Gabriel Kolko - Main Currents in Modern American History

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Author: Gabriel Kolko
Full Title: Main Currents in Modern American History
Category: #books
No academic discipline is more ill-equipped than history to analytically or intellectually explain the origins of the crises which have plagued the United States and the world with increasing intensity over the past half-century. Empiricism without insight has produced fine monographs, of which there have been an increasingly large number dealing with various phases of modern American history, but it cannot by itself create vital linkages which lead to a more comprehensive vision. Historians since World War Two have avoided the main questions and the exceedingly difficult basic problems, partially out of conservatism for some but largely because the murky reflective banalities of conventional liberal thought have encouraged myopia. Moreover, it is also a fact that the United States is a nation so complex and distinctive that existing general theories, most of which were formulated in Europe, tend to be too irrelevant or incomplete to offer much help in filling the conceptual void. The result is that, for all of these and other reasons, American scholarship has largely been immune to the dominant experiences of its age: the violence and deepening crises at home, the capacity for unlimited savagery and ruthlessness of United States foreign policy abroad, and the clear trend of the nation toward greater difficulties without resolutions for any of them. The gap between acceptable intellectual mystifications and social reality and experience grows wider with time, notwithstanding the appearance after 1960 of critical and valuable writings on various quite specific dimensions of the general American malaise.
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The main purpose of this book is to describe historically the nature and purpose of power and its institutions in the United States, and its evolution over the century since the 1870s - the period of modern capitalism. That century witnessed numerous changes in the political and economic order as well as among classes. In a vital sense, these altering domestic configurations touch such fundamental issues as which groups held power, how they exercised it, and the consequences of their actions. But history involves, as well, the question of the powerless: workers and farmers above all. American capitalism during its first century was a system that was quite consistent at the level of its ultimate functions, but its structure and problems evolved in ways we must consider here in a manner which gives due respect to both continuity and change in American history.
But whatever the deficiencies of descriptive history, it seems quite clear that the main drift in modern American history illustrates the limits of capitalism and its social order in dealing with its emerging difficulties. The weaknesses and tensions of the system, therefore, we must move to the fore, with the growing inability of the directors of the society to control or rationalize it being the central institutional phenomenon over the past century.
Even so, when Eastern investment financiers did seek to invest in manufacturing and mining, which they were both more eager and able to do after 1898, they in turn still had to depend partially on tapping the European capital market until as late as 1914, when Europeans held $4.5 billion in American bonds and securities. It was because of J. P. Morgan's access to European outlets that the United States Treasury called upon him to help place its 1895 gold loans, but during the 1907 financial panic it was Morgan and his associates who pleaded with Washington to mobilize its resources to save the entire Eastern banking community from crisis. By the first decade of this century, the Treasury, inadequate as it was had assumed greater central banking functions than an allegedly collusive Wall Street, which remained sufficiently internally disunited as well as far too remote from the mushrooming new economic and financial centers to control its own economic welfare.
Banking and finance needed a center of control which New York alone simply could not provide by purely economic means, and, as we shall soon see, it was for this reason that Wall Street turned to politics when its economic power and control no longer sufficed.
National regulation of various components of the economy after 1887, ranging from railroads to banking to industry, was an effort to find political means to resolve the economic problems which economic decentralization, competition, and a whole panoply of new challenges made endemic to American capitalism. It was not the exclusive method which various business leaders employed to attain stabilization and integration of their industry; for other nonpolitical means included trade associations and pools that sought voluntary price and output agreements and, of course, further efforts at mergers and economic concentration. Indeed, one can only view the American national reform experience from the 1880s until World War One as a frustrating cycle in which specific business constituencies moved alternatively between political and voluntary economic solutions to their problems, abandoning the one for the other as each in its turn failed to resolve their dilemmas or, what was as common, when general prosperity made past instabilities temporarily disappear
Modes of capitalist rivalry are abundant, though not as numerous as the number of competitive industries. Generally, however, sectors of any industry often realize it is to their direct welfare to equalize those costs-labor or transport particularly which allow some firms to employ lower prices to grab a larger share of existing markets. And established firms invariably favor efforts to reduce the ease with which new firms can enter their industry. This has also necessarily meant that some firms within an industry have ardently spoken against regulation, a fact to which historians later attached exclusive importance, and at the same time nonbusiness elements have also favored some mode of regulation or even policing of an economic sector. Anyone who sees this diversity as the essence of the era ignores the critical question of who benefits from a measure and defines its implementation, when in fact the motives of the losers, or those who created pressures others redirected for their own ends, should be of marginal interest. In brief, the issue is who succeeds rather than fails in attaining his main objectives in politics, and not so much the motives of reformers as the consequences of legislation. National or even state regulation is merely an instrument toward the goal of industrial regulation, and not an objective in itself, for when there are no useful, immediate economic consequences in political intervention, business has rarely advocated it. During the great expansion of economic activity and new firms between 1870 and 1914, with its destabilizing depressions and business downturns as well as long-term aggregate growth, political regulation of the national and state economies grew in frequency despite the long-run prosperity. After World War One, business attraction to national political intervention was more closely related to economic conditions, declining with prosperity. Indeed, for very diverse reasons, hardly any social element of American society was consistently opposed to some form of regulation.
In certain economic sectors, such as insurance and utility regulation, advocates of regulation were stymied, but they further illustrated the fact that many businessmen increasingly saw politics as the arena in which to find solutions for wasteful competition, inconsistent state regulations, the easy entrance for new firms into their industry, and potential crisis. What was politically impossible for the moment because of divisions within the industry might prove relevant another year-and often did. Meanwhile, the numerous federal acts and agencies created during the "Progressive Era" left an important, if incomplete, basis for later reforms. In addition to the railroad regulatory system there was now a Federal Trade Commission and a Federal Reserve Board, food and drug legislation, a meat inspection that the biggest firms had much desired, and diverse other laws.
In the case of assorted industrial regulations, here too one finds the advocates of national legislation emerging in response to decentralization and competition in the various industrial sectors, from steel to meat; and their success in the form of the Federal Trade Commission is more equivocal because of the imprecision of the law and the ignorance of all in face of the sheer magnitude of the task of regulating a capitalism characterized all too much by its mythical virtue of competition. "Unfair competition" was made illegal under the 1914 law, curiously banning price cutting designed to reduce the number of competitors in a field, but more to the point was the desire of the FTC, in the words of its first chairman, Joseph H. Davies, in 1915, "that our industries shall be integrated and stabilized" to confront the national and world economy. That the way to attain this goal remained a mystery to even its most ardent advocates was of less immediate significance than the definition of the goal itself. And what was most essential for later efforts in all fields was that, in a piecemeal and exploratory fashion, an extensive foundation of the modern American political economy had been laid and critical precedents established in a comprehensive fashion.
For the most part, before the war the advocates of this rationalization thought almost exclusively in terms of the concrete problems of their own industries, and the types of laws and commissions they propounded must always be assessed in terms of the economic context that made them desirable to one or another group. The Northern cotton-textile industry long advocated the passage of national child labor legislation not because of philanthropy or even some abstract pecuniary theory but purely and simply to strike a blow at their Southern rivals, who, enjoying a lower-cost labor supply, were beginning to dominate the market. Others began considering various forms of public unemployment insurance as an intriguing means of reducing labor turnover and thereby lowering labor costs. In addition to political actions to attain stability, profit, and rationality, business contemplated new innovations, for after 1911 trade associations begin emerging to standardize industry practices, with FTC encouragement following what eventually was to lay a critical basis of postwar regulatory efforts. The legal bases of this political capitalism were by no means fully completed over the thirty years after the creation of the ICC, and there had been many false starts and errors-not merely those political opponents dietated but, also, those limits of capitalist planning that ignorance and, above all, a changing structural environment in which men planned for the future on the basis of a quite different past imposed. And in a context in which goals always exceeded the means for attaining them, new improvisations and yet more change were foreordained.
With the exception of two railroad acts, meat inspection, and the Food and Drug Administration, as well as a hands-off policy toward Morgan-related firms, Roosevelt was to leave it to Wilson to implement much of what big-business elements advocated.
In the intervening period after 1900 until the war, in which personal political ambitions melded with skepticism and opposition from agrarian conservatives who saw no need to assist industry and bankers, there are many details on which historians have focused, losing sight of the forest for the trees, but the fact is that by 1914 the most important business constituencies in the various key economic sectors had attained the essential legislation they sought from the federal government.
Meanwhile, the Presidents and their circles responded to the bankers and businessmen who sought their ears and actions, and any historian who works in the documents of the period finds innumerable recurrent contacts between important economic leaders and the main political figures both before and during the enactment of legislation they desire or oppose. It would be shocking if it were otherwise, just as it is predictable there was only one recorded case during this era of a black entering the White House for nonmenial purposes -and whether it was by the front door has been debated-and none, apparently, of real workers of whatever race to air their views. In effect, within the parameters of a class society, political life was administered according to its class character and political parties, and that fact, perhaps more than anything else, meant that business forces in need would have a reasonable chance to attain their goals, in part or wholly, by resort to political mechanisms. Incrementally, that process has provided modern American history with one of its main currents and defining experiences.
The Impact of War The First World War did not bring to a definitive culmination the efforts of anti-competitive businessmen to rationalize their indus tries. It did create a skein of incipient organizational forms that were to be modified and revived later, deepened informal cooperation among firms so that something like oligopoly emerged in numerous industries, and produced a general prosperity and rising prices that solved all the earlier business problems which had stimulated the movement for regulation and national stabilization in the first instance. The wartime crisis produced new business-government integrative mechanisms, but the Wilson Administration disbanded them almost immediately after the end of the conflict, leaving precedents and experiences on which others would build.
Despite the frustrations of the early war organization, which reflected both inexperience and the fact that the military and government bureaucracy could not match business for expertise in management of wartime mobilization, by July 1917 the Wilson Administration created the War Industries Board under the domination of men largely from finance and industry. Wary of elaborate bureaucratic codes and prone to informal yet binding accords, it was the first time businessmen had so comprehensively and profitably managed capitalism. Railroad executives ran the Railroad Administration, and an oil engineer and entrepreneur ran the Fuel Administration. Advocates of business-government cooperation were predominant, including those who had for some time urged national regulations which would have permitted industry-wide price and output agreements to attain stabilization. Briefly, the political and economic context of the Progressive Era delineated the personnel, policies, and forms the wartime structure pursued.
As it was, given rising prices and the vast market which Washington and its allies provided, there were relatively few critics of the wartime organizational machinery itself. Between entry into the war and August 1919, the public debt rose twenty times as expenditures skyrocketed to create unprecedented business prosperity, melting opposition to the vast expansion of business-government integration. Ironically, the good times diminished the memory of the events of less affluent years and split the industrial community's opinion on whether to perpetuate the new institutions in various forms. In effect, the war also proved that massive government outlays, loans, and subsidies were also means to assure business profits-an experience whose message was not to be lost-without creating new regulatory bodies.
The railroads alone were able to obtain new legislation in 1920 which allowed them legally to perpetuate the wartime rationalization of their entire industry in the form of pooling agreements and profit guarantees, but even this was never to prove adequate to assure them sufficient profits in the more straitened decades that accompanied the new competition of auto and truck transport. The biggest firms in the steel industry, who had been in the vanguard of the prewar movement to establish federal regulation of their industry on terms they defined, inclined to continue the new arrangements of price-fixing and output controls after the war, but found the Wilson Administration and smaller firms unsympathetic. The political environment and business divisions proved uncongenial to sustaining the wartime bodies. Trade-association advocates and executives in numerous other industries plagued by prewar price rivalries or overproduction also preferred-though not enough to fight hard for it-perpetuating the wartime measures which represented the culmination of the national regulation movement after 1900. But in the aftermath of their frustration and inability to mobilize sufficient business pressure and backing, all that they could do was to resolve to sustain or build trade associations which voluntarily accomplished the same goals-or privately to continue those new wartime ties and accords with specific firms, which, indeed, helped lay the basis of modern oligopoly, The Federal Trade Commission agreed to review and approve a number of these congenial practices. Businessmen attained their ultimate goal-profitability and security-with the merger of peacetime reforms and war organization. On this basis they laid the foundations of postwar business reform, not in an ideo logical way for not even the most ardent business advocates of the continuation of the wartime structures qualified for this designation - but as pragmatists who, when the older ways once again began to fail, were to remember how well the wartime departure had succeeded. The national government had built a vast administrative structure which businessmen had defined and guided from its inception, and they might yet do so once again.
In the decades preceding World War One the architects of a system of political capitalism elaborated piecemeal views on assorted subjects; and while no one man or group embodied them all, it can be said that main characteristics emerge for what is necessarily an artificial portrait. They were anti-competitive, and hence their attraction to federal sanctioning of price and production accords and insulation of the larger industry from cutthroat entrants. The trade association movement was but the logical nonpolitical expression of this sentiment when political reticence and frustration with earlier efforts left the integrationists few options after 1920. They tended to oppose taxation as a tool of regulation, and gladly destroyed the wartime excess profits taxes which had been temporarily used to feed them more contracts. Equity in the social sense scarcely moved any of them, and their penchant for racism was a common social attitude of the period in any case. Order, hierarchy, and efficiency were more congenial notions, though not as ends in themselves but justifiable because they were profitable. Some saw social welfare reform outside the criterion of the cash nexus, but most were moved by what seemed pecuniarily rewarding. Northern textile-mill owners worried about the children their Southern competitors exploited, not the conditions of their own adult labor. Others saw company-organized unions as superior to autonomous organizations, and workmen's compensation and unemployment insurance systems as means not only of reducing labor costs via lower turnover but transferring the liabilities of employers to the state. Out of this melange of attitudes, impulses, and interests no consistent, overarching sophisticated philosophy could emerge, though indeed businessmen and their spokesmen never tired of banally defining their own interests and hegemony in universal rather than class terms. But it embodied the ingredients and contradictions in what was essentially a typically eclectic American philosophy for adjusting to a troublesome new reality that the merger of industrialism, growth, and space was distinctively creating in the United States.
To consider the farmer as an aspiring entrepreneur ignores entirely the economic structure of peasants everywhere and the economic compulsions of excessively small acreage and output per farm which required the individual farmer to risk growth or face bankruptcy. All peasants, even those in pre- and postrevolutionary societies, are involved in risk-taking in the normal order of things, they aspire to succeed economically but rarely do, and the resemblance between this activity and any stage of capitalist enterprise is upon closer examination quite superficial. More important are the farmer's economic failures, which define his political responses and economic future. Some farmers, of course, succeed in becoming wealthy and conservative in this process, but the vast majority fail to develop secure and minimally comfortable existences, and their politics will sometimes reveal their misery. Agriculture, like the rest of an economy, has a class structure, and the distinction between large and small farmers is always a real one politically and socially. In such places as Kansas, of course, the local town elites and the eastern Kansas political hierarchy combined with a few large farmers to keep the new western populations out of political power as well as to monopolize state-controlled economic resources. Instability of population and institutionsclubs, churches, and such-meant that newcomers were less ready for political struggle against existing dominating elites, a fact that was to persist, save for a few exceptional and astonishing years during the brief Populist ascendency when both Kansas and Nebraska had Populist governments
Midwestern Populism's demise in the hands of demographic forces was yet faster than that in the South, and if one looks at the population of the counties where the Populists were strongest it becomes apparent that the radicals were neither converted nor prosperousinstead they moved. In effect, it was in the process of abandoning their region in desperation that they temporarily accepted a radicalized politics; yet the same mental and physical motion meant that they would not stay to consolidate their economic power by political means. In 1889 the first western Kansas counties began experiencing a population decline, and over the next two years some counties lost up to 77 percent of their population and whole towns were abandoned. In the decade 1890-1900 six southwest Kansas counties lost over 60 percent of their population, and in fifty Plains counties-mainly in Kansas and Nebraska-the population fell by nearly a third. This population movement is the overarching reality, more than any other factor, which explains the demise of Midwestern Populism.
Perhaps most disturbing of all to conventional wisdom is the fact that between 1898 and 1914 about one million American residents, the vast majority of whom had been previously in the states with large agrarian radical movements, moved to Canada, predominantly the rich wheat-growing provinces. Many had been Populists, and some outstanding former Populist political leaders were among their ranks, and this constituency and its inheritance became an important strand in the Canadian social democratic movement. Many, of course, were from the predominantly first-generation ethnics who composed the large majority of the population of the Dakotas and Minnesota, but the fact that one of the reasons agrarian radicalism disappears is due to departure from the United States entirely of a significant portion of its adherents is a reality too important for all but a few specialists to ignore.
Because the economic and international environment in which American capitalism operates is always in flux, the exact means for reaching its objectives of profit and continuity have by necessity varied, so that the modalities appropriate to one period and set of conditions have usually differed from those of another. We must cope with change as well as continuity in the emergence of the modern American political economy, because it embodies both. To define the goals of security and profitability as part of the entire system over time is easy, yet to assume that the dominant techniques and institutions of one stage are necessarily those of another is impossible, for consistency in this regard is almost as nonexistent as tactical agreement among businessmen within a framework to which they are all united on ultimate principle only. After 1920 the direction and problems of American capitalism altered from the preceding decades, not once but often, as the insecurity and instabilities of the prewar period were partially obscured and yet new challenges emerged.
2
The Foundations of the United States as a World Power, 1880-1919
In any case, after 1899 the problem of unprofitable excess industrial capacity in the United States was partially brought under control with the expedients of mergers, a growing domestic population and market, the beginnings of government rationalization of banking, railroads, and industry, and the return of relative prosperity.
This dimension of the growing United States need for access to the Third World has scarcely been discussed in the works of historical critics and apologists alike. More important is the reality that this still small United States dependence was to carry with it vast consequences for the nations increasingly geared to American demand, leaving Washington with options to control Latin American states which were less a question of intentions or desire, at least for purposes of argument here, than of structural relations from which the United States could select any steps it chose. And even if these actions might not resolve the problems of American capitalism's profitability, they created the skein of dependency which over time was to bear fruit in United States oppression and intervention in the Third World. In effect, by 1913 fully 43 percent of the exports of Chile, Mexico, Peru, and Bolivia, and 48 percent of Brazil, Colombia, Cuba, and Ecuador, were directed to the United States-a pervasive reality which was only to grow with time. In the Philippines this integration with the United States economy was greater yet.
What critical historians must admit, as an aspect of coming to grips with a comprehensive, realistic economic theory, is that during 1900-1914 internal expansion satisfied most businessmen by far, even as an imperialist foreign policy placated some interests in need.
Although earlier historians may have overstressed British policy as a deliberate courtship of the United States to build a new alliance against the greater menace of Germany, in fact Britain's careful respect for the new American power built up a serious, at least partially calculated, mutual interdependence. In turn, the avoidance of the drastic rearrangement of the world and colonialism which Britain's defeat in World War One would have engendered was vital to the United States. Sentimental preferences also existed, especially among such progressive imperialists as Theodore Roosevelt, Henry Cabot Lodge, Elihu Root, and others, who from a racist viewpoint admired British colonialism's role in the world, but mutual interest was the bedrock of the de facto Anglo-American entente that was to emerge.
In Asia the framework in which United States efforts proceeded was far more complicated and, ultimately, was to fail to preserve both peace and American power in an environment in which the balance of power diplomacy was eventually to become increasingly irrelevant before the tides of nationalism and revolution germinating throughout Asia. But the first American entry - and the most ignored - was the bloody acquisition of the Philippines and the long repression, eventually costing at least 200,000 Filipino lives, which was required when the Americans found that in order really to take the islands they had first to retrieve it by force and chicanery from a Filipino independence movement largely in control at the end of the war with Spain. Americans, with few exceptions, refused to reflect on the enormity of this crime, which it later repeated again in a yet more brutal form in Vietnam. But it was from this island base, held firmly in hand with terrible force, and then also co-option and cultural imperialism, that the United States was to embark on its Asian role, a role that eventually became the most demanding and troublesome in America's long history.
The Enigma of Ideology
Discussions of the role of ideas and ideology as the basis of American foreign relations will always necessarily be artificial; and divorced from the actual conduct of diplomacy, they will also prove grossly misleading. That leaders can or do relate each specific action to some intellectual frame of reference is to exaggerate the role that ideas are designed to play, yet standards and parameters of conduct exist and some are capable of being subsumed as principles. Indeed, the very lack of precision and the inability always to relate actions to final objectives and principles must be taken into account in order to comprehend the latent weaknesses and dilemmas of United States foreign policy. More pressing in the daily reality is the existence of constituencies and their concrete pressures to accomplish this or that goal, but even these have a minimally predictable coherence. Ideology, therefore, can be based on formal propositions and doctrines, or it can also be the merger of ideas and the functional practices which real interests impose on the conduct of foreign relations in a capitalist society. At various times and places it can be both, or either. More often, the practice searches for its own rationalization after the fact, and simply reflects the pervasive truth that the distribution of power in a capitalist society rarely had allowed Washington to conduct policies counterproductive to those tangible interests which could be measured not in terms of doctrinal purity but in dollars or the promise of them. In this regard, the first principles of United States foreign policy can be considered as purely utilitarian: those which satisfy the interests of powerful constituencies are followed so long as they succeed, with doctrinal purity being less important than accomplishments. Historians, in brief, can make too much of the ideological basis of United States foreign policy, and are especially wont to do so when they separate ideas from practice. A speech, after all, is much more likely to be written to satisfy an occasion than to articulate a basis to guide future action.
Consistency regarding all details of the practice on which the broad principles of United States diplomacy rest is impossible, if only because the often vague ideological abstractions of the "Open Door,"
"liberal internationalism," or even "national interest," to cite only a few of the overall characterizations of the intellectual premises of United States conduct, cannot always be translated by decision makers into specific actions which satisfy all the priorities and needs of all the factions of American capitalism-who agree on the abstractions but have varying strategies to sell different commodities or attain privileges, often at the expense of each other. More practically, the men who administer policy usually are responsive to one approach to the achievement of United States hegemony or success which slights the needs of other constituencies.
Historians, in any case, have considered virtually all of the utterances of men of varying degrees of power involved in the shaping of United States diplomacy after 1880, from Presidents to business leaders. To precisely sort out the relative weight one attaches to McKinley's claim to have heard the "Almighty's" injunction to retain the Philippines to "Christianize" it, or to the cotton-textile industry's lobbying to open the China market, is a futile exercise, but it is surely a retreat from reality and an encouragement to wishful thinking to state that just because we cannot know everything we have no responsibility to attempt to strike some approximate syntheses. For in the aggregate it is a fact that the final intended result of the whole course of United States foreign policy after the Civil War was to optimize the power and profit of American capitalism in the global economy, striving for the political and military preconditions essen tial to the attainment of that end. At times it is certain that the missionary impulse and doctrines of racial supremacy were operative, even for their own sake, and Roosevelt and Wilson's admiration for the cultural imperialism of Britain and Europe was a fact even when the profit of America was not an issue at stake. Few, if any, American leaders after the Civil War challenged the assumption that the expansion of Caucasian nations was synonymous with human progress. Roosevelt did indeed believe in "just" wars, and a certain admiration among him and his friends for combat and bloodshed as a healthy human activity existed at various times, even though in practice Roosevelt as President tried to avert conflicts among European powers and tried to preserve a balance of power there more congenial to American interests. A paradox, surely, but a quite common one that was to appear in the sort of convenient but genuinely sincere contradictions which so marked the thought of his numerous successors. Such an unconscious unity of seeming opposites is quite a common element in the development of such ideology as may have emerged, and is perhaps the best argument for stressing the practice and function of United States foreign policy rather than only the rhetoric used to justify it.
50 * Woodrow Wilson embodied all of these paradoxes and strains of thought, and precisely because of his academic background he wrote and said more on which later historians have been able to focus.
Insofar as Wilson was mainly preoccupied with national affairs until at least 1914, this inordinate attention to his every utterance is somewhat contrived, and in fact he did not worry about consistency as much as satisfying the needs of the moment. But even if domestic concerns took the majority of his time, Wilson shared an export consciousness which caused him often to note, as in his acceptance speech to the Democratic convention in 1912, that American industries "have expanded to such a point that they will burst their jackets if they cannot find a free outlet to the markets of the world." And Wilson was indeed a Southerner who represented the full restoration of the South to equality of access to power, but his deep racism differed from that of his predecessors only in degree but not in kind.
Racism in the most inclusive sense was respectable conventional wisdom throughout this period, not merely in the United States but among European liberals as well. More distinctive was Wilson's deep commitment to free trade doctrines so fashionable when he was a doctoral student, but also so universally shared by a South which, more than any other section of the United States, was integrated with its cotton and tobacco exports into the world economy. The foundations of Wilsonian internationalism were therefore congenial with both the theory and practice he and his region inherited, though in his conduct he also associated the fulfillment of these doctrines with the need of Northern manufacturing for new markets-as in reality it was. When viewing the relation of America to Europe and the Eastern Hemisphere, Wilson surely believed that freer trade and the integration of the world economy would produce the sort of natural harmony and prosperity the advocates of laissez faire had always predicted. America would benefit, but so would the entire world, in that sincere doctrine of the reconciliation of interests Republicans and Democrats so blithely shared at the time. Liberalized capitalist internationalism and integration, for Wilson, was an agency of civilization and peace. The advancement of United States trade and the interests of the world at one and the same time would be servedan article of faith American leaders have sincerely held in various forms until this day.
For the Philippines and Latin America, however, United States political leaders always evoked a consistent exception. By holding the Philippines, or giving aid to American investors in Haiti by sending in troops, or such, the United States made possible the future blessings of liberty and held out the hope of diminishing injustices. Later, by opposing Bolshevism and all manifestations of the Left, and by using food aid and the threat of starvation to force nations to American terms, philanthropy and national interest were both maximized.
To state, as Wilson did in September 1916, that "Not only when this war is over, but now, America has her place in the... world of finance and commerce upon a scale that she never dreamed of before," was merely to proclaim what the constituents of American power also believed; but rather than being cynical, Wilson internalized this goal as genuinely best for the entire world." That it was sincere made it no less acquisitive and dangerous, or perhaps more so. What is certain is that before the World War the United States had affected the synthesis of liberal ideology and classic national expansion which was to become the hallmark of United States globalism for the next sixty years. Moreover, after 1914 it created the organizations and honed the strategy that would allow it to move into Europe's traditional markets. Its internationalism and appeals to higher goals were integral to its expansion of its national economic and strategic interests and its thin ideological and moral rhetoric was to become a standard handmaiden to justify its more brutal actions to serve itself in Haiti, the Philippines, Cuba or, later, Vietnam. For surprisingly large constituencies of other nations suffering from the void that the collapse of various national and reform social theories had produced after 1900, the political charms of this doctrine of liberalized capitalist internationalism were to provide the United States with a remarkably durable means of organizational mobilization useful to the attainment of its own concrete national interests-less with cynicism than because Americans too needed some faith by which to justify the bloodshed and expenses that their burgeoning imperialism required.
Hence the odd mixture of liberal international doctrine for the Eastern Hemisphere, a narrower, more classically imperialist practice and theoretical exceptionalism for the Western Hemisphere, and pragmatic attention, in the overwhelming majority of cases, to protecting and advancing specific United States interests wherever the need might arise without reference to such clarity and insight as larger ideologies are supposed to provide. Success was a better criterion for men of action than doctrinal purity. Ideas, in any case, are rarely so precise as to provide an exact guide for relating to each problem, and hence they can be bent accordingly to justify what the needs and interests of the moment require. Rarely do they lead to deductions as to which praxis the faith demands, for the essence of American liberal ideology was a broadness which allowed it to subsume the most diverse actions and become all things to all men. This universality made such abstractions useful not merely for American liberals but those of Europe as well. Hence its complexity and simplicity at one and the same time.
Wilson, in any case, saw in the now ascendant United States economic power the possibility of dictating the nature of the peace to his future allies. "When the war is over," he wrote in July 1917, "we can force them to our way of thinking, because by that time they will... be financially in our hands." What was essential was to guarantee a world in which all nations-by which he meant white European states-could participate equally on the basis of free intercourse. Controls, even to regulate commodity and raw material prices, were anathema to his ideal laissez-faire doctrine. His commitment to this set of goals deepened with the advent of the Bolshevik Revolution in November 1917, when his concern for the reform of cruder types of economically closed European colonialism, if not the destruction of German autarkic intentions, was largely pushed aside by the emergence of the previously unimaginable problem of revolution and a dynamic Left rising from the chaos of war. It was at this point that the desire to create a significantly reformed open world capitalist economic and political order was tactically blunted by the ever-growing obsession of preventing the further expansion and growth of Bolshevism and revolution. The compromises and alleged tragedies of Wilson's allegiance and principles at this point are exaggerated, if only because the fight against revolution was, from a purely American capitalist viewpoint, a necessary precondition to the reform of world capitalism in the Eastern Hemisphere.
What the decision not to try simultaneously to reform European capitalism and destroy revolution did show, however, is that when confronted with a choice the United States would decisively, firmly opt for counterrevolution. From the viewpoint of the larger interests of American capitalism, that decision appeared rational insofar as it preserved the framework so essential to the very existence of the system in any form. That principle, hammered out in the maelstrom of a war that was producing the negations of imperialism as a consequence of its own greed and self-destruction, became the firmest legacy of the Wilson period and one of the most durable premises of United States foreign policy for the remainder of the century,
The United States and Revolution
The problem of the emergence of a world Left and revolution was one that transcended the intellectual equipment with which the United States entered the twentieth century and World War One. It was, in essence, unimaginable, and scarcely contemplated as the main outcome of the vast process of bloodletting called modern war. But any war will generate internal crises and upheavals appropriate to the latent fragility of a social order and the magnitude of the external forces, an unanticipated reality that neither the United States nor its allies could calculate, and one they found inordinately difficult to project into the future by virtue of their own confidence in the stability of traditional societies.
It was Lenin, not Wilson (much less his European peers), who by the fall of 1917 understood the trend of European history and could cope with it. The fact is that the European masses, in Germany and France especially, shared the disgust and apathy of the Russian people toward the whole bloody, insane war, and they wanted nothing so much as to see the torment cease. Lenin urgently wished peace in order to make revolution elsewhere and consolidate it in Russia, while Wilson and his advisers wished to destroy Bolshevism, or at the very least to fatally alter it as a precondition of modernizing and reintegrating Russia into a sustained anti-German struggle and, thereafter, a liberalized world capitalist order. The Fourteen Points were preeminently an effort in this direction, linking, as they did, vaguely defined reform of the European political and economic structures to a settlement "affecting" (but in reality in) a Russia with which the rest of the entente could cooperate. There was no chance, despite continued German aggression and disagreements within Bolshevik ranks, that Soviet Russia could accept the Fourteen Points, or even the more compromising modifications Colonel Edward House or William Bullitt proposed, and Wilson eventually shared Lansing's view that Bolshevism was a greater danger than German militarism and, indeed, probably a diabolical plot concocted and directed from Berlin in the first place.
The Dilemma of Japan
The new reality of instability in Asia and America's need to balance Japan's expansive power was ironic in light of the fact that Japan had received so much encouragement from the Theodore Roosevelt Administration to play its active role in Asia. William Howard Taft had less confidence in Japanese intentions, and from 1909 he slowly, hesitantly began divorcing United States policy from the legitimation his predecessors had given to Japan's sphere of influence. Taft wished to help United States business play a role in Manchuria and northern China precisely to prevent Japan's political domination should its economic growth remain exclusive and unchallenged, and for a time he was encouraged in this by Willard Straight of the J. P. Morgan Company, an ardent advocate of large United States economic penetration who had made the issue something of a personal crusade. But neither could make the risky venture sufficiently profitable to attract much investment interest, and the effort became essentially a politically prompted one in which Washington naïvely hoped that businessmen would risk the loss of money on behalf of the more remote United States strategic and political interest in becoming a power in China. But potential American investors did not agree, as their motivation dropped yet further and they sought for a way to disengage from the political pressures. This they accomplished when Wilson came to office and they posed what was known to be a politically unacceptable precondition for loans: a guarantee of the force of United States arms to collect from the Chinese should they default. When Wilson in March 1913 denounced the bankers for this position they were quite happy to drop the entire China question. And, paradoxically, the Wilson Administration shifted all too often on the danger of Japan's domination of China, thereby lessening its incentives to utilize funds to reinforce a political policy.
World War One, like its successor, was to prove far more significant not in the way in which it did or did not lead to a formal diplomatic settlement at Versailles or the creation of a League of Nations, which was predestined to fail regardless of United States participation, but because it created vast, uncontrollable social and economic forces; and, indeed, counterrevolutionary leaders could not begin to imagine their full extent. The war led to the emergence of a revolutionary Left, isolated territorially for the time but incipient many other places, as a historic force; it led to the metamorphosis of conservative bourgeois nationalism into fascism; to a panoply of new economic and social crises; to the vast upheaval and the direction of the world for the next half-century. War shattered many of the social and political equilibria throughout the globe to an extent few contemporaries appreciated when they began to try to reestablish some type of order.
War and the Distribution of World Power
The war wholly upset the pre-1914 relations between nations and removed the moderating preoccupations of common enemies that had smoothed the course of United States, British, and Japanese interaction for two decades. Former allies now had to seek a new equilibrium, and the entire world system of alliances and interests, in Asia as well as Europe, was at stake. United States dependence on Britain for the partial defense of its international status was no longer necessary. It was as if a convoluted game of chance had led to the table being thrown to the floor with fewer players reemerging-and two of them, Japan and the United States, being relatively far larger. Germany no longer appeared a factor, and the specter of revolution by January 1919 seemed to be something that capitalist nations now could contain and isolate-perhaps, thereby, even to forget. "Food relief is now the key to the whole [Eastern] European situation," Wilson concluded that month as they met at the Versailles Conference to dictate to Germany and set impossible conditions for Soviet Russia. "Bolshevism... cannot be stopped by force but it can be stopped by food," though the President soon endorsed ample force as well.16 British economic adviser John Maynard Keynes later that year accurately described the conference's true historic significance as "the fearful convulsions of a dying civilization."
By 1920 all of Latin America's dependence on imports from the United States had grown from 25 percent in 1913 to 50 percent. Almost one-fifth of all United States exports now were directed toward its southern neighbors, a share that was to remain relatively constant for four decades.
During 1915-1920 over one-tenth of the gross national product went to exports—far higher than during the next war—and while Europe made war and death the United States made money and grew proportionately more powerful and prosperous from the follies of other states.
Few leave their homelands willingly, and the notion that Europe's hungry and oppressed came to the United States because of its social or intellectual virtues may be good ideology but it is poor history. For it was less America's assets than Europe's failures that prompted 34 million men and women to immigrate in a little over one century.
Only by examining the nature of workers and work itself during the formative period of American capitalism can one begin to explain why the American labor movement, unique to the world, failed to develop a commitment to one of the several historic socialist ideologies and the goal of sharing in the operational control of social power. In effect, in a society where the working class is an objective reality it fails to develop a consciousness, even from its structurally common experience, comparable to that of virtually every other industrial capitalist society. And only by seriously comprehending the immigrant experience, not only in their workplaces but in their homes and communities, can one appreciate some of the main sources of contemporary America's violence and social and individual disintegration.
Migration to the United States was an aspect of an international phenomenon which the emergence of European capitalism created. While data are often quite approximate, it appears that between 1821 and 1932, 34 million people entered the United States, while 16 million went to Argentina, Canada, and Brazil at about the same time. Asiatic Russia received 3.5 million voluntary peasants between 1897 and 1914 alone, and 12 million in the 140-year period beginning 1800. There were many "promised lands" to which to escape, and the British Isles and Germany-the first touched by the traumas of capitalism-provided the bulk of the reluctant emigrants until 1885. Immigrants from England and Germany equaled only 3.3 percent and 5.6 percent of their homelands' respective populations in 1890, but the Irish-born in America amounted to 40 percent of the population at home, and Norwegians 21 percent
Chapter 3. The American Working Class: Immigrant Foundations
1. International working-class migration is a topic of great significance, and while the analytical assessments of it are still thin, the data with which to begin major studies are first-class. Particularly good are Imre Ferenczi, ed., International Migrations (New York, 1929), I; Walter F. Willcox, ed., International Migrations (New York, 1931), II; Edith Abbott, ed., Historical Aspects of the Immigration Problem: Select Documents (Chicago, 1926).
- Note: This is a footnote.
More fundamental about those immigrants who came to the United States from Southern and Eastern Europe is that, excepting the Jews, the vast majority came with the explicit intent of remaining temporarily, accumulating sufficient funds to reverse their marginal peasant existence at home or transform it entirely, and returning. On this point there is no dispute, and it means that in terms of subjective orientation a large section of the de facto American working class was a transitional one, just as it was to be in physical fact for an astonishingly large proportion of returnees.
The intended temporary nature of the American sojourn was partially reflected in the lower percentage of females-34 percentin the 1899-1924 migration. Jews, who had the highest ratio of permanent immigrants, also had a near parity of sexes. Yet the proportion of female returnees is about equal to that among males, indicating that here too the intent to return home was deep-rooted.
The Nature of the Industrialization Process upon However much scholars may disagree on precise causes of the unique phenomenon, there is no question that American capitalism developed within the context of a quite distinctive technology unlike that of Western Europe, and this in turn both created and built a no less diverse and unique working class. Capital- and technologyintensive to an unprecedented extent, American industry created a rhythm of life and an extraordinarily disciplined and numbing division of labor which made possible a higher standard of living even as it demanded more exhausting and alienating labor.
Whatever the causes, which Brinley Thomas and H. J. Habakkuk have most satisfactorily explained, the fact is indisputable that capital accumulation after the Civil War and until 1919 attained an amazing rate of growth, despite frequent depressions, reaching 14.7 percent annually in mining during the 1870s and 8.8 percent annually in manufacturing during the 1880s. Not until 1919 did the rate of growth in total reproducible wealth begin to drop off, but by then America was the world's leading economy. By 1919 the ratio of capital to manufacturing output reached a peak never equaled since, largely to employ an unprecedented variety of technological innovations. In mining, the ratio of capital invested to the value of product also rose to a high point in 1919 and then began dropping sharply with the stunning efficiency of technology. Between 1869 and 1914 horsepower per manufacturing wage earner increased by about two and one-half times. Up to 1919 capital investment was geared, unprecedentedly, to utilizing technological innovations to replace labor, and the man-hours worked as a ratio of manufacturing output fell by almost one-half between 1900 and 1929. Despite a relatively high wage standard which tended to grow in terms of real income, wages as a percentage of the value added by manufacturing fell from 48 percent in 1879-the peak year-to 36 percent in 1929. Until 1919, only the sheer growth of the output of American industry demanded an expanded labor supply. Yet at the same time the very availability of a large unskilled labor supply made a capital-intensive industry possible as well as mandatory; thereafter, technology and the efficiency of capital reached a point sufficient to eliminate the necessity of enlarging the industrial work force in the same burgeoning fashion.
European investments, directly or even in the form of capital transferred by immigrants, assisted this explosion of output. Significant numbers of skilled British workers, escaping the crises of English capitalism, transferred critical knowledge, though not a sufficient number came to allow British modes of industrial organization to define those in the United States. By and large, therefore, skilled labor was too scarce and expensive, thus laying the basis of a capitaland technology-intensive capitalism unlike any to be found anywhere before World War Two. Necessity dictated such a course. Neither present-day historians nor contemporary observers dispute this, yet the issue here is how it defined the development of the American working class.
The ethnic worker's most common response to unemployment or dissatisfaction in the United States was far less socialism or trade unionism than a hastening of his planned return to his homeland. Emigration, not social transformation, provided him with the easiest and most commonly exploited solution to his personal troubles, and the remarkable correlation of emigration to downturns in the business cycle bears witness to the fact that Europe provided American capitalism with an escape valve of significance. Yet the interaction of the immigrant working class and American trade unionism explains their common weaknesses insofar as the emergence of a classconscious radical proletariat is concerned, as well as its occasional small successes. For the majority of the ethnic workers stayed in the United States, albeit as transitional men both in terms of their aspirations and usually in terms of their objective economic status in a highly mechanized industrialism.
The Privileged Native Working Class The very existence of ethnics as the major group in basic industry and mining created automatic pressures of upward mobility for those elements of ethnic migrants least prone to return home the Western and Northern Europeans-and, above all, the old "Yan kees" who had ceased to reflect the culture of their forebears. In short, the very presence of a psychologically and often physically temporary working class often made increasingly bourgeois and occupationally mobile the permanent workers to an extent otherwise impossible.
The qualifications for this upward mobility, in terms of occupational function, income, and status, were a knowledge of English and, if one stayed within industry or mining, the possession of skills. For the Yankees, the advent of the European migrant and economic growth meant a need for foremen, clerks, officials, and white-collar occupations of every sort. In New England cotton textiles, for example, almost all overseers were Yankees simply because workers of one ethnic group refused to obey sufficiently any "ethnic" of another nationality. Yankees were "considered superior" in executive posts in the iron and steel industry, and they were often recruited from the ranks of workers, while British migrants and, thereafter, Germans might also qualify, and roughly the same ranking was followed in skilled worker positions. Until the 1930s, it may be fairly argued, the Northern Yankee working class could reasonably expect to find countless opportunities simply not available to Western and Northern European, much less "new," immigrants. That he moved out of the poorest working-class jobs is unquestionable, and one may debate only the extent to which he obtained success in entirely new class functions. Within the industrial system until the Great Depression, for reasons of experience, language, and status, the Yankee worker could not yet identify to any appreciable extent with the immigrant working class, thereby leaving a cleavage that was not easily surmounted. When technology eliminated his skills within the workplace, rather than falling into the mass of the working class the Yankee had available to him options closed to the immigrant working class.
Measurements of mobility may be gauged in terms of occupational roles over generations, social status and esteem, economic changes in one's position regardless of job, or even the relative compensation received by various professions. In the end, what is most essential is the structure and nature of a society at any given time whether or not it recruits democratically, for high occupational mobility is not inconsistent with great economic and social inequality. Moreover, given the sheer quantity of research on the topic, some sense of the question's intrinsic significance is essential to avoid both analytic and statistical inundation.
In fact, the annual wage difference between Southern and Eastern European worker-mainly unskilled-and the occupationally betteroff white native born of native father in 1909 was roughly two-thirds, and the gap closed only partially for the immigrants' children. The data are immense-far more than I can even mention in the broadest outline-but a few general conclusions arise. First, for the immigrants who came and tarried there appears to have been very low occupational mobility for Southern and Eastern European workers, and they remained among the poorest paid regardless of how long they stayed. Their children experienced appreciable upward occupational mobility, especially if they were of Western or Northern European origins, but save for the British and Jews they never caught up with the Yankees; and even in 1950 and thereafter the Southern and Eastern European Catholics formed a disproportionately large part of the lower-paid working class. What remains, in the end, are stratified American communities based on economic and cultural distinctions continuing within the framework of a class society that despite alterations in its composition endured throughout the century after 1876. The immigrants did not so much create or deepen the class structure of America as fall into it.
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It was logical for the immigrants to concentrate in cities. For considerations of economy, the availability of jobs, and the existence of such family or friends as they possessed reinforced the impulse to become urban dwellers, above all in the northern Atlantic states; and in 1920, three-quarters of the foreign-born whites lived in cities. By 1900 the foreign-born composed 22 percent of the urban population, but 28 percent of all cities of 100,000 or over population. Twenty years later nearly 58 percent of the population of these largest cities was foreign born or of foreign parentage. In effect, the main centers of growth in America were ethnically subdivided. All this is familiar.
Indeed, the structure of the immigrant communities of all major ethnics is also no mystery, and there is hardly any disagreement that, although there were not necessarily wholly undiluted ethnic sections defining the map of each city, most cities were divided by roughly ethnic but essentially working-class neighborhoods, leaving divided workers who scarcely related to each other as a class at all. These ethnics, in turn, were often physically and organizationally subdivided according to villages or regions from which they hailed in the Old Country, and around these associations they built what has perhaps too casually been termed the “urban village." Sociologists and historians have been commenting on such patterns for a half-century. The existence of subgroups within the ethnic community-the Landsmanshaften among Jews, contadini among Italians, and so on -meant the separate festa, the initially exclusive club, the synagogues of nationally divided and mutually contemptuous Jews, a Catholic Church rent with seemingly perpetual disunity between the Irish and all the rest, and much, much else besides. Even the English workers kept themselves apart, and after 1910 black migrants from the West Indies were to maintain their own churches and clubs in Harlem. With workers internally divided even within the ethnic community, until the distinctions of region and dialect could be overcome, the goal of a united working class with common goals and values remained a chimera.
Not unexpectedly, immigrants, once they sensed that return home was further off than they had initially expected, transferred their peasant attitudes toward house ownership to the American context, thereby laying the basis for later ugly confrontations with each other and, above all, with blacks. The migrant, after all, was often an insecure peasant with aspirations, which at first he articulated in terms of more secure or greater land tenure in Europe. If he was not to return there, he resolved to have his homestead in America; and from the inception, the "new" migrants were noted as far more aggressive home and property purchasers than the generally better-paid native Yankees. Home-ownership became some thing of an index of intent to return, and Rumanians, who were once among the most frequent returnees, increased their home-ownership rate from 3 percent in 1908 to 33 percent in 1928. Such attitudes, which were even more deeply implanted among second-generation Americans who had no illusions whatsoever about living in Europe, meant that the ethnic working class was far more locked into the debt system than natives. Home-ownership among the significantly lower paid foreign-born iron- and steelworkers in 1909 was 21 percent as opposed to 15 percent for the third- or later-generation "natives," but among their children it jumped to 27 percent. While patterns differ in other industries, where ownership rates were about equal, what is clear is that by the 1930s immigrants and their children transferred to America Old World habits that reduced their physical mobility somewhat, accentuating their cultural and physical isolation in poorer neighborhoods throughout America. And this tendency at the same time made their often lumpen bourgeois attachment to the value of their property and meeting payments a factor of no mean importance to their potential militancy and egalitarianism as members of the larger working class.
Rivalry as a Way of Relating
If the violence that such ethnic divisions and segregation produced in factory and community is difficult to quantify, and thereby perhaps more imagined than real, nonetheless there was violence and disunity that no account of the modern American working class, city, or life dares slight. For the existence of rival city nationality gangs fighting each other, or forcibly excluding intruders from their neighborhood turf, was a vital, indisputable source of the present disintegration of American cities. To the immigrant still suffering from the confusion and trauma of having just arrived, ethnic gang taunting and violence loomed large. The tension such incidents between nationalities produced was also transferred to the workplace; and in mining regions, where the communities were relatively more transitional and the work more dangerous, inter-ethnic strife, bloody labor struggles, and the great excess of men to women all combined in varying degrees to produce much violence the peak of which was perhaps reached in southern Illinois after World War One. Yet a half-century later Michael Novak quite fairly observed that each ethnic group remained intensely hostile toward all outsiders and, it must be noted, unionism's nominal organizational success did not significantly diminish that intense bias. Opinion polls were merely to reinforce what anyone could observe in the so-called white backlash and George Wallace's successes among Northern ethnics: good unionists, including many among those with the most radical social views, remained deeply suspicious of blacks, but also (and less well appreciated) of each other as well. 20 88 * way The roots of this hostility can be traced not merely to the ethnic gangs fought each other but also the manner in which their institutional efforts in the American environment clashed as soon as the "new" immigrants landed. For the Jews and Protestants who arrived and were kept out of established co-religious institutions there was no problem-they simply set up their own often minutely differentiated bureaucracies. For the deeply Catholic majority from Southern and Eastern Europe, however, finding scope for their deep and often particular religiosity was but one part of their struggle with the Irish. In the anthracite coal communities of Pennsylvania, where the Irish had first worked and then largely departed, well over onehalf of the priests at the turn of the century were Irish, and their need to use English and their general inability to comprehend the Eastern European workers quickly led to strained relationships. The Italians had much the same experience in the major Atlantic cities, which meant that the Church in quite short order became far less powerful among the Italians than the Irish, even producing some Pentecostal schisms-although alienation was mainly expressed in the speedier growth of secularism. The Poles also were hostile to the Irishdominated Church, finding it offered no community, and they organized a few of their own schismatic parishes. As for the Irish, despite a few eventual compromises with the ethnics, they preferred retaining control of their hierarchy, and even today most of the bishops and archbishops in the United States are Irish.
Immigrants, in short, found other ethnics adding frustrations to their life outside of the workplace. The Irish not only controlled the Church, which was potentially important to the Italian or Polish immigrant's social adjustment to the strange new world and secondarily an avenue of occupational mobility, but they virtually dominated politics in many major cities, and with it innumerable jobs, contracts, licenses, graft, and crime-in short, the wellsprings of boodle that since the founding of the American colonies have become traditional means for acquiring wealth and power. Politics, and the crime symbiotic on it, thereby became a source of disunity rather than cohesion among urban ethnics; and while the Depression of the 1930s was somewhat to modify this pattern, ethnic rivalry rather than a broader conception of interest and class still greatly, if not exclusively, defined the contours of American urban voting.
The decision to exploit the interstices of the system via crime reflected both the nature of the power configurations in the urban setting, which closed off more "respectable" channels of capital accumulation, as well as the corrosive impact of American life on the ethnic. In relation to the dominant Anglo-Saxon culture, America was a continuous assault on the integrity of the individual and his self-esteem. Combined with this was the breakdown of the ethnic's family as he underwent pain and anguish when his children rejected his values and prohibitions yet were themselves not accepted by the dominant culture. While I shall say more of this later, the net effect was to produce a much greater crime rate among the children of immigrants than existed among their parentsPoles, Italians, Jews, all-and far greater yet than in Europe. Crime then simply meant acquiring the material goals a society idealized by the only means left available to the dispossessed and scorned. Less invidious was to gain a political office or become a policeman, but for the ethnic it was in reality all a part of the same sordid game. Later those who could capitalize on their successes in these various enterprises were to encourage their children to take more respectable positions and attend "Ivy League" schools.
- 89 The Italians, Jews, and Irish were by no means alone in regarding crime as a means of social mobility, scarcely illegal because the police of Irish and all other nationalities both partially regulated it and, via fairly systematic fees, shared in its proceeds. But the Jews and Irish had other bases of power, and the vast majority of Italians either returned home or remained a part of the subproletariat. Italian leaders then used the organizational and economic foundations that crime provided to finally break the Anglo-Irish control of bigcity polítics, notably in Chicago in the 1920s and then less decisively in New York and the East.21 What is most critical here about this phenomenon is not the structure of American urban politics or capital accumulation, which I discuss in other chapters, but that ethnic divisions which have both a cultural and religious basis all too often have been transferred into a political arena which has prevented the emergence of a politics based on class and economic interest. Given the amorphous character of the two major parties and their consensus on economic fundamentals, in a sense this ethnic and cultural rivalry has been essential for parties that are required both by custom and necessity to contrive distinctions between themselves that really do not exist on even the narrowest definition of principle. Yet that transcendent awareness of the real economic interests which would be required to dissolve the ethnic nature of agrarian as well as urban politics that has manifested itself repeatedly over the past century, replacing it with a politics based on class, has been absent from modern American history. In the end, rather than fostering unity, politics in the United States further stimulated ethnic divisions-a schism that has been kept alive long after most ethnics mastered English, attained some significant degree of occupational and physical mobility, and retained precious little of the culture they knew either when younger or from their parents' recollections.
Immigrant labor was relatively inefficient and had a high turnover that employers increasingly regarded as a costly nuisance, but its abundance made total labor costs far lower than they might otherwise have been and only intensified the transfer of skills to technology and machines rather than men. Indeed, the equivalent development of American capitalism after 1880 without access to such a pool of men was inconceivable.
- Note: This and AI today is the capitalist dream.
The overall accident rate in American coal mines in 1900-1906 was almost four times that of France and twice that of Prussia, with the gap increasing over time. And among Southern and Eastern European miners working in the United States, the death rate by accidents was almost twice that of natives and migrants from other European regions. In different industries the accident rate among immigrant workers was estimated to be roughly two to four times that of natives, and in 1908 alone, United States Bureau of Labor experts estimated, there were 30,000 to 35,000 fatal and about 2 million nonfatal industrial accidents. Ethnic workers often could not read safety instruction sheets, and the language factors that divided workers also made them prone to accidents and errors. The costly and widespread practice of hiring ethnic foremen or liaison personnel only very partially adjusted foreign workers to the increasingly dangerous high-speed technology they were being called upon to service. Maiming, blinding, and death were common enough destinies for immigrants who had gone to America searching for security.
Indeed, the mass culture which most immigrants brought was simply a knowledge-often very minimal of their languages and the conventions of their native rural societies. Very few intellectuals or bearers of "high culture" migrated to America, and these, surely, were the most miserable and frustrated of men. Over time their main function was to supply the highly mobile children who would staff American faculties and the RAND Corporation, while they themselves manned ethnic newspapers and bureaucracies. These endured, and even at the beginning of this decade the ethnic press in America numbered more than forty dailies and 150 journals with a circulation of 42 million, while more than 600 ethnic radio programs-overwhelmingly stressing music-retained 20 million or more listeners. Yet despite this persistence, it remained a fact that the descendants of the first generation quickly lost command of the language; and, above all, the immigrant's own familiarity with it was so superficial as to grant him precious little defense against his own acculturation to a kind of limbo ethnicity which left him with only slight knowledge of the most precious aspects of his own culture and only sufficient immersion in it psychologically to divide him from fellow workers who spoke other tongues. In the end, it produced a working class that was to a great measure both lumpen and insecure, accommodating but not assimilating in America, uncertain of its ultimate destination in the case of most, cut off from the larger society and even, to an increasingly remarkable and painful degree, his own ethnic community and family.
Lumpen Society and Lumpen Class
The United States throughout its history was a nation of high physical mobility among all its peoples, who, motivated by economic need, ambition, or both, with increasing frequency moved what were by European standards vast distances. The price such individuals paid for their restlessness was great in social and psychological terms. Ethnics, in a parallel and overlapping manner, often shared experiences. There were aspirations and regret, nostalgia and overwork, the absence of family and constraints, and a much higher level of random violence than Europe ever knew. If natives and Wasps were spared the rejection and confusion which afflicted the ethnics because of language, customs, and prejudice, there is no doubt that a psychological and moral toll agonized them also, and this produced social as well as personal breakdowns-many now sanctioned and purveyed institutionally as amusements or military strategies-less well known in Europe. The United States, in brief, was a lumpen society of mobile individuals to an extent unparalleled in the history of industrialized nations; and this fact goes a long way in explaining the casual, impersonal violence Americans now experience at home and which their state proudly exports in infinitely greater quantity abroad.
Qualitatively, therefore, the ethnic's disintegration in the American urban context was not different than the rest of society's, but the extensive ethnic basis of the working class makes this phase of its problem important also. For the individualism of the economically ambitious immigrant, even within the framework of his ethnic community, helped produce a splintered working class of the twentieth century and a mass of quite aimless persons unable to relate as a community with a common interest and destiny.
Thomas and Znaniecki noted that after World War One the immigrant experience was producing a significantly higher rate of mental disorders and social breakdown, above all among their children, and since then a mass of data-good, bad, and indifferenthas been produced. Yet the very best has offered some persuasive conclusions, the most fundamental being that people who migratewhether to another nation or just to another state-are significantly more prone to serious mental disorders than those who do not; and from this one can reasonably hypothesize that less grave psychologi cal maladies are apt to affect many of those who elude data gatherers by avoiding hospitalization. Moreover, communities with high population growth rates are more likely to congregate or produce unstable types than those with lower rates of increase. And, lastly, the immigrant who came to the United States and returned home was, despite economic success, perhaps the most marginal, unhappy man of all, and this dimension forces one to at least ask whether many of the alienated immigrants from Europe were perhaps also destined to be marginal men wherever they might be.
- 97 For example, in 1939-1941 migrants to New York State who had arrived within five years were hospitalized for psychoses more than twice as frequently as nonmigrants. Migrants in the state longer than five years had a hospitalization rate only a quarter greater than native New Yorkers. Ignoring internal migration altogether, and comparing psychoses among foreign- and nonforeign-born whites in New York State in 1939-1941, foreign-born males were hospitalized only 11 percent, and females 21 percent, more than American-born. Almost two decades later, Massachusetts communities in the highest quartile of growth rates had twice the hospitalizations for depression as the lowest, and about three times the rate of suicides. Unanswered by all this, however, is the question of the psychological record of the children of foreign-born, who were at least as affected by conflicts of cultures and values. In 1903, second-generation white ethnics formed an only slightly larger share of those in hospitals for the insane than their proportion of the white population in the same age categories. Their parents, on the other hand, were more than half overrepresented among the insane and comprised over one-third of the patients in 1903. Yet what unquestionably emerges is that migration within and from without America produced a significantly more psychologically crippled nation than in most of Europe, with the main pressure on the ethnic coming relatively soon after her or his arrival.
  This conclusion is best illustrated by Ornulv Odegaard's analysis of Norwegians remaining in their homeland, those who went to Minnesota, and those who returned from America. In 1889-1909, in Minnesota the Norwegian-born had a rate of admissions to mental hospitals almost one-half greater than the native-born. For 19091929 the differences decline somewhat but remain significant, the Norwegian-born still exceeding the rest of the population for hospitalizations by nearly one-third. Yet Norwegians who returned home from America had the highest rate of all, or twice that of nonmigrants, which led Odegaard to note that in addition to the impact of the trauma of adjusting to America, "relatively many psychopathic or early psychotic individuals [could be found] among the emigrants, because the restlessness, dissatisfaction, etc., which is so common in such personalities is very likely to induce them to leave their country...."26 Indeed, the same quite modest conclusion also applies to native American whites who migrate internally. For all this too helps partially our understanding of today.
  Odegaard's conclusions that migrants are a particularly unstable element are surely reinforced by the now substantial literature which exists on the one-third of the ethnics who repatriated home.
  While it is impossible to argue they were more unhappy than those who remained in America, the Greeks, Italians, Croats, and others who returned appear to have shared certain common characteristics.
  First, they were upwardly mobile economically, often challenging and being rejected in their claims for status by the local ruling elites.
  An astonishing number managed to lose their money again, either through poor management or war, and they engaged in the quite conspicuous consumption one expects from parvenus everywhere.
  Americani in Italy, and Amerikansti in Croatia, their clothes, speech, mixture of English and native words, and general independence made them both disliked and catered to within their usually rural communities. These misfits brought few innovations back with them but mainly articles of consumption; they quickly romanticized what life in America had been like, found it inordinately difficult to readjust to home, and congregated together even to the perverse extent of opening an American Legion post in Athens. In the case of a small minority, some went back to the United States. In Poland they introduced the street gang techniques they had acquired in America, making local reactionaries more unpleasant yet. In general, therefore, they appear to have been misfits-kounesmenos, or "shaken ones," they were aptly called in Greece and perhaps the unhappiest lot of all.
For those who managed, for reasons of either sentiment or class, to stay within the complicated stratified entities called ethnic neighborhoods which after the 1950s became the symbolic cultural and shopping centers of second and third generations, now barely literate in their parents' tongues, living in aseptic communities within driving distances of West and North Ends everywhere-the Wasps' urban-renewal bulldozers began delivering the final coup de grace to the vestiges of an internecine working-class structure which tragically had never developed a culture and politics appropriate to its own objective situation.
That ethnic willingness to transcend the suspicion of nationality toward nationality, save perhaps when it came to their common fear and hatred of blacks, at no time emerged during the twentieth century to help lay the basis of genuine unity from which class consciousness could overcome racial and ethnic identifications. Ethnic workers saw their grievances in an ethnic focus, which was essential to the very existence of political machines. Yet most ethnics were in reality primarily individuals and families, too preoccupied confronting their anxieties, conflicts of values, nostalgia, and private tears to politically or intellectually transcend the compulsive prejudices of their own nationality or religion. Such marginal socialist ethnic groups as arose, above all among Jews, Germans, or Finns, were scarcely efforts to escape their particularist culture but rather a transitional assertion of values temporarily useful in the diaspora and thereafter to become almost exclusively social and ethnic in function. It was not, surely, a creed they transmitted to their children.
Hence the temporary working class became the permanent working class with its own historically unique style and goals, lumpen people in a lumpen society, with that instability and frequently successful absurdity and triumph of demagoguery that often sways all the American people. It is in this context that the trade-union movement and the political expressions of the American masses evolved in the twentieth century, compounding the nation's problems while so far depriving it of the promise of real solutions.
But unemployment was only one of many major structural facts undermining the so-called prosperity decade's future. Income distribution, which has remained fairly constant since the first reasonably accurate data for 1910, during the 1920s left the richest fifth of the recipients with over one-half of the personal income. Despite the faster expansion of real income for workers after a long period of stability or modest growth, by 1929, a Brookings Institution study reported, 42 percent of the consumer units lived at or below a "subsistence-and-poverty" level that was poor indeed, while another 36 percent were at the "minimum-comfort" level. These consumers, who shared the other half of the personal income, left United States capitalism with the unresolved paradox of underconsumption relative to the excess industrial plant and the surplus capital available.
As always, nowhere were economic crisis and poverty more evident than in the agrarian sector. The farmers-also as alwayswere the victims of larger economic forces over which they had no control and which, despite the emergence of the politically much noticed Congressional "farm bloc" in 1921, were constantly to escape the constraints the agrarians' conservative as well as more radical spokesmen were to seek to impose on elusive economic realities.
Economic crisis and poverty in the 1920s defined the existences of farmers more than any other major segment of the nation.
The rules of the game, whether one calls it the "associative state," as did Hoover, the "cult of efficiency," "business syndicalism,"
"voluntaristic capitalism," or whatever, were Hoover's forte. The elimination of industrial waste and duplication, scientific management, planning, empiricism, rationalization-all these techniques, familiar in varying degrees before and after Hoover, were approaches he cultivated. In essence, Hoover was convinced that every problem had a solution rather than presaging yet new dilemmas, and it was sufficient to use investigative, empirical techniques-usually via commissions of experts-to define answers. One never questioned first premises, according to such a view, but only sought to formulate and apply superior rules for a given game. This positivism, which ignored entirely the reality that differing concrete interests might articulate quite irreconcilable answers depending on their particular needs and perspectives, to say nothing of the fact that the problems to be solved were endemic in capitalism for as long as the system survived, was a popular myth then and thereafter. It was scarcely one Hoover originated, and it made technocrats play a role for the next half-century which their repeated failures scarcely diminished as less well trained leaders also failed. Indeed, such an increasingly popular belief in the efficacy of research and expertise was interesting as a reflection of a growing capitalist dilemma of attempting to substitute research and planning when their ignorance left them without reliable solutions, and it was the existence of both blindness and anxiety that is more important to comprehend than the pseudo-scientific jargon of expert mystifiers. The class premises of any inquiry were always assumed, and never challenged, but Hoover advanced the pseudo-positivist faith as never before.
The garment industry, which like coal was so competitive that no common program among businessmen was possible, also shared the same economic problems, and like most other specific industrial associations tended to lose members during periods of declining prosperity. Incapacity to hold and discipline members on a voluntary basis was a problem common to a sufficient number of competitive industries, making the entire organizational concept frivolously irrelevant when real economic problems arose. Indeed, in such industries only unions provided the remaining nonpolitical hope for coordinating and restraining competitive conditions on a national scale, a fact that won the employers associations to the union cause in garments before the war and was eventually greatly to influence labor relations in coal and many other industries.
During the 1920s, however, two major problems gravely endangered the investment bankers, and their puny efforts could barely control them through voluntary codes and education. First was the critical new role of the Federal Reserve System and its eventual development of policies that were to increase the quantity of its own and other financial resources pouring into the New York Stock Exchange. In 1922 the Federal Reserve System began regulating the bank discount rate so as to control the flow of funds it judged essential for both the welfare of the domestic economy and the balance of international payments and, in general, its increasingly intricate financial relations with European central banks. Until 1927 there was no basic conflict between the national and international functions of the system, and the dominating personality of Benjamin Strong resolved such tensions as arose until late 1928 in favor of the Reserve Bank of New York's higher call money rates. Over the next year, trying both to dampen the wild speculation that inflated prices on the New York Stock Exchange fueled and yet not gravely endanger Britain's financial position, the Federal Reserve System was locked in a power struggle between the Board in Washington and the New York Bank, and then acted indecisively and belatedly to increase interest rates the following summer-too late to avert the panic that Strong the preceding year had predicted.
The second critical danger to the IBA was the fact that dealing in securities had become a business which far exceeded their membership, which in 1929 was perhaps one-tenth of all security dealers and less than one-quarter of the investment bankers. By 1930, in fact, commercial banks sold over 60 percent of the new security issues.
Although the IBA opposed federal legislation after 1920 and confined itself to the improvement of state laws, the older, more established houses felt the impact of new competitors despite the growth of the market. Not only was the only existing trade association less and less able to regulate the conditions of the immense field, but it increasingly complained about the dubious and, as events were to prove, dangerous methods of peddling new issues. By the time of the crash, the trade association responsible for the voluntary regulation of perhaps one of the most important single financial institutions of the decade had worked itself into a position of frustrating impotence.
The October 1929 stock market crash came when it appeared inevitable that a world monetary disaster was at hand for an accumulation of decisive reasons, and all that specific cause did was to heighten already existing latent weaknesses and within two years destroy the international credit structure to which major capitalist economies were by then linked. The world economy which had resolved the numerous dilemmas and weaknesses of national capitalism for a decade now brought them to the fore, and for almost a decade the United States unsuccessfully tried to solve the problems of national capitalism largely isolated, both by circumstances and intent, from the international economy.
It was not until September 1931 that the rare if sketchy business programs for general economic recovery began emerging, first of all in the famous plan that Gerard Swope, president of General Electric, released. Swope's ideas were not at all original or imaginative, but simply a logical extension of the trade-association theory which reinforced its powers with legal sanctions. The plan permitted trade associations under federal supervision, immune to anti-trust laws, to collectively decide upon production, prices, and investments, and made illegal "unfair" practices. Hoover, curiously enough, immediately recoiled: "It is the most gigantic proposal of monopoly ever made in history," and later called it the genesis of the National Recovery Administration. In fact it was very much like specific industry plans Hoover had endorsed while Secretary of Commerce, and his rejection of the scheme was both inconsistent and politically unwise. Some weeks later the United States Chamber of Commerce circulated a somewhat modified version of the Swope plan, including a national economic council. In fact it was less compulsory than the Swope plan insofar as the legal force of trade-association agreements was concerned, and Hoover thought it would, as his official chroniclers phrased it, "drive the country toward the Fascism of which it was a pattern." Not for the first or last time, a President showed his capacity for monumental inconsistencies, and his rejection only gained him an important new critic in the Chamber. The Chamber's membership, however, ratified the scheme, and the NAM also supported it. Despite the fact that important big businessmen publicly voiced skepticism as to what trade associations might accomplish in any form, the general trend of the program was as close to a business solution for the Depression as was to emerge. But Hoover's venomous response to a plan so parallel to his own ideas, and his obduracy in refusing to define meaningful alternatives, led to a significant political break between the administration and critical organized business circles. This rupture was, in essence, not different from the one his successor was eventually to confront. Later, during the 1932 Presidential campaign, Chamber president Henry Harriman warned Hoover that unless he endorsed the contours of the approach, many businessmen would support Roosevelt, who he claimed had agreed with it. For better or worse, the approach had sunk roots where it counted. But it was not so much a rejection of the assumptions of the premises of the 1920s as a further application of them, focusing on price competition and overproduction rather than internal demand and international crisis.
By mid-1931, as the financial emergency threatened to produce a major banking crisis, particularly in the South and Midwest among banks too heavily involved in mortgages to farmers and homeowners, bankers increasingly favored the creation of a federal banking structure to lend funds to, and thereby protect, the private banks in trouble from a run by depositors anxious to save themselves. As is now well known, after some hesitancy during which he favored voluntary banker collaboration without government sponsorship, at the end of 1931 Hoover agreed to the creation of a Reconstruction Finance Corporation modeled after the wartime War Finance Corporation and run by men from-or close to the banking community. A half-billion dollars in loans for banks and business was now available to buttress the economy somewhat. And $125 million to strengthen the Federal Farm Board and land banks was another measure to help the banks indirectly.
The New Administration, the New Deal
The men and party that inherited the responsibility of dealing with a depression that was to affect the United States more profoundly and longer than any other industrial nation were distinctly unprepared to transcend the limits of such conceptualizations and programs which were a part of the times. It is one thing to talk of the continuity of approaches between the Roosevelt Administration and that which preceded it, as historians are increasingly wont to do, but another to focus on their common limitations and confusions. Both, indeed, are essential not merely to understanding the origins of the New Deal but also its outcome.
The Struggle for Industrial Control
The NIRA law said little about the substance of industry-wide codes other than that the industry itself might draw them up-and the President sanction or reject them-to promote such lofty but vague goals as fair competition as well as cooperation, greater production and purchasing power as well as employment, and the like. Industry codes were also to be drafted with the participation of consumers and labor, but they were never to be consulted. For practical purposes, the NRA was to create over 500 cockpits where the various factions of every type of industry might struggle for mastery of political authority as they had long since competed for shares of the marketplace. The controls of economic and political power, in effect, were now to become synonymous.
The Cotton Textile Institute, the industry's trade association, viewed the NRA proposal as its major opportunity to impose stabilizing price and production codes with legal sanction, and both privately and publicly it celebrated the new era. In May, even before the passage of the act, at the behest of General Johnson it enthusiastically began drawing up its own code, thereby initiating a harmonious relation that gave the industry's larger firms full scope finally to test their associational theories. Johnson, for his part, in due course appointed a former cotton manufacturer to represent the government.
Because the industry was already in favor of the forty-hour week to limit production, and Northern manufacturers favored minimum wages to increase the costs of their Southern competitors, the industry had fewer difficulties than all others in hammering out a common program of legal sanctions. It was the first code enacted.
Cotton textiles now had a legal basis for limiting industry expansion and cutthroat competition. The automobile industry, by contrast, was not competitive and had substituted working oligopoly for trade associations, which were most active precisely among those industries with a high number of firms or easy entry. Stated another way, from 1929 to 1932 auto prices dropped 21 percent while cotton textiles fell precisely twice that amount, and the auto industry was one of the last to cooperate with the NRA-if only because Henry Ford's obduracy created innumerable barriers to doing so. But although the new cotton-textile authority now had a free hand internally, its problems, much to its surprise, remained far greater than its means. For one thing, large industrial consumers of cotton products, such as tire manufacturers, attacked the premises of the new price-fixing and much preferred the old order of industry chaos from which they had profited. Critical was the fact that it was exceedingly difficult for the code authority to anticipate overproduction and time its restrictions accordingly, though it attempted to do so. More to the point, the objective of the entire effort was profit, and although industry income increased during 1933, the following year profits fell by three-quarters, and over half the firms in the industry reported no net profit. Disillusionment was inevitable, especially among Southern producers who had conceded many of their cost advantages in order to test cooperation. Many turned a jaundiced eye on all other New Deal innovations and concluded, especially after Johnson's forced departure in August 1934, that the collaboration was not worth the results. In 1935 profits again fell, and the CTI removed those leaders who had taken it into the NRA adventure. Hoping to head off chaos, New England producers in 1935 successfully sought to use their governors to organize a new federal effort to redeem the industry, and the White House cooperated in creating a special cotton committee. It, in turn, considered a wide range of proposals for government control of the industry, ranging from higher labor costs to machinery destruction, but only in the following year did legislation arise which dealt mainly with textile labor-and it was not considered at the time. In effect, what this rather typical competitive industry learned by mid-1935 was that the economic problems it confronted far exceeded any response based on organizational unity, whether politically enforced or voluntary. The industry that had invested the greatest hopes in trade associationism for the longest time was to finally find its illusions shattered.
In the trucking industry, the great ease of entry and intensified competition after 1929 created among larger trucking firms a desire both for federal regulation that would end cutthroat rates as well as, in some cases, unionization that would equalize costs. Railroads, for their part, had throughout the 1920s favored federal regulation of trucking to reduce its increasingly costly competitive impact on their share of the market for transportation. Even before 1932 some large truckers began demanding Interstate Commerce Commission regulation of the industry, and at the end of that year the American Highway Freight Association was formed for the primary objective of passing a federal regulatory act comprehensive enough to elimi association enthusiastically endorsed the NRA and urged rate-fixing as part of the industry code, but opposition from more competitive truckers who had formed their own trade association in the hope of also shaping the code forced the NRA to demand that the two groups unite and create a common program. This they did by organizing the American Trucking Association, which agreed upon a modified ratefixing system, which required truckers to charge at least the cost of the service. Backing rate-fixing, as well, was the Teamsters Union, which saw it as indispensable to ending the great wage inequalities in the cutthroat industry. Fair labor practices and unionism, bigger truckers appreciated, would drive up costs and undermine marginal operators. When the NRA code for trucking was finally approved, the ATA, with an important degree of industry backing, dominated the code authority
Anti-union sentiment as well as business and personal reasons all led to resistance from other truckers, who then undertook to lobbying for the older formula of ICC regulation of all trucking as a way of circumventing the NRA. Early in 1934 such a bill was submitted in the Congress and its main attraction was inflexible tariffs. The struggle between these two viewpoints was not resolved quickly, because important shipping interests who preferred competition blocked more sweeping rate-fixing under the NRA authority. Given the complex nature of rate structures and the intensely competitive nature of the truckers, by 1935 large operators were increasingly disappointed with the laxity of the NRA system of regulation. During May 1935, days before the Supreme Court declared the NRA unconstitutional, the National Industrial Recovery Board ruled that cost could no longer be used as a basis of minimum prices or ratesthereby destroying a truckers' code that, in any case, was not being strictly applied. With the Court decision the ATA and its critics in the industry joined forces with the railroads to demand ICC regulation, which quickly became law the following August. Free entry into the industry was virtually ended, as rate regulation and safety and hours controls reduced the nuisances of competition. The NRA had failed, but regulation was deferred rather than ended.
While nearly 600 different industry codes provided ample diversity, the continuity between trade associationism of the 1920s and the NRA, and the use of political power by business constituencies to meet their goals of profitability during a crisis, in a number of industries meshed with the problem of unionism. The trucking and cotton-textile industries proved that the elimination of price competition was impossible without roughly comparable wage costs, and in labor-intensive industries this equalization was all the more imperative. If the industries were highly competitive, as in garments or coal, labor costs were a key-if not the only means-to price stabilization; but if they were controlled by a sufficiently small number of firms to allow oligopolistic collaboration independent of government enforcement, the question of labor became more a threat than a promise. In the latter case, the automobile industry was an excellent example.
of Production-worker costs as a percentage of the value of automobiles during the 1930s were substantially higher than the national manufacturing average despite a near total absence of unionization at the inception of the New Deal. The handful of auto firms had no need for the NRA code to impose unifying price or output practices on the industry, its NRA code contained none of consequence, and the section 7a provisions simply reflected the industry desire to pre vent the emergence of unionism. In the steel industry, which was even more labor intensive but somewhat less concentrated, the NRA code was left sufficiently vague regarding labor organizations to allow numerous companies to create company unions. The NRA labor board was powerless to challenge seriously the industry-dominated codes, which merely perpetuated the status quo and ignored union pressures. Ickes and Johnson, for their part, showed as much disdain for unions as did businessmen. Virtually all of the anxieties regarding the NRA, Johnson, and unions which the rare pro-labor New Dealers shared were realized.
In the garment industry, however, the union alone possessed the potential means for imposing price stability, for unequal labor costs were the key to "unfair competition." Trade associations, which had sought to work intimately with the unions, were alone unable to impose stability, and when the NRA received its first code submission from three New York employer groups in the women's garment industry they dealt almost exclusively with wages, hours, and working conditions-a focus that became the rule for almost a year. In the women's coat and suit industry code the wording was virtually the same as in earlier collective bargaining agreements. For both in women's and men's clothing industries the large majority of the employers were now ready to use the only organizational method of stabilization available-unionization. Under the circumstances, unlike any other mass industry save the comparable coal sector, the union membership in the two major garment unions-both of which considered themselves socialist-led-multiplied.
Still the industry remained thoroughly cutthroat, and geographical wage differentials accepted in some of the codes simply were a union effort to accommodate to the existence of runaway plants and sweatshops in return for the right to collect the dues of non-New York workers. In time, politically powerful clothing employers were able to get additional modifications imposed on the codes by arguing that the existing accords reflected the needs of the dominant portion of the industry and unions in New York. Thereupon began a litigatious and increasingly divisive struggle to use the code authoritiesusually belatedly to enforce what were essentially collective-bargaining rules, a process that the outlawing of the NRA terminated before total disintegration occurred. From that time on, the unions and certain branches of the ladies' garment industry sought to maintain substitutes for the NRA machinery, though in the men's industry the effort to reassert the control of effective unionism was attempted once again. In both sectors the effort to stabilize the industry by equalizing labor costs broke down, leaving the inexorable laws of competitive capitalism to levy their toll on workers and owners alike.
In investment securities, many big banks that had entered the field during the 1920s were ready, even eager, to divorce the ultimately risky business from their normal banking functions, and both the Chase National-the largest in the country-and National City Bank shared this opinion. National City, indeed, actually did so before any new laws were passed. Winthrop W. Aldrich, head of Chase, particularly favored this change, and his public advocacy of such a reform in March 1933 pushed administration thinking in his direction. Such alterations impinged on both banking and investmentsecurities reforms, and it was in the latter field that the pressure for changes first bore fruit.
Despite stormy political words that were not to dissolve the financial reforms the New Deal created-words that were harshest from those businessmen who had gained the least or when elections and politics required them-the period 1933-1936 revealed which businessmen and interests were heeded during the programmatic vacuum which existed from the inception of the Roosevelt Administration. The business structure was composed of large numbers of interests with a great variety of necessarily quite conflicting needs and objectives, and to radically varying degrees their political power was unequal. The trade associations usually represented the larger sectors of any industry, and partially as a reflection of this fact specifically small business trade associations begin to appear after 1937. To the extent that differing groups had equal access to political power in Congress, or no overwhelming coalition of firms existed, as in bituminous coal, regulation of an industry became impossible as economic competition created a neutralizing political deadlock and prevented any decisive reforms. When such business disunity was absent, or no important group resisted lobbying efforts that the Chamber of Commerce or comparable organizations mounted, capi talists could define the essentials of the regulation they had conceptualized as desirable and politically expedient in such a way as to provide themselves with what they hoped would be political solutions for economic dilemmas. In the case of the NRA, the political structure showed itself to be socialized wholly by capitalism's priorities and personnel, and aggressive economic constituencies thereby imposed politically those economic constraints that otherwise would have been beyond their own capacity.
Politics becomes the means, once again, to engage more successfully in business. To Harriman, Swope, Aldrich, and men able to telephone and receive deferential, polite audiences, political responses to economic threats were conceivable in a way that would never enter the mind of a Kansas grain merchant. To the former, their political power exceeded their economic, and gave them a means by which better to solve their economic difficulties. Given the paucity of programmatic alternatives and the consensus of values and institutional mechanisms that bound together the ever-changing New Deal leaders and the directors of big industry and finance, it was logical that it was to the latter that Washington would turn. This consensual framework assumed only a predictable number of legislative alternatives, and it constrained the tactical social visions and political space within which the first New Deal could operate. Given, as well, the limits of capitalist social knowledge which the structural economic context and the compounded problems and policy failures of preceding decades had imposed, by 1936 the dilemma confronting both big business and a political leadership necessarily symbiotic on its vision and direction was that the economic programs the various influential capitalist constituencies had imposed on it were not solving the overall crisis of American capitalism that had existed since 1930 but had its roots in the maturation of the system after 1919.
Unemployment in 1933 amounted to 12.8 million persons, or almost onequarter of the labor force. But in 1938, with the gross national product virtually equal to 1929, 10.4 million persons, equal to 19 percent of the labor force, remained unemployed, and almost 9 million more people were out of work than in 1929. Whatever the New Deal tried to do fell behind the inexorable crisis of a mature capitalism no longer able to expand sufficiently.
The New Deal's response to the misery the Depression produced was always tentative and partially improvised because of its premature optimism regarding economic recovery. Beginning with the Civilian Conservation Corps for youth in March 1933, which was eventually to spend over $2.5 billion and then an initial half-billiondollar state and local relief-grant program that eventually and unexpectedly reached almost $3 billion and had as many as 5½ million individuals and families on its rolls at one time-the New Deal jumped from one agency and program to another as it found costs exceeding anticipations, and with few tangible results save new parks, airports, and the like. By 1935, with almost $2 billion spent, Roosevelt and his advisers thoroughly disliked the concept of relief and the budget deficits it engendered, but in that year they initiated the Works Progress Administration with the hope it could produce more useful and eventually less costly results. But any effort to reduce state or local programs merely created area relief crises, and such relief, with or without productive work, was reluctantly built into the system for as long as the Depression lasted. It was unintended and unplanned, but unavoidable.
The question of relief was greatly exacerbated by the astonishing and wholly unpredictable developments in the structure of American agriculture which the collapse of the urban sector produced. Throughout the 1920s, the number of farms but especially the farm population began significantly declining. Beginning with the Depression and until 1935, despite the calamitous drop which made 1932 farm income less than half that of 1929, migration back to the farms caused more than half a million new farms to be created during a crisis of agricultural overproduction. Thereafter farms fell off sharply. Affecting the Appalachians and the Corn Belt most strongly, this phenomenon touched the entire nation. The starkest poverty became more and more common.
In one sense, what is less surprising than the reemergence of agrarian discontent during this period is the fact that there was not more of it than manifested itself in the much-investigated vastly Farm Bureau, Farmers' Union, Farmers' Holiday movements, Southern Tenant Farmers' unions, and associated militant groups that blockaded roads, struck, marched, and caused occasional threats of a revolution that was never to occur. Given the magnitude of the farm crisis and misery, which in many regions was far worse than in the cities, it is more critical to understand that none of these groups managed to channel the great bulk of the farmers into their ranks, but that during this period and thereafter the virtually semi-official, conservative Farm Bureau, representing the better-off farmers and politically close to the Democratic Party, emerged as the strongest of the organized farm minorities. The rest, particularly the Farmers'
Union, shared more in common with the Bureau than divided them, and the similarity in the higher economic standing and preference for political mobilization without deep ideological convictions of both these groups meant that the two main wings of the farmers'
movement would not stray far. Both the Bureau and Union, in any case, by 1932 found it possible to agree on a common program, and that fragile unity was more important than that which separated them. As it was, during the 1930s they both landed in the Democratic Party with varying degrees of fervor.
In any event, both the new Secretary of Agriculture, Henry Wallace, and the New Deal's May 1933 Agricultural Adjustment Act pleased the Farm Bureau, which was duly consulted in the drafting of its parity payments scheme. The Farmers' Union, while more reticent, also indirectly backed the administration's efforts. The AAA reduced the quantity of basic crops by assigning acreage allotments, in exchange for which farmers were given government payments.
Local committees of farmers assigned these critical allotments. Restricting cultivation and food production, despite national outeries, soon became less consequential than the successful efforts of larger farmers to monopolize subsidies for restrictions, farm mortgage help, and the numerous favors that piled up with each new federal program and appropriation. At the local administrative level, the Farm Bureau dominated the AAA until the Supreme Court nullified the law in January 1936, but controlled its replacements thereafter. On the whole, the wealthier farmers until this day receive the lion's share of the benefits of the New Deal's response to the agrarian crisis.
In terms of human consequences, the New Deal's farm program left the farm crisis largely intact. The fact that gross farm income increased during the first New Deal (at a rate not different from the 1932-1933 increase before the 1933 laws took effect) does not alter the fact that the income distribution among farmers left the very poor in misery. That deprivation, which became far better known after 1935, and which the New Deal's subsequent legislation could do little to mitigate, was ultimately only alleviated by the next war and the return of full employment-that is, in the resumed decline of the farm population.
Roosevelt and the large majority of his advisers had earnestly tried to work with big business, and in the fall of 1934, as his economic failures began to mount, he successfully renewed that cordial entente with public eulogies of private initiative and the profit motive. His later difficulties with big business, as opposed to the much more numerous small businessmen who had obtained the least from the New Deal, were surely not irrevocable and, in kind if not degree, no worse than Hoover had also experienced. The New Deal, after the failures of experience and the Supreme Court decisions that removed increasingly weak crutches, had to move somewhere, and for three years it became the victim of chronic indecision, which politics, its own fiscal conservatism, the dilemma of small business, and genuine confusion all imposed. Until the approach of war overshadowed all else and rescued the economy, the interaction between these elements defined the elliptical course of the second Roosevelt Administration.
Roosevelt and numerous key advisers had truly believed in the 1932 Democratic platform on reduced federal expenditures and budget-balancing, and the President was always surrounded by men whose firm objective was eventually to implement it. Hence his short-lived spring 1933 efforts in this direction, which necessity and premature optimism soon terminated. Hoover's $2.7 billion deficit in 1932 the New Deal exceeded by $900 million in 1934 but then about matched in 1935. In 1936, with a deficit of $4.4 billion, the administration finally chose to reverse its pump-priming course. Fiscal 1937, which ran to July of that year, produced a slash of $1.6 billion off the deficit, but fiscal 1938, which began in July 1937, saw another $1.6 billion chopped off the deficit and a budget fiscally more conservative than Hoover's last effort. Given large unemployment, which had begun to increase again in early 1937, the slashed WPA rolls and cancellation of numerous public works projects intersected with the already weakening industrial recovery to cause industrial production to drop one-third from mid-1937 to early 1938, driving unemployment back up to 19 percent of the labor force in 1938. In short, the economy was about where it had been in early 1931. Without relief funds, in many cities hungry men and women were forced back to scavengering in refuse heaps and garbage cans. Moreover, some administration leaders now expected massive permanent unemployment to persist indefinitely. It was during this period that the New Dealers began simultaneously floundering in several different directions for new economic solutions. It is perhaps exaggerated to assign philosophical bases to their differences, yet some such distinctions emerged, though what is more critical is that both failed to define real answers to the decade-old economic collapse.
In February 1939 Harry Hopkins, now the President's most important adviser, took the occasion of his first major speech as Secretary of Commerce to reassure businessmen of the administration's realism and desire not to alienate them. The following August, as the federal 1940 budget remained about constant but the portion going to military expenditures inched upward, the administration created the War Resources Board, entirely composed of top businessmen and soon dubbed the "MorganDupont" group. Its demise was due less to liberal-labor opposition than its inept sense of public relations, but assurances from top administration officials sustained the second and more durable administration integration of government and business beginning to unfold. Businessmen, in any case, throughout World War Two were to domi nate war agencies much as they had during the first conflict.
But 1940 unemployment stood at 8.1 million, or 14.6 percent of the labor force, and increasing military expenditures by about three and one-half times the next year brought the 1941 rate down to 9.9 percent. Save for 1921 and the preceding decade, it was still the highest peacetime unemployment the United States had known in the twentieth century. And in 1941 corporate profits after taxes for the first time since the crash exceeded those of 1929.
World War Two itself ended the protracted crisis of a mature American capitalism that had lasted, in increasingly grave forms, two decades. It made superfluous economic regulation by voluntary or political means as an enormous demand, vast governmental capital resources, and a seemingly guaranteed prosperity replaced the failures of purely economic and political controls of capitalism with what was to become the longest prosperity in American history. The galaxy of doctrines and concepts of planning and social and human mastery articulated during the first four decades of the century now became a rich lode of the forgotten past for historians to mine. The virtually total failure of the old order's assumptions about control, efficiency, rationality, planning, progress, and much else besides, and the irrelevance of the vast bulk of the institutions it had created to apply them, did not lead to capitalism's demise but to a continuing new integration of politics and economics that was to become a part of the permanent crisis of America and the world, assuming global rather than the hitherto largely national dimensions. What now underlay the system's success was not its social perception and capacity to apply it but its will to devote formerly unimagined resources to preserving its power, and in the process to risk all.
5 The American Working Class:
Structure and Limits The history of the American working class is not merely a chronicle of strikes, organizations, and personalities-the ingredients that have virtually monopolized the writing of labor history-but much more centrally is the story of the evolution of the relationship between workers and industry and the very nature of capitalism itself. No other class in American society has so little control over the forces that constrain and mold its existence, yet an assessment of this relationship of the working class to the general economy as well as to specific industries is still to an astonishing extent absent from what historians, regardless of their viewpoint, write. It is this larger, decisive institutional context that is the subject of this chapter.
Although specialists in the field may differ in degree, there is a large consensus that workers' earnings in an industry depend on the extent of its concentration, with perhaps some modification for growth in demand for the industry's products, and that the wage effects of unionism are often quite minimal. The industries with the highest rates of wage increases between the two world wars were not the most highly unionized, and only during the period that union membership was declining-1920-1933-did money wages of organized workers appreciably exceed those of unorganized in the same industry. Thereafter, despite the large upsurge in union membership, the differential was rarely more than 15 percent and often close to zero. The total hourly compensation in unionized establishments increased only 15 percent more than unorganized during the period 1966-1972, to use a cruder but more recent figure which somewhat overstates the union gains.¹ Trends in the demand for labor are far more persuasive in explaining this difference and near equality in wage increases than unionization, and in fact unions have historically provided their memberships with a poor floor against the consequences of vagaries in the business cycle.
Nor can it be argued that the success of organization has sympathetically redounded to increase the wages of the nonunionized workers. Looking at the relative earnings rankings of workers in major industries before and after the advent of mass unionization in some of them, there has been almost no significant change for which unionization appears responsible. The workers in certain industries, such as apparel, have even declined in their relative wage ranking with the increase of unionization, and some have slightly risen, but the most striking feature during the first half of this century is the remarkable incapacity of unionism to alter the economic standing of its members within the larger industrial structure and, what is more important, to improve significantly the wages its members obtain over the unorganized in the same industry. 2 The reasons for this failure to some extent compose the organizational history of the labor movement in the United States, and it is one that describes unions led by socialists as well as avowed capitalists. Socialists among shoe or garment workers conformed to the exigencies of the business cycle much as anti-socialists did in other industries. The economic limits that competition and depression imposed guaranteed the failure to unionize Southern textile workers between the two wars, and when success came later it scarcely modified the wage structure that this competitive industry imposed on organized and unorganized plants alike. Even if inter-union power struggles and political reasons prompted some unions at various times to press claims and demands, in the aggregate they have dealt with the economics of their industries on the terms businessmen defined.
During the first half of the twentieth century, capital growth in relation to labor input was below the national average in textiles, furniture, food and beverages, leather products, and printing and publishing; and firms or sectors of these larger industries that also had a very high share of wages as a percentage of the value of their output usually had both labor strife and worker poverty. Textile and forest products wages hovered around 50 percent of the value of output from before World War One until World War Two, while those sectors had far more than their share of conflict and misery, and rank among the poorest paid in the first fifty-three years of this century. The chemical or petroleum and products made from coal industries, by contrast, had one of the highest rates of investment as well as a wage share by 1939 only one-fifth to one-quarter of value added.
They were very highly concentrated firms that could freely transfer higher labor costs to consumers or absorb them in annual increases in the efficiency of labor, and there was a fairly inflexible demand for their output. Their workers, with and without unions, were among the best paid since 1899 and went on strike relatively infrequently.
The two most important changes in the distribution of the American population after 1870 until 1950 were the significant diminution in the South's share-from 24 percent to 19 percent-and the rise of the West's from 3 to 13 percent. Both the Northeast and North Central states declined in their shares about one-tenth over the same period, but still composed three-fifths of the nation. The surprising constancy of these aggregate figures eludes one more essential factor: Americans were frequent movers, to and fro, within the same regio or to new ones, and they tended to go where living standards and economic opportunities were higher. By the end of the nineteenth century, wages in the South had declined to less than three-fifths of those in the Eastern United States, while per capita wealth was barely half. Although that gap closed significantly after 1929, the South remained the best place to find cheap labor, and three decades later the majority of the rural poor were Southerners. The existence of the South and lower-wage areas throughout the twentieth century affected greatly a trade-union movement that always was inhibited in its demands by the reality and, perhaps more importantly, the threat of runaway shops should they demand too much.
Yet while American workers experienced physical mobility, their economic evolution presented a far more mixed picture. In large part this complexity is due to the fact that even radical analysts are not primed to regard the conditions of labor in one country in the often integral context of an international labor force of high mobility. Yet it is the very existence of mass migration to America that greatly altered the lives of European workers even as it affected in quite negative ways those who were already in the United States..If the history of the American working class is not precisely the use of native rural elements to contain the urban working class, it is most certainly one in which Europe's superfluous population performs to some great extent the same role. For while the real income of American workers rose in the aggregate before the First World War, during the periods of peak migration it increased much more slowly, if at all.
Most important, from 1860 until 1913 the growth of average real wage rates in the United States was far lower than in Sweden, significantly less than Britain's, and slightly below that of France and Germany. While absolute wages of workers in the United States were higher because of an already greater base, this low rate of subsequent increase was critical in allowing the vast accumulation of capital for investment before 1919. In effect, the vast deluge of European manpower on America provided labor ready to work for less than natives might otherwise have been able to obtain without unions; and, above all, lower wages sustained the forward momentum of United States capital accumulation during its most critical period.
The American working class evolved after the turn of the century in ways that unions could only partially anticipate, but in the end its increased complexity left what was unmistakably a quite traditional working class in the objective occupational sense, yet one without the subjective characteristics that socialists had anticipated. In part this was due to its immigrant character and the rising occupational mobility of many of the rest, but other factors must also be noted.
Perhaps the most radical transformation of the occupational functions of the working class came between 1890 and 1920, when clerical and sales labor increased from 6 percent of the work force to 13.8 percent, and later to 23.6 percent in 1973. This category absorbed many old natives who were being pushed upward by virtue of the new immigrant proletariat-and after 1940 women workers also swelled the clerical occupations. Semi-skilled workers, the ubiquitous operatives, were to edge up from 14.7 percent in 1910 to 20.4 percent in 1950, only to slip back to 16.9 percent by 1973; skilled workers went from 11.7 percent in 1910 to 13.4 percent by 1973. It was the unskilled nonfarm workers and service workers, who were 21.5 percent of the work force in 1910 and 18.3 percent in 1973, who suffered a real long-term decline. But despite this, a large classic working class was still as intact and significant as ever in the objective sense, and it was only the farm sector that truly diminished after 1890.
With immigrants hoping to return to Europe and dreaming of a second chance at home, but meanwhile locked by language, prejudice, and preference into their own quite isolated communities; with wives expecting soon to cease working, or women being too busy to consider much more than the next task; with mountain people expecting to accumulate the bundle to return to open spaces, and older acculturated Americans being given white collars and men to oppress; with restless people moving West; with personalism and numerous socially approved modes of escaping reality both encouraged and utilized; with the pervasive illusions of mobility without the reality; with black people ruled out of everything and shunted aside; with all this and much, much more than prose can easily capture, it is no wonder that workers, the poor, and the oppressed counted for little in determining the fate of the first century of modern American history.
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The Business Response to Unionism While business responses to unionism over the past century at first glance appear quite diverse, the overriding guide for its conduct -as contrasted to its words-has always been self-interest. But precisely because self-interest for one firm is not identical to that of another, and the economics of various industries can evoke very different conduct, American corporate behavior regarding unions and labor has a certain superficial complexity on which historians have lavished many books while usually missing its essence.
An easily discarded pragmatism characterized even the most prowelfare businessmen who, ready to endorse the existence of a nominal union movement, gathered in the National Civic Federation from the late 1890s until World War One. Its rival, the National Association of Manufacturers, differed from the NCF only in the size and specific economic position of its members, who were drawn from generally less profitable small and medium businesses in the more competitive industries in which labor costs could not so readily be transferred to customers. Though somewhat of an oversimplification, the economics of this division still explains a very great deal. The NCF was indeed funded heavily by the J. P. Morgan firms, ranging from United States Steel to International Harvester, who at the same time were advocates of greater rationalization and stability in the economy both by corporate cooperation and integration and, in due course, by political intervention. Firms backing the NCF were large, tended to be capital-intensive, and were evolving toward effective oligopoly. And, outside of the NCF-NAM rivalry, which ceased with the decline of the NCF in the 1920s, there were always regionally based or specific industries which encouraged unions in the hope they would equalize labor costs and thereby reduce cutthroat competition-coal and garments were the most notable of these.
The overriding theme, therefore, of business responses to unionism was pragmatic self-interest, and anyone who looks for a genuine ideology of business-labor cooperation, much less a consistency in functional conduct, will be hard pressed. Judge Elbert Gary of United States Steel abstractly defended the right of workers to join unions even as he fought them, to the extent that as late as 1923 it was none other than President Coolidge who forced his corporation to abandon the twelve- for the eight-hour day it had bitterly resisted for decades.
State Policy Toward Labor
One can at least make partially explicable the complexity and seeming unevenness of national policies toward labor since the Civil War by always asking the question "Who loses and who gains and what were their respective roles in prompting action?" For, given the nature of industrial economics, losses are never uniform or even general, and what is a greater cost to, say, a Southern textile firm is improved competitivity for a New England producer. While it oversimplifies history to view labor legislation as an aspect of intra-industry rivalry, neither can one continue to ignore that dimension. And just as one can easily misperceive the concept of efficiency and the rationalization of a labor supply, the fact remains that in a capitalintensive economy with a labor force as variegated, mobile, and costly as America's, serious analysts of that society should not gainsay the significant economic value stimulating the desire to rationalize the work force.
The federal government's role as strikebreaker is far better known, at least if the quantity of written history is an indication, than its uneven but parallel efforts over time to integrate labor into society by more subtle means. The former need not detain us long. From 1877 onward the use of federally controlled troops during strikes became commonplace, with seventy-one Presidential seizures of firms during strikes-largely during wartime being accompanied by occasional but well-known federal anti-strike injunctions and criminal prosecutions of labor leaders. Twenty-nine injunctions to end and resolve strikes after the Taft-Hartley Act of 1947 sustain the legal basis of this coercive tradition down to our own day, setting aside the ambiguous 1914 Clayton Act clause that "the labor of a human being is not a commodity or article of commerce," as well as the much-celebrated Norris-LaGuardia Anti-injunction Act of 1932.
The yet more intensive parallel actions of the many states only greatly amplify a well-known picture. For if coercion is required, then it is no surprise that the government brings its legal monopoly 180 * over it to bear.
More interesting and far less well known have been the reform efforts since 1914 to stabilize and make more efficient the role of labor, if not unionism, in the social system. In large measure these efforts were the outcome of the increasingly polyglot nature of the work force since 1890, and the fact that after 1918 immigration was no longer needed-prompted, as well, by the coincidence that the most troublesome strike of the immediate postwar era, the Great Steel Strike of 1919, was largely manned by the traditionally docile immigrants who composed the bulk of the industry's members. Labor's "Americanization," via forced speeded acculturation in language skills as well as an astonishing period of prohibition of alcoholic beverages aimed mainly at the personal habits and efficiency of workers of foreign birth or parentage, was one dimension of the effort.
Thirteen percent of the Socialists were enrolled in foreign language sections in 1912, but 53 percent in 1919, and most of the latter went with the Communists when they split. Thereafter, immigrants dominated the membership of both parties, which increasingly assumed a fraternal, leisure function for their members, a convivial assemblage of banquet-hall followers who funded the earnest, increasingly small membership still political in the true sense of that term. The Communists took greater pains to use English, making it the language of almost all their publications, but the majority of Socialist literature was in other languages. Only styles rather than constituencies differed. Neither party, during the most intensive, protracted crisis of American capitalism, was able to make any even modest but permanent gains. Both, in fact, had become just two of hundreds of improvisations immigrants devised to survive socially in a strange new land.
Given the melange of factors-the stratified, divided nature of the working class, its tentative relation to America, its high mobility physically within and without the country, its cultural alienation and overlapping, confused identities, its racial irrationality, and much else besides there was one profoundly different alternative to class politics and consciousness for the American working class, one for which there is no historical precedent: individual disintegration. Elsewhere economic crises produced social and political responses, and that is the history of defeated as well as successful socialist movements. In America, to an unparalleled extent, personal disintegration more than anything else was the reaction of the millions of individual victims of capitalism: crime, drugs, breakdowns, personal isolation, violence... In this sense, therefore, the failure of the Left was inevitable regardless of its numerous shortcomings, and the latter only further sealed an evolution for which one cannot identify any real options in the past. The collapse of the Left was ultimately but one more aspect and a reflection of the older, deeper, and intensifying generalized crisis of all American society in the twentieth century.
The Brotherhood of Locomotive Firemen, next in the rail labor status hierarchy, also conformed to this mentality in a remarkably consistent way. "The fireman of today is the engineer of tomorrow," as a speaker at its 1878 convention put it, and in 1876 its grand master declined to stand for reelection because he was soon to become an engineer, and quite naturally preferred that occupation. Despite the fact that many members were dismissed after the 1877 strikes, the Brotherhood-with its motto of "Benevolence, Sobriety, and Industry"-was to persist a while longer in its hope that, in member Eugene V. Debs's words, the railroads would not misinterpret its intentions and that "peace and harmony will prevail between us forevermore."
While recent studies of membership participation vary in degree they all reinforce the fact that an extraordinary number of union members-perhaps as high as 99 percent or more in locals of over 4000 members-do not attend meetings. And in most of these locals there is no serious work for them to do on matters of fundamental policy, and hence their absence is based on a large measure of conscious or inadvertent good sense. Reflecting that growing alienation was the fact that the percentage of worker votes for union representation dropped from 82 percent in 1936-1941 to 58 percent by 1958 and 36 percent in 1975.
6 The United States and the World Crisis, 1920-1945
The First World War rended asunder the economic, political, and psychological stability of the European old order and world capitalism. If that order had been fragile and divided, it had at least been relatively predictable and cohesive compared to the world that was to emerge. The war had been the reflection, not the cause, of the civil war within international capitalism, but the contemporaries of the event could not imagine that the process was only beginning rather than ending, much less that violent conflict between and within nations would become far more common than before. And those larger economic and political forces endemic in this protracted crisis caused and circumscribed the problems with which men of power in the United States and Europe ultimately had to cope. Given their confidence in their system and themselves, they could scarcely perceive the magnitude of the challenge confronting them.
Despite the instability intrinsic in the system, prewar world commerce had been economically centered in Great Britain, with sterling the standard of world trading and London the capital of world banking. The war seriously shook the value of the pound, greatly diminished the French franc, at least temporarily destroyed the German and Austro-Hungarian economies and their roles, and opened the door to the accession of the United States to its principal, though not wholly dominant, role in world finance to match the industrial preeminence it had attained before the war. The new United States control of world trade markets reflected this reality.
Regardless of its own structural need for access to the world econ omy, the stability and power of the dollar, as well as the destruction of the traditional economic centers of Europe, so accelerated the relative American position in the world economy that the genuine integration of the United States into the global economic order was inevitable. This growing American ascendancy, however, was a trend in world economic power which other nations, and above all Britain, resisted, and it was the inevitable friction that accompanied this transfer of responsibilities and privileges which formed the central thread of United States foreign policy in the 1920s.
The vacuum which the decline of European power created had vital political and military consequences as well, especially in the Far East-where it was the United States alone that might aspire to check the emergent overt Japanese imperialism moving into the vacuum which the collapse of the prewar equilibrium made inevitable. These political and strategic questions were significant but less than central to the United States during the 1920s, but there was such a clear relationship between the economic and subsequent political evolution of the world that it is to the economic issues that one must first and primarily look to comprehend the origins and causes of the political and military controversies that became the center of the world scene during the 1930s.
Given the immense wartime accumulations of profit and capital, American investors for the first time on a large scale turned with enthusiasm to foreign outlets to supplement domestic speculative attractions.¹ Nevertheless, United States industry was unable to resolve its dilemma of excess capacity by enlarged exports. The quantity of products exported during the 1920s fell sharply from the peak of 1915-1920 and, adjusted for price changes, was not again to equal the successes United States firms had attained throughout the war in Europe. As a percentage of the gross national product, exports of goods in 1921-1929 were almost one-half of the 1915-1920 record, and they even trailed behind the share of exports during the mediocre decade ending 1914. At the same time, the dependence of the American economy on imports of raw materials changed profoundly during this period as the nation developed a vast, permanent raw materials deficit. Between 1913 and 1929 the quantity of its imports of crude materials rose 146 percent, far higher than any other category of imports, but for items for which there was imperative need to sustain the American economy.
The question of the Soviet Union was scarcely one on which the United States and its former allies disagreed. The isolation of that nation, as if it were a bad dream that might thereby disappear, was their common response after their massive invasions there had failed to dislodge the Bolsheviks. Hatred of Bolshevism united the former allies and Central Powers in a transitory way, and it increased the fear of the Left everywhere in Europe, ultimately easing the acceptance of fascism in Italy, East Europe, and eventually, Germany. Still, given the sustained irrationality of the war, the loss of only Russia by the capitalist world was to prove a relatively small price for the system to pay, and after the next war the cost would vastly increase until, indeed, it was to become seemingly limitless. The League, with or without the United States, would not revise these realities, which were not based on defective organizational structures but on the very nature of world capitalism's inherited maladies.
United States bankers were fully aware of their need to sustain the flow of loans to Europe. "But if the decrease in our export balance is to be gradual and not abrupt," Morgan partner and later top State Department official Dwight Morrow warned in October 1919, "it means that for some time to come there will be a substantial export to be settled... by foreign credits.... That is why we are all studying the problem of international credits."5 At first major New York bankers hoped that the government-backed export credit guarantees that they designed the Edge Act to encourage would prove helpful, but the measure proved to be too little and too slow. The State Department itself was incapable of finding a solution, for on one hand it wished to see both the European economy recover and avoid a prostrate Germany hobbling that goal and again reopen the door to Bolshevism in Germany. But at the very same time that it insisted on the repayment of war debts owed the United States it also maintained high tariff walls which diminished Europe's capacity to repay the Americans, and also demanded the German delivery of reparations-a burden which by 1923 had helped make a trillion marks worth less than 24 cents and had totally paralyzed the German economy. Indeed, Washington persisted with the patently fallacious argument that there was no relation between, say, France's war debt and its ability to collect reparations, and that the United States was not in fact the final creditor ultimately responsible for the world's financial dilemma. Although Hoover and the Commerce Department enthusiastically promoted increased American exports, and thereby built an important political backing for the brilliant, aggressive Secretary, the fact is that his effort was, from a purely economic viewpoint, more notable for its inadequacy in finding a sufficient level of normal trade than its more publicized and studied successes. The main problems confronting the United States in maintaining its position and aiding recovery in the world economy were those of providing adequate credit and neutralizing the complicated legacy of warimposed financial mechanisms and arrangements.
For the American bankers who sold German bonds yielding a respectable 7 or 8 percent, the name of the game was not security but sales, for they took their profits immediately as a charge against the principal. From 1924 to 1930 over $1.2 billion went to Germany alone in what was a precarious though profitable business for United States investment houses netting at least $50 million in fees. That almost two-fifths of all United States foreign loans were in default by 1935 was not so much a confirmation of Hoover's warnings as an illustration of the compulsions and weaknesses which were increasingly becoming the very essence of the world financial system throughout the entire decade.
This fatal structural defect is surely the single most significant and instructive phenomenon to emerge from the increasingly fragile and crisis-ridden decade. Both in fact and desire the economies of the major capitalist nations were more and more integrated throughout the decade after the war, which made the growing weaknesses of each one the problem of them all-and that vulnerability was predominantly economic but also political in the broadest sense. For this reason, in an effort that was more and more characterized by futility, the United States, England, and France-in relation to other nations in lesser roles-attempted to develop coordinated financial policies among their central banks. Given the almost exclusive role the Federal Reserve System allocated its New York bank over international financial questions, until October 1928 this meant that Benjamin Strong, a former J. P. Morgan associate and now head of the Federal Reserve Bank of New York, led American policy. The major world bankers who dealt with each other, though often personally congenial, from the inception each acted on behalf of his national interests and needs. And because of the myriad conflicting economic and political interests and disagreements, this meant that the central banks were largely occupied with the increasingly futile effort to overcome differences among the major capitalist nations essentially moving from one crisis to another. The details of these inordinately complicated issues have been best described in the fascinating official Federal Reserve Bank history of the debacle, yet it involved such ever-changing problems as the role of gold in international reserves, interest rates in conflict with international as opposed to national economic objectives, German recovery, and the uncontrolled as well as directed flows of capital in the world. At one point it was an American effort to get German banks to use dollars and gold as reserves and diminish British power in that nation, at another the excess flow of investable funds from the United States to Europe during 1927, when foreign interest rates were significantly greater there. It was the 1927 drop in United States interest, only partially designed to help the British attract capital and retain gold, that had the unanticipated effect of stimulating further speculation on the United States stock market after early 1928, which was one of several important immediate factors that triggered the 1929 crash.
By 1928, in any event, it became clear that each national economy was too fragile to allow cooperation to stabilize the others, and the difficulties that characterized the earlier period now were greatly aggravated. The world credit and financial structure, built on an accretion of shortrange decisions which, from the American viewpoint, had nothing more in common than a desire to optimize national profit and power, had in fact become a kind of byzantine system far too vulnerable to any single weakness to survive much longer. It was sufficiently integrated so that problems in one nation could have serious consequences to another, but too decentralized and divided to even imagine finding common solutions. And the weakest nation in the chain was Germany, whose very revival and continued existence within the sphere of integrated, as opposed to rival, capitalism was dependent on access to foreign-mainly United States-credits. By mid-1928, despite the prevalent optimistic pabulum, some United States investment and banking leaders began developing a quite sophisticated model of the specific weaknesses of the world economy and their consequences not merely to the United States stock market, world economic power, or exports, but even to the future of capitalism in Europe. Seeing the crisis, both the Federal Reserve Bank of New York and other key investment interests took steps, all of which were to prove more or less futile, to correct what they misperceived to be the most urgent weaknesses, though the Federal Reserve System and its New York bank now split and neutralized each other's power. By October 1929, when American and world capitalism began breaking down with mounting intensity each passing month, all efforts to sustain cooperation only further confirmed that the entire system of voluntary integration had always been a chimera.
In fact, the effort at capitalist cooperation had also been a critical attempt to save Germany for a reasonably integrated and cooperative European and world capitalism, an undertaking also essential for the health of the American economy as it emerged after the World War. And, in the last analysis, bolstering European capitalism, especially in Germany and Central Europe, was indispensable to undoing the social and political effects of the Great War and protecting the world against revolution and the atavistic nationalist Right. The effort was not to succeed.
Also a failure was the assumption of capitalist rationality and the possibility of cooperation, even when mutual dangers were clearly perceived, when conflict was more profitable to national interests.
Indeed, those real problems that official bankers could accurately identify transcended their capacity for rational, common action simply because their national interests dictated different solutions regardless of the clarity of their perceptions. The dilemma of managing a national capitalism both in its domestic and international frameworks repeatedly proved an untenable one of priorities and concrete tactics, especially with the increasingly contradictory, conflict-prone efforts of each nation to try to use others to solve domestic problems.
Yet there was at the same time the disparity between capitalist social analysis, which might indeed be accurate on detailed aspects of a far greater context, and the richly textured social comprehension that the political, social, as well as economic aspects of the historic breakdown of world capitalism required. Even to admit the existence of that crisis was to accept a definition of reality which condemned to futility reform within the context of the old order. To a critical dysfunctional degree, the 1920s proved, a law of a capitalist society and its foreign policy was that it produced conflicts of national interests and that no mechanism or formula existed to undo the instability and crises inherent to capitalism from numerous political, economic, and social origins. The United States became the world's banker and used its funds both for temporary profit and to stave off further revolutionary changes for a decade, but ultimately its own limits and weaknesses were to merge, even heighten, with those of Europe to lead to a collapse that was bloodier, graver, and more protracted than the last. By 1930 the United States had largely failed in its effort to play Britain's prewar role in the stabilization and exploitation of the world economy, it had scarcely reintroduced equilibrium anywhere in the world which the military or political traumas of the war had touched, the Soviet Union had neither disintegrated nor disappeared, and the danger of revolution from the Left was now far exceeded by the reemergence of military capitalism dressed in exotic fascist ideologies. It was for the next decade to cope with the political and military consequences of the 1920s preoccupation with a world economy that began its unprecedented collapse even before the short decade of respite had ended. Ultimately, the 1920s would later appear merely as an exception in the longer epoch of violence, civil war, and crisis of world capitalism that was to sear the next decade and thereafter.
The Collapse of the World Economy
After 1929 the world economy for the United States was but a vast array of insoluble difficulties, and its former allure dissipated with each new shock. These growing frustrations are ultimately interesting because of the way they shaped United States planning for the future. In fact, like all the other capitalist economies, both out of choice and necessity the American economy turned inward as the fragile channels of world commerce capsized. While the 1929 crash did not immediately bring on a world monetary collapse, it made it inevitable by heightening the existing system's endemic weaknesses and undermining the international credit structure to which so many capitalist nations were tied.
The crash struck the United States and Germany hardest, and it affected the United States the longest, with 25 percent of its labor force unemployed in 1933 and 17 percent in 1939. In mid-1932 general world trade was only one-third of 1929, and by 1938 it was still far below precrash levels. As for the United States, its exports as a percentage of the gross national product were the lowest since the Civil War, and in 1932 and 1933 its exports were valued at less than a third of 1929. In May 1931, after the collapse of the Credit-Anstalt, Austria's largest commercial bank, revealed the vulnerability of all Central Europe in the face of the maze of reparations claims and short-term loans that had accumulated, Hoover's one-year moratorium on all reparations and intergovernmental debts was too little, too late. That summer, as British finance stumbled from one crisis to another, the final encapsulation of national economies became inevitable as England on September 20 suspended the gold standard and payments and thereby began to consolidate a sterling bloc which removed one-third of the world's trade from normal intercourse. By the end of the year a system of rigid exchange controls, touching two-thirds of international trade, was in effect among half the nations, including the United States. The world, in effect, was now a melange of trade blocs and insular national economies, and their uneven economic recoveries-eventually the United States' included-were to come largely as a consequence of rearmament and preparation for war.
For the United States, however, this did not mean an end to empire in the Western Hemisphere, even though the objective value of the hemispheric system declined temporarily. Indeed, given the collapse of trade elsewhere, Latin America's relative importance and promise to the United States increased, if only because, unlike Europe, it and the Philippines were the two areas of which the United States could be sure and where its control was sufficient to shape reality in conformity to its needs. But the Roosevelt Administration's policy moved at a somewhat more subtle rhetorical level than that of its predecessors, even though Hoover is probably as much the author of the "Good Neighbor Policy" as those who later obtained credit for it. He had at the end of his administration withdrawn United States troops from Nicaragua and as well as partially from Haiti, and generally had opposed use of troops.
The Democratic Party decided to do no less than Hoover, and its 1932 platform condemned meddling in Latin American internal affairs. During summer 1933, however, when the venal and cooperative Machado regime in Cuba was overthrown, the State Department responded to its own instinct as well as United States business interests by opposing the nationalist government of Ramon Grau San Martin, with its labor and, allegedly, Communist backing. At the end of 1933, after unrelenting American political and economic pres was sealed. "Our own commercial and export interests in Cuba cannot be revived under this government," Ambassador Sumner Welles warned Washington, and in January of the next year the United States supported and immediately recognized a Batista-backed coup that managed Cuba on behalf of United States interests for the next quarter-century. Shortly thereafter the fictitious autonomy of the new satellite was reinforced when the United States agreed to discard the Platt Amendment-save for a base at Guantanamo. Tariffs of both nations were altered to further integrate Cuba, and by the end of 1934 trade between the two states had increased well over 100 percent. "If the case of Cuba was to be the focus of Latin American scrutiny of our acts and intentions," Secretary of State Cordell Hull later recalled, "a happier one could scarcely have been chosen."8 Latin America, therefore, became a region in which the United States more intensively cultivated economic possibilities in lieu of options elsewhere, and Hull gave full vent to his trade and low-tariff theories, in effect to further integrate the hemisphere into a United States-led trade bloc. From this time onward the State Department busily mobilized Latin America to endorse United States trade policies at one hemispheric conference after another. And while its crude, overt intervention in Cuba belied the reality, the Roosevelt Administration tried to improve the rhetoric of its Latin American policy by repudiating the Roosevelt Corollary the President's cousin had announced three decades earlier by withdrawing the last troops from Haiti in 1934 even as it was consolidating its ideal example of the Cuban venal comprador regime. If in fact hemispheric commerce with the United States was not to recover during the 1930s merely by virtue of such political domination and despite the creation in 1934 of an Export-Import Bank that was largely used to lubricate hemispheric trade, what exchange there was became yet more reliably a part of the United States economic empire. Occasional exceptions, such as the Mexican oil nationalization of 1938 which United States firms crudely provoked when they ignored Mexican court orders, were possible because of the neutralizing role of United States silver investors in Mexico who counseled against rash action lest they too be seized, alternative markets for Mexican oil, and the erroneous American confidence that they could later retrieve the property at a more propitious time. Despite Washington's covert attack on the standing of the peso and boycott of equipment to its oil industry, Mexico's success was the exception rather than the ruleone that the United States would not again so lightly tolerate.
With the collapse of the world economy, Japanese militarists were able to prevail in taking their country to war in Manchuria in September 1931, hoping thereby to head off nationalist anti-Japanese forces emerging there, install their own puppet as a counter to the one they felt the Anglo-Americans had in Chiang, and to expand their already dominant power in the regional economy. Indeed, by that time Japan's investments and trade with China were, by far, preeminent, but in Manchuria only a very small fraction of total United States investments in China stood to lose by a Japanese takeover. By 1931, as well, United States trade with Japan was two to three times greater than with China-a fact that was to remain true for the rest of the decade-while its investments in Japan were almost three times as high as in China. The weight of these statistics had importance in creating within the United States a group of key investment leaders, of whom Thomas Lamont of the Morgan firm was the most important, who like most British officials sympathized with Japan's ambitions in Manchuria. And they in turn reinforced diplomats, such as Ambassador Joseph Grew in Tokyo or Nelson Johnson in Peiping, who urged understanding if not justification of Japan's seemingly natural ambitions in northern China, where it would serve as a strong barrier to Communism by ending local chaos.
Accepting Japan's sphere of influence there, this group argued, would cause it to stop and accept the United States presence farther south and in the Philippines. In this view, the United States had to work for its own interests in the context of an aggressive Japan, a strategy perfectly consistent with Washington's main Asia policy since 1905.
This ambiguity was to find full scope in the much studied response to Japan's invasion dubbed the "Stimson Non-Recognition Doctrine." In fact Hoover and his Secretary of State were quite explicit that "these questions" involving China would never cause the United States to go to war with Japan, and Stimson himself wished the League of Nations to take the initiative in the crisis and allow the United States to follow it. At the same time, he was conscious that an unopposed Japanese success would cause "direct material damage to our trade" and "incalculable harm... to American prestige in China," and hence the United States backed the League's decision to study the situation while at the same time it urged conciliation on the victim and executioner alike.10 The doctrine, which suggested that the United States would not accept the legality of changes in the Open Door policy or China's territorial independence, was both atypical of United States policy thereafter and nebulous enough not to offend. The League's Lytton Commission report the following October was critical of the Chinese by explaining the historical origins of Japan's expansion, yet condemned the Japanese and demanded their withdrawal without any mention of greatpower action to compel it. The report was the sort of intricate balancing act the United States could endorse. Japan, of course, ignored it and withdrew from the League. Despite the unresolved matters of naval expansion in the background, relations with Japan the next two years improved despite disagreements on economic issues. But in April 1934, with Japan's own Monroe Doctrine of a "Co-prosperity Sphere in Greater East Asia," the United States felt but did not voice its displeasure at the virtual end of the Open Door which Japan's proclaimed assumption of responsibility for the peace of the area, and its opposition to any activity disturbing its imperialist relations with China, implied. The British, however, with their stake in China nine times greater than that of the United States, much to Hull's irritation were quite resigned to assigning northern China to Japan, and for the moment the United States could not circumscribe Japan.
Nor was it able to do much when Japan at the end of the year announced it would not renew existing restrictions on naval expansion which were to terminate in 1936. The United States had, after all, begun large naval construction, admittedly allowed within existing treaties, purely to create employment at home, but that act mitigated its subsequent ability to complain about Japan's action
The European Disaster
After having helped sow chaos in Europe during 1914-1918, and having deferred it with money during the following decade, it was there that the United States was to turn its primary attention to the political and diplomatic failures of the old order. That priority was the logic of the United States' own industrial criteria of power, and that fetish was to prevail in its thinking about the world until this very day.
The United States was confused as to what to do meaningfully to control fascism and tacitly, and later explicitly, fell behind British and French appeasement diplomacy. During the September 1938 Czech crisis and Munich, Hull took the position that the United States would not make appeals for peace or resort to force, while Roosevelt felt "It's safe to urge peace until the last moment." On September 26, Roosevelt wired Hitler and Edward Beneš "not to break off negotiations looking to a peaceful, fair, and constructive settlement," and after the destruction of Czechoslovakia was arranged the United States urged Beneš not to upset it.13 Neither Hull nor Roosevelt felt that Munich gave the West more than a breathing space, but they were ready to take that much at Czech expense. To Hull, indeed, the solution to the European crisis was subsumed in his monomania, which I discuss below, but suffice it to say the initiative was left to a European diplomacy that blundered into a war in which friends and enemies were chosen only in the last moments of one of the most compromised chapters of the history of diplomacy, in which the Anglo-French were willing to save Polish reaction but not Czech democracy, in which the Western Europeans first tried to direct Hitler's attack against the Soviet Union and then either surrendered or refused to fight seriously when they failed, in which the USSR agreed to complicity with Germany rather than combat it, the Czechs surrendered rather than fight alone or with the USSR, and in which the West and Germany both wooed fascist Italy and tolerated 220 * Franco Spain.
The Economic Foundations of American Foreign Policy
States often have ideologies which are not an index to their practice, and the disparity between the two can exist in constant contradiction. Ideology will not last long if it becomes dysfunctional to the preservation of power, but if it is merely irrelevant it can remain enshrined indefinitely. In any case, false consciousness is at least as old and common as the clear unity of perception, action, and principle, and it is important to know when it exists and powerful men believe that their actions should advance some goals and commitments. If in fact, as I think it can be argued, the practice of United States foreign policy since 1890 has never quite found its suitable comprehensive ideology which conforms to practice, and a benign tension between the two has existed since then, it was during 19331944 that Cordell Hull, whose tenure as Secretary of State was the longest in United States history, made a serious effort to formulate a suitable American theory of the world. One cannot, in any case, comprehend the motives as well as the theory of United States foreign policy after 1933 without taking Hull's accurate if incomplete official vision seriously.
United States foreign policy after 1890 was so deeply concerned with economics that it was no surprise that Hull should articulate what was a conservative economic interpretation of history and world conflict. In the crudest terms, to the Hullians the basic source of world conflict was trade and economic rivalry, and if nations could unhamper and free trade, then they would automatically attain peace. As a former leader of the low-tariff Southerners in the House, whose cotton and tobacco crops made it the most internationally minded of all sections, Hull also neatly reflected the interests of his most important constituents, but it would be wrong to reduce his commitments merely to those of the pork barrel. "But toward 1916,"
he later recalled, "I embraced the philosophy I carried throughout my twelve years as Secretary of State.... From then on, to me, unhampered trade dovetailed with peace; high tariffs, trade barriers, and unfair economic competition, with war. Though realizing that many other factors were involved, I reasoned that, if we could get a freer flow of trade-freer in the sense of fewer discriminations and obstructions so that one country would not be deadly jealous of another and the living standards of all countries might rise ... we might have a reasonable chance for lasting peace."14 That neither the history of capitalist conflict nor logic made Hull's political conclusions or visions follow from his premises and the fact that the entire notion was no less ideology and false consciousness in his hands than in Woodrow Wilson's first American clear statement of the doctrine are besides the point. The United States was a trading nation that could benefit from the implementation of such doctrines, from which it could gain if others accepted them also. That it too was a high-tariff nation ready to dominate its entire hemisphere was irrelevant.
Whether false or hypocritical, the Hullian doctrine was useful and sincerely believed as well.
Hull's economic interpretation of the causes of war was one that was shared both by businessmen and those Senators who thought neutrality acts could remove the specific economic causes which forced the United States into World War One. And since a concrete military or strong diplomatic response was one the United States was unwilling to employ against the rise of fascism until the end of the decade, Hull reacted to each challenge by referring to general economic principles and relations the United States wished others to both accept and implement. "It is the collapse of the world structure, the development of isolated economies," he argued in May 1935, "that has let loose the fear which now grips every nation, and which threatens the peace of the world."15 In fact, however, the change in the world economy most harmful to the United States was the consolidation of the Britishdominated sterling bloc, and a good number of the largest firms of American big business reached their own cartel, output, marketing, and patent agreements with German industry to avoid economic conflicts. It was to the problem of Anglo-American relations that the State Department after 1936 turned most earnestly, attempting to win Britain's support not only for familiar trade principles but concrete changes in tariff and exchange policies. The former was not overly difficult, if only because the British still respected the theories on which their nineteenth-century hegemony was based, and the matter was inconclusively negotiated at the level of practice until 1938. For political reasons Britain was unwilling to break off such talks, preferring to cultivate American friendship and solidarity with its diplomatic strategy, but economically it could not afford to make major concessions and was not to do so until after the next war.
Hull, on the other hand, tried to persuade the British that economic causes were the origins of Germany's expansionism, and that diplomatic solutions went hand in hand with economic. "I kept hammering home the economic side of international relations as the major possibility for averting the catastrophe," Hull later recalled. 10 After much bickering the British agreed to minor and rather vague conces sions in a November 1938 agreement they thought politically expedient to sign-though in fact the Anglo-American struggle over the theory and practice of world trade was only beginning. "I feel sure,"
Hull told the German ambassador during the Munich crisis, "that if the German Government decides to change its course and adopt our liberal commercial policy, it could move in our direction more rapidly than even German officials imagine. Capital and businessmen in other countries would immediately discover your Government's basic change of policy, and your manufacturers would soon get credit with which to pay for raw materials."17 This widely held economic interpretation of Nazism was not so much incorrect as immaterial and naïve for the exigencies of the moment and the nature of the needed cure of the malignancy that had grown on an ill German capitalism which, admittedly, had major resemblances with all the others. Publicly, not only for Hull but for the entire administration, the United States answer to the world crisis was economic accords and expansion. "I believed," Hull persisted in 1940 with his correct but now momentarily irrelevant thesis on raw materials and trade, "that the trade agreements program should be retained intact to serve as a cornerstone around which the nations could rebuild their commerce on liberal lines when the war ended."18 By that time other officials did not disagree with Hull but knew that they would first have to find political and military solutions
The obvious political implications of troop locations weighed heavily in the thinking of men such as Secretary of War Henry Stimson and others, and in August 1943 Britain and the United States authorized a mobile force to drop in Germany within hours should it surrender or capsize before the opening of the second front. Not until 1943, when it became apparent that the USSR had definitively stopped and reversed the thrust of the German advance, did diplomacy and politics become the main concern to the American decision makers. They tended to assume that the American ability to control the terms of the peace settlement would increase if these questions were postponed until the end of the conflict, when both its allies would be weaker and more solicitous of American opinion. In August 1943, as well, while the USSR was still fighting the Germans within its own prewar borders, Anglo-American forces invaded Italy and thereby raised the issue of whether, in lieu of a three-power political accord, possession would be nine-tenths of the law in dictating the nature of the European peace.
By that time the military and political problems of Europe had merged for both American and British leaders. The political impact of the war on Europe's masses was immeasurable but self-evidently very great, and threatening to the Anglo-Americans. Politically, Europe's traditional Right had been allied with Hitler, and in many countries it was to an important degree in exile or dead. The Resistance in Italy, France, Yugoslavia, Greece, and elsewhere was predominantly Communist-led or ready to collaborate in a united front with them, and it was the Resistance alone that could merge patriotism with their social program. A constant preoccupation in Washington and London was what the Left and Resistance might do, and the relation of these forces to Russia. For while the USSR had publicly abolished the Comintern in May 1943 and often had publicly called upon all Communists to subordinate their programs to unity behind the effort to win the war, the issue of the Left for the United States was one of capabilities as well as intentions, and in fact American leaders always held Moscow accountable for all actions of the Resistance, as if it lacked any scintilla of true independencedespite massive proof to the contrary. That Russia would play the role of inhibitor of revolutionaries seeking to attain power seemed inconceivable, yet it was nevertheless true. But for the West's leaders the greater danger was the very existence of a powerful Left with the capacity and will to prevail, and that problem had to be confronted in 1943 independently of Russia's intentions.
Yugoslavia was the prime example of Communist power in Eastern Europe, but it was so patently wholly autonomous of the USSR that the British during the last two years of the war, wisely but prematurely, sought to make their own alliances directly with the Tito-led mass peasant radical nationalist movement that had tied down thirty-three Axis divisions by the end of 1943. To the United States, which worked for the better part of the war with the reactionary collaborationist Serbian guerrillas under Draža Mihajlović, Tito was a Moscow agent, despite the fact that no visible Soviet aid went to him. But Tito's relations with the Russians, who recognized King Peter's exile regime in London, were already going from bad to worse. Tito's pan-Slavism and flirtation with the idea of an eventual South Balkan federation enchanted the British, who saw it as a barrier against Soviet influence, but it guaranteed an eventual rupture with Moscow. To such facts, of course, Washington was immune.
Creating and Planning the Postwar World
The failure of the peace after World War One, and the objective need of the United States economy not to allow a renewal of prewar failures, led to a wartime planning for the peace far more intense than anything undertaken during the first conflagration. The United States was determined not to lose the peace again, nor could it afford to do so.
Indeed, insofar as the postwar principles around which the United States hoped to construct world institutions were concerned, Washington began at the inception of the war to try to gain the commitment of its allies, and above all Britain, to the letter and principles of its postwar system. For a reformed world economy, Britain was the single most crucial problem because of the preponderant role its sterling bloc played in the entire world trading system.
The United States immediately linked its wartime aid to British sup port for American postwar plans and ideas, an integration which revealed the practice as well as the theory of the ideal world system it hoped to impose and lead.
The first important example of this American effort was the Atlantic Charter, which Churchill and Roosevelt issued in August 1941. By that time the British, for political reasons, were desperate to court the Americans but also unable to afford conceding everything they demanded, and these terms followed closely Hull's philosophy. While mentioning political matters quite superficially, the Charter called for free access on equal terms to the trade and raw materials of the world after the war, a point that Churchill strenuously insisted also incorporate respect for "existing obligations."22 For the next four years the United States relentlessly moved from the general to the specific in mobilizing support for these goals, and spent an inordinate amount of time badgering the British, above all, to conform to all the subtleties of the Hullian doctrine of abolition of trade blocs, free trade, and open access to raw materials. After strenuous disputes which caused even the desperate British to delay signing it, London agreed to the only somewhat more specific objectives of world economic reform in Article VII of the Lend-Lease Agreement of February 1942, the precise meaning of which was to remain a source of controversy for the next five years.
- 235 For Washington the matter was not so much a question of principle as the prevention of another depression and the conditions that had brought the last one about. Concern over large postwar unemployment was widespread among economic planners from 1942 onward, and a Niagara of pessimistic studies and speeches on the dangers of insufficient postwar trade, access to raw materials, and investment opportunities gushed forth from official and private agencies and personalities. In effect, postwar planners hoped to avoid the mistakes made after 1918 on the implicit assumption that the two postwar epochs would not be politically dissimilar. From this viewpoint American strategists regarded the war and Depression as an exceptional development in history rather than one that would fundamentally revise the nature of the world and the problems and forces within it.
The Bretton Woods, New Hampshire, conference of July 1944 led to the creation of the International Monetary Fund and World Bank, which were intended to facilitate the quick restoration of "normal" world trade. Such a vision, quite as naturally, meant a firm United States opposition to Axis reparations playing an important, if any, role in postwar reconstruction. Normal loans and investments, the United States felt confident, could accomplish that objective.
Permanent membership in the Security Council and a veto were American ideas, and from the inception the Americans demanded membership for China because of the latter's explicit willingness to serve as what Churchill dubbed a "fagot-vote" for the United States in return for continued economic and political aid.
The issue of German reparations was linked to the role of United States credits in postwar reconstruction, and low or no reparations was about Washington's only consensus on the future of Germany other than the implied assumption it should not have any form of socialist society. Russia, on the other hand, until the last months of the war seemed certain to be in possession of the majority of German territory, an American premise which only Hitler's decision in January 1945 to fight to the death on the Eastern Front while permitting relatively easy combat in the West proved incorrect. But Russia as well as France wished German reparations with which to reconstruct. Treasury Secretary Henry Morgenthau, the advocate of dismantling German heavy industry, therefore also favored a large loan to Russia-a loan the United States was ready to extend only in return for Soviet political good behavior. Others, such as Stimson and Navy Secretary James Forrestal, opposed a stern peace because they knew it would lead to a vacuum in Europe's economy as well as politics, opening the door to Communism. Hull simply wished a liberalized Germany integrated into the world economy, and the matter was not resolved into a common United States policy before the Yalta Conference of February 1945. There, with the Anglo-Americans having just been on the defensive and beholden to timely Soviet military pressure, with the USSR still likely to capture most of Germany and United States desire to get it later to fight Japan on the Chinese mainland, America's leaders were anxious to attain, at most, only general decisions on Germany and all other questions in the hope the crucial details could be more favorably interpreted afterwards, when the United States would be tactically as well as strategically stronger.
This view was quite consistent with the general wartime policy of putting off all political settlements until the end of the conflict, and the late date the Yalta Conference was convened was in itself testimony to the astonishing United States ability to succeed in this effort as long as it did.
Tito and his Partisans were the masters and beholden to no one, though the United States was more certain than ever that he was Russia's agent.
In virtually every important Far Eastern nation, above all the former colonial states, there was a disintegration of power and a vacuum which the Left began to fill as the vast, hungry masses took to arms. In China the issue was who would occupy the immense Japanese-occupied territory. In the Philippines the Communist-led Huk guerrillas, the main antiJapanese resistance, began replacing the collaborators who had once been United States compradors as well. In the Dutch East Indies a puppet independence government was in place, and in Korea, for which no occupation or partition agreement had been drawn up, a strong Left and independence movement existed everywhere. Above all, Vietnam was about to begin its August Revolution, which was to become the single most important test of United States power over the following generation. On August 14 the United States issued General Order Number One, attempting to define the political outcome of the war in Asia and reverse the immense danger to it of a vast sweeping revolution that could change the very future of all history. Asia had to emerge intact from the war or it could not be cautiously reformed and integrated into the contemplated United States Pacific destiny.
The Japanese were ordered not to transfer either their arms or authority to forces that General Douglas MacArthur did not approve of, making them the de facto American agents. Korea was divided at the 38th parallel to stop the flow of a Soviet army capable of going far south of that middle line. The Philippines were left in the hands of the collaborators, and Indochina was divided between China and a French-British occupation, while in China the Japanese were ordered not to give either arms or territory to the Communists. All this had no relationship to reality, and it was a decision for a restoration of the old order that was to trouble profoundly the remainder of the century
7 The Accumulation of Power
Power includes the ability to manipulate the levers that affect profoundly the material lives of many people, and in United States history it has rested in sufficiently diverse places at any given time to reinforce the inclination of the vast majority of writers on American life to avoid confronting what is not only one of the most complex but also sensitive and vital of topics. Yet not to attempt to understand the directorship of power in modern American history is to be ignorant of both politics and economics, their interrelationships, character, and possibilities. Apologists for the status quo find that the simple denial of the class nature and function of society and decision-making within it is adequate, and the descriptively elusive character of the social system and its management is the best reinforcement of their thesis. Radical simplifiers have contented themselves with quite primitive models which tend to lean heavily on explanations which are at best historically limited, often quite irrelevant, and almost never linked together into a broader analysis. And defenders and critics alike of the constituted order of power erroneously attribute to the existing system a strength and coherence which invariably underestimates the weaknesses and limits intrinsic in it.
Power is expressed by a vast, interwoven, and quite complex series of political and economic institutions the direction of which rests in the hands of persons whose selection over time becomes a central question given the undeniable reality that the economy and political structure do in fact historically define the larger contours of the application of American power institutionally at home and abroad. How such people accumulate various forms of political and economic power, and the ways in which elites are created in the United States, can alter over time, though one can also define a fairly limited number of quite predictable mechanisms whose relative importance may change in degree if not in kind. The economic and political universe and the criteria within which elites operate are durable, despite the fact that no single, much less simple, model suffices to explain the variations possible within this ultimate limit.
Selection methods may more or less fluctuate, but the systems they are designed to serve do not. At the economic foundations the business leadership works within the premises of capitalism; at the political levels there has been a larger consensus and historical continuity in domestic and foreign policy that both transcends and defies the recruitment process. Yet as the conditions and needs of American society have altered, the role of traditional means of recruitment and the accumulation of power for this or that constituency or group have not so much been replaced as supplemented.
In the barest outline, existing evidence shows that economic development in the United States after 1865, and for at least the next four decades, was significantly controlled by existing long-established social and economic elites, and not merely in the hands of sons of "businessmen"-even though transitory factors of new settlements created increasingly important exceptions farther west. But given New York, Boston, and Philadelphia's critical role as the center of United States corporate headquarters which dominated their regional economies-and thereby the main national developments until 1900-the evolution of urban centers is critical. In essence, who succeeded in these cities largely depended on their status-family and social connections and access to existing economic power. The crucial groups in economic development after 1870 had both a high degree of status and economic privilege before the Civil War, and existing models of economic history do no justice to a reality in which not all men entered the initial period of United States industrialization as equals, but in which those men with a "head start" in the accumulation process tended to share heavily in the control of the future as well as the past distribution of economic power. This wellplaced constituency laid the foundations for their political influence and, to some variable but always critical extent, defined the basic ground rules for the distribution of power in America until this day.
Even if time has seen modifications of its original forms as the structure of economic activity and rewards has altered, it is still a central foundation of American power.
A crucial foundation of business activity was the extended family or kinship system, which immensely facilitated the eager young elite Bostonians entering businesses "with all their force," to quote one sour contemporary, and provided the decisive universe for recruitment of key personnel and leaders.¹ Founded on fortunes initially amassed largely in commerce and mercantile activities, real estate, and finance, the established families had the capital essential to master the economic revolution that after the Civil War took place in manufacturing, railroads, and mining. Massachusetts and Pennsylvania had the highest average capital investment per manufacturing firm in the country in 1870 and more than enough for regional needs -a fact that drove the capital of these cities westward. "The family and social connections of the firm," observed Henry Lee Higginson, the head of the critical Lee, Higginson investment banking house and arbiter of Boston finance for decades, "assured to it the best possible clientele; there was sufficient capital. ... The firm owed in some measure to family alliances its well-advised connections with the best financial enterprises of the day."2 Key firms, such as Higginson's and Kidder, Peabody & Co., in Boston, tended to provide the crucial coordination for vast undertakings involving numerous areas of activity, removing the dangers of costly or even fatal errors that exclusively narrow family undertakings were more likely to make.
To manage new activities the heads of enterprises everywhere preferred recruiting on the basis of blood ties, a fact that greatly colored individual behavior, goals, and responsibilities in a manner that formal conventional economic theory has not attempted to describe. In Boston, recruitment on the basis of blood, or, lacking sufficient quantities, club and school affiliations, was the rule. Higginson himself, after losing money on assorted ventures of his own, later confessed, "I was taken in at the beginning of 1868 as a matter of charity to keep me out of the poorhouse." Subsequently he employed and also complained about relatives in similar straits. John Murray Forbes, merchant prince turned railroad tycoon, retrieved his indigent cousin, Charles E. Perkins, from Cincinnati, and eventually Perkins became president of one of his lines. Forbes always hired relatives first, and the children of other Boston elite families afterward. Charles Francis Adams, Jr., when president of the Union Pacific Railroad, made it a point to hire "my kids"-Harvard men-if possible. Investment banking in New York relied on blood ties first as the basis of recruitment, and the German-Jewish banking firms in New York were manned at the upper levels by what was a series of interlocked extended families. Superimposed on kinship were marriage bonds, which not only saved some family fortunes but provided others with new managers with whom affiliations of blood and kinship meant that much more than mere profit motivated individual behavior. Key families, in effect, formed the basis of primary economic networks managing and owning economic activities as collectivities whose exact shares altered with new marital liaisons, tax avoidance structures, occupational choices to continue in the business or outside it, and similar variables. As a kinship group the family could much better afford to lose some children to other occupations, diversions, or death, and it gave sound management to the kin group's general interests, which, with the addition of tamper-proof trusts, assured its future control of large and growing economic resources.
The older American elite thereby retained economic power throughout the nineteenth century, though less exclusively as the twentieth century progressed, and with it automatically came renewed status, though it was something it surely never lost. The importance of being in the Social Register which began in 1880 along with comparable clubs and schools around the same period to protect and confirm the pretensions of the elite and absorb some of its surplus capital-has been greatly exaggerated. Suffice it to say, all in the Register do not have significant economic power, and those with important fortunes not in the Register because they are Jews, Catholics, divorced, or for ephemeral reasons are much too numerous to ignore at any time, but particularly as the twentieth century advances. The Register and exclusive clubs, schools, and churches are the effect, not the cause, of wealth, and the socially and educationally integrated relationship of this elite is merely a perfectly predictable if increasingly unreliable mechanism for controlling marriagewhich is to say, economic-choices crucial both to a family's objective welfare and preferences. The key Philadelphians in 1940 number under four dozen and are the main architects of the economy the city controls, and the thousands of others in the Register are of small importance by comparison. The majority of millionaires both in Philadelphia and Boston at the turn of the century were in their Registers, yet what is most significant is the one-third to two-fifths of the millionaires who in 1902 were excluded. Personal reasons explain many of these omissions, but despite the importance of the older highstatus "Establishment"-type elites in the foundation of industrial capitalism, it was evident even by 1900 that interests that did not conform to this stereotype were already important (about one-tenth of the key business leaders) and, with the economic development of the nation in ways the old elite did not or could not control, likely to increase with time.
The first group to emerge was the German-Jewish banking families in New York, who were composed of a set of older families who intermarried and had their own tightly knit social world excluding most Jews and all Christians. They, in turn, where ostracized from the Establishment social world and, of course, the Register. Speyer & Co., J. and W. Seligman, and Kuhn, Loeb were but some of the main names in this orbit around 1900, and later it was to grow beyond even the bounds of German Jews to encompass numerous other Jewish interests in finance, merchandising, and such branches of mining as the Guggenheim empire. Jacob H. Schiff in 1900 was surely one of the ten most important financiers, yet not in the Register-a fact which in no way diminished his very substantial importance.5
What emerges after the first four decades of modern capitalism is a significantly higher economic mobility into the elite, but in a manner which in no way alters the economic and social structure of capitalism or the distribution of income and wealth. Whatever the form of economic accumulation or the propensity toward broadening the directorship of capitalism, the system defines social and human relationships in precisely the same fashion regardless of the family, religious, or racial origins of the most important owners and managers of the economy. Intrinsically significant in capitalism is not the manner in which it is constructed by one or another group of individuals, but the economic and human outcome of the effort itself. Yet insofar as the exercise and purpose of political power reflect the nature of the distribution of economic power, the alterations in the accumulation and distribution of economic resources become a key to comprehending the changing nature of political leadership in this century.
Still there is a significant historical value in perceiving the social and family organizations and continuity that made for success in the accumulation process, and the manner in which they persist even to this day. Indeed, even major corporations built wholly by individual rather than collective kinship and peer-group efforts, after the First World War as well as before, for tax as well as other reasons frequently passed to family control-Ford is the best-known exampleand in any case family domination during the 1960s explained the operational control of 45 percent of the 300 largest American corporations, while another 15 percent were under possible family control.
The forms that had succeeded after the Civil War retained efficacy a century later, and many of the men who created the corporate structures then still had heirs continuing a century later with strategic blocks of stock and directorships. Joined by new corporations and now new families along the way, both persistence and change had marked a century which was completely constant only in the purpose and profits of economic activity.
Schools should not be wholly gainsaid, because they too are important preliminary institutions in the socialization process and measurably influence who succeeds and fails in business, but they are not decisive in recruiting key political bureaucrats. From 1933 to 1965, 40 percent of the 1032 key federal executive appointees in domestic as well as military and foreign-policy posts attended eighteen universities, and the three most importantHarvard, Yale, and Princeton-accounted for almost half of these. Catholics were only 19 percent of this total number, though their share increased over time to reach 26 percent under Kennedy and one-third under the first two years of the Johnson Administration. Jews were 4 percent overall, but reached 7 percent under Kennedy and surely increased yet more under Nixon. What is clear is that non-elite-school bureaucrats, Catholics, and Jews when in power acted in a manner quite indistinguishable from those conforming to the "Establishment" model, proving that the power of the office imposes absolutely clear reference points on any appointee, and whatever his origins, no one who is not wholly predictable and conforms to the parameters of consensus on the function of power is able to obtain a vital post. So deprived of individuality are these bureaucrats, and so impersonal and devoid of sensibilities the office and the power structure that produces executives, that public resignations for reasons of principle become virtually unheard of as bureaucratic mechanisms wholly displace even the most elementary scruples.
Personal contacts are important, however, as one component of a much broader selection process: the existence of family and personal dynasties that offer ample scope to their more talented members. The Foster-Dulles dynasty produced John W. Foster, Secretary of State in 1892, and Robert Lansing, Wilson's Secretary of State; and their grandsons and nephews, John Foster and Allen Dulles served as Secretary of State and director of the CIA long after. The Henry Stimson dynasty included successors in Dean Acheson, the Bundys, and John J. McCloy to carry on the tradition Stimson's law partner -and also Secretary of State-Elihu Root had helped shape. The Rockefeller dynasty was economic in origin but soon moved into númerous key political roles, and with the sponsorship of Kissinger's career eventually magnified its own power. The Kennedy clan is yet another, based largely on the mysticism of names that also helped make a second Roosevelt President. Such dynasties, which intersect government, top corporate law, finance, clubs, marital alliances, schools, and much else, have a certain deceptive fascination and are instructive in showing the integration of political, economic, and social power at various points. Indeed, at any given time one or more exist as quite important selection mechanisms for the administration of power. Yet viewed alone, or even as primary recruitment systems essential to the organization of America at the top, they become seriously misleading, for there is no evidence that family or power dynasties are a necessary prerequisite to the continuity in policy and practice of American capitalism in its larger context. W. Averell Harriman, born into one of these dynasties, was no more important in post-1945 history than Joseph Dodge, son of a poster painter, high school grad, and one-time car salesman who became a successful Detroit banker. Both fulfilled their numerous key responsibilities in precisely the same way, for exactly the same ends. Alone or together, Dodges and Harrimans were sufficient to give continuity and leadership to America's established order. Neither could transcend the imperatives of conduct the larger principles of that order imposed upon them, nor undo its personal or institutional limits.
Diplomats, even after the Foreign Service Act of 1924, came from elite families and were educated in elite schools; and whether their fellow students and friends went to Washington, law, business, or the university was merely a matter of taste and inclination. The channels of contact-family, marriage, clubs-always existed, even though I would argue that such personal ties were incidental rather than causal to the nature of decisions made. For whether foreign policy personnel were well-born or not, their visions and consensus transcended such intimate links. It is, of course, germane that Franklin Roosevelt, himself a patrician, recruited 44 percent of his key personnel from business or law, and that one of his two key diplomats responsible for overthrowing the radical Grau government in Cuba in 1934 was closely associated with major United States sugar investors, but it is difficult to imagine American Molasses being dissatisfied with any of the other personnel that might have been chosen to implement a policy exactly like dozens that preceded and followed in comparable situations. The larger foreign policy consensus which existed meant it was natural for some firm or interests with a need -as the rubber companies and British price manipulations after 1920, or the J. P. Morgan & Co.-initiated federal export loan guarantees in 1919, or Owen Young of General Electric's successful promotion of a Bank for International Settlements after 1929, and numerous other possible examples-to stimulate a government action or obtain its endorsement of their own. In cases such as the Federal Reserve Bank of New York, the Wall Street banks administratively organized it and the Bank was in charge of official United States overseas monetary policy, thereby leaving matters more directly in business hands, especially when its own agents staffed the key posts.
Both the selection process of decision makers and the purposes of policy were circular and mutually reinforcing: it made sense to have a knowledgeable former oil-company executive or lawyer directing a program of overseas petroleum diplomacy if one automatically assumed that acquisition of new fields and profits for United States firms was the purpose of policy.
Suffice it to say, over one-half of the key posts within the State Department from 1944 to 1960 were occupied by men who had first been with major law firms, in banking and finance, or with bigbusiness firms. It was that understanding and contact with big business which defined the conduct of diplomats and provided the standard to which they were obliged, at risk of losing their posts, to conform. And such premises reflected, in turn, the broader consensus within all institutions-business, press, education, politics-that the prosperity and security of capitalism as a system was integral to the larger national interest and welfare. That assumption, so uncontested at meaningful levels, excluded a vast range of foreign policy decisions which were never taken, regardless of whether or not specific interests lobbied against them, or who and how foreign policy personnel were chosen. The United States Government always opposed the loss of American property, and hence national revolutionary movements; it never voluntarily relinquished markets to another country at the expense of United States exporters; it automatically opposed foreign bases as close to United States soil as American bases were to foreign territory; and it always objected to foreign actions which precluded future United States involvement in local economic development. The larger assumptions and parameters of decisions, therefore, are fixed by an overriding consensus and the collective nature of political power and capitalism in the United States; and although the tactical means selected to reach ends can be quite variable, even the limits of that variability are predictable in advance, regardless of who specifically makes the choice.
But stating this much only diminishes the importance of such matters as elite recruitment which so many scholars have thought to be causal rather than incidental to the larger process of United States foreign policy. It is germane when it comes to the differences admissible within this consensus, and these are critical to understanding why some steps are taken at a given time, why others are blocked or modified, and which priorities are applied from the numerous options available but still, ultimately, all subsumed by the consensus on protecting United States capitalism and power in the world. For the broad consensus on capitalism is alone too abstract to comprehend causes of short- and often even middle-range decisions, though if we ignore it as the contextual framework we also discard concern for the larger nature of reality. There is not one interest among many capitalists, save on abstract theory which is meaningless should the profit go to others, but only the individual need to accumulate. What helps New York bankers may hurt Chicago, and Chicago or some region may neutralize the former, or, more frequently, the biggest bankers of all cities may dispute with small banks. High tariffs endanger one group, and may cause it to resist different interests. More often, what happens in regard to one area or commodity may affect only one constituency, which may push its cause without resistance by others; and, depending on who they are and the conjuncture of circumstances, they may affect United States foreign policy whether or not their gain has any objective importance to other business elements or the larger system.
From this viewpoint it is unimportant to argue, for example, that opening a small market in China was not essential to the economic health of the United States economy at the turn of the century, but merely to show that the State Department listened to relatively small interests who were unopposed because of the indifference of others and able to influence its actions. Conversely, it is vital to note that the overseas success of this faction alone did not save United States capitalism from non-profitability, and that the State Department and larger political community's attention were overwhelmingly else where than in the China market. Advocacy in a void, however, works only for those who speak for power and can mobilize it, but often the priorities or even the simple lack of time within the State Department may cause proponents of this or that action to fail. Bureaucratic rivalries within government are more fashionable to study than economic conflicts outside it, but these too cannot be gainsaid if one also respects the limits of variability that consensus and overall purposes impose. Personalities clash for often absurd reasons, but at some critical point, the nature of which more clearly reveals the motives and needs of a system, their differences are finite. Political agencies struggle for funds and prerogatives at each other's expense, and repeatedly these types of tensions prove fruitful to comprehend.
Often, as with Hull, Acheson, or Dulles, a Secretary of State or high official will try to define some larger aggregate interest than that of, say, a dollar-a-year man who feeds contracts back to his employer, but even these generalizers invariably fail to satisfy the diversity of power constituencies all must reckon with in foreign economic affairs.
- 263 Within the framework of a broader collective vision and purpose, foreign policy becomes an aggregate of specific policies and concrete priorities which respond to immediate pressures and needs, but to focus on them alone is to ignore the most significant aspect of United States history: its unity and purpose. Collectively these decisions may unwittingly undermine the rational attainment of broader goals, but never in the history of United States foreign policy have men been able to fully and sufficiently gauge the implications of means to final goals and to rationally move toward their attainment without complicating decisions which often require others to be made in the attempt to neutralize miscalculations. Crises are the outcome of such failures and unforeseen errors which responses to specific pressures as well as the application of a general strategy produce, and crisis is the rule rather than the exception in United States foreign affairs-a testimony to the profound limits of social knowledge in capitalism and its inability to be the final master of its own destiny,
The Military and Power Military power is the instrument American political leaders utilize to advance their increasingly ambitious objectives abroad, and the growth of the Military Establishment to its present vast size was the logical, necessary effect of expansionism after 1945 rather than its cause. The concept of a "military-industrial complex" which assumed that the military was co-equal with the state and business, if not, to use C. Wright Mills's phrase, in "ascendancy," was utilitarian social criticism but a poor basis for durable social analysis. But violence is the means to implement the quite purposeful political and economic objectives that self-styled "liberals" and "democrats" define, and the increasingly technological and organizationally complex nature of warfare since 1914 has, if anything, constrained and eventually reduced the importance of the military in the decisionmaking structure.
This process of growing dependence on civilians working in or for the Defense Department, as it was dubbed after 1947, greatly intensified with the technological revolution in warfare immediately after World War Two. Given the enormous complexity of atomic and nuclear weapons, electronics, and propulsion and rocket systems, the services formally acknowledged, in Eisenhower's words in 1946, that "there appears little reason for duplicating within the Army an outside organization which by its experience is better qualified then we are to carry out some of our tasks."10 These tasks proved eventually to be far more than incidental, but were in effect the keystone of United States military doctrine, a doctrine for which the military services lacked the essential expertise. Thereupon began a vast research and development program that was to marry industry, universities, and the economy of the nation together, bringing more and more civilians into key Defense posts. The air force in 1948 created the RAND Corporation to advise it, and from 1953 to 1958 it assigned direction of its missile program to the Ramo-Woolridge Corporation, while it left the coordination of its specific weapons systems to the prime contractors. In 1955 the multi-university Institute for Defense Analysis was created to undo a near-collapse in the Pentagon's inhouse weapons evaluation group, and by the end of the decade almost half of the three services' supervisory procurement personnel were civilians with business experience. The military alone simply could not cope with modern warfare. The technological fetishism underlying military doctrine effectively displaced officers from planning for the short flash of devastation that war had allegedly become, until 1962. What generals could not master, the fast-talking and-thinking business executives or Ph.D.s allegedly could.
It was under the leadership of the former president of Ford Motor Company, Robert McNamara, that the civilian ascendancy over the military officers became the most extensive and the Pentagon the most destructive. McNamara candidly stated "that the techniques used to administer these affairs of a large organization are very similar whether that organization be a business enterprise or a Government institution, or an educational institution." His model was Ford, and he made technical competence the highest virtue, and further downgraded the generals and admirals. It was when civilian mastery over the officers was total, a relationship that was purely a coincidence rather than a cause, that the Defense Department became engaged in one of the greatest efforts of human barbarism in all of modern history-one which all the ingenuity of cost efficiency, "package programming," utterly self-confident businessmen, and liberal professors could also not prevent from becoming the worst defeat America was to suffer in over a century.
Civilian mastery of the military made the latter an instrument of a policy that others defined, preeminently big businessmen, their lawyers, and politicians, and insofar as the Pentagon was a factor in the American power structure it was as an adjunct of the traditional institutions of power. The concept of the "military-industrial complex," of the triumvirate of politicians-business-military, and similar notions simply ignored the manner in which the generals had been neatly absorbed into a larger, more durable historic framework. The military budget, which was qualitatively a new factor in the economy, businessmen managed as they did the civilian expenditures.
And when the key decisions to embark on organized destruction took place, civilian counsel prevailed-with no less inhumane results.
The collapse of McNamara's empire and the failure of his "crackpot realism" did not end civilian supremacy over the military, and businessmen who managed the Pentagon and then returned to their older affairs remained the rule. The Vietnam war proved, more than any other event in American history, that the ideological premises of those in favor of civilian supremacy over the professional officers had always been wholly warlike in means and ends. It revealed how fully the Military Establishment had become the instrument of warfare liberalism during the Fair Deal-Great Society period of American history-as well as how futile this technically precocious ideology is in asserting the mastery of the United States over determined and ably led revolutionary mass movements.
The forms of the accumulation of power have altered historically within American capitalism even as the general social and economic functions of that system have not. Different economic, political, and social modalities for attaining success have emerged, not so much to replace each other as to become parallel means by which individuals have played duplicate and interacting roles. These constituencies have interrelated comfortably in the world of affairs. The traditional modes coexist with new ones for personal advancement as the criteria for recruitment have become far more flexible even as the purpose of rulership has remained unchanged. Within the worlds of business and politics this pattern of recruitment and success has varied significantly over time. The existing pre-Civil War economic and social elites parlayed their accumulated assets into a significant mastery over the early growth of modern American capitalism, only to be increasingly joined over time by newer entrepreneurs of diverse social and ethno-religious origins: men who succeeded largely because of their relevant capacities rather than whom they knew from school and club days. In time, they too formed exclusive new elites, with their children also succeeding on the basis of a “head start" that was decisive for all those willing and minimally able enough to exploit it. Beneath a common structural role, numerous configurations in American power developed, based on differences in regions, types of economic functions, social origins, and much else.
Both the political and economic organizations readily absorbed such distinctions without perceptibly altering.
When new institutional structures emerged, of which the gargantuan post-1941 Military Establishment was the most notable, for a spectrum of reasons existing economic and political leaders immediately dominated it and absorbed the professional officers into an integrated power system as secondary influences. Success for an officer came not from within the military, based on uniquely martial criteria, but by wholly conforming to the political-economic system's ground rules to capitalize on his fame or, far more likely, experience in the armed forces to enter politics or business as a man essentially indistinguishable from all the rest. The military thereby became a tertiary institution for power accumulation for rare generals, like Eisenhower, and some thousands of businessmen who had once been officers, but in itself nothing remotely resembling an autonomous power coequal with business and politics.
Because the accumulation of power and the formation of the various components of power occur in different ways, even at the same time, despite a certain number of parallel mechanisms for personal and group aggrandizement, the economic universe within which they all operate remains constant. Studying the changing layers which compose the structure of capitalist power and how these layers interrelate therefore becomes a major task of social analysis, but one which can become exceedingly misleading if one assumes only that the historical process is merely one of a clash of factionsregional, intellectual, or based on interests-rather than a finite social universe in which different constellations are always in motion even as the whole moves with the ultimate unity which is its essence.
The accumulation of power in the hands of various constituencies can affect aspects or even the timing of the social order insofar as its ever more integrated economic and political aspects are concerned, but not its general function or direction. It may even greatly affect its capacity to resolve problems at a given moment in history, yet to assume that the problems would not exist were the structure of power somewhat differently organized is a favorite error of liberal optimists who personalize social defects in sections of the order-the CIA, Texans, and the Pentagon being some of the more favoredrather than capitalism as a total system of economic power which by its very nature and needs must be surrounded with diverse political elements. The components of the system alter with historical changes in the accumulation of power, yet capitalism remains the very bedrock of modern American history-the overriding structure which predetermines the purposes for which the United States today exists.
8 Politics and the Foundations of Power
To assert the existence of a society which rules with the consent of the people can be a specious ideological rationale, a statement of reality-or both. In the United States, the notion of "consensus" as the basis of political legitimacy has become conventional wisdom among academic theorists and Fourth of July orators alike, but the validity of the doctrine touches the nature of the political order, the basis of the mandate on which it reigns, and the very character and purpose of politics. Indeed, it is patently incomplete to discuss politics in modern American history without first determining the foundations of power and the role of the masses in shaping political life.
Analyses of these fundamental questions invariably leave one in a bewildering descriptive and theoretical limbo from which the status quo is inevitably praised as grounded on democratic sanction. Traditionally, consensus theory focuses on ideological precepts and the way a nation purportedly holds them, with the existence of shared values and goals being crucial to some essential unanimity which most people allegedly hold. Even critics of capitalism, such as Thorstein Veblen, believed in the overwhelming predominance of class values that all Americans shared within the framework of a class society that in fact benefited relatively few. Later theorists, convinced of the entrepreneurial, class-based Lockian ideology's absolute permeation into the alleged mass values, argued a quite similar position. A system that rules with the consent of the oppressed, who strive only to be counted in at the top also, thereby reconciles the notion of consensus with the structural reality of classes.
It cannot be denied that since the Civil War there has existed an astonishingly pervasive belief among many-though to say "all" would be unwarranted conjecture-that the banal, vague ideological model of American political power and purpose described in elementary school "civics" courses retains a fundamental influence. On the role of Congress as an agency to affect state power the large majority of Old and New Leftists and prowar yahoos agreed throughout the period after World War Two. False consciousness among instant and pop radicals naïvely speaking truth to presumably sensitive or misguided power, or a middle class morbidly afraid of "creeping socialism" in Washington, is a basic cultural phenomenon that analysts have yet to confront with even partial adequacy; and leaders too often share, in quite important ways, false perceptions which can lead to costly errors both in terms of money and overall priorities"credibility" during the Indochina war is the best example of this. Yet ultimately it is less important that the elite have false consciousness than that others share theirs as well. For those who do not count for much in the weighting of opinions, their misperceptions of the limits of their freedom and the modes of serious social change lead only to utopian futility and, for a very few self-proclaimed liberals and reformers, ceremonial opposition. Here "freedom" becomes merely the right willingly to consent to a type of action which reinforces the illusion of individual potency while in reality it does not touch a mechanism of power and decision-making which thereby gains additional tolerance and social time to continue according to quite different functional, if not celebrated and articulated, rules. The illusion of "freedom" helps make possible its suppression via a politics which, as a historic fact, never transcends predetermined orbits and assumptions. Indeed, simply because of American leaders' almost endemic inability since the Civil War to articulate comprehensive ideology which brings practice and theory together, save quite partially for rare conservatives such as Theodore Roosevelt's Secretary of State and War, Elihu Root, illusions among significant numbers of the masses may be no less shared in high places where men are trained to act without reflection as to purposes and ultimate questions.
Modes of Integration
If consensus has historically included conscious approval, apathy, and cooption, when it has broken down in some visible manner it has also led to a resort to the law, a great deal of outright socially directed and legally sanctioned repression and violence, and the emergence of temporarily fashionable racist theories. The vogue that eugenics enjoyed during the Progressive Era, being taught as "science" in universities and receiving widespread endorsement from Theodore Roosevelt downward, is just one of many temporary but repetitive aberrations in United States social thought when challenges from below were perceived: in this case largely from Southern and Eastern European immigrants. Each crisis has tended to lead to similar authoritarian expressions, usually less elaborately structured and often as quickly forgotten as uttered. The Great Strike of 1877 was one such period of outright totalitarian effusions, and the practice of violence as often as not had its verbal rationalizations. Repression and violence, in all cases, make explicit what has historically always been implicit in "consensus"-those who do not agree by their own accord or indifference must submit in other ways. During the rare moments that non-consensus finds expression in some usu ally unpredictable fashion by virtue of its lack of institutionally sanctioned means, reference to law and order is exploited to destroy the effort to make formal freedoms an instrument of real freedom in the social process. "Freedom" thereby becomes a posture the powerful tolerate among the powerless, and those in power make certain they will remain ineffectual. The large body of law for suppression always in readiness is a pervasive fact that the celebrants of American freedom refuse to confront. For authority and power exist because of special interests in society and their ability to impose restraints rather than on any general social sanction, thereby making an enforced consensus from above the ultimate arbiter of the direction society takes. The very concept of the existence of true freedom in America among the larger population thereby becomes a means for undermining its fulfillment and binding together with ideology what otherwise requires courts, police, and armies. But it is at the moment that a substantial number of individuals seek to translate formal into real freedom with those minimal resources at their command that the true basis of social cohesion is revealed. "Consensus," at this point, becomes an ideological phrase which wholly obscures the real basis of authority in United States society since the Civil War-law and the threat of repression. Terms such as "cohesion," "order," and "integration" are far more descriptively accurate in revealing how the system of American power operates in historical reality. Succinctly, the state of repression depends on the extent of real opposition to constituted power. And in the United States very little opposition, and the glad willingness to submit to authority voluntarily rather than involuntarily, has evoked repression disproportionately greater than the real challenge. "Liberalism" is not a descriptive phrase for the experience with civil liberties and rights in America, but an ideological mystification to hinder it.
War, above all, tests the limits of "consensus" and "freedom" and shows that repression and authority are the ultimate guarantors of social cohesion. While the progressive theory of the neutral state led to a hubris that naturally encouraged imposing class interests on those few not willing to accept it in reality, jingoism was no less important in provoking the outbreak of repression which accompanied World War One.3 The dissenter against the war had only the freedom to become a victim in the social process, as a battery of sedition and espionage laws joined existing criminal-anarchy legislation to prove that law was the natural underpinning of repression. Advocacy, to say nothing of action, in all its forms simply became illegal, and the thousands of arrests and deportations from 1917 until 1920 only led to the extension of repressive state legislation in the immediate postwar period. Thirty-five states passed anti-"Red" legislation in the few years ending in 1920, and the creation of what was to become the Federal Bureau of Investigation was a no less enduring legacy in the anti-radical cause. Free speech as a war casualty proved only that its use in the form of dissent was not tolerable, and the whole sordid history of the next decade, from Babbittry to the rise of the Klan to the Sacco and Vanzetti case, was hardly atypical of the treatment received by the Industrial Workers of the World in the prewar decade, and by strikers of all types earlier yet. Repression of dissent is intrinsic to modern American history.
The anti-war movement and New Left again posed a challenge to authority, which responded with intensive infiltration of numerous new groups and eventually the employment of both the CIA and Internal Revenue, along with the FBI, to gather data on at least 10,000 key black and anti-war leaders in addition to a less select concern for the lives of a yet far larger number. Opening their mail, tapping phones, provoking groups, and surveillance became acceptable state practice. In the case of the Black Panthers it involved the liquidation of some of their key leaders by the Chicago police. Beginning with the Spock case in 1967 and running through numerous famous trials, the Justice Department initiated a process of legal harassment that eventually proved nearly all of the accused innocent but distracted them and millions of dollars away from their "freedom" to dissent. For many hundreds of solitary, unknown individuals who objected to war with burned draft cards and other ceremonial gestures, fate was less kind, and prisons long and hard to endure. One century of American history, if nothing else, proved that behind clichés the state exercised authority, and when freedom moved from rhetoric to social action, however slight its real threat to constituted power, repression followed almost as a rule.
Enforcing the New Order
The American social order needed stable politics and institutions to ensure the unchallenged hegemony of the broad economic principles of capitalism on which it was based. By necessity, almost incrementally and without any comprehensive design, this meant ever greater control over the population, its modes of thinking and action, its aspirations and potential dangers. Social integration and cohesion were not the spontaneous result of a universally shared set of values, much less some mystical bureaucratic, organizational impulses to impose order on society in some neutral fashion, but an evolving class response to potential or real social challenges. The history of social "scientific" fads in the United States is really one of anticipating or responding to dangers inimical to the elitist consensus from above.
The cultural environment in which the late-nineteenth-century American elite responded to the apparent risks confronting the social order was unabashedly racist and nativist, with the university system as the most disingenuous fount of common prejudices. The Teutonic mysticism of the late-nineteenth-century political scientists and historians was merely a rhetoric-laden justification for the antiCatholic, anti-Semitic, racist, anti-Southern and Eastern European immigrant views of the greatest names in American letters: John W.
Burgess, Frederick Jackson Turner, Henry and Brooks Adams, Charles Norton, E.L. Godkin, and so many others. The massesunwashed, unlettered, hardly speaking English-"a surplus of undesirable citizens who never think at all and who feel wrongly," as Henry Lee Higginson typically phrased it, were a potential menace to American society under the hegemony of the traditional ruling classes.5 As voters, their danger was that much greater; as a floating labor supply they were imperfect, inefficient, and threatening; in terms of the nature of the demands of an orderly society based on stable politics and political assumptions, the people were at best a challenge, at worst a menace.
284 * Hence the spate of concepts of social control and social order:
Prohibition, scientific management, eugenics, and forced acculturation. The socialization process was speeded wherever possible for immigrants, until finally the declining demand for labor ended free entry altogether in 1924; the birth of modern public relations, geared to shape mass values and opinions and Congressional votes at one and the same time, begins at this time amid the consciousness, as AT&T vice-president E. K. Hall put it in 1909, that "the public mind... is in my judgment the only serious danger confronting the company.
That "public mind" was never permitted to evolve undisturbed along "consensual" or other lines, if by that term we mean something more elevated and philosophical than manipulated accord. From the turn of the century until this day, it was the object of a cultural and ideological industry that was as unrelenting as it was diverse: ranging from the school to the press to mass culture in its multitudinous dimensions.
Violence
The fact that America after a century of modern industrial capitalism had become like a perfect trap for developing and then containing within it all the problems and dilemmas-individual and social-that can plague relations between persons or within institutions was not surprising. Violence in America antedated industrialism and urban life, and it was initially a product of an expansive ruralcommercial economy that in the context of vast distance and a hastily improvised and often changing social structure saw barbarism, violence, and their toleration ritualized into a way of life. Slayery consisted of institutionalized inhumanity and an attack on the very fiber of the black's personal identity and integrity, yet the ultimate restraint on its violence was the value of the black as property. Against the Indians, who owned and occupied much coveted land, wholesale slaughter was widely sanctioned as a virtue. That terribly bloody, sordid history, involving countless tens of thousands of lives that neither victims nor executioners can ever enumerate, made violence endemic to the process of continental expansion. Violence reached a crescendo against the Indian after the Civil War and found a yet bloodier manifestation during the protracted conquest of the Philippines from 1898 until well into the next decade, when any where from 200,000 to 600,000 Filipinos were killed in an orgy of racist slaughter that evoked much congratulation and approval from the eminent journals and men of the era who were also much concerned about progress and stability at home. From their inception, the great acts of violence and attempted genocide America launched against outsiders seemed socially tolerated, even celebrated. Long before Vietnam, that perverse acceptance of horror helped make possible the dominating experiences of our own epoch.
Violence thereby became a kind of irony overhanging the larger drama of American history. A nation that had slaughtered so many Indians, enslaved so many blacks, butchered so many Filipinos, and believed in domestic integration and order imposed on diverse, potentially unruly sectors of the working class also emerged as the most violent nation in the industrial world, both at home and abroad. Even as its politicians decried crime, they themselves were purchasing and dropping 15 million tons of munitions in Indochina, only to confirm the fact that whether calculated in dark urban alleys or the highest offices in Washington, Americans accepted more than any other people the practice and contemplation of violence. It had, indeed, almost become the national calling around which a true consensus might be said to have emerged. For those not acting in slime or governmental sessions, there was always the television to watch and the family gun to hold. "It is unbelievable that a secretary should have to write this kind of a letter," the executive secretary of the Organization of American Historians wrote his membership in February 1973 in warning them about the muggings in the Chicago hotel in which they would hold their next collective discussions of the nation's past,"... but living in the kind of society that we live in right now, these problems are becoming increasingly more demanding." That history had not only ironies but also poetic justice. Social cannibalism and disintegration were now becoming as American as the Fourth of July.
Given the astonishing degree to which the electorate ignored politics after 1896, elite management of politics intensified both out of desire and necessity; and the occasional rise in voting to make upsurges politically important, as when urban immigrants and their children began voting to a greater degree after 1928, in no way altered the means or purposes for which parties ran their affairs. The significant aspect of the rise of the ethnics in urban politics was not the facile machine manipulation of them but the fact that their ethnic differences and hostilities kept them from forming a party based on class rather than distinctive cultures, and it was this aberration that left the machine bosses and other oligarchies a vast uncontested void in which they maintained their free reign. If politics is full of surprises at the short- and intermediate-range levels, and if the dominant caucuses of one period can be the losers of another, the fact remains that all of the sectors of both the Republican and Democratic parties are inalterably wedded to the desirability of capitalism as a general economic framework, if not the specific interests within it which are to be most favored. As Woodrow Wilson put it in 1912 in a moment of splendid candor, "When I sit down and compare my views with those of a Progressive Republican I can't see what the difference is, except that he has a sort of pious feeling about the doctrine of protection, which I have never felt." If these differences provide most of the distinctions which we have come to associate with political issues, this larger framework within which they occur is quite constant and primary. Despite the curious insistence of some commentators that American parties, unlike European, are nonideological, in fact what is true is that they simply share a common and quite cohesive vision of the nature of the desirable society, and however much they may disagree on the details, that vision has been unwavering for a century. If these premises are never articulated into formal doctrines required for membership, but merely expressed as traditional commitment, American political culture has been kept mindlessly lower thereby than in any comparable Western European nation, a condition not exclusive to American politics only but which has given its people less intellectual defense against demagogues and rogues than perhaps any other country with equivalent literacy. In effect, such utilitarian mindlessness has made the United States a politically underdeveloped nation more easily and willingly manipulated by elites than any.
The Politics of Money
Since the Civil War, the viability and leadership of successful political parties at the local, state, and national levels have depended on their access to money with which to campaign. This overriding fact has changed somewhat in form but not in principle, and to divorce political history and theory from the question of the cost of politics, as is the wont of most academic specialists seeking to impose schematic systems and clinical, impersonal order on political phenomena, is to ignore its essence. The absence of ideology or a serious political culture, save in the far vaguer consensus which is more assumed than articulated, makes money and jobs-or the promise of them-the adhesive that binds the party's workers to the organization. In one way or another, without a deep political culture the American political man becomes by necessity a professional.
In this context, the decision-making structure of either major party is intrinsically hierarchical and totalitarian: those who control access to jobs-the boss or the elected chief-have the voices that count most. This oligarchy is not imposed so much as it is understood by players in the political arena to be part of the given rules of the game. What is exceptional rather than the norm of United States politics is the absence of favoritism and chicanery, kickbacks, patronage, and payoffs. Rogues hold sway far more often than not, and they differ only in terms of the extent to which their appetites are bridled and their manners suave. From Grant, whose secretary shared handsomely and without retribution when the Whisky Ring cheated the Treasury of millions, to Nixon, the process of systematic, ritualized corruption has in some manner or another touched the offices of many of the Presidents and most of their higher administrations. At the lower ranks, it has been more the rule than the exception. Corruption, whether in the service of individuals or interests, is endemic to the very purposes and means of American politics over the past century. The root of the problem-personal greed apart-is money and the cost of successful politics.
This system of organized, routinized corruption was built into local, state, and national politics at the very inception of the modern period of American history, though its roots stretch far back into a colonial past in which politically well placed men who had access via charters, land grants, and government aid and contracts built some of the earliest fortunes. Beginning with the Crédit Mobilier scandal in 1873, which implicated fifteen Congressmen and James G. Blaine, who became the Republican Presidential nominee in 1884 and missed victory by 30,000 votes, and ending with the personal fortunes that Lyndon B. Johnson and Richard Nixon accumulated while in government, the history of money and politics has scarcely altered.
Save for theorists who wholly divorce themselves from operational realities, scarcely any student of the last third of the nineteenth century has denied the deep role that patronage and peculation had in coloring the American political experience. Even the critics of the system, the Mugwumps, and later civil service reformers, included some disgruntled office seekers among their more prominent leaders. Most were what one would properly call conservatives on social issues. The federal government, in any event, was even in the 1870s the nation's largest single employer, and the introduction of civil service by no means diminished its ample supply of benefactions for the faithful. It was assumed that the reward of loyal political work was a job or jobs for the activist or his friends, all of whom would sustain the party or caucus out of their salaries or other means of obtaining revenues. Locally, of course, reform of hiring and patronage procedures was slower yet in coming, and never completed.
Even defenders of the existing system admit the corruption which prevailed in customs houses and the Senate, though in the latter case they with good cause argue that the main legislation of the period was not settled by the admittedly significant amounts of money that moved into Senatorial hands. To some critical extent it is true that at a grand policy level the opinions of key leaders were the products of the larger values of the dominant class of the age. Yet the decisions that Senators made on land grants, mail service contracts, or rights-of-way did not involve ideological consensus, and here patronage and corruption were frequently decisive. 13 And the way ward heelers mobilized their neighborhoods, bar owners advised and treated their customers, policemen enforced the law, and numerous functionaries performed their tasks of mobilizing the vote all revolved eventually around the amounts of money and jobs dispensed for their services. Corruption was so universal by the end of the century, as Robert D. Marcus points out in the best of the recent accounts of the period, that it probably simply canceled itself out, save that one must add that it still left those with funds master over both parties. Vote-buying, in any case, was common enough, and could cost a great deal, though it generally never went so far as in Adams County, Ohio, where it was learned that 85 percent of those who cast votes in the 1910 election had sold their choice at least once in their lifetime, though on that particular occasion only 26 percent were convicted of vote-selling. In 1905 New York City was alleged to have had over 170,000 purchased votes, though rural areas were credited with greater venality than urban.¹4
The first great expression of this new form of business domination was the relation between Theodore Roosevelt's progressivism, and later the 1912 Progressive Party itself, and the interests clustered around the House of Morgan as opposed to Standard Oil of New Jersey. Roosevelt's sympathy for Morgan firms, his model of alleged "good trusts," was genuine; but when tempted to prosecute a Morgan firm, he was reminded, as Henry Knox Smith, head of the Bureau of Corporations, put it in September 1907, that "it is a very practical question whether it is well to throw away now the great influence of the so-called Morgan interests. . . and to place them generally in opposition." Standard had also contributed heavily to the GOP, though by emphasizing the Congressional election of men such as Senator Boies Penrose of Pennsylvania, on whose favors it could reliably call. It sought futilely to relate to Roosevelt's specific designation of it as an "evil trust" in 1907 and 1908 by offering to help secure the President the GOP nomination in 1908. Roosevelt assiduously guarded his connections with Morgan leaders, who donated hundreds of thousands of dollars to his 1912 efforts to capture the Republican nomination, and then at least a quarter of a million dollars to his new party campaign-whose platform was preeminently the work of Morgan executive George Perkins.
For practical purposes, access to increasingly vast sums of money was not a sufficient condition of political victory in a Presidential campaign, yet it surely became a necessary one. In 1868 the Republican National Committee raised approximately $200,000 in large part by imposing levies on office and contract holders. By 1892 it expended $1,700,000, only to lose the election, and twice that amount in the following campaign. After 1912, when nominal reporting requirements were enacted, figures on total party outlays became somewhat more reliable, though still far from accurate. But by 1928 the Democrats spent well over $5 million, while the Republicans exceeded $6 million. Carefully calculated assessments on jobs helped produce some of these sums, especially in local elections, where spending could legally remain largely confidential. As C. K. Yearley has shown in his brilliant, systematic analysis of Northern party finance from 1860 to 1920, every hope, every post, each candidate, had a price to pay into the party coffers, depending on the town, state, and time. Police applicants in New York handed over as much as $500 cash at the end of the last century, promotions went for as high as $10,000, and throughout America brothels, liquor dealers, saloonkeepers, sidewalk peddlers, bootblacks, and myriad others all paid into pockets money that in turn moved up the hierarchy of authority. Reform campaigns came and went, and more puritanical days were forgotten, but the kickback and payoff and systematic corruption endemic to local and state politics remained pervasive in the United States throughout these formative generations. What is at question is not the existence of de facto legalized corruption as intrinsic to polítics at this level, but only its extent. It was rarely, if ever, expunged from the routine administration of such cities as Boston (by 1910 perhaps the most corrupt city of all), New York, Chicago, Philadelphia, Buffalo, Denver, and innumerable other Northern cities. It surely made the police in many of these urban regions, as the New York State Commission of Investigation once more and tiresomely showed in 1973, the largest, most systematic organized source of crime and theft of public funds in many of the cities that were dangerous to live in, as Denver, Philadelphia, Chicago, and Albany, to mention only a few of the more recently scandalized centers, were also once again to learn. In fact the police had always served both as tax gatherers for their own class and those who appointed them as well as regulators of the accumulation of wealth based on vice. Successful syndicate-scale crime, thereby, became symbiotic on efficient police, who eliminated the petty potential rivals to established entrepreneurs.
The extraordinary aspect of corruption in the United States is that it scandalizes and outrages public sensibilities, though in fact any generalization on the broad historical pattern of politics makes it inevitable to conclude that such corruption is predictable and systemic, and both the means and ends of politics as a vocation. The Nixon Administration scandals of 1973-1974 involved standard operating procedures well known to most of its more successful critics, and hence the artificiality of the entire Watergate crisis of confidence. If it were the mere discovery of corruption and kickbacks that justified the removal of Vice Presidents and Presidents from power, then hardly any of their detractors also in office would remain employed. A Congress that voted funds to drop 15 million tons of explosives on Indochina but reacted strongly only to the infinitesimally smaller crimes of Nixon Administration peculations in fact was an integral part of the entire political system which sustained press attention examined closely in only one of its more visible manifestations. Hence the instinctive, realistic public opinion, at the 1974 peak of Watergate controversy, which gave both Congress and the President an equally low rating of 29 percent who felt the two major institutions of national affairs were operating in an "excellent" manner
Politics in America, surely at the national level, had since the end of the nineteenth century become an arena in which competing power constituencies sought different solutions to problems and distinctive satisfactions for their desiresoften at the expense of one another. Such a rivalry presumed conflict up to a point, but it was one in which only the wealthy and well-placed could participate, and it was this economic qualification that ultimately united them against those without property. In this fashion, the concept of "public interest" became a utilitarian justification for actions benefiting some, though usually not all, private ends. The history of the American political economy had amply proved that fact. That the two parties cultivated a certain minimal set of contrived distinctions which effectively channelized the votes of those masses who voted alone is sufficient justification for their claiming a genuine difference between the two. Yet what unites them, not merely in terms of "bipartisanship" or interchangeable officials, is immeasurably greater than that which divides, above all during the seasonal electoral charades. Indeed, as the shift of businessmen from one party to the other during the Presidential elections of 1896, 1932, and 1972 showed, or as with the critical assistance Truman gave Eisenhower in the effort to make him the 1952 Republican nominee and guarantee continuity in United States foreign policy, flexibility transcended ritual party allegiances whenever necessary. Yet beyond principles, which were common and profound regardless of the concrete ways specific constituencies wished them applied, were the similar organizational structures as they had developed in a parallel manner during a century's development. Oligarchic and premised on organized apathy, elite-led and financed, systematically and predictably corrupted, desirous of only carefully controlled and directed two- or four-year mass mobilizations, parties had become a critical reinforcement of the larger structure of power in America.
The main contours of American politics revealed a nation whose history had been far from democratic in practice, and whose rhetoric was scarcely more than an organizational weapon utilitarian in mobilizing votes and molding opinion. Elitist and oligarchical in fact and practice, politics had become another means for administering and securing capitalist power in America, a mechanism increasingly geared over time to access to money and acceptability in the eyes of those with funds to dispenseand interests to protect. In that large relationship between capitalism and politics, power and organizations, one can subsume the political history of the nation over the past century. If that evolution was based on a public consensus, the least that could be said is that the opinions of people were increasingly ignored or manipulated with time, and the basis on which that tailoring of attitudes occurred was anything but voluntarist and democratic. What explained the direction of political power, in the last instance, was its integral function in sustaining a larger social order of which it was inalterably a part.
All the problems that American capitalism could not solve before 1941 were seemingly swept away in the rush to rearm and do combat with the Axis. Resources which were unimaginable in 1937 were freely available just a few years later, and most of the Congressional political constraints of the preceding decades of national politics disappeared. The grave problem of insufficient demand and an oversupply of labor and capital within a year turned into shortages. The insoluble failures of the various economic sectors before 1941, and above all the inadequacy of earlier forms of political capitalism, now became irrevelant in the face of the onrushing state-guaranteed purchases of the economy's output. The dilemmas that had paralyzed the New Deal during 1937-1938 were now forgotten, save by a comparative handful who speculated about postwar adjustments, but so many new instrumentalities of action emerged that their specific anxieties were to prove largely misplaced, while they could not even imagine other potentially critical economic and social challenges.
The war economy resolved the long inter-war crisis of maturity and stagnation in the American economy, rupturing in vital ways the operational framework in which post-1877 American capitalism had sought to resolve its problems, and initiated a new era both for United States capitalism and also for the social order and world in which it now, by necessity, operated in a more comprehensive and integrative fashion. If it did so within the structural limits inherited from preceding decades, and with the same sympathetic merger of political and economic power which is the hallmark of all reform efforts, the American political economy was also to produce permanent new institutions. And within these, inevitably, there were also to be new as well as some older problems to resolve.
The bulk of the war's economic gains still fell predominantly to big business and reinforced its relative control over the economy. Of the $175 billion in prime contracts placed from June 1940 through September 1944, thirty-three corporations received over one-half the total, while ten alone obtained almost one-third by value. This pattern of concentrated procurement was one that the state would follow over subsequent decades, though different firms were to figure among the privileged few. Yet more interesting to industry was the introduction of cost-plus-fixed-fee contracts which allowed companies to transfer all research and development costs to the state and provided a powerful incentive to increasing costs, as well as a basis for new industries. At the inception of the wartime buildup during 1940-1941, 42 percent of all significant army contracts were allocated in this manner, though the percentage fell to about onethird by the end of 1944. The unique principle of transferring all risk to the national government and subsequent profits to private hands was almost as original as the innovation of the state as not only the supplier of guaranteed markets with assured minimum profits but as the supplier of capital as well.
The government's share of the nation's capital goods, excluding roads and streets, land, and military assets, began growing significantly in percentage terms throughout the period after 1902, but was only onetenth of the total in 1922 and 13 percent in 1939. By 1946 it was 21 percent, but larger yet if military holdings are added. It was the emergence of the federally funded defense plants that accounted for this important new growth of the government in the economy.
The government constructed $17 billion worth of new plant during the war period. This vast sum was equivalent to over onethird of the real net value of all manufacturing structures and equipment then installed in the United Statesproviding well over twothirds of all the capital for military-related industrial expansion. But it would have spent far more had it not been for the vast unused productive capacity from the Depression, which the war once again made highly profitable. In addition, it spent many billions in research and development contracts to private industry, subsidies to stimulate the production of essential supplies, and the like-so that at the end of the war about $50 billion in war surplus property had accumulated. Controlled overwhelmingly by the 250 biggest manufacturing corporations, this sector-save in aluminum-was largely sold to the original wartime lessees at a price of less than one-quarter of the original cost, thereby consolidating the position of oligopoly in several key industries. If the United States emerged from the war without any firm economic program, save a desire for international economic integration, at least it had established some new, critical precedents which became the basis of a type of planning founded not on a coherent strategy but rather on incremental decisions which, taken together, seemed successful. Not the least of these was the role of government as capitalizer, subsidizer, and contractor to an extent imaginable only during a war that was from an economic viewpoint to continue, in varying degrees, until this day.
Apart from its material consequences, the World War Two interaction between big business and Washington led to important organizational developments which only further deepened the merger of key personnel in business and politics which began after the Civil War and which federal regulation had begun to institutionalize. A panoply of new federal agencies came into being after the war to deal with the greatly enhanced role of the national government, and these were largely manned with executives who interchangeably moved from corporate to government to biglaw posts.
The staffing of Washington with businessmen, which reached its apex during the war, was destined never to end, and despite occasional moments of tension the mutual confidence and working relations between big businessmen and the state were to become closer and more durable than at any time during the twentieth century
Although big industrialists, bankers, and their lawyers could be found in the majority of key government posts dealing with military and foreign policy at virtually any time after 1946, in no way was this new integration of personnel more dramatically illustrated than in the creation of "without compensation" (WOC) executives in government to succeed the wartime "dollar-a-year" men. Almost all of the oil and gas officials in Washington after 1946 were drawn from the industry, and many were there on a no-compensation basis. During the Korean war, ten of twelve Petroleum Administration for Defense division heads were WOC's, while nearly 900 others filled key posts throughout government. In certain well-known cases, WOC's negotiated purchases on behalf of the government with their own firms, often at considerable extra cost to the nation, and in general they tended to improve the access that big business had to procurement contracting. On the other side of the coin, over 2000 former high-ranking military officers were by 1968 employed by the hundred largest contractors dealing with the Pentagon-nearly three times the number of a decade earlier-as loyalties became more indistinguishable than ever.
Between calendar 1950 and 1951, in any case, the military budget increased from $14 to $34 billion, and its share of the gross national product leaped from 5 percent to 10.3, and by 1953 reached the postwar high of 13.5 percent of the GNP. Despite a small decline in dollars during the post-Korean period, and a more significant drop in its share of the GNP, by 1957 the Pentagon budget began its inexorable annual dollar growth, and during the 1960s its share of the GNP hovered around 9 percent, or about twice the 1947-1950 average and alone about equal to the weight of peak government spending for all programs during the New Deal.
The military budget thereby became the sponge which absorbed much, if not always all, excess industrial capacity, thereby putting a floor under the capitalist economy. The Pentagon's annual 8 to 10 percent of the GNP provided that critical break-even point of economic stimulus which made much of the rest of the economy viable and far less perturbed by a crisis of demand. Its significance was qualitative rather than merely quantitative, lifting economic activity and capacity utilization to the point at which its seemingly relatively small increment to production provided a far larger share of profits. As a multiplier in stimulating business it greatly exceeded virtually all others. Until other difficulties aroseas they inevitably would-capitalism could at least resolve the problem of insufficient demand so troublesome during the inter-war years. Thereupon began a vast multifarious cornucopia which affected some industries, firms, and regions more than others, but spilled over with its multiplier effect to define the whole tempo of economic developments, with each major adjustment in military spending tending to have some concomitant impact on the level of employment. Private and public capital merged for defense contractors, who by 1967 were using $15 billion in government-owned property to realize some of the highest profits on their own investments in perhaps recorded United States history. Despite the fact that by 1968 fixed-price contracts made up about half the total, the opportunities for pyramiding profits offered firms astonishing and unprecedented possibilities for gains. At the extreme, the Pentagon filed suit against North American Aviation for in two successive years making 612 and 802 percent profits on their investment when the contract provided for only 8 percent. Less objectionable to it was the 43 percent return on investment the vast Minuteman missile program produced during 19581966.
On the whole, a hundred corporations received roughly twothirds of the total defense contracts during the period after 1951, and although their precise identities changed, it was the big-business sector that benefited most from the new bonanza. California was by far the greatest recipient of contracts, but New York and eventually Texas were almost as dependent on the military demand. California in 1966 could calculate that 17 percent of its employment was directly defense generated, to which one would have to add the multiplier effect of consumer-oriented related jobs this key group had created with its higher incomes. In 1962 seven of the largest contractors were at least three-quarters dependent on military contracts, while another ten were at least one-half dependent and another eight at least one-quarter dependent. More important, as the B-36, F-111, and C-5A procurements showed, it was the Pentagon's capacity to award mammoth contracts and eventually even low-interest loans to ailing, less-competitive firms that repeatedly staved off major bankruptcies in the military-oriented industrial sector.
The government, citing military necessity, had now located new tools for stimulating the economy. Regions with higher than average unemployment received a preference for Pentagon contracts if all other factors were equal. During 1951-1959 the government granted over $23 billion in accelerated amortization to mainly big corporations, tantamount to granting interest-free loans via privileged tax write-offs as well as variable subsidies which ultimately will amount to billions. Its allocations to research and development, about 60 percent of which went to private business, by 1968 had surpassed $17 billion annually; and such federally financed research, while only 0.5 percent of the GNP in 1946, had reached 2.2 percent by 1966. Space and atomic research about equaled military "R and D" by the mid-1960s, thereby opening a vast demand for new research- and labor-intensive industries as well as a pool of mentfunded innovations virtually free to business. Government patent policy allowed contractors to retain exclusive patent rights, without charge, on inventions developed while fulfilling government contracts, though the Pentagon usually excludes itself from future royalty payments on such discoveries. Depletion allowances ended up giving oil and mining firms untold billions of dollars of additional profits. Rapid depreciation clauses, as in the 1954 Tax Act, offered other stipends, and the role of the government as subsidizer of the capitalist economy, employing not only the Defense but AEC, NASA, HEW, and numerous other budgets, as well as tax rulings, became a vast undertaking for which few, if any, pre-1941 precedents could be found.
Wherever one turned, the new federal economic policy had married economic growth with help to big business and upperincome groups, providing demand and contracts which covered every conceivable aspect of economic activity. In 1946 the relatively inefficient sector of mining, in the name of national defense, obtained the national stockpile act, which found in Washington a market for generally highcost domestic output that no one else needed or could afford. Mainly buying minerals and certain agricultural raw materials, the program also built plants which it often sold at a minute fraction of cost, and by 1961 it had goods costing $9 billion on its hands-a figure almost matched in 1974. Large publications benefited most from the postal deficits that second-, third-, and fourthclass mails created, reaching anywhere from $403 to $726 million annually throughout the 1950s. Over $1 billion in direct subsidies went to United States shipowners during 1947-1960, not to mention far higher sums in guaranteed shipping contracts which the law that at least half of all government-financed cargoes must be carried in American-owned vessels required. All forms of farm subsidies, of which around one-half of the price-support component went to the richest tenth of the growers, amounted to over $22 billion during 1951-1961. Assorted services and subsidies to business (excluding tax decisions, Pentagon military functions, and strategic-rawmaterials stockpiling) were estimated at over $11 billion during the same period.
In essence, concentrating on military spending and expenditures designed to serve business and big farmers, the postwar federal budget went far beyond anything known during the New Deal to more directly provide, in a manner the New Deal had not attempted, additional demand so essential to reasonably full production and employment. In 1936 the federal government's expenditures equaled 10 percent of the gross national product, a figure that dropped to 8 percent by 1938. In 1953, by contrast, federal expenditures were over 21 percent of the GNP, and during the budgetminded year of 1957 fell to almost 18 percent, with unemployment 4.3 percent in 1957 as opposed to 2.9 percent in 1953. But by 1975, with federal outlays 21 percent of the GNP, unemployment reached 8.5 percent. Unemployment, reflecting this central linkage of the economy to the military sector, proved exceedingly sensitive to federal expenditures until the 1970s, when other problems began reducing dramatically the efficacy of these anti-recessionary techniques.
During fiscal 1958, when federal expenditures were cut back sharply to reduce what proved to be a $3 billion budget deficit, unemployment rose to 6.8 percent, an increase over the 1957 rate of more than one-half and a then postwar high until 1975. But a $13 billion deficit the following year and a 12 percent increase in federal outlays partially reversed the trend.
Overseeing this integration of politics and economics into a yet higher stage of political capitalism was a group of top officials drawn largely from the world of big business, top corporate law, and major finance. If this fact was not necessarily a cause of the new arrangement, and surely not a new precedent in United States history, it nevertheless simplified the administration of the machinery of state and guaranteed, along with much else, that the existing programs would not be significantly modified as had been many-though by no means all-earlier efforts in state integration of the economy. Of the 234 men who during 1944-1960 held the key positions in the State, Defense or War, Treasury, and Commerce departments, plus other relevant executive agencies dealing with foreign and military policy, their multiple government careers meant that they accounted for at least 678 posts, most of which were at the highest policymaking level.
Those from big law, banking, and investment firms accounted for 36 percent of these key positions, while another 25 percent of the offices were occupied by those from industry, utilities, and miscellaneous business and commercial firms. In addition to these three-fifths of the key jobs falling to men of economic affairs, another 16 percent were held by career government officials who were subsequently to leave government-mainly for business.3 Much more important than the WOC's, over whom they had ultimate control, this small elite sought to work within what was an inflexible framework of governmentbusiness relations which encompassed vast spending along with the enormous regulatory mechanisms inherited from earlier epochs.
More than ever, the merger of politics and economics had now produced the hybrid synthesis of political capitalism which, in the largest sense, became the foundation of capitalist power. The government was now financier and provider of capital as well as premium markets, and it could regulate the rate of economic activity, employment, and, to some measure, growth by a mixture of expenditures and policies which were overwhelmingly military both in form and consequence. Such a new power had not so much been planned after 1946 as grown by accretion, not the least because far fewer political constraints existed on spending for war than for other purposes. Hence there is a danger in automatically implying clarity to men who preferred merely to take the path of least resistance in solving the postwar political and economic dilemmas at one and the same time, just as it is unwarranted to impute too much innocence or stupidity to the men who directed the process. Each case must carefully be judged on its own merits.
In 1956, when the minimum wage was raised to one dollar an hour, only 24 million out of 52 million nonagricultural workers were covered by the law, and of these only 2 million were earning less than the minimum wage, which was set far below the existing norm. The 1961 law, which increased the coverage of nonagricultural workers to half the total, raised the minimum to $1.25 on a sliding scale which took two to four years to attain, thereby leaving the real purchasing power of the new wage about where it had been at one dollar in 1956. In 1939 the minimum wage was two-thirds of the average more than half. In 1966 the minimum wage was hiked to $1.60 hourly, almost three-fifths of the average manufacturing worker's hourly pay that year, but inflation quickly reduced it to barely onethird by May 1974-when yet another complicated annual incremental increase schedule was introduced which would get the minimum wage up to $2.30 by steps taking until January 1978 for some.
The latest increase immediately affected only 4.2 million workers, a mere 6 percent of the nation's nonsupervisory total, in even the smallest degree, and still exempted one-fifth of the workers from any coverage at all. And adjusted for the rate of inflation, the new minimum wage meant it bought no more than one dollar did in 1956, and by 1977 would be slightly more than two-fifths of the average hourly pay in manufacturing, and less than that the following year. Belated and penurious at every turn and declining yet further in importance, the entire program was both irrelevant to human needs and surely did nothing to sustain the postwar prosperity celebrated as the triumph of the "welfare state."
Old-age and survivor insurance was but a part of the same Scroogian logic, perhaps more so by virtue of the fact that its payroll deduction base was increased from a flat 2.5 percent on an increasing income base of its participants in 1960 to 4.8 percent in 1969 and 5.85 percent in 1973, and thereby became a regressive tax taking a higher share of the income of the poor than any other income group.
It provided only 22 percent of the income of the 65-and-over population in 1958, while public assistance provided another 7 percent in that year. By 1967 old-age insurance still accounted for only 26 percent of the income of this group, while public assistance had fallen to around 4 percent. In 1974, with the average old-age insurance payment for the retired a paltry $187 monthly, the larger part of the meager income of the aged, who formed one of the largest components of the population incorporated into the highly touted if shortlived "war on poverty," came from nongovernmental sources. And the little that came from Social Security was in fact but an aspect of the vast regressive system of self-supporting, forced savings wholly designed and intended to preserve the existing distribution of wealth. The introduction of Medicare in 1966, which insured 24 million elderly persons by 1973, was overexaggerated in its significance, while the later Medicaid for welfare and poverty cases assisted much more superficially the same number of persons in 1973. Medi care, in fact, in 1972 accounted for nearly 30 percent of all health insurance benefits paid-and, of course, all were actuarially selffinancing in one manner or another.
The so-called war on poverty was cut from much the same penurious logic. By 1966, when this campaign was in full operation, the growth of per capita governmental expenditures for all forms of public welfare had grown 180 percent since 1950 compared to 257 percent for "national defense." Moreover, while federal, state, and local public welfare outlays were almost $7 billion in 1966, the tax burden on the two poorest tenths of the nation was somewhat higher than that sum-which meant that as a general class the lowest fifth of the nation was obtaining less than it was giving, and the redistributive effect of the war on poverty was nil. But if one added the more than $12 billion in taxes the third-poorest tenth paid, then the alleged effort to help lower-income Americans became a cruel farce, with the poorest third paying far more than they might be said to be receiving by even the most extravagant calculations.6 From a purely economic viewpoint, in which the sheer weight of dollars contributed most to demand, the federal budget for military purposes, aids to business and agriculture, and overseas grants and loans of arms and goods counted the most in sustaining the postwar economic dynamism, and the paltry so-called welfare measures were either inconsequential or self-financing in a manner that did nothing significant to alter overall consumer demand. Rather than being a welfare capitalism, the postwar economy had become heavily dependent on warfare-real or potential-and, perhaps as important, had introduced a debt economy which created a temporary stimulus along with an entirely new, potentially great weakness into the very structure of the system.
A credit capitalism, wild by earlier standards, now came into existence as Washington sought to mitigate the pressures of relatively minor recessions and unemployment to stave off far worse.
Federal war and overseas spending alone did not suffice for this purpose, and the logic of continuous, growing credit and inflation produced dangerous fragility and the threat of a liquidity crisis unlike any possible during the 1920s.
Nowhere was this danger greater than in the consumer sector, where families, with business encouragement, revolutionized their buying habits to make installment purchasing a way of life that defied poverty and unemployment. Installment credit debt in 1929 had been negligible-only 4.2 percent of the national personal incomeand only about one-fifth of the families utilized this form of spending.
In effect, the additional retrenchment and liquidation that Depression unemployment would have otherwise forced upon a high-credit economy was spared consumers, and their credit was certainly not a cause of the crash or its duration. It was in the comparable fantasy world of stock purchases on margin that catastrophic liquidations helped significantly to exacerbate the crash's impact. In 1947 the relative installment debt was less than 1929, but thereafter it began to grow until by 1957 it had reached $34 billion and 9.7 percent of personal income. One-half of all consumers, especially middleincome families, now were using installment credit. In that year the Federal Reserve Board took cognizance of the phenomenon in a monumental analysis which feebly tried to warn that "major depressions preceding World War Two were characterized by debt defaults and related difficulties. What started out to be a relatively modest problem of financial adjustment sometimes turned out to have vastly multiplied effects.... Even though the analogy of 1929 is of diminishing relevance, the possibility of an episode of drastic and spiraling liquidation should not be dismissed."7 The Board's admonition went untranslated into policy as prosperity on time now moved to a stage that defied all predictions. Between 1957 and 1975 the consumer installment debt increased nearly five times and amounted now to 13 percent of personal income. Debt repayment as a percentage of disposable income had risen from less than 5 percent of disposable income in 1946 to 16 percent in 1974, and nearly four-fifths of the consumers were now in debt. Taking a long, careful look down the larger credit precipice in 1974, Business Week concluded that "The U.S. has tried to do too much with too little, and that cannot go on forever."
The Sinews of Profit
Profits are the sinews of capitalism, the goal of the system as well as the instrumentalities by which it grows. At no point in the history of the modern American economy, save 1931-1933, did profit ever fall to crisis proportions; but the way the economy was managed, the political and social problems it created, and its strategy at home and overseas reflected time and again the magnitude of domestic profitability. Despite the fact that crises often emerged for reasons quite independent of profitability, implications of profits both to national and foreign policy in all its dimensions were never less than large, and often immense. The condition of profit is one of the structural keystones influencing the course of American history in a capitalist society.
Profits are enormously difficult to calculate precisely, and no single adequate source of information exists. Seemingly small accounting changes will produce radically different figures, and very contradictory numbers for the same year are common. More intangibly, the point at which profits are insufficient for economic growth and the system's dynamism is often impossible to define, even by those receiving them. Different corporations, divided by both size and industry, experience quite distinctive profitability; and after 1941 the broadening of both the individual and corporate income tax created incentives to consume profits in nontaxable ways: expense accounts and perquisites, more complex forms of executive compensation, and such. This said, however, it appears likely that by any criterion the period since 1946 has probably been one of the most profitable in the history of American capitalism and about comparable to the 1920s-whose ample returns, however, did not prevent a subsequent depression. Considering the ratio of profits after federal income tax to stockholders' equity, manufacturing corporations during 1947-1959 averaged 12 percent annually, 11.2 percent over the next decade, and 11.5 percent during 1970-1974-virtually a consistent rate throughout the postwar period. Looking at profits per unit of output, there was no trend toward a falling rate of profit for nonfinancial corporations throughout the postwar period, with the business cycle being the key factor explaining annual variations. The dividend yield on common stocks fell sharply over the period, but, on the other hand, the price-earnings ratio was considerably higher in the period after 1960 than before, and the bulk of the evidence would support the contention that postwar profits were fairly constant and high. Needless to say, such averages included poorer years, and these naturally were closely correlated to recessions-making 1975 the worst year of the past decade. Banks were more profitable after 1946 than in any other peacetime period in United States history since 1876, and somewhat ahead of the 1920s. And with sharply increasing interest rates after 1968, bank net income moved to new highs.
Still, profits at any given time are unevenly distributed. Large corporations, with assets of at least $10 million after the war, tended to make far more on their equity before taxes than smaller firms, but companies among the 200 biggest manufacturers were much more profitable than the rest. The after-tax profits as a percentage of sales of the largest companies were at least two-fifths greater than the smaller firms during 1947-1956. This was due not merely to their economies in the scale of their production, which often were at best marginal, but also to their advantages in being able to use oligopoly to more effectively control prices and profit. Firms in industries with a high concentration ratio generally had a return on their net worth of anywhere from one-half to two-thirds greater than those more competitive. Both in terms of profits on equity before taxes or the always lower profits on sales before taxes, the 1961 profits of corporations with at least $250 million in assets were substantially greater than those in the $25-250 million asset range, and far greater than those below. Because of their monopolistic or oligopolistic control of prices, many of the giants could compensate for lower demand during economic downturns.
In the aggregate, with these critical distinctions in the data, United States capitalism prospered as never before throughout the period 1946-1959. But during the next decade, while some corporations did as well (as I shall discuss in greater detail in the next chapter), the outlets for profitable investment in the United States were exceeded abroad, so that during 1957-1973 the equivalent of over 12 percent of manufacturing expenditures at home for new plant and equipment went abroad as direct investments. United States capitalism became not so much saturated as spongy in terms of its domestic prospects, and investment abroad became more essential to many large firms. To be sure, many important exceptions, such as the petroleum industry, prospered throughout the decade after 1965, but this did not guarantee them a trouble-free political climate insulated against something far worse than just lower returns. Nor did it prevent their prosperity from greatly reducing that of other products, such as automobiles, which fell into a depression after 1973 as a consequence, among other things, of high oil costs and profits.
omy One index to the emerging contradictions in the capitalist econafter 1970 was the lower utilization of the productive capacity of manufacturing and major materials industries. Despite the business threats of that period of insufficient capital and profits to combat obsolescence, which were designed primarily to shock Congress into allocating yet more favorable tax provisions, the industrial plant far exceeded the domestic capacity to absorb its output. Industry, if anything, had overcapitalized during the postwar era. Five different indices all showed that 1970-1975 had the highest amount of unused capacity since World War Two, with late 1974 and 1975 marking the nadir. Taking the Federal Reserve Board's index, the manufacturing utilization rate was 77.2 percent during 1970-1975 compared to 91.9 percent in the postwar high period of 1950-1954. In brief, the capitalist economy's traditional nemesis of inadequate demand and overexpansion had reappeared in almost classic form despite all the vast means that had been employed to counteract them. And for that reason the dilemma was all the more dangerous, as the efficacy of the postwar economic measures proved all too finite-and no better ones remained to be employed.¹³
Wealth and Income Distribution
The distribution of income and wealth is the iron test of the outcome of years of alleged reform and the general trends in the economy, from profit rates to welfare payments. However debatable the dimensions or the motives of this or that issue or action, by looking at the distribution of the final benefits we can resolve all lesser problems. That decisive partition, indeed, was not only the culmination of all the legislative actions, strikes, and much else, but it created by itself a set of fundamental and quite inevitable and permanent structural challenges which not so much superseded the problems of the debt economy, rates of profit, and dilemmas of the world economy as paralleled and aggravated them all.
The distribution of income and wealth is not only a question of equity but also the determinant of a sufficient degree of demand and consumption to keep the economy in reasonably full employment and production. If adequate demand cannot be attained via consumer spending-a constant dilemma since the foundation of modern capitalism-then if other means are not found crises ensue. Underconsumption, while not the only structurally destabilizing force eroding the successes of the economy at any given time, is surely its most persistent, and quite able eventually to undo the compensatory achievements of such expenditures as federal spending, large armies, or credit. Aware of this possibility, since 1950 many celebrators of the status quo argued that the historically inequitable pattern of income and wealth distribution in the United States had been made more just as a part of the New Deal "welfare state," and that this explained the long postwar boom.
From 1944, the income tax replaced the corporation tax as the most important single source of federal revenue. The tax system that was to emerge after the war, both at the federal and state-local levels, meant that a vast amount of regressive taxation quickly offset the progressive income tax to fairly equally distribute the tax load to all income categories. After World War Two, the posttax income distribution was virtually identical to the pretax figures. In 1958, the share of total income of each income class below $15,000 going to every form of taxation was 20-21 percent. But in 1966, according to the most reliable estimate of the tax incidence, the poorest tenth paid 27 percent of its total income in all forms of taxes, while the other nine-tenths hovered around 25-26 percent. The most conservative calculation of the tax burden still has the poorest tenth paying out 17 percent of its income in taxes, and the richest only 30 percent. In fact, despite much discussion of tax evasion during 1962 and the revision of the tax laws, yet new loopholes were introduced into the system to protect the existing distribution from erosion. Innumerable special provisions and complexity now had become an institutionalized constant designed to create the illusion of equity while preserving inequality. By 1974, $58 billion worth of such special legal write-offs, euphemistically called "tax expenditures," were distributed among individual taxpayers with the excuse they stimulated some type of economic activity or action. Twenty-three percent of this amount went to individuals earning $50,000 or more, and another 30 percent went to those in the $20,000-$50,000 brackettogether, a mere 15 percent of the taxpayers. 15
Most important of all in preserving poverty and low incomes among all groups, after 1965 the level of workers' real earnings remained virtually stable, until the drop of 8 percent in weekly real income during 1973-1974 left the working class where it had been economically ten years earlier; and during 1975 it began to sink below that point. Given the interaction of demographic, sociological, and, above all, those economic factors intrinsic to modern capitalism, postwar poverty was inevitable and its persistence in the future no less likely.
These surrogates essential to the sustenance of capitalism became increasingly dangerous with time-to the world immediately, but then to the American population and, ultimately, to the very health and viability of capitalism at home. If the mass' toleration of the mistakes of the status quo increased, as only the atavistic Right emerged in the form of the George Wallace movement as a durable, significant new factor on the political scene, capitalism's structural freedom to make further tragic as well as uneconomical errors ap peared to be diminishing qualitatively after one century of American industrial capitalism. The social time that the population gave it could not forestall unprecedented new dangers to the system. The society of improvisations, composed at the economic policy level largely of responses designed to neutralize the consequences of past errors, and in which leaders neither truly planned nor could introduce a stable, permanent order, was finally beginning to produce an accumulation of ever-mounting problems. Hard-core unemployment, often rising to new levels; permanent inflation along with low growth; credit and deficits to and by all but still inadequate to assure sufficient industrial expansion and consumption by people; a greater dependence on an increasingly precarious international economy in which the United States was politically, militarily, and economically overextended; social chaos at home that made drugs, commercialized euphoria, and intensely violent and disintegrated communities and their disillusioned people the common present and dominant future-all this testified to the failure of American capitalism and the astonishingly fragile society it had created after one century. Though probably no single one was decisive, the conjunction between all the domestic and global frustrations and problems that continuous improvisations as well as structural imperatives produced had by the 1970s brought both the United States and world capitalism into a cycle of escalating crises for which no effective resolution could be found. Superficially rational, yet in fact half-managed in half-ignorance, the higher disorder of the system was coming home to rest, bringing with it the corrosive impact of a reality no longer capable of being deferred. The economic, political, and social limits of the postwar polítical economy were finally being approached-with what conclusion no one, from the system's managers and defenders to its strongest critics, could be certain.
In the end, the main lesson of the postwar political economy was surprisingly similar to that of earlier periods: that the problems of the society and economy eventually multiplied faster than its capacity to resolve them, that each new major effort produced its own destructive contradictions, and that merely to try to make the system work without fully, accurately gauging the consequences of each act was merely to court potential new crises. At no time was the effort to integrate and rationalize capitalism via political or economic instrumentalities to succeed, despite temporary accomplishments. The desire to stabilize capitalism is never independent of the political and structural capacity of the leadership to do so, and this it sought to accomplish mainly as a by-product to answering specific problems within the framework of the existing distribution of wealth and power. Controlling or reflecting such power scarcely qualified men in Washington to perceive the right course, which was much more defined by interest and exigency in the guise of disinterested insight.
After 1945 it was politically easier to spend money on arms, especially if lavished properly among the Congressional districts, than on anything else, so that desire and political necessity were joined. By the time such fundamental policies decided in often capricious ways accumulated, an immense vested interest in the perpetuation of the postwar political economy, its ideological mystifications included, had come into being. And if the system could understandably not get off the well-worn track now fraught with limits and new dangers, circumstances would eventually run it off. After three decades, capitalism had become so fragile, so dependent on the health of so many seemingly small as well as immense variables, that no one could predict precisely which one-at home or abroad, involving inflation, credit, liquidity, war, peace, Presidents and their mellifluous men who lied as a way of life, and so much more-would intersect them all into a potential disaster.
At the end of the first century of American industrial capitalism the question was no longer if or how a new crisis would come but increasingly, even for the system's defenders, when it might arrive.
Traumatized by the failures-Vietnam above all of the three "successful" decades, more and more men-of-power doubted the efficacy of their own solutions. The economic and social malaise of contemporary capitalism could both be measured and felt, and the society was adrift, with its most dangerous challenges still before it. Capitalist America's power structure could not, because of ignorance and structural imperatives, resolve its crisis; but neither was the opposition capable of replacing it. Such an impasse condemned both the United States and the world to new, potentially endless, turmoil and misery yet to be inflicted at home and abroad. Despite the fact there was no serious opposition from a Left, that freedom from social challenge by no means solved the problems of the status quo. It merely implied that its inevitable need to confront its growing political and economic dilemmas, when it came, would be the inexorable consequence of capitalism's inherent contradictions.
10 The Perpetual Crisis: American Foreign Policy Since 1946 World War Two did not end with peace or a diplomatic settlement but only unleashed social, economic, and political forces which ultimately were not negotiatable and transcended the capacity of the United States or any other nation to control. One may define the postwar decades as being a "Cold War" of Soviet-American interaction, and it is from this perspective that postwar history is largely written. But that notion grossly misses the texture of a much larger, ultimately more decisive reality, bypasses the terror and virtually unlimited violence in which the United States was to engage and the revolutionary upheavals which repeatedly created disarray in Washington's priorities and strategy-and challenges to its ambitions and hegemony. And a myopic focus on Soviet-American affairs ignores, too, the fact that relations among capitalist states, and United States plans for their future, were ultimately to prove at least as decisive after the war as they had been before. The questions emerging from Washington's desire once and for all to create an integrated, cooperative world capitalism became inextricably linked to the manner in which the leaders of the United States confronted their problems with Russia and quite autonomous revolutionary struggles. If postwar American foreign policy therefore emerges as an indissoluble skein of events in which the global framework is crucial, and priorities, crises, and needs are constantly mingling and clashing-the complexity of this picture to later viewers ultimately also gives them the sense of problems that confronted the American leaders who were ultimately to fail in imposing their essentially hegemonic goals on this bewildering diversity. It is true that to the men in Washington some questions were far more important than others, and they sought to stamp their priorities on what was to prove an uncontrollable world; but one cannot comprehend the final emergence of Vietnam as the most important war of the epoch-if not the century for the United States-save as an aspect of these universal ambitions and the intersection of its numerous and unattainable objectives touching every corner of the globe after 1945.
In a critical sense, the history of American foreign policy after World War Two is not merely one of how Washington sought to attain those main objectives it defined. More significant in the longer run was how a frustrating real world interacted with a myriad of the United States' seemingly lesser goals in a way that gradually evoked ever larger operational commitments, eventually dominating its foreign policy and greatly altering its priorities. Ultimately, the history of postwar foreign policy was to reveal that along with its increasingly bloody and expensive successes, the constraints of its resources and the uncontrollable nature of the international situation were to leave the nation in what has become a permanent and ever more frustrating crisis involving both its power and its confidence.
The Priorities Dilemma
What was significant about the format of contrived crises into which United States foreign policy was plunged from mid-1946 onward was not the way in which American leaders rationalized the vast sums spent to help the American economy or integrate Western Europe in the name of the struggle against Russia-for they offered both truth and falsity simultaneously-but the manner by which the complexity of the world, the limits of American power, and the ignorance, myopia, and naïveté of its most sophisticated leaders led to a confusion of priorities and their loss of mastery over events. With each failure the range of their possible action and options altered, often imperceptibly and at times in dramatic ways, as America's ability to define the course of world history diminished over time.
This was true in its dealings with the capitalist world, however temporary its quite costly successes in stabilizing West German politics and gaining a modicum of Western European obeisance, and above all in its relationship to the non-European world. It was only in regard to the USSR, ironically, that a predictable understanding evolved, even if it was based on reciprocal fear that was gradually allowed to accommodate mutual trade as well. An equilibrium also emerged because, while ideologically revolutionary, in terms of state conduct the Russians consistently pursued a primary devotion to national security and interests at the sacrifice of destabilizing revolutionary actions.
What appears "accidental" in American foreign policy after 1946 was essentially a result of the dilemmas and superficially unpredictable crises intrinsic in a foreign policy that set before itself no less a goal than the economic reconstruction and integration of world capitalism, along with the political and military protection of the venal and repressive regimes whose retention in a neocolonial status became a precondition for their incorporation into a world under American direction. And given the possibility of altered priorities which the world and its inherently uncontrollable qualities repeatedly presented to a United States which reacted to one crisis after another as if its resources were inexhaustible, the American leaders'
seemingly improvised responses to reality cannot be appreciated save as a function of a set of objectives sooner or later preordained to create frustrations and, with the changing balance of world power, failures. Even if its exact actions are not always predictable, one may in principle anticipate the nature, if not the precise time and place, of the difficulties that imperialist powers will encounter. After 1946, this process becomes the defining experience of United States for.
eign policy.
Like a slowly, inexorably unfolding plant, revolutions and upheavals that far exceeded the aftermath of World War One had begun or were incipient throughout the world. With Japanese, French, and British colonialism defeated or weakened, the world now saw immense vacuums which the tides of revolutionary forces would fill in due course. The interaction of these alterations in the balance of world forces, the impact of revolutionary ideologies and nationalism of socialist as well bourgeois varieties, meant that a new epoch of continuous struggle had begun. China, Indochina, Korea, Greece, the Philippines, Malaya, Algeria, Angola, Indonesia, Cuba, Chile, Portugal, to mention but a few, were beginning in a vast elliptical fashion, including losses and terrible tragedies, to wholly transform the world. The United States now sought to relate to this world with its theories of expansive national power defined as "internationalism," its increasingly irrelevant fascination with a technology oriented only to mastery over other technological societies, and an increasingly objective need to operate abroad. Given the collapse of European imperialisms, it was only the existence of the United States as the aspiring surrogate of them all that held up the leaking walls of the old order and reaction, and thereby defined the terrible main violence of modern history. America's guns, money, and men created the central experience of the post-1945 epoch.
The Korean war was essentially the internationalization of a civil conflict that had begun in 1945 immediately after Korea's liberation from Japan and the artificial partition, which the United States imposed in August 1945, of the nation into what was to become two permanent sectors. The totalitarian regime that United States funds and, until June 1949, troops kept alive in the south left the nation in constant turmoil, with guerrilla warfare within the south itself and increasingly large scale combat between the two sections along the 38th parallel in the year before the north autonomously made the decision to reunify the nation in June 1950. Divorced from the preceding five years of history, theories on the origins of the Korean war merely become a part of the Cold War's mythology. In June 1950, despite its sincere belief in Soviet responsibility for the conflict's outbreak, Washington was fully aware of the deeper internal origins of the conflict and not wholly surprised by the event. And it was also quite confident its participation in keeping the Right in power in the south would not involve much of its resources for too long. By the late fall, as well, the Korean war gave the Truman Administration the otherwise unavailable means for mobilizing vast new Congressional appropriations sufficient to implement NSC68 and deal with myriad expensive needs in Europe-programs far exceeding the cost of the Korean war itself. What indeed was likely to have been a short war lasted until July 1953, requiring 33,600 American lives and $18 billion, only to end in a total military stalemate along the 38th parallel where it had first begun. Despite the fact that by mid-1951 Major General Emmett O'Donnell, Jr., could report that "almost the entire Korean Peninsula is just a terrible mess. Everything is destroyed," a vast United States air, naval, and artillery superiority could not produce military victory over a dedicated enemy using high mobility, decentralization, tunnel defenses, and movement at night. Massive firepower produced barbarism, killing over a million South Korean civilians and at least an equal number in the north, but not victory. Korea proved there was no relationship between the expenditure of industrial power and the political and military results obtained. The dilemma of adjusting its power to reality was now a permanent frustration for United States foreign and military policy, with its goals far exceeding its means.
In overt warfare, the limits of violence were now publicly exposed. In covert warfare, however, and in aid to reactionary comprador regimes such as the Philippines or in suppressing weak local guerrilla movements, a whole new world of techniques from the jailer's key and the torturer's interrogation, to repression at every level of violence and instigating coups-opened itself to the United States in ways essentially unknown before World War Two. Those who assert that the application of American power is entirely open and known to the careful observer are just as naïve as those who argue that the functioning of its foreign policy is wholly conspiratorial in means and ends rather than the flexible effort to attain prescribed objectives and needs. America's private armies, police agents, cultural apparatuses with kept ideologists, and so much else begin at this time as a permanent, heavily funded means of combating still fragile revolutionary movements or even, as with Iran in 1954, eliminating the domination of nominal allies over oil supplies and introducing United States control. Guatemala in 1954, Indonesia in 1957, the Bay of Pigs in 1961, private armies in Laos and Vietnam beginning in the 1960s, Indonesia again in 1965-the United States after 1948, operating through the CIA and the Pentagon, recorded numerous successes as well as failures in its often barely clandestine campaign of persuasion, bribes, assassinations, torture, and repression. Against revolutionary movements operating in a propitious structural environment, and with an adequate mass base and free of putschist, legalíst, or similar errors, police repression rarely succeeded. At best it could only gain time, which in Greece, the Philippines, or South Korea only produced the restoration of the old corruption and, sooner or later, the return of new struggles and, for the United States, new challenges and losses.
During the 1950s Vietnam became an issue linked to so many other questions from France's role in Europe and the efficacy of American weaponry and the New Look to the need to insulate the raw-materials producers against the tides of revolution that it is now scarcely any surprise that the increasing successes of the Vietminh in mobilizing the masses for the revolution and protracted struggle should have become the major postwar conjunction of America's effort to relate to the dominant if not unilinear trends of history and resolve its gnawing self-doubts about its ability to protect the larger world socio-economic matrix in which its interests could survive and prosper. Vietnam was, over time and with increasing intensity, the inevitable, transcendent test of the entire world system the United States aspired to create; it was the fusion of all its past frustrations as an imperialist nation, and a test in which the United States was to fail totally. It revealed, as none others would, the virtually unlimited violence and terrorism to which American foreign policy could resort-as well as its motivations and limits-and thereby became the most important revolutionary event in at least a quarter-century.
The domino theory was first articulated in the context of the Middle East during the 1947 Truman Doctrine "crisis," and even before its first Indochina challenge Washington had defined a concept of political-military overhead charges as integral to the realization of its economic goals. In effect, just as the United States in the 1920s learned it had to make economic investments in the Third World to control raw materials, so in the revolutionary world context of the postwar epoch it increasingly understood it had to make political and military investments to sustain the specific environment in which the neocolonial economic system could operate. The domino theory was simply an articulation of this counterrevolutionary assumption, yet its cost was one American leaders could never estimate in advance, thereby laying the seeds of their undoing.
After the final triumph of the Chinese revolution, the struggle in Vietnam was initially a question of Acheson's resolve to stem the further advance of revolution, and in May 1950 the United States began to give economic and military aid to the Indochina puppet regimes. Had Korea not immediately thereafter absorbed Washington's attention in Asia, it is likely that far more yet would have been done to assist the French cause. As it was, from 1950 through June 1954 and the signing of the Geneva Accords, the United States supplied the French with at least $3.5 billion in military aid, paying for over half of the war by 1953. Diverse reasons lay behind this large commitment.
Two vital American considerations were France's ability to block West German rearmament so long as it was bogged down in Indochina, and the future of Japan in Asia and the world economy.
As for France, its quick victory would mean its return to European problems and an army at home sufficiently powerful to guarantee that a remilitarized Germany posed no threat. And for Japan, a Communist Southeast Asia meant the loss of its most logical markets and raw-materials suppliers as well as a possible dependence on Leftist states which might thereby affect Japan's social system. In the global integrated economy which American leaders planned, the JapanEast Asia axis was the logical structure for cooperation with the metropolis.
The "New Look" strategy debate, which came at the time France was losing the major battles of the war as well as the period the United States sought totally to isolate China, further intensified the resolve of men in Washington to apply their force in Vietnam.
If the United States did not come nearly so close to entering the war with its air and atomic power as some have supposed on the basis of the statements of John Foster Dulles, Admiral Arthur Radford, and others, it still made certain that the Geneva Accords would be ignored in the south in its desire that the nation remain permanently partitioned.
- 365 By far the most important reason for America's mounting involvement in Indochina, however, was the strategic economic argument the Joint Chiefs of Staff first articulated in April 1950 and which American leaders shared consistently thereafter. The fall of Indochina would cause Thailand and Burma to follow, "major sources of certain strategic materials" would be lost, and the balance of world power would shift in a significant way against the United States. The "critical psychological, political and economic consequences," the National Security Council decided in a formal policy paper in June 1952, could even "endanger the stability and security of Europe."
  After Southeast Asia's fall, India and the Middle East might follow, and the situation of the Pacific offshore chain might become "precarious."5 Rubber, tin, and oil would be lost in Southeast Asia, which alone could endanger Japan; and the loss of Thai and Burmese rice exports might force Japan to accommodate to Communism. References to tin, rubber, copra, iron ore, tungsten, and oil were integral to all major United States evaluations of the war for the next decades.
  The domino concept, in which the fate of an entire region became contingent on the survival of its weakest member, also became a major theme along with the test of the military effectiveness of the Pentagon's arsenal-"credibility." However variable the emphasis on any of these points in the period after 1950, all remained important in explaining the motives which made Indochina the conjunction of all the unresolved frustrations of military power, economic integration, and leadership against counterrevolution which was to inspire American foreign policy after World War Two. When Dulles in 1954 resolved to impose the violent, corrupt, and moribund Diem regime on South Vietnam, little did he realize that by frustrating the implementation of the Geneva Accords, and given the continuing American aspirations and fears in Southeast Asia, he would lay the foundations for the most important defeat of his nation's power in its modern history. But that event was the logic of the frustrations inherent in the vast objectives for world hegemony under American guidance that had motivated its foreign policy after 1945.
If Congress insisted that arms replace economic aid, a policy which many Western European leaders justifiably worried might cause more harm than good to their already wobbling economies still in need of peace to recover, their reluctance was overwhelmed as United States military grants increased from $211 million in 1949 to $4.2 billion in 1953, fueling the American economy to new heights of prosperity even as it caused significant damage to Britain and other nations hit hard by the impact of the Korean war on their essential raw-materials imports.
To some critical extent the new cornucopia of arms, as well as common obsessions over the dangers of a new war, bound the Western European nations to United States direction, and thereby allowed America the integration via political and military means it had otherwise failed to attain through the medium of trade and investment, as Hull and his peers once thought possible. Yet the world had become so politicized, and the global economy along with it, that normal economic intercourse conducted in conventional ways now became less viable and attainable given the problems in the European economy, the hesitancy of Congress, and the real impact of revolution in making smaller capitalism's area of operation. In this context, with the United States now prosperously in the new political economy that war was seemingly to make enduring, with 12 percent of the gross national product in 1952 and 1953 going into the Pentagon budget alone, plus foreign arms aid, and a budget deficit of over $9 billion in 1953, it was clear that the Hullian world system would be sharply modified, that new rules were being written for sustaining world capitalism, and that along with new strength the system might also in due course develop new weaknesses for which no one could concoct a permanent cure.
Vietnam was in one sense all the more essential as a testing ground for the efficacy of the United States counterrevolutionary capacities because of the trauma of the Cuban revolution on Washington's selfconfidence. Cuba was unquestionably an exceptional situation in the hemisphere, and its very proximity to the mainland and the extent of United States domination made it both more galling to Washington and riper for revolution. The Cuban elite failed to resist what was initially a small revolutionary military challenge because of that movement's still unclarified nature. And at least as important was the elite's relative physical mobility made possible by the proximity of a safe haven ninety miles away and the liquid nature of its capital and functions as a consequence of its symbiotic and marginal economic role in servicing the United States investment and tourism which controlled the island's economy. No ruling class was as weak or disloyal as Havana's, while at the same time the revolution's absence of a definite ideological and economic commitment left the United States uncertain as to whether it was essential to act. This unintentional protective indecision gave the revolution two critical years during which to consolidate its power and to evolve politically. In large part it was to do so in response to Washington's boycotts, pressures, and other assaults on its national self-determination, which made resistance to Yankee imperialism and the creation of an anti-imperialist ideology the precondition of genuine independence.
It was its stunning defeats in Cuba, and particularly the failure of the CIA's "Bay of Pigs" invasion in April 1961, that humiliated the Kennedy Administration, with its bevy of limited war theorists so influential on the instinctively combative President, into making Indochina the proof of "credibility," "the various techniques and gadgets now available" both doctrinally and in terms of weapons, and turning Indochina into a symbolic test of strength between the major power of the West and the Communist bloc.7 And just as the still keen remembrance of the Korean war, the Berlin crisis of 1961, and the failures of Cuba encouraged this confrontation in Vietnam that would reiterate the efficacy of United States strength, each American success at counterrevolution elsewhere primed Washington to believe that it could attain the same triumph imminently in Indochina, as its experts there always saw the victory at the end of the tunnel -if only more were done to grasp it. The Brazilian coup in 1964, the terrible Indonesian massacres and reactionary coup of 1965, the short, effective United States invasion of the Dominican Republic with 21,000 of its troops the same year-each success as well as each failure spurred on men in Washington who were increasingly confident of the efficacy of their "techniques and gadgets." Just as the United States had responded to Korea with the frustration of China ever present in its calculations, Kennedy and his circle reacted to the Indochinese crisis after 1961 with the failures of Cuba hanging over them in that larger global and contextual linkage which was the natural reflection of the world view which had guided United States foreign policy since 1945. The merger of accumulated frustrations and failures, Vietnam was the optimum possible American effort to make its military power, economic integration, and leadership decisive against the tides of revolutionary change which have all too slowly but quite irresistibly transformed the world since 1917. The crucifixion of Indochina that was then to begin to unfold in the second Indochina war was directed toward Southeast Asia and the dominoes, but also against all the rest of revolutionary mankind, leaving the people of Indochina to confront the vindictive, increasingly desperate barbarism postwar American imperialism's defeats produced-and to win complete victory. Yet their total triumph out of the terrible period to follow was not merely testimony to America's weakness but a lesson to others as to the potential and means for future revolutionary successes.
References to the dominoes in the region persisted during this time and until the final debacle, and a consciousness of the raw materials involved and the economic element continued throughout the period until 1968 for which relatively full documentation exists, though less strongly after 1962 than before. The strategic explanation, and the need to resist the alleged expansionist designs of China against all of Asia, became the most prominent, though surely not exclusive, justification of all. The war was one of a world conflict, "the testing ground" for wars of liberation, as Secretary of State Dean Rusk put it in March 1966; "part of a continuing struggle to prevent the Communists from upsetting the fragile balance of power," Undersecretary of State George Ball explained. Once committed, Defense Secretary Robert McNamara told President Johnson in January 1964 that "we cannot disengage U.S. prestige to any significant de"9 "If we leave Vietnam with our tail between our legs," General Maxwell Taylor argued the following September, "the conseof this defeat in the rest of Asia, Africa, and Latin America quences would be disastrous."10 American leaders made similar justifications repeatedly in internal as well as public policy discussions. This synthesis of credibility and the domino theory profoundly influenced the commitment to fight on. Yet neither challenge was new to Vietnam, nor would they end with the final American defeat there.
gree.
8 Both unable and unwilling to confront the triumph of the National Liberation Front with the Vietnamese people as successions of its own venal puppets moved from crisis to failure in Saigon, the United States prepared to compensate for the acknowledged influence and recuperative powers of the revolutionary cause with a sheer quantity of arms and funds that was not only to make Vietnam a test of credibility but also of the limits of technology and firepower.
A kind of Maginot Line psychology which assumed that military hardware solved socio-economic and political as well as military problems spawned a technological fetishism which, while immensely destructive, was never decisive against high mobility, decentralization, revolutionary elan, and organization. The NLF mastered the objective conditions, even creating a symbiotic relationship with the enemy-occupied territories from which it could at least also extract some strength. Ultimately, its resourcefulness as well as devotion, combined with the trauma that the United States was to impose on South Vietnam's society and economy, provided it with the ingredients for complete victory. And in combat, American officers morosely concluded by mid-1967 that the NLF controlled the timing and terms of combat in almost four-fifths of the engagements. Technological fetishism was to fail, and the United States military machine could perform barbarous acts but not victorious ones. Indeed, precisely because the United States had put its forces on the testing line of battle, some American leaders correctly appreciated, the NLF's immense triumph might inspire others to follow its example, and the dominoes might fall yet more quickly than had the United States stayed out of Indochina altogether.
Over a million Vietnamese were killed, over 10 million were driven from their homes, fighting lasted a decade and a half, 46,000 Americans died, at the peak of the war about three-quarters of a million American men were stationed in or around Indochina in war-related tasks, and at least $200 billion was spent on the war. The continuing and now far deeper crisis of the limits of United States power since World War Two, the conflict over priorities, and the transformation of its position from global preeminence into decline were the main outcomes of the Vietnam test. For Vietnam was not just a total defeat for the United States. It was also an ignominious humiliation of its erstwhile power that was greater than anything it imagined possible. In May 1975, after it occurred, Washington could only lamely assert that th
Objectively, the United States had a smaller stake in Southeast Asia before its intervention than virtually anyplace else in the world. It simply grossly misjudged the costs of preserving the capitalist bloc and its freedom to expand into a region should it wish to do so. Vietnam was scarcely atypical, since so many small United States interventions elsewhere had, and have, easily and quickly succeeded. It was an error only insofar as the United States understandably minimized the extent of the effort it might have to expend; and one could find no better case for the utter futility of "rational" planning and foresight in the effort to apply a foreign policy against a tide of objective forces. What began as a consensus among foreign policy leaders and factions of the function of intervention, and the need to prove "credibility" and stop falling dominoes, by 1967 became a source of deepening division among those who shared an agreement on abstract principles of the uses of American power but disputed where to apply it once Vietnam embarrassingly exposed its limits.
power Vietnam further imbalanced the budget and fanned inflation seriously, weakened the dollar in world trade, alienated more citizens and created more internal divisions than any event of the past half-century, gave a critical respite to Cuba to consolidate and Chile to move Left, made Western Europe far more independent politically as well as economically, diminished the military challenges to the USSR by reducing United States funds available for missiles, and in almost every conceivable manner shifted the balance of world economic, political, and military power against the United States.
Never did any great imperialism diminish in its global strength so quickly. By 1968 that fact was so clear that the pressure within the United States to reduce the commitment to the war, if only for economic and pragmatic rather than principled reasons, had become too great for both Johnson and Nixon to ignore.
The consensus and "bipartisanship" among the elite broke down because short of unifying principles they had a real conflict of concrete interests, and reality is not just a question of agreement on ultimate rhetoric but whose pocketbook is being filled. For the first time since the end of the Second World War, the decisive foreign policy constituencies separated on a key issue largely because the war had become too expensive and was leading to the serious neglect of other aspects of global expansion. Unable to do everything and satisfy all interests, the struggle over foreign policy priorities began.
Even the Pentagon, whose strategic air and naval power factions had seen their prestige and budgets fall as the conventional land army became temporarily supreme, split on the cost of the war. To all of these factions total United States withdrawal from Indochina was unthinkable, and not even nominally anti-war Presidential aspirants like Eugene McCarthy and George McGovern advocated it. When the ideologues like W.W. Rostow and Dean Rusk, and army generals like William Westmoreland, in early 1968 advocated a massive escalation of the war to exceed the already great strain it was imposing on the dollar abroad and budget at home, the men from big business and big law who had earlier hoped for cheap, quick victory in the Vietnam test case-personalities such as Acheson, George Ball, McGeorge Bundy, Douglas Dillon, Cyrus Vance, Arthur Dean, and John J. McCloy-persuaded Johnson to stop the escalation and thereby shattered his own self-confidence. It was for Richard Nixon now to resolve the pressures from those who wished to fight as well as those who sought to direct foreign policy elsewhere and save the economy at home and abroad from the consequences of a Pentagon budget which far exceeded the capacity of the economy to absorb.
For the seven largest United States banks, in 1971 their foreign operations produced 28 percent of their total profits. Some of the largest New York banks earned as much as one-half of their net income after taxes overseas. This trend reflected the astonishing post-1965 explosion of branch banking abroad. In 1966 only thirteen United States banks had foreign branches, and these had total assets of about $9 billion. By 1974 the number of American banks in these operations had increased tenfold and their assets by seventeen times, with increasingly risky loans amounting in the billions becoming commonplace. This internationalization of the corporate and banking sectors added temporary profit and dynamism to United States capitalism and staved off possible problems that a purely domesticbased capitalism would have engendered, but it also integrated it far more closely to a world economic structure which was simultaneously weakening for numerous reasons, not the least of which was the inflationary impact of United States military and economic policy discussed later in this chapter. Early in 1976 the United States Comptroller of Currency revealed that twenty-eight banks, including some of the nation's largest, were in serious and even critical financial difficulties because of their many billions of marginal foreign loans. Insufficient to save the system at home, the internationalization of American banks added only a potential permanent weakness along with temporary success, setting the stage for later crises.
That determination to equate the "free world" cause with that of America's profit became the foundation of numerous actions from troop interventions and CIA covert aid, to counterrevolution in Chile and Indonesia-and the wellspring of the postwar crisis which the United States response to Third World change had created. World economic integration, not on the basis of equality but of domination, became the essential prerequisite for the American economy, and the political and military obligations and immense costs this objective imposed were never-ending. Where local compradors and oligarchies buttressed with arms, money, and advisers would not suffice, more direct United States power was essential; and hence began a long succession of interventions into the domestic social orders of numerous areas of the globe. The stakes involved in that struggle to establish American hegemony were increasingly great, for the United States and above all for the national independence movements committed to economic growth for their own rather than America's welfare. Ironically, it was the effort to attain its hegemonic objectives that was to weaken the United States as a world economic power far more profoundly than its important successes in preserving the status quo, with its prisons, violence, and stagnation, and eventually create the very trap in which the relatively shortlived United States-dominated capitalist world was to produce its own crisis and internal contradictions.
The United States raw-materials deficit began during the 1920s, and specific industries became concerned with the economic accessibility and political nature of every nation in which some of their essential imports were located. In the Middle East, of course, securing oil became the keystone around which United States conduct was at least initially founded, and in Chile and Africa raw materials assumed decisive proportions. Academics who argue that alternate sources to the supplies of any country or for any product could be found, or even that the United States might become self-sufficient in either oil or copper if ready to pay the higher costs, ignore entirely how operational foreign policy was conducted in response to specific pressures as well as objective needs.
By 1956-1960 the United States was importing over half of all its required metallic ores and almost 60 percent of its wool. It is irrelevant that after 1959 United States investments and imports shifted toward developed nations and manufactured products, for the absolute dependence on imported raw materials grew throughout the 1960s until, with the outbreak of the 1973 oil price war between the Organization of Petroleum Exporting Countries (OPEC) producers and industrial world, it was an obsession based on objective needs. More important was the trend of United States imports of raw materials to grow far more rapidly than its exports of goods. And while many of its essential needs came from a Canada, which was largely United States-dominated economically and politically, it is no less a fact that global reserves for numerous vital minerals were found in the Third World. Manganese, chromium, nickel, copper, tin, bauxite, and so much else were still largely located in areas of political and social upheaval. Importing at least half of fifty four essential commodities in 1956-1960, by the beginning of the 1970s the United States was realizing a 1954 Senate report's prediction that "to a very dangerous extent, the vital security of this Nation is in serious jeopardy" without free access to imported raw materials, 22 386 * The United States consumed about two-fifths of the entire world's nonrenewable resources in 1971, utilizing 42 percent of the aluminum production, 38 percent of its nickel, and 32 percent of its cobalt-minerals in which its own reserves were less than 2 percent of the world's total. In 1950 the United States relied on imports for more than half its supplies of only four of the thirteen basic raw materials, reached six by the early 1970s, and projected a deficiency of nine by 1985. In 1974 its raw-materials balance of payments was $16 billion in the red, and while dire predictions of yet greater dependency in the future are partially contingent on the extent of economic activity, it was still clear that America's integration into the world rawmaterials system was a question of fundamental significance to it. However variable the predictions of future United States deficiencies, by 1974 it was the indisputable consensus that the United States, along with the remainder of the capitalist world, was confronting greater shortages and increasing dependency on the rest of the world, including that portion of it in upheaval. With the United States importing over one-third of its oil by 1973, and scheduled to reach one-half by 1985, "Even a brief interruption of this supply," a 1972 Chase Manhattan Bank report noted, "can have a severely damaging impact."23 "Petroleum is a finite commodity that is essential, to an extent unequaled by any other commodity, to a country's well-being," Undersecretary of State John N. Irwin noted in April 1972, "and... it is the most political of all commodities. "24
The Crisis of American Foreign Policy
By the end of its first century as a modern nation the United States was deeply enmeshed in a profound crisis of priorities and power which its leaders freely acknowledged but for which they had no cure. "I feel we are at a watershed," Henry Kissinger admitted in January 1975. "We are at a period which in retrospect is either going to be seen as a period of extraordinary creativity or a period when really the international order came apart-politically, economically, and morally.... If we miss the opportunity, I think there is going to be chaos. "31 And since it had disintegrated more quickly with Kissinger at the helm than during any other period in recent American history, which option would be realized was a foregone conclusion.
That tortured recognition began with Washington's hesitant, partial awareness after 1971 that its vast investment of resources in Vietnam was the most important overcommitment of American power of the past century, and the very success of technicians like Kissinger and Schlesinger reflected the failure of traditional strategies and leaders, and the hope that the academic high priests could accomplish with their verbalism and presumed insights what the professionals and Wall Street lawyers had not. That the failure was structural, and the mandarins could do no more about it than others, was a reality Washington and purveyors of conventional wisdom would not so readily admit, but America's increasing difficulties made it evident nonetheless.
The collapse of confidence in the efficacy and mechanisms of United States foreign policy was very much a part of the greater dilemma of the limits of social knowledge in managing American capitalism. The vastly increased complexity that the American domestic and international political economy had created only made control over the application and stabilization of United States power at home and abroad that much more difficult. And because solutions to challenges now had to become more comprehensive and costly, they also became more dangerous and politically impossible-and thereby more elusive. In fact, long before 1976 remedial actions had become insufficient to cope with the vast accumulation of new structural problems along with more traditional dilemmas, with the post1945 society of improvisation and gargantuan spending now largely adrift. Capitalism was an always changing order, full of new configurations that upset established patterns and made irrelevant past solutions. Yet there were more than structural constraints on saving the system. Given the limits of their social knowledge, both in defining answers, as well as in applying them correctly on a global scale, the directors of the system were bewildered and had lost one vital capacity for mastery, virtually guaranteeing that modern America's second century from its inception would be quite unlike the first, with hubris a mood that repeated failures would hardly long sustain.
America's disastrous fascination in Vietnam with its technology and the symbolism of its purposes there led to a fatal myopia which some in Washington during 1970-1971 vainly attempted to alter. In the spring of 1971 Secretary of State William Rogers, who had little responsibility for the overall management of foreign affairs, announced that the United States would impose formal priorities to guide foreign policy. Yet no sooner were guidelines defined than American leaders ignored them, as the unanticipated consequences of past economic and military failures created new concrete challenges and diversions. And given the universal objectives of United States foreign policy, with its 370 treaties on every conceivable topic by the 1970s, its over 300 major bases abroad, and adventures and interests everywhere, the imposition of rationality and control on the inherently mercurial became just another chimera. Most of the crises to which America was to respond for the next five years were unanticipated and, more important, unwanted.
The so-called Watergate scandal alone sufficed to send the leaders of the nation off on new distractions quite unlike those that are predictable in principle, if not detail. Watergate was an outcome of the general loss of confidence in only a man among the leaders of American society, and although Nixon also believed in the traditional ends of United States foreign policy, he had badly abused, largely by excluding them, many of the constituencies that traditionally gave it guidance. In terms of actual legal violations, the administration's peculations were no more than customary, and the bald lies and criminality which Nixon's Indochina policy involved caused the offenses of Watergate to pale to insignificance by contrast. This process, which Kissinger's systematic concentration of foreign policy decision-making in his own hands reinforced, ended by leaving the Secretary of State far more powerful. It stimulated the reemergence of Congress as a vehicle for the inhibition of those foreign policies displeasing to powerful constituencies, and placed at least a momentary brake on Executive authority. It did not, however, alter the goals of United States policy or those fundamental shared commitments and interests which bound the President and his critics together, much less reduce America's already massive existing dilemmas. Perhaps more than anything else, Watergate showed the strains that the frustrations as well as the abuse of the prerogatives of foreign policy had created, thereby further intensifying a disunity within the power structure that had once been traditional to it on the level of practice if not ultimate purposes. The Watergate crisis was a symptom of battle fatigue in the face of past and future failures in the conduct of American power,
Every President is elected with practical or moral debts to those who supported him, and Jimmy Carter in 1977 was no exception. While Carter, unlike Reagan, immediately sought to stress foreign rather than domestic affairs, both his accumulated political obligations and events themselves forced national questions into his purview. Favorable economic conditions during the first half of his term allowed him some discretion, but slow growth after 1979 and then the recession and sharply increased unemployment that began in 1980 rudely intruded on both Carter and his successor. More important was the persistently high inflation which began with the Vietnam War in 1966 and which became a new structural aspect and destabilizing threat to the American economy, reaching an unprecedented 13.5 percent in 1980. Inflationary pressures are highly corrosive to existing economic relationships and upset numerous powerful economic interests as well as the entire population. The result was a growing cacophony of demands to resolve the perplexing economic and social problems inflation brought with it. Such economic challenges as well as regulation quickly intruded themselves the Carter Administration, and Reagan promised to make them his principal concern,
The most classic regulatory problems involved the railroads, which transferred all passenger services to the federal government in 1971 and received a $2 billion subsidy in return over the next five years. In 1976, with the projected subsidy three times that and the freight sector sorely in need of yet more, the extent to which the function of federal regulation was to keep alive obsolete and inefficient industries became a serious issue. A 1976 Railroad Act promised another $1.6 billion subsidy, but failed to solve the reality that less than half of the existing rail mileage was now profitable. Backed by enormously powerful local political and industrial interests, railroads had become the main beneficiary of the regulatory system, stoutly resisting its dismantling. Indeed, federal intervention in this case was merely a concealed transfer of the financial losses of sick industries to the general public. This same principle was now extended to ailing industrial firms, and beginning with Lockheed in 1971, the specialty steel industry in 1977, and Chrysler in 1979, guaranteed loans of $250 million to $1.5 billion were given to firms able to rally the votes in Congress.
Ronald Reagan's election in 1980 revealed both the possibilities and constraints on the Presidency and the enigmas of contemporary politics. He campaigned on a platform merging nostalgia and self-interest with utopian competitive capitalist theory which the self-made California entrepreneurs who were his main backers defined. Yet most who voted for Reagan were really protesting against Carter's failures. And while Reagan's advocacy of less economic regulation, more competition, lower taxes, and a balanced budget along with far greater military spending was an inconsistent program designed mainly to win votes and campaign funds, it also revealed those deep ideological legacies that have persisted in confusing American political dialogue for generations.
The Reagan Administration did plan to make the domestic econ omy and social order its first priority, a commitment its most active supporters enthusiastically shared. What surprised the President and his followers most in their first confrontation with reality was both the persistence of past economic policies and interests in inhibiting new action and the fundamental conflict between a tax reduction, a budgetbalancing program, and an expansive foreign policy.
Aside from the fact that the "supply-side" economics of Reagan's campaign and first year in office was merely an assertion of the classic conservative faith that removal of government from the economy automatically solves all problems, it was inherently impossible to cut taxes 10 percent a year for three years and balance the budget by 1984. Throughout 1981 the Budget director, David A. Stockman, saw the debacle of Reaganomics coming, admitting, "... we [had] to get a program out fast... in a 20- or 25-day time frame, and we didn't think it all the way through. We didn't add up all the numbers."93 By summer 1981 Congress began stoutly resisting the President's proposals and defending their constituencies' immense interests in their favorite subsidies and spending programs. As the President tried to raise military spending and cut taxes simultaneously the economy fell even more deeply into a malaise which quickly alienated his initial supporters and made his policies appear both confused and adventurist. The highest interest rates in American history in 1981, the biggest post-1946 drop in the gross national product in 1982, the greatest and longest postwar unemployment during 1982-83 along with sharply reduced profits and the lowest capacity utilization rate in manufacturing since the 1930s... all the results destroyed Reagan's domestic dreams. Most of his supply-side advocates were gone by the summer of 1982, but not before the damage had been done. With a federal budget deficit in 1981 of $58 billion, the following year it grew to $111 billion, and in 1983 it was $195 billion, with predictions of even higher amounts for the following years.
404 * Reagan did not invent the nation's basic postwar structural problems; he only exacerbated them. Just as changes in the regulatory system had begun under Carter and gone much further under him, so too there was a direct continuity between the fate of the social welfare system under both Presidencies, revealing that not even the most audacious men could easily transform basic problems and patterns confronting the nation. After the Vietnam War, inflation persis tently undermined the entire Social Security system, from old-age benefits to unemployment compensation, making constant and increasingly costly changes in them a rising dilemma. In 1977, hoping to cope with a decade's accumulating problems, Congress made a major revision in the Social Security Act, projecting a rate of inflation and unemployment that quickly proved wholly unrealistic. It failed to address its fundamental weakness-the pay-as-you-go structureand by 1982 the system was in deficit and, depending on trends in the economy, losses were projected to reach $19 to $85 billion by 1986. Early Reagan Administration efforts to reduce retirement benefits met a stone wall of opposition in Congress, forcing a compromise law in April 1983 which essentially kept the existing system intact but still left open the possibility of another actuarial crisis should the economy perform worse than anticipated.
But inflation and unemployment also began creating myriad new economic problems. Household indebtedness rose sharply after 1976 to unprecedented postwar levels, only to plunge after 1980 in a manner which protracted the recession. Combined with unemployment, which hit 8.5 percent in 1975 and after dropping over the next four years was 9.6 percent in 1983, the results appeared in an exceptional new trend in modern American history: real wages of workers in the entire private, nonfarm sector began a sharp longterm decline after 1972, dropping 15 percent by 1983.
By late 1982 the Reagan Administration's self-confidence in domestic matters had fallen precipitously and it contented itself with patching up a program that was both less exotic and more attuned to its own reelection prospects and to the enormous vested interests in Congress and the business community who were successfully resisting all efforts to impinge on their favorite programs. A $98 billion tax increase in August 1982 neutralized the cut of the preceding year as administration spokesmen admitted the supply-side program had failed, and with the election of twenty-six more Democrats to the House the following November the President further lost his ability to control his own Party. From that point onward his effort to increase military expenditures, which had grown from 24 percent of the budget in 1981 and was originally scheduled to be 32 percent in 1984, was subjected to stout and growing Congressional and business resistance, compelling the administration to significantly reduce its ambitions. Political exigencies and the economy had quite quickly managed to wear down the most ideological President in modern American history, leaving his administration adrift and subject to uncontrollable forces to which it responded with growing perplexity.
The Growing Integration of the American and World Economies
In part this loss of mastery was due to the analytic myopia which has increasingly plagued the national government since Franklin Roosevelt: it has simply been unable to understand the nature of American society, its problems and their solutions, quickly enough to head them off. Social reform, regulation, and economic management in a highly dynamic, fluid nation increasingly involved in a yet far more uncontrollable world had by the mid-1970s reached a point where persistent failures were exhausting the social order's abilities to cope with such a diverse reality.
The trends were clear, the problems also. America's exports as a proportion of the GNP doubled between 1970 and 1980, and over the same time the share of United States corporate profits coming from direct overseas investments increased from 12 to 33 percent.
Nearly five million jobs in 1980 were linked to the export of manufactures, and by the early 1980s well over one quarter of the value of all farm products, double the share of a decade earlier, was being exported. Four-fifths of the new jobs in manufacturing between 1977 and 1980 were linked in some way to exports. At the same time, the sharp post-1971 fluctuations in the value of the United States dollar by 1976 had begun to erode the American balance of trade, which hit a record deficit of $43 billion in 1982, climbed to well over $70 million in 1983, and was projected to be $110 billion in 1984. Temporarily spared resolving this crisis because of the enormous flow of foreign capital into the United States in search of high interest, the American economy was on the horns of an irreconcilable dilemma.
The moment it resorted to more protectionist measures to balance its trade, other nations would reduce their imports of its goods; either way the American economy would suffer, and frequent international conferences to prevent a world trade war failed to alter its growing imminence.
Even more ominous was the spiralling world debt structure that banks, led by United States firms, created after 1970. In 1971 the non-oil-developing countries held $50 billion in external debts, but it increased to $400 billion in 1980, half held by private banks. By 1984 it had reached an estimated $700 billion. With it came insoluble debt service difficulties for these nations, which merely kept borrowing without any solutions to reverse their indebtedness. So long as banks could continue the borrowing cycle they made fabulous profits, but by the end of 1982 the ten largest United States banks had sums equal to 169 percent of their entire equity tied up in the most troubled countries. The problem of how to resolve this paradoxical outcome of universal greed and naiveté became the topic of endless meetings and conferences seeking to head off the collapse of the world capitalist economy.
This astonishing vulnerability of the American to the world economy was by the 1980s the main structural outcome of its sustained effort to integrate the global order along Wilsonian lines.
Rather than attaining a stable and prosperous international system it had managed to stimulate high economic growth in the context of structural changes that also produced enormously perplexing challenges. Its fate was directly dependent on increasingly uncontrollable trends beyond its borders.
The world the United States had sought to remold after 1945 has become increasingly diverse both politically and economically, and the passage of time and shifting distribution of world military and economic power added to its difficulties as America's resources became more discernibly finite even as its goals remained constant. And since reducing its global objectives exceeded the willingness and ability of either the Carter or Reagan Administrations, in a fundamental sense American efforts since the Vietnam debacle have been composed of increasingly futile and dangerous attempts to transcend the limits of its own power.
Despite the historic importance of the Vietnam War, no foreign policy leader reflected seriously on its meaning to future action, and when Carter became President he surrounded himself with men drawn from the tiny circle of the foreign policy Establishment: men who had worked for Johnson, Nixon, and Ford and who shared core assumptions and styles of operation. Such men are not partisan in the American political sense and generally regard foreign policy problems as technical issues within the framework of a binding consensus.
Kissinger helped Cyrus Vance during the State Department transition, and Vance kept four of Kissinger's advisors. Carter himself, when he initiated his race for the nomination in 1973, joined the newly formed Trilateral Commission of key American, Japanese, and Western European business and foreign policy leaders seeking to prevent the emergence of exclusive trade and political alliances in the wake of growing world economic problems. Linked to numerous other equally influential groups, the Trilateral supplied him with many classically bipartisan advisors, including his National Security assistant, Zbigniew Brzezinski.
408 * While such men were interchangable with those in any postwar administration, Carter during his first one hundred days in office sought to create a distinctive image of himself as someone "bold, imaginative and skeptical-in short, refreshing."4 This posture was also an attempt to preempt future political challenges from both wings of his Party. From the inception, therefore, he emerged with the reputation of being an unorthodox innovator on a number of key foreign policy questions, but since he never intended to reject inherited wisdom he eventually also appeared confused and inconsistent.
Iran and the Dilemma of American Power
Washington installed the Shah of Iran after the CIA organized the overthrow of the nationalist Mossadegh government in 1953.
Seeking to build a modern army, the Shah spent a large part of the nation's wealth to buy $18 billion in arms from the United States by 1977, absorbing one-quarter of all American arms sales after 1950. Washington saw Iran, its key link in the Gulf region, as crucial to the global economics and geopolitics of oil as well as the military control of the area. Visiting Teheran at the end of 1977, President Carter feted Iran as "an island of stability" in the region. Within months a growing opposition under the direction of mainly religious leaders, fully aware of America's role as the Shah's major supporter, began leading the first effective opposition since 1953 to the astonishingly corrupt and notoriously repressive regime. In the last months of 1978, as resistance reached vast proportions and the Shah's police and army shot thousands of protestors, Carter stood loyally by him. When elements of his own military forced him finally to go into exile in January 1979, fundamentalist Islamic forces bent on destroying American influence in the country quickly triumphed. In the months that followed American power looked pathetic, and when the Ayatollah Khomeini in November ordered the seizure of the American embassy and kept fiftythree of its employees hostage all of the problems of contemporary foreign policy crystallized around the sustained crisis. By the time he left office, the President could count Iran as his major foreign policy After Vietnam, concern over the "credibility" of American power became the dominant theme in Washington's responses to foreign policy crises. Yet it was more aware than ever that the mere application of power to prove American might could very well entangle it in protracted conflicts that would lead to a loss of control over its priorities. In the combination of support for unstable regimes, credibility, and fear of the domino, the Carter Administration maintained all the dilemmas that have plagued United States foreign policy before and since. To break out of this contradictory and repeatedly uncontrollable crisis-producing context became Carter's main preoccupation.
The Carter Administration responded to this problem primarily by attempting triangular diplomacy and by developing a military capability appropriate for a limited war that it knew could break out anywhere in the world. Despite this administration's "human rights"
campaign it instinctively staked American interests on pliant undemocratic and corrupt regimes in the Third World. Washington's primary objective was to neutralize Soviet power and free American forces for the vast areas of instability and crisis in the rest of the world.
Creating military power was the least complex aspect of this strategy, and it no more occurred to Carter's advisors that arms would fail them as it had their predecessors than did the notion of reducing American globalism's unlimited goals. Within months of coming to office the Carter Administration decided to create a 100,000-man "rapid deployment force" (RDF), able, as the President later described it, "to protect our own interest and to act in response to requests for help from our allies and friends."6 Authorizing the expansion of advance bases, such as Diego Garcia in the Indian Ocean, the real impetus to the RDF came with the Shah's fall and the collapse of the dictatorial 46-year-old Somoza regime in Nicaragua in July 1979. When Central America thus intruded itself into Washington's focus, the administration concluded that its other right-wing allies in the region were also in danger. In October 1979, after Brzezinski pressed for action, top priority was given to procuring the equipment the RDF needed to airlift itself and its heavy equipment anywhere in the world. It was also at this time that the Carter Administration went on record for a substantially larger increase in military spending through 1984, and the 1980 defense budget grew 15 percent over the preceding year. Crucial to its assumptions was that America would be able and willing to intervene decisively and efficiently anywhere in the world to prove the credibility of American power.
Diplomacy was directly linked to the administration's arms policy and plans for local interventions, notwithstanding a bitter dispute among Carter's advisors over whether it should take an anti-Soviet direction or attempt to press for détente and arms control. Even before the new President came to office a growing number of strategists, Brzezinski included, decided that China was no longer an expansionist power and that Washington could employ it as leverage to obtain Soviet cooperation outside of Asia. "Triangulation," first attempted successfully to obtain Chinese assistance in reaching the 1973 Vietnam peace settlement, now could be used to stabilize Southeast Asia, where Chinese influence seemed crucial, and penalize the Russians should they persist in helping countries the United States opposed. Secretary of State Cyrus R. Vance thought the strategy might provoke the Soviets in Europe, and would fail in any case.
But Brzezinski prevailed and in the spring of 1978 traveled to China and publicly linked Soviet policy in Africa to American aid to China.
Although the Chinese were delighted to cooperate and thought a strategic alliance with Washington might become the basis of their foreign policy, too many reservations existed among influential policymakers outside the White House. By 1980, after full diplomatic relations were established, the triangulation policy stalled, not the least because China still had ambitions in Taiwan and other regions which many of America's older allies thought dangerous. Still, as a potential if not a real threat, playing the "China card" was a new factor in Washington's global strategy.
Like all of its predecessors since 1950, the Reagan Administration still had to obtain the military power essential to its foreign policy priorities in the various regions of the world and to make this power look "credible" to America's enemies. Its first response was to continue Carter's RDF program, also concentrating its use in the Middle East. But this administration realized that airlifting the RDF's equipment 8,000 miles would prove difficult and it began considering storing heavy arms in the region in advance, permanently stationing American forces there also, as well as relying more on its local allies manpower. After the Israeli invasion of Lebanon in 1982, Washington's Middle East strategy became confused, particularly after Israel rejected the President's short-lived plan for settling the Palestinian question. The Reagan Administration, like most of its predecessors since 1945, split publicly on which Middle East nation to support, and Haig's endorsement of Israel was one critical factor in his being pushed aside for George Shultz. That American-supplied arms to Israel were being used for an aggression the United States strongly condemned clearly illustrated the problem of military aid to nations at war with neighbors. Meanwhile, by the spring of 1983 the Pentagon was looking forward to 1986 as the year it would have its RDF in the Gulf ready to fight, although against whom and with whose assistance remained obscure.
It did not take the Reagan Administration long to realize that the complexities of the world made its RDF in the Gulf appear a bit Global political events were not evolving to conform to the quixotic.
carefully planned advance locations of its arms or troops, much less to its elaborately calculated priorities, as indeed they had not since 1945. CIA efforts in Central America had failed. Its growing efforts to destabilize Nicaragua as well as save the repressive right-wing El Salvador regime were still bearing little fruit, and its contemplated 1981 covert operation against Grenada had been stopped in the Senate. Yet Washington concluded in July 1983 that maintaining the chain of corrupt conservative governments in El Salvador, Guatemala, and Honduras now required eliminating the Sandinistas in Nicaragua. Not only were counterrevolutionary forces armed despite initial House votes against it, but American technicians began to provide key services for them, using CIA equipment. Most importantly, the United States in the summer of 1983 initiated a vast base complex in Honduras as periodic military maneuvers were inaugurated for an indefinite period and threatened a naval blockade of Nicaragua. The National Security Council on July 8 endorsed the domino theory for Central America, and several months later senior administration spokesmen made it plain that the overthrow of the Sandinistas was official policy. Yet the decisive inhibition to any single military action remained the basic dilemma also plaguing its general commitment to interventions everywhere in the world: the United States knew that it did not have either the political or military strength to fight successfully a protracted war in Central America, yet it had no assurance that once intervening it could avoid it. Sponsoring harassment from neighboring governments and various rightwing elements still seemed its only alternative, yet it, too, was not likely to succeed
Hubris and Dependency in a World of Upheaval
From the end of the Korean War to the end of the first Reagan Administration the Soviet-led world had in certain crucial regards become far weaker. The Sino-Soviet split moved from ideological differences to military confrontation, and within Eastern Europe the Hungarian, Czech, and Polish upheavals were neutralized only by force or threat of arms, while Rumania pursued an independent foreign policy. Failures of economic planning mired Soviet-bloc economies in domestic troubles, while in Afghanistan the Russians had committed themselves to a war that dragged on futilely. China, politically and economically unstable as well as ideologically demor alized, was pursuing a policy of military pressure on Vietnam after its terribly destructive invasion of it in January 1979.
Despite the profound turmoil within the Communist bloc, the United States was still far less able to control the remainder of the globe than it was in 1949, when it confronted a united enemy and was at the peak of its own hegemony over Europe, atomic arms, and the world economy. While its Communist enemies languished, thereby fulfilling one of the main American goals, United States power in the world declined even more quickly.
The United States in the mid-1980s stood alone among all nations in its readiness to intervene with its own overt and covert military power virtually everywhere in the world. Counting the number of American threats of military intervention since 1945, a 1978 Brookings Institution study itemized over 200 cases.10 But it was now increasingly clear that despite Washington's profound effect on the forces of change throughout the globe, the entire world was still changing and the United States had failed in the large majority of cases to control its direction. Nor had Moscow done any better, as movements from the Right to the Left exploited it for their own purposes. In a pluralistic world no nation could realistically aspire to lead or guide mankind's course, and the price of attempting to do so would increasingly become a loss of control over its own destiny.
Ironically, while Washington gained much from the problems within the Communist world it lost far more from the sheer magnitude and diversity of global pluralism. And because of Washington's desire to block the development of radical and nationalist states everywhere, the emergence of uncontrollable and unpredictable political and social dynamics integral to modern history increasingly defied it. Corrupt and self-serving economic and military elites in so many nations of the world alone guaranteed that movements would inevitably arise to resist the social systems such regimes fostered.
And the very nature of the social, demographic, and economic problems of vast areas demanded radical responses that only the Left could provide, making its leadership inevitable. The increasingly independent nature of that Left in most countries made it more rather than less dangerous to the United States, for both China and the Soviet Union had repeatedly shown that liberation movements heeding their advice were far less militant than those which did not.
Indeed, just as both world capitalism and Marxism-Leninism had become far more internally nuanced and diverse than any theorist would have conceived during the first half of this century, so too had Third World and even radical movements in industrial nations evolved in ways that seemed unimaginable. From ecologists and churches opposing the nuclear bomb in Western Europe, to Solidarity resisting the pro-Soviet state from a radical position in Poland, to militant Islam in Iran and peasant movements in Central America, the nature and origins of forces of change in the world no longer conformed to neat, simple models.
The Carter and Reagan Administrations never confronted the nature of this real world and its relevance to its far-flung objectives, nor did any great debates emerge among those who have responsibility for governing. The United States was now paying a growing price for its ideological underdevelopment as well as the fathomless hubris of inherited American values. By failing to define and lower its goals the successive Carter and Reagan Administrations only deepened America's postwar crisis.
The quickening integration of the world economy that occurred after 1970 was rooted in the earlier ambitions of an American-led world capitalism. Although creating vast profits for American business, the economic integration of world capitalism was now independent of any one nation's control. It had produced a structure of growth and prosperity vulnerable to debt defaults, currency fluctuations, and political upheavals that were hopelessly entangling and were by 1984 growing in intensity and perplexity. For what integration did not bring was economic or political stability. Nations such as Brazil, Mexico, and even Communist Poland found that an alliance of the International Monetary Fund and private bankers was telling them how to run their internal social systems-something that workers refused to accept voluntarily in any of those places. The economic fate of capitalism in the world, the United States included, was to some degree now bound up with political events in a relatively few poor but large countries, a situation which no one imagined possible when Hull first articulated his vision of a postwar world order.
And while the postwar search for equilibrium through nuclear and conventional arms was surely one of the ostensible justifications for the arms race after 1954, by the 1980s that race was more precarious than ever. The spread of nuclear weapons had shattered the Soviet and American monopolies, and apart from the increasing technological sophistication of their own arsenals, the expected pro alized, was pursuing a policy of military pressure on Vietnam after its terribly destructive invasion of it in January 1979.
Despite the profound turmoil within the Communist bloc, the United States was still far less able to control the remainder of the globe than it was in 1949, when it confronted a united enemy and was at the peak of its own hegemony over Europe, atomic arms, and the world economy. While its Communist enemies languished, thereby fulfilling one of the main American goals, United States power in the world declined even more quickly.
The United States in the mid-1980s stood alone among all nations in its readiness to intervene with its own overt and covert military power virtually everywhere in the world. Counting the number of American threats of military intervention since 1945, a 1978 Brookings Institution study itemized over 200 cases. 10 But it was now increasingly clear that despite Washington's profound effect on the forces of change throughout the globe, the entire world was still changing and the United States had failed in the large majority of cases to control its direction. Nor had Moscow done any better, as movements from the Right to the Left exploited it for their own purposes. In a pluralistic world no nation could realistically aspire to lead or guide mankind's course, and the price of attempting to do so would increasingly become a loss of control over its own destiny.
Ironically, while Washington gained much from the problems within the Communist world it lost far more from the sheer magnitude and diversity of global pluralism. And because of Washington's desire to block the development of radical and nationalist states everywhere, the emergence of uncontrollable and unpredictable political and social dynamics integral to modern history increasingly defied it. Corrupt and self-serving economic and military elites in so many nations of the world alone guaranteed that movements would inevitably arise to resist the social systems such regimes fostered.
And the very nature of the social, demographic, and economic problems of vast areas demanded radical responses that only the Left could provide, making its leadership inevitable. The increasingly independent nature of that Left in most countries made it more rather than less dangerous to the United States, for both China and
The only certainty about the future is change, and change produces economic and political instabilities. America's ambition to control and regulate change in the world, much less prevent it, is a formula for perpetual turbulence at home and violence abroad, for it is futile and has by the end of the twentieth century become the main source of instability and crises in the American experience. The causes and consequences of this monumental dilemma were fully evident by 1976, and experiences since then have only deepened and aggravated the trends that were quite obvious much earlier. Less clear was how long American society could afford the economic and military costs of its obsessions overseas, costs which even after Vietnam rose to unprecedented levels. Least certain of all was the role of the American people in seeking to reverse the crisis of their social order for better or worse, and it was this reaction, perhaps above all, that would determine their own fates as well as the destiny of much of mankind. Indeed, given the increasing risks of an already dangerous world drifting amidst ever more destructive weaponry, their response might also decide the ultimate nature of the modern historical experience.
About the Author
GABRIEL KOLKO is the author of The Roots of American Foreign Policy, The Politics of War, Railroads and Regulation, The Triumph of Conservatism. Wealth and Power in America, and, with Joyce Kolko, The Limits of Power. He received a doctorate from Harvard University and is currently professor of history at York University in Toronto. He is in the process of completing a book on the Vietnam War, which Pantheon will publish in 1986.