Architects of Globalism: Building a New World Order During World War II by Patrick Hearden

Architects of Globalism: Building a New World Order During World War II by Patrick Hearden

I want to thank the Presidential Libraries all of them What marvelous source of historical research Iíve had the pleasure of working here at the Hoover Library as well as the Truman Library, and the Roosevelt Library And I think itís been a wonderful experience, and I learned a lot Hopefully I can share some of what I learned today The title of my talk is, ìArchitects of Globalism.î I want to talk about American planning for the postwar world that occurred basically between 1941 and 1945 I got interested in this topic when I was working on a book on how the United States got involved in World War II I was working on Americaís reaction to Nazi Germany between ë33 and í41 And I learned something in that book, and that is that American policymakers began making plans for the postwar period six months prior to Pearl Harbor And that led me to two conclusions, number one: American leaders six months before Pearl Harbor assumed the United States would be in the war Secondly: they assumed the United States would win the war Otherwise, Hitler would be doing the planning [Laughter] Who then did the planning? Well, I would argue that the primary responsibility for the planning took place in the walls of the State Department President Roosevelt had State Department advisors, and they did most of the planning There was some stuff going on outside The War Department did some military planning, and the Treasury Department did some financial planning which led to the Bretton Woods Conference, the World Bank, the International Monetary Fund, et cetera The primary conference ñthe primary planning going on inside the State Department it was conducted under the auspices of first Secretary of State, Hull and then later toward the end, Secretary of State Stetinnius, and of course Under Secretary Wells, Assistant Secretary Berle, Acheson, and Will Clayton et cetera But then, to supplement the State Department personnel, other people were brought in For example, Isaiah Bowman, who was the president of Johns Hopkins University He came down to Washington to the State Department a couple days a week to participate in postwar planning sessions He was one of the leading geographers in the world and knew where everything was that was worth anything Other people came in, for example, Adolph Berle and Dean Acheson Each had strong egos and didnít get along with each other very well And so while Acheson was doing economic planning, head of the economic subcommittee, Berleís the head of financial subcommittee And they had a hard time getting along And so they just brought in Myron Taylor, former chairman of the board of U.S. Steel to be kind of run heard over the two of them And he kind of took over for that for awhile Later on, Myron became the special ambassador to the Vatican FDR had sent him over to work with the Pope et cetera So anyhow, these are the kind of people Iím dealing with And, what I want to argue is that these postwar planners in the State Department really sought to build a new world order; a new world order that would serve as the foundation for both American prosperity and world peace Now, they really thought that they would have to do two fundamental things in order to achieve their broad objective Number one they would have to establish a liberal capitalist world system A liberal capitalist world system, as Justus suggested earlier ñ a Wilsonian system based upon the principle of equal economic opportunity In other words, all countries, large and small alike, should have equal access to raw materials,

to commodity markets, so that they could enjoy prosperity within the framework of peaceful trade Now, these postwar planners were haunted by a fear of a postwar depression They thought that once we ñ well, they first of all they said that we had a long time The New Deal they thought was a failure The Democrats in the Roosevelt administration thought the New Deal was a failure They realized that between 9 and 10 million Americans were still unemployed in 1939 when the Nazi soldiers invaded Poland that September And that we were starting to pull out of these hard times because of military spending They were spending a lot of money, and that was putting people back to work Also, a lot of unemployed people ended up in the Army and Navy Thatís why we had Rosie the Riveter et cetera because instead of having a glut, a surplus of labor, we had a shortage of labor And so things were changing for the better But they thought, once the war ends, weíre going to go right back to where we were In other words, if General Motors, Ford, and other people stopped producing military hardware, and start producing civilian commodities once again, when they turn the wheels of industry back, civilian production, whoís gonna buy the stuff? And they were afraid, deathly afraid, that we would be visited again by the twin problems of widespread overproduction and massive unemployment How, then to avoid a postwar depression? How to make American capitalism function prosperously? They thought there were two basic ways you could go On the one hand you could engage in centralized economic planning You could plan it so everything is produced in the United States would be consumed in the United States So thereíd be an internal balance between supply and demand The problem with that approach, they believed, is that it would undermine the free enterprise system They would have big brother in Washington, just like big brother in Moscow engaging in centralized planning telling private entrepreneurs what to produce, how much to produce, when to produce it, how much to pay for it et cetera, et cetera The word that they would use would be, ìeconomic regimentation.î We would call it a, ìcommand economy.î It doesnít make any difference what you call it, that this is what they were they thought this was an option and it was an option they didnít want to go down Now, other people said you wouldnít have to go quite that far You could actually engage in Keynesian pump-priming You could just borrow a bunch of money, and you know, have a public works program ñ build roads, and National Parks et cetera, et cetera The problem is even people that were flexible thought that Keynesianism was dangerous Thought it was like a habit forming drug that based on what you could do Itís easy to hire someone to do something But when the job is done, according to Keynes, and the ñ youíre in a period of prosperity, and the business cycle is turned upward then, of course what weíre supposed to do is cut the spending Weíre supposed to cut the spending Then weíre supposed to fire everybody we just hired And, of course, people donít want to do that And so we end up spending in good times as well as bad et cetera, et cetera And you donít have this nice even cycle that Keynes had envisioned Also there was another problem with Keynes and that is president Roosevelt never bought it FDR was never committed to full-scale counter-cyclical spending And he argued that we, as soon as the war was over, were going to have to cut drastically back on our spending So basically, that wasnít considered really a viable option The other option was overseas commercial expansion That we could do what Wilson would want to do That we could try and find foreign markets for the surplus products of our farms and factories, so we could maintain full employment and prosperity within the United States That would not only allow the American people to enjoy prosperity but they would be able to enjoy prosperity within the framework of a capitalist system In other words, they didnít just want to have a prosperous country

They wanted to have a prosperous country without changing our basic way of life They didnít want to have Socialism or Fascism or any kind of a command economy, or economic regimentation or anything else In other words, the Democrats advising FDR shared Herbert Hooverís basic idea of maintaining economic liberty within the United States And so I think a lot of times we think of the Roosevelt people and the Hoover people as diametrically opposed And I find that they shared many many common assumptions and goals The question then is how to do this? How to establish a liberal capitalist world system? I would argue that American policy makers believed that weíd have to do three things in order to achieve this Number one: we would have to lower the American tariff We would have to lower the American tariff, and then try to encourage other people to lower their tariffs in order to ñ they really wanted to do two things They wanted both a reduction in trade barriers and also the elimination of commercial discriminations So basically, not only did they want to lower tariff barriers, but they didnít want one country to have higher tariffs against country A than against country B. In other words, they wanted to have everybody to have not only low tariffs but equal access across the board They debated about how to get there Some of them said well the best thing to do is to just to maintain the reciprocal trade program and have bilateral trade with various countries based upon a non-conditional most-favored nation principle so all the benefits would be generalized for everyone else Other people said no, the best way to do this is try to get everybody together and have one big conference and then everybody would realize that participated in this conference that when they lowered their tariff, other people would lower tariff, and they would be reciprocated And that would be a lot easier than having all these individual treaties all around Well, they couldnít get that through during the war They finally got it through two years later in 18 ñ1947 with the General Agreement on Trade and Tariffs Yeah ñ which is really the background to the WTO, the World Trade Organization right now So basically that was put in place and planned for during the war The second thing that they thought they would have to do, is that they would have to use American financial clout That we would have to underwrite the postwar reconstruction of war torn countries; particularly the postwar reconstruction of Europe, which was by far our major trading partner And so weíre going to have to do this And you can do this again in a variety of ways That you can ñ the government will do part of it And the government will do part of it by, for example expanding the lending power of the Export-Import Bank so we can give more money to countries that need it — Excuse me We could, you know, make postwar reconstruction loans this way But, the government could also try to get other governments to help and they could do this by forming a world bank And that was what that was all about The World Bank, however is ñ is crucial The original idea of Harry Dexter White of the Treasury Department wanted the idea that the World Bank would actually loan a bunch of money But he found out that Congress wouldnít go along with this So, they backtracked to what the World Bank would simply do is guarantee the payment for private Europe bankers So basically, most of the money is going to come out of the New York banking community rather than Uncle Sam That was the idea As you know it didnít turn out that way Later on we had the Marshall Plan and Uncle Sam put up about 17 billion dollars But that wasnít the plan then They didnít think that would be necessary at all They thought that most of the money would come from private banking sources, and some of the money would come from the American taxpayer in the form of the Export-Import Bank loans Finally, they thought that they would have to promote the de-colonization of the world Basically you had countries, allied countries like England, France, and Holland et cetera that had colonies that they dominated and that they exploited for themselves They put up tariff walls around them and so they could monopolize the raw materials and

markets for themselves Well, what Roosevelt wanted to do and the State Department policymakers, they wanted to gradually, not immediately, rapidly ñ they didnít want to rapidly de-colonize the world because they thought that would lead to chaos and bloodshed What they wanted to do is to gradually de-colonize the world They had the development idea of what they called the ìTrusteeship Plan.î And the idea was that under the auspices of the United Nations that there be a trustee or group of trustee nations that would take over colonial areas They would, they would call them dependent as opposed to independent territories Take for example, Vietnam, which would be a, we would call it a colony of France They would say it was a dependent territory within the French Empire At any rate, the question was what are you going to do with a county like Vietnam? Well, FDR would say what we can do is we can have a trustees ñ say maybe Chiang Kai-shek of the Chinese would be on the trustees, maybe Stalin would be a trustee, and maybe Uncle Sam would be a trustee So then the three trustees ñ and the role of the trustee would be twofold Number one, they would gradually introduce institutions of government So that they could, actually under tutelage, learn how to govern themselves And in a place like Vietnam, it might be very fast It might, it might happen just in 15 or 20 years In a place like Borneo, it might happen in 300 years They didnít think that some people were ready for this at all They werenít, they werenít utopian dreamers They understood that some places were much more prepared to govern themselves than others The trustees would have another obligation Besides preparing their wards for their eventual political independence, they would also make sure that the Open Door policy was implemented in those areas In other words, no one would monopolize those areas, but those areas would be open so other countries around the world would have equal access to the raw materials and commodity markets within those trusteeship territories So that was the idea And of course the idea would be that if this was true, if you had equal access to all the former colonies around the world, it would be good for the United States, right? Because American companies, American farmers, American manufactures would have access to those markets to help maintain full employment and prosperity here But not just Americans, that other countries would too And they were particularly concerned about what they called a ìhave notî country There, there were two ìhave notî countries that they thought were potential trouble makers because of their past history: Germany and Japan By that they meant that both Germany and Japan had a narrow natural resource base, an inadequate natural resource base, to support its dense urban population In other words, both Germany and Japan had to export manufactured goods in order to earn foreign exchange needed to purchase raw materials to feed their machines and foodstuffs to feed their population And if countries like Germany and Japan were prohibited from gaining access to raw materials and commodity markets around the world in order to support themselves that they would be tempted to once again, try to steal the stuff In other words, the question is: how are Germany and Japan going to be reintegrated into a peaceful family of nations? And the answer is that they gave was that they were going to have to show them how they can satisfy their essential economic needs through peaceful commerce rather than through military conquest So that was basically the idea Well, all these plans, all these economic plans depended upon one thing They depended upon British cooperation with the United States Because if Britain and the United States combined controlled over half of world trade and if Britain and the United States joined hands to try to establish a liberal capitalist world system then other countries could easily be induced to join

But if the British went their own way, and clamed up back into their imperial preferences system, and had a Sterling block, and tried to isolate themselves from the rest of the world, other countries might do the same, and we would be stuck There would be no liberal capitalist world system And so, one of the keys to all this is getting the British to cooperate, getting the British to go along They thought that they had two things that they could do to get the British to go along The first thing was that they could use, Lend-Lease, the Lend-Lease aid program as a lever to pry open the British auto-imperial preference system What the British did in 1932 was establish a preference system around all their colonies and commonwealths And so there would be low tariffs within the system but high tariffs around the system So in other words, it would ñ just say the relationship between Wisconsin and Canada ñ Wisconsin would like to send dairy products, you know, to Canada Well, it would they would have to pay more to get in than somebody else would within the empire; and the same thing around the board So basically the, the trade going between Canada and the United Kingdom or Canada and Australia, or New Zealand, or whatever would be ñ have a low tariff and the trade between the United States to the United Kingdom or to Canada or to New Zealand or whatever would be to have a higher tariff And so the, the tendency would be to trade within the Sterling block and leave the United States outside it So basically what we proposition was quite simple, that if you would like us to give you Lend-Lease supplies, weapons to defend yourself against Germany, we would like you to open the doors of your markets after the war And, of course, there was a lot of back and forth over all this The British didnít want to do this They didnít want to sign on the dotted line Weíre trying to get them committed in advance et cetera, et cetera And, we finally got a master Lend-Lease plan after Pearl Harbor in February of í42 And even that, the ñ it was kind of a little wishy-washy The British werenít totally committed to this But we thought we could totally commit them to it with our second thing And that is that we knew that when the war was over, the British would have to come to the United States for a postwar reconstruction loan And we thought that we could force the British to abide by what we would call liberal commercial principles Now there was a problem then, it wasnít simply auto-imperial preferences During the war, the British had imported all kinds of goods from countries like India And they paid for those goods, not with other products; they paid for them with IOUís They paid for them saying after the war, we will pay you back And the IOU was called a Block Pound So rather than a regular Pound that you can convert in to gold and turn the gold into a Lira to buy and Italian good or a Franc to buy a French good, or a Dollar to buy an American good, or a Mark to buy a German good or whatever, these Block Pounds could only be used to buy British manufactured goods And so basically, after the warís over, the ñ all these other countries like India that have Block Pounds, will not be able to purchase from the United States, or anyone else if they want to Theyíre going to have to use that currency to buy from England, and only to England So, we said, look we would like to give you ñ weíre very generous, we would like to give you a long term loan itíll take 50 years to pay it back And weíll only charge you 2%, the effective rateís about 1Ω % because you donít have to pay it back for 5 years You donít have to start paying interest for 5 years We, we are very generous One condition and one only: you agree within a year after the British loan goes into effect that you have currency convertibility, and that the Pounds become unblocked, and that we have access to your empire The British didnít want to do this The British basically said that we would rather not borrow money at all Weíd like you to give it to us instead In other words, the British were asking for a Marshall Plan [Laughter] And, and we said, well we understand that but the American people wonít go along with it Congress wonít go along with it And the best that we can do is what weíre doing But in order for you to do that, what are you going to do for us? And that is, theyíre going to unblock the currency wall

What happened? There was a rush on the Pound, and ultimately the British were broke, they werenít just teasing us And we gave them another 10 years extension So they really had until 1957 until, before they had to go to complete convertibility Because it turned out that we were a little hard on them At any rate ñ so all of this idea is to create a prosperous and peaceful world order But they werenít dreamers They understood that basically this might not work I mean even, even if we can have an international open door, and even if Americans are prosperous, there might be another Hitler that will come along and say I donít just want to trade peacefully, I want to dominate Iíd like to dominate all of Europe or something like that And, in other words, that, that this liberal capitalist world system will provide an opportunity for a country like Germany to choose peace But itís possible that even if you provide them an opportunity to enjoy prosperity within the framework of peace, some nut might come along and say they want more than that And that means that you just canít depend upon a Wilsonian world to maintain world peace Youíre going to have to have a second thing And that was, weíre going to have to establish an international security system We would call it the United Nations The idea was with it that the big four policemen: the United States, Soviet Union, Great Britain, and China The big four must serve as world policemen They would divide up the responsibility militarily England and Russia would, hopefully, keep the peace in Europe, the Middle East, and Africa The United States, hopefully, would be able to keep the peace throughout the Western Hemisphere and also Asia It raises a question, you know, what about China? And the answer was that, well, hopefully, China will be able to help us shoulder this military burden in the future But right now, Chinaís too weak and disorganized et cetera And so Chinaís going to have to get back on its feet and get built up et cetera So, in the short run, it will really be the big three rather than the big four trying to police the world There would be two divisions in the United Nations There would be a General Assembly which all the small countries around the world would be invited to join And it would do nothing As FDR said, it would give the smaller countries time, opportunity to blow off steam It was not to be taken seriously Ultimately, of course, it was taken seriously and became, during the Cold War, a very useful propaganda tool that you could use against first Russia, and then later on people were using it against the United States et cetera But that, but the, the real power was going to be in the Security Council The major powers were going to dominate This is not democratic at all This is big power diplomacy FDR didnít even, didnít even want a General Assembly you know He said, you know, this will just be a vacuous debating society You know Nothing will get done Itís crazy But he was convinced to go along by Sumner Welles and other State Department people, saying, you canít just insult the rest of the world Theyíre going to have to make things look a little bit better At any rate, the big three are going to dominate the Security Council Then they decided to add France et cetera, so thereíd be a big four then five et cetera But the original idea was basically that it would be the people that won the war would police the world after the war The idea was, was that it was a debate whether or not a country involved in a dispute should be able to participate in deciding what should be done with that dispute Well, Stalin said no, we must have unanimity That all decisions that the united ñ the Security Council ñ Well the Security Council really do two decisions: either pose economic sanctions, or use military force against an aggressor nation, okay So, whether or not you want to pose economic sanctions or military force everyoneís going to have to agree So each country: Britain, United States, Russia will have a veto power

At first America said, well, this is awful Stalin just wants a veto power so he can dominate East Europe But after awhile, FDR began saying that I ñ he thought Stalin had a point That ñ what if, for example, the United States was in a disagreement over petroleum in Mexico Do we want other countries sticking their nose inside the Monroe Doctrine? The argument was no; that we want to handle it ourselves And secondly, the, if, if the ñ if you didnít have a veto power ñ if the Security Council decided to go to war, what would that do to the American constitution, and the , and the constitutional prerogative of the Congress to declare war if itís already been done in advance? And so there were certain legal concerns as well as concerns about protecting the Monroe Doctrine And so they began thinking, maybe Stalinís not all that far off Maybe the principle of unanimity should hold sway Maybe there should be a veto and thatís how it was constructed Now, these strategic plans depended upon Russian cooperation Sorry Weíre running out of time And, so what I will try to do is say that the Russians basically, we were afraid that the Russians were going to try to take over Eastern Europe We thought that they wanted a security perimeter We thought that we could try to stop them by number one telling them that we will join the U.N We will be part of the Security Council We wonít bail out like we did in 1919 And we will help keep the Germans down Secondly, we will loan you billions of dollars for the postwar reconstruction of the Soviet Union And what we wanted, what we called it an open sphere of influence in Eastern Europe That we thought that the Russians should treat Eastern Europe the way we would treat Honduras or Costa Rica That the people of Honduras or Costa Rica would have the freedom to practice whatever religion they wanted, to elect whatever political leadership that they wanted, to have their own democratic and cultural institutions They would be able to trade with anybody they wanted But they would not be allowed to let Germany or Japan or somebody else come in and establish a military base aimed at the United States Like, for example, the Russians tried to do in ñ with the Cuban situation in í62 Okay, so basically we wanted to let, let the, let the Russians have their own military physical security protected and still allow the Eastern European countries to be part of the liberal capitalist world system Thatís all [Applause]

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