The period from 1914 to 1940 is one of the most crucial and enigmatic in modern world history, and in the history of modern U.S. foreign policy. World War I catapulted the United States into international economic and political leadership, yet in the aftermath of the war, despite grandiose Wilsonian plans, the United States quickly lapsed into relative disregard for events abroad: it did not join the League of Nations, disavowed responsibility for European reconstruction, would not participate openly in many international economic conferences, and restored high levels of tariff protection for the domestic market. Only in the late 1930s and 1940s, after twenty years of bitter battles over foreign policy, did the United States move to center stage of world politics and economics: it built the United Nations and a string of regional alliances, underwrote the rebuilding of Western Europe, almost single-handedly constructed a global monetary and financial system, and led the world in commercial liberalization.
The author would like to acknowledge the comments and suggestions of Beverly Crawford, Robert Dallek, Amy Davis, Barbara Geddes, Judith Goldstein, Joanne Gowa, Stephan Haggard, John Ikenberry, Robert Jervis, Miles Kahler, Paul Kennedy, Robert Keohane, Charles Kindleberger, Steve Krasner, David Lake, Mike Mastanduno, William McNeil, John Ruggie, Stephen Schuker, Jack Snyder, Arthur Stein, and Richard Sylla.
1. Kindleberger, Charles, The World in Depression 1929–1939 (Berkeley: University of California Press, 1973), pp. 297–99. The Carr citation is from his The Twenty Years Crisis, 1919–1930 (London: Macmillan, 1939), p. 234. A popular British satirical history of the 1930s, under the heading “A Bad Thing,” summarized the results of the Great War somewhat more succinctly: “America was thus clearly top nation, and History came to a.” Sellar, Walter and Yeatman, Robert, 1066 And All That (New York: Dutton, 1931), p. 115.
2. Dallek, Robert, The American Style of Foreign Policy (New York: Knopf, 1983) is a good survey of traditional American insularity.
3. The historical literature on the period is so enormous that it is feasible only to cite the most recent important additions. Two review essays and a forum are a good start: Kathleen Burk, “Economic Diplomacy Between the Wars,” Historical Journal 24 (December 1981), pp. 1003–15; Jacobson, Jon, “Is There a New International History of the 1920s?” American Historical Review 88 (06 1983), pp. 617–45; Maier, Charles, Schuker, Stephen, and Kindleberger, Charles, “The Two Postwar Eras and the Conditions for Stability in Twentieth-Century Western Europe,” American Historical Review 86 (04 1981). Other important works include Denise Artaud, La question des dettes interalliées et la reconstruction de l'Europe (Paris: Champion, 1979); Costigliola, Frank, Awkward Dominion: American Political, Economic, and Cultural Relations with Europe 1919–1933 (Ithaca, N.Y.: Cornell University Press, 1984); Hogan, Michael J., Informal Entente: The Private Structure of Cooperation in Anglo-American Economic Diplomacy, 1918—1928 (Columbia: University of Missouri Press, 1977); Leffler, Melvyn, The Elusive Quest: America's Pursuit of European Stability and French Security, 1919–1933 (Chapel Hill: University of North Carolina Press, 1979); McNeil, William, American Money and the Weimar Republic (New York: Columbia University Press, 1986); Schuker, Stephen, The End of French Predominance in Europe (Chapel Hill: University of North Carolina Press, 1976); and Silverman, Dan, Reconstructing Europe after the Great War (Cambridge: Harvard University Press, 1982). Many of the leading scholars in the field summarize their views in Gustav, Schmidt, ed., Konstellationen Internationaler Politik 1924–1932 (Bochum, W. Ger.: Studienverlag Dr. N. Brockmeyer, 1983).
4. Kindleberger, Charles, “Group Behavior and International Trade,” Journal of Political Economy 59 (02 1951), pp. 30–46; Gourevitch, Peter, “International Trade, Domestic Coalitions, and Liberty: Comparative Responses to the Crisis of 1873–1896,” Journal of Interdisciplinary History 8 (Autumn 1977), pp. 281–313; Gourevitch, Peter, “Breaking with Orthodoxy: the Politics of Economic Policy Responses to the Depression of the 1930s,” International Organization 38 (Winter 1984), pp. 95–129; Ferguson, Thomas, “From Normalcy to New Deal: Industrial Structure, Party Competition, and American Public Policy in the Great Depression,” International Organization 38 (Winter 1984), pp. 41–94.
5. For figures on U.S. foreign private assets, see Goldsmith, Raymond, A Study of Savings in the United States, vol. 1 (Princeton, N.J.: Princeton University Press, 1955), p. 1093.
6. The classical explanation of the process is Vernon, Raymond, “International Investment and International Trade in the Product Cycle,” Quarterly Journal of Economics 80 (05 1966), pp. 190–207.
7. On agricultural and industrial trade preferences in the 1920s, see Eichengreen, Barry, “The Political Economy of the Smoot-Hawley Tariff,” Discussion Paper No. 1244, Harvard Institute for Economic Research, May 1986.
8. Opposition to the League was indeed led by a prominent nationalist Massachusetts senator whose adamant insistence on protecting manufactured goods while allowing the free import of inputs was ably captured by “Mr. Dooley,” who noted that “Hinnery Cabin Lodge pleaded f'r freedom f'r th' skins iv cows” in ways that “wud melt th' heart iv th' coldest mannyfacthrer iv button shoes.” Cited in Garraty, John A., Henry Cabot Lodge (New York: Knopf, 1953), p. 268; the book contains ample, and somewhat weightier, evidence of Lodge's economic nationalism.
9. Lake, David, “The State and American Trade Strategy in the Pre-Hegemonic Era,” in this volume.
10. Edwards, George, The Evolution of Finance Capitalism (London: Longmans, 1938), pp. 204–5, and U.S. Department of Commerce, Historical Statistics of the United States (Washington: GPO, 1960), pp. 139, 537. The definitive work on the period is Kathleen, Burk, Britain, America and the Sinews of War, 1914–1918 (Boston: Allen & Unwin, 1985). See also Kennedy, David, Over Here: The First World War and American Society (New York: Oxford University Press, 1980); Madden, John T., Nadler, Marcus, and Sauvain, Harry C., America's Experience as a Creditor Nation (New York: Prentice-Hall, 1937), pp. 44–46; Noyes, Alexander Dana, The War Period of American Finance (New York: Putnam, 1926), pp. 113–18; and Schultz, William J. and Caine, M. R., Financial Development of the United States (New York: PrenticeHall, 1937), 503–4.
11. Nicolson, Harold, Dwight Morrow (New York: Macmillan, 1935), pp. 171–75.
12. Lewis, Cleona, America's Stake in International Investments (Washington, D.C.: Brookings Institution, 1938), p. 352. See, for a discussion of the experience, Dayer, Roberta A., “Strange Bedfellows: J. P. Morgan and Co., Whitehall, and the Wilson Administration During World War I,” Business History 18 (07 1976), pp. 127–51.
13. Lewis, , America's Stake, p. 355; Nicolson, , Dwight Morrow, pp. 177–82; Carosso, Vincent P., Investment Banking in America: A History (Cambridge. Mass.: Harvard University Press, 1970), pp. 205–14. For a thoughtful survey of the political effects, see Cooper, John Milton Jr., “The Command of Gold Reversed: American Loans to Britain, 1915–1917,” Pacific Historical Review 45 (05 1976), pp. 209–30.
14. This is Lewis's, figure; America's Stake, p. 362. Others give different amounts. See, for example, Noyes, , The War Period, pp. 162–93; Schultz, and Caine, , Financial Development, pp. 525, 533–42; Hiram, Motherwell, The Imperial Dollar (New York: Brentano's, 1929), p. 85.
15. Charles, Kindleberger, “Origins of United States Direct Investment in France,” Business History Review 48 (Autumn 1974), p. 390.
16. Scott, Nearing and Joseph, Freeman, Dollar Diplomacy (New York: Huebsch, 1925), p. 273.
17. Shoup, Lawrence H. and Minter, William, Imperial Brain Trust: The Council on Foreign Relations and United States Foreign Policy (New York: Monthly Review, 1977), pp. 11–28.
18. Cited in Frank, Costigliola, “United States-European Relations and the Effort to Shape American Public Opinion, 1921–1933,” in Schmidt, , ed., Konstellationen Internationaler Politik, p. 43. See also Costigliola, , Awkward Dominion, pp. 56–75 and 140–66, Divine, Robert A., Second Chance: The Triumph of Internationalism in America During World War II (New York: Atheneum, 1972), pp. 6–23.
19. Lamont, Thomas W., Across World Frontiers (New York: Harcourt, Brace, 1951), pp. 215, 217–18.
20. Viner, Jacob, “Political Aspects of International Finance,” Journal of Business of the University of Chicago 1 (04 1928). p. 146.
21. See, in addition to works cited above, Abrahams, Paul P., The Foreign Expansion of American Finance and its Relationship to the Foreign Economic Policies of the United States, 1907–1921 (New York: Arno, 1976); Feis, Herbert, The Diplomacy of the Dollar: First Era 1919–1932 (Baltimore: Johns Hopkins University Press, 1950); Wilson, Joan Hoff, American Business and Foreign Policy, 1920–1933 (Lexington: University Press of Kentucky, 1971); Costigliola, Frank, “The United States and the Reconstruction of Germany in the 1920s,” Business History Review 50 (Winter 1976), pp. 477–502; Costigliola, Frank, “Anglo-American Financial Rivalry in the 1920s,” Journal of Economic History 38 (12 1977), pp. 911–34. Because the issues are so widely treated, citations will only be given where necessary to confirm a specific fact, controversial interpretation, or direct quotation.
22. On these issues, see the articles by Lamont, Thomas, Sheldon, James, and Rosenthal, Arthur J. in Annals of the American Academy of Political and Social Science 88 (03 1920), pp. 114–38.
23. See especially Abrahams, , Foreign Expansion of American Finance; and Costigliola, , “Anglo-American Financial Rivalry,” pp. 914–20. For an interesting view of one aspect of the war debts tangle, see Dayer, Roberta A., “The British War Debts to the United States and the Anglo-Japanese Alliance, 1920–1923,” Pacific Historical Review 45 (11 1976), pp. 569–95.
24. Brandes, Joseph, Herbert Hoover and Economic Diplomacy (Pittsburgh: University of Pittsburgh Press, 1962), pp. 170–96; Leffler, Melvyn, “The Origins of Republican War Debt Policy, 1921–1923,” Journal of American History 59 (12 1972), pp. 585–601.
25. Cited in Silverman, , Reconstructing Europe, pp. 157 and 189.
26. Cited in U.S. Congress, House of Representatives, Committee on Banking and Currency, Subcommittee on Domestic Finance, Federal Reserve Structure and the Development of Monetary Policy, 1915–1935: Staff Report (Washington, D.C.: GPO, 1971), p. 62. I am grateful to Jane D'Arista for bringing these and other documents to my attention.
27. Hogan, , Informal Entente, pp. 62–66.
28. See, for example, Clarke, Stephen V. O., Central Bank Cooperation 1924–1931 (New York: Federal Reserve Bank of New York, 1967), pp. 46–57, and Dawes, Charles G., A Journal of Reparations (London: Macmillan, 1939), pp. 262–64, for evidence of just how central the bankers were.
29. The agent-general, S. Parker Gilbert, was a close associate of Morgan partner Russell Leffingwell. Costigliola, , “The United States and the Reconstruction of Germany,” pp. 485–94; Feis, , Diplomacy of the Dollar, pp. 40–43; Leffler, , Elusive Quest, pp. 90–112; Neanng, and Freeman, , Dollar Diplomacy, pp. 221–32; Nicolson, , Dwight Morrow, pp. 272–78; Schuker, , French Predominance in Europe, pp. 284–89.
30. For Lamont's optimism, see Proceedings of the Academy of Political Science 11 (January 1925), pp. 325–32.
31. Nicolson, , Dwight Morrow, pp. 191–92.
32. Wilson, , American Business, pp. 70–75.
33. Cited in Silverman, , Reconstructing Europe, p. 239.
34. Mary, Maltz Jane, The Many Lives of Otto Kahn (New York: Macmillan, 1963), pp. 204–5. For the similar views of Davis, Norman H., see Proceedings of the Academy of Political Science 12 (01 1928), pp. 867–74. See also Wilson, , American Business, pp. 65–100.
35. Hoover is cited in Joseph, Brandes, “Product Diplomacy: Herbert Hoover's Anti-Monopoly Campaign at Home and Abroad,” in Ellis, Hawley, ed., Herbert Hoover as Secretary of Commerce (Iowa City: University of Iowa Press, 1981), p. 193. See also Elliston, H. B., “State Department Supervision of Foreign Loans,” in Howland, Charles P., ed., Survey of American Foreign Relations 1928 (New Haven, Conn.: Yale University Press for the Council on Foreign Relations, 1928) pp. 183–201; Dulles, John Foster, “Our Foreign Loan Policy,” Foreign Affairs 5 (10 1926), pp. 33–48; Brandes, , Herbert Hoover, pp. 151–96; Feis, , Diplomacy of the Dollar, pp. 7–17; Leffler, , Elusive Quest, pp. 58–64.
36. David, Burner, Herbert Hoover: A Public Life (New York: Alfred A. Knopf, 1979), p. 186.
37. These are recalculated from Lewis, , America's Stake, pp. 619–29; her aggregate figures are inexplicably inconsistent.
38. McNeil, , American Money, p. 282.
39. See Meyer, Richard H., Banker's Diplomacy (New York: Columbia University Press, 1970).
40. Costigliola, Frank, “The Other Side of Isolationism: The Establishment of the First World Bank, 1929–1930,” Journal of American History 59 (12 1972), and Harold, James, The Reichs bank and Public Finance in Germany 1924–1933 (Frankfurt: Knapp, 1985), pp. 57–94. On BIS attempts at international financial cooperation from 1930 to 1931, see Brown, William A. Jr., The international Gold Standard Reinterpreted, 1914–1934, vol. 2 (New York: National Bureau of Economic Research, 1940), pp. 1035–47. For the views of New York bankers see the articles by Shepard Morgan of Chase and Reynolds, Jackson of the First National Bank of New York in Proceedings of the Academy of Political Science 14 (01 1931), pp. 215–34, and Morgan, Shepard, “Constructive Functions of the International Bank,” Foreign Affairs 9 (07 1931), pp. 580–91. For an excellent overview of this period, see Clarke, , Central Bank Cooperation.
41. Cited in Leffler, , Elusive Quest, p. 238. On German–American financial relations after 1930, see Harold, James, The German Slump: Politics and Economics 1924–1936 (Oxford: Clarendon Press, 1986), pp. 398–413.
42. Lewis, , America's Stake, pp. 400–1; Foreign Bondholders Protective Council, Annual Report for 1934 (New York: FBPC, 1934), pp. 218–24.
43. Burner, , Herbert Hoover, p. 298.
44. Falkus, M. E., “United States Economic Policy and the ‘Dollar Gap’ in the 1920s,” Economic History Review 24 (11 1972), pp. 599–623, argues that America's enormous balance of trade surplus in the 1920s was due more to the structure and composition of U.S. industry and trade than to trade barriers. Whether this is true or not, the fact remains, as Falkus recognizes, that contemporaries on both sides of the tariff wall perceived U.S. tariffs to be of major significance in limiting European exports.
45. Feis, , Diplomacy of the Dollar, p. 14.
46. These conclusions about American foreign policy in the 1920s differ a bit from those of some of the historians upon whose work my analysis is based. Leffler and Costigliola, especially, stress what they see as the unity of American policy, although both emphasize the importance of domestic constraints on this policy. In my view both scholars, despite their innovations, are too wedded to a modified Open-Door interpretation that overstates the unity and purposiveness of U.S. economic interests, and this methodological overlay colors their conclusions. I believe that the evidence, even as presented by them, warrants my analytical conclusions.
47. Clarke, Stephen V. O., The Reconstruction of the International Monetary System: The Attempts of 1922 and 1933, Princeton Studies in International Finance No. 33 (Princeton, N.J.: International Finance Section, Department of Economics, 1973), pp. 19–39; Moore, James R., “Sources of New Deal Economic Policy: The International Dimension,” Journal of American History 61 (12 1974), pp. 728–44.
48. See especially John, Blum Morton, Roosevelt and Morgenthau (Boston: Houghton Muffin, 1970), pp. 45–53, and Ferguson, , “Normalcy to New Deal,” pp. 82–85. For a sympathetic European view of Roosevelt's policy, see Paul, Einzig, Bankers, Statesmen and Economists (London: Macmillan, 1935), pp. 121–57.
49. See Blum, , Roosevelt and Morgenthau, pp. 40–42, and, for an interesting example, Mitchelman, Irving S., “A Banker in the New Deal: James P. Warburg,” International Review of the History of Banking 8 (1974), pp. 35–59. For an excellent survey of the period, see Romasco, Albert, The Politics of Recovery: Roosevelt's New Deal (New York: Oxford University Press, 1983).
50. For details of the Hull–Peek controversy, see Adams, Frederick C., Economic Diplomacy: The Export-Import Bank and American Foreign Policy 1934–1939 (Columbia: University of Missouri Press, 1976), pp. 81–93 and Dallek, Robert, Franklin D. Roosevelt and American Foreign Policy 1932–1945 (New York: Oxford University Press, 1979), pp. 84–85, 91–93.
51. For a discussion of the impact of crisis on ideologies and institutions, see Judith, Goldstein, “Ideas, Institutions and American Trade Policy,” this volume.
52. Blum, , Roosevelt and Morgenthau, pp. 64–67; Clarke, Stephen V. O., Exchange-Rate Stabilization in the Mid-1930s: Negotiating the Tripartite Agreement, Princeton Studies in International Finance No. 41 (Princeton, N.J.: International Finance Section, Department of Economics, 1977), pp. 8–21.
53. Proceedings of the Academy of Political Science 17 (May 1936), p. 107.
54. Harold van, B. Cleveland, “The International Monetary System in the Inter-War Period,” in Benjamin, Rowland, ed., Balance of Power or Hegemony: The Interwar Monetary System (New York: NYU Press, 1976), p. 51. For a lengthier explanation of the ways in which the Tripartite Agreement marked the turning point in the evolution of U.S. economic internationalism, see Charles, Kindleberger, The World in Depression 1929–1939 (Berkeley: University of California Press, 1973), pp. 257–61. See also Blum, , Roosevelt and Morgenthau, pp. 76–88; and Clarke, , Exchange-Rate Stabilization, pp. 25–58.
55. Warren, Robert B., “The International Movement of Capital,” Proceedings of the Academy of Political Science 17 (05 1937), p. 71.
56. Ruggie, John O., “International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order,” International Organization 36 (Spring 1982), pp. 379–415, discusses the order that emerged.
57. Proceedings of the Academy of Political Science 17 (May 1936), p. 113.
58. Feis, Herbert, The Changing Pattern of International Economic Affairs (New York: Harper, 1940), p. 95. Stephen Schuker has, in personal communication, insisted that it was not until 1942 or 1943 that Roosevelt moved away from extreme economic nationalism. He marshals important evidence and convincing arguments to this effect, but the account presented here reflects current scholarly consensus. If, as he has done in the past, Schuker can disprove the conventional wisdom, this analysis of U.S. foreign economic policy in the late 1930s would, of course, need to be revised in the light of new data.
59. See, for example, Krasner, Stephen D., Defending the National Interest (Princeton, N.J.: Princeton University Press, 1978).
60. As, for example, Lake, David A., “International Economic Structures and American Foreign Policy, 1887–1934,” World Politics 35 (07 1983), pp. 517–43.
61. For a survey of each, see Longstreth, Frank, “The City, Industry and the State,” in Colin, Crouch, ed., State and Economy in Contemporary Capitalism (London: Croom Helm, 1979), and Abraham, David, The Collapse of the Weimar Republic (Princeton, N.J.: Princeton University Press, 1981). On a related issue, see Kennedy, Paul, “Strategy versus Finance, in Twentieth-Century Britain,” in his Strategy and Diplomacy 1870–1945 (London: Allen & Unwin, 1983).
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