1953, the outer defences of the French
point at Dien Bien Phu were crumbling. The French chief of
Dulles ready to risk all-out war with Red China by authorizing
American intervention in Indochina. As usual, Dulles thought
wonders could be achieved by air strikes alone against the
of Dien Bien Phu and for a few day, at Dulles' prodding, the
States tottered "on the brink of war." Dulles proposed "a
action policy:" "If Britain would join the United States and
would agree to stand firm, the three Western states could
friendly asian nations to oppose communist forces.
President Eisenhower agreed but his calls to Churchill and
found the British government opposed to the adventure because
Sino-Soviet Treaty of 1950 bound Russia to come to the
China if it were attacked by the United States as Dulles
During the 1954 Far Eastern Geneva Conference, two American
aircraft carriers, loaded with atomic weapons, were cruising
China Sea, awaiting orders from Washington to hurl their
at the Communist forces besieging the 15,000 exhausted troops
at Dien Bien Phu. In Washington, Admiral Radford was
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advocating such aggressive action on a generally reluctant
In Paris, public outrage was rising over Indochina where the
had expended 19,000 lives and $8 billion without improving
particle. The fall of Dien Bien Phy on May 7th led to the fall
French government. The new prime minister promised a
cease-fire or his
own retirement within 30 days. He barely met the deadline.
The Indochinese settlement of July 20, 1954 was basically a
compromise, some of whose elements did not appear in the
itself. A Communist North Vietnam state was recognized north
17th parallel and the rest was left in three states: Laos,
and South Vietnam.
The new state system was brought within the Dulles network of
trip-wire pacts on September 8, 1954 when Britain, France,
New Zealand, Pakistan, Thailand, Philippines and the U.S.
South-East Asia Treaty Organization (SEATO) and extended their
protection to Laos, Cambodia and South Vietnam.
The Geneva agreement was to neutralize the Indochina states
was apparently not acceptable to the Dulles brothers and any
stability in the area was soon destroyed by their activities,
especially through the Central Intelligence Agency (CIA)
subvert the neutrality of Laos and South Vietnam by channeling
millions in American funds to Right-wing army officers,
large military forces, rigging elections, and backing
These techniques might have been justified in the eyes of the
if they had been successful but, on the contrary, they
mass of the natives in the area, brought numerous recruits to
Left, gave justification for Communist intervention from North
Vietnam, disgusted our allies in Britain, France, Burma, India
elsewhere, and by 1962 had almost destroyed the American image
position in the area.
In Laos, the chief political figure was Prince Phouma, leader
the neutralist group, who tried to keep a balance between the
Communist Pathet Lao on his Left and the American-subsidized
politicians and militarists led by General Nosavan on his
American aid was about $40 million a year of which about $36
went to the army. This was used, under American influence, as
rather than an anti-Leftist influence culminating in a
bungled army attack on two Pathet Lao battalions in 1959 and
rigged elections in which all the Assembly seats were won by
candidates in 1960. In August 1960, an open revolt in behalf
the neutralist Phouma game rise to a Right-wing revolution led
General Nosavan. This drove the neutralists in the arms of the
The SEATO Council refused to support the American position,
Laotian army was reluctant to fight, and the American military
was soon involved in the confused fighting directly.
The American bungle in Laos was repeated, with variations,
elsewhere in southern and southeastern Asia. In South Vietnam,
American aid, largely military, amounted to about two thirds
country's budget, and by 1962, it had reached $2 billion. Such
which provided little benefit for the people, corrupted the
government, weakened the swollen defense forces, and set up a
between the rulers and people which drove the best of the
Leftward, in spite of the exploitative violence of the
guerrillas. A plebiscite in 1955 was so rigged that the
candidate won over 98% of the vote. The election of 1960 was
similarly managed, except in Saigon, the capital, where many
refused to vote. As might have been expected, denial of a fair
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led to efforts to assassinate the American-sponsored
and gave rise to widespread discontent which made it possible
Communist guerrillas to operate throughout the country. The
military response drove casualties to a high sustained
figure by 1962 and was uprooting peasantry throughout the
an effort to establish fortified villages which the British
introduced with success in Malaya.
These errors of American policy, which were repeated in other
places, arose very largely from two factors:
1) American ignorance of local conditions which were passed
animosity against Russia and China;
2) American insistence on using military force to overcome
neutralism which the mass of Asiatic people wanted.
The American militarization of both Thailand and South Vietnam
was used to increase pressure on Cambodia which was driven to
support for its independence from China and Russia.
North Vietnam had a deficiency of food while South Vietnam,
all delta areas, is a zone of rice surplus and thus a shining
for North Vietnamese aggression.
The collapse of the world price of rice at the end of the
War left Burma with an unsellable surplus of almost two
Within the next three years, Burma signed barter agreements
China and Soviet Europe by which Burma got rid of a third of
surplus each year in return for Communist goods and technical
assistance. These returns were so poor in quality, high in
poorly shipped that Burma refused to renew the agreements in
Farther west, in southern Asia (correctly called the Middle
from the Persian Gulf to Burma) American bungling also opened
opportunities for Soviet penetration which the Soviets failed
India was determined to be neutral; Pakistan was willing to be
ally of the United States.
The partition of India before independence in 1947, as in
Palestine and earlier in Ireland, received strong impetus from
Round Table Group, and in all three cases, it led to horrors
violence. In India's case, the partition was a butchery rather
surgical process. Imposed by the British, it cut off two areas
northwestern and northeastern India to form a new Muslim state
Pakistan (cutting right through the Sikhs in the process). The
nations began under two new leaders. In the post-partition
minorities on the wrong sides of the lines sought to flee, as
refugees, to India or Pakistan, while the Sikhs sought to
new homeland by exterminating Muslims in East Punjab. In a few
almost 200,000 were killed and twelve million were forced to
The two sections of Pakistan were separated from each other by
1,100 miles of India territory, its boundaries irrational, its
economic foundations torn to shreds by the partition.
In 1958, martial law was established and General Khan became
president. Under military rule, a sweeping land-reform program
restricted owners to 500 irrigated or 1000 non-irrigated acres
the surplus distributed to existing tenants or other peasants.
landlords received compensation in long-term bonds.
The American insistence on the non-committed nations adopting
anti-Soviet lines opened the way for the Soviet to pose as the
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of such nations by supporting their neutralism.
At the end of World War II, about 80 percent of Iran's
were peasants. Four fifths of the land was almost entirely
being either mountainous or arid. Moreover, the peasants who
the land were much oppressed by heavy rents to absentee
also controlled, as separate rights, essential access to
about a seventh of the land was owned by peasants who worked
Peasants retained little more than a fifth of what they
The shah has shifted the basis of his support from the elite
landed group to this growing middle class.
Before 1914, the shah sought to raise funds for his personal
by selling concessions and monopolies to foreign groups. Most
were exploitive of the Iranian peoples. Of these, the most
was the concession for petroleum which came into possession of
Anglo-Persian Oil Company which came to be controlled, through
stock ownership, by the British government.
At the end of World War I, Iran was a battleground between
Russian and British armed forces. By 1920, the withdrawal of
forces left the anti-Bolshevik Russian Cossack Brigade as the
significant military force in the country. The chief Iranian
in that force, Reza Pahlavi, in the course of 1921-1925
over control of the government and eventually deposed the
28-year-old Shah Ahmad.
Pahlavi's chief aim was to break down tribalism and localism.
this end, he defeated the autonomous tribes, settled nomadic
villages, shifted provincial boundaries to break up local
created a national civil service and police force, established
national registration with identity cards for all, and used
conscription to mingle various groups in a national army.
All these projects needed money and the chief resource, oil,
tied up completely in the concession held by the AIOC with the
inevitable result that it became the target of the Iranian
desire for traditional development funds. The older Iranian
would have been satisfied with a renegotiated deal but the
groups demanded the complete removal of foreign economic
nationalization of the petroleum industry.
By 1950, the Shah put his prime minister in to force through
supplemental agreement. Opposing groups introduced
bills. Gradually, the nationalization forces began to coalesce
strange figure, Mr. Muhammad Mossadegh, with a doctorate in
Politically, he was a moderate but his strong emotional appeal
Iranian nationalism encouraged extreme reactions among his
The company insisted that its status was based on a
agreement which could not be modified without its consent. The
government maintained the agreement was a matter of
public law which it had a right to enforce. The Iranian
declared it had the right to nationalize an Iranian
operating under its law on its territory, subject only to
The nationalist arguments against the company were numerous:
1) It had promised to train Iranians for all positions
had only used them in menial tasks, trained few natives and
2) The company had reduced its payments to Iran, which were
profits, by reducing the amount of its profits by bookkeeping
It sold oil at very low prices to wholly-owned subsidiaries
Iran or to the British Navy, allowing the former to resell at
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prices so that AIOC made small profits, while the subsidiaries
large profits not subject to the Iranian royalty obligations.
believe that all profits should fall under the obligations.
late as 1950, AIOC admitted that the accounts of 59 such dummy
corporations were not included in AIOC accounts.
3) AIOC generally refused to pay Iranian taxes, especially
but paid such taxes to Britain; at the same time, it
Iranian profit royalties after such taxes so that the higher
taxes went, the less the Iranian payment became. Thus, Iran
income tax to Britain. In 1933, AIOC paid #305,000 in British
and #274,000 in Iranian taxes. In 1948, the two figures were
million to Britain and #1.4 million to Iran.
4) The payment to Iran was also reduced by putting profits
reserves or into company investments outside Iran, often in
subsidiaries, and calculating the Iranian share only on the
distributed as dividends. Thus in 1947, when profits were
million, almost #15 million went to British income taxes, over
million to stockholders, and only #7 million to Iran. If the
to Iran had been calculated before taxes and reserves, it
received at least #6 million more that year.
5) AIOC's exemption from Iranian customs deprived Iran of
million a year.
6) The company drew many persons to arid and uninhabited areas
then provided very little of the costs of housing, education,
7) AIOC as a member of the international oil cartel reduced
production and thus reduced Iran's royalties.
8) AIOC continued to calculate its payments to Iran in gold at
per ounce for years after the world gold price had risen to
ounce while the American Aramco in Saudi Arabia raised its
9) AIOC's monopoly prevented Iran developing other Iranian oil
As a consequence of all these activities, the Iranian
nationalists of 1952 felt angered to think that Iran had given
million tons of oil over fifty years and obtained about #800
The Iranian opposition to nationalization was broken in 1951
the prime minister was assassinated. The nationalization bill
passed and at the request of the Majlis, the shah appointed
prime minister to carry it out. This was done with
turmoil which included strikes by AIOC workers against
British wage cuts, anti-British street riots and the arrival
British gun-boats at the head of the Persian Gulf. Rather than
the enterprise or operate it for the Iranian government, AIOC
curtail operations and ship home its engineers. In May 1951,
appealed to the International Court of Justice in spite of
protests that the case was a domestic one, not international.
July, 1952, did the court's decision uphold Iran's contention
At first, the U.S. supported Iran's position fearing British
recalcitrance would push Iran toward Russia. However it soon
apparent that the Soviet Union, while supporting Iran's
not going to interfere. The American position then became
pro-British and anti-Mossadegh. This was intensified by
the international petroleum cartel comprising the seven
companies in the world.
As soon as Britain lost its case in the International Court of
Justice, it put into effect a series of reprisals against Iran
rapidly crippled the country. Iranian funds were blocked; its
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purchases in British controlled markets were interrupted; its
to sell oil abroad were frustrated by a combination of the
Navy and the world oil cartel (which closed sales and
facilities to Iranian oil). These cut off a substantial
portion of the
Iranian government's revenues and forced a drastic curtailment
Mossadegh broke off diplomatic relations with the British,
deported various economic and cultural groups, and dismissed
Senate and the Iranian Supreme Court which were beginning to
By that time, almost irresistible forces were building up
Mossadegh, since lack of Soviet interference gave the West
freedom of action. The British, the AIOC, the world petroleum
the American government and the older Iranian elite led by the
combined to crush Mossadegh. The chief effort came from the
the personal direction of Allen Dulles, brother of the
State. Dulles, a former director of the Schroeder Bank in New
will be remembered that the Schroeder Bank in Cologne helped
arrange Hitler's accession to power as chancellor in January
In the Near East, the mobs are easily roused and directed by
those who are willing to pay and Dulles had the unlimited
of the CIA. From these he gave $10 million to Colonel H.
Schwartzkopf who was in charge of training the Imperial
Gendarmerie and this was judiciously applied in ways which
mobs tune. The whole operation was directed personally by
In August Mossadegh held a plebiscite to approve his policies.
The official vote was about two million approvals against
hundred disapprovals but his days were numbered. On August
Shah precipitated the planned anti-Mossadegh coup by naming
Zahedi as prime minister and sent a messenger dismissing
The latter refused to yield and called his supporters into the
where they rioted against the Shah who fled with his family to
Two days later, anti-Mossadegh mobs, supported by the army,
Mossadegh supporters. He was forced out of office and replaced
General Sahedi. The shah returned from Italy on August 22nd.
The fall of Mossadegh ended the period of confusion. From 1953
on, the shah and the army, backed by the conservative elite,
controlled the country and the docile Majlis. Two weeks after
shah's countercoup, the U.S. gave Iran an emergency grant of
million, increased its economic aid payment to $23 million and
to pay $5 million a month in Mutual Security funds. In return,
became a firm member of the Western bloc. The Communist Tudeh
was relentlessly pursued after 1953.
By 1960, the shah tried a program of agrarian reform which
to restrict each landlord's holdings to a single village,
excess lands for payments spread over 10 years and granting
to the peasants who worked them for payments over 15 years.
own estates were among the first to be distributed but by the
1962 over 5000 villages had been granted to their peasants.
In the meantime, the oil dispute was settled and the incomes
Iran were considerably increased averaging about $250 million
TRAGEDY AND HOPE Chapters XIX-XX
by Dr. Carroll Quigley
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XIX. THE NEW ERA
XX. TRAGEDY AND HOPE: THE FUTURE IN PERSPECTIVE
CHAPTER XIX: THE NEW ERA, 1957-1964
THE GROWTH OF NUCLEAR STALEMATE
Dulles refused to recognize the right of anyone to be neutral
tried to force all states to join the American side of the
Cold War or
be condemned to exterior darkness.
The so-called "missile gap" was a mistaken idea for the U.S.
in a condition of "nuclear plenty" and of "overkill capacity"
posed a serious problem for the Soviet Union. It was,
enough, just at that time (end of 1957) that two American
Gaither Report and the Special Studies Project of the
Brothers Fund) suggested the existence of a missile gap or
in missile capacity of the United States compared to the
based on the overemphasis on the "size" of Soviet rocket
this pleasant period of self-deception, the Soviet Union
an unofficial international suspension of nuclear bomb testing
1958 until 1961.
As a result of NASA's $5 billion budget, the educational
was brought into the tempestuous atmosphere of the frantic
marketplace and was being ransacked from the highest levels
high school and even below for talented, trained, or merely
people. As the demands for such people grew and their
and opportunities increased, the substantial minority who were
talented, trained or eager found fewer and fewer opportunities
a living and began to sink downward toward a steadily growing
class of social outcasts and underprivileged, the socially
group of the impoverished.
In 1959, Red China began making increasingly unfavorable
about Khrushchev's doctrines of "peaceful coexistence with
and the "inevitable victory of Socialism without war." He
the need for war and the Soviet Union was willing to reach
disarmament supervised by mutual controls including aerial
As late as 1960, only 38,000 man-days of labor were lost by
strikes and lockouts in West Germany compared to almost half a
in the Netherlands, 3 million in the U.K. and 19 million in
In Germany in 1958, eight great trusts still controlled 75
percent of crude steel production, 80 percent of raw iron, 60
of rolled steel, and 36 percent of coal output.
The ten percent increase each year in the West German gross
national product was something that could not be denied or
In East Germany in 1960, almost a million farmers were forced
into less than 20,000 collective farms by methods of violence
social pressure similar to those Stalin had used. And the
were similar: agricultural production collapsed. Shortages of
were soon followed by other shortages.
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Khrushchev's talk about "peaceful co-existence" was sincere
he sincerely wished to divert the Communist-Capitalist
non-violent areas. Thus he was sincere in his disarmament
Metternich said, "A diplomat is a man who never allows himself
the pleasure of a triumph," and does so simply because it is
interest of the stronger that an opponent who recognizes the
strength and is reasonable in yielding to it not be overthrown
replaced by another ruler who is too ignorant or too
After Russia backed down on the Cuban missile crisis, the
House received a long and confused letter from Khrushchev
clearly showed his personal panic and, to save his reputation,
not released to the public. The next morning, the Soviet
Office published a quite different text, suggesting that a
made dismantling both the American missile sites in Turkey and
Soviet missile sites in Cuba. To those inside both
was recognized as a Soviet surrender since they knew that the
sites were obsolete and were already scheduled to be
was rejected by the White House because it would have
the world a surrender of Turkey. Instead, the White House
an offer to remove the Russian missiles if we would lift the
and promise not to invade Cuba.
THE DISINTEGRATING SUPERBLOCS
LATIN AMERICA: A RACE BETWEEN DISASTER AND REFORM
The Brazilian cost of living rose 40% in 1961, 50% in 1962,
70% in 1963.
Latin America is not only poverty-ridden but the distribution
wealth and income is so unequal that the most ostentatious
exists for a small group side by side with the most degrading
for the overwhelming majority. Four fifths of the population
America get about $53 a year, while a mere 100 families own
90% of the
native-owned wealth of the whole area and only 30 families own
that wealth. In Brazil, half of all and is owned by 2.6% of
landowners while 22.5% is owned by only 1/2% of the owners. In
America, at least two thirds of the land is owned by 10% of
As things stood in 1960, infant mortality varied between 20%
35% in different countries.
While such conditions may rouse North American to outrage or
humanitarian sympathy, no solution can be found by emotion or
sentimentality. The problems are not based on lack of anything
structural weaknesses. Solutions will not rest on anything
that can be
done to or for individual people but on the arrangements of
Latin American lacks the outlook that will mobilize its
constructive rather than destructive directions.
Obviously, the birthrate must decrease or the food supply must
increased faster than the population. And some provision must
to provide peasants with capital and know-how before the great
estates are divided up among them. A more productive
resources should have priority over any effort to raise
We hear a great deal about Latin America's need for American
capital and American know-how, when in fact the need for these
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less than the need for utilization of Latin America's own
know-how. The wealth and income of Latin America, in absolute
quantities, is so great and it is so inequitably controlled
distributed that there is an enormous accumulation of incomes,
beyond their consumption needs, in the hands of a small
Latin Americans. Much of these excess incomes are wasted,
merely used for wasteful competition in ostentatious social
largely due to the deficiencies of Latin American
The solution is not to redistribute incomes but to change the
patterns of character and of personality formation so that
incomes will be used constructively and not wasted.
At least half the value of American aid has been wiped away by
the worsening of Latin America's terms of trade which made it
necessary for it to pay more and more for its imports at the
that it got less and less for its exports made worse by much
available supply of foreign exchange spent for self-indulgent
constructive spending abroad or simply to hoard their money in
York, London or Switzerland. The solution must be found in
responsible, more public-spirited, and more constructive
outlook, of money flows, and of political and social security.
similar solution must be found for social deficiencies like
housing, education, and social stability.
An Asian despotism is a two-class society in which a lower
consisting of nine tenths of the population supports an upper
class consisting of a governing bureaucracy of scribes and
associated with army leaders, landlords, and moneylenders. The
essential character of an Asian despotism rests on the fact
ruling class has legal claim on the working masses and
power to enforce these claims.
Arabic boys grow up egocentric, self-indulgent, undisciplined,
immature, spoiled, subject to waves of emotionalism, whims,
and pettiness. Another aspect of Arabic society is its scorn
honest, steady manual work, especially agricultural work.
There is a
lack of respect for manual work that is so characteristic of
Pakistani-Peruvian axis. The Bedouin outlook include lack of
for the soil, for vegetation, for most animals, and for
These attitudes are to be seen constantly as erosion,
vegetation and wild life, personal cruelty and callousness to
living things, including one's fellow man, and a general
indifference to God's creation.
The ethical sides of Judaism, Christianity and Islam sought to
counteract harshness, egocentricity, tribalism, cruelty, scorn
and one's fellow creatures but these efforts have met with
The method for the reform of Latin America rest in the upper
class of that society. Such reform can come about only when
surpluses that accumulate in the hands of the Latin American
are used to establish more progressive utilization of Latin
The whole system is full of paradox and contradiction. The
obstacle to progress and hope rests in the oligarchy because
controls wealth and power, and also because there is no hope
unless it changes its ideology.
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World War II, by increasing demand for Latin America's mineral
and agricultural products, pushed starvation and controversy
the immediate present. Latin American boomed: the rich got
poor had more children. A few poor became rich, or at least
But nothing was done to modify the basic pattern of Latin
power, wealth, and outlook.
Until the 1952 revolution, the Bolivians, mostly of Indian
descent, who were treated as second-class persons working as
semislaves in the mines or as serfs on the large estates, had
capita annual outcome of about $100. As might be expected, the
majority were illiterate, sullen and discouraged.
The Junta was overthrown in 1952. Paz Estenssoro returned from
exile to become president. Pressure from the tin miners and
peasants forced the new regime to nationalize the mines and to
up many of the large estates. Production costs of tin rose
market price thus wiping out their foreign exchange earnings.
the world price of tin collapsed in 1957.
The problems could hardly be handled because of popular
in a democratic country to live beyond the country's income.
collapse did not occur because of the efforts of President
assistance from the United States.
If any proof were needed that radical reform for sharing the
wealth of the few among the many poor is not an easy, or
method, Bolivia's hard-working Indians, once hopelessly dull,
and sullen, are not bright, hopeful, and self-reliant. Even
clothing is gradually shifting from the older funereal black
brighter colors and variety.
Few contrasts could be more dramatic than that between the
Bolivian revolutionary government (in which a moderate regime
pushed toward radicalism by popular pressures and survived,
year, with American assistance) and the Guatemala revolution
Communist-inspired regime tried to lead a rather inert
the direction of increasing radicalism but was overthrown by
American action within three years (1951-1954).
Guatemala is one of the "banana republics." The retail value
Latin America's part of the world's trade in bananas is
billion dollars a year but Latin America's gets less than 7%
value. One reason for this is the existence of the United
Company which owns two million acres of plantations in six
and handles about a third of the world's banana sales. It pays
$145 million a year into the six countries and claims to earn
$26 million profits on its $159 million investment but this
figure of about 16.6% is undoubtedly far below the true
1970, 95% of the land held by United Fruit was uncultivated.
Guatemala, like Bolivia, has a population that consists
of impoverished Indians and mixed bloods (mestizos). From 1931
it was ruled by the dictator Jorge Ubico, the last of a long
corrupt and ruthless tyrants. When he retired to New Orleans
free elections chose Juan Jose Arevalo (1945-1950) and Jacobo
Guzman (1950-1954) as presidents. Reform was long overdue and
two administrations tried to provide it, becoming increasingly
American and pro-Communist over their nine-year rule. When
civil or political rights were almost totally unknown and 142
(including corporations) owned 98% of the arable land. Free
press, legalized unions, and free elections preceded the work
reform but opposition from the United States began as soon as
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became clear that the Land Reform Act of June 1952 would be
the United Fruit Company. This act called for redistribution
uncultivated holdings above a fixed acreage or lands of
owners, with compensation from the twenty year 3 percent bonds
to the tax value of the lands. About 400,000 acres of United
lands fell under this law and were distributed by the Arbenz
government to 180,000 peasants. This was declared to be a
penetration by Allen Dulles, Director of the CIA, which soon
American-trained and American-financed Guatemalan Colonel,
Castillo Armas, who was prepared to lead a revolt against
American money and equipment, and even some American
fly "surplus" American planes, Armas mounted an attack of
exiles from bases in two adjacent dictatorships, Honduras and
Nicaragua." Both these countries are horrible examples of
Latin American government should not be, corrupt, tyrannical,
and reactionary, but they won the favor of the United States
Department by echoing American foreign policy at every turn.
Nicaragua, often a target of American intervention in the
decayed, dirty, and diseased under the twenty-year tyranny of
Anastasio Somoza (1936-1956). His assassination handed the
over to be looted by his two sons, one of whom became
the other served as commander of the National Guard.
From these despotic bases, the CIA-directed assault of Colonel
Armas overthrew Arbenz Guzman in 1954 and established in
regime similar to that of the Somozas. All civil and political
freedoms were overthrown, the land reforms were undone, and
reigned. When Armas was assassinated in 1957 and a moderate
his successor, the army annulled those elections and held new
which one of their own, General Fuentes, was "elected." He
what remained of Guatemala's Socialist experiments by granting
enterprises, at very reasonable prices, to his friends while
collecting his own pay of a $1 million a year. Discontent from
associates led to a conservative army revolt but American
secured his position. The U.S. could not afford a change of
since that country was the chief aggressive base for the Cuban
attack on Cuba at the Bay of Pigs in April 1962.
The CIA success in attacking "Communist" Guatemala from
dictatorial Nicaragua in 1954 was not repeated in its more
attack on "Communist" Cuba from dictatorial Guatemala in 1962.
fact, the Bay of Pigs must stand as the most shameful event in
history since the end of World War II.
The causes of the Cuban disaster, if we oversimplify, may be
organized in terms of two intersecting factors:
1) the personality deficiencies of the Cubans themselves such
lack of rationality and self-discipline, their emotionalism
2) the ignorance and ineptitude of the American State
seems incapable of dealing with Latin America in terms of the
problems of the area but instead insists on treating it in
America's vision of the world, which is to day, America's
preconceptions and economic interests.
Cuba is more Spanish than much of Latin America and only
its independence in 1898, two generations later than the rest
America. Then, for over thirty years, until the abrogation of
Platt Amendment in 1934, Cuba was under American occupation or
threat of direct American intervention. It fell under American
economic domination by American investments on the island and
becoming deeply involved in the american market, especially
A local oligarchy of Cubas was built up including an
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landlord group that had not existed previously.
With the establishment of the Good Neighbor Policy in 1933 and
ending the threat of American direct intervention, it became
for the Cubans to overthrow the tyrannical and bloody rule of
Machado which had lasted for eight years (1925-1933).
The opportunity to begin a series of urgently needed and
demanded social reforms under Machado's successor, San Martin,
lost when the United States refused to recognize or to assist
regime. As a result, a ruthless Cuban army sergeant, Fuegencio
Batista, was able to overthrow San Martin and begin a ten-year
through civilian puppets chosen in fraudulent elections, and
directly as president himself. When San Martin was elected
in 1944, he abandoned his earlier reformist ideas and became
of a series of increasingly corrupt elected regimes over the
eight years. The fourth such election for 1953 was prevented
Batista seized power once again in 1952.
The next seven years were filled with Batista's efforts to
his position by violence and corruption against the rising
discontent against his rule.
One of the earliest episodes in that tide was an attempted
by a handful of youths, led by 26-year-old Fidel Castro in
Cuba on July 26, 1953. The failure of the rising gave Castro
of imprisonment and more than a year of exile but at the end
he landed with a handful of men to begin guerrilla operations.
Batista's regime was so corrupt that many segments of the army
middle class were neutral or favorable to Castro's operations.
necessary arms and financial support came from these groups
the core of the movement was made up of peasants and workers
young middle-class university students.
This Castro uprising was not typical because of Castro's
fanatical thirst for power, his ruthless willingness to
property or lives in order to weaken the Batista regime, and
double method of operation, from within Cuba rather than from
and from a rural base, the peasants, rather than the usual
the army, used by most Latin American rebels.
On New Year's day of 1959, Castro marched into Havana. Within
weeks, the supporters of the Batista regime and dissident
Castro's movement began to be executed by firing squad.
For a year, Castro's government carried on reforms aimed at
satisfying the more obvious demands of the dispossessed
Military barracks were converted into schools; the militia was
permanently established to replace the regular army; rural
centers were set up; a full-scale attack was made on
schools were constructed; urban rents were cut in half;
were slashed; taxes were imposed on the upper classes; the
once reserved for the rich, were opened to all; and a drastic
reform was launched.
These actions were not integrated into any viable economic
program but they did spread a sense of well-being in the
although they curtailed the building boom in the cities,
rooted in American investment, and they instigated a flight of
rich from the island to refuge in the U.S.
Castro sought to export revolution to the rest of Latin
Arms and guerrilla fighters were sent, and lost, in
efforts to invade Panama, Nicaragua, Haiti, and the Dominican
Republic. Failure of these turned him to methods of more
penetration, largely worked by propaganda and the arming and
of small subversive groups, especially where democratic or
regimes seemed to be developing as in Venezuela or Colombia.
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same time, an unsuccessful effort was made to persuade all
America to form an anti-Yankee front.
Although the U.S. had promised in 1959 to follow a policy of
toward Cuba, these changes within the island and a visit
of Soviet Deputy Premier Mikoyan in February 1960 forced a
reconsideration of this policy. The Mikoyan agreement promised
petroleum, arms and other needs for its sugar followed by
establishment of diplomatic relations with the Soviet Union in
with Red China later in the year. The Soviet embassy in Havana
a source of Communist subversion for all Latin America almost
while in September Khrushchev and Castro jointly dominated the
session of the General Assembly of the U.N. in New York.
Castro obtained petroleum for Cuban sugar. When he insisted
American-owned refineries in Cuba process this oil, they
were at once seized by Castro.
The U.S. struck back by reducing the Cuban sugar quota in the
American market which led, step by step, to Castro's sweeping
nationalization of foreign-owned factories on the island. The
States retaliated by establishing a series of embargoes on
exports to the U.S. These controversies led Castro into an
trap similar to that into which Nasser had fallen with Egypt's
Each nationalist leader committed his chief
product (sugar and cotton) to the Soviet Union as payment for
Communist (often Czech) arms. This tied these countries to the
Union and deprived them of the chance to use their own source
foreign money for equipment so urgently needed for economic
improvement. By December when American diplomatic relations
were broken off, the Cuban economic decline had begun and soon
a point where standards of living were at least a third below
Batista level except for some previously submerged groups.
At the end of 1960, the Eisenhower Administration decided to
force to remove Castro. This decision was a major error and
led to a
totally shameful fiasco. The error apparently arose in the CIA
based on a complete misjudgment of the apparent east with
agency had overthrown the Arbenz regime in Guatemala in 1954
organizing a raid of exiles, armed and financed by the CIA,
Guatemala from Nicaragua. The CIA analyzed this apparently
coup quite incorrectly,since it assumed that Arbenz had been
overthrown by the raiding exiles when he had really been
his own army which used the raid as an excuse and occasion to
of him. But on this mistaken basis, the CIA decided to get rid
Castro by a similar raid of Cuban exiles from Guatemala.
This decision was worse than a crime; it was stupid. A
unilateral, violent attack on a neighboring state with which
not at war, in an area where we were committed to multilateral
peaceful procedures for settling disputes, was a repudiation
our idealistic talk about the rights of small nations and our
to peaceful procedures that we had been pontificating around
since 1914. It was a violation of our commitment to
in the Americas and specifically in Cuba. In sequence to our
intervention in Guatemala, it strengthened Latin American
the U.S. as indifferent to Latin America's growing demand for
The whole operation, patterned on Hitler's operations to
Austria and Czechoslovakia in 1938 was bungled as Hitler could
have bungled anything. The project was very much a Dulles
job and its execution was largely in the hands of the CIA.
The plan of invasion of Cuba seems to have been drawn on
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Hitler lines: the expeditionary force was to establish a
Cuba, set up a government on the island, be recognized by the
the actual government of Cuba, and ask Washington for aid to
order in the rest of the island which it did not yet control.
assured President Kennedy that if matters were allowed to go
they were, Castro would be strengthened in power (which was
and that the invasion would be success because of the Cuban
led by the anti-Castro underground, would rise against him as
they heard of the landing.
The executive committee of Cuban refugees in the U.S., mostly
representatives of the older ruling groups in Cuba, were eager
restore the inequitable economic and social system that had
before Castro. They were alienated from the most vigorous
groups in the Cuban underground who had no desire to turn back
clock to the Batista era. The CIA would not cooperate with the
Castro underground because it was opposed to their wish for
economic reform. Accordingly, the CIA launched the invasion
notifying the Cuban underground. Then the attack was bungled.
This greatly strengthened Castro's prestige in Latin American
more than in Cuba itself. This in turn permitted him to
deepening wave of passive resistance and sabotage within Cuba
chiefly from the peasants to recapture control of the Cuban
In May 1961, Castro proclaimed that Cuba would be a socialist
state but despite his statements, he was not in any way a
Communist or a convinced anything else, but was a power-hungry
emotionally unstable individual, filled with hatred of
himself, and restless unless he had constant change and
satisfactions. His tactical skill, especially in foreign
remarkable, and shows similarity to Hitler's.
On the whole, the role of the U.S. in Latin America has not
such as to help either patterns or priorities, largely because
concern has been with what seems to be useful or better for us
than with what would be most helpful to them.
Despite the enthusiasm and energy that make it possible for
to overthrow corrupt and tyrannical regimes,it soon becomes
they have little idea what to do once they get into power. As
result, they fall under the personal influence of unstable and
ignorant men, the Nassers, the Perons, and the Castros who
on emotionally charged programs of hatreds and spectacular
unconstructive nationalism that waste time and use up
the real problems go unsolved.
A heavy responsibility rests with the United States for this
widespread failure to find solutions to problems all the way
Pakistan to Peru. The basic reason for this is that our
this great area have been based on efforts to find solutions
own problems rather than theirs; to make profits, to increase
of necessary raw materials, to fight Hitler, to keep out
prevent the spread of neutralism. The net result is that we
more hated than the Soviet Union and neutralism reveals itself
clearly as it dares through the whole area.
The sole consequence of the Dulles efforts to do the wrong
along the Pakistani-Peruvian axis has been to increase what he
seeking to reduce: local political instability, increased
and Soviet influence, neutralism, and hatred of the U.S.
Although the Dulles period shows most clearly the failures of
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American foreign policy in Latin America, the situation was
both before and since Dulles. American policy has been
American needs and desires and not by the problems of Latin
There are four chief periods in U.S. policy in Latin America
1) a period of investment and interventionism (until 1933) and
basically a period of American imperialism. American money
investments seeking profits out of the exploitation of the
resources. There was little respect for the people themselves
intervention by American military and diplomatic forces was
close at hand as a protection for American profits and
2) the Good Neighbor Policy in 1933 reduced intervention while
3) from 1940 until 1947, our efforts to involved the are in
foreign policy against Hitler and Japan;
4) since 1947, against the Soviet Union.
Both these efforts have been mistakes.
That this failure continued into the 1960s was clear in
Washington's joy at the military coup that ejected the
Goulart government from Brazil in 1964 for that government,
misdirected and incompetent, at least recognized that there
urgent social and economic problems in Brazil demanding
real recognition that such problems existed was achieved in
until Castro's revolution forced the realization.
The formal agreement for the Alliance for Progress aims and
attitudes were admirable but required implementation features
were not covered in the Charter itself.
"We, the American Republics, hereby proclaim our decision to
unite in a common effort to bring our people accelerated
progress and broader social justice within the framework of
dignity and personal liberty. Almost two hundred years ago we
this hemisphere the long struggle for freedom which now
people in all parts of the world. Now we must give a new
that revolutionary heritage. For America stands at a turning
history. The men and women of this hemisphere are reaching for
better life which today's skills have placed within their
are determined for themselves and their children to have
ever more abundant lives, to gain access to knowledge and
opportunity for all, to end those conditions which benefit the
the expense of the needs and dignity of the many."
These were fine words but the methods for achieving these
desirable goals were only incidentally established in the
the whole, it cannot be said that it has been a success. It's
achievement has been ameliorative rather than structural, and
alone indicates that it has not been a success. For unless
structural reforms, its economic development will not become
or even manage to keep up with the growth of population on
the basis of income per capita.
The failure of the Alliance for Progress to achieve what it
touted to achieve was a result that it was not intended
be a method for achieving a better life for Latin Americans
intended to be a means of implementing American policy in the
War. This became clearly evident at the second Punta del Este
Conference in 1962 where Washington's exclusive control over
granting of funds was used as a club to force the Latin
states to exclude Cuba from the Organization of American
original plan was to cut off Cuba's trade with all Western
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countries. A two-thirds vote was obtained only after the most
American "diplomatic" pressure and bribery involving the
withholding of American aid to the Alliance. Even at that, six
countries, Brazil, Mexico, Argentina, Chile, Bolivia, and
representing 70% of Latin America's population refused to vote
The aid takes the form not of money which can be used to buy
best goods in the cheapest market but as credits which can be
only in the U.S. Much of these credits goes either to fill the
the budgets or the foreign-exchange balances which provides
maximum of leverage in getting these governments to follow
lead but provides little or no benefit to the impoverished
THE JAPANESE MIRACLE
The post-war agrarian reform redistributed the ownership of
by the government taking all individual land holdings beyond
acres, all rented land over 2.5 acres, and the land of
landlords. The former owners were paid with long-term bonds.
peasants without land or with less than the maximum permitted
were allowed to buy land from the state on a long-term
basis. Cash rents for land were also lowered. As a result,
became a land of peasant owners with about 90% of the
worked by its owners.
Agrarian reform has driven Communism out of the rural areas
restricted it to the cities, chiefly to student groups.
Under the Czar, Russia produced great surpluses, especially of
Previous to the Land Reform Law of 1950, 10% of families owned
53% farm land while 32% owned 78% of the land. This left over
thirds of such families with only 22% of the land. The first
agrarian reform had been the "elimination of landlordism." The
landlords were eliminated with great brutality in a series of
spectacular public trials in which landlords were accused of
crime in the book. At least 3 million were executed and
that number were imprisoned but the totals may have been much
The land thus obtained was distributed to poor peasant
each obtaining about one-third of an acre.
The second stage sought to establish cooperative farming. In
effect, it took away from the peasants the lands they had just
obtained. The third stage constituting the basic feature of
Leap Forward" merged the 750,000 collective farms into about
agrarian communes of about 5,000 families each. This was a
rather than simply an agrarian revolution since its aims
destruction of the family household and the peasant village.
activities of the members, including child rearing, came under
control of the commune.
The Communist government was not involved in corruption,
and calculated inefficiency as earlier Chinese governments
were and had both greater power and greater desire to operate
rationing system but the fact remains that the inability of
agricultural system to produce sufficient food surpluses to
communized industrial system at a high rate of expansion is
confirmed and the need for all Communist regimes to purchase
from the Western countries confirms that there is something in
Western pattern of living which does provide a bountiful
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A source of alienation between Moscow and Peking is concerned
with the growing recognition that the Kremlin was being driven
a policy of peaceful coexistence with the U.S. not as a
tactical maneuver (which would have been acceptable to China)
but as a
semipermanent policy since Marxist-Leninist theory envisioned
advanced capitalist states as approaching a condition of
collapse from "the internal contradictions of capitalism
crisis would be reflected in two aspects: the continued
of the working class with the consequent growth of the
violence of the
class struggle in such countries and increasing violence of
imperialist aggressions of such countries toward each other in
struggles to control more backward areas as markets for the
products that the continued impoverishment of their own
impossible to sell in domestic market. The falseness of these
was fully evident in the rising standards of living of the
industrial countries. This evidence of the errors of
theories was increasingly clear to the Kremlin, although it
be admitted, but it was quite unclear to Peking.
Mao Tse-tung, son of a peasant who became wealthy on
and moneylending was born in 1893 in Hunan province.
There are at least half a dozen legal, minor political parties
Red China today (1966). These not only exist and are permitted
participate in the governing process in a very minor way, but
subject to no real efforts at forcible suppression, although
subject to persistent, rather gentle, efforts at conversion.
French expenditure of $7 billion and about 100,000 lives
the eight-year struggle ended at Geneva in 1954. The Geneva
provided that all foreign military forces, except a French
group, be withdrawn from Laos. When the Pathet Lao showed
strength in the elections of May 1958, the anti-Communist
combined to oust Premier Phouma and put in the pro-Western
This government was then ejected and replaced by a Right-wing
junta led by General Nosavan in 1960; but within seven months
coup led by Kong Le brought Phouma back to office. Four months
Nosavan once again replaced Phouma by military force. The
countries refused to recognize this change and increased their
supplies to the Pathet Lao by Soviet airlift.
The Geneva agreement of 1954 had recognized the Communist
government of North Vietnam dividing the country at the 17th
but this imaginary line could not keep discontent or Communist
guerrillas out of South Vietnam so long as the
southern government carried on its tasks with corruption,
and arbitrary despotism. These growing characteristics of the
Vietnam government centered around the antics of the Diem
President Diem's brother Nhu was the actual power in the
heading up a semi-secret political organization that
military and civil appointments. On the Diem family team were
other brothers, including the Catholic Archbishop of Vietnam,
country's ambassador to London, and the political boss of
Vietnam who had his own police force.
While the country was in its relentless struggle with the
Vietcong Communist guerrillas who lurked in jungle areas,
without warning at peasant villages that submitted to the
government or did not cooperate with the rebels, the Diem
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tyranny was engaged in such pointless tasks as crushing Saigon
school agitations by secret police raids or efforts to
overwhelming Buddhist majority and to extend favors to the
Catholics who were less than 10% of the population.
When Diem became president in 1955, after the deposition of
pro-French Emperor Bao Dai, the country had just received
refugees from North Vietnam which the Geneva conference had
Ho Chi Minh's communists, the overwhelming majority of which
Roman Catholics, raising their number to over a million in a
population of 14 million. Nevertheless, Diem made these
chief basis of his power, chiefly recruiting the refugees into
police forces dominated by the Diem family.
By 1955, these were already beginning to persecute the
majority, at first by harassing their religious festivals and
but later with brutal assaults on their meetings. An attempted
army units was crushed and the Diem rule became increasingly
American military assistance tried to curtail the depredations
the Communist guerrillas. The intensity of the guerrilla
steadily increased following Diem's re-election with 88% of
American intervention was also stepped up and gradually began
from a purely advisory and training role to increasingly
participation in the conflict. From 1961 onward, American
averaged about one dead a week, year after year. The Communist
guerrilla casualties were reported to be about 500 per week
did not seem to diminish their total number or relax their
These guerrilla attacks consisted of rather purposeless
destruction of peasant homes and villages, apparently designed
convince the natives of the impotence of the government and
advisability of cooperating with the rebels. To stop these
depredations, the government undertook the gigantic task of
the peasants into "agrovilles" or "strategic hamlets" which
were to be
strongly defended residential centers entirely enclosed behind
barricades. The process, it was said, would also improve the
and social welfare of the people to give them a greater
resist the rebels. There was considerable doubt about the
effectiveness of the reform aspect of this process and some
about the defence possibilities of the scheme as a whole. Most
observers felt that very little American economic aid ever
village level but instead was lost on much higher levels. By
summer of 1963, guerrillas were staging successful attacks on
strategic hamlets and the need for a more active policy became
This final crisis in the story of the Diem family and its
henchmen arose from religious persecution of the Buddhists
guise of maintaining political order. On November 1, 1963, an
American-encouraged military coup led by General Minh
Diem family. A new government with a Buddhist premier calmed
domestic crisis but was no more able to suppress guerrilla
THE ECLIPSE OF COLONIALISM
The massive economic mobilization for World War II showed
that there could be an equally massive post-war mobilization
resources for prosperity.
It is usually not recognized that the whole economic expansion
Western society rests upon a number of psychological attitudes
are prerequisites to the system as we have it but are not
explicitly. Two of these may be identified as:
1) future preference and
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2) infinitely expandable material demand.
In a sense, these are contradictory since the former implies
Western economic man will make almost any sacrifice in the
the same of some hypothetical benefit in the future while the
implies almost insatiable demand in the present. Nonetheless,
essential features of the overwhelming Western economic
Future preference came out of the Christian outlook and
especially the Puritan tradition which was prepared to accept
any kind of sacrifice in the temporal world for the sake of
eternal salvation, willing to restrict their enjoyment of
the sake of capital accumulation.
The mass production of this new industrial system was able to
continue and to accelerate to the fantastic rate of the 20th
so that today, the average middle-class family of suburbia has
schedule of future material demands which is limitless.
Without these two psychological assumptions, the Western
would break down or would never have started. At present,
preference may be breaking down and infinitely expanding
demand may soon follow it in the weakening process. If so, the
American economy will collapse unless it finds new
In Asia, as is traditional along the Pakistani-Peruvian axis,
structure of societies had been one in which a coalition of
bureaucracy, landlords, and moneylenders have exploited a
of peasants by extortion of taxes, rents, low wages, and high
rates in a system of such persistence that its basic structure
back to the Bronze Age empires before 1000 B.C.
CHAPTER XX: TRAGEDY AND HOPE, THE FUTURE IN PERSPECTIVE
THE UNFOLDING OF TIME
Weapons will continue to be expensive and complex. This means
that they will increasingly be the tools of professionalized,
mercenary, forces. All of past history shows that the shift
mass army of citizen-soldiers to a smaller army of
fighters leads, in the long run, to a decline of democracy.
When Khrushchev renounced the use of both nuclear war and
conventional violence, and promised to defeat the West by
competition, he was convinced that the Soviet Union could
the U.S. because it could, in his opinion, overcome the
in the race for economic development that the Socialist way of
would become the model for emulation by the uncommitted
In other economies, when additional demands are presented to
economy, less resources are available for alternative uses.
But in the
American system, as it now stands, additional new demands
to increased resources becoming available for alternative
notably consumption. Thus if the Soviet Union embraced a
increase in space activity, the resources available for
Russian levels of consumption would be reduced while in
increases in the space budget makes levels of consumption also
It does this because increased space expenditures provide
purchasing power for consumption that makes available
unused resources out of the unused American productive
This unused capacity exists in the American economy because
structure of our economic system is such that it channels
funds into the production of additional capacity (investment)
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any conscious planning process or any real desire by anyone to
increase our productive capacity. It does this because certain
institutions in our system (such as insurance, retirement
security payments, undistributed corporate profits and such)
certain individuals who personally profit by the flow of funds
theirs into investment continue to operate to increase
when they have no real desire to increase productive capacity
indeed many decry it). In the Soviet Union, on the contrary,
are allotted to the increase of productive capacity by a
planning process and at the cost of reducing the resources
in their system for consumption or for the government (largely
Thus the meaning of "costs" and the limitations on ability to
mobilize economic resources are entirely different in our
the Soviet system and most others. In the Soviet economy,
real costs, measurable in terms of the allotment of scarce
that could have been used otherwise. In the American system,
are fiscal or financial limitations that have little
the use of scarce resources or even with the use of available
therefore not scarce) resources. The reason for this is that
American economy, the fiscal or financial limit is lower than
limit established by real resources and therefore, since the
limits act as the restraint on our economic activities, we do
to the point where our activities encounter the restraints
the limits of real resources (except rarely and briefly in
technically trained manpower, which is our most limited
These differences between the Soviet and American economies
1) the latter has built-in, involuntary, institutionalized
which the former lacks;
2) the latter has fiscal restraints at a much lower level of
activity which the Soviet system also lacks.
Thus greater activity in defence in the USSR entails real
since it puts pressure on the ceiling established by limited
resources while greater activity in the American defence or
effort releases money into the system which presses upward on
artificial financial ceiling, pressing it upward closer to the
and remote, ceiling established by the real resources limit of
American economy. This makes available the unused productive
that exists in our system between the financial ceiling and
resources ceiling; it not only makes these unused resources
for the government sector of the economy from which the
was directly made but also makes available portions of these
resources for consumption and additional capital investment.
For this reason, government expenditures in the U.S. for
like defence or space may entail no real costs at all in terms
economy as a whole. In fact, if the volume of unused capacity
into use by expenditures for these things (that is, defence
and so on)
is greater than the resources necessary to satisfy the need
the expenditure was made, the volume of unused resources made
available for consumption or investment will be greater than
volume of resources used in the governmental expenditure and
additional government effort will cost nothing at all in real
but will entail "negative" real costs. (Our wealth will be
by making the effort).
The basis for this strange, and virtually unique, situation is
be found in the large amount of unused productive capacity in
even in our most productive years. In the second quarter of
productive system was running at a very high level of
it was functioning about 12% below capacity, which represented
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of $73 billion annually. In this way, in the whole period from
beginning of 1953 to the middle of 1962, our productive system
operated at $387 billion below capacity. Thus if the system
operated near capacity, our defence effort over the nine years
have cost us nothing, in terms of loss of goods or capacity.
This unique character in the American economy rests on the
that the utilization of resources follows flow lines in the
that are not everywhere reflected by corresponding flow lines
claims on wealth (that is, money). In general, in our economy
lines of flow of claims on wealth are such that they provide a
large volume of savings and a rather large volume of
when no one really wants new productive capacity; they also
inadequate flow of consumer purchasing power, in terms of
potential flows, of consumer goods; but they provide very
sharply scrutinized and often misdirected flows of funds for
of resources to fulfill the needs of the government sector of
trisectored economy. As a result, we have our economy
resource-utilization patterns, with overinvestment in many
overstuffed consumers in one place and impoverished consumers
another place, a drastic undersupply of social services, and
widespread social needs for which public funds are lacking.
In the Soviet Union, money flows follow fairly well the flows
real goods and resources, but, as as result, pressures are
resources. These pressures mean that saving and investment
directly with consumption and government services (including
putting the government under severe direct strains, as the
higher standards of living cannot be satisfied except by
investment, defence, space, or other government expenditures.
Many countries of the world are worse off the Soviet Union
because their efforts to increase consumers' goods may well
investment based on savings that must be accumulated at the
As a chief consequence of these conditions, the contrast
the "have" nations and the "have-not" nations will become even
This would be of little great importance to the rest of the
it not that the peoples of the backward areas, riding the
rising expectations" are increasingly unwilling to be ground
poverty as their predecessors were. At the same time, the
stalemate increases the abilities of these nations to be
exercise influence out of all relationship to their actual
to act, sometimes, in an irresponsible fashion.
These neutrals and other peoples of backward areas have acute
problems. Solutions do exist but the underdeveloped nations
unlikely to find them.
A growing lowest social class of the social outcasts (the
Lumpenproletariat) has reappeared. This group of rejects from
bourgeois industrial society provide one of our most
future problems because they are gathered in urban slums, have
political influence, and are socially dangerous.
In the U.S. where these people congregate in the largest
and are often Negroes or Latin Americans, they are regarded as
racial or economic problem, but they are really an educational
social problem for which economic or racial solutions would
little. This group is most numerous in the more advanced
areas and now forms more than 20% of the American population.
they are a self-perpetuating group and have many children,
increasing in numbers faster than the rest of the population.
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The pattern of outlook on which the tradition of the West is
based has six parts:
1) There is truth, a reality (thus the West rejects
solipsism and nihilism)
2) No person, group, or organization has the whole picture of
truth (thus there is no absolute or final authority.)
3) Every person of goodwill has some aspect of the truth, some
of it from the angle of his own experience.
4) Through discussion, the aspects of the truth held by many
pooled and arranged to form a consensus closer to the truth
of the sources that contributed to it.
5) This consensus is a temporary approximation of the truth
experiences make it necessary to reformulate.
6) Thus Western man's picture of the truth advances closer and
to the whole truth without ever reaching it.
This methodology of the West is basic to the success, power
wealth of Western Civilization.
To the West, in spite of all its aberrations, the greatest sin
from Lucifer to Hitler, has been pride, especially in the form
intellectual arrogance, and the greatest virtue has been
especially in the intellectual form which concedes that
always subject to modification by new experiences, new
the opinions of our fellow men.
The most triumphant of these aspects is science, whose method
a perfect example of the Western tradition. The scientist goes
to work each day because he has the humility to know that he
have any final answers and must work to modify and improve the
he has. He publishes his opinions and research reports or
these in scientific gatherings so that they may be subjected
criticism of his colleagues and thus gradually play a role in
formulating the constantly unfolding consensus that is
is what science is, "a consensus unfolding in time by a
effort in which each works diligently seeking the truth and
his work to the discussion and critique of his fellows to make
slightly improved, temporary consensus."
THE UNITED STATES AND THE MIDDLE-CLASS CRISIS
American society in the 1920s was largely middle-class. Its
values and aspirations were middle-class and power or
it was in the hands of middle-class people.
Most defenders of bourgeois America saw the country in
terms and looked forward to a not remote future in which
everyone would be middle-class except for a small shiftless
of no importance. America was regarded as a ladder of
Wealth, power, prestige and respect were all obtained by the
standard, based on money. This in turn was based on a
emotional insecurity that sought relief in the ownership and
of material possessions.
Years ago in Europe, the risks (and rewards) of commercial
enterprise, well reflected in the fluctuating fortunes of
as Antonio in The Merchant of Venice were extreme. A single
could ruin a merchant or make him rich. This insecurity was
by the fact that the prevalent religion of the day disapproved
he was doing, seeking profits or taking interest, and he could
way of providing religious services to the town dwellers
the intimate association of the ecclesiastical system with the
existing arrangement of rural landholding.
Credit became more important than intrinsic personal
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and credit was based on the appearance of things, especially
appearances of the external material accessories of life. Old
such as future preference or self-discipline, remained, but
redirected. Future preference ceased to be transcendental in
and became secularized.
Middle-class self-discipline and future preference provided
savings and investment without which any innovation - no
appealing in theory - would be set aside and neglected.
The middle-class character is psychic insecurity founded on
of secure social status. The cure for such insecurity became
insatiable material acquisition. From this flowed attributes
preference, self-discipline, social conformity, infinitely
material demand, and a general emphasis on externalized
values. The urge to seek truth or to help others are not
compatible with the middle-class values.
One of the chief changes, fundamental to the survival of the
middle-class outlook, was a change in society's basic
human nature. This had two parts to it. The traditional
attitude was that human nature was essentially good and that
formed and modified by social pressures and training. The
of human nature was based on the belief that it was a kind of
copy of God's nature. In this Western point of view, evil and
negative qualities; they arose from an absence of good, not
presence of evil. Thus sin was the failure to do the right
doing the wrong thing.
Opposed to this view was another which received its most
formulation by the Persian Zoroaster in the seventh century
came in through the Persian influence on the Hebrews,
during the Babylonian Captivity of the Jews, in the sixth
more fully through the Greek rationalist tradition from
Plato. The general distinction of this point of view from
William Golding (in Lord of the Flies) is that the world and
are positive evils and that man, in at least this physical
part of his
nature, is essentially evil. As a consequence, he must be
totally to prevent him from destroying himself and the world.
view, the devil is a force, or being, of positive malevolence
by himself, is incapable of good and is, accordingly, not
free. He can
be saved in eternity by God's grace alone and he can get
temporal world only by being subjected to a regime of total
The contrasts can be summed up thus:
Evil is an absence of Good;
Evil is a positive entity.
Man is basically good;
Man is basically evil.
Man is free;
Man is a slave of his nature.
Man can contribute to his salvation by good works;
Man can be saved only by God.
Self-discipline is necessary to guide or direct;
Discipline must be external and total.
Truth found from experience and revelation interpreted by
Truth is found by rational deduction from revelation.
Luther, Calvin, Thomas Hobbes, Blaise Pascal and others
that truth was to be found in rational deduction from a few
revealed truths in sharp contrast with the orthodox point of
still represented by the Anglican and Roman churches which saw
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largely free in a universe whose rules were to be found by
The Puritan point of view led directly to mercantilism which
regarded political-economic life as a struggle to the death in
where there not sufficient wealth or space for different
them, wealth was limited to a fixed amount and one man's gain
someone else's loss. That meant that the basic struggles of
were irreconcilable and must be fought to a finish. This as
the Puritan belief that nature was evil and that a state of
a jungle of violent conflicts.
One large change was the Community of Interests which rejected
mercantilism's insistence on limited wealth and the basic
incompatibility of interests for the more optimistic belief
parties could somehow adjust their interests within a
which all would benefit mutually.
Above all, the middle-class which dominated the country in the
first half of the 20th century were a small group of
Below were the petty bourgeoisie who had middle-class
Below these two were two lower classes: the workers and the
In America, as elsewhere, aristocracy represents money and
position grown old, and is organized in terms of families
of individuals. Traditionally it was made up of those families
money, position,and social prestige for so long that they
never had to
think about these and,above all, never had to impress any
with the fact that they had them. They accepted these
family membership as a right and an obligation. Since they had
that these could be lost, they were self-assured, natural but
Their manners were gracious but impersonal. Their chief
was the assumption that their family position had obligations.
"noblesse oblige" led them to participate in school sports
they lacked obvious talent) to serve their university (usually
family tradition) in any helpful way, and to offer their
their local community, their state, and their country as an
Another good evidence of class may be seen in the treatment
to servants who work in one's home: the lower classes treat
equals, the middle-classes treat them as inferiors, while the
aristocrats treat them as equals or even superiors. On the
number of aristocratic families in the U.S. is very few, with
in each of the older states. A somewhat larger group of
consists of those like the Lodges, Rockefellers, or
Kennedys,who are not yet completely aristocratic either
are not, in generations, far enough removed from money-making,
because of the persistence of a commercial or business
The second most numerous group in the U.S. is the petty
bourgeoisie, including millions of persons who regard
middle-class and are under all the middle-class anxieties and
pressures but often earn less money than unionized laborers.
result of these things, they are often very insecure, envious,
with hatreds, and are generally the chief recruits for any
Right, Fascist, or hate campaigns against any group that is
or which refuses to conform to middle-class values. Made up of
shopkeepers, and vast numbers of office workers in business,
government, finance and education, these tend to regard their
collar status as the chief value in life, and live in an
envy, pettiness, insecurity, and frustration. They form the
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portion of the Republican Party's supporters in the towns of
as they did for the Nazis in Germany thirty years ago.
Eisenhower himself was repelled by the Radical Right whose
impetus had been a chief element in his election although the
class had preferred Senator Taft as their leader. Eisenhower
however had been preferred by the Eastern Establishment of old
Street, Ivy League, semi-aristocratic Anglophiles whose real
rested in their control of eastern financial endowments
foundations, academic halls, and other tax-exempt refuges.
As we have said, this Eastern Establishment was really above
parties. They had been the dominant element in both parties
and practiced the political techniques of J.P. Morgan.
They were, as we have said, Anglophile, cosmopolitan, Ivy
internationalist, astonishingly liberal, patrons of the arts,
relatively humanitarian. All these things made them anathema
lower-middle-class and petty-bourgeois groups who supplied the
in Republican electoral victories but found it so difficult to
nominations (especially in presidential elections) because the
money necessary for nominating in a Republican convention was
to Wall Street and to the Eastern Establishment. The ability
latter to nominate Eisenhower over Taft in 1952 was a bitter
the radical bourgeoisie.
Kennedy was an Establishment figure. His introduction to the
Establishment arose from his support in Britain. His
the English Establishment opened its American branch as well.
indication of this connection was the large number of
men appointed to office by President Kennedy.
In the minds of the ill-informed, the political struggle in
U.S. has always been viewed as a struggle between Republicans
Democrats at the ballot box in November. Wall Street long ago
that the real struggle was in the nominating conventions. This
realization was forced upon the petty-bourgeois supporters of
Republican candidates by their inability to nominate their
congressional favorites. Just as they reached this conclusion,
wealth appeared in the political picture, sharing
suspicions of the East, big cities, Ivy League universities,
foreigners, intellectuals, workers and aristocrats. By the
election, the major political issue in the country was the
struggle behind the scenes between the old wealth, civilized
cultured in foundations, and the new wealth, virile and
arising from the flowing profits of government-dependent
in the West and Southwest.
At issue here was the whole future face of America, for the
wealth stood for values and aims close to the Western
diversity, tolerance, human rights and values, freedom, and
of it, while the newer wealth stood for the narrow and
aims of petty-bourgeois insecurity and egocentricity. The
issues between them, such as that between internationalism and
unilateral isolationism (which its supporters preferred to
"nationalism") were less fundamental than they seemed, for the
issue was the control of the Federal government's tremendous
influence the future of America by spending of government
petty bourgeois and new wealth groups wanted to continue that
into the industrial-military complex, such as defence and
the older wealth and non-bourgeois groups wanted to direct it
social diversity and social amelioration for the aged and the
for education, for social outcasts, and for protecting
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resources for future use.
The outcome of this struggle, which still goes on, is one in
which civilized people can afford to be optimistic. For the
wealth is unbelievably ignorant and misinformed.
The National parties and their presidential candidates, with
Eastern Establishment assiduously fostering the process behind
scenes, moved closer together and nearly met in the center
identical candidates and platforms although the process was
as much as possible, by the revival of obsolescent or
cries and slogans.
The two parties should be almost identical so that the
people can "throw the rascals out" at any election without
any profound or extensive shifts in policy. The policies that
vital and necessary for America are no longer subjects of
disagreement, but are disputable only in details of procedure,
priority, or method: we must remain strong, continue to
function as a
great World power in cooperation with other Powers, avoid
war, keep the economy moving, help other countries do the
provide the basic social necessities for all our citizens,
opportunities for social shifts for those willing to work to
them, and defend the basic Western outlook of diversity,
cooperation,and the rest of it, as already described.
Either party in office becomes in time corrupt, tired,
unenterprising and vigorless. Then it should be possible to
every four years by the other party which will be none of
but will still pursue, with new vigor, approximately the same
The capture of the Republican National Party by the extremist
elements of the Republican National Party in 1964 and their
elect Barry Goldwater with the petty-bourgeois extremists
only a temporary aberration on the American political scene
from the fact that President Johnson had pre-empted all the
that it was hardly worthwhile for the Republicans to run a
contestant against him. Thus Goldwater was able to take
control of the
party by default.
The virulence behind the Goldwater campaign, however, had
to do with default or lack of intensity. Quite the contrary.
ardent supporters were of the extremist petty-bourgeois
driven to near hysteria by the disintegration of the
the steady rise to prominence of everything they considered
Catholics, Negroes, immigrants, intellectuals, aristocrats,
scientists, and educated men generally, cosmopolitans and
internationalists and, above all, liberals who accept
diversity ad a
This disintegration of the middle classes had a variety of
causes, some of them intrinsic, many of them accidental, a few
obvious, but many of them going deeply into the very depths of
existence. All these causes acted to destroy the middle-class
acting to destroy the middle-class outlook.
In the earlier period, even down to 1940, literature's attack
the middle-class outlook was direct and brutal, from such
Upton Sinclair's "The Jungle" or Frank Norris's "The Pit,"
dealing with the total corruption of of personal integrity in
meatpacking and wheat markets. These early assaults were aimed
commercialization of life under bourgeois influence and were
fundamentally reformist in outlook because they assumed that
of the system could somehow be removed. By the 1920s, the
much more total and saw the problem in moral terms so
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no remedial action was possible. Only complete rejection of
values could remove the corruption of human life seen by
Sinclair Lewis in Babbitt or Main Street.
The Puritan point of view of man as a creature of total
without hope of redemption which in the period 1550-1650
despotism in a Puritan context, now may be used, with
support, to justify a new despotism to preserve, by force
conviction, petty-bourgeois values in a system of compulsory
conformity. George Orwell's 1984 has given us the picture of
system as Hitler's Germany showed us its practical operation.
Goldwater's defeat moved the possibility so far into the
the steady change in social conditions makes it remote indeed.
For generations, even in fairly rich families, the
continued because of emphasis on thrift and restraints on
By 1937, the world depression showed that the basic economic
were not saving and investment but distribution and
there appeared a growing readiness to consume, spurred on my
techniques, installment selling and the extension of credit
productive side to the consumption side of the economic
process. As a
result, an entirely new phenomenon appeared in middle-class
the practice of living up to, or even beyond, their incomes -
unthinkable scandal in any 19th century bourgeois family.
Middle-class marriages were usually based on middle-class
of economic security and material status rather than on love.
accurately, middle-class marriages were based on these
considerations in fact, while everyone concerned pretended
were based on Romantic love. Even when the marriage becomes a
in the sense that it persists, it is never total and merely
the marriage becomes an enslaving relationship to the husbands
source of disappointment and frustration to the wives.
In the old days, the merchant bankers of London controlled
well the funds that were needed for almost any enterprise to
substantial success. Today, much larger funds are available
diverse sources, from abroad, from government sources, from
and pension funds, from profits from other enterprises. These
longer held under closely associated controls and are much
impersonal and professional in their disposal so that on the
energetic man (or a group with a good idea) can get access to
funds today, and can do so without anyone much caring if he
the established social precedents.
Lycurgus renounced social change in prehistoric Sparta only by
militarizing the society.
Tragedy and Hope? The tragedy of the period covered by this
is obvious but the hope may seem dubious to many. Only the
time will show if the hope I seem to see in the future is
there or is the result of mis-observation and self-deception.
The historian has difficulty distinguishing the features of
present and generally prefers to restrict his studies to the
past,where the evidence is more freely available and where
helps him to interpret the evidence. Thus the historian speaks
decreasing assurance about the nature and significance of
they approach his own day. The time covered by this book seems
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historian to fall into three periods: the 19th century from
1895; the 20th century after World War II, and a long period
transition from 1895 to 1950.
The 20th century is utterly different from the 19th century
the age of transition between the two was one of the most
periods in all human history. Two terrible wars sandwiching a
economic depression revealed man's real inability to control
by nineteenth century techniques of laissez-faire,
competition, selfishness, nationalism, violence, and
These characteristics of late nineteenth-century life
World War II in which more than 50 million persons were
of them by horrible deaths.
The hope of the twentieth century rests on the recognition
war and depression are man-made, and needless. They can be
the future by turning from the 19th century characteristics
mentioned and going back to other characteristics that our
society has always regarded as virtues: generosity,
cooperation, rationality, and foresight, and finding an
in human life for love, spirituality, charity, and
On the whole, we do know now that we can avoid continuing the
horrors of 1914-1945 and on that basis alone we maybe
our ability to go back to the tradition of our Western society
resume its development along its old patterns of Inclusive
Electronic edition by John Turmel
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