Chapter 5. World Wars: Battles over Who Decides the Rules of Unequal Trade
This is a chapter from the book, Economic Democracy; The Political Struggle for the 21st Century. Visit that link for more information about the book.
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 that “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 wholesale, usually from England.”3
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, WWI 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 Britain’s “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 WWI. WWII was simply a replay of WWI.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 that this was the cause of WWI: “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 that a dominant currency has “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 a powerful tool and 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 as per the formula outlined in Chapter One.
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 WWI. 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. After that war, Britain thought that
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 WWI, 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 employ military might to 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 WWII. 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 rights. However, the injustice to Germany in denying her equality in world trade was extreme and injustice breeds extremism. As we have shown, World Wars I and II were caused by the attempt to economically strangle (contain) Germany.18
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 that 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 WWII and six years before America entered that 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
Because Germany was bypassing Britain’s monopolization of finance capital through barter agreements, that blockade was intended to re-impose neo-mercantilist “free” trade and contain German economic power as well as its Aryan supremacist philosophy. After the war, Secretary of State Cordell Hull reaffirmed that trade was the primary cause of WWII:
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 been able to negotiate 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 concurred 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-WWII 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-to-30% of building costs.25 Take specific note on 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 that 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 to produce quality products and access to markets to sell those products, those industries and products back the money created to produce those industries.
After WWII, under United States protection as a buffer against fast-expanding socialism, Japan reestablished her centrally planned cartels (Germany reestablished theirs at the same time) to maintain low import prices for raw materials, high prices for Japanese citizens, and lower 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 that 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-WWII conquests cut powerful European traders off from what was once their private domain. This was the common bond between Germany and Japan in WWII 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.
America Protects the Imperial Centers
Check a globe and note the enormous expanse of the world where most of the world’s natural resources are located, which is undeveloped and impoverished, and which in 1997 consumed only 14% of the world’s resources. Then note the small area of the world which has few resources, which is developed, wealthy and powerful and which consumed 86% of the world’s resources.27 The resources which produce the wealth and power of the imperial centers are primarily in, and thus properly owned by, the impoverished undeveloped world. The secret that can never be acknowledged is that—if the impoverished world had access to finance capital, technology, and markets—it is they who would be wealthy.
As impoverished nations started breaking free from the chains of neo-mercantilist imperialism after WWII and exercising their rights as free people, the words spoken by Western security councils demonstrated they clearly realized their dilemma: “China is moving towards an economy and a type of trade in which there is no place for the foreign manufacturer, the foreign banker, or the foreign trader.”28 “We cannot expect domestic prosperity under our system without a constantly expanding trade with other nations. The capitalist system is essentially an international system, if it cannot function internationally, it will break down completely.”29
The threat of the governments of half of Europe being no longer allied with the West and the loss of China after that war led to Germany and Japan, as well as Taiwan and South Korea—right on the border of China—being included as allies. The strategy of allowing those once-threatening
imperial-centers-of-capital access to finance capital, technology, resources, and markets rapidly rebuilt Germany and Japan and much of Southeast Asia.
The Friedrich List protection provided post-WWII Japan, Taiwan, and South Korea (which was democratic-cooperative-capitalism but not yet superefficient capitalism) would be a great model to develop the entire world. However, the rest of the colonial world—which was forming their own nonaligned bloc to control its destiny—was not only denied all those protections, they were covertly destabilized and the rules of Adam Smith free trade, as interpreted by neo-mercantilists, were applied. True free trade was nonexistent, all the free trade rhetoric notwithstanding.
America allied with Britain to defeat Germany in WWI, allied with both Britain and the Soviet federation to defeat Germany again, and defeated Japan almost alone, in WWII. The United States then allied with the former hostile imperial-centers-of-capital to defeat the rising center of capital to the East, the federated Soviet Union, and suppress the many breaks for economic freedom of the colonial nations. European nations were prostrate after bankrupting each other battling over the world’s wealth and America picked up the baton as protector of the now-allied
That the Cold War was primarily to maintain control of the world’s resources, not to defend against attack, is proven by the fact that even after the collapse of the Soviet Union, the West’s supposed imminent military threat, the U.S. military budget alone is becoming equal to that of the rest of the world combined. America and its allies together have at least 20-times the firepower of any possible combination of nations allegedly hostile to their interests.
Western imperialists may need that firepower. Much of Southeast Asia is highly industrialized and, in 2002, China alone graduated over 400,000 Ph.D.s in the hard sciences. We must remember it was Germany graduating 3,000 engineers to Britain’s 350 that made the German economy so much more efficient and it was Germany’s takeover of British markets with the production of those engineers that led to World Wars I and II. Only a philosophy of sharing resources, sharing productive capacity, and sharing in the wealth produced can avoid fascist military control of world resources which could easily turn into WWIII.
America’s and NATO’s rapid-reaction forces snuffing out resistance worldwide is only control of resources and control of the wealth-producing-process hiding under other excuses.
- Woodrow Wilson, President of the United States, 1919, Quoted by Noam Chomsky, On Power and Ideology, (South End Press, 1990), p.14; see Margaret Macmillan, Paris 1919: Six Months that Changed the World (New York: Random House, 2001). Back to text
- Steven Schlosstein, Trade War (New York: Congdon & Weed, 1984), p. 9. Back to text
- Kurt Rudolph Mirow, Harry Maurer, Webs of Power (Boston: Houghton Mifflin Co., 1982), p. 16. Back to text
- D.J. Goodspeed, The German Wars (New York: Bonanza Books, 1985), p. 71. Back to text
- Petr Kropotkin, Mutual Aid (Boston: Porter Sargent Publishing Co.), p. 334. Back to text
- 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). Back to text
- 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. Back to text
- Nazli Choucri, Robert C. North, Nations in Conflict (San Francisco: W. H. Freeman and Company, 1974), in part quoting other authors, pp. 58-59, 106-07. See also Samuel Williamson, Jr., The Politics of Grand Strategy (London: Ashfield Press, 1969). Back to text
- Karl Polanyi, The Great Transformation (Boston: Beacon Press, 1957), p. 19. Back to text
- 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). Back to text
- 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. Back to text
- John Reed, The Education of John Reed (New York: International Publishers, 1955), pp. 74-75. Back to text
- 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. Back to text
- Bookworld, Washington Post (April 14, 1994), p. 14 (From McGehee’s Database). Back to text
- Gardner, Safe for Democracy, p. 98. Back to text
- Goodspeed, German Wars, pp. 267-68. Back to text
- Lester Thurow, Head to Head: The Coming Economic Battle Among Japan, Europe, and America (New York: William Morrow and Company, 1992), pp. 55-56. Back to text
- James and Suzanne Pool, Who Financed Hitler (New York: Dial Press, 1978), p. 41. Back to text
- Williams, Tragedy of American Diplomacy, pp. 128-29. Back to text
- 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. Back to text
- Richard Barnet, The Rockets’ Red Glare: War, Politics and the American Presidency (New York: Simon and Schuster, 1990), p. 194. Back to text
- Williams, Tragedy of American Diplomacy, pp. 163-64, emphasis added. Back to text
- Walter Russell Mead, “American Economic Policy in the Antemillenial Era,” World Policy Journal (Summer 1989), p. 422. Back to text
- James Fallows, “How the World Works,” The Atlantic Monthly. December 1993, p. 82. Back to text
- Clairmont, Rise and Fall of Economic Liberalism, pp. 169, 268. Back to text
- 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. Back to text
- United Nations Human Development Report, 1998. Back to text
- Noam Chomsky, “Enduring Truths: Changing Markets,” CovertAction Quarterly (Spring 1996), p. 49. Back to text
- Eric Wolf, Europe and the People Without History (Berkeley: University of California Press, 1982), p. 9. Back to text
- Full Table of Contents
- Chapter 1. The Secret of Free Enterprise Capital Accumulation
- Chapter 2. The Violent Accumulation of Capital is Rooted in History
- Chapter 3. The Unwitting hand Their Wealth to the Cunning
- Chapter 4. The Historical Struggle for Dominance in World Trade
- Chapter 5. World Wars: Battles over Who Decides the Rules of Unequal Trade
- Chapter 6. Suppressing Freedom of Thought in a Democracy
- Chapter 7. The World Breaking Free frightened the Security Councils of every Western Nation
- Chapter 8. Suppressing the World’s break for Economic Freedom
- Chapter 9. “Frameworks of Orientation”: Creating Enemies for the Masses
- Chapter 10: The Enforcers of Unequal Trades
- Chapter 11. Emerging Corporate Imperialism
- Chapter 12. Impoverishing Labor and eventually Capital
- Chapter 13. Unequal Trades in Agriculture
- Chapter 14. Developing World Loans, Capital Flight, Debt Traps, and Unjust Debt
- Chapter 15. The Economic Multiplier, Accumulating Capital through Capitalizing Values of Externally Produced Wealth
- Chapter 16. Japan’s Post-World War II Defensive, Mercantilist, Economic Warfare Plan
- Chapter 17. Southeast Asian Development, an Accident of History
- Chapter 18. Capital Destroying Capital
- Chapter 19. A New Hope for the World
- Chapter 20. The Earth’s Capacity to Sustain Developed Economies
- Chapter 21. The Political Structure of Sustainable World Development
- Chapter 22. Equal Free Trade as opposed to Unequal Free Trade
- Chapter 23. A Grand Strategy for World Peace and Prosperity
- Chapter 24. Adjusting Residual-Feudal Exclusive Property Rights, as per Henry George, Produces a Modern Land Commons
- Chapter 25. Restructuring Residual-Feudal Exclusive Patent Laws Produces a Modern Technology Commons
- Chapter 26. A Modern Money Commons
- Chapter 27. A Modern Information Commons
- Chapter 28. Wi-Fi Empowering the Powerless
- Conclusion: Guidelines for Sustainable World Development
- Appendix I. Expansion and Contraction of Cultures
- Appendix II: A Practical Approach for Developing Poor Nations and Regions
This is a chapter from the book, Economic Democracy; The Political Struggle for the 21st Century. Visit that link for more information about the book.