World Wars Decides Who Controls World Trade

United States President Woodrow Wilson is known as one of the most peaceful presidents America has ever had. But he knew control of resources and trade was the goal of all powerful nations:

Since trade ignores national boundaries and the manufacturer insists on having the world as a market, the flag of his nation must follow him, and the doors of the nations which are closed against him must be battered down. Concessions obtained by financiers must be safeguarded by ministers of state, even if the sovereignty of unwilling nations be outraged in the process. Colonies must be obtained or planted, in order that no useful corner of the world may be overlooked or left unused.[1]

When two or more powerful nations deny each other equal trading rights, war develops. Spain, Holland, Portugal, and France had been overwhelmed by British sea power and cunning control of markets.

Otto von Bismarck, unifier of the German nation, deduced “free trade is the weapon of the dominant economy anxious to prevent others from following in its path.”[2]

Studying the development philosophy of Friedrich List, he consolidated the German nation in the late 1800s and industrialized—“factories, machinery, and techniques were bought whole-sale, usually from England.”[3]

Kaiser Wilhelm carried on Bismarck’s development policies. At first German manufactures were of inferior quality, just as Japan’s products were later when it first industrialized. However, it did not take the Germans long to learn.

By 1913, Germany had 60,000 university students to Britain’s 9,000, and 3,000 engineering students to Britain’s 350. German industries were not only out-producing Britain, they were producing superior products.[4]

Earlier, in 1888, philosopher T.H. Huxley outlined the disaster that would befall Britain if it should ever lose its dominance in trade:

We not only are, but, under penalty of starvation, we are bound to be, a nation of shopkeepers. But other nations also lie under the same necessity of keeping shop, and some of them deal in the same goods as ourselves. Our customers naturally seek to get the most and the best in exchange for their produce. If our goods are inferior to those of our competitors, there is no ground, compatible with the sanity of the buyers, which can be alleged, why they should not prefer the latter. And if the result should ever take place on a large and general scale, five or six millions of us would soon have nothing to eat.[5] [26 years later, when Britain was threatened with just such a loss, WW I began.]

Outlining that the concern was Germany’s threat to British trade, in 1897 the publication Saturday Review wrote: “If Germany were extinguished tomorrow, the day after tomorrow there is not an Englishman in the world who would not be richer.

Nations have fought for years over a city or right of succession; must they not fight for two hundred fifty million pounds sterling of yearly commerce?”[6]

Britain’s survival depended upon selling overpriced manufactured products and losing those markets would collapse her economy. As their “national interest” was at stake, she had signed pacts with France, Austria-Hungary, Italy, and eventually Russia, all designed to contain Germany.

Austria-Hungary changed sides and the clash of interests in the Balkans between the competing imperial centers of capital led directly to WW I. WW II was partially a replay of WW I.[7] Before that War, Europe

was “stifling” within her boundaries, with production everywhere outstripping the European demand for manufactured products. All Europe was therefore “driven by necessity to seek new markets far away,” and “what more secure markets” could a nation possess than “countries placed under its influence?.”… The rapid growth of German trade and the far-flung extension of German interests first encouraged in Germany a demand for a larger merchant marine, and then for a larger and more effective navy…. Without a strong fleet, Germany would find herself at the mercy of Britain, a “grasping and unscrupulous nation which, in the course of history, had taken opportunity after opportunity to destroy the trade of its commercial rivals.”[8]

As Germany tried hard to break Britain’s control of world commerce, Britain

was reinforcing her position by making a hard and fast alliance with Austria-Hungary and Italy…. In 1904, Britain made a sweeping deal with France over Morocco and Egypt; a couple of years later she compromised with Russia over Persia, that loose federation of powers was finally replaced by two hostile power groupings; the balance of power as a system had now come to an end…. About the same time the symptoms of the dissolution of the existing forms of world economy—colonial rivalry and competition for exotic markets—became acute.[9]

These “two hostile power groupings” were the old imperial centers of capital, Britain and her allies, and the emerging imperial centers of capital, Germany and her allies. Restrictive trade practices were strangling potentially wealthy countries and “everyone knew it would start but no one knew how or when … until Archduke Ferdinand was shot.[10]

Except for religious conflicts and the petty wars of feudal lords, wars are primarily fought over resources and trade. President Woodrow Wilson recognized this as the cause of WW I: “Is there any man, is there any woman, let me say any child here that does not know that the seed of war in the modern world is industrial and commercial rivalry?”[11]

The real war, of which this sudden outburst of death and destruction is only an incident, began long ago. It has been raging for tens of years, but its battles have been so little advertised that they have hardly been noted. It is a clash of traders…. All these great German fleets of ocean liners and merchantmen have sprung into being since 1870. In steel manufacture, in textile work, in mining and trading, in every branch of modern industrial and commercial life, and also in population, German development has been equally amazing. But geographically all fields of development were closed…. Great Britain took South Africa. And pretended to endless surprise and grief that the Germans did not applaud this closing of another market.[12]

Financial warfare is a powerful weapon in trade wars:

It should be recalled that the practically universal use of sterling in international trade was a principal component of Britain’s financial sway, and it was precisely into this strategic sphere that Germany began to penetrate, with the mark evolving as an alternative to the pound. The Deutsche Bank conducted “a stubborn fight for the introduction of acceptance [of the German mark] in overseas trade in place of the hitherto universal sterling bill…. This fight lasted for decades and when the war came, a point had been reached at which the mark acceptance in direct transactions with German firms had partially established itself alongside the pound sterling.”…“It seems probable that if war had not come in 1914, London would have had to share with Germany the regulatory power over world trade and economic development which it had exercised so markedly in the nineteenth century.”[13]

Serious researchers recognize a dominant currency as having “regulatory power over world trade and development.”

Almost 50 years after the American dollar replaced the British pound as the world’s trading currency, the Washington Post noted: “Under the Bretton Woods system, the Federal Reserve acted as the world’s central bank. This gave America enormous leverage over economic policies of its principal trading partners.”[14]

Control of a trading currency is the primary mechanism through which imperial centers of capital maintain unequal currency values and unequal trading values which keep the wealth of the periphery flowing to the imperial center.

The British were afraid of both German economic power and the loss of their central bank operating as the world’s central bank.

Because their industries and economic infrastructures were primitive and could not compete with Britain’s highly developed technology and economic infrastructure, all major countries had protective tariffs on the eve of WW I.

Historically markets have been both opened and protected by military force. Opening others markets while protecting their own were primary to the national security of virtually every imperial center of capital. Britain thought

placing a ring of new nations around Germany (supported by proper guarantees) would do away with the immediate danger of a German-led economic union…. Once Germany’s threat to British economic supremacy had abated the prewar crisis inside British politics would resolve itself.[15]

Germany and World War II

German leaders were still angry over their humiliating defeat in WW I, a war fought over trade, and trade was a large component of this second struggle. “The peace conference of 1919, held in Versailles, marked not the end of the war but rather its continuation by other means.”[16]

The injustice of controlled markets under the guise of free trade was never rectified. A resentful Germany prepared, at first secretly, then more and more openly, to develop military might to eventually break those trade barriers and eliminate the humiliation and restrictions of Versailles:

The late 1920s and early 1930s began with a series of worldwide financial crashes that ultimately spiraled downward into the Great Depression. As GNPs fell, the dominant countries each created trading blocks (the Japanese Greater East Asia Co-Prosperity Sphere, the British Empire, the French Union, Germany plus Eastern Europe, America with its Monroe Doctrine) to minimize imports and preserve jobs. If only one country had kept imports out, limiting imports would have helped it avoid the Great Depression, but with everyone restricting trade, the downward pressures were simply magnified. In the aggregate, fewer imports must equal fewer exports. Eventually, those economic blocks evolved into military blocks, and World War II began.[17]

This is not a defense of Germany’s racist motives or conduct in WW II. The supporters and goals of fascism are the antithesis of this treatise. Fascism would severely restrict rights for the masses while this treatise would expand them to full and equal rights.

However, the injustice to Germany in denying her equality in world trade was extreme and injustice breeds extremism. As we have shown, the purpose of World War I was to economically strangle (contain) Germany,[18] this was a component cause of WW II, and in It Took 70 Years to Contain the Soviet Federation we address the need to prevent their rise.

William Appleman Williams, in The Tragedy of American Diplomacy, identified control of markets as the cause of both World Wars I and II. He notes free trade was then called the “Open Door Policy” and

It was conceived and designed to win the victories without the wars…. It does not prove that any nation that resisted (or resists) those objectives was (or is) evil, and therefore to blame for [the] following conflicts or violence.[19]

Both Presidents McKinley and Wilson “unequivocally pointed to Germany as the most dangerous rival of the United States in that economic struggle” and President Franklin Roosevelt and his advisors “explicitly noted as early as 1935 … that Germany, Italy and Japan were defined as dangers to the well-being of the United States.”[20]

In fact, on April 10, 1935, four years before WW II and six years before America entered the war, Roosevelt “wrote a letter to [Britain’s] Colonel House telling him he was considering American participation in a joint military and naval blockade to seal off Germany’s borders.”[21]

Germany was bypassing Britain’s monopolization of finance capital through barter agreements. That blockade was intended to contain German economic power as well as its Aryan supremacist philosophy. After the war, Secretary of State Cordell Hull reaffirmed trade as being a primary cause of WW II:

Yes, war did come, despite the trade agreements. But it is a fact that war did not break out between the United States and any country with which we had [negotiated] a trade agreement. It is also a fact that, with very few exceptions, the countries with which we signed trade agreements joined together in resisting the Axis. The political line-up followed the economic line-up.[22]

Walter Russell Mead concurs that wars are extensions of trade wars. He warned: “The last time the world deprived two major industrial countries, Germany and Japan, of what each considered its rightful ‘place in the sun’ the result was World War II.”[23]

Japan’s Greater East Asia Co-Prosperity Sphere and World War II

Under the guns of Admiral Perry’s naval task force in 1854, Japan’s markets were forced open. They were forced to sign a trade agreement with a tariff limit of 5% while the average tariff on imports into America of almost 30% was immediately raised even higher.[24]

Learning the mechanics of becoming wealthy through this experience with neo-mercantilist unequal trade, and on the advice of Herbert Spencer, the Japanese studied Western economic theories carefully and in 1872 formed their trade policies.

Japan copied and improved upon Germany’s industrial cartels, and followed the European model of establishing colonial empires to create the pre-WW II Greater East Asia Co-Prosperity Sphere.

Both Germany and Japan were following Friedrich List’s philosophy of consolidating nations and developing industrial power.

The origin of many of today’s Japanese corporations came from the post-Meji Japanese government building the most up-to-date factories and selling them to industrialists for 15%-30% of building costs.[25]

Take specific note of how Germany and Japan’s independence, based on military might, gave them the power to create money and thus combine natural resources and labor to produce industrial capital.

They could not have built those basic industries quickly, if at all, while remaining dependent upon the British pound as their trading currency.

A nation without natural resources need only create the money, build the industry, barter production from industry for more resources, and pay for it all with the goods produced. Japan provides the model.

So long as a country has access to technology and resources to produce quality products and access to markets to sell those products, those industries and products back the money created to build those factories. We use these principles extensively outlining how to develop a peaceful, prosperous world.

After WW II, under United States’ protection as a buffer against fast-expanding socialism, Japan re-established her centrally planned cartels and Germany re-established theirs at the same time.

The goal was to maintain low import prices for raw materials, high prices for Japanese citizens, and competitive export prices of high-quality consumer goods to penetrate world markets.

Japan’s industrialization was a strengthened and fine-tuned copy of Germany’s cartel industrialization which was such a threat to England:

America is no longer such a rich country. And Japan is no longer poor. Much of America’s wealth has been transferred to the Japanese through the medium of exports and imports. Their exports and our imports.[26]

Japan’s pre-WW II conquests cut powerful European traders off from what was once their private domain. This was the common bond between Germany and Japan in WW II and virtually any respectable history of the origin of the war in the Pacific outlines the embargoes against Japan and the trade negotiations carried out right up to the bombing of Pearl Harbor.

The total embargo of oil against Japan just before war broke out in 1941 would have squeezed its economy just as effectively as a Middle East embargo would squeeze Western economies today.

We now turn to how The World Breaking Free Frightened the Security Councils of Every Western Nation

Those crucial 170 words describing an honest, efficient, capitalist economy. Does anyone have the ear of President Barack Obama’s Economic Recovery Team?

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[1] Woodrow Wilson, President of the United States, 1919, quoted by Noam Chomsky, On Power and Ideology (South End Press, 1990), p.. 14.

[2] Steven Schlosstein, Trade War (New York: Congdon & Weed, 1984), p. 9.

[3] Kurt Rudolf Mirow, Harry Maurer, Webs of Power (Boston: Houghton Mifflin Co, 1982), p. 16.

[4] D.J. Goodspeed, The German Wars (New York: Bonanza Books, 1985), p., 71.

[5] Petr Kropotkin, Mutual Aid(Boston: Porter Sargent, no date). P. 334.

[6] Frederic F. Clairmont, The Rise and Fall of Economic Liberalism (Goa, India: The Other India Press, 1996), pp. 195, 197; William Appleman Williams, The Contours of American History (New York: W.W. Norton, 1988), his Empire as a Way of Life (Oxford: Oxford University Press, 1980), and his The Tragedy of American Diplomacy (New York: W.W. Norton, 1972); Eli F. Heckscher, Mercantilism (New York: Macmillan Company, 1955); Fritz Fisher, Germany’s Aims in the First World War (New York: W.W. Norton, 1967), pp. 38-49; Dwight E. Lee, Europe’s Crucial Years (Hanover, NH: Clark University Press, 1974).

[7] Williams, Contours of American History, pp. 54, 66, 122-23, 128-29, 144-45, 168-70, 221-22, 272, 319, 338-40, 363, 349, 368-69, 383, 411, 417-23, 429, 434-37, 452, 455-58, 461-64; Williams, Empire as a Way of Life; Williams, Tragedy of American Diplomacy; Heckscher, Mercantilism, especially vol. 2, pp. 70-71.

[8] Nazi Choucri, Robert C. North, Nations in Conflict (San Francisco: W..H. Freeman & Company, 1974), in part quoting other authors, pp 55-59. See also Samuel Williamson Jr. The Politics of Grand Strategy (London: Ashfield Press, 1969).

[9] Karl Polanyi, The Great Transformation(Boston: Beacon Press, 1957), p. 19.

[10] Lawrence Malkin, The National Debt (New York: Henry Holt and Co., 1988), p. 11; Williams, Contours of American History; Heckscher, Mercantilism; Lloyd C. Gardner, Safe for Democracy (New York: Oxford University Press, 1984).

[11] Terry Allen, “In GATT They Trust,” Covert Action Information Bulletin, (Spring 1992), p. 63; George Seldes, Never Tire of Protesting (New York: Lyle Stuart, Inc., 1968), p. 45; Gardner, Safe For Democracy, chapters 1-2. See also Williams, Contours of American History, p. 412; Heckscher, Mercantilism, vol. 2.

[12] John Reed, The Education of John Reed (New York: International Publishers, 1955), pp. 74-75.

[13] Harry Magdoff, Paul M. Sweezy, Stagnation and the Financial Explosion (New York: Monthly Review Press, 1987) p. 167. Quotes are from H. Parker Willis and B. H. Beckhart’s Foreign Banking Systems and from J. B. Condliffe’s The Commerce of Nations.

[14] Bookworld, Washington Post (April 14, 1994), p. 14 (From McGehee’s Database).

[15] Gardner, Safe for Democracy, p. 98.

[16] Goodspeed, German Wars, pp. 267-68.

[17] Lester Thurow, Head to Head: The Coming Economic Battle Among Japan, Europe, and America (New York: William Morrow and Company, 1992), pp. 55-56.

[18] James and Suzanne Pool, Who Financed Hitler (New York: Dial Press, 1978), p. 41.

[19] Williams, Tragedy of American Diplomacy, pp. 128-29.

[20] Ibid, pp. 73, 128-29, 172-73; see also pp. 72-3, 134-5, 142; Williams, Contours of American History, pp. 412, 451-57, 462-64.

[21] Richard Barnet, The Rockets’ Red Glare: War, Politics and the American Presidency (New York: Simon and Schuster, 1990), p. 194.

[22] Williams, Tragedy of American Diplomacy, pp. 163-64, emphasis added.

[23] Walter Russell Mead, “American Economic Policy in the Antemillenial Era,” World Policy Journal (Summer 1989), p. 422.

[24] James Fallows, “How the World Works,” The Atlantic Monthly. December 1993, p. 82.

[25] Clairmont, Rise and Fall of Economic Liberalism, pp. 169, 268.

[26] Schlosstein, Trade War, pp. 9, 13, 55, 99. Fallows, World Works, pp. 73, 82. See also J.M. Roberts, The Triumph of the West (London: British Broadcasting Company, 1985), p. 33.

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