If appeasement is the explanation for Washington's delayed recognition of the Nazi danger, what are we to make of the extensive American business relations with Germany all during the Third Reich?
Major corporations headquartered in the U.S. found the Nazi agenda a refreshing change from the sharp class conflict of the Weimar years. As soon as Hitler took power in January 1933 he set about abolishing unions, dramatically slashing wages, eliminating worker benefits, ignoring workplace safety standards, privatizing government enterprise, funneling subsidies to major corporations, and sharply reducing taxes for the very rich. At the same time, he pursued an aggressively anti-Communist foreign policy, massively expanding his military strength as a prelude to annexing Austria and Czechoslovakia. While these moves were taken in stride in the West, Hitler’s widely advertised threat to crush the Soviet Union actually found favor among Western elites, who had long dreamed of doing away with the Bolsheviks.
Investment patterns reveal striking sympathies among U.S. business leaders. Coinciding with the advent of Nazism, U.S. investment in Germany soared by nearly 50%, while declining elsewhere on the continent. Unable to resist the cheap labor, low business taxes, and dazzling profits, Du Pont, Ford, General Motors, Westinghouse, Goodrich, Standard Oil of New Jersey, J. P. Morgan, I.B.M., and I.T.T., ignored omnipresent terror and murder in favor of conducting a booming business with the Reich.
Greatly enhancing the destructive capability of the Nazi military, American owned factories supplied Germany with tanks, trucks, fighter planes, bombers, oil imports, synthetic fuels, synthetic rubber, and advanced communications technology. These materials were used to kill Allied troops, bomb British cities, and sink Allied ships. Meanwhile, IBM prospered from providing Germany with the punch cards and machines it needed to target, enslave, and kill millions of Jews and other victims of Nazi eugenics throughout Europe.
Some plutocrats did not cease their collaboration even after the continent was plunged into war, conducting uninterrupted business with the Nazis and readily making use of slave labor delivered by German authorities. According to declassified Dutch documents and U.S. government archives, Prescott Bush, father and grandfather of the later Bush presidents, realized lavish profits off of Auschwitz slave labor. His Union Banking Corporation helped Thyssen to make the Nazi steel that killed Allied soldiers and assisted the financing of Thyssen coal mines that routinely worked Jewish prisoners to death.
U.S. companies kept control of their German subsidiaries with minimal interference from Hitler, who was mainly interested in maintaining production. Reciprocally, Washington did nothing to interfere with U.S.-based corporations directly servicing the German war machine. In fact, President Roosevelt actually issued an order not to bomb U.S. corporate property in Germany or German-occupied Europe. When Cologne was razed by Allied bombers, its Ford factory—at the time turning out army vehicles used to kill U.S. troops—was undamaged. German civilians took to using it as a bomb shelter. After the war, I.T.T. collected $27 million from the U.S. government in compensation for damages inflicted on its German plants by Allied bombing raids. General Motors received $33 million and Ford and other companies collected their own sizable indemnifications.
In addition to investing heavily in Nazi Germany, American firms bankrolled Italian fascism from the early twenties and continued to ship Mussolini oil even after he invaded Ethiopia in clouds of mustard gas. Washington, too, evidenced fascist sympathies: it imposed a unilateral arms embargo on Spain (while Italy and Germany poured in troops and weapons to Franco), complained of Japan’s closed door rather than its massive atrocities in China, refused to join the U.S.S.R. in a united front against Nazism until far too late, failed to prosecute the major firms illegally trading with the Axis all through the war, installed fascist collaborators in the wake of successive military victories, and hired Nazis to continue their anti-Communist bloodletting on the U.S. payroll once the war was declared over. Finally, in a war effort that many Americans took to be a human rights crusade against Germany’s vicious treatment of Jews, it led segregated troops into battle, dispatched 120,000 innocent Japanese-Americans to concentration camps, and adopted wholesale extermination of civilians as a routine tactic of its air war.
Such were the general features of the “good war.”
"Appeasement” makes little sense as an explanation for all this. Britain, France, the U.S., and a dozen other Western nations had not been too war-weary to invade the Soviet Union in 1918 after four of the most blood-soaked years the world had ever seen. A generation later they were still ready to fight Communism, but not Fascism, even though the Soviets had renounced world revolution in 1921 and Hitler spelled out his expansionist agenda with brutal clarity three years later in Mein Kampf. Furthermore, fear of war’s deadly consequences carries little explanatory force given that German military capacities remained weak all through the thirties and were far from overwhelming even when Hitler conquered France in the spring of 1940.
In spite of the relative ease with which it might have been accomplished, the West made no timely effort to stop Hitler; not in 1934, when Nazi thugs assassinated the Austrian Prime Minister; not in 1936, when Germany reoccupied the Rhineland in violation of the Versailles Treaty; not in 1938, when Hitler annexed Austria and dismembered Czechoslovakia. In those years the U.S. perceived the Nazi dictator as an ideological “moderate” who had restored German economic strength and kept the Bolshevik hordes at bay. Ambassador William E. Dodd’s regular warnings that soaring U.S. trade with the Reich was directly aiding Hitler’s massive re-armament campaign fell on deaf ears in Washington, which replaced him with a diplomat friendlier to the Nazis.
Clement Leibovitz and Alvin Finkel, co-authors of a study critical of the appeasement hypothesis, dismiss altogether the idea that placating the Nazis accounts for the policies that consistently aided them:
... the argument here is that “appeasement”—the notion that a war-weary Britain humored Hitler’s wish to gobble up small countries, in order to avoid another European-wide slaughter—is a myth. Chamberlain and his followers made clear that they did not wish to fight fascism as such—indeed, that they admired many aspects of fascism. They were not trying to avoid a war; their whole intention was to turn Nazi militarism loose in a bloody confrontation with the Soviet Union to end Bolshevism in its heartland. Hitler was to be given a free hand in Eastern Europe so that this common end could be achieved. ‘Appeasement’ was no more than a public front constructed to appease public disgust with the Nazis and the Nazis’ treatment of minorities such as the Jews and small nations such as Czechoslovakia and Austria.
The outbreak of World War II marked not the failure of “appeasement” but the collapse of the tacit pact between British and German leaders.1
Furthermore, the West proved overtly hostile to genuinely anti-fascist movements, which developed in Spain, where the U.S. imposed a unilateral arms embargo on the anti-Franco forces, and among the peasant and worker-based resistance that fought German occupation throughout Europe, where Washington disarmed, dispersed, and destroyed popular forces. These policies existed in sharp contrast to those awarding a free hand to Mussolini in Abyssinia, Franco in Spain, and Hitler in Central Europe—and this at a time when fascism could have been stopped at relatively low cost.
What historian Gabriel Kolko calls the “problem of the left” made it impossible for the Roosevelt administration to embrace a genuinely anti-fascist ethic. The problem of the left was that European resistance movements were led by socialists, social democrats, and Communists, whose convictions clashed with Anglo-American hegemonic designs. As British historian Basil Davidson explains, the wartime collapse of traditional ruling groups and fascist collaborators yielded a situation where “large and serious resistance came and could only come under left-wing leadership and inspiration ... the self-sacrifice and vision required to begin an effective resistance, and then rally others to the same cause, were found only among radicals and revolutionaries.” These, in turn, were mostly men and women who “followed the hope and vision of a radical democracy.” As South African Prime Minister Jan Christiaan Smuts warned Winston Churchill after the fall of Mussolini, “with politics let loose among those peoples, we may have a wave of disorder and wholesale Communism set going all over those parts of Europe.” Communism meant not domination from Moscow but the ascendancy of popular movements dedicated to collective social designs placing fundamental human needs ahead of private gain. That was heresy.
Washington’s strategy had been not to risk everything on behalf of democracy, as the architects of the "good war" claimed, but rather, to let others fight fascism. As FDR once confided to his son, the U.S. tried to function as “reserves” while the Soviets exhausted themselves holding off the Nazi onslaught, after which Washington would deliver the coup de grace, which is very much how things turned out. According to Roosevelt scholar Warren Kimball, “aid to the Soviet Union became a presidential priority” only on the assumption that Red Army victories would obviate the need for U.S. troops to fight a ground war in Europe. Senator Harry Truman went even further, stating after the German invasion of Russia in June 1941 that the U.S. should strive to bring about the two countries’ mutual annihilation: “If we see that Germany is winning we ought to help Russia and if Russia is winning we ought to help Germany and that way let them kill as many as possible.”
With the collapse of the Axis powers the U.S. took over the world, an outcome wartime planners had anticipated from the beginning. A week after the U.S. entered the war Isaiah Bowman, Director of the Council on Foreign Relations, wrote Hamilton Fish Armstrong that the U.S. government had to “accept world responsibility ... The measure of our victory will be the measure of our domination after victory.” In the spirit of selfless imperialism so popular down through the ages, “responsibility” meant unilateral authority, which Washington gladly seized while talking of its “obligation” to rule the world for the benefit of all.2
Fascism: A Threat To Private Enterprise
As war in Europe threatened to engulf the U.S., American business leaders and government officials discussed the threat that the Nazis posed to the free enterprise system. Convinced liberal capitalism could not exist in one state, the Roosevelt administration ultimately chose to fight to keep foreign markets open, cloaking its effort to preserve freedom of private investment in the lofty rhetoric of the Atlantic Charter and the Four Freedoms.
In 1934 more than 80% of U.S. foreign trade was with countries that the U.S. enjoyed a trade surplus with. The following year General Motors president Alfred P. Sloan exclaimed that a loss of foreign markets would require “adjustments to our national economy appalling to contemplate.” By 1936 Assistant Secretary of State Francis Sayre was warning that “if we are to choose the pathway of economic self-sufficiency, we must frankly accept a system of government control over private business enterprise.” After the 1938 Munich agreement, J. Pierrepont Moffat, chief of the State Department’s European Division, explained that American commercial interests would suffer because German domination of Central and Eastern Europe meant “a still further extension of the area under a closed economy.”
In January 1940, the president of the Iron and Steel Institute warned that “in the event of war we can expect a degree of regimentation and control by Government that is now unthinkable.” The same month the Fortune group predicted: “There is a real danger ... that as a result of a long war all the belligerent powers will permanently accept some form of state-directed economic system.” Meanwhile, Business Week worried that, “We may have to sacrifice some of the notions we have held about the rights of private property owners to dispense of their property as they see fit.”
In short, U.S. business leaders and government officials feared German economic nationalism would destroy private investment. A victorious Germany that conscripted labor and converted Europe to an industrial workshop under Berlin’s sole control would deprive U.S. business leaders of the opportunity to export their surplus, which would force them into reliance on the federal government to strictly regulate the domestic economy in order to establish an internal balance between supply and demand. This concern, not beguiling rhetoric about universal human rights, formed the operative value behind U.S. foreign policy, which explains why Washington opposed the triumph of European anti-fascist resistance movements at the end of the war as much as it did Hitler during the war: both placed collectivist designs ahead of private profit and the demands of the market.
Financer Bernard Baruch explained the Nazi economic threat five days before Hitler invaded France in 1940: “Germany does not have to conquer us in a military sense. By enslaving her own labor and that of the conquered countries, she can place in the markets of the world products at a price with which we could not compete.” The next day investment banker W. Averell Harriman also stressed the economic danger of a regimented Nazified Europe: “The idea that American free enterprise can compete in the foreign markets against such competition is ludicrous.”
Three days after the Nazis occupied Paris, the American charge d’affairs in Berlin, Alexander Kirk, predicted that Hitler “will confront the United States within a brief measure of time with the impossible task of adjusting its system to an economy in which it will be excluded from access to all foreign markets.”
Days later Business Week warned that if the Nazis won the war they would set wage scales and price levels with the sole aim of capturing foreign markets for goods manufactured under their control. “The United States,” the article concluded, “would tend to become a lone [free enterprise] island in a world dominated by a philosophy of industrial coordination. We may be forced to adopt some of the totalitarian ways of doing things,” the editors observed. “We may have to sacrifice some of the notions we have held about the rights of private property owners to dispense of their property as they see fit.”
Ten days later Will Clayton, a leading cotton exporter, announced that a German victory would lead to a government controlled export economy. “If the rest of the world adopts totalitarian methods of trade,” he reasoned, “we will be compelled to conform if we wish to sell our surpluses.”
On August 15, 1940, Joel C. Hudson wrote from his consular post in Berlin that if German export plans went into effect, the position of the U.S. would be much like that of “an old-fashioned general store in a region of hard-boiled chain stores.”
By January, 1941 U.S. business journals were all worried about the potential doom of the American free enterprise system. “The great danger facing the Western Hemisphere in the event of a totalitarian victory,” Barron’s declared, “is not the immediate threat of armed invasion, but rather the threat of trade aggression.”
Two months later W. H. Schubart of the Bank of Manhattan expressed his displeasure at the prospects of a Nazi-American trade war. “If Germany wins, she will most certainly extend her clearing system,” he said. “In such a barter economy we shall not fit and much of the world trade will be denied us.”
In June, 1941 Barron’s warned: “The inevitable consequence of federal control of the export portion of the business would be that government agencies would eventually find it necessary to extend their authority to the company’s whole operations, domestic and foreign.” Meanwhile, Fortune opined: “Industry and trade, labor and agriculture would become part of a state system, which in its own self-defense, would have to take on the character of Hitler’s system. Freedom cannot be national. It must be international.”
Two months before Pearl Harbor Winthrop W. Aldrich of Chase National Bank warned the attendees of the National Foreign Trade Convention in New York that, “The tremendous power of the Nazi-dominated and regimented economy in the field of foreign trade would make it necessary for our own government to regiment our own foreign commerce.” The Business Advisory Council added its warning that, “A greater dependency on self-containment [would lead to] a degree of regulatory control destructive of free enterprise.” Finally, W. Randolph Burgess of the National City Bank noted that the U.S. had joined Great Britain in the battle against Hitler so that “his conception of foreign trade does not become dominant on this planet.”9
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