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The politics of productivity: foundations of American international economic policy after World War II

  • Charles S. Maier

The years immediately after World War II provided American policy makers with a unique opportunity to help shape the international economic order for a generation to come. United States objectives are usually described in terms of enlightened idealism or capitalist expansionism. But much of the way policy makers envisaged international economic reconstruction derived from the ambivalent way in which domestic economic conflict had been resolved before and during the New Deal. In the inconclusive struggle between business champions and the spokesmen for reform, Americans achieved consensus by celebrating a supposedly impartial efficiency and productivity and by condemning allegedly wasteful monopoly. Looking outward during and after World War II, United States representatives condemned Fascism as a form of monopoly power, then later sought to isolate Communist parties and labor unions as adversaries of their priorities of production. American blueprints for international monetary order, policy toward trade unions, and the intervention of occupation authorities in West Germany and Japan sought to transform political issues into problems of output, to adjourn class conflict for a consensus on growth. The American approach was successful because for almost two decades high rates of growth made the politics of productivity apparently pay off. Whether an alternative approach could have achieved more equality remains an important but separate inquiry.

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1 For critical analyses, Gardner, Lloyd C., Economic Aspects of New Deal Diplomacy (Madison: University of Wisconsin Press, 1964); Kolko, Gabriel, The Politics of War: The World and United States Foreign Policy, 1943–1945 (New York: Random House, 1968); Williams, William Appleman, The Tragedy of American Diplomacy (New York: Dell Publishing Co., 1962).

2 For Johnston and Nelson, see Gaddis, John Lewis, The United States and the Origins of the Cold War, 1941–1947 (New York: Columbia University Press, 1972), pp. 176–77, 185–89. Clayton cited in Thomas Paterson, Soviet-American Confrontation: Postwar Reconstruction and the Origins of the Cold War (Baltimore: The Johns Hopkins University Press, 1973), p. 4.

3 The Memoirs of Cordell Hull, 2 vols. (New York: Macmillan Co., 1948), Vol. 1, p. 364.

4 To see the implications of Wilsonianism, see Levin, N. Gordon Jr., Woodrow Wilson and World Politics. America's Response to War and Revolution (New York: Oxford University Press, 1970).

5 For the earlier analogue: Gallagher, John and Robinson, Ronald, “The Imperialism of Free Trade,” Economic History Review, 2nd series, 6 (1953): 115; objections in D.C.M. Platt, The Imperialism of Free Trade: Some Reservations,” Economic History Review, 2nd series, 11 (1968): 296306, and Further Objections to an ‘Imperialism of Free Trade,’ 1830–1860,” Economic History Review, 2nd series, 26 (1973): 7791.

6 Rowland, Benjamin M., “Preparing the American Ascendency: The Transfer of Economic Power from Britain to the United States,” in Balance of Power or Hegemony: The Interwar Monetary System, Rowland, Benjamin M., ed. A Lehrman Institute Book (New York: New York University Press, 1976), pp. 195224, and, in the same volume, Cleveland, Harold van B., “The International Monetary System in the Interwar Period,” esp. pp. 5456; Pumphrey, Lowell M., “The Exchange Equalization Account of Great Britain,” American Economic Review, 32 (12 1942): 803–16.

7 Gardner, Richard N., Sterling-Dollar Diplomacy: Anglo-American Cooperation in the Reconstruction of Multilateral Trade (Oxford: Clarendon Press, 1956), offers the best account of this relationship.

8 Rowland in Rowland, pp. 202–04, 213–15.

9 For Morgenthau's ideas, see Blum, John Morton, ed., From the Morgenthau Diaries, Vol. 3: Years of War 1941–1945 (Boston: Houghton Mifflin Company, 1967), pp. 228–30, 324–26, 333ff;cf. Kolko, pp. 323–40.

10 Leuchtenburg, William E., Franklin D. Roosevelt and the New Deal, 1932–1940 (New York: Harper and Row, 1963), pp. 243 ff.; Huthmachei, J. Joseph, Senator Robert F. Wagner and the Rise of Urban Liberalism (New York: Atheneum, 1971); Sherwood, Robert, Roosevelt and Hopkins (New York: Harper & Brothers, 1948), pp. 110–11.

11 Letter to Averell Harriman, July 7, 1941, in James Forrestal papers, Princeton University Library, Box 56. For a liberal, journalistic account of Washington wartime economic conflicts, see Catton, Bruce, The Warlords of Washington (New York: Harcourt, Brace, 1948).

12 Koistinen, Paul A. C., “Mobilizing the World War II Economy: Labor and the Industrial-Military Alliance,” Pacific Historical Review, 42 (11 1973): 443–78, esp. 446–60. Cf. Bernstein, Barton J., “America in War and Peace: The Test of Liberalism,” in Toward a New Past: Dissenting Essays in American History, Bernstein, Barton J., ed., (New York: Random House-Vintage, 1968).

13 Blum, John Morton, ed., The Price of Vision: The Diary of Henry A. Wallace, 1942–1946 (Boston: Atlantic-Little Brown, 1973), p. 137. See also Markowitz, Norman D., The Rise and Fall of the People's Century: Henry A. Wallace and American Liberalism, 1941–1948 (New York: Free Press, 1973), pp. 47ff.; Schapsmeier, Frederick H. and Schapsmeier, Edward L., Prophet in Politics: Henry A. Wallace and the War Years, 1940–1945 (Ames, Iowa: The University of Iowa Press, 1970), pp. 5571.

14 Bernstein in Bernstein for Congressional conservatism; Markowitz, pp. 57–65 on NRPB; Huthmacher, pp. 285–302; Bailey, Stephen Kemp, Congress Makes a Law: The Story behind the Employment Act of 1946 (New York: Columbia University Press, 1950).

15 See Hawley, Ellis, “Herbert Hoover, the Commerce Secretariat and the Vision of an ‘Associative State,’ 1921–1928,” The Journal of American History, 61 (06 1974): 116–40; also Hawley's, own essay in Herbert Hoover and the Crisis of American Capitalism, Hawley, Ellis et al. (Cambridge, Massachusetts: Schenkman, 1973); Karl, Barry D., “Presidential Planning and Social Science Research: Mr. Hoover's Experts,” Perspectives in American History, 3 (1969): 347409; Maier, Charles S., “Between Taylorism and Technocracy: European Ideologies and the Vision of Industrial Productivity in the 1920's,” Journal of Contemporary History, 5 (04 1970): 2761.

16 Schriftgeisser, Karl, Business Comes of Age: The Story of the Committee for Economic Development and its Impact upon the Economic Policies of the United States (New York: Harper and Row, 1960); also Stein, Herbert, The Fiscal Revolution in America (Chicago: University of Chicago Press, 1969), Chapters 8–9; Lekachman, Robert, The Age of Keynes (New York: Random House, 1966).

17 Secretary of Commerce files in W. Averell Harriman papers, Washington, National Press Club Luncheon, October 15,1946.

18 The Journals of David E. Lilienthal, Vol. 1: The TVA Years, 1939–1945 (New York: Harper & Row, 1964), p. 471, entry of April 14, 1942. On the conservation justification, see Himmelberg, Robert F. essay in Hawley et al. , pp. 6382; for planning in the '30s: Hawley, Ellis W., The New Deal and the Problem of Monopoly (Princeton: Princeton University Press, 1966), pp. 122–27, 130–46; Lorwin, Lewis L. and Hinrichs, A. Ford, National Economic and Social Planning (Washington: GPO, 1935); Roos, Charles F., NPA Economic Planning (Bloomington, Indiana: Principia, 1937); Merriam, Charles, “The National Resources Planning Board: A Chapter in American Planning Experience,” American Political Science Review, 38 (12 1944): 1075–88.

19 Robinson, Joan, The Economics of Imperfect Competition (London, 1933); Chamberlain, Edward H., The Theory of Monopolistic Competition (Cambridge, Massachusetts: Harvard University Press, 1938).

20 US Congress, Senate, Industrial Prices and their Relative Inflexibility, by Gardiner Means, Sen. Doc. 13, 74th Congress, 1st. Sess. 1935; cf. Beile, Adolph and Gardiner, Means, The Modern Corporation and Private Property (New York: The Macmillan Co., 1937); also Leven, Maurice, Moulton, Harold G., Warburton, Clark, America's Capacity to Consume (Washington: The Brookings Institution, 1934), pp. 126–28.

21 Lynch, David, The Concentration of Economic Power (New York: Columbia University Press, 1946), pp. 134; Hawley, , The New Deal and the Problem of Monopoly, pp. 404–19.

22 Temporary National Economic Committee, Hearings, Vol. 1, appendix, p. 105.

23 The Memoirs of Cordell Hull, 1, p. 364.

24 Lilienthal, p. 324, entry of May 22, 1941.

25 Blum, John Morton, ed., From the Morgenthau Diaries, Vol. 1: Years of Urgency, 1938–1941 (Boston: Houghton Mifflin Company, 1965), p. 20.

26 Lynch describes the TNEC results; for antitrust see Hawley, , The New Deal and the Problem of Monopoly, pp. 420–25.

27 See three books byBrady, Robert, The Rationalization Movement in German Industry (Berkeley and Los Angeles: University of California Press, 1933); The Spirit and Structure of German Fascism (New York: The Viking Press, 1937); Business as a System of Power (New York: Columbia University Press, 1943); Neumann, Franz, Behemoth: The Structure and Practice of National Socialism (Toronto and New York: Columbia University Press, 1942). Cf. Niethammer, Lutz, Entnazifientng in Bayern: Säuberung und Rehabilitierung unter amerikanischer Besatzung (Frankfurt am Main: S. Fischer Verlag, 1972), pp. 37 ff.

28 Cohen, Jerome B., Japan's Economy in War and Reconstruction (Minneapolis: University of Minnesota Press, 1949), p. 427.

29 For the embittered reaction of one see Martin, James Stewart, All Honorable Men (Boston: Little, Brown, 1952).

30 Council on Foreign Relations: Studies of American Interests in the War and the Peace, Memoranda of Discussion; Economic and Financial Series, E-A 36, October 27, 1942.

31 Gardner, Cf., Sterling-Dollar Diplomacy; Rowland in Rowland, pp. 213–22; Paterson, pp. 159–73; Harrod, Roy, The Life of John Maynard Keynes (New York: Harcourt, Brace, 1951), p. 547 (letter to Keynes, March 2,1943).

32 Dupriez, Leon H., Monetary Reconstruction in Belgium (New York: The Carnegie Endowment for International Peace and the King's Crown Press, 1947), esp. Chapters 3–4; Grotius, Fritz, “Die europäischen Geldreformen nach dem 2. Weltkrieg,” Weltwirtschaftliches Archiv, Vol. 63 (1949 II): 106–52, 276–325; Gurley, J.C., “Excess Liquidity and European Monetary Reforms,” The American Economic Review, 43 (03 1953): 76100; Möller, Hans, “Die westdeutsche Währungsreform von 1948,” in Währung und Wirtschaft in Deutschland 1876–1975, Bundesbank, Deutsche, ed., (Frankfurt am Main: Fritz Knapp GmbH, 1976), pp. 433–83.

33 For criticism, Cecco, Marcello De, “Sulla politica di stabilizzazione del 1948,” Saggi di politico monetaria (Milan: Dott. A. Giuffrè Editore, 1968), pp. 109–41; Economic Cooperation Administration, Country Study (Italy) (Washington, 1950); Foa, Bruno, Monetary Reconstruction in Italy (New York: The Carnegie Endowment for International Peace and King's Crown Press, 1949); favorable judgments in Hildebrand, George H., Growth and Structure in the Economy of Modern Italy (Cambridge, Massachusetts: Harvard University Press, 1965), Chapters 2 and 8. On France, see Parodi, Maurice, L 'èconomie et la socéé française de 1945 à 1970 (Paris: Armand Colin, 1971), pp. 66ff. For general coverage of postwar policies, Brown, A.J., The Great Inflation, 1939–1951 (London: Oxford University Press, 1955), pp. 227–48.

34 Diebold, William Jr., Trade and Payment in Western Europe (New York: Harper and Row, 1952), esp. pp. 6469. I have also drawn upon an oral-history interview with Averell Harriman, Milton Katz et al.

35 On this issue, see Diebold, William Jr., The End of the ITO, Princeton University, Department of Economics and Social Institutions, Studies in International Finance (Princeton: Princeton University Press, 1952).

36 Paterson, pp. 94–98.

37 US Department of State, Foreign Relations of the United States, 1946, V, 440–43. (Minutes of the Twenty-Fourth Meeting of the National Advisory Council on International and Monetary Problems, Washington, May 6,1946.)

38 Council on Foreign Relations archives, Records of Groups, XII G.

39 US Department of State, Foreign Relations of the United States, 1947, III, 224–25.

40 Trends can be followed in Lefranc, Georges, Le mouvement syndical de la libèration aux èvènements de mai–juin 1968 (Paris: Presses Universitaires de France, 1969), pp. 4176; Levi, Fabio, Rugafiori, Paride, Vento, Salvatore, II triangolo industriale tra ricostruzione e lotta di classe 1945/48 (Turin: Feltrinelli, 1974); Pepe, Adolfo, “La CGIL della ricostruzione alia scissione (1944–1948),” Storia Contemporanea, 5 (1974): 591636; Rieber, Alfred J., Stalin and the French Communist Party, 1941–1947 (New York: Columbia University Press, 1962), Chapter 14.

41 Besides the above, see Ambassador Caffrey's report to the State Department in Foreign Relations of the United States, 1947, III, p. 703, and Ambassador Dunn (Rome) on May 28, 1947, in ibid., pp. 91 Iff.

42 Lefranc, pp. 51–76; Turone, Serigo, Storia del sindacato in Italia (1943–1969) (Bari: Laterza, 1973), pp. 177–89; Horowitz, Daniel L., The Italian Labor Movement (Cambridge, Massachusetts: Harvard University Press, 1963), pp. 214 ff.

43 The New York Times, May 8, 1967, p. 1, for Braden revelations.

44 Foreign Relations of the United States, 1947, III, 690–91 (Caffrey cable, February 19), and 747–48 (Dunn report, December 11, 1948), III.

45 Evolution of the CIO leadership can be followed in Foreign Relations of the United States, 1948, III, 847–48, 867 (reports of March 10 and 24).

46 Foreign Relations of the United States, 1948, III, p. 863 (03 28,1948).

47 Ibid., p. 855 (March 17, 1948).

48 For Clay's opposition to British plans, and Washington discussions, seeForeign Relations of the United States, 1947, II, pp. 910–11, 924ff; also Smith, Jean Edward, ed., The Papers of Lucius D. Clay: Germany 1945–1949, 2 vols. (Bloomington, Ind.: The Indiana University Press, 1975), Vol. 1, pp. 341–43, 352–63, 411–13. For German political ramifications see, among others, Schwarz, Hans-Peter, Vom Reich zur Bundesrepublik. Deutschland im Widerstreit der aussenpolitischen Konzeptionen in den Jahren der Besatzungsherrschaft 1945–1949 (Neuwied and Berlin: Luchterhand, 1966), pp. 297344, 551–64; also Schmidt, Eberhard, Die verhinderte Neuordnung 1945–1952 (Frankfurt am Main: Europäische Verlagsanstalt, 1970).

49 Halliday, Jon, A Political History of Japanese Capitalism (New York: Pantheon Books, 1975), pp. 206–19, is useful from a Marxist perspective. See also Kishimoto, Eitaro, “Labour-Management Relations and the Trade Unions in Post-War Japan (1),” The Kyoto University Economic Review Vol. 38, No. 1 (04 1968): 135, which emphasizes the role played by “seniority wages” in encouraging enterprise unions at the expense of more class-oriented labor coalitions; also Ayusawa, Iwayo F., A History of Labor in Modern Japan (Honolulu: East-West Center Press, 1966), pp. 257–75, 281–301, 315–23; Taira, Koji, Economic Development and the Labor Market in Japan (New York: Columbia University Press, 1970), pp. 183–87.

50 Halliday, , A Political History of Japanese Capitalism, pp. 182–90; Gimbel, John, The American Occupation of Germany, 1945–1949 (Stanford, Calif.: Stanford University Press, 1968), pp. 147 ff., 163 ff., 174–85.

51 See, for example, Herman Abs's presentation to the Council on Foreign Relations, December 5,1949, Council on Foreign Relations Archives, Records of Meetings, Vol. 10.

52 Ellis, Howard, The Economics of Freedom (New York: Harper, 1952), pp. 129, 135.

53 Titmuss, Richard, ”The Irresponsible Society,” Essays on the Welfare State (Boston: Beacon Press, 1969).

54 These continuities in Europe comprise a major theme of my own current research; for the Japanese case, see Taira, p. 188, drawing upon the Japanese work of Ryohei Magota.

55 For the issue of whether international monetary systems do or do not require “hegemonic” leadership see the essays in Rowland, ed., Balance of Power or Hegemony; also Krasner, Stephen D., “State Power and the Structure of International Trade,” World Politics Vol. 28, No. 3 (07 1976): 317–43. Insights into the regulatory capacity of the earlier system are derived from Bloomfield, Arthur, Short-Term Capital Movements under the Gold Standard, Princeton University, Department of Economics and Social Institutions, International Studies No. 16 (Princeton, N.J., 1952), esp. pp. 72ff.; Lindert, Peter, ”Key Currencies and Gold, 1900–1913,” Princeton Studies in International Finance, No. 24 (Princeton, N.J.: Princeton University Press, 1969).

1 Department of History at Duke University. This essay draws upon papers the author presented in 1975—76 while a Fellow of the Lehrman Institute in New York City. The title of that series, which is intended to serve as the base for a future book, was The United States and the Reorganization of European Institutions after World War II.

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