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The World The Dollar Built

( Originally Published 1952 )

The Leader of the World

`The problem of Russia is . . . a question of our own fitness to survive .. .

`The essential question is one which we should have to answer if there were not a communist alive. Can we make freedom and prosperity real in the present world?

`If we can, communism is no threat. If not, with or without communism, our own civilization would ultimately fail.'

Henry L. Stimson,

former U.S. Secretary of War September, 1947

HOW TO LIVE IN THE SAME WORLD WITH THE: AMERICAN giant has been one of our greatest problems ever since the war came to an end.

Americans, a mere six-and-a-half per cent of mankind, came to have virtually half of the world's economy within their borders. They harvested one-third the grain and half the cotton grown on earth, melted fifty-five per cent of the world's steel and other basic metals, pumped seventy per cent of its oil, used fifty per cent of its rubber, generated forty-five per cent of all mechanical energy, produced sixty per cent of the world's manufactured goods—and enjoyed forty-five per cent of the entire annual income of humanity.

At home, when the world awoke to its post-war 'normalcy', Americans owned close to half of the world's developed wealth.

Abroad, their private investments in the mines and oil wells, forests and plantations, factories and'power plants, shipping and railways of other countries—to say nothing of the debts foreign governments owed the United States—equalled the combined national wealth of fifteen member states of the United Nations, one-third of its entire initial number.

From her mere six per cent of the world's land, the United States spanned the globe with a vast network of airbases at the disposal of the world's largest long-range forces of bombing and transport planes, with a navy dwarfing the total of all other nations' fleets, and with strategic outposts for her great land forces—all of them backed by the largest armament potential on earth.

How other nations would make their way in that new world, develop, compete and live, how the Soviet challenge and the `backward' regions' quest for freedom and progress would be met, how safe the hard-won peace would be—all this would largely depend upon America. Not so much upon her mere intentions for a peaceful, progressive, cooperative world as upon the course her giant economy would take, upon the domestic and foreign policies it would impose on Washington, and the reactions those policies must evoke abroad.

Despite all the unexampled wealth and power of the United States, the leaders of American business faced the post-war world with a deep sense of insecurity, with the fear of being isolated. Many of them, as an article in the New York Times Magazine Section put it on November 10, 1946, actually considered themselves in the difficult position of the Soviet leaders nearly thirty years before—trying to maintain capitalism, as they were trying to maintain communism, in a single country'.

For the world was in the throes of social and economic change; and the American people themselves were anxious for reform of the economic order of the United States, in tune with this global trend.

Most nations were trying, or hoping, to turn away from private enterprise, toward some form of socialism—at the very time when American business needed more than ever free access to foreign outlets for its surplus goods and surplus capital; when the prosperity of America's own half of the world economy depended more than ever upon freedom of action in the other half; when it was clear that the established rules of the economic game of laissez faire could not long survive in America if they were abolished in most of the outside world.

In country after country, governments were taking trade away from merchants, plants from industrialists, railways and banks from financiers. In one way or another, they wanted to plan their nations' economic lives and do what private enterprise everywhere had failed to do: develop and use their maximum productive powers, eliminate the danger of depression and give their peoples full employment, steadily rising living standards and economic security. None of these governments wanted to shut off international commerce. But whatever their political hue, all were trying to soften the impact on their economies of the always unstable American giant, to direct their foreign trade according to domestic wants and plans, to decide how much and what and where and on which terms their nations were to buy and sell and barter, and to determine whether and on what conditions the capital investments and the private enterprise of foreign interests were to be admitted.

During the early post-war years it was not so much Soviet collectivism as the example of Britain's experiment in Labour Socialism that caused American business the great `misgivings about the future of the United States in a world of progressive statism', of which the Wall Street Journal wrote on December 20, 1946. For the new reform trend threatened to engulf other nations of great importance to American trade and investment. It might eventually bring together a group so great and mutually complementary that the result would be another powerful economic bloc—as resistant to the influence of America's own half of the world economy as the Communist bloc, and possibly on sufficiently good trading terms with the Soviet sphere to fence in the free enterprise of the United States even more. `Welfare-statism' on the British pattern, spokesmen of American business alleged, would actually be the `stalking horse of communism'.

Worst of all, a large part of the American people, dissatisfied with their share in the nation's bounty and always haunted by the fear of boom and bust, were hopefully watching the British experiment that promised an economic order free from depression and insecurity, to be achieved without the high price of revolution. If the Labour experiment succeeded, domestic pressure for its emulation in the United States might well become irresistible.

The Charter of the new United Nations listed among the prerequisites for peace `the promotion of the economic and social advance-Merit of all peoples . . . higher standards of living, full employment. . . Its ideology seemed to evolve more on the pattern of the `welfare-state' than on that of 'free enterprise'. It encouraged many Americans in the hope that their nation's new world leadership would aim at a `bigger, better, worldwide New Deal', at breaking down the resistance of vested interests to the kind of social and economic reform they wanted for themselves.

These were the reasons why American business leaders had to take the offensive against the trend of reform—to revive and strengthen the hold of free enterprise abroad and secure it at home.

By 1946, `distinguished leaders in America's international trade', according to the New York Times of November 17, frankly told the Thirty-third National Foreign Trade Council of the 'assumed responsibility by American businessmen and their Government to establish our free enterprise system in other nations of the world'. And Philip D. Reed, Chairman of the General Electric Company, made this typical statement at a meeting of business executives on January 14, 1947: 'If we fail to support in every way we can the principles of the American economic system throughout the world, then we shall be in very real danger of losing them at home as well as abroad.'

`To American experts, the time seems ripe now for wider acceptance of the American idea', the New York Times repeated on March 23, 1947. The problem . . . is to make our world leadership work so effectively that there will never be any doubt hereafter that democracy and free enterprise offer the best way of life for the common people of the world.'

Thus it became necessary to convince both the American people and the outside world that American free enterprise and democracy were indeed one; that, while admittedly 'private enterprise had failed abroad, even in its old home in England', the American economic system 'is something unique in the world', in the words of the New York Times of May 11, 1947; and that its historical record proved `the superiority of the dynamic quality of American free enterprise to other forms of private enterprise and to all forms of absolutism'.

While the test of America's post-war leadership was still in the making, Big Business took it upon itself to provide historic proof of the superior merits of American free enterprise. In countless 'public service' advertisements, commercial radio programmes, speeches and pamphlets, it popularized the story of the way America had come, of the manner in which free enterprise had enabled a mere six-and-a-half per cent of the world's people, the youngest of all great nations, to acquire as much wealth and productive power as all the other ninety-four per cent of mankind had amassed over the centuries.

As far as it goes, this story of American free enterprise is to a good part true, and it is great and fascinating.

All on their own, the American pioneers pushed the nation's frontiers over the virginal vastness of the continent. With their bare hands and simple tools they cleared prairies and forests, dried up swamps, and spread fertile acres over the wilderness. Directed by no other force or plan than the free and never-ending search of opportunity, they tamed and harnessed mighty rivers, opened deep veins of coal and ore, dotted the country with workshops that grew into mills and factories. Without help and guidance from government they drove across lowlands, mountains and deserts the trails that blazed the way for roads and railways; and over plains and hillsides, along the coasts and lakes and rivers they scattered settlements and anchorages that stretched out into towns and ports and became the bustling centres of a new era of material progress.

Different from other nations in the days of their historic chance--Spain, Portugal and Holland, Britain, France and Russia, Germany and Japan—the young United States hurt no other nation in her onward march, took no other people's territory, or very nearly so. It was true, the Yankee pioneers forced the native Red Indians to yield their hunting grounds, pushed back the Mexicans who settled on the lands they overran, and the armed might of the United States conquered from decadent Spain the colonies of Puerto Rico, Cuba and the Philippines. But American free enterprise always offered infinitely more to foreign peoples than it took from them. Decade after decade it welcomed millions of European immigrants into its new life of greater freedom and faster progress, true to the words on the Statue of Liberty in New York harbour: give me your tired, your poor your huddled masses yearning to breathe free—the wretched refuse of your teaming shore—send these, the homeless, tempest-tossed to me.

It was free enterprise—eager to get what benefits it could from government, but never relying on it to show the way, never allowing it to interfere with opportunity—that led America to wealth and power. It was free enterprise that even freed the slaves: its progress-inducing profit motive was the real driving force behind those who seemed to lead the fight for emancipation on moral grounds; for free enterprise, instead of slaves, needed free labour that could be hired and fired at will.

When four generations of old-timers and wave after wave of newcomers had done their pioneering and the twentieth century began, that trifling part of mankind who called themselves Americans owned one-seventh of the world's developed wealth and produced nearly one-third of its manufactured goods.

Different again from the conquering nations of old Europe—where even the influx of rich colonial tributes failed to cure poverty and prevent stagnation, where war after war was hatched and revolution brewed, where the people seemed to abandon their faith in opportunity and meekly sought what came to be called security—Americans pressed on with the peaceful march over their continent, reached further into its empty spaces, settled it closer, ploughed it wider, dug it deeper, first for coal and iron and copper and then for oil and other minerals. They built their cities higher and their factories larger, mastered ever new techniques, harnessed new means of mechanical power, and moved faster and faster from record to new record.

Again, America hurt virtually no foreign nation in her rise to greater wealth and power, conquered no foreign territory, and offered infinitely more to others than she took from them. When U.S. gunboats and Marines continued to intervene in some small, backward nations in Central America and laid hands on a narrow strip of land across the Isthmus, wasn't it to create for the world's commerce the marvel of the Panama Canal? When American dollar diplomacy extended the nation's sway deeper into South America, wasn't it to stimulate the productive forces of that sleeping continent? When America joined in the European war, didn't she save the victims of imperial Germany and the old world as a whole?—sending across the Atlantic her loan-financed guns, munitions and supplies and finally her fighting men; and after victory her food, clothing and medicines, machines and raw materials, to heal the wounds of the great struggle; and then, year after post-war year, her loans and supplies to rebuild the peace. Was it America's fault that Europe fell back into its rot of stagnation, apathy and strife, while in the United States free enterprise pushed on to new exploits?

In the late twenties, when the war-developed techniques of production had made the nation's dream ever bigger and better and more real, Americans held within their borders one-third of mankind's wealth and more than two-fifths of its industrial equipment.

Their achievements became the wonder of the world: the way they raised greater and greater harvests with less and less toil; the conveyor belt methods of mass production they used to speed up the output of their factories, making their average worker twice as productive as his best European colleague; the drive of their salesmanship and advertising, those screaming, powerful dynamos that drove their economy; the speed at which they outpaced old competitors in every field; the giant factories and skyscrapers they built, the millions of motor cars they crowded on their roads, the mechanical appliances they put into their homes, and the rising living standards more and more of them enjoyed. From all over the globe came economists and businessmen, politicians, engineers and labour leaders to study the great miracle of America's free enterprise.

It was true that then, after the record-of-all-record years of 1929, things changed almost overnight. The New Era of prosperity that was to last for ever came to a sudden halt. Many of the pioneers, instead of pushing farther across new frontiers of opportunity, turned into unemployed migrants, roaming in their battered automobiles over the crisis-ridden continent, in search of bare survival. These nomads of a mechanized age, whole families and sometimes whole communities, fled from hopelessly indebted farms, from homes that were foreclosed after their most cherished belongings had been carted off because they could not meet their instalment payments; from plants and mines and stores and offices which bankrupt or frightened owners were shutting down; from once busy industrial centres that suddenly became ghost towns through the lack of orders and employment. And very few still came from Europe, now that America herself had many millions of tired and poor, homeless and tempest-tossed, a great mass of wretched human refuse, on her own teeming shores.

But wasn't all this a mere accident, to a good part the consequence of the economic disorders in wayward Europe? Whatever the causes of the great American crisis, didn't it prove, rather than disprove, the resourcefulness of free enterprise? For, while the people suffered, business found fresh opportunities to overhaul and renew its equipment, to devise ever new methods of saving labour; so that this period of human tragedy was at the same time one of great technological progress.

Thus, the American economy could soon show the world again its unique capabilities. When the victims of aggression in Europe and Asia needed the products of its factories and farms, in the late thirties, the nation was ready for prodigious output. When America herself was attacked by Japan and the great world war against fascism rose to its climax, the engines of industry hummed faster than ever before, the tractors pulled ploughs and reapers farther across old and new acres, mines and oil wells yielded undreamed-of bounty, huge new factories shot up as quickly as little workshops had once mushroomed in the pioneer days, and the miracle of America, the wonder of the world, came back to throbbing life after ten years of stagnation and despair.

Hands, brains, machines and capital that had so long been in reserve were used without restraint. And while one-quarter of all men were in the fighting forces—as many as had formerly been unemployed—the others, reinforced by more of the women and the very young and old, raised the nation's productive capacity to yet another record.

In four years they made its permanent equipment grow by fully one-half.

With all the tools, the plants, the fields, the mines, the furnaces and shipyards that had been idle, and with all those they created anew in wartime, Americans quickly doubled the nation's total output.

They pumped to the corners of the world an ever swelling stream of guns, munitions, planes, tanks, bulldozers, ships and machines, food, raw materials, clothing, medicines and whatever else was needed to support their growing armies, navies and air fleets, and to help their war-ravaged allies in the common struggle.

Yet even while this vast flood of products flowed abroad, Americans were able to retain more for their own needs than they had ever consumed in the best years of peace. Living standards never were so high for so many in the United States as during the second world war.

The nation's income now was ten or twelve times as large per head of its people as that of the rest of the world.

Measured in mere quantity, the 'average American' ate nearly twice as much in time of war as the average non-American did in time of peace; and his was infinitely more nutritious, richer food. He could afford to buy four, five or six times as much clothing and footwear, uncounted times as many luxuries. Yet he saved more money than ever in the past, saved more in fact than the average citizen of most other nations earned for his meagre livelihood. Americans now had 5o per cent of the world's telephones and radios, 75 per cent of the bathtubs, Sr per cent of the automobiles, 83 per cent of the civilian aircraft, 85 per cent of the refrigerators, washing machines and other mechanical household aids.

Nearly six-sevenths of all their work, measured in terms of the energy required, was now done for Americans by power-driven machines, their mute mechanical slaves; while in the outside world machinery took barely one-tenth of all labour off the back of the average worker in agriculture, industry and transport—so that Americans, with all their incomparable productivity, had the shortest work week in the world.

Wasn't all this the final proof of the superiority of the American way of economic life, of free enterprise? Wasn't it understandable that America should try to press her system on a needy world of which she now was the leader?

But there was another side to this brilliant record.

It proved the uniqueness not of the character of American free enterprise but of its opportunities.

Singular blessings of geography and history were decisive factors in the nation's spectacular rise, too often overlooked or minimized.

The virginal vastness of the rich continent, ready for development against no odds of climate or pre-shaped social patterns, such as Asia and Europe inherited from their medieval past, gave American private enterprise possibilities enjoyed by no other major nation.

America's remoteness from the world's great military powers was another unique advantage to her soaring economic growth.

Decade after decade, the population of Europe grew at a much faster pace than did the need for fresh labour forces in the old world's less fortunate, less quickly developing economies. Tens of millions of emigrants were thus set free when the empty United States needed tide after tide of cheap workers from abroad, to create new farms and mines, workshops and factories. Those immigrants, generation after generation, brought with them the precious skills of Europe, the special spark and strength of those who rebelled against misery,. intolerance and stagnation at home and did not fear to risk their all in a new life abroad. Europe, bearing the cost of raising them, thus made a gift worth uncounted billions of dollars to the United States.

Capital, too, was abundant and cheap in the old world when large foreign investment funds were the second prerequisite for American development. Europe's surplus capital was as anxious to seek its chance abroad as Europe's surplus people. It did not care what kind of social system it helped, so long as it was offered reasonable gain: just as it aided the democratic United States, Australia, and Canada, it flowed into authoritarian Czarist Russia, colonial India, semi-colonial China, and the ever-rebelling republics of Latin America.

European investments did infinitely more for the United States and its free enterprise than American capital, to this day, has done for the development of any other nation. By 1900, Europe's $3 1/2 billion longterm capital investments in the United States equalled the value of all equipment in her manufacturing industries and on all her farms. The $8 1/2 billion Europe held in the country in 1929 were still half as much as the vastly increased value of all the machinery, tools and equipment in America's entire industrial plant. Even in 1945, the $9 billion of long-term foreign funds at work in the American economy exceeded the assessed value of all land and buildings on Manhattan Island, the core of New York City, the richest metropolis on earth.

Apart from Europe's men and money, billions worth of European equipment, shipped to the United States decade after decade, helped decisively to build her industries and mines and railways, shipping and trade, technology and science. Again, it was no special merit of her free enterprise that enabled America to import this tremendous volume of European machinery, tools and instruments without ever being hindered by any shortage of sterling, marks or francs—in the way European nations have been handicapped by their paralysing dollar shortage since the economic relationship between the old and new worlds was reversed. For another lucky accident of history so willed it that the United States, primarily a country of vast natural resources, grew up as the complementary counterpart rather than the competitor of industrial Europe. America's surpluses of food, cotton and tobacco, and then of metals, oil and other raw materials, were precisely what Europe lacked; so that America was always able to exchange her products for as much European industrial equipment as she wanted. Even from 1919 to 1949 America continued to require and buy on the average $450 million worth of high-quality European machinery a year—far more than the United States, by now herself the greatest engineering nation, exported to all the world's 'backward regions'.

With Europe's men and skills, capital and machinery to stake her growth, America also received whatever she needed of the fruits of Europe's science, of the old world's ever new inventions and technological improvements. For—no matter how much Europe's scientific and technical `know-how' enabled America to increase her rival strength and her power of commercial competition from behind the high customs walls which 'free enterprise' forced the state to build up for its protection—the rest of the world still was essentially a free-trade world, whose governments did not restrain their citizens from letting potential economic, political or even military rivals buy whatever blueprints, licences and patents they desired.

Up to 1900, some 45,000 priceless foreign patents were brought to the United States, and during the following three decades another 120,000. Even in the fifteen years until 1945 every eighth or ninth patent registered in America was of foreign origin, 85,000 altogether.

Economic crisis, fascism and war sent large numbers of Europe's best research workers to America. And immediately after the second world war, `1,500 German scientists and technicians, representing the cream of Germany's technological brains, have been quietly streaming into the United States . .. to help exploit for American industry the processes, inventions and manufacturing secrets discovered by allied agents after the German surrender', the New York Herald Tribune reported on December 18, 1945.

The climactic technological achievement that gave America her present might owes its very origins to foreign aid. 'In the field of nuclear science and atomic power, out of, say, a dozen of the fundamental ideas, some nine or ten have come from Europe', Dr Karl T. Compton, one of America's leading scientists, said in a speech on December 9, 1947.

Another unique blessing for which free enterprise can claim no credit: its home market of continental size, free from national borders and customs walls, has enabled American industry to develop the modern techniques of mass production of which most other countries could but dream.

But all these beneficial accidents of geography and history were probably eclipsed in their importance by the great saving windfalls which twice came to the rescue of American free enterprise when it ran into serious trouble, twice gave it the stimulus to further growth which it was no longer able to generate on its own. Those saving windfalls were the two great world wars.

During the years before the first war, stagnation reigned ominously in the United States. The economic order, after many lesser shocks, was approaching its first fateful crisis. The normal annual rise of about 2 1/2 per cent in the per capita purchasing power of the nation's total income—the very mark and means of earlier success—came to a halt. From 1901 to 191 5 the people's power to buy their own products fell instead of rising. While both population and productive capacity continued to grow, the total number of workers in the manufacturing industries actually decreased. Surpluses of goods and labour in the midst of persistent want, dire scarcity side by side with potential plenty, threatened America with economic and social crisis. Free enterprise was in no better position to solve these problems of fully developed capitalism in the lucky United States than it was in the older, less privileged nations.

Perhaps our going to war is the only way in which our present prominent trade position can be maintained and a panic averted', wrote the U.S. ambassador in London, Walter Hines Page, in x917, while America was still outside the European conflict.

America's going to war soon brought her industries and farms that flood of orders, that justification for building new plant and applying new technology, that mighty impulse to fresh expansion of economic activity which her peace economy had no longer been able to unleash. Not only was a panic prevented, but a great boom was set off and the war, for the time being, saved the economic order of free enterprise. During the average ten years after the war, the per capita income in terms of actual purchasing power was 9 per cent above that of the ten pre-war years. Employment reached unprecedented heights, wartime-swollen exports stayed large, supported by big American loans to allies and ex-enemies, and by 1929 the output and sales of industry were twice as large as they had been in 1914.

Yet, even during that great boom, millions of Americans still found no jobs, the farmers failed completely to benefit from prosperity, and fully one-fifth of the nation's productive capacity remained idle.*

Eventually, the stimuli of war expansion and war-accumulated savings were spent. The swollen speculative credit structure collapsed. The panic struck. It threw the nation back and paralysed the system of 'free enterprise' as no social order in all history had ever been paralysed without defeat in war or pestilence.

For ten long years there was depression in the United States. It responded little to the counter-measures of the New Deal. For the New Deal's state controls over business went no further than necessary to help private enterprise survive to a new sunny day. They restricted this or that right of business but never touched its basic power over the nation's economic fate. They redistributed the national income only superficially but did not mean to bring about a thorough reform of the economic system. The nation's income fell, production dropped, and unemployment rose to proportions the modern world had never seen.

Those were the tragic years of which seven had already passed and three more were still in store when President Roosevelt said in 1937: `I see a great nation, upon a great continent, blessed with a great " the economic system works very imperfectly at best. Figured on a conservative basis . . . we estimate that the economic machine operates at the best around 8o% of capacity and at the worst at little more than 50%' (Brookings Institution, Income and Economic Progress), wealth of natural resources . . . which can demonstrate that, under democratic methods of government, national wealth can be translated into a spreading volume of human comforts hitherto unknown. . . . In this nation I see tens of millions of its citizens ... who at this very moment are denied the greater part of what the lowest standards of today call the necessities of life. I see millions denied education, recreation and the opportunity to better their lot and the lot of their children. I see millions lacking the means to buy the products of farm and factory and by their poverty denying work and productiveness to many other millions. I see one-third of a nation ill-housed, ill-clad, ill-nourished.'

Free enterprise knew no way out. The nation fell behind in a world in which the new-founded Soviet Union, unaffected by the general crisis, was testing a new economic system with its Five Year Plans. 'It is significant that the relative position of the United Stares gradually deterioriated in the thirties', stated 'one of the greatest economists of the country' in a speech which Representative George B. Schwabe read into the Congressional Record on December 4, 1947, during the first debate on the Marshall Plan which was to help forestall a repetition of that sad experience.

The new wonder of the world in the thirties was the unprecedented depth of America's depression, the cruel mass suffering it caused in the richest of all countries, the tragic frustration that took hold of the nation and its powerful business leaders—until war came again to the rescue of free enterprise and set in motion an even mightier cycle of revival than the first war had done, a cycle of bounteous orders, fresh justifications for industrial expansion, fuller employment, and rising popular purchasing power.

When the second world war ended and reconversion to peace-time needs was accomplished, America's industrial production towered 8o per cent over its pre-war level, and employment was up 54 per cent. The national income per head of the greatly increased population, in terms of goods, was 57 per cent above that of the last pre-war years. Corporation profits, swollen nearly 400 per cent in their inflated dollar totals, were still two-and-a-half times as large in comparable 'real' value as they had been during the last pre-war years. And war-accumulated savings of unexampled size again promised some continuation of the boom into the years of peace.

Once more, war saved free enterprise from terrible dilemma. And once more, in helping her allies win the common struggle, America remained untouched by bomb and shell, unravaged by invaders, suffered neither death nor violation of civilians, no serious hardships, no close-to-home experience of the tragic side of war.

'It could be said of the nation as a whole that we lost some blood, shed a few tears, and got up a healthy sweat', Edwin G. Nourse, chairman of the President's Council of Economic Advisers (U.S. News of December o, 1948), summarized that second saving windfall which turned deep depression into a great boom.

Instead of barely surviving with her equipment worn out and damaged, as Britain, the Soviet Union and other allies did, America emerged from the war with her national wealth actually doubled.

Instead of all but exhausting her investment wealth abroad, as others did, the United States now also possessed greater foreign investments than before. While the allied nations were half starved, worse-sheltered and worse-clad, more denuded of the barest comforts, nearer physical and mental exhaustion than in modern memory, Americans, during the war, were better fed, more prosperous and economically more secure than they had ever been.

The uneven balance of the allies' gains and losses in two victories must be faced; for it is at the very basis of much of the world's present problems. It does not mean taking away from the glory of her soldiers and production workers nor ignoring the great measure of her contributions to victory if one recognizes the fact that the United States was fortunate enough to make enormous economic gains during the two great wars which to her allies meant only loss and destruction.

The first world war cost America 130,000 of her sons who were by contrast, Britain lost at least one-quarter of her total national wealth due to the second world war. At 1945 prices, her pre-war national wealth was estimated at about £30,000,000,000. Britain's direct war losses alone, according to Statistical Materials Presented During The Washington (loan) Negotiations (cmd. 6707, H.M. Stationery Office, 1945) totalled £7,248,000,000—i .e., £1,450,000,000 on destruction and damage to property; £700,000,000 on shipping losses; £900,000,000 on depreciation and obsolescence not made good during the war; £118,000,000 on sales and repatriation of overseas investments; £2,928,000,000 on fresh foreign debts in the form of increase in 'sterling balances' and overseas loans; and £152,000,000 on depletion of gold and U.S. dollar reserves.

Even though one cannot measure human tragedy statistically, add up the sum totals of heroism and anguish and thus compare one nation's contribution with another's, it is a fact that the United States suffered no more than two-and-a-half per cent of the allies' combined casualties in the first world war, and one-and-one-tenth per cent of their human losses in the second world war. America's allies had to sacrifice thirty-two times as large a part of their people in these two wars-69,000 out of each million, not counting China's losses, against 2,15o out of each million in the United States. The American losses in the second world war were about as many, according to official statistics, as the number of Americans killed at home during the same period by ordinary accidents.

America spent for allied victory $26 billion by 1918 and $330 billion by 1945: about one-eighth of all that the first war cost the allies in expenditures and losses from destruction; and not much less than one-third of their combined bill of war the second time.

But it is just as true that the actual cost of the second world war, at about $2,430 for the average American, was barely higher than that of the much poorer average Briton, whose share was $2,3 5o—quite apart from what he still had, and has, to spend on repairing the damage and the wear and tear of the last war. The average Soviet citizen, considerably poorer still, paid $2,160 for actual war costs, in addition to suffering a loss of $776 per capita from the destruction of a large part of his country. Even in terms of comparative financial costs, therefore, the United States was fortunate enough to win victory at infinitely less sacrifice than did her allies.

Still another factor in the economic record of America is too often overlooked: no matter how honestly and fervently the nation wanted peace and progress for the world, its economic order helped to intensify the international drift to crisis and military conflict between the first and second world wars. -

It makes no difference whether or not a few in the United States contributed wittingly and willingly to these developments. The fact is that America was forced, by the rules under which her free enterprise system operates, to deepen misery and foster war abroad.

Firstly, America could not help 'exporting' unemployment and economic crisis to other nations, in her attempt to reduce them at home. How this was done was well described years later, on February 15, 1947, in a speech by Leon H. Keyserling, then Vice-chairman of the President's Council of Economic Advisers: 'Unemployment in America results in the main from a recurrent phenomenon in our economy—from the fact that our production has tended to exceed the absorptive capacity of our home markets to buy the full supply of goods at current prices. In the past, when this tendency has commenced to appear, we have endeavoured to dispose of our surplus of goods abroad. . . . The very conditions of unemployment at home which made us want to dump goods abroad, made us correspondingly fearful of allowing the entry of goods into this country. The consequence of this one-way flow of goods was that it contributed to the demoralization of the economies of other countries. In effect, we were trying to export unemployment.'

Secondly, American free enterprise enabled the future enemies of world peace to prepare for fresh conquest—more easily and effectively than they could have done without large-scale assistance from banks and industries in the United States. Germany was given huge loans (mainly, as it turned out, at the sacrifice of small American savers) and a vast volume of modern equipment and strategic raw materials, all of which contributed decisively to her rearmament for fresh aggression. Japan, even while fighting China, obtained from America year' after year the oil, machine tools, engines, steel scrap, chemicals and patent licences she needed 'to build up her fighting forces for still further conquest.

For, under the existing economic order American firms could not risk losing business that ran into billions of dollars—no matter how dangerous the consequences of helping potential aggressors might be to the peace of the world. Also, Germany and Japan were the Soviet Union's closest enemies, and a good many American industrialists were not averse to the line of thought which was later so frankly expressed by Senator Harry S. Truman, of Missouri: `If we see that Germany is winning we ought to help Russia', the New York Times quoted him on June 24, 1941, 'and if Russia is winning we ought to help Germany, and that way let them kill as many as possible.'

This was the chain of special circumstances and lucky accidents of history, of saving windfalls in the shape of war and benefits derived from an attitude toward the world which—as Roosevelt put it on January 6, 1945—'preferred international anarchy to international co-operation with nations which did not see and think exactly as we did'.

The American economic order could not fairly claim that its superior merits were responsible for the spectacular rise of the United States that resulted from all these factors.

Against this background, American free enterprise could claim still less to be exportable as the image in which other nations should remould their economies.

This record was in fact a serious warning to Americans: no longer to risk having to be rescued from stagnation, depression and crisis by the stimulus of war; never again to allow situations to arise in which `perhaps our going to war is the only way in which our present prominent trade position can be maintained and a panic averted'; but so to adapt their economic order to their own needs and their increased responsibilities toward mankind that they could safely thrive on the peace and progress of the world which they desire.

America must change her economic order if the world is to live in peace.

To do her share in the prevention of another war, America must pay the price of peace—by putting her own house in order, changing the haphazard, crisis-breeding ways of her economic life, by basing prosperity on the fulfilment of her people's right to economic security.

This was Roosevelt's warning early in 1944, when he told Congress : 'It is our duty now to lay plans and determine the strategy for winning of a lasting peace and the establishment of an American standard of living higher than ever before known.'

Prosperity for a mere parr of the people would not be sufficient. `We cannot be content', he continued his famous 'Economic Bill of Rights' message, 'no matter how high the general standard of living may be, if some fraction of our people—whether it be one-third or one-fifth or one-tenth—is ill-fed, ill-clothed, ill-housed and insecure.' For the nation's war-enlarged productive machine was now of such magnitude that it must either find steady employment in providing full and safe prosperity for everyone, allowing all to work and enjoy to the full the fruits of their labour, or that the American economy must once again drift toward crisis and depression, distort the nation's domestic and foreign policies and endanger the peace and progress of the world.

For the achievement of this two-fold aim of prosperity and peace Americans could no longer rely solely on their political democracy, their rights to free elections, free speech, a free press and free assembly. They had to make democracy complete and real by adding modern economic rights to their traditional political liberties. 'As our nation has grown in size and stature,' Roosevelt said, `as our industrial economy expanded—these political rights proved inadequate to assure us equality in the pursuit of happiness. We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. "Necessitous men are not free men."

The American democracy on which the peace of the world depends must therefore first adopt a 'second Bill of Rights under which a new basis of security and prosperity can be established for all—regardless of station, race or creed . . . the right to a useful and remunerative job . . . the right to earn enough to provide adequate food and clothing and recreation . . . the right of every farmer to raise and sell his products at a return which will give him and his family a decent living . . . the right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies . . . the right of every family to a decent home .. . the right to adequate medical care and the opportunity to achieve and enjoy good health . . . the right to adequate protection from the economic fears of old age, sickness, accident and unemployment .. . the right to a good education.'

Since `all of these rights spell security', Roosevelt carried on, putting aside the illusion of safety through military power, 'America's own rightful place in the world depends in large part upon how fully these and similar rights have been carried into practice for our citizens'.

The world would not be safe if the social order of the most powerful nation continued to leave its citizens without full economic rights and the basic reassurance of economic security.

Tor unless there is security here at home', Roosevelt concluded his prophetic warning, 'there cannot be lasting peace in the world.'

Were these only the facile promises of a political master tactician, trying to fire the people's final war effort and to soothe the allies' fears of the post-war trends of the American free enterprise economy? Or did they express the deep-felt hopes of an intuitive statesman who, had he lived, would have fought to make them the basis of his country's domestic and foreign policies?

In either case, Roosevelt must have realized that much of the possibility of post-war economic reform had already been sacrificed.

For, ever since the approach of the second world war, the Government had helped Big Business, the opponent of all economic reform, to consolidate its political power—believing that, in the words of the Temporary National Economic Committee of the U.S. Senate, 'the reactionary opposition could only be carried along by concessions that strengthened its position for the post-war period'.

The World The Dollar Built:
The World The Dollar Built

Corporate Power

The Captive Audience

Business Of Government

The Dangerous Drift

America Needs Foreign Aid

The Urge To Arm

Cold War At Home

Too Little - But Too Much

Income Pyramid

Read More Articles About: The World The Dollar Built

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