This is from Today In History from the History Channel. This is purely informational - not the required blog.
At the 11th hour on the 11th day of the 11th month of 1918, the Great War ends. At 5 a.m. that morning, Germany, bereft of manpower and supplies and faced with imminent invasion, signed an armistice agreement with the Allies in a railroad car outside Compiégne, France. The First World War left nine million soldiers dead and 21 million wounded, with Germany, Russia, Austria-Hungary, France, and Great Britain each losing nearly a million or more lives. In addition, at least five million civilians died from disease, starvation, or exposure.
On June 28, 1914, in an event that is widely regarded as sparking the outbreak of World War I, Archduke Franz Ferdinand, heir to the Austro-Hungarian empire, was shot to death with his wife by Bosnian Serb Gavrilo Princip in Sarajevo, Bosnia. Ferdinand had been inspecting his uncle's imperial armed forces in Bosnia and Herzegovina, despite the threat of Serbian nationalists who wanted these Austro-Hungarian possessions to join newly independent Serbia. Austria-Hungary blamed the Serbian government for the attack and hoped to use the incident as justification for settling the problem of Slavic nationalism once and for all. However, as Russia supported Serbia, an Austro-Hungarian declaration of war was delayed until its leaders received assurances from German leader Kaiser Wilhelm II that Germany would support their cause in the event of a Russian intervention.
On July 28, Austria-Hungary declared war on Serbia, and the tenuous peace between Europe's great powers collapsed. On July 29, Austro-Hungarian forces began to shell the Serbian capital, Belgrade, and Russia, Serbia's ally, ordered a troop mobilization against Austria-Hungary. France, allied with Russia, began to mobilize on August 1. France and Germany declared war against each other on August 3. After crossing through neutral Luxembourg, the German army invaded Belgium on the night of August 3-4, prompting Great Britain, Belgium's ally, to declare war against Germany.
For the most part, the people of Europe greeted the outbreak of war with jubilation. Most patriotically assumed that their country would be victorious within months. Of the initial belligerents, Germany was most prepared for the outbreak of hostilities, and its military leaders had formatted a sophisticated military strategy known as the "Schlieffen Plan," which envisioned the conquest of France through a great arcing offensive through Belgium and into northern France. Russia, slow to mobilize, was to be kept occupied by Austro-Hungarian forces while Germany attacked France.
The Schlieffen Plan was nearly successful, but in early September the French rallied and halted the German advance at the bloody Battle of the Marne near Paris. By the end of 1914, well over a million soldiers of various nationalities had been killed on the battlefields of Europe, and neither for the Allies nor the Central Powers was a final victory in sight. On the western front-the battle line that stretched across northern France and Belgium-the combatants settled down in the trenches for a terrible war of attrition.
In 1915, the Allies attempted to break the stalemate with an amphibious invasion of Turkey, which had joined the Central Powers in October 1914, but after heavy bloodshed the Allies were forced to retreat in early 1916. The year 1916 saw great offensives by Germany and Britain along the western front, but neither side accomplished a decisive victory. In the east, Germany was more successful, and the disorganized Russian army suffered terrible losses, spurring the outbreak of the Russian Revolution in 1917. By the end of 1917, the Bolsheviks had seized power in Russia and immediately set about negotiating peace with Germany. In 1918, the infusion of American troops and resources into the western front finally tipped the scale in the Allies' favor. Germany signed an armistice agreement with the Allies on November 11, 1918.
World War I was known as the "war to end all wars" because of the great slaughter and destruction it caused. Unfortunately, the peace treaty that officially ended the conflict-the Treaty of Versailles of 1919-forced punitive terms on Germany that destabilized Europe and laid the groundwork for World War II.
Thursday, November 11, 2010
Role of the fall of the British Empire in today’s world
After reading the below article and doing research, discuss what role the fall of the British Empire had on the issues in the Afghanistan, Pakistan and India region today. Specifically address decisions or actions taken during and after the British Empire and their direct effect on current events within the region.
Pakistan Replays the 'Great Game'
Mr. Husain Haqqani
Far Eastern Economic Review, October, 2005
http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=17642
For over two years, Abdul Latif Hakimi regularly telephoned Pakistani and Western reporters and described himself as the spokesman for Afghanistan’s Taliban. He claimed responsibility on behalf of the Taliban for several terrorist attacks. In June, when a MH-47 helicopter was shot down during an antiguerrilla mission in Afghanistan’s Kunar province bordering Pakistan, killing all 16 U.S. troops on board, Hakimi reported the incident to the media before U.S. or Afghan officials. Hakimi’s claims were often exaggerated or even totally fabricated. But no one doubted that he was based in Pakistan and that he spoke on behalf of the Taliban.
Hakimi’s telephone press conferences and interviews, conducted on satellite and cell phones, offered an embellished version of an emerging ground reality. After being toppled from power in the aftermath of 9/11, the Taliban have reconstituted themselves in part of the Afghan countryside as an insurgent force, especially in provinces dominated by the Pashtun ethnic group along the Pakistan-Afghan border.
Since the beginning of 2005, casualties in Afghanistan have been rising. Some 84 American soldiers and 1,400 Afghans have been killed this year, more than any year since the arrival of U.S. forces in 2001. The Taliban insurgency is weak and not yet as threatening as the challenge in Iraq. But Afghan insurgents are clearly getting arms, money and training. Through propaganda of the type waged by Hakimi, the Taliban are also recruiting new members.
When Pakistani authorities announced on Oct. 4 that Hakimi had been arrested in the southwestern city of Quetta, just across the border from the Taliban’s traditional support base of Kandahar, officials in Afghanistan were not impressed. Why had it taken the Pakistanis so long to silence Hakimi when he operated freely in Pakistan for over two years, they asked. What about other Taliban leaders who roam the streets of Quetta and other Pakistani cities and towns quite openly?
Pakistan’s decision to arrest the Taliban spokesman was attributed to relentless U.S. pressure. Days before Hakimi’s arrest, U.S. officials reportedly raised the issue of the Taliban operating freely in Pakistan during meetings with President Pervez Musharraf in New York.
U.S. officials are usually restrained in publicly criticizing Pakistan, a key U.S. ally in the war against terrorism, for fear of embarrassing the country’s pro-U.S. military strong man, Gen. Musharraf. But last summer U.S. ambassador Zalmay Khalilzad questioned Pakistan’s commitment to eliminating the Taliban in an interview just before leaving Afghanistan for his new assignment in Iraq. Ambassador Khalilzad wondered why Pakistan’s security services could not find Hakimi and another deputy to Taliban leader Mullah Omar, Akhtar Usmani, when they were readily available to the media and occasionally gave interviews to Pakistani television channels.
U.S. and Afghan officials realize that it will be difficult to bring lasting peace to Afghanistan if the Taliban and other enemies of President Hamid Karzai’s government continue to find sanctuary in Pakistan. Notwithstanding the high profile arrest of the Taliban spokesman, there is no evidence that Pakistan is about to sever all links with the Taliban or to give up its dreams of a client state in Afghanistan.
During the war against the Soviets, Pakistan’s military leader General Zia ul-Haq had adopted a policy that would bleed the Soviets without goading then into direct confrontation with Pakistan. Pakistani intelligence officers used the metaphor “the water must not get too hot” to describe that policy.
It seems that Pakistan is pursuing a similar policy in relation to Afghanistan today. By allowing the Taliban to regroup and mount insurgent attacks across the border, Pakistan’s hopes to make it clear to Afghan leaders such as Mr. Karzai that they cannot stabilize their country without Pakistan’s help. At the same time, Pakistan does not want the situation to reach the point of inviting U.S. reprisals.
Ties between Pakistan and the Taliban date back to the founding of the movement in 1994. Then, the Taliban—Pashtun students of madrassas, or Islamic seminaries—rose to end the bitter civil war that had ravaged Afghanistan for almost two years after the collapse of a pro-Communist government. Pakistan had fueled the civil war as well, trying to promote the cause of its client Islamist leaders, especially Gulbeddin Hekmatyar, who earned notoriety by raining rockets on Kabul in a bid to wrest control of Afghanistan’s capital.
Pakistan’s role, with U.S. help, as the staging ground for the guerrilla war against the Soviet Union in Afghanistan between 1979 and 1988 is widely known. What is less well known is Pakistan’s historic concern with extending its influence into Afghanistan long before the arrival of Soviet troops in Afghanistan. Pakistan’s attitude toward Afghanistan was formed largely by historic developments of the 19th century when Britain and Russia competed for influence in Central Asia in the “Great Game” of espionage and proxy wars.
Concerns about security against Russia pushed the frontier of British India westward and the British lost precious lives in their effort to directly control Afghanistan. Recognizing Afghanistan as a buffer between the British and Russian empires saved both from having to confront each other militarily. By accepting a neutral and independent Afghan Kingdom the British sought to pass on the burden of subduing some of the tribes the imperialists considered lawless to a local monarch, albeit with British economic and military assistance.
Afghanistan’s frontier with British India was drawn by a British civil servant, Sir Mortimer Durand, in 1893 and agreed upon by representatives of both governments. The border, named the Durand Line, intentionally divided Pashtun tribes living in the area, to prevent them from becoming a nuisance for the Raj. On their side of the frontier, the British created autonomous tribal agencies, controlled by British political officers with the help of tribal chieftains whose loyalty was ensured through regular subsidies. The British used force to put down sporadic uprisings in the tribal areas but generally left the tribes alone in return for stability along the frontier.
Adjacent to the autonomous tribal agencies were the “settled” Pashtuns living in towns and villages under direct British rule. Here, too, the Pashtuns were divided between the Northwest Frontier province and Baluchistan. Although Muslim, the Pashtuns generally sided with the cause of anti-British Indian nationalism and were late, and reluctant, in embracing the Muslim separatism of the All India Muslim League’s campaign for Pakistan. When the majority of British India’s Muslims voted for the creation of Pakistan, the Pashtuns elected leaders who emphasized ethnic pride over a religious national identity.
After Pakistan’s independence from Britain in 1947, Pakistani leaders assumed that Pakistan would inherit the functions of India’s British government in guiding Afghan policy. But soon after Pakistan’s independence, Afghanistan voted against Pakistan’s admission to the United Nations, arguing that Afghanistan’s treaties with British India relating to Afghan borders were no longer valid because a new country was being created where none existed at the time of these treaties. Afghanistan demanded the creation of a Pashtun state, “Pashtunistan,” which would link the Pashtun tribes living in Afghanistan with those in the nwfp and Baluchistan. There were also ambiguous demands for a Baluch state “linking Baluch areas in Pakistan and Iran with a small strip of adjacent Baluch territory in Afghanistan.”
From Pakistan’s perspective, this amounted to demanding the greater part of Pakistan’s territory and was clearly unacceptable. The Afghan demand failed to generate international backing, and Afghanistan did not have the military means to force Pakistan’s hand.
Although India publicly did not support the Afghan claim, Pakistan’s early leaders could not separate the Afghan questioning of Pakistani borders from their perception of an Indian grand design against Pakistan. They wanted to limit Indian influence in Afghanistan to prevent Pakistan from being “crushed by a sort of pincer movement” involving Afghanistan stirring the ethnic cauldron in Pakistan and India stepping in to undo the partition of the subcontinent. Pakistan’s response was a forward policy of encouraging Afghan Islamists that would subordinate ethnic nationalism to Islamic religious sentiment.
Pakistan’s concern about the lack of depth in Pakistan’s land defenses led to the Pakistani generals’ strategic belief about the fusion of the defense of Afghanistan and Pakistan. Pakistan’s complicated role in Afghanistan beginning well before the Soviet invasion of 1979 and through the rise and fall of the Taliban can best be understood in light of this desire.
Pakistan’s position as the principal foreign player in Afghanistan following the Soviet withdrawal changed with the arrival of American and NATO forces in the aftermath of Al-Qaeda’s terrorist attacks in the United States on Sept. 11, 2001. Pakistan has recognized that changed situation, deferring a great deal to American concerns. But it has clearly not abandoned its long-term national objective of ensuring that the government in Kabul is subordinate to Pakistan’s regional agenda.
Pakistan provided crucial logistics and vital intelligence support when the U.S. went to war to topple the Taliban from power. Initially, Pakistan had hoped for a role for some Pakistani clients in the new government in Kabul and had floated the idea of “moderate Taliban” joining the future Afghan government. Although Taliban leaders were completely excluded from the interim government formed in 2001, they have been allowed by President Karzai to participate in parliamentary elections upon renouncing violence.
But Mr. Karzai and other Afghan nationalists remain unwilling to accept Pakistan’s vision of Afghanistan as a subordinate state. Afghanistan maintains close ties with India and expects to pursue an independent foreign policy. Although Pakistan is engaged in a peace process with India, its generals remain fearful of Indian domination. India’s size coupled with its economic and military might make its ascendancy inevitable, but that does not deter Pakistan from pursuing options of low intensity and subconventional warfare for greater regional influence. The decision to continue to back or tolerate the Taliban is part of Pakistan’s grand design for positioning itself as a major player in a contemporary version of the Great Game.
Pakistan will crack down on the Taliban, and give up the option of supporting Islamist insurgents in Indian-controlled Kashmir, only when it finds the cost of positioning itself as a major regional power unbearable. The U.S. could help Pakistan realize the dangers of persisting with its traditional policies by refusing to publicly pretend that it is unaware of Pakistan’s regional double-dealing. An American-brokered accord between Pakistan and Afghanistan to end the latent dispute over the Durand Line, coupled with international guarantees to end Pakistan’s meddling in Afghanistan, might be the minimum requirements for durable peace in the region where the 9/11 plot to attack the U.S. was hatched.
Pakistan Replays the 'Great Game'
Mr. Husain Haqqani
Far Eastern Economic Review, October, 2005
http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=17642
For over two years, Abdul Latif Hakimi regularly telephoned Pakistani and Western reporters and described himself as the spokesman for Afghanistan’s Taliban. He claimed responsibility on behalf of the Taliban for several terrorist attacks. In June, when a MH-47 helicopter was shot down during an antiguerrilla mission in Afghanistan’s Kunar province bordering Pakistan, killing all 16 U.S. troops on board, Hakimi reported the incident to the media before U.S. or Afghan officials. Hakimi’s claims were often exaggerated or even totally fabricated. But no one doubted that he was based in Pakistan and that he spoke on behalf of the Taliban.
Hakimi’s telephone press conferences and interviews, conducted on satellite and cell phones, offered an embellished version of an emerging ground reality. After being toppled from power in the aftermath of 9/11, the Taliban have reconstituted themselves in part of the Afghan countryside as an insurgent force, especially in provinces dominated by the Pashtun ethnic group along the Pakistan-Afghan border.
Since the beginning of 2005, casualties in Afghanistan have been rising. Some 84 American soldiers and 1,400 Afghans have been killed this year, more than any year since the arrival of U.S. forces in 2001. The Taliban insurgency is weak and not yet as threatening as the challenge in Iraq. But Afghan insurgents are clearly getting arms, money and training. Through propaganda of the type waged by Hakimi, the Taliban are also recruiting new members.
When Pakistani authorities announced on Oct. 4 that Hakimi had been arrested in the southwestern city of Quetta, just across the border from the Taliban’s traditional support base of Kandahar, officials in Afghanistan were not impressed. Why had it taken the Pakistanis so long to silence Hakimi when he operated freely in Pakistan for over two years, they asked. What about other Taliban leaders who roam the streets of Quetta and other Pakistani cities and towns quite openly?
Pakistan’s decision to arrest the Taliban spokesman was attributed to relentless U.S. pressure. Days before Hakimi’s arrest, U.S. officials reportedly raised the issue of the Taliban operating freely in Pakistan during meetings with President Pervez Musharraf in New York.
U.S. officials are usually restrained in publicly criticizing Pakistan, a key U.S. ally in the war against terrorism, for fear of embarrassing the country’s pro-U.S. military strong man, Gen. Musharraf. But last summer U.S. ambassador Zalmay Khalilzad questioned Pakistan’s commitment to eliminating the Taliban in an interview just before leaving Afghanistan for his new assignment in Iraq. Ambassador Khalilzad wondered why Pakistan’s security services could not find Hakimi and another deputy to Taliban leader Mullah Omar, Akhtar Usmani, when they were readily available to the media and occasionally gave interviews to Pakistani television channels.
U.S. and Afghan officials realize that it will be difficult to bring lasting peace to Afghanistan if the Taliban and other enemies of President Hamid Karzai’s government continue to find sanctuary in Pakistan. Notwithstanding the high profile arrest of the Taliban spokesman, there is no evidence that Pakistan is about to sever all links with the Taliban or to give up its dreams of a client state in Afghanistan.
During the war against the Soviets, Pakistan’s military leader General Zia ul-Haq had adopted a policy that would bleed the Soviets without goading then into direct confrontation with Pakistan. Pakistani intelligence officers used the metaphor “the water must not get too hot” to describe that policy.
It seems that Pakistan is pursuing a similar policy in relation to Afghanistan today. By allowing the Taliban to regroup and mount insurgent attacks across the border, Pakistan’s hopes to make it clear to Afghan leaders such as Mr. Karzai that they cannot stabilize their country without Pakistan’s help. At the same time, Pakistan does not want the situation to reach the point of inviting U.S. reprisals.
Ties between Pakistan and the Taliban date back to the founding of the movement in 1994. Then, the Taliban—Pashtun students of madrassas, or Islamic seminaries—rose to end the bitter civil war that had ravaged Afghanistan for almost two years after the collapse of a pro-Communist government. Pakistan had fueled the civil war as well, trying to promote the cause of its client Islamist leaders, especially Gulbeddin Hekmatyar, who earned notoriety by raining rockets on Kabul in a bid to wrest control of Afghanistan’s capital.
Pakistan’s role, with U.S. help, as the staging ground for the guerrilla war against the Soviet Union in Afghanistan between 1979 and 1988 is widely known. What is less well known is Pakistan’s historic concern with extending its influence into Afghanistan long before the arrival of Soviet troops in Afghanistan. Pakistan’s attitude toward Afghanistan was formed largely by historic developments of the 19th century when Britain and Russia competed for influence in Central Asia in the “Great Game” of espionage and proxy wars.
Concerns about security against Russia pushed the frontier of British India westward and the British lost precious lives in their effort to directly control Afghanistan. Recognizing Afghanistan as a buffer between the British and Russian empires saved both from having to confront each other militarily. By accepting a neutral and independent Afghan Kingdom the British sought to pass on the burden of subduing some of the tribes the imperialists considered lawless to a local monarch, albeit with British economic and military assistance.
Afghanistan’s frontier with British India was drawn by a British civil servant, Sir Mortimer Durand, in 1893 and agreed upon by representatives of both governments. The border, named the Durand Line, intentionally divided Pashtun tribes living in the area, to prevent them from becoming a nuisance for the Raj. On their side of the frontier, the British created autonomous tribal agencies, controlled by British political officers with the help of tribal chieftains whose loyalty was ensured through regular subsidies. The British used force to put down sporadic uprisings in the tribal areas but generally left the tribes alone in return for stability along the frontier.
Adjacent to the autonomous tribal agencies were the “settled” Pashtuns living in towns and villages under direct British rule. Here, too, the Pashtuns were divided between the Northwest Frontier province and Baluchistan. Although Muslim, the Pashtuns generally sided with the cause of anti-British Indian nationalism and were late, and reluctant, in embracing the Muslim separatism of the All India Muslim League’s campaign for Pakistan. When the majority of British India’s Muslims voted for the creation of Pakistan, the Pashtuns elected leaders who emphasized ethnic pride over a religious national identity.
After Pakistan’s independence from Britain in 1947, Pakistani leaders assumed that Pakistan would inherit the functions of India’s British government in guiding Afghan policy. But soon after Pakistan’s independence, Afghanistan voted against Pakistan’s admission to the United Nations, arguing that Afghanistan’s treaties with British India relating to Afghan borders were no longer valid because a new country was being created where none existed at the time of these treaties. Afghanistan demanded the creation of a Pashtun state, “Pashtunistan,” which would link the Pashtun tribes living in Afghanistan with those in the nwfp and Baluchistan. There were also ambiguous demands for a Baluch state “linking Baluch areas in Pakistan and Iran with a small strip of adjacent Baluch territory in Afghanistan.”
From Pakistan’s perspective, this amounted to demanding the greater part of Pakistan’s territory and was clearly unacceptable. The Afghan demand failed to generate international backing, and Afghanistan did not have the military means to force Pakistan’s hand.
Although India publicly did not support the Afghan claim, Pakistan’s early leaders could not separate the Afghan questioning of Pakistani borders from their perception of an Indian grand design against Pakistan. They wanted to limit Indian influence in Afghanistan to prevent Pakistan from being “crushed by a sort of pincer movement” involving Afghanistan stirring the ethnic cauldron in Pakistan and India stepping in to undo the partition of the subcontinent. Pakistan’s response was a forward policy of encouraging Afghan Islamists that would subordinate ethnic nationalism to Islamic religious sentiment.
Pakistan’s concern about the lack of depth in Pakistan’s land defenses led to the Pakistani generals’ strategic belief about the fusion of the defense of Afghanistan and Pakistan. Pakistan’s complicated role in Afghanistan beginning well before the Soviet invasion of 1979 and through the rise and fall of the Taliban can best be understood in light of this desire.
Pakistan’s position as the principal foreign player in Afghanistan following the Soviet withdrawal changed with the arrival of American and NATO forces in the aftermath of Al-Qaeda’s terrorist attacks in the United States on Sept. 11, 2001. Pakistan has recognized that changed situation, deferring a great deal to American concerns. But it has clearly not abandoned its long-term national objective of ensuring that the government in Kabul is subordinate to Pakistan’s regional agenda.
Pakistan provided crucial logistics and vital intelligence support when the U.S. went to war to topple the Taliban from power. Initially, Pakistan had hoped for a role for some Pakistani clients in the new government in Kabul and had floated the idea of “moderate Taliban” joining the future Afghan government. Although Taliban leaders were completely excluded from the interim government formed in 2001, they have been allowed by President Karzai to participate in parliamentary elections upon renouncing violence.
But Mr. Karzai and other Afghan nationalists remain unwilling to accept Pakistan’s vision of Afghanistan as a subordinate state. Afghanistan maintains close ties with India and expects to pursue an independent foreign policy. Although Pakistan is engaged in a peace process with India, its generals remain fearful of Indian domination. India’s size coupled with its economic and military might make its ascendancy inevitable, but that does not deter Pakistan from pursuing options of low intensity and subconventional warfare for greater regional influence. The decision to continue to back or tolerate the Taliban is part of Pakistan’s grand design for positioning itself as a major player in a contemporary version of the Great Game.
Pakistan will crack down on the Taliban, and give up the option of supporting Islamist insurgents in Indian-controlled Kashmir, only when it finds the cost of positioning itself as a major regional power unbearable. The U.S. could help Pakistan realize the dangers of persisting with its traditional policies by refusing to publicly pretend that it is unaware of Pakistan’s regional double-dealing. An American-brokered accord between Pakistan and Afghanistan to end the latent dispute over the Durand Line, coupled with international guarantees to end Pakistan’s meddling in Afghanistan, might be the minimum requirements for durable peace in the region where the 9/11 plot to attack the U.S. was hatched.
Wednesday, November 3, 2010
The Tools of Imperialism: Technology and the Expansion of European Colonial Empires in the Nineteenth Century
Ladies and Gentlemen,
http://www.jstor.org/stable/1879216?seq=1
After reading the article "The Tools of Imperialism: Technology and the Expansion of European Colonial Empires in the Nineteenth Century" by Daniel R. Headrick, at (http://www.jstor.org/stable/1879216?seq=1) explore the following questions:
1. What were the root causes of European Imperialism?
2. Did technology create the conditions to allow imperialist actions? Or did they just make it easier?
Please ensure that you provide your initial comment with supporting information provided in this articel and your own research.
http://www.jstor.org/stable/1879216?seq=1
After reading the article "The Tools of Imperialism: Technology and the Expansion of European Colonial Empires in the Nineteenth Century" by Daniel R. Headrick, at (http://www.jstor.org/stable/1879216?seq=1) explore the following questions:
1. What were the root causes of European Imperialism?
2. Did technology create the conditions to allow imperialist actions? Or did they just make it easier?
Please ensure that you provide your initial comment with supporting information provided in this articel and your own research.
Sunday, October 10, 2010
Isolationism
After reading the articles below, answer the following questions and comment on your peers comments:
1. Define isolationism.
2. How did isolationism effect our involvement in World War II?
3. What are the issues with isolationism? Is it an effective policy today?
A Warning on Isolationism
Wendell Willkie
January 8, 1941
Delivered January 8, 1941 before the Women’s National Republican Club
Hotel Astor, New York City
Mrs. Hays, members of the Women’s National Republican Club, I am delighted to be here, not alone as the last candidate on the Republican ticket for President of the United States, but also to thank each one of you personally for what you did in that crusade which we conducted just before Nov. 5. There is considerable solace in defeat. Not long ago I was reading the autobiography of Henry Watterson, that sparkling editor of The Louisville Courier-Journal. His father was a Congressman prior to the Civil War, and Henry spent much of his time in Washington with his father and was a great friend of many notables, among whom his greatest friend was Stephen Arnold Douglas who, as you know, was an outstanding leader in American public life.
The boys were sitting around the table one night, perhaps imbibing more than they should, and one of them said, "What do you think has happened—Steve Douglas wants to be President of the United States." Another spoke up, "Well, if Steve Douglas wants to be President we will have to go out and work for him. But I don’t for the life of me know why he wants to be President at 44 years of age and have to be good for the rest of his life."
The American people relieved me of the necessity of being good for the balance of my life.
I am greatly concerned about the Republican party—because in my judgment it is the only political organization in the United States today that can possibly ultimately bring back to the American people those principles that made this government great. It is the only political organization in the United States that can possibly restore to this country the system of free enterprise and individual liberty which transposed this country from a wilderness to the greatest industrial nation with a higher standard of living than that of any other country in the world and which offers over a period of years, when the rewards of this system are more widely diffused among the people, the ultimate hope of mankind for liberty and well-being.
And my concern about the Republican party and its place in this country is such that instead of speaking mere pleasantries to you I decided to speak to you very frankly of what I believe should be the Republican party’s position in this most critical moment in the Iong and magnificent history of liberty. I do not presume to speak for all in the party; I speak as Wendell Willkie to you fellow-Republicans saying what is in my heart and what I think will ultimately bring the Republican party to full power in the American system of government.
Whether we like it or not America cannot remove itself from the world. Every development in the art of transportation, every development in the art of communication has reduced the size of the world so that the world today actually is no larger than the thirteen original colonies were when we established our system of liberty in the United States. And much as we would like to withdraw within ourselves and much as we would like to disregard the rest of the world—we cannot. ’We cannot be indifferent to what happens in Europe. We cannot forget the fighting men of Britain. They are defending our liberty as well as theirs.
If they are permitted to fail I say to you quite deliberately that I do not believe liberty can survive here. I take issue with all who say we can survive with freedom in a totalitarian world.
I want to say to you even though some of you may disagree with me, and I say it to you with all the emphasis of my being, that if Britain falls before the onslaught of Hitlerism, it will be impossible over a period of time to preserve the free way of life in America.
There has been a bill introduced in Congress to give the President quite extraordinary power to deal with the present crisis, and as I said last Sunday, this bill must be modified in several respects and particularly in one—the extraordinary power granted must automatically come back to the people on a definite date.
I have listened this afternoon to the suggestions of Jim Wadsworth with whom, whether or not you all agree, you must say of him that of all the men in public life he has most consistently stood for what he believes, irrespective of the consequences. I have listened to some of his suggested amendments and I think they are wise suggestions to consider. I have also reviewed the suggestion of Kenneth Simpson, member of Congress from New York, and I think his suggestions are wise ones.
But let me say to you that if the Republican party in the year of 1941 makes a blind opposition to this bill and allows itself to be presented to the American people as the isolationist party, it will never again gain control of the American government. I beg of you—I plead with you—you people who believe as I do in our great system of government—please do not in blind opposition—do not because of hate of an individual—and of all persons in the United States I have least cause to hold a brief for him—forget the critical world situation which confronts us and in which America is a part.
We are fortunate to be represented in Congress—we Republicans—by very able and outstanding men. It is their duty and if I have any persuasive ability with them, I beg of them to debate and consider the bill and each of its provisions carefully. I urge you likewise to call upon them to examine the bill with utmost scrutiny and debate it thoroughly but in the final analysis after justifiable criticism urge them not to vote to render America or its Chief Executive impotent to preserve liberty in Britain—not alone because we are sympathetic with Britain’s economic, social and cultural way of life but primarily because in her preservation of that way of life the hope of preserving it in America will be assured.
May I say to you as my considered judgment that America will not stay out of the war merely by persons asserting bravely in speeches that she will not go into the war. We will, however, stay out of the war, in my judgment, if the men of Britain are supported to the utmost and immediately. This can only be done by the granting of enlarged powers to the President to deal not alone with the international situation but with the building of the materials and instruments of combat.
Republicans of 1941, you who gave to me the rarest privilege that could come to any man, the privilege of leading the greatest cause of this century in a great crusade—I call upon you now to rise to the opportunity of preserving the blessed principles of freedom and the preserving of the Republican party so that it may be an effective instrumentality in the solution of both our domestic and our international problems. If during this critical period we play a wise and proper part America in the near future will call us the truly gallant and brave defenders of America into power. Let us not fail.
URL: http://www.TeachingAmericanHistory.org/library/index.asp?documentprint=1603
Foreign Policy Concepts: Isolationism and Internationalism
http://www.resolutegroup.org/index.php?id=7:32:0
Since its founding, America has exhibited periods of both internationalism and isolationism, with the nation moving from positions of global involvement to virtual retrenchment. Why is this and what is the history behind it?
It is generally accepted that before America took her place as a great power, the US engaged in a fairly uniform policy of non-engagement, or isolationism. Thomas Paine sowed the earliest seeds of isolationism in his book, “Common Sense”. “It is in the interest of America to steer clear of Europe” he wrote. John Adams later declared that America “must separate ourselves from all European politics.” Finally, George Washington’s Farewell Address enshrined the policy for all time. From Washington, through Jefferson, to the Monroe Doctrine, there has been the underlying notion of isolationism in American political life. There were interactions and relations, but the US mainly remained removed from the internal affairs of Europe, a situation highlighted by the British-French War of the 1790’s. Too busy dealing with the domestic growth of the US and rebuilding the nation after the Civil War, 19th century American leaders chose to stay out of the European arena of power politics and the balance of power system.
In 1916 Isolationist sentiment was so strong that President Wilson had to tour the nation to defeat the non-interventionist in Congress, intent on stalling The National Defence Act. Following the War Americans remained isolationist: the horror of battle had not been intended as a prelude to permanent European involvement and the fighting had changed few minds. Indeed the movement gained more than a number of recruits following the carnage and isolationists were able to block American entry to the League of Nations. America moved to a period of political isolationism, but could not prevent the rest of the world carrying on without it. American investment in the outside world meant that America would be an international power regardless of individual political preferences. Even though America had rejected the League of Nations, by 1922 she had unofficial observers there. Despite the presence of American judges, the nation remained absent from the World Court, seen as too much of an extra-national authority by isolationists. Many pacts and treaties of neutrality were signed at this time, notably the Kellogg Briand Pact of 1928 that renounced the use of war as a means of effecting policy.
By 1932, the mood of the nation was such that Franklin Roosevelt had to publicly reject his Wilsonian attitudes towards internationalism to be elected President of the United States. By 1940, even with war raging in Europe, leading Americans remained isolationist. Most notable were Charles Lindbergh and Ambassador Joseph P. Kennedy. Non-interventionist in the Congress forced the Neutrality Act of 1935 on President Roosevelt to prevent him from selling arms to Britain. They also supported a Constitutional amendment proposing a public referendum before any declaration of war. Such non-interventionist sentiment met with popular approval among the people of the United States. Since World War Two, America has embarked on a global foreign policy that committed it to involvement in every corner of the world. Isolationists however, were vocal critics of the Truman Doctrine of containment. The era of activism reached its peak in Vietnam, where defeat led to a resurgence of isolationism. Overall however, global activism has dominated American foreign policy since 1945.
Whilst isolationism has always played apart in American foreign policy, a penchant for internationalism has always been evident in American intervention in the political affairs of other nations. It is also evident in efforts to transplant American values around the globe. America has long seen herself as having a special mission in the world, viewing herself as innocent and virtuous in the midst of a tainted world. “The function of American policy is to mark other states up or down according to their obedience to our rules” wrote Professor Arthur Schlesinger. Indeed, according to Schlesinger, American isolationism does not involve American secession from the rest of the world. Its essence was the rejection of commitments to other states, to avoid ‘entangling alliances’ as Jefferson put it.
This dilemma has much to do with policy makers being unable to reconcile the benefits of withdrawing from the world with advantages of reforming it. Louis Hartz has written that America feels the need to “either withdraw from ‘alien’ things, or transform them; It cannot live in comfort by their side.” Whilst the debate between interventionists and isolationists has never been fully resolved, a cycle of behaviour appears to have emerged, with each policy taking a political generation to run its course. This is a prime example of what Arthur Schlesinger refers to as 'the cycles of American history." The first isolationist phase ended with Washington’s Farewell Address, leading to the early expansionist era that ended with the Monroe Doctrine. The next interventionist era occurred from the time of the Mexican War until the acquisition of Alaska in 1867. The First Word War dominated the next internationalist era, during which America became a world power. The inter- war period was a time of great isolationist sentiment, shaken off by the attack at Pearl Harbour.
As a political philosophy, Isolationism dictates that America serves its interests best by perfecting democracy at home, acting as a beacon for mankind. It also indicates that America’s values impose an obligation to crusade for them around the world, in search of a perfect future. Clearly these can be seen as particularly conservative traits. It is a pessimistic view of human nature and sees inequity between nations as an inevitable feature of international affairs. Foreigners are seen as threatening outsiders. The best way to deal with other nations is to avoid them. Both conservatives and isolationists are reluctant to become involved with others or to assume responsibility for them. They resist legislation that may interfere with a nation’s autonomy and are for the most part inhospitable to social change. The public embraces isolationist policies more enthusiastically than American leaders, and reports indicate that isolationist attitudes are most prevalent among the less educated segments of society.
With the end of the Cold War, the debate over isolationism and internationalism has resurfaced. In 1991, President George Bush used Wilsonian sounding principle to describe his vision of a new world order, dedicated to peace and security, freedom and the rule of law. Bush was such an internationalist that he has been accused of wanting to lead the world rather than just America. The end of the Cold War has resulted in the absence of a discernible threat as a central organising principle. Instead of a well-defined threat, America now faces uncertainty in which it must develop foreign policy. American leaders face unfamiliar foreign policy challenges in dealing with small states armed with weapons of mass destruction. There are also questions over future alliances. Allies and enemies can no longer be defined by their status in the Cold War and military planning must move beyond containment and the avoidance of nuclear war.
President Clinton has remained committed to American activism, claiming that America must "fulfil our responsibility as the world’s sole super-power." This however is not always the view of many in Congress. The view of many of the Republican majority is that there should be major cuts in foreign aid, restricted participation in UN operations, and the end of the Agency for International Development, the Arms Control and Disarmament Agency and the US Information Agency. This view has been referred to as 'minimalist' by Haass, and favoured only by those who 'take a narrow view of US responsibility and obligations to meet challenges.' Clearly however, such calls do reflect the thoughts and opinions of some Americans, as personified by Pat Buchanan’s ‘America First’ movement and Ross Perot’s Fortress America references in 1992.
The Clinton Administration caused international concern in 1992 when it stated that the nation's domestic problems would require priority not only at home but also abroad. A series of speeches by top administration officials followed in September 1993 to alleviate fears that Clinton would be an isolationist Democrat, intent only on fixing the economy by protectionist methods. Rather, Clinton has proved to be an Internationalist like his predecessor, President Bush. Thus the Administration has emphasized free trade, open markets and the need to promote American 'competitiveness' in overseas markets. Whilst many of these objectives are consistent with an internationalist approach, the main aim of the Administration has been a return to growth and fuller employment in America. Whereas President Bush used foreign policy for its own end, Clinton has employed foreign policy to assist the domestic economy. The current Administration could not accept an isolationist agenda for it has used International policies to fuel the domestic agenda that was the bedrock of Clinton’s 1992 victory. As such Clinton’s foreign policy is closely linked to domestic economic principles. The GATT and NAFTA successes reveal a world view that domestic growth depends on foreign economic policy that promotes US exports and world trade. The goal clearly is to avoid the isolationist trade policies of the 1930s. When Britain’s inability to exercise leadership and America’s unwillingness to do so were primary causes of the Great Depression.
America is too entwined internationally with too many obligations and responsibilities to ever to be able to realise such a goal as isolationism, however the sentiment and the fear of involvement remain. The American actions in Bosnia are exemplary of this. Americans have been reluctant to send troops to help end the conflict and as a result the war has lasted for years. Only with the insurance’s of a definite pull out date have the troops actually gone over. One could put this down to the “Vietnam Syndrome” the US reluctance to involve itself in n unpopular war with the risk of high casualties with no definitive national interest. This can be seen as a form of isolationism.
America is now truly internationalist. The GATT deal has been ratified, the NAFTA deal pushed through. American envoys have brokered deals in Haiti, and Bosnia. Operation Vigilant Warrior has kept Kuwait free. Thus as America approaches the 21 century the issue remains the same; Should America be a global power or should it assume a less ambitious posture? Controversy over the answer is unlikely to end as reasonable people will asses the benefits and costs of intrusive Globalism. Current American duality is expressed by the President himself, declaring that “America cannot turn her back on the world” and yet at the same time stating that “America cannot be the world’s policeman”.
Isolationism and internationalism will continue to be important aspects within American foreign policy making. However, isolationism, although espoused by the minority, is less significant or important now, as explained, the US is now part of a global commitment. The US could not isolate itself even if it wanted to. Too much money has been invested abroad, as has too much foreign money and cultures been invested in the US. As technology improves and the barriers and boarders are weakened, the frontier continues to move outside the US boarders.
American Isolationism Before World War II
http://www.harwich.edu/depts/history/HHJ/iso.htm
The great rule of conduct for us in regard to foreign nations is in extending our commercial relations, to have with them as little political connection as possible. So far as we have already formed engagements, let them be fulfilled with perfect good faith. Here let us stop. Europe has a set of primary interests which to us have none; or a very remote relation. Hence she must be engaged in frequent controversies, the causes of which are essentially foreign to our concerns. Hence, therefore, it must be unwise in us to implicate ourselves by artificial ties in the ordinary vicissitudes of her politics, or the ordinary combinations and collisions of her friendships or enmities. – George Washington (U-S-History – Isolationism, par. 5)
Since the creation of this great country, a debate has raged back and forth whether to remain in a bubble on our separate continent from the rest of the world and to remain neutral, or to become involved in world affairs, and thus gain prestige, or destruction. Since World War II, the United States has increasingly “meddled” in the affairs of other nations, such as many Latin and South American countries, the Middle East, and Vietnam to name a few. Now, there is little of this non-intervention sentiment in the United States. Leading up to World War II, though, was the period of perhaps the greatest anti-war surge in the United States.
Isolationism, the term for this anti-war sentiment, was led by many congressmen and other influential people, such as the well-known Charles A. Lindbergh. They did not want America drawn into another World War, and so created the Neutrality Acts to punish warring nations. Roosevelt struggled greatly against Isolationism, but vowed to the American people that he would never send their sons into war, a promise that was soon broken. When England was under attack from the Germans, Roosevelt convinced the American people to push aside Isolationism and give the British greatly needed war materials under the Lend-Lease Act. When Jewish refugees fleeing Nazi persecution fled to the United States on the S. S. St. Louis, they were rejected and sent back because of the United States’ 1924 immigration policy limiting immigration from Eastern and Southern Europe. The anti-war sentiments were nudged along by the Germans, who funded many congressmen to continue lobbying for Isolationist views. Isolationism in American influenced American policy in the late 1930s and early 1940s and greatly delayed its entry into World War II.
A great proponent of American Isolationism, and also a source of much criticism, was the famous aviator, Charles Lindbergh. One author even refers to part of the isolationism debate as “eleven moths of oratory between Franklin Roosevelt and Charles Lindbergh” (Berg 413) when Lindbergh had first joined the America First Committee. Lindbergh had his own views on America and the Germans. “[…] It seemed to me essential to France and England, and even to America, that Germany be maintained as a bulwark against the Soviet Union” (Berg 376). This prophetic view of American intervention fueled him to advocate an isolationist policy in America.
On September 11, 1941, Lindbergh spoke in Des Moines, Iowa, giving a lengthy speech urging the United States to not get involved in the War. He alluded to American debts from the First World War. “As you all know, we were left with the debts of the last European war; and unless we are more cautious in the future than we have been in the past, we will be left with the debts of the present case” (Ranfranz, par. 20). This is a reference back to the Nye Committee and its biased conclusions made about the U.S.’s involvement in World War I. He then accused the British, the Jewish, and the Roosevelt administration of being “the three most important groups who have been pressing this country toward war” (Jenkins 127). If, he suggests, any one of these three groups ceases pushing for war, our country will be safe. “If any one of these groups—the British, the Jewish, or the administration—stops agitating for war, I believe there will be little danger of our involvement” (The History Channel, par. 1). He also accused them of plotting a means of forcing the U. S. into the war.
When hostilities commenced in Europe, in 1939, it was realized by these groups that the American people had no intention of entering the war […] They planned: first, to prepare the United States for foreign war under the guise of American defense; second, to involve us in the war, step by step, without our realization; third, to create a series of incidents which would force us into the actual conflict. (Ranfranz, par. 34)
Lindbergh denounced war propaganda for influencing the American population. “Our theaters soon became filled with plays portraying the glory of war. Newsreels lost all semblance of objectivity. Newspapers and magazines began to lose advertising if they carried anti-war articles” (Ranfranz, par. 36). He lamented the bigotry towards “individuals who opposed intervention”. Lindbergh then moved on to criticizing the Lend-Lease Act and the supposed “verge of war” it led the U. S. to. “First, we agreed to sell arms to Europe; next, we agreed to loan arms to Europe; then we agreed to patrol the ocean for Europe; then we occupied a European island in the war zone” (Ranfranz, par. 43). He then commented that it would be very difficult for America to be victorious in a war with Germany, stating that the German forces were “stronger than our own” (Ranfranz, par. 47). This controversial comment was met by many boos in the middle of a speech full of relatively nothing but cheers. This speech led to accusations of Lindbergh as an anti-Semite. Also, his name was removed from his hometown watertower in Little Falls, Minnesota (The History Channel, par. 2). This shows the great movement against isolationism and towards war among the American population nearing Pearl Harbor. Earlier, though, there was much less resistance against the isolationists in America.
During the spring of 1934, Fortune magazine published an article connecting European politics with the armaments industry. Then it discussed the activity of the American steel companies and the political ties in America. This article prompted a Senate investigation headed by Senators Pittman and Nye, a very isolationist Republican of North Dakota. The (incorrect) results of this investigation were that “American entry into the war was the work of wicked Wall Street bankers” (Perkins 96). In response to this thesis, Congress quickly began work on “neutrality legislation” (96) to prevent the U.S. from being drawn into another war. These laws became known as the Neutrality Acts. They “forbade American ships to sail into war zones or ports of belligerent nations, citizens to travel on merchant vessels belonging to belligerents, banks to lend money to nations at war, manufacturers to sell any armaments or other specified war-related products to warring countries” (Cooper 6). The most amazing part of these acts, though, was the proposed “Ludlow Amendment”. This amendment would allow the United States to go to war only after a national referendum. “The American people, faced perhaps by some instant danger, were supposed to debate the issue in every part of the land, expose their divisions to the possible enemy, and fracture their national unity in time of peril by sharp and perhaps bitter discussion” (Perkins 101). This obviously opinionated idea of the Ludlow Amendment gives a worst-case scenario showing how very flawed such an idea would be. Although this extreme measure could put the country in grave danger, seventy-five percent of the public was in favor of such an idea in 1935, and still sixty-eight percent in 1938 (102). “When the issue was brought to the floor of the House in [1938], it was clear that a great parliamentary battle impended. The President spoke out against the proposal; so, too did the Secretary of State” (102). In the House there were 209 votes for the amendment, and 188 votes against, not enough for the two-thirds vote required (102). It is very serious, though, how very divided the House was on this outrageous matter. It reflects how extremely distrustful the American people were of the President and how intense the anti-war sentiment was during that time period. Dexter Perkins describes this:
The Ludlow amendment represents the isolationist sentiment in its most extreme form. It was based on distrust of the executive on a conception of foreign policy which would have accentuated internal division and made effective action impossible, on that kind of fear of war which encourages others to war. It was the high-water mark of the movement of American withdrawal. (102)
The Neutrality Acts greatly hindered both the aggressor and the victim nations in war. Roosevelt made this connection and attempted to get Congress to allow loopholes in the act. “[Roosevelt] recommended the stepping-up of defense appropriations and expressed the opinion that the neutrality legislation of 1937 might operate unevenly, might ‘actually give aid to an aggressor and deny it to the victim’” (106). Basically, by cutting off support to both the aggressor and the victim, the victim would only grow weaker, while the aggressor would grow more powerful. Once World War II began, this proved to be the case for Nazi Germany and Britain. Britain was suffering much more greatly from the Neutrality Acts than Germany was. Roosevelt’s beliefs about these acts greatly reflect his general motives during his last two terms in the Whitehouse. He wanted to keep the isolationist American population happy while keeping the U. S. safe from foreign threats. He believed that “the country would be more likely to keep out of the war if the arms embargo were repealed. […] If the democratic nations could win, there was less chance of the United States being involved than if Germany were victorious” (108). He therefore “pursued a settled policy of weakening the Neutrality Acts” (Cooper 7) and helped out the Allied nations against the German aggressors.
This policy led to the creation of the Lend-Lease Act of 1941, a great achievement of Roosevelt against the flow of isolationism, but first came a prelude in the summer of 1940 – the bases-destroyers deal. In this negotiation with Britain, America received many British bases “extending from Trinidad on the south to Newfoundland on the north” (Perkins 114). This ingenious idea was accepted by the isolationists because the bases would strengthen the U.S., but also greatly aided the British navy. “Almost half their destroyers had been damaged or demolished” (113). A year later, the situation was much worse and Britain was in serious need of armaments, but this time the isolationists were harder to persuade. Roosevelt, to sway the American people, made a comparison between Britain and a house burning down. “He made a parable about a man whose house was on fire and a neighbor who lent his garden hose – without demanding payment for it – in order to put out the fire” (Daniels 320). This comparison went over very well with the American people, and led him to continue this idea of aiding England. The American people now understood that the British “wanted materials, not men” (321). Isolationists, though, saw this idea as one step closer to war. According to the Chicago Tribune, the Lend-Lease bill would “destroy the Republic” (321). One Senator called it a “triple-A foreign policy: it will plough under every fourth American boy” (321). Senator Burton K. Wheeler of Montana claimed the bill was “a bill to enable the President to fight an undeclared war with Germany” (Grapes 37). The America First Committee was immediately against it, and Lindbergh drew great crowds to the Congressional Hearing for the bill (Daniels 321).
Even the former isolationist Republican candidate for president, Wendell Willkie supported the bill. In the Senate Caucus Room on February 11th, 1941, Willkie spoke in support of the Lend-Lease Act. “He proposed sending Britain all American bombers except those needed for training. He advocated a steady flow of more and more destroyers” (Daniels 322). In retaliation, Senator Nye quoted Willkie’s earlier statement towards Roosevelt, “on the basis of his post performance with pledges to the people, you may expect war by April, 1941, if he is elected” (323). After a long pause, Willkie shrugged and admitted, “It was a bit of campaign oratory” ruefully. A roar of laughter went up among the room, and “Nye and his like seemed swept aside in the applause. […] Isolationist righteousness was routed” (323). Soon after, the bill was signed into law.
Many opponents of the Lend-Lease Act, including Senator Wheeler of Montana realized that in order to send materials to the British across the Atlantic, armed convoys would be needed. “[…] American warships would have to be assigned convoy duty. That meant putting American ships and American lives in the line of fire and it increased the possibility of an armed exchange between German and U. S. naval forces” (Grapes 37). This point, did, in fact, become reality on September 4th, 1941. During this incident, the U. S. destroyer Greer exchanged fire with a German submarine (37-8). “A week later, on September 11, Roosevelt reacted to this attack in a speech in which he announced that he had given orders to the Navy to ‘shoot on sight’ and warned that Axis warships entering the American defense zone did so ‘at their peril’” (Shirer 882). More incidents like this occurred in coming months including two in October of 1941. On the 17th, the USS Kearny was torpedoed by the Germans, and eleven American sailors were killed when the U. S. destroyer Reuban James was torpedoed on the 31st. Following these attacks, “Roosevelt declared an unlimited national emergency” (Grapes 38) which many realized brought the U. S. very much closer to the joining the war than before.
The crowning “achievement” of isolationism was the incident of the S. S. St. Louis. On May 13, 1939, the S. S. St. Louis left Hamburg, Germany with 937 passengers (one account, by Bryan Grapes, claims the number to be 936 passengers, but 937 is more likely), 930 of whom were Jewish refugees (Wiaik 6). The ship’s destination was Havana, Cuba. Fourteen days later, though, when they arrived at Havana, the Cuban government had revoked their landing permits and they were unable to land. Instead, they sailed north to Florida where they waited off the coast of Miami, close enough to see the lights from the city at night. The U. S. government, with full knowledge of the persecution that had come to these people, and the plight they faced if forced to return, sent them away.
This incident reflects the United States’ unwillingness to become entangled in European affairs. The government could not admit the Jews into the country because of harsh immigration laws imposed in 1924 under the Coolidge administration. Although by some accounts, this harsh act was completely unnecessary and was a terrible example of American indifference to the plight of the Jews, others speak of it differently. According the Bryan Grapes, the American government greatly assisted the Jews in finding safe places to live, although not in the U. S. “None […] of the passengers of the St. Louis were returned to Nazi Germany. They were all resettled in democratic countries – 288 in the United Kingdom, and the rest in France, the Netherlands, Belgium, and Denmark” (Grapes 211). What he fails to state is that four out of five of these countries mentioned were taken over by the Nazis within a few years. This incident is truly an error in judgement of the American government. An exception should have been made to keep hundreds of people from suffering at the hands of the Nazis.
The Germans put great effort into keeping America out of the war. They funded isolationist sentiments throughout the United States for a long period of time before the Japanese attack on Pearl Harbor. The Germans not only saw the United States as a threat to join the war, but they also thought that if there was no chance whatsoever of U. S. entry, then England would finally give in to the Germans. Therefore, the Germans went to great lengths to keep the U. S. neutral. “In the United States the German Embassy, under the direction of Hans Thomsen, the chargé d’affaires, was spending every dollar it could lay its hands on to support the isolationists in keeping America out of the war and thus discourage Britain from continuing it” (Shirer 747). Thomsen put particular effort into the party conventions occurring in 1940. He tried influencing both parties to include anti-war planks, especially the Republicans (748). According to German papers captured after their defeat, a Republican Congressman was paid $3,000 “to invite fifty isolationist Republican Congressmen to the Republican convention ‘So that they may work on the delegates in favor of an isolationist foreign policy’” (748). This same individual also wanted $30,000 for full-page ads in American newspapers including one in the June 25th, 1940 New York Times (748). In this ad, many Democratic Senators spoke against Roosevelt and a recent change of cabinet officials. The advertisement begins, “The Democratic Party, we believe, is the interventionist and war party and is rushing us headlong into war in efforts to quarantine and police the world with American blood and treasure” (New York Times 19). This is a reference to Roosevelt’s 1937 “Quarantine” speech, in the Midwest, where he “urged peaceful countries to unite and ‘quarantine’ international lawlessness” (U-S-History - Roosevelt, par. 8). Senator Johnson of Colorado goes on to give his opinion that “[…] If the democratic Party fails to do its duty and makes the mistake of nominating an interventionist for the office of President, so far as I am concerned, my country will come before my Party” (New York Times 19). This quote insinuates that the Democratic party, by renominating Roosevelt, is unpatriotic and will be ruining the United States, a very harsh jab at the Democrats, by a Democrat isolationist. Another Senator quoted in this German-funded isolationist advertisement is Senator Walsh of Massachusetts, another Democrat isolationist. He accuses the Roosevelt administration of not thinking of the poor or the majority of the American public, and of charging into war.
[…] Oh, the tragedy of it, that a powerful group of men of property should be challenging the peace desires of the millions of poor people who toil and labor and sacrifice to whom war brings more poverty, whose children are made for generations to eat the bread of poverty of war (19).
Senator Walsh of Massachusetts, and Senator Joe Kennedy, also of Massachusetts, although being Democrats, were very influential isolationists. This lack of sympathy towards Great Britain probably stems from their Irish backgrounds.
These Senators were bribed into making statements betraying their parties, their countries, and themselves. The German attempts to push the Presidency to Willkie failed, thankfully, and Roosevelt was able to bring about his ideas of Lend-Lease, to which Willkie joined in. There was still a large group of the United States population that was isolationist, though, right up until the attack on Pearl Harbor.
After World War I, the people of the victor nations were exhausted by the war. This tiredness of war led to a great aversion for the war by the people of Britain, France, and the United States. Among these countries “sentiments among politicians and the public turned rapidly and decisively in an anti-interventionist direction” (Cooper 5). In Britain and France, this attitude became known as appeasement. In America, it was called Isolationism. This shift in attitudes led to many new laws proclaiming the United States’ neutrality in the world. “Starting with the Senate’s surprise rejection of membership in the World Court in 1934 – which had previously been pushed by Republican presidents as well as now by the Democratic president, Franklin Roosevelt – both houses of Congress swung overwhelmingly isolationist” (6). From 1934 on, isolationism grew steadily stronger with the creation of the Neutrality Acts, one after another, in 1935, ’36, and ’37. Some historians believe isolationism was extreme throughout the late 30s because “The American people did not as yet feel insecure. It was when fear was added to moral condemnation that their temper began to change and that in increasing measure they began to feel that they might be compelled in their own interest, to combat the advance of totalitarianism” (Perkins 105). This opinion of isolationism as an idea that only thrives during times of safety is completely true. Even today, the American people feel safe, so a great percent of the population feels no need to be at war with Iraq. That is how the human mind works, and how it will continue to work in times of peace.
Although it seemed to make sense at the time that the U. S. would be safe as long as it stayed out of the war, there is a moral dilemma that must be confronted. This dilemma, whether to help those in need, was brought to the spotlight during the S. S. St. Louis incident, America made the wrong choice and turned away 937 people in need of shelter and protection. The question is, when is it more important to protect the people of your fellow nations at your own nation’s expense? This debate has continued ever since George Washington’s famous farewell address denouncing foreign “entanglements”. These “entanglements” are what keep a nation alive and thriving in the world, and must be maintained to some degree. Franklin Roosevelt realized that one day we must go to Germany, whether the American people are in favor of it or not. He, therefore, tried to get America involved as quickly as possible, against the will of his apathetic nation. Roosevelt said, wisely, “We must be the arsenal of democracy” (Daniels 321). This was true only until Japan attacked our men at Pearl Harbor and killed isolationism in America. This attack destroyed America’s false sense of security and turned us into much more than the arsenal of democracy. We became the juggernaut of the free people of the world; ready to help all the people we turned away for years. We repented for our American Isolationism.
1. Define isolationism.
2. How did isolationism effect our involvement in World War II?
3. What are the issues with isolationism? Is it an effective policy today?
A Warning on Isolationism
Wendell Willkie
January 8, 1941
Delivered January 8, 1941 before the Women’s National Republican Club
Hotel Astor, New York City
Mrs. Hays, members of the Women’s National Republican Club, I am delighted to be here, not alone as the last candidate on the Republican ticket for President of the United States, but also to thank each one of you personally for what you did in that crusade which we conducted just before Nov. 5. There is considerable solace in defeat. Not long ago I was reading the autobiography of Henry Watterson, that sparkling editor of The Louisville Courier-Journal. His father was a Congressman prior to the Civil War, and Henry spent much of his time in Washington with his father and was a great friend of many notables, among whom his greatest friend was Stephen Arnold Douglas who, as you know, was an outstanding leader in American public life.
The boys were sitting around the table one night, perhaps imbibing more than they should, and one of them said, "What do you think has happened—Steve Douglas wants to be President of the United States." Another spoke up, "Well, if Steve Douglas wants to be President we will have to go out and work for him. But I don’t for the life of me know why he wants to be President at 44 years of age and have to be good for the rest of his life."
The American people relieved me of the necessity of being good for the balance of my life.
I am greatly concerned about the Republican party—because in my judgment it is the only political organization in the United States today that can possibly ultimately bring back to the American people those principles that made this government great. It is the only political organization in the United States that can possibly restore to this country the system of free enterprise and individual liberty which transposed this country from a wilderness to the greatest industrial nation with a higher standard of living than that of any other country in the world and which offers over a period of years, when the rewards of this system are more widely diffused among the people, the ultimate hope of mankind for liberty and well-being.
And my concern about the Republican party and its place in this country is such that instead of speaking mere pleasantries to you I decided to speak to you very frankly of what I believe should be the Republican party’s position in this most critical moment in the Iong and magnificent history of liberty. I do not presume to speak for all in the party; I speak as Wendell Willkie to you fellow-Republicans saying what is in my heart and what I think will ultimately bring the Republican party to full power in the American system of government.
Whether we like it or not America cannot remove itself from the world. Every development in the art of transportation, every development in the art of communication has reduced the size of the world so that the world today actually is no larger than the thirteen original colonies were when we established our system of liberty in the United States. And much as we would like to withdraw within ourselves and much as we would like to disregard the rest of the world—we cannot. ’We cannot be indifferent to what happens in Europe. We cannot forget the fighting men of Britain. They are defending our liberty as well as theirs.
If they are permitted to fail I say to you quite deliberately that I do not believe liberty can survive here. I take issue with all who say we can survive with freedom in a totalitarian world.
I want to say to you even though some of you may disagree with me, and I say it to you with all the emphasis of my being, that if Britain falls before the onslaught of Hitlerism, it will be impossible over a period of time to preserve the free way of life in America.
There has been a bill introduced in Congress to give the President quite extraordinary power to deal with the present crisis, and as I said last Sunday, this bill must be modified in several respects and particularly in one—the extraordinary power granted must automatically come back to the people on a definite date.
I have listened this afternoon to the suggestions of Jim Wadsworth with whom, whether or not you all agree, you must say of him that of all the men in public life he has most consistently stood for what he believes, irrespective of the consequences. I have listened to some of his suggested amendments and I think they are wise suggestions to consider. I have also reviewed the suggestion of Kenneth Simpson, member of Congress from New York, and I think his suggestions are wise ones.
But let me say to you that if the Republican party in the year of 1941 makes a blind opposition to this bill and allows itself to be presented to the American people as the isolationist party, it will never again gain control of the American government. I beg of you—I plead with you—you people who believe as I do in our great system of government—please do not in blind opposition—do not because of hate of an individual—and of all persons in the United States I have least cause to hold a brief for him—forget the critical world situation which confronts us and in which America is a part.
We are fortunate to be represented in Congress—we Republicans—by very able and outstanding men. It is their duty and if I have any persuasive ability with them, I beg of them to debate and consider the bill and each of its provisions carefully. I urge you likewise to call upon them to examine the bill with utmost scrutiny and debate it thoroughly but in the final analysis after justifiable criticism urge them not to vote to render America or its Chief Executive impotent to preserve liberty in Britain—not alone because we are sympathetic with Britain’s economic, social and cultural way of life but primarily because in her preservation of that way of life the hope of preserving it in America will be assured.
May I say to you as my considered judgment that America will not stay out of the war merely by persons asserting bravely in speeches that she will not go into the war. We will, however, stay out of the war, in my judgment, if the men of Britain are supported to the utmost and immediately. This can only be done by the granting of enlarged powers to the President to deal not alone with the international situation but with the building of the materials and instruments of combat.
Republicans of 1941, you who gave to me the rarest privilege that could come to any man, the privilege of leading the greatest cause of this century in a great crusade—I call upon you now to rise to the opportunity of preserving the blessed principles of freedom and the preserving of the Republican party so that it may be an effective instrumentality in the solution of both our domestic and our international problems. If during this critical period we play a wise and proper part America in the near future will call us the truly gallant and brave defenders of America into power. Let us not fail.
URL: http://www.TeachingAmericanHistory.org/library/index.asp?documentprint=1603
Foreign Policy Concepts: Isolationism and Internationalism
http://www.resolutegroup.org/index.php?id=7:32:0
Since its founding, America has exhibited periods of both internationalism and isolationism, with the nation moving from positions of global involvement to virtual retrenchment. Why is this and what is the history behind it?
It is generally accepted that before America took her place as a great power, the US engaged in a fairly uniform policy of non-engagement, or isolationism. Thomas Paine sowed the earliest seeds of isolationism in his book, “Common Sense”. “It is in the interest of America to steer clear of Europe” he wrote. John Adams later declared that America “must separate ourselves from all European politics.” Finally, George Washington’s Farewell Address enshrined the policy for all time. From Washington, through Jefferson, to the Monroe Doctrine, there has been the underlying notion of isolationism in American political life. There were interactions and relations, but the US mainly remained removed from the internal affairs of Europe, a situation highlighted by the British-French War of the 1790’s. Too busy dealing with the domestic growth of the US and rebuilding the nation after the Civil War, 19th century American leaders chose to stay out of the European arena of power politics and the balance of power system.
In 1916 Isolationist sentiment was so strong that President Wilson had to tour the nation to defeat the non-interventionist in Congress, intent on stalling The National Defence Act. Following the War Americans remained isolationist: the horror of battle had not been intended as a prelude to permanent European involvement and the fighting had changed few minds. Indeed the movement gained more than a number of recruits following the carnage and isolationists were able to block American entry to the League of Nations. America moved to a period of political isolationism, but could not prevent the rest of the world carrying on without it. American investment in the outside world meant that America would be an international power regardless of individual political preferences. Even though America had rejected the League of Nations, by 1922 she had unofficial observers there. Despite the presence of American judges, the nation remained absent from the World Court, seen as too much of an extra-national authority by isolationists. Many pacts and treaties of neutrality were signed at this time, notably the Kellogg Briand Pact of 1928 that renounced the use of war as a means of effecting policy.
By 1932, the mood of the nation was such that Franklin Roosevelt had to publicly reject his Wilsonian attitudes towards internationalism to be elected President of the United States. By 1940, even with war raging in Europe, leading Americans remained isolationist. Most notable were Charles Lindbergh and Ambassador Joseph P. Kennedy. Non-interventionist in the Congress forced the Neutrality Act of 1935 on President Roosevelt to prevent him from selling arms to Britain. They also supported a Constitutional amendment proposing a public referendum before any declaration of war. Such non-interventionist sentiment met with popular approval among the people of the United States. Since World War Two, America has embarked on a global foreign policy that committed it to involvement in every corner of the world. Isolationists however, were vocal critics of the Truman Doctrine of containment. The era of activism reached its peak in Vietnam, where defeat led to a resurgence of isolationism. Overall however, global activism has dominated American foreign policy since 1945.
Whilst isolationism has always played apart in American foreign policy, a penchant for internationalism has always been evident in American intervention in the political affairs of other nations. It is also evident in efforts to transplant American values around the globe. America has long seen herself as having a special mission in the world, viewing herself as innocent and virtuous in the midst of a tainted world. “The function of American policy is to mark other states up or down according to their obedience to our rules” wrote Professor Arthur Schlesinger. Indeed, according to Schlesinger, American isolationism does not involve American secession from the rest of the world. Its essence was the rejection of commitments to other states, to avoid ‘entangling alliances’ as Jefferson put it.
This dilemma has much to do with policy makers being unable to reconcile the benefits of withdrawing from the world with advantages of reforming it. Louis Hartz has written that America feels the need to “either withdraw from ‘alien’ things, or transform them; It cannot live in comfort by their side.” Whilst the debate between interventionists and isolationists has never been fully resolved, a cycle of behaviour appears to have emerged, with each policy taking a political generation to run its course. This is a prime example of what Arthur Schlesinger refers to as 'the cycles of American history." The first isolationist phase ended with Washington’s Farewell Address, leading to the early expansionist era that ended with the Monroe Doctrine. The next interventionist era occurred from the time of the Mexican War until the acquisition of Alaska in 1867. The First Word War dominated the next internationalist era, during which America became a world power. The inter- war period was a time of great isolationist sentiment, shaken off by the attack at Pearl Harbour.
As a political philosophy, Isolationism dictates that America serves its interests best by perfecting democracy at home, acting as a beacon for mankind. It also indicates that America’s values impose an obligation to crusade for them around the world, in search of a perfect future. Clearly these can be seen as particularly conservative traits. It is a pessimistic view of human nature and sees inequity between nations as an inevitable feature of international affairs. Foreigners are seen as threatening outsiders. The best way to deal with other nations is to avoid them. Both conservatives and isolationists are reluctant to become involved with others or to assume responsibility for them. They resist legislation that may interfere with a nation’s autonomy and are for the most part inhospitable to social change. The public embraces isolationist policies more enthusiastically than American leaders, and reports indicate that isolationist attitudes are most prevalent among the less educated segments of society.
With the end of the Cold War, the debate over isolationism and internationalism has resurfaced. In 1991, President George Bush used Wilsonian sounding principle to describe his vision of a new world order, dedicated to peace and security, freedom and the rule of law. Bush was such an internationalist that he has been accused of wanting to lead the world rather than just America. The end of the Cold War has resulted in the absence of a discernible threat as a central organising principle. Instead of a well-defined threat, America now faces uncertainty in which it must develop foreign policy. American leaders face unfamiliar foreign policy challenges in dealing with small states armed with weapons of mass destruction. There are also questions over future alliances. Allies and enemies can no longer be defined by their status in the Cold War and military planning must move beyond containment and the avoidance of nuclear war.
President Clinton has remained committed to American activism, claiming that America must "fulfil our responsibility as the world’s sole super-power." This however is not always the view of many in Congress. The view of many of the Republican majority is that there should be major cuts in foreign aid, restricted participation in UN operations, and the end of the Agency for International Development, the Arms Control and Disarmament Agency and the US Information Agency. This view has been referred to as 'minimalist' by Haass, and favoured only by those who 'take a narrow view of US responsibility and obligations to meet challenges.' Clearly however, such calls do reflect the thoughts and opinions of some Americans, as personified by Pat Buchanan’s ‘America First’ movement and Ross Perot’s Fortress America references in 1992.
The Clinton Administration caused international concern in 1992 when it stated that the nation's domestic problems would require priority not only at home but also abroad. A series of speeches by top administration officials followed in September 1993 to alleviate fears that Clinton would be an isolationist Democrat, intent only on fixing the economy by protectionist methods. Rather, Clinton has proved to be an Internationalist like his predecessor, President Bush. Thus the Administration has emphasized free trade, open markets and the need to promote American 'competitiveness' in overseas markets. Whilst many of these objectives are consistent with an internationalist approach, the main aim of the Administration has been a return to growth and fuller employment in America. Whereas President Bush used foreign policy for its own end, Clinton has employed foreign policy to assist the domestic economy. The current Administration could not accept an isolationist agenda for it has used International policies to fuel the domestic agenda that was the bedrock of Clinton’s 1992 victory. As such Clinton’s foreign policy is closely linked to domestic economic principles. The GATT and NAFTA successes reveal a world view that domestic growth depends on foreign economic policy that promotes US exports and world trade. The goal clearly is to avoid the isolationist trade policies of the 1930s. When Britain’s inability to exercise leadership and America’s unwillingness to do so were primary causes of the Great Depression.
America is too entwined internationally with too many obligations and responsibilities to ever to be able to realise such a goal as isolationism, however the sentiment and the fear of involvement remain. The American actions in Bosnia are exemplary of this. Americans have been reluctant to send troops to help end the conflict and as a result the war has lasted for years. Only with the insurance’s of a definite pull out date have the troops actually gone over. One could put this down to the “Vietnam Syndrome” the US reluctance to involve itself in n unpopular war with the risk of high casualties with no definitive national interest. This can be seen as a form of isolationism.
America is now truly internationalist. The GATT deal has been ratified, the NAFTA deal pushed through. American envoys have brokered deals in Haiti, and Bosnia. Operation Vigilant Warrior has kept Kuwait free. Thus as America approaches the 21 century the issue remains the same; Should America be a global power or should it assume a less ambitious posture? Controversy over the answer is unlikely to end as reasonable people will asses the benefits and costs of intrusive Globalism. Current American duality is expressed by the President himself, declaring that “America cannot turn her back on the world” and yet at the same time stating that “America cannot be the world’s policeman”.
Isolationism and internationalism will continue to be important aspects within American foreign policy making. However, isolationism, although espoused by the minority, is less significant or important now, as explained, the US is now part of a global commitment. The US could not isolate itself even if it wanted to. Too much money has been invested abroad, as has too much foreign money and cultures been invested in the US. As technology improves and the barriers and boarders are weakened, the frontier continues to move outside the US boarders.
American Isolationism Before World War II
http://www.harwich.edu/depts/history/HHJ/iso.htm
The great rule of conduct for us in regard to foreign nations is in extending our commercial relations, to have with them as little political connection as possible. So far as we have already formed engagements, let them be fulfilled with perfect good faith. Here let us stop. Europe has a set of primary interests which to us have none; or a very remote relation. Hence she must be engaged in frequent controversies, the causes of which are essentially foreign to our concerns. Hence, therefore, it must be unwise in us to implicate ourselves by artificial ties in the ordinary vicissitudes of her politics, or the ordinary combinations and collisions of her friendships or enmities. – George Washington (U-S-History – Isolationism, par. 5)
Since the creation of this great country, a debate has raged back and forth whether to remain in a bubble on our separate continent from the rest of the world and to remain neutral, or to become involved in world affairs, and thus gain prestige, or destruction. Since World War II, the United States has increasingly “meddled” in the affairs of other nations, such as many Latin and South American countries, the Middle East, and Vietnam to name a few. Now, there is little of this non-intervention sentiment in the United States. Leading up to World War II, though, was the period of perhaps the greatest anti-war surge in the United States.
Isolationism, the term for this anti-war sentiment, was led by many congressmen and other influential people, such as the well-known Charles A. Lindbergh. They did not want America drawn into another World War, and so created the Neutrality Acts to punish warring nations. Roosevelt struggled greatly against Isolationism, but vowed to the American people that he would never send their sons into war, a promise that was soon broken. When England was under attack from the Germans, Roosevelt convinced the American people to push aside Isolationism and give the British greatly needed war materials under the Lend-Lease Act. When Jewish refugees fleeing Nazi persecution fled to the United States on the S. S. St. Louis, they were rejected and sent back because of the United States’ 1924 immigration policy limiting immigration from Eastern and Southern Europe. The anti-war sentiments were nudged along by the Germans, who funded many congressmen to continue lobbying for Isolationist views. Isolationism in American influenced American policy in the late 1930s and early 1940s and greatly delayed its entry into World War II.
A great proponent of American Isolationism, and also a source of much criticism, was the famous aviator, Charles Lindbergh. One author even refers to part of the isolationism debate as “eleven moths of oratory between Franklin Roosevelt and Charles Lindbergh” (Berg 413) when Lindbergh had first joined the America First Committee. Lindbergh had his own views on America and the Germans. “[…] It seemed to me essential to France and England, and even to America, that Germany be maintained as a bulwark against the Soviet Union” (Berg 376). This prophetic view of American intervention fueled him to advocate an isolationist policy in America.
On September 11, 1941, Lindbergh spoke in Des Moines, Iowa, giving a lengthy speech urging the United States to not get involved in the War. He alluded to American debts from the First World War. “As you all know, we were left with the debts of the last European war; and unless we are more cautious in the future than we have been in the past, we will be left with the debts of the present case” (Ranfranz, par. 20). This is a reference back to the Nye Committee and its biased conclusions made about the U.S.’s involvement in World War I. He then accused the British, the Jewish, and the Roosevelt administration of being “the three most important groups who have been pressing this country toward war” (Jenkins 127). If, he suggests, any one of these three groups ceases pushing for war, our country will be safe. “If any one of these groups—the British, the Jewish, or the administration—stops agitating for war, I believe there will be little danger of our involvement” (The History Channel, par. 1). He also accused them of plotting a means of forcing the U. S. into the war.
When hostilities commenced in Europe, in 1939, it was realized by these groups that the American people had no intention of entering the war […] They planned: first, to prepare the United States for foreign war under the guise of American defense; second, to involve us in the war, step by step, without our realization; third, to create a series of incidents which would force us into the actual conflict. (Ranfranz, par. 34)
Lindbergh denounced war propaganda for influencing the American population. “Our theaters soon became filled with plays portraying the glory of war. Newsreels lost all semblance of objectivity. Newspapers and magazines began to lose advertising if they carried anti-war articles” (Ranfranz, par. 36). He lamented the bigotry towards “individuals who opposed intervention”. Lindbergh then moved on to criticizing the Lend-Lease Act and the supposed “verge of war” it led the U. S. to. “First, we agreed to sell arms to Europe; next, we agreed to loan arms to Europe; then we agreed to patrol the ocean for Europe; then we occupied a European island in the war zone” (Ranfranz, par. 43). He then commented that it would be very difficult for America to be victorious in a war with Germany, stating that the German forces were “stronger than our own” (Ranfranz, par. 47). This controversial comment was met by many boos in the middle of a speech full of relatively nothing but cheers. This speech led to accusations of Lindbergh as an anti-Semite. Also, his name was removed from his hometown watertower in Little Falls, Minnesota (The History Channel, par. 2). This shows the great movement against isolationism and towards war among the American population nearing Pearl Harbor. Earlier, though, there was much less resistance against the isolationists in America.
During the spring of 1934, Fortune magazine published an article connecting European politics with the armaments industry. Then it discussed the activity of the American steel companies and the political ties in America. This article prompted a Senate investigation headed by Senators Pittman and Nye, a very isolationist Republican of North Dakota. The (incorrect) results of this investigation were that “American entry into the war was the work of wicked Wall Street bankers” (Perkins 96). In response to this thesis, Congress quickly began work on “neutrality legislation” (96) to prevent the U.S. from being drawn into another war. These laws became known as the Neutrality Acts. They “forbade American ships to sail into war zones or ports of belligerent nations, citizens to travel on merchant vessels belonging to belligerents, banks to lend money to nations at war, manufacturers to sell any armaments or other specified war-related products to warring countries” (Cooper 6). The most amazing part of these acts, though, was the proposed “Ludlow Amendment”. This amendment would allow the United States to go to war only after a national referendum. “The American people, faced perhaps by some instant danger, were supposed to debate the issue in every part of the land, expose their divisions to the possible enemy, and fracture their national unity in time of peril by sharp and perhaps bitter discussion” (Perkins 101). This obviously opinionated idea of the Ludlow Amendment gives a worst-case scenario showing how very flawed such an idea would be. Although this extreme measure could put the country in grave danger, seventy-five percent of the public was in favor of such an idea in 1935, and still sixty-eight percent in 1938 (102). “When the issue was brought to the floor of the House in [1938], it was clear that a great parliamentary battle impended. The President spoke out against the proposal; so, too did the Secretary of State” (102). In the House there were 209 votes for the amendment, and 188 votes against, not enough for the two-thirds vote required (102). It is very serious, though, how very divided the House was on this outrageous matter. It reflects how extremely distrustful the American people were of the President and how intense the anti-war sentiment was during that time period. Dexter Perkins describes this:
The Ludlow amendment represents the isolationist sentiment in its most extreme form. It was based on distrust of the executive on a conception of foreign policy which would have accentuated internal division and made effective action impossible, on that kind of fear of war which encourages others to war. It was the high-water mark of the movement of American withdrawal. (102)
The Neutrality Acts greatly hindered both the aggressor and the victim nations in war. Roosevelt made this connection and attempted to get Congress to allow loopholes in the act. “[Roosevelt] recommended the stepping-up of defense appropriations and expressed the opinion that the neutrality legislation of 1937 might operate unevenly, might ‘actually give aid to an aggressor and deny it to the victim’” (106). Basically, by cutting off support to both the aggressor and the victim, the victim would only grow weaker, while the aggressor would grow more powerful. Once World War II began, this proved to be the case for Nazi Germany and Britain. Britain was suffering much more greatly from the Neutrality Acts than Germany was. Roosevelt’s beliefs about these acts greatly reflect his general motives during his last two terms in the Whitehouse. He wanted to keep the isolationist American population happy while keeping the U. S. safe from foreign threats. He believed that “the country would be more likely to keep out of the war if the arms embargo were repealed. […] If the democratic nations could win, there was less chance of the United States being involved than if Germany were victorious” (108). He therefore “pursued a settled policy of weakening the Neutrality Acts” (Cooper 7) and helped out the Allied nations against the German aggressors.
This policy led to the creation of the Lend-Lease Act of 1941, a great achievement of Roosevelt against the flow of isolationism, but first came a prelude in the summer of 1940 – the bases-destroyers deal. In this negotiation with Britain, America received many British bases “extending from Trinidad on the south to Newfoundland on the north” (Perkins 114). This ingenious idea was accepted by the isolationists because the bases would strengthen the U.S., but also greatly aided the British navy. “Almost half their destroyers had been damaged or demolished” (113). A year later, the situation was much worse and Britain was in serious need of armaments, but this time the isolationists were harder to persuade. Roosevelt, to sway the American people, made a comparison between Britain and a house burning down. “He made a parable about a man whose house was on fire and a neighbor who lent his garden hose – without demanding payment for it – in order to put out the fire” (Daniels 320). This comparison went over very well with the American people, and led him to continue this idea of aiding England. The American people now understood that the British “wanted materials, not men” (321). Isolationists, though, saw this idea as one step closer to war. According to the Chicago Tribune, the Lend-Lease bill would “destroy the Republic” (321). One Senator called it a “triple-A foreign policy: it will plough under every fourth American boy” (321). Senator Burton K. Wheeler of Montana claimed the bill was “a bill to enable the President to fight an undeclared war with Germany” (Grapes 37). The America First Committee was immediately against it, and Lindbergh drew great crowds to the Congressional Hearing for the bill (Daniels 321).
Even the former isolationist Republican candidate for president, Wendell Willkie supported the bill. In the Senate Caucus Room on February 11th, 1941, Willkie spoke in support of the Lend-Lease Act. “He proposed sending Britain all American bombers except those needed for training. He advocated a steady flow of more and more destroyers” (Daniels 322). In retaliation, Senator Nye quoted Willkie’s earlier statement towards Roosevelt, “on the basis of his post performance with pledges to the people, you may expect war by April, 1941, if he is elected” (323). After a long pause, Willkie shrugged and admitted, “It was a bit of campaign oratory” ruefully. A roar of laughter went up among the room, and “Nye and his like seemed swept aside in the applause. […] Isolationist righteousness was routed” (323). Soon after, the bill was signed into law.
Many opponents of the Lend-Lease Act, including Senator Wheeler of Montana realized that in order to send materials to the British across the Atlantic, armed convoys would be needed. “[…] American warships would have to be assigned convoy duty. That meant putting American ships and American lives in the line of fire and it increased the possibility of an armed exchange between German and U. S. naval forces” (Grapes 37). This point, did, in fact, become reality on September 4th, 1941. During this incident, the U. S. destroyer Greer exchanged fire with a German submarine (37-8). “A week later, on September 11, Roosevelt reacted to this attack in a speech in which he announced that he had given orders to the Navy to ‘shoot on sight’ and warned that Axis warships entering the American defense zone did so ‘at their peril’” (Shirer 882). More incidents like this occurred in coming months including two in October of 1941. On the 17th, the USS Kearny was torpedoed by the Germans, and eleven American sailors were killed when the U. S. destroyer Reuban James was torpedoed on the 31st. Following these attacks, “Roosevelt declared an unlimited national emergency” (Grapes 38) which many realized brought the U. S. very much closer to the joining the war than before.
The crowning “achievement” of isolationism was the incident of the S. S. St. Louis. On May 13, 1939, the S. S. St. Louis left Hamburg, Germany with 937 passengers (one account, by Bryan Grapes, claims the number to be 936 passengers, but 937 is more likely), 930 of whom were Jewish refugees (Wiaik 6). The ship’s destination was Havana, Cuba. Fourteen days later, though, when they arrived at Havana, the Cuban government had revoked their landing permits and they were unable to land. Instead, they sailed north to Florida where they waited off the coast of Miami, close enough to see the lights from the city at night. The U. S. government, with full knowledge of the persecution that had come to these people, and the plight they faced if forced to return, sent them away.
This incident reflects the United States’ unwillingness to become entangled in European affairs. The government could not admit the Jews into the country because of harsh immigration laws imposed in 1924 under the Coolidge administration. Although by some accounts, this harsh act was completely unnecessary and was a terrible example of American indifference to the plight of the Jews, others speak of it differently. According the Bryan Grapes, the American government greatly assisted the Jews in finding safe places to live, although not in the U. S. “None […] of the passengers of the St. Louis were returned to Nazi Germany. They were all resettled in democratic countries – 288 in the United Kingdom, and the rest in France, the Netherlands, Belgium, and Denmark” (Grapes 211). What he fails to state is that four out of five of these countries mentioned were taken over by the Nazis within a few years. This incident is truly an error in judgement of the American government. An exception should have been made to keep hundreds of people from suffering at the hands of the Nazis.
The Germans put great effort into keeping America out of the war. They funded isolationist sentiments throughout the United States for a long period of time before the Japanese attack on Pearl Harbor. The Germans not only saw the United States as a threat to join the war, but they also thought that if there was no chance whatsoever of U. S. entry, then England would finally give in to the Germans. Therefore, the Germans went to great lengths to keep the U. S. neutral. “In the United States the German Embassy, under the direction of Hans Thomsen, the chargé d’affaires, was spending every dollar it could lay its hands on to support the isolationists in keeping America out of the war and thus discourage Britain from continuing it” (Shirer 747). Thomsen put particular effort into the party conventions occurring in 1940. He tried influencing both parties to include anti-war planks, especially the Republicans (748). According to German papers captured after their defeat, a Republican Congressman was paid $3,000 “to invite fifty isolationist Republican Congressmen to the Republican convention ‘So that they may work on the delegates in favor of an isolationist foreign policy’” (748). This same individual also wanted $30,000 for full-page ads in American newspapers including one in the June 25th, 1940 New York Times (748). In this ad, many Democratic Senators spoke against Roosevelt and a recent change of cabinet officials. The advertisement begins, “The Democratic Party, we believe, is the interventionist and war party and is rushing us headlong into war in efforts to quarantine and police the world with American blood and treasure” (New York Times 19). This is a reference to Roosevelt’s 1937 “Quarantine” speech, in the Midwest, where he “urged peaceful countries to unite and ‘quarantine’ international lawlessness” (U-S-History - Roosevelt, par. 8). Senator Johnson of Colorado goes on to give his opinion that “[…] If the democratic Party fails to do its duty and makes the mistake of nominating an interventionist for the office of President, so far as I am concerned, my country will come before my Party” (New York Times 19). This quote insinuates that the Democratic party, by renominating Roosevelt, is unpatriotic and will be ruining the United States, a very harsh jab at the Democrats, by a Democrat isolationist. Another Senator quoted in this German-funded isolationist advertisement is Senator Walsh of Massachusetts, another Democrat isolationist. He accuses the Roosevelt administration of not thinking of the poor or the majority of the American public, and of charging into war.
[…] Oh, the tragedy of it, that a powerful group of men of property should be challenging the peace desires of the millions of poor people who toil and labor and sacrifice to whom war brings more poverty, whose children are made for generations to eat the bread of poverty of war (19).
Senator Walsh of Massachusetts, and Senator Joe Kennedy, also of Massachusetts, although being Democrats, were very influential isolationists. This lack of sympathy towards Great Britain probably stems from their Irish backgrounds.
These Senators were bribed into making statements betraying their parties, their countries, and themselves. The German attempts to push the Presidency to Willkie failed, thankfully, and Roosevelt was able to bring about his ideas of Lend-Lease, to which Willkie joined in. There was still a large group of the United States population that was isolationist, though, right up until the attack on Pearl Harbor.
After World War I, the people of the victor nations were exhausted by the war. This tiredness of war led to a great aversion for the war by the people of Britain, France, and the United States. Among these countries “sentiments among politicians and the public turned rapidly and decisively in an anti-interventionist direction” (Cooper 5). In Britain and France, this attitude became known as appeasement. In America, it was called Isolationism. This shift in attitudes led to many new laws proclaiming the United States’ neutrality in the world. “Starting with the Senate’s surprise rejection of membership in the World Court in 1934 – which had previously been pushed by Republican presidents as well as now by the Democratic president, Franklin Roosevelt – both houses of Congress swung overwhelmingly isolationist” (6). From 1934 on, isolationism grew steadily stronger with the creation of the Neutrality Acts, one after another, in 1935, ’36, and ’37. Some historians believe isolationism was extreme throughout the late 30s because “The American people did not as yet feel insecure. It was when fear was added to moral condemnation that their temper began to change and that in increasing measure they began to feel that they might be compelled in their own interest, to combat the advance of totalitarianism” (Perkins 105). This opinion of isolationism as an idea that only thrives during times of safety is completely true. Even today, the American people feel safe, so a great percent of the population feels no need to be at war with Iraq. That is how the human mind works, and how it will continue to work in times of peace.
Although it seemed to make sense at the time that the U. S. would be safe as long as it stayed out of the war, there is a moral dilemma that must be confronted. This dilemma, whether to help those in need, was brought to the spotlight during the S. S. St. Louis incident, America made the wrong choice and turned away 937 people in need of shelter and protection. The question is, when is it more important to protect the people of your fellow nations at your own nation’s expense? This debate has continued ever since George Washington’s famous farewell address denouncing foreign “entanglements”. These “entanglements” are what keep a nation alive and thriving in the world, and must be maintained to some degree. Franklin Roosevelt realized that one day we must go to Germany, whether the American people are in favor of it or not. He, therefore, tried to get America involved as quickly as possible, against the will of his apathetic nation. Roosevelt said, wisely, “We must be the arsenal of democracy” (Daniels 321). This was true only until Japan attacked our men at Pearl Harbor and killed isolationism in America. This attack destroyed America’s false sense of security and turned us into much more than the arsenal of democracy. We became the juggernaut of the free people of the world; ready to help all the people we turned away for years. We repented for our American Isolationism.
The Great Depression
Using the 2 articles below, and the historical context article, answer the following question:
Does the current economical turmoil equate to a modern "depression"? Why do people compare the current situation to the depression of the 1930s? Do you think it is an accurate comparison? If yes, how? If no, why?
ARTICLE 1:
Posted 11.05.2008
Lessons of the Great Depression
Future painful day of reckoning?
By Rebecca Cole
"Washington was rife with both fear and optimism as Roosevelt was sworn in on March 4, 1933 - fear that the economy might not recover and optimism that the new and assertive president just might make a difference." -- Myths of the Great Depression, Lawrence Reed
Nearly every article written recently about the economic meltdown usually contains the phrase, "the worst financial crisis since the Great Depression" to describe the current state of affairs.
Last month, Lawrence Reed, president of the Foundation for Economic Education, a free-market think-tank, drew parallels between today’s crisis and what he terms the "myths" of the Great Depression.
"If we ignore history, we will be condemned to repeat it," Reed told a crowd of about 75 undergraduates and guests at Colorado Christian University in Lakewood. "I’d like to say the Federal Reserve has learned from the Great Depression, but maybe not all the lessons."
Reed said the years of expansion in the 1920’s were caused primarily by the Fed’s "disastrous mismanagement" of monetary policy. Driving interest rates to historic lows ensured bloated liquidity and created an artificial short-term boom. As commodity prices skyrocketed and the dollar plunged, it all came crashing down on October 24, 1929.
Sound familiar?
In today’s global financial crash, initial finger-pointing was aimed at greedy Wall Street investment banks that peddled chopped-up mortgage securities and credit default swaps around the world. But now former Fed chairman Alan Greenspan is in the hot seat for keeping interest rates too low for too long and fueling the housing boom at the root of the financial mess.
The real danger, Reed said, is if the new administration makes the kind of monetary mistakes he says a "silver-tongued" President Franklin Roosevelt made with his New Deal policies — doubling the tax rate for those in the top bracket, raising tariffs, implementing price controls and choking the monetary supply — that turned a recession into a severe and prolonged depression.
"Speeches are no substitute for good policy, as the 1930s demonstrated," Reed said. "FDR could give a fireside chat like no other. But if the policies are bad, they will not restore confidence."
Blasting the Bush administration’s bailout mentality, Reed said it amounts to nothing more than a short-term stimulus.
"Debts aren’t disappearing; they’re only getting transferred," he said. "We’re not removing malfeasance in this behavior; we’re subsidizing it. In the short run, it may make you feel good, but in the long run there’s a piper to be paid."
Calling for a "quick and healthy adjustment," Reed said any effort to forestall an inevitable correction is only going to "put the day of reckoning off" and make it more painful in the future. "There’s a cleansing that takes place when markets are allowed to go to where values really are. When we prevent that cleansing, we just prop up the system for a more painful future correction."
Reed said the Bush administration is "a disaster on the spending front, one of the worst in our history," and that he’s not happy with either of the possible replacements. With the election over and Sen. Barack Obama declared the winner, he will inherit a record $455 billion deficit — doubled from its level at $162 billion just one year ago — and an overall national debt north of $10 trillion.
"There needs to be less government meddling and more personal responsibility," Reed said.
Tucker Hart Adams, president of the Adams Group, who has monitored and analyzed the Colorado economy for 30 years, agrees with Reed’s analysis to some extent in terms of personal responsibility. "Nobody wants to say it’s our fault, as a country, as individuals, for trying to live beyond our means as we have done for several decades, and it has just gotten worse and worse."
But Hart Adams disagreed with Reed on the $700 billion rescue plan and said there is a clear place for government regulation, especially in terms of transparency. "Markets work when you have perfect information. We didn’t have that, and nobody cared, nobody asked."
To step back and let the market chart its own course, she said, would cause horrible suffering — and with the interconnected global economy, not just here in the U.S — that could be prevented.
"We need jobs, we need people paying taxes, we need goods and services produced," Hart Adams said. "And if we have to smooth the transition period in order to not have bread lines and 25 percent unemployment I think that’s a valid role for government.
"We’re going to have to pay one way or the other, unless we’re going to just say, ‘Let ’em starve,’" she said.
Rebecca Cole is the online editor at Rocky Mountain Institute, a non-profit "think-and-do" tank that drives the efficient use of energy and resources. Learn more about RMI's latest initiative, Reinventing Fire, to move the U.S. off fossil fuels by 2050.
ARTICLE 2:
USA 2008: The Great Depression
Food stamps are the symbol of poverty in the US. In the era of the credit crunch, a record 28 million Americans are now relying on them to survive – a sure sign the world's richest country faces economic crisis
By David Usborne in New York
Tuesday, 1 April 2008
We knew things were bad on Wall Street, but on Main Street it may be worse. Startling official statistics show that as a new economic recession stalks the United States, a record number of Americans will shortly be depending on food stamps just to feed themselves and their families.
Dismal projections by the Congressional Budget Office in Washington suggest that in the fiscal year starting in October, 28 million people in the US will be using government food stamps to buy essential groceries, the highest level since the food assistance programme was introduced in the 1960s.
The increase – from 26.5 million in 2007 – is due partly to recent efforts to increase public awareness of the programme and also a switch from paper coupons to electronic debit cards. But above all it is the pressures being exerted on ordinary Americans by an economy that is suddenly beset by troubles. Housing foreclosures, accelerating jobs losses and fast-rising prices all add to the squeeze.
Emblematic of the downturn until now has been the parades of houses seized in foreclosure all across the country, and myriad families separated from their homes. But now the crisis is starting to hit the country in its gut. Getting food on the table is a challenge many Americans are finding harder to meet. As a barometer of the country's economic health, food stamp usage may not be perfect, but can certainly tell a story.
Michigan has been in its own mini-recession for years as its collapsing industrial base, particularly in the car industry, has cast more and more out of work. Now, one in eight residents of the state is on food stamps, double the level in 2000. "We have seen a dramatic increase in recent years, but we have also seen it climbing more in recent months," Maureen Sorbet, a spokeswoman for Michigan's programme, said. "It's been increasing steadily. Without the programme, some families and kids would be going without."
But the trend is not restricted to the rust-belt regions. Forty states are reporting increases in applications for the stamps, actually electronic cards that are filled automatically once a month by the government and are swiped by shoppers at the till, in the 12 months from December 2006. At least six states, including Florida, Arizona and Maryland, have had a 10 per cent increase in the past year.
In Rhode Island, the segment of the population on food stamps has risen by 18 per cent in two years. The food programme started 40 years ago when hunger was still a daily fact of life for many Americans. The recent switch from paper coupons to the plastic card system has helped remove some of the stigma associated with the food stamp programme. The card can be swiped as easily as a bank debit card. To qualify for the cards, Americans do not have to be exactly on the breadline. The programme is available to people whose earnings are just above the official poverty line. For Hubert Liepnieks, the card is a lifeline he could never afford to lose. Just out of prison, he sleeps in overnight shelters in Manhattan and uses the card at a Morgan Williams supermarket on East 23rd Street. Yesterday, he and his fiancée, Christine Schultz, who is in a wheelchair, shared one banana and a cup of coffee bought with the 82 cents left on it.
"They should be refilling it in the next three or four days," Liepnieks says. At times, he admits, he and friends bargain with owners of the smaller grocery shops to trade the value of their cards for cash, although it is illegal. "It can be done. I get $7 back on $10."
Richard Enright, the manager at this Morgan Williams, says the numbers of customers on food stamps has been steady but he expects that to rise soon. "In this location, it's still mostly old people and people who have retired from city jobs on stamps," he says. Food stamp money was designed to supplement what people could buy rather than covering all the costs of a family's groceries. But the problem now, Mr Enright says, is that soaring prices are squeezing the value of the benefits.
"Last St Patrick's Day, we were selling Irish soda bread for $1.99. This year it was $2.99. Prices are just spiralling up, because of the cost of gas trucking the food into the city and because of commodity prices. People complain, but I tell them it's not my fault everything is more expensive."
The US Department of Agriculture says the cost of feeding a low-income family of four has risen 6 per cent in 12 months. "The amount of food stamps per household hasn't gone up with the food costs," says Dayna Ballantyne, who runs a food bank in Des Moines, Iowa. "Our clients are finding they aren't able to purchase food like they used to."
And the next monthly job numbers, to be released this Friday, are likely to show 50,000 more jobs were lost nationwide in March, and the unemployment rate is up to perhaps 5 per cent.
HISTORICAL BACKGROUND:
The Great Depression as Historical Problem
Michael A. Bernstein
It is now well over a half-century since the Great Depression of the 1930s, the most severe and protracted economic crisis in American history. To this day, there exists no general agreement about its causes, although there tends to be some consensus regarding its consequences. Those who at the time argued that the depression was symptomatic of a profound weakness in the mechanisms of capitalism were only briefly heard. After World War II, their views appeared hysterical and exaggerated, as the industrialized nations sustained dramatic rates of growth and as the economics profession became increasingly preoccupied with the development of Keynesian theory. As a result, the economic slump of the interwar period came to be viewed as a policy problem rather than the outgrowth of fundamental tendencies of capitalism. The presumption was that the Great Depression could never be repeated owing to the increasing sophistication of economic analysis and policy formulation. Indeed, the belief became commonplace that the business cycle was "tamed" and "obsolete."
The erratic performance of the American economy during the 1970s and 1980s and more recent challenges associated with globalization have made this notion itself obsolete. Entirely new varieties of economic thinking have emerged, asserting that the government cannot alter levels of real output except under exceptional circumstances. Indeed, confidence in the "Keynesian Revolution" has been shaken, and a new "classicism" has come to prominence in economic thought.
In this climate of economic opinion, it is important to remember that the postwar optimism for Keynesian economics emerged at a time of dramatic reconstruction in the world economy and concomitant prosperity in the United States. Such hope had been absent in the decade of the Great Depression, and even during the war years there had been apprehension that a return to depression would come close on the heels of victory. But the high growth rates of the fifties and sixties obscured the prewar debates and dissolved for the moment any fears of a return to hard times.
Yet far from being resolved, the concerns and misgivings of the depression and war years simply faded from view. It has by now long been fashionable to claim that "Keynes is dead," and few economists choose to engage with the ideas of an older generation who struggled to understand devastating events at a time when orthodox theories and remedies no longer sufficed. Indeed, the vast majority of contemporary economists have grown decidedly hostile to arguments concerning the Great Depression that do not focus on the short run or on policy failure. In this respect, they have avoided the structural, institutional, and long-run perspectives more characteristic of the work of their forebears who sought to situate the Great Depression within a historical framework that spanned several decades or more. By so doing, they have lost an appreciation not simply of some possible causes of the Great Depression itself, but also of the subsequent development and performance of the American economy since mid-century. It is for this reason that I seek, through a reassessment of these older analytical approaches, to persuade you of the insight afforded by an understanding of "The Great Depression as Historical Problem."
Trends in the Literature
The older literature concerning the Great Depression in the United States may be broadly classified into three categories. One set argued that the severity and length of the downturn was the direct result of the collapse of financial markets that began in 1929. Such work emphasized the causes of the 1929 crash and those factors that amplified its impact. Another school of thought concluded that the economic calamity of the 1930s was the direct result of poorly formulated and politically distorted actions undertaken by the government. A third set of research took a broader perspective and attempted to analyze the depression in a long-run context. It suggested that whatever the origins of the slump, the reasons for its unparalleled length and severity predated and transcended the events of 1929.
The Stock Market Crash as Cause
All short-run analyses of the Great Depression shared a common attribute. They focused on the immediate causes and impacts of the New York Stock Market collapse of 1929, and they asserted that the resulting devaluation of wealth and disruption of the banking system explained the intensity of the crisis. The "business confidence" thesis was perhaps the best example of this school of thought. It held that regardless of the mechanisms that caused the collapse, the dramatic slide of the stock market created intensely pessimistic expectations in the business community. The shock to confidence was so severe and unexpected that a dramatic panic took hold, stifling investment and thereby a full recovery.
A more comprehensive formulation of the short-run argument directly confronted the question of why financial markets collapsed. Looking to the political and institutional distortions created by the Treaty of Versailles, some writers (such as Irving Fisher and Lionel Robbins) argued that the depression was the inevitable consequence of the chaotic and unstable credit structure of the twenties. The principal irritant consisted of a dangerous circle of obligations and risks, epitomized by the Dawes Plan of 1924, in which the United States lent funds to Great Britain, France, and Germany, at the same time the Allies depended on German reparations to liquidate their American debts. By 1928 American banks were already quite wary of the situation, but their predictable response, cutting back on loans to European governments, merely made the situation worse.
Moreover, the demise of the gold standard in international trade and demands that Germany make reparations payments in gold created a net gold flow into the United States that led to a veritable explosion of credit. Extremely unstable credit arrangements thereby emerged in the twenties, and once the crash came, the collapse of the banking system was quick to follow. Thus excessive credit and speculation, coupled with a weak banking network, caused the Great Depression.
Another version of the short-run approach concerned the immediate effects of the crash on consumer wealth and spending. The severity of the downturn, it was argued, resulted in a drastic devaluation of consumer wealth and a loss of confidence in credit. The resulting decreases in purchasing power left the economy saddled with excess capacity and inadequate demand.
None of these short-run arguments were completely convincing. Because the business confidence thesis was subjective, it was virtually impossible to evaluate in the light of historical evidence. There was also the objection that notions like these mistook effect for cause; the economic circumstances of the thirties may have generated pessimism and panic, rather than being caused by such feelings.
Later economists frequently rejected the excessive credit and speculation argument on the grounds that it abstracted too boldly from real rather than monetary events in the interwar economy. Indeed, business cycle indicators turned down before the stock market crashed. Indices of industrial production started to fall by the summer of 1929, and a softness in construction activity was apparent in 1928. Such critics as John Kenneth Galbraith held that "cause and effect run from the economy to the stock market, never the reverse. Had the economy been fundamentally sound in 1929 the effect of the great stock market crash might have been small . . . the shock to confidence and the loss of spending by those who were caught in the market might soon have worn off."
As for the wealth and spending hypothesis, the evidence did not provide compelling proof. The dramatic decline in consumption expenditures after 1929 may have been due to the stock market debacle; it may have arisen once expectations had been dampened by the events after 1929; or it may have been an outgrowth of a declining trend in construction activity and in farm incomes during the twenties. But even recent investigations have been incapable of unambiguously explaining a large portion of the decline in spending. We can speak of a drop, but we cannot say for sure why it happened.
Policy Errors as Cause
Another approach to understanding the Great Depression evaluated the extent to which the slump was the result of systematic policy errors. According to this school of thought, inadequate theory, misleading information, and political pressures distorted the policy-making process. Such investigators as Melvin Brockie, Kenneth Roose, and Sumner Slichter maintained that from 1932 onward the American economy showed great potential for recovery, only to be set back profoundly by the 1936 recession. They asserted that the New Deal's Industrial Codes raised labor costs and material input prices, thus negating whatever monetary stimulus existed. The rhetoric and ideology of the Roosevelt Administration may have further contributed to the downturn by jeopardizing the confidence of the business community. Not surprisingly, several investigators labeled the downturn of 1936-1937 the "Roosevelt Recession."
It was not solely criticisms of actual government policy in which these writers indulged to explain the depression's unusual severity. In some cases they also criticized the government for not doing enough. They maintained that the private sector moved too quickly in the mid 1930s in raising prices. As a result, by 1937 consumers increasingly resisted higher prices as they sought to liquidate the large debt incurred earlier in the decade and to maintain their savings in uncertain times. The average propensity to consume subsequently fell, and a recession took hold. Pro-competitive policies presumably were the solution, but government action (such as the creation of the Temporary National Economic Committee to Investigate the Concentration of Economic Power) was too little, too late, and was often inspired more by political than economic concerns.
The notion that the Great Depression was essentially an outgrowth of policy failures was problematic at best. To be sure, one could with the benefit of hindsight engage in some forceful criticism of economic policy during the 1930s. But it seems a futile exercise. After all, in many respects the Roosevelt Administration (especially the Board of Governors of the Federal Reserve System) did what many of its predecessors had done in the face of a cyclical downturn. One must ask, therefore, how government officials suddenly became so inept in the interwar period. Moreover, the question remains: why were traditional policies that had seemingly worked in the past and that represented a theoretical consensus among generations of economists suddenly so perverse in the 1930s? What had changed in the structure and operation of the national economy in the interwar period that made orthodox economic theory and policy inadequate?
Long-Run Factors as Cause
The literature that focused on long-run factors in the American depression was distinctive in holding that the stock market crash of 1929 was less important than certain developments in the economy that had deleterious impacts throughout the interwar period. Some authors (for example, Seymour Harris and Paul Sweezy) argued that during the 1920s the distribution of national income became increasingly skewed, lowering the economy's overall propensity to consume. Others, such as Charles Kindleberger, W. Arthur Lewis, and Vladimir Timoshenko, focused on a shift in the terms of trade between primary products and manufactured goods, due to the uneven development of the agricultural and industrial nations. This change in the terms of trade, they argued, created a credit crisis in world markets during the bad crop yields of 1929 and 1930. At the same time that agricultural economies were losing revenue because of poor harvests and declining world demand, the developed economies were contracting credit for the developing nations and imposing massive trade restrictions such as America's Hawley-Smoot Tariff of 1930. As the agricultural nations went into a slump, the industrialized countries (most notably the United States) lost a major market for their output. Hence, the downturn of 1929 became more and more severe.
Industrial organization economists (Adolf Berle and Gardiner Means most prominent among them) sought an explanation of the depression in the trend toward imperfect competition in the American economy of the early twentieth century. After the crash of 1929, prices became increasingly inflexible, due to the concentrated structure of American industry and the impact of labor unions. On the one side, these "sticky prices" further limited the already constrained purchasing power of consumers. On the other, noncompetitive pricing predominated in the capital goods sector, meaning producers were less willing to buy new plants and equipment. Price inflexibility thus inhibited the recovery of both final product demand and investment demand.
There were several weaknesses in these theories. Those authors who focused on an increasingly unequal distribution of income did not marshal unambiguous evidence to make their case, nor did they specify precisely how such factors came to life in the interwar economy. While Berle and Means claimed to have demonstrated a relative price inflexibility in concentrated economic sectors during the 1930s, their critics were unconvinced. Given that the aggregate price level fell by one-third in the early thirties, they argued, how inflexible could the general price system have been? The "sticky prices" thesis also relied on an assumption of perfect competition in all markets other than those where the imperfections existed. If this assumption were relaxed, the thesis did not hold.
The terms of trade argument similarly had a major flaw. The major weaknesses in the American economy of the interwar period were domestic, and the collapse of demand on the part of agricultural nations was not highly relevant. During the 1920s, exports as a share of the nation's gross national product had annually averaged only a bit over 5 percent. A fall in export demand, then, could not have played a major role in worsening or prolonging the Great Depression.
Theories of Economic Stagnation
Continued research on the Great Depression necessarily relied upon the work of Joseph Schumpeter on cyclical processes in modern economies. Schumpeter held that the interwar period was an era in which three major cycles of economic activity in the United States (and Europe) coincidentally reached their nadir. These cycles were 1) the Kondratieff, a wave of fifty or more years associated with the introduction and dispersion of major inventions; 2) the Juglar, a wave of approximately ten years' duration that appeared to be linked with population movements; and 3) the Kitchin, a wave of about forty months' length that had the appearance of a typical inventory cycle.
Schumpeter's efforts were paralleled by those of Simon Kuznets and, more recently, Moses Abramovitz and Richard Easterlin. Kuznets was successful in documenting the existence of waves of some fifteen to twenty years in length. These periodic swings, according to Abramovitz, demonstrated that in the United States and other industrialized countries, "development during the nineteenth and early twentieth centuries took the form of a series of surges in the growth of output and in capital and labor resources followed by periods of retarded growth." Significantly, "each period of retardation in the rate of growth of output . . . culminated in a protracted depression or in a period of stagnation in which business cycle recoveries were disappointing, failing to lift the economy to a condition of full employment or doing so only transiently." The specific behavioral mechanisms that could account for the Kuznets phenomenon (and its precise manifestation in the United States in the 1930s) were necessarily the focus of continued debate. It is in this context that we can understand the large literature on "secular stagnation."
In general, stagnation theorists agreed that stagnation, or economic maturity, as it was sometimes called, involved a "decrease of the rate of growth of heavy industries and of building activity . . . [and] the slowing down of the rate of growth of the total quantity of production, of employment, and usually of population. It [also involved] the rising relative importance of consumer goods." However, they differed in emphasis, falling into two broadly defined groups: those who focused on the decline of new technologies and those who were more concerned with the shrinkage of investment outlets as the rate of population growth fell. Followers of this second school held that as population growth fell off, and as major markets in housing, clothing, food, and services consequently contracted, outlets for new investment were quickly limited.
Both variants of stagnation theory had limitations. For one, arguments concerning economic maturity and population growth conflated population with effective demand. As one critic put it: "[i]t is sometimes maintained that the increase in population encourages investment because the entrepreneurs anticipate a broadening market. What is important, however, in this context is not the increase in population but in purchasing power. The increase in the number of paupers does not broaden the market."
Much like the population theory, the variant of stagnation theory that focused on the decline of technological change embodied many inconsistencies and questionable assertions. Proponents of this school claimed that the lower rate of technological innovation (said to be a primary cause of the economy's inability to recover from the depression) derived from the state of technological knowledge at the time, yet they offered little justification of this position. A further objection to the technology argument was apparent to some of the stagnation theorists themselves. Their work contained an implicit assumption that new innovations were always of the capital-using type, but if innovations were capital-saving, their argument foundered. Heavy investment (in railroads, motor cars, and housing, for example) during earlier stages of economic growth may have given way in later periods to newer forms of investment in managerial technique and information processing. These latter innovations may not have absorbed very large amounts of investment expenditure at all. While they may have improved the organization and efficiency of production, their impact on spending would not have been adequate to the task of systematic recovery.
The Work of Josef Steindl
It was the Austrian economist Josef Steindl who provided the most sophisticated version of the economy maturity idea. Not surprisingly, he did so in part by explicitly situating the Great Depression in the United States within a long-term development framework. His work linked economic stagnation directly with the behavior of capitalist enterprise, thereby avoiding the mechanistic qualities of many of the stagnation arguments as well as their frequent appeals to external factors. Steindl's version of the maturity thesis was that long-run tendencies toward capital concentration, inherent in capitalist development over time, led to a lethargic attitude toward competition and investment. Specifically, the emergence of concentrated markets prevented the utilization of excess capacity that is required for an economic revival.
Price inflexibility in concentrated industries is intensified during depressions, and this has an important impact on the response of firms to economic fluctuations. Firms' revenues tend to be so jeopardized in a slump that price reduction seems unfeasible. There may even be incentives to raise prices in order to compensate for the reduction in sales. For a given industry, therefore, the impact of a decline in the growth rate will depend on the extent to which the industry is concentrated. In a sector where the squeezing out of competitors is relatively easy, large declines in demand will result in the reduction of profit margins for each firm as prices are cut. By contrast, in a concentrated market, profit margins will tend to be inelastic in the face of lowered demand.
At the macroeconomic level the implications of inelastic profit margins are most profound. In these circumstances, price reductions do not compensate for declines in the rate of growth, and thus companies tend to reduce their rate of capacity utilization. Reductions in capacity utilization imply not only declines in national income but also increases in unemployment. In the presence of underutilized capacity, firms will be increasingly disinclined to undertake any net investment. A cumulative process is thereby established wherein a decline in the rate of growth, by generating reductions in the rate of capacity utilization, will lead to a further decline in the rate of expansion as net investment is reduced. Individual firms, by believing that decreases in their own investment will alleviate their own burden of excess capacity, merely intensify the problem economy-wide. The greater the proportion of the nation's industry that is highly concentrated, the greater the tendency for a cyclical downturn to develop into a progressive (and seemingly endless) decline.
A further consequence of the existence of highly concentrated sectors in the national economy is the impact it has on demand. The higher profit margins secured by large firms are indicative of an increasingly skewed distribution of output that, when combined with the reluctance of firms to invest (or otherwise spend) their revenues, generates a rising aggregate marginal propensity to save. Declining effective demand is combined with rising excess capacity when a slump occurs. The potential for recovery, barring the intervention of exogenous shocks, government spending, or the penetration of foreign markets, is therefore greatly lessened.
What is central to Steindl's thesis is the concept of long-term alterations in industrial structure that make the economy as a whole less capable both of recovering from cyclical instability and of generating continued growth. He assumed the emergence of oligopolistic market structure to be inherent in the process of capitalist development, because of capitalism's tendencies toward the development of large-scale manufacturing techniques and financial concentration. Economic maturity and the threat of stagnation result because the growing incidence of "[o]ligopoly brings about a maldistribution of funds by shifting profits to those industries which are reluctant to use them." In order to escape stagnation, capital must be redistributed either to more competitive sectors or new industries.
Indeed, during the Great Depression, some members of Roosevelt's "Brain Trust," such as Rexford Tugwell, argued forcefully for the imposition of an "undistributed profits tax" to prevent the accumulation of corporate surpluses. The incentive of the tax, it was claimed, would lead firms to issue more of their surpluses in the form of productive investment or dividends. As a result, the mobilization of capital resources would be more efficient and more likely to generate recovery. Embedded in the Revenue Act of 1936, the undistributed profits tax proved to be one of the most unpopular and controversial pieces of legislation to emerge from the New Deal, and it was repealed in 1938.
Interestingly enough, there exists no clear relationship between stagnation and concentration in American industry during the Great Depression. By applying a static conception of market structure, investigators have tended to focus on the number of firms in an industry as the primary determinant of a sector's competitiveness. Yet, as I discovered in my own research, some highly concentrated industries were relatively vibrant during the decade, while others appeared virtually moribund. Clearly, the evidence concerning market structure was a frail reed upon which Steindl based his theory. Whether a given industry is dynamic or not involves several issues unrelated to the number of firms or the extent of capital concentration issues having to do with the industry's position in the economy's input-output matrix, the durability of its output, and the relative maturity of the industry with respect to the shifting composition of the economy as a whole.
The weaknesses in Steindl's analysis do not, of course, obscure the importance of his contribution to an understanding of the Great Depression in particular, and of mature capitalist economies in general. That importance derives from the fact that Steindl attempted to situate the decade of the thirties within a larger historical framework. In this context, he could view the Great Depression as the outcome of an interaction between cyclical forces dating from 1929 and tendencies of long-run development spanning a half-century or more. In short, he was thus able to understand the Great Depression as a historical problem.
The U.S. Economy Since the Great Depression
Steindl had, of course, focused his work on the interwar economic crisis of the 1930s. His central theses regarding maturity and stagnation in advanced capitalist economies seemed particularly compelling when viewed in terms of the long-run historical experience of the Great Depression. Yet both the postwar record, at least in the case of the United States, and some of the theoretical lacunae in his earlier claims, led Steindl to modify some of the arguments of his 1952 book. With the 1976 republication of his Maturity and Stagnation in American Capitalism, Steindl allowed that technical innovation, product development, public spending, and research and development initiatives might provide the means to escape from investment inertia. Even so, he was extremely concerned that most accumulation strategies in mature capitalist nations would focus on military-industrial activity and war itself. Using both public and private investment funds for other purposes, while obviously desirable, would be "exceedingly hard" given "the workings of political institutions."
The wisdom (not to mention the prescience) of Steindl's 1976 observations becomes apparent as soon as one surveys the more recent evolution of American capitalism. American accumulation in the latter half of the twentieth century, on the one side, confirmed many of Steindl's suppositions regarding expansion in advanced industrial states. On the other, it demonstrated both the unique and abiding flexibility of capitalism in the face of contradictory tendencies toward underutilization, and the importance of political and social forces often thought by economists to be superfluous. In all these respects, contemporary history reveals the conceptual power and importance of what Steindl had to say when he first examined the crisis of the1930s. But it also reminds us of the unyielding impacts of contingency and human agency in economic performance over time.
World War II achieved in the United States, of course, what the New Deal could not--economic recovery. With the start of war in Europe, the unemployment rate began to fall so that by the time of the Japanese naval offensive at Pearl Harbor, only 7 percent of the labor force remained idle. American entry into the war brought almost instantaneous resolution of the persistent economic difficulties of the interwar years. Between 1939 and1944 the national product, measured in current dollars, increased by almost 125 percent, ultimately rising to $212 billion by 1945.
Yet as World War II came to a close many economists and businesspeople worried about the possibility of a drop in the level of prosperity and employment. But these apprehensions proved to be unwarranted. In the first year after the war, gross national product fell less than the postwar reduction in government spending; unemployment did not even reach 4 percent; consumer spending did not fall at all, and eventually rose dramatically. Although recessions occurred between 1945 and the mid 1970s, most of them lasted only about a year or less, and none of them remotely approached the severity of the Great Depression. During these three decades American output steadily increased with only minor setbacks. According to the Federal Reserve Board's index, manufacturing production doubled between 1945 and 1965, and tripled between 1945 and 1976.
Such robust economic performance is hardly surprising in wartime especially when conflict is global and, with few exceptions, kept outside of national boundaries. What is most striking about the American economic experience linked with World War II was the enduring growth and prosperity of the postwar years. Consumption and investment behavior played a major part in this great prosperity of the late forties and fifties. As soon as Germany and Japan surrendered, private and foreign investment in the United States rose quickly. On the domestic side, reconversion was itself an investment stimulus. Modernization and deferred replacement projects required substantial deployments of funds. Profound scarcities of consumer goods, the production of which had been long postponed by wartime mobilization, necessitated major retooling and expansion efforts. Even fear of high inflation brought on by the dismantling of wartime price and wage controls prompted many firms to move forward the date of ambitious and long-term investment projects. On the foreign side, both individuals and governments were eager to find a refuge for capital that had been in virtual hiding during the war. Along with a jump in domestic investment, therefore, a large capital inflow began in late 1945 and early 1946.
Domestic consumption was the second major component of postwar growth. Bridled demand and high household savings due to wartime shortages, rationing, and controls, coupled with the generous wages of the war economy, contributed to a dramatic growth in consumer spending at war's end. The jump in disposable income was bolstered by the rapid reduction in wartime surtaxes and excises. And the baby boom of the wartime generation expressed itself economically in high levels of demand for significant items like appliances, automobiles, and housing. G.I. Bill benefits additionally served to increase the demand for housing and such things as educational services, with associated impact on construction and other industrial sectors.
Foreign demand for American exports grew rapidly in the immediate postwar years. In part the needs of devastated areas could only be met by the one industrial base that had been nearly untouched by war-related destruction. Explicit policy commitments to the rebuilding of allied and occupied territories, such as the Marshall Plan in Europe, also served to increase the foreign market for the output of American industry.
American postwar prosperity and the benefits of world economic leadership continued throughout most of the 1950s. But the prosperity of the decade, while robust and impressive, nevertheless weakened by 1957. This set the stage for the arrival of a new brand of economics in Washington, explicitly (and self-consciously) imbued with the doctrines of Keynesianism.
From the "New Frontier" policies of John F. Kennedy, to the "Great Society" agenda of his successor Lyndon Johnson, through the declaration of a "New Federalism" by Richard Nixon, there ensued an era of sustained central government intervention in the nation's economic life. The goal of many (but not all) of the "new" economists of the early 1960s--achieving simultaneously acceptable levels of unemployment and inflation--has more recently shattered. But throughout the sixties and much of the seventies (and for some even during the eighties) the perceived obligation of government to secure overall economic instability was not seriously questioned and remained one of the more important changes of twentieth-century American economic history.
Historical specificity notwithstanding, American economic performance in the latter half of the twentieth century seems to have conformed in many respects with the general analytical propositions derived from interwar economics. The ability to forestall and/or overcome tendencies toward economic stagnation has depended upon a varied set of circumstances, both global and domestic. But a continuation of such a charmed existence is apparently no longer possible. Josef Steindl himself noted, in 1976, that "the cheerful extroverted era of [postwar] growth has apparently come to an end." And, in words that today seem as relevant as they did over twenty years ago, he noted that the reasons for this were "the reduction of tension between the superpowers . . . the increase in tension within the capitalist countries . . . and . . . the emergence of environment, raw material, and energy problems . . . ."
In the midst of a return to the unstable growth of earlier decades, an altogether reactionary (re)orientation of fiscal and monetary policy has occurred. A resurgence of general equilibrium approaches to cyclical phenomena has prompted the formupoignancy of this state of contemporary affairs are made strikingly clear when we reflect upon the Great Depression as a significant and coherent historical problem. q
Note on this Issue: As this article amply demonstrates, consideration of the economic history of the Great Depression necessarily focuses on both quantitative and aggregate data that tend to obscure the human dimensions of the event. Indeed, the challenge for those of us who teach about this profound economic crisis is to find substantive ways in which to link the economics of the interwar years with the personal and social experience of its contemporaries. It is for this reason that the inspired work of the contributors to this special issue of the OAH Magazine of History should prove so useful to all of us in our work with students. In the pages that follow, readers will find visual and textual examination of the many ways in which Americans endured, understood, and ultimately overcame the burdens of the Great Depression. These articles and lesson plans will assist us all in our determination to convey to students the singular nature of the economic crisis of the interwar era and the remarkable accomplishments of the generation that lived through it.
Bibliography
Abramovitz, Moses. "The Nature and Significance of Kuznets Cycles." Economic Development and Cultural Change 9 (1961): 225-48.
Bernstein, Michael A. The Great Depression: Delayed Recovery and Economic Change in America, 1929-1939. New York: Cambridge University Press, 1987.
Brockie, M. "Theories of the 1937-38 Crisis and Depression." Economic Journal 60 (1950): 292-310.
Easterlin, Richard A. Population, Labor Force, and Long Swings in Economic Growth: The American Experience. New York: National Bureau of Economic Research, 1968.
Fisher, Irving. Booms and Depressions: Some First Principles. New York: Adelphi, 1932.
------. The Stock Market Crash And After. New York: Macmillan, 1930.
Galbraith, John Kenneth. The Great Crash, 1929. 3d ed. Boston: Houghton Mifflin, 1972.
Harris, Seymour. Saving American Capitalism: A Liberal Economic Program. New York: Knopf, 1948.
Keynes, John Maynard. The General Theory of Employment, Interest, and Money. New York: Harcourt, Brace and World, 1964.
Kindleberger, Charles Poor. The World in Depression: 1929-1939. Berkeley: University of California Press, 1973.
Kuznets, Simon. "Long Swings in the Growth of Population and in Related Economic Variables." Proceedings of the American Philosophical Society 102 (1958): 25-52.
Lewis, W. Arthur. Economic Survey, 1919-1939. Philadelphia: Blakiston, 1950.
Means, Gardiner C., and Adolf A. Berle. The Modern Corporation and Private Property. New York: Harcourt, Brace and World, 1968.
Roose, Kenneth D. The Economics of Recession and Revival: An Interpretation of 1937-1938. New Haven: Yale University Press, 1954.
Schumpeter, Joseph A. Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process. New York: McGraw-Hill, 1939.
Slichter, Sumner. "The Downturn of 1937." Review of Economics and Statistics 20 (1938): 103-15.
Steindl, Josef. Maturity and Stagnation in American Capitalism. 1945. Reprint, New York: Monthly Review Press, 1976.
------. "On Maturity in Capitalist Economies." In Problems of Economic Dynamics and Planning: Essays in Honour of Michal Kalecki, 423-32. New York: Pergamon, 1966.
------. "Reflections on the Present State of Economics." Banca Nazionale del Lavoro Quarterly Review 148 (1984): 3-14.
Sweezy, P. M. "Demand Under Conditions of Oligopoly." Journal of Political Economy 47 (1939): 568-73.
Timoshenko, Valdimir P. World Agriculture and the Depression. Ann Arbor: University of Michigan Press, 1933.
United States Department of Commerce. Historical Statistics of the United States: Colonial Times to 1970. Washington, DC: Government Printing Office, 1975.
________________________________________
Michael A. Bernstein is a professor of history and associated faculty member in economics at the University of California, San Diego. His most recent book is A Perilous Progress: Economists and Public Purpose in Twentieth-Century America (2001).
Does the current economical turmoil equate to a modern "depression"? Why do people compare the current situation to the depression of the 1930s? Do you think it is an accurate comparison? If yes, how? If no, why?
ARTICLE 1:
Posted 11.05.2008
Lessons of the Great Depression
Future painful day of reckoning?
By Rebecca Cole
"Washington was rife with both fear and optimism as Roosevelt was sworn in on March 4, 1933 - fear that the economy might not recover and optimism that the new and assertive president just might make a difference." -- Myths of the Great Depression, Lawrence Reed
Nearly every article written recently about the economic meltdown usually contains the phrase, "the worst financial crisis since the Great Depression" to describe the current state of affairs.
Last month, Lawrence Reed, president of the Foundation for Economic Education, a free-market think-tank, drew parallels between today’s crisis and what he terms the "myths" of the Great Depression.
"If we ignore history, we will be condemned to repeat it," Reed told a crowd of about 75 undergraduates and guests at Colorado Christian University in Lakewood. "I’d like to say the Federal Reserve has learned from the Great Depression, but maybe not all the lessons."
Reed said the years of expansion in the 1920’s were caused primarily by the Fed’s "disastrous mismanagement" of monetary policy. Driving interest rates to historic lows ensured bloated liquidity and created an artificial short-term boom. As commodity prices skyrocketed and the dollar plunged, it all came crashing down on October 24, 1929.
Sound familiar?
In today’s global financial crash, initial finger-pointing was aimed at greedy Wall Street investment banks that peddled chopped-up mortgage securities and credit default swaps around the world. But now former Fed chairman Alan Greenspan is in the hot seat for keeping interest rates too low for too long and fueling the housing boom at the root of the financial mess.
The real danger, Reed said, is if the new administration makes the kind of monetary mistakes he says a "silver-tongued" President Franklin Roosevelt made with his New Deal policies — doubling the tax rate for those in the top bracket, raising tariffs, implementing price controls and choking the monetary supply — that turned a recession into a severe and prolonged depression.
"Speeches are no substitute for good policy, as the 1930s demonstrated," Reed said. "FDR could give a fireside chat like no other. But if the policies are bad, they will not restore confidence."
Blasting the Bush administration’s bailout mentality, Reed said it amounts to nothing more than a short-term stimulus.
"Debts aren’t disappearing; they’re only getting transferred," he said. "We’re not removing malfeasance in this behavior; we’re subsidizing it. In the short run, it may make you feel good, but in the long run there’s a piper to be paid."
Calling for a "quick and healthy adjustment," Reed said any effort to forestall an inevitable correction is only going to "put the day of reckoning off" and make it more painful in the future. "There’s a cleansing that takes place when markets are allowed to go to where values really are. When we prevent that cleansing, we just prop up the system for a more painful future correction."
Reed said the Bush administration is "a disaster on the spending front, one of the worst in our history," and that he’s not happy with either of the possible replacements. With the election over and Sen. Barack Obama declared the winner, he will inherit a record $455 billion deficit — doubled from its level at $162 billion just one year ago — and an overall national debt north of $10 trillion.
"There needs to be less government meddling and more personal responsibility," Reed said.
Tucker Hart Adams, president of the Adams Group, who has monitored and analyzed the Colorado economy for 30 years, agrees with Reed’s analysis to some extent in terms of personal responsibility. "Nobody wants to say it’s our fault, as a country, as individuals, for trying to live beyond our means as we have done for several decades, and it has just gotten worse and worse."
But Hart Adams disagreed with Reed on the $700 billion rescue plan and said there is a clear place for government regulation, especially in terms of transparency. "Markets work when you have perfect information. We didn’t have that, and nobody cared, nobody asked."
To step back and let the market chart its own course, she said, would cause horrible suffering — and with the interconnected global economy, not just here in the U.S — that could be prevented.
"We need jobs, we need people paying taxes, we need goods and services produced," Hart Adams said. "And if we have to smooth the transition period in order to not have bread lines and 25 percent unemployment I think that’s a valid role for government.
"We’re going to have to pay one way or the other, unless we’re going to just say, ‘Let ’em starve,’" she said.
Rebecca Cole is the online editor at Rocky Mountain Institute, a non-profit "think-and-do" tank that drives the efficient use of energy and resources. Learn more about RMI's latest initiative, Reinventing Fire, to move the U.S. off fossil fuels by 2050.
ARTICLE 2:
USA 2008: The Great Depression
Food stamps are the symbol of poverty in the US. In the era of the credit crunch, a record 28 million Americans are now relying on them to survive – a sure sign the world's richest country faces economic crisis
By David Usborne in New York
Tuesday, 1 April 2008
We knew things were bad on Wall Street, but on Main Street it may be worse. Startling official statistics show that as a new economic recession stalks the United States, a record number of Americans will shortly be depending on food stamps just to feed themselves and their families.
Dismal projections by the Congressional Budget Office in Washington suggest that in the fiscal year starting in October, 28 million people in the US will be using government food stamps to buy essential groceries, the highest level since the food assistance programme was introduced in the 1960s.
The increase – from 26.5 million in 2007 – is due partly to recent efforts to increase public awareness of the programme and also a switch from paper coupons to electronic debit cards. But above all it is the pressures being exerted on ordinary Americans by an economy that is suddenly beset by troubles. Housing foreclosures, accelerating jobs losses and fast-rising prices all add to the squeeze.
Emblematic of the downturn until now has been the parades of houses seized in foreclosure all across the country, and myriad families separated from their homes. But now the crisis is starting to hit the country in its gut. Getting food on the table is a challenge many Americans are finding harder to meet. As a barometer of the country's economic health, food stamp usage may not be perfect, but can certainly tell a story.
Michigan has been in its own mini-recession for years as its collapsing industrial base, particularly in the car industry, has cast more and more out of work. Now, one in eight residents of the state is on food stamps, double the level in 2000. "We have seen a dramatic increase in recent years, but we have also seen it climbing more in recent months," Maureen Sorbet, a spokeswoman for Michigan's programme, said. "It's been increasing steadily. Without the programme, some families and kids would be going without."
But the trend is not restricted to the rust-belt regions. Forty states are reporting increases in applications for the stamps, actually electronic cards that are filled automatically once a month by the government and are swiped by shoppers at the till, in the 12 months from December 2006. At least six states, including Florida, Arizona and Maryland, have had a 10 per cent increase in the past year.
In Rhode Island, the segment of the population on food stamps has risen by 18 per cent in two years. The food programme started 40 years ago when hunger was still a daily fact of life for many Americans. The recent switch from paper coupons to the plastic card system has helped remove some of the stigma associated with the food stamp programme. The card can be swiped as easily as a bank debit card. To qualify for the cards, Americans do not have to be exactly on the breadline. The programme is available to people whose earnings are just above the official poverty line. For Hubert Liepnieks, the card is a lifeline he could never afford to lose. Just out of prison, he sleeps in overnight shelters in Manhattan and uses the card at a Morgan Williams supermarket on East 23rd Street. Yesterday, he and his fiancée, Christine Schultz, who is in a wheelchair, shared one banana and a cup of coffee bought with the 82 cents left on it.
"They should be refilling it in the next three or four days," Liepnieks says. At times, he admits, he and friends bargain with owners of the smaller grocery shops to trade the value of their cards for cash, although it is illegal. "It can be done. I get $7 back on $10."
Richard Enright, the manager at this Morgan Williams, says the numbers of customers on food stamps has been steady but he expects that to rise soon. "In this location, it's still mostly old people and people who have retired from city jobs on stamps," he says. Food stamp money was designed to supplement what people could buy rather than covering all the costs of a family's groceries. But the problem now, Mr Enright says, is that soaring prices are squeezing the value of the benefits.
"Last St Patrick's Day, we were selling Irish soda bread for $1.99. This year it was $2.99. Prices are just spiralling up, because of the cost of gas trucking the food into the city and because of commodity prices. People complain, but I tell them it's not my fault everything is more expensive."
The US Department of Agriculture says the cost of feeding a low-income family of four has risen 6 per cent in 12 months. "The amount of food stamps per household hasn't gone up with the food costs," says Dayna Ballantyne, who runs a food bank in Des Moines, Iowa. "Our clients are finding they aren't able to purchase food like they used to."
And the next monthly job numbers, to be released this Friday, are likely to show 50,000 more jobs were lost nationwide in March, and the unemployment rate is up to perhaps 5 per cent.
HISTORICAL BACKGROUND:
The Great Depression as Historical Problem
Michael A. Bernstein
It is now well over a half-century since the Great Depression of the 1930s, the most severe and protracted economic crisis in American history. To this day, there exists no general agreement about its causes, although there tends to be some consensus regarding its consequences. Those who at the time argued that the depression was symptomatic of a profound weakness in the mechanisms of capitalism were only briefly heard. After World War II, their views appeared hysterical and exaggerated, as the industrialized nations sustained dramatic rates of growth and as the economics profession became increasingly preoccupied with the development of Keynesian theory. As a result, the economic slump of the interwar period came to be viewed as a policy problem rather than the outgrowth of fundamental tendencies of capitalism. The presumption was that the Great Depression could never be repeated owing to the increasing sophistication of economic analysis and policy formulation. Indeed, the belief became commonplace that the business cycle was "tamed" and "obsolete."
The erratic performance of the American economy during the 1970s and 1980s and more recent challenges associated with globalization have made this notion itself obsolete. Entirely new varieties of economic thinking have emerged, asserting that the government cannot alter levels of real output except under exceptional circumstances. Indeed, confidence in the "Keynesian Revolution" has been shaken, and a new "classicism" has come to prominence in economic thought.
In this climate of economic opinion, it is important to remember that the postwar optimism for Keynesian economics emerged at a time of dramatic reconstruction in the world economy and concomitant prosperity in the United States. Such hope had been absent in the decade of the Great Depression, and even during the war years there had been apprehension that a return to depression would come close on the heels of victory. But the high growth rates of the fifties and sixties obscured the prewar debates and dissolved for the moment any fears of a return to hard times.
Yet far from being resolved, the concerns and misgivings of the depression and war years simply faded from view. It has by now long been fashionable to claim that "Keynes is dead," and few economists choose to engage with the ideas of an older generation who struggled to understand devastating events at a time when orthodox theories and remedies no longer sufficed. Indeed, the vast majority of contemporary economists have grown decidedly hostile to arguments concerning the Great Depression that do not focus on the short run or on policy failure. In this respect, they have avoided the structural, institutional, and long-run perspectives more characteristic of the work of their forebears who sought to situate the Great Depression within a historical framework that spanned several decades or more. By so doing, they have lost an appreciation not simply of some possible causes of the Great Depression itself, but also of the subsequent development and performance of the American economy since mid-century. It is for this reason that I seek, through a reassessment of these older analytical approaches, to persuade you of the insight afforded by an understanding of "The Great Depression as Historical Problem."
Trends in the Literature
The older literature concerning the Great Depression in the United States may be broadly classified into three categories. One set argued that the severity and length of the downturn was the direct result of the collapse of financial markets that began in 1929. Such work emphasized the causes of the 1929 crash and those factors that amplified its impact. Another school of thought concluded that the economic calamity of the 1930s was the direct result of poorly formulated and politically distorted actions undertaken by the government. A third set of research took a broader perspective and attempted to analyze the depression in a long-run context. It suggested that whatever the origins of the slump, the reasons for its unparalleled length and severity predated and transcended the events of 1929.
The Stock Market Crash as Cause
All short-run analyses of the Great Depression shared a common attribute. They focused on the immediate causes and impacts of the New York Stock Market collapse of 1929, and they asserted that the resulting devaluation of wealth and disruption of the banking system explained the intensity of the crisis. The "business confidence" thesis was perhaps the best example of this school of thought. It held that regardless of the mechanisms that caused the collapse, the dramatic slide of the stock market created intensely pessimistic expectations in the business community. The shock to confidence was so severe and unexpected that a dramatic panic took hold, stifling investment and thereby a full recovery.
A more comprehensive formulation of the short-run argument directly confronted the question of why financial markets collapsed. Looking to the political and institutional distortions created by the Treaty of Versailles, some writers (such as Irving Fisher and Lionel Robbins) argued that the depression was the inevitable consequence of the chaotic and unstable credit structure of the twenties. The principal irritant consisted of a dangerous circle of obligations and risks, epitomized by the Dawes Plan of 1924, in which the United States lent funds to Great Britain, France, and Germany, at the same time the Allies depended on German reparations to liquidate their American debts. By 1928 American banks were already quite wary of the situation, but their predictable response, cutting back on loans to European governments, merely made the situation worse.
Moreover, the demise of the gold standard in international trade and demands that Germany make reparations payments in gold created a net gold flow into the United States that led to a veritable explosion of credit. Extremely unstable credit arrangements thereby emerged in the twenties, and once the crash came, the collapse of the banking system was quick to follow. Thus excessive credit and speculation, coupled with a weak banking network, caused the Great Depression.
Another version of the short-run approach concerned the immediate effects of the crash on consumer wealth and spending. The severity of the downturn, it was argued, resulted in a drastic devaluation of consumer wealth and a loss of confidence in credit. The resulting decreases in purchasing power left the economy saddled with excess capacity and inadequate demand.
None of these short-run arguments were completely convincing. Because the business confidence thesis was subjective, it was virtually impossible to evaluate in the light of historical evidence. There was also the objection that notions like these mistook effect for cause; the economic circumstances of the thirties may have generated pessimism and panic, rather than being caused by such feelings.
Later economists frequently rejected the excessive credit and speculation argument on the grounds that it abstracted too boldly from real rather than monetary events in the interwar economy. Indeed, business cycle indicators turned down before the stock market crashed. Indices of industrial production started to fall by the summer of 1929, and a softness in construction activity was apparent in 1928. Such critics as John Kenneth Galbraith held that "cause and effect run from the economy to the stock market, never the reverse. Had the economy been fundamentally sound in 1929 the effect of the great stock market crash might have been small . . . the shock to confidence and the loss of spending by those who were caught in the market might soon have worn off."
As for the wealth and spending hypothesis, the evidence did not provide compelling proof. The dramatic decline in consumption expenditures after 1929 may have been due to the stock market debacle; it may have arisen once expectations had been dampened by the events after 1929; or it may have been an outgrowth of a declining trend in construction activity and in farm incomes during the twenties. But even recent investigations have been incapable of unambiguously explaining a large portion of the decline in spending. We can speak of a drop, but we cannot say for sure why it happened.
Policy Errors as Cause
Another approach to understanding the Great Depression evaluated the extent to which the slump was the result of systematic policy errors. According to this school of thought, inadequate theory, misleading information, and political pressures distorted the policy-making process. Such investigators as Melvin Brockie, Kenneth Roose, and Sumner Slichter maintained that from 1932 onward the American economy showed great potential for recovery, only to be set back profoundly by the 1936 recession. They asserted that the New Deal's Industrial Codes raised labor costs and material input prices, thus negating whatever monetary stimulus existed. The rhetoric and ideology of the Roosevelt Administration may have further contributed to the downturn by jeopardizing the confidence of the business community. Not surprisingly, several investigators labeled the downturn of 1936-1937 the "Roosevelt Recession."
It was not solely criticisms of actual government policy in which these writers indulged to explain the depression's unusual severity. In some cases they also criticized the government for not doing enough. They maintained that the private sector moved too quickly in the mid 1930s in raising prices. As a result, by 1937 consumers increasingly resisted higher prices as they sought to liquidate the large debt incurred earlier in the decade and to maintain their savings in uncertain times. The average propensity to consume subsequently fell, and a recession took hold. Pro-competitive policies presumably were the solution, but government action (such as the creation of the Temporary National Economic Committee to Investigate the Concentration of Economic Power) was too little, too late, and was often inspired more by political than economic concerns.
The notion that the Great Depression was essentially an outgrowth of policy failures was problematic at best. To be sure, one could with the benefit of hindsight engage in some forceful criticism of economic policy during the 1930s. But it seems a futile exercise. After all, in many respects the Roosevelt Administration (especially the Board of Governors of the Federal Reserve System) did what many of its predecessors had done in the face of a cyclical downturn. One must ask, therefore, how government officials suddenly became so inept in the interwar period. Moreover, the question remains: why were traditional policies that had seemingly worked in the past and that represented a theoretical consensus among generations of economists suddenly so perverse in the 1930s? What had changed in the structure and operation of the national economy in the interwar period that made orthodox economic theory and policy inadequate?
Long-Run Factors as Cause
The literature that focused on long-run factors in the American depression was distinctive in holding that the stock market crash of 1929 was less important than certain developments in the economy that had deleterious impacts throughout the interwar period. Some authors (for example, Seymour Harris and Paul Sweezy) argued that during the 1920s the distribution of national income became increasingly skewed, lowering the economy's overall propensity to consume. Others, such as Charles Kindleberger, W. Arthur Lewis, and Vladimir Timoshenko, focused on a shift in the terms of trade between primary products and manufactured goods, due to the uneven development of the agricultural and industrial nations. This change in the terms of trade, they argued, created a credit crisis in world markets during the bad crop yields of 1929 and 1930. At the same time that agricultural economies were losing revenue because of poor harvests and declining world demand, the developed economies were contracting credit for the developing nations and imposing massive trade restrictions such as America's Hawley-Smoot Tariff of 1930. As the agricultural nations went into a slump, the industrialized countries (most notably the United States) lost a major market for their output. Hence, the downturn of 1929 became more and more severe.
Industrial organization economists (Adolf Berle and Gardiner Means most prominent among them) sought an explanation of the depression in the trend toward imperfect competition in the American economy of the early twentieth century. After the crash of 1929, prices became increasingly inflexible, due to the concentrated structure of American industry and the impact of labor unions. On the one side, these "sticky prices" further limited the already constrained purchasing power of consumers. On the other, noncompetitive pricing predominated in the capital goods sector, meaning producers were less willing to buy new plants and equipment. Price inflexibility thus inhibited the recovery of both final product demand and investment demand.
There were several weaknesses in these theories. Those authors who focused on an increasingly unequal distribution of income did not marshal unambiguous evidence to make their case, nor did they specify precisely how such factors came to life in the interwar economy. While Berle and Means claimed to have demonstrated a relative price inflexibility in concentrated economic sectors during the 1930s, their critics were unconvinced. Given that the aggregate price level fell by one-third in the early thirties, they argued, how inflexible could the general price system have been? The "sticky prices" thesis also relied on an assumption of perfect competition in all markets other than those where the imperfections existed. If this assumption were relaxed, the thesis did not hold.
The terms of trade argument similarly had a major flaw. The major weaknesses in the American economy of the interwar period were domestic, and the collapse of demand on the part of agricultural nations was not highly relevant. During the 1920s, exports as a share of the nation's gross national product had annually averaged only a bit over 5 percent. A fall in export demand, then, could not have played a major role in worsening or prolonging the Great Depression.
Theories of Economic Stagnation
Continued research on the Great Depression necessarily relied upon the work of Joseph Schumpeter on cyclical processes in modern economies. Schumpeter held that the interwar period was an era in which three major cycles of economic activity in the United States (and Europe) coincidentally reached their nadir. These cycles were 1) the Kondratieff, a wave of fifty or more years associated with the introduction and dispersion of major inventions; 2) the Juglar, a wave of approximately ten years' duration that appeared to be linked with population movements; and 3) the Kitchin, a wave of about forty months' length that had the appearance of a typical inventory cycle.
Schumpeter's efforts were paralleled by those of Simon Kuznets and, more recently, Moses Abramovitz and Richard Easterlin. Kuznets was successful in documenting the existence of waves of some fifteen to twenty years in length. These periodic swings, according to Abramovitz, demonstrated that in the United States and other industrialized countries, "development during the nineteenth and early twentieth centuries took the form of a series of surges in the growth of output and in capital and labor resources followed by periods of retarded growth." Significantly, "each period of retardation in the rate of growth of output . . . culminated in a protracted depression or in a period of stagnation in which business cycle recoveries were disappointing, failing to lift the economy to a condition of full employment or doing so only transiently." The specific behavioral mechanisms that could account for the Kuznets phenomenon (and its precise manifestation in the United States in the 1930s) were necessarily the focus of continued debate. It is in this context that we can understand the large literature on "secular stagnation."
In general, stagnation theorists agreed that stagnation, or economic maturity, as it was sometimes called, involved a "decrease of the rate of growth of heavy industries and of building activity . . . [and] the slowing down of the rate of growth of the total quantity of production, of employment, and usually of population. It [also involved] the rising relative importance of consumer goods." However, they differed in emphasis, falling into two broadly defined groups: those who focused on the decline of new technologies and those who were more concerned with the shrinkage of investment outlets as the rate of population growth fell. Followers of this second school held that as population growth fell off, and as major markets in housing, clothing, food, and services consequently contracted, outlets for new investment were quickly limited.
Both variants of stagnation theory had limitations. For one, arguments concerning economic maturity and population growth conflated population with effective demand. As one critic put it: "[i]t is sometimes maintained that the increase in population encourages investment because the entrepreneurs anticipate a broadening market. What is important, however, in this context is not the increase in population but in purchasing power. The increase in the number of paupers does not broaden the market."
Much like the population theory, the variant of stagnation theory that focused on the decline of technological change embodied many inconsistencies and questionable assertions. Proponents of this school claimed that the lower rate of technological innovation (said to be a primary cause of the economy's inability to recover from the depression) derived from the state of technological knowledge at the time, yet they offered little justification of this position. A further objection to the technology argument was apparent to some of the stagnation theorists themselves. Their work contained an implicit assumption that new innovations were always of the capital-using type, but if innovations were capital-saving, their argument foundered. Heavy investment (in railroads, motor cars, and housing, for example) during earlier stages of economic growth may have given way in later periods to newer forms of investment in managerial technique and information processing. These latter innovations may not have absorbed very large amounts of investment expenditure at all. While they may have improved the organization and efficiency of production, their impact on spending would not have been adequate to the task of systematic recovery.
The Work of Josef Steindl
It was the Austrian economist Josef Steindl who provided the most sophisticated version of the economy maturity idea. Not surprisingly, he did so in part by explicitly situating the Great Depression in the United States within a long-term development framework. His work linked economic stagnation directly with the behavior of capitalist enterprise, thereby avoiding the mechanistic qualities of many of the stagnation arguments as well as their frequent appeals to external factors. Steindl's version of the maturity thesis was that long-run tendencies toward capital concentration, inherent in capitalist development over time, led to a lethargic attitude toward competition and investment. Specifically, the emergence of concentrated markets prevented the utilization of excess capacity that is required for an economic revival.
Price inflexibility in concentrated industries is intensified during depressions, and this has an important impact on the response of firms to economic fluctuations. Firms' revenues tend to be so jeopardized in a slump that price reduction seems unfeasible. There may even be incentives to raise prices in order to compensate for the reduction in sales. For a given industry, therefore, the impact of a decline in the growth rate will depend on the extent to which the industry is concentrated. In a sector where the squeezing out of competitors is relatively easy, large declines in demand will result in the reduction of profit margins for each firm as prices are cut. By contrast, in a concentrated market, profit margins will tend to be inelastic in the face of lowered demand.
At the macroeconomic level the implications of inelastic profit margins are most profound. In these circumstances, price reductions do not compensate for declines in the rate of growth, and thus companies tend to reduce their rate of capacity utilization. Reductions in capacity utilization imply not only declines in national income but also increases in unemployment. In the presence of underutilized capacity, firms will be increasingly disinclined to undertake any net investment. A cumulative process is thereby established wherein a decline in the rate of growth, by generating reductions in the rate of capacity utilization, will lead to a further decline in the rate of expansion as net investment is reduced. Individual firms, by believing that decreases in their own investment will alleviate their own burden of excess capacity, merely intensify the problem economy-wide. The greater the proportion of the nation's industry that is highly concentrated, the greater the tendency for a cyclical downturn to develop into a progressive (and seemingly endless) decline.
A further consequence of the existence of highly concentrated sectors in the national economy is the impact it has on demand. The higher profit margins secured by large firms are indicative of an increasingly skewed distribution of output that, when combined with the reluctance of firms to invest (or otherwise spend) their revenues, generates a rising aggregate marginal propensity to save. Declining effective demand is combined with rising excess capacity when a slump occurs. The potential for recovery, barring the intervention of exogenous shocks, government spending, or the penetration of foreign markets, is therefore greatly lessened.
What is central to Steindl's thesis is the concept of long-term alterations in industrial structure that make the economy as a whole less capable both of recovering from cyclical instability and of generating continued growth. He assumed the emergence of oligopolistic market structure to be inherent in the process of capitalist development, because of capitalism's tendencies toward the development of large-scale manufacturing techniques and financial concentration. Economic maturity and the threat of stagnation result because the growing incidence of "[o]ligopoly brings about a maldistribution of funds by shifting profits to those industries which are reluctant to use them." In order to escape stagnation, capital must be redistributed either to more competitive sectors or new industries.
Indeed, during the Great Depression, some members of Roosevelt's "Brain Trust," such as Rexford Tugwell, argued forcefully for the imposition of an "undistributed profits tax" to prevent the accumulation of corporate surpluses. The incentive of the tax, it was claimed, would lead firms to issue more of their surpluses in the form of productive investment or dividends. As a result, the mobilization of capital resources would be more efficient and more likely to generate recovery. Embedded in the Revenue Act of 1936, the undistributed profits tax proved to be one of the most unpopular and controversial pieces of legislation to emerge from the New Deal, and it was repealed in 1938.
Interestingly enough, there exists no clear relationship between stagnation and concentration in American industry during the Great Depression. By applying a static conception of market structure, investigators have tended to focus on the number of firms in an industry as the primary determinant of a sector's competitiveness. Yet, as I discovered in my own research, some highly concentrated industries were relatively vibrant during the decade, while others appeared virtually moribund. Clearly, the evidence concerning market structure was a frail reed upon which Steindl based his theory. Whether a given industry is dynamic or not involves several issues unrelated to the number of firms or the extent of capital concentration issues having to do with the industry's position in the economy's input-output matrix, the durability of its output, and the relative maturity of the industry with respect to the shifting composition of the economy as a whole.
The weaknesses in Steindl's analysis do not, of course, obscure the importance of his contribution to an understanding of the Great Depression in particular, and of mature capitalist economies in general. That importance derives from the fact that Steindl attempted to situate the decade of the thirties within a larger historical framework. In this context, he could view the Great Depression as the outcome of an interaction between cyclical forces dating from 1929 and tendencies of long-run development spanning a half-century or more. In short, he was thus able to understand the Great Depression as a historical problem.
The U.S. Economy Since the Great Depression
Steindl had, of course, focused his work on the interwar economic crisis of the 1930s. His central theses regarding maturity and stagnation in advanced capitalist economies seemed particularly compelling when viewed in terms of the long-run historical experience of the Great Depression. Yet both the postwar record, at least in the case of the United States, and some of the theoretical lacunae in his earlier claims, led Steindl to modify some of the arguments of his 1952 book. With the 1976 republication of his Maturity and Stagnation in American Capitalism, Steindl allowed that technical innovation, product development, public spending, and research and development initiatives might provide the means to escape from investment inertia. Even so, he was extremely concerned that most accumulation strategies in mature capitalist nations would focus on military-industrial activity and war itself. Using both public and private investment funds for other purposes, while obviously desirable, would be "exceedingly hard" given "the workings of political institutions."
The wisdom (not to mention the prescience) of Steindl's 1976 observations becomes apparent as soon as one surveys the more recent evolution of American capitalism. American accumulation in the latter half of the twentieth century, on the one side, confirmed many of Steindl's suppositions regarding expansion in advanced industrial states. On the other, it demonstrated both the unique and abiding flexibility of capitalism in the face of contradictory tendencies toward underutilization, and the importance of political and social forces often thought by economists to be superfluous. In all these respects, contemporary history reveals the conceptual power and importance of what Steindl had to say when he first examined the crisis of the1930s. But it also reminds us of the unyielding impacts of contingency and human agency in economic performance over time.
World War II achieved in the United States, of course, what the New Deal could not--economic recovery. With the start of war in Europe, the unemployment rate began to fall so that by the time of the Japanese naval offensive at Pearl Harbor, only 7 percent of the labor force remained idle. American entry into the war brought almost instantaneous resolution of the persistent economic difficulties of the interwar years. Between 1939 and1944 the national product, measured in current dollars, increased by almost 125 percent, ultimately rising to $212 billion by 1945.
Yet as World War II came to a close many economists and businesspeople worried about the possibility of a drop in the level of prosperity and employment. But these apprehensions proved to be unwarranted. In the first year after the war, gross national product fell less than the postwar reduction in government spending; unemployment did not even reach 4 percent; consumer spending did not fall at all, and eventually rose dramatically. Although recessions occurred between 1945 and the mid 1970s, most of them lasted only about a year or less, and none of them remotely approached the severity of the Great Depression. During these three decades American output steadily increased with only minor setbacks. According to the Federal Reserve Board's index, manufacturing production doubled between 1945 and 1965, and tripled between 1945 and 1976.
Such robust economic performance is hardly surprising in wartime especially when conflict is global and, with few exceptions, kept outside of national boundaries. What is most striking about the American economic experience linked with World War II was the enduring growth and prosperity of the postwar years. Consumption and investment behavior played a major part in this great prosperity of the late forties and fifties. As soon as Germany and Japan surrendered, private and foreign investment in the United States rose quickly. On the domestic side, reconversion was itself an investment stimulus. Modernization and deferred replacement projects required substantial deployments of funds. Profound scarcities of consumer goods, the production of which had been long postponed by wartime mobilization, necessitated major retooling and expansion efforts. Even fear of high inflation brought on by the dismantling of wartime price and wage controls prompted many firms to move forward the date of ambitious and long-term investment projects. On the foreign side, both individuals and governments were eager to find a refuge for capital that had been in virtual hiding during the war. Along with a jump in domestic investment, therefore, a large capital inflow began in late 1945 and early 1946.
Domestic consumption was the second major component of postwar growth. Bridled demand and high household savings due to wartime shortages, rationing, and controls, coupled with the generous wages of the war economy, contributed to a dramatic growth in consumer spending at war's end. The jump in disposable income was bolstered by the rapid reduction in wartime surtaxes and excises. And the baby boom of the wartime generation expressed itself economically in high levels of demand for significant items like appliances, automobiles, and housing. G.I. Bill benefits additionally served to increase the demand for housing and such things as educational services, with associated impact on construction and other industrial sectors.
Foreign demand for American exports grew rapidly in the immediate postwar years. In part the needs of devastated areas could only be met by the one industrial base that had been nearly untouched by war-related destruction. Explicit policy commitments to the rebuilding of allied and occupied territories, such as the Marshall Plan in Europe, also served to increase the foreign market for the output of American industry.
American postwar prosperity and the benefits of world economic leadership continued throughout most of the 1950s. But the prosperity of the decade, while robust and impressive, nevertheless weakened by 1957. This set the stage for the arrival of a new brand of economics in Washington, explicitly (and self-consciously) imbued with the doctrines of Keynesianism.
From the "New Frontier" policies of John F. Kennedy, to the "Great Society" agenda of his successor Lyndon Johnson, through the declaration of a "New Federalism" by Richard Nixon, there ensued an era of sustained central government intervention in the nation's economic life. The goal of many (but not all) of the "new" economists of the early 1960s--achieving simultaneously acceptable levels of unemployment and inflation--has more recently shattered. But throughout the sixties and much of the seventies (and for some even during the eighties) the perceived obligation of government to secure overall economic instability was not seriously questioned and remained one of the more important changes of twentieth-century American economic history.
Historical specificity notwithstanding, American economic performance in the latter half of the twentieth century seems to have conformed in many respects with the general analytical propositions derived from interwar economics. The ability to forestall and/or overcome tendencies toward economic stagnation has depended upon a varied set of circumstances, both global and domestic. But a continuation of such a charmed existence is apparently no longer possible. Josef Steindl himself noted, in 1976, that "the cheerful extroverted era of [postwar] growth has apparently come to an end." And, in words that today seem as relevant as they did over twenty years ago, he noted that the reasons for this were "the reduction of tension between the superpowers . . . the increase in tension within the capitalist countries . . . and . . . the emergence of environment, raw material, and energy problems . . . ."
In the midst of a return to the unstable growth of earlier decades, an altogether reactionary (re)orientation of fiscal and monetary policy has occurred. A resurgence of general equilibrium approaches to cyclical phenomena has prompted the formupoignancy of this state of contemporary affairs are made strikingly clear when we reflect upon the Great Depression as a significant and coherent historical problem. q
Note on this Issue: As this article amply demonstrates, consideration of the economic history of the Great Depression necessarily focuses on both quantitative and aggregate data that tend to obscure the human dimensions of the event. Indeed, the challenge for those of us who teach about this profound economic crisis is to find substantive ways in which to link the economics of the interwar years with the personal and social experience of its contemporaries. It is for this reason that the inspired work of the contributors to this special issue of the OAH Magazine of History should prove so useful to all of us in our work with students. In the pages that follow, readers will find visual and textual examination of the many ways in which Americans endured, understood, and ultimately overcame the burdens of the Great Depression. These articles and lesson plans will assist us all in our determination to convey to students the singular nature of the economic crisis of the interwar era and the remarkable accomplishments of the generation that lived through it.
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Michael A. Bernstein is a professor of history and associated faculty member in economics at the University of California, San Diego. His most recent book is A Perilous Progress: Economists and Public Purpose in Twentieth-Century America (2001).
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