CHAPTER FIVE
THE WAR FOR THE AMERICAN FRONTIER

The only thing we have to fear is fear itself.

FRANKLIN DELANO ROOSEVELT, 1933

When everyone began to realize finally that the country was really filled up, that there were no more good homesteads and no frontier to fill up in times of depression, there was great uneasiness.

HENRY AGARD WALLACE, 1934

Foreign markets must be regained if America’s producers are to rebuild a full and enduring domestic prosperity for our people. There is no other way if we would avoid painful economic dislocations, social readjustments, and unemployment.

FRANKLIN DELANO ROOSEVELT, 1935

The rest of the world–Ah! there is the rub.

FRANKLIN DELANO ROOSEVELT, 1936

The reason for all this battleship and war frenzy is coming out. We Democrats have to admit we are floundering. The Democratic administration is getting down to the condition that Mr. Hoover found himself [in]. We have pulled all the rabbits out of the hat and there are no more rabbits.

REPRESENTATIVE MAUREY MAVERICK, 1938

There can be no military disarmament without economic appeasement.

SECRETARY OF STATE CORDELL HULL, 1938

Unless substantial economic offsets are provided to prevent this nation from being wholly dependent upon the war expenditures we will sooner or later come to the dilemma which requires either war or depression.

JOHN L. LEWIS, C.I.O., 1940

What interests us primarily is the longer-range question of whether the American capitalist system could continue to function if most of Europe and Asia should abolish free enterprise.

FROM THE FIFTH FORTUNE ROUND TABLE DISCUSSION
ON THE U.S. AND WAR, 1940

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.

CORDELL HULL, 1948

A visitor from afar might have concluded in 1929 that the foundations and the superstructure of the Pax Americana, so candidly avowed by Secretary of State Hughes in 1924, were firmly established. And so they were, a truth demonstrated by America’s ability to meet two major challenges during the next 15 years and emerge as the first nuclear superpower in world history.

President Hoover had barely established a routine of administrative procedure before the basic assumptions underlying the open-door conception of America and its role in the world were undercut in a fundamental way by the Great Depression. The entire policy was predicated on the proposition that the overweening economic power generated by the American economic system would enable it to overcome competitors and wrong-headed revolutionaries and bestow prosperity and democracy upon the entire world. Yet within two years the American economic system was not providing for its own citizens.

A second event dramatized and extended the domestic crisis of the corporate order. For by the end of Hoover’s term in office, it was apparent that the broad revolutionary challenges to America’s program for the world, which first appeared to plague President Wilson, were being taken up, in part or in toto, by other major powers. However they distorted or misused the upsurge of dissatisfaction with the status quo, the leaders of Germany, Japan, and Italy were working with the most powerful weapon available—the determination, born equally of desperation and hope, of large numbers of people to improve, radically and immediately, the substance and tone of their daily lives. And though a great hardship and suffering, these revolutions seemed to have survived and converged in a Russia beginning to assert its right and ability to lead the world out of economic and spiritual depression into a better future.

The key decision made by American leaders, and accepted by the rest of the nation, involved a bipartisan agreement to preserve the existing system of corporate capitalism governed according to the existing practices of constitutional democracy. Far from being a revolution, the New Deal was a consensus and a movement to prevent a revolution. Thus it is most aptly defined and described as a movement to provide for the emergency relief, the short-run rehabilitation, and the long-term rationalization of the existing corporate society. Its objective was to define and institutionalize the roles, functions, and responsibilities of three important segments of any industrial society—capital, labor, and the government—and to do so according to the principles of capitalism. In fundamental ways, therefore, the New Deal continued and developed the central approach and outlook formulated by advocates of a corporate society such as Theodore Roosevelt, Herbert Croly, Herbert Hoover, Bernard Baruch, Gerald Swope, and Samuel Gompers.

While the initial necessity to grapple with the domestic crisis temporarily de-emphasized the foreign policy that was an integral part of that outlook, the New Deal did not make any fundamental change in the traditional policies of economic and ideological empire. Even in the depths of the depression, and increasingly so in subsequent years, the overseas expansion of the American corporate system was considered a basic means of recovery and further development. Franklin Roosevelt quickly reasserted, moreover, the kind of aristocratic noblesse oblige that his cousin Theodore had infused into American diplomacy. He also displayed a good bit of the crusading fervor for the extension of American ideas and ideals that had characterized the outlook and actions of Woodrow Wilson.

Roosevelt’s sense of noblesse oblige and mission gave his foreign policy a more assertive and expansive tone than was produced by Hoover’s emphasis on efficient economic expansion. This difference did not become readily apparent until the mid-1930s, but its early manifestations can be observed in the events of 1929 to 1933. President Hoover’s response to Japanese military expansion in Manchuria was conditioned by his long-term objective of establishing a community of interest with Japan in Asia, and by his fear of war as the pump-primer for revolution. He neither liked nor approved of Japan’s actions, but he concluded that Japanese expansion was much the lesser evil when judged against Chinese revolutionary nationalism or the Soviet Union. War by itself was dangerous enough, but undertaken in the context of depression it would produce general disaster.

Roosevelt and Stimson shared some aspects of Hoover’s outlook in general. Both men favored working with Japan throughout the 1920s and agreed with Hoover’s emphasis on the importance of peace—both generally and in the circumstances of the depression. But they differed with Hoover over the best means of insuring peace. The divergence was the product of two factors: Roosevelt and Stimson came to question Japan’s willingness and ability to accept America’s conception of the world without coercion of some sort; and they entertained an active sense of America’s mission in China. Those considerations led them to disagree with Hoover over what should and could be done to sustain peace, even though they were willing to accept his policy under the existing circumstances. Nevertheless, they inclined toward economic pressure and a show of force to push Japan back toward an acceptance of American leadership in the world community. In 1932 and 1933 this divergence of opinion among American leaders was not severe and dramatic, and it was not acted upon either by Stimson or by Roosevelt, but it did reveal a difference of opinion that became extremely significant within five years.

That willingness to employ economic coercion against Japan at the end of the 1930s seems to be the main explanation for what is a rather general impression that Roosevelt recognized the Soviet Union in 1933 for the purpose of exerting similar pressure on Tokyo. It is true that some Americans like Senator Borah suggested the maneuver; and the Russians did their best to foster that interpretation at the time to improve their own position in dealing with Japan. But it was not the reason Roosevelt acted.

The recognition of Russia was largely the result of a persistent campaign by large and small business interests who felt that it would lead to a vast increase in their export of goods, capital, and services. Their efforts began in 1926, when the first signs of economic trouble appeared in many industries. For that matter, Hoover began financing such exports through the Reconstruction Finance Corporation before he left office (though neither the President nor Secretary Stimson responded favorably to Borah’s proposals). Roosevelt did not recognize the Soviets simply, or only, as an economic move (the first Export-Import Bank, however, was organized explicitly to handle the anticipated export boom). His upper-class urbanity, for example, led him to consider the game of make-believe about the nonexistence of such a major country as something more than slightly ridiculous on the part of the world’s most powerful country. And he did want to establish some kind of communication and discussion about peace between the United States and all major nations. But he never considered the kind of an entente sought by the Russians, as was indicated by his persistent refusal to respond to their overtures for a nonaggression pact with China and the Soviet Union.

Short-term as well as traditional long-run economic considerations also played an important role in Roosevelt’s dramatic moves to improve and regularize relations with Latin America. The Good Neighbor Policy was infused with the tone and substance of noblesse oblige and announced in the rhetoric of America’s mission to defend and extend democracy, but its context was defined by the immediate and specific needs of American businessmen and by the long-range objective of a broad integration of the economy of the United States with that of Latin America. It was Roosevelt’s Latin American policy, not his recognition of Russia in 1933, which offered the strongest hint that he entertained from an early date the idea of a major intervention in world politics at some later time. From the outset, the leadership of the United States was asserted, defended, and extended in terms of meeting the European challenge to America’s open-door empire in the Western Hemisphere. And the continued development of that interpretation and argument culminated in the treaty organization of the American system. Even so, the European challenge of the early 1930s was economic, not military.

Roosevelt’s conception of America’s general role in the world, and of its economic expansion, became clearer and more forceful in 1934, when it seemed that the early policies of the New Deal were generating recovery from the depression. This illusion of success enabled the Roosevelt Administration to give more attention to world affairs than it had during its first year in office. The most striking feature of this development was the degree to which Roosevelt and his advisors reasserted the traditional foreign policy of the United States. As with Theodore Roosevelt and John Hay, they assumed the necessity, desirability, and ability of the American economic system to expand throughout the world. And with Woodrow Wilson, they asserted America’s leadership in the establishment and maintenance of an orderly peace. At home and abroad, peace and order were the main objectives of the New Deal.

In general, therefore, the United States at first gave ground before the assertiveness of Germany, Japan, and Italy. Neither private corporate nor official political leaders approved all the actions of those powers, but the bipartisan consensus among American leaders during these years was based on acquiescence in Axis actions and appeasement of Axis demands. The underlying attitude was that world problems would be taken care of by American recovery. Various critics did agitate for unilateral action in Europe or Asia, for an entente with the Soviet Union, or for more vigorous alignment with Great Britain and France, but they effected no significant modification, let alone a fundamental change in American policy.

Quite in keeping with traditional policies, American leaders undertook a vigorous campaign during these same years to renew and extend America’s economic expansion. The corporations, for example, steadily extended their overseas operations after 1934. During the 1920s, moreover, Roosevelt and Hull had talked of solving domestic economic problems in terms of “exportable surpluses”; and once in power they stressed the importance of foreign trade and investment for domestic revival and for controlling conditions abroad which caused wars and revolutions. Based on the proposition that “the political line-up followed the economic line-up,” this program for the expansion of the American economic system was presented as the answer to specific and general problems. Inherent in the approach was a definition of trade that went far beyond the idea of an exchange of commodities and services. The denotation of the definition emphasized trade as the expansion and control of markets for America’s corporate system, while the connotations stressed the control and development of raw-material supplies.

Secretary Hull’s reciprocal trade program was designed to meet both needs. The strategy was simple: in return for lowering American tariffs on selected items exported by a foreign country, that nation would decrease its tariffs on certain American exports. And by insisting upon the unrestricted most-favored-nation clause, the United States sought to extend its own potential or actual market even further. In practice, America traded tariff reductions on items which it needed (such as selected raw materials) or on goods which did not seriously challenge producers at home, in return for foreign reductions on American surpluses.

The reciprocity program offers basic insights into New Deal foreign policy and also serves to document its continuity with the decade of the 1890s. First proposed as a key element in foreign policy during the late 1880s, and then tentatively written into law in a limited way in the McKinley Tariff Act of 1890, the concept of reciprocity treaties was taken up by the National Association of Manufacturers in 1895 as an integral part of its drive for foreign markets. From the beginning, moreover, the principle of the unconditional most-favored-nation clause (by which America gained any benefits extended to other nations) was closely associated with the idea of reciprocity.

Neither Secretary of State Hull nor any other New Deal policy-maker ever improved very much upon McKinley’s clear and candid explanation of the policy. “It is to afford new markets for our surplus agricultural and manufactured products,” he had remarked in 1896, “without loss to the American laborer of a single day’s work that he might otherwise procure.” The statement of purpose written into the first and basic New Deal trade act of 1934 was no more than a rather clumsy reiteration of the outlook and logic evolved by intellectuals, businessmen, and politicians during the Crisis of the 1890s. The law announced that it was “for the purpose of expanding foreign markets for the products of the United States (as a means of assisting in the present emergency in restoring the American standard of living, in overcoming domestic unemployment and the present economic depression, in increasing the purchasing power of the American public, and in establishing and maintaining a better relationship among various branches of American agriculture, industry, mining, and commerce).”

Secretary Hull had long advocated greatly expanded penetration of Latin American markets, with a complementary influence over that region’s sources of raw materials. His move upward from Tennessee politics to the House of Representatives was in considerable measure a result of the reputation and backing he had won by pushing that issue. Actually, of course, his emphasis on exports to Latin America was merely one facet of his almost religious faith in the nineteenth-century doctrine of free trade as a solution to the political and social, as well as economic, ills of the United States and the world. That commitment led him, not unnaturally, to make unfavorable moral judgments of any and all countries which opposed his plan, which tried other techniques of handling foreign trade (such as balancing accounts with each country separately), or which had economic systems that limited the activities of American businessmen (such as Russia and Mexico).

Hull’s outlook further provided him with a circular argument involving cause, effect, and prescription that seemed to him, at any rate, unanswerable either by example or logic. Long before the Great Depression actually began, for instance, he predicted and explained such a crisis in terms of his theory. Speaking on January 3, 1929, he first documented the great gap between America’s productive capacity and its actual output. Then he noted that there were great surpluses in spite of the idle facilities. “These glaring facts and conditions,” he concluded, “soon will compel America to recognize that these ever increasing surpluses are her key economic problems, and that our neglect to develop foreign markets for surpluses is the one outstanding cause of unemployment.” Because they were confusing and seemingly indecisive, President Roosevelt’s early actions in the foreign trade area apparently upset Hull considerably. In one of his most famous campaign speeches delivered before the Commonwealth Club in San Francisco, for example, Roosevelt referred explicitly and with considerable emphasis to the end of the frontier and implied that this called for a more self-contained and planned economy. It developed later, however, that he had neither written nor studied and evaluated the speech before he delivered it. Even so, a careful reading of the document reveals that the argument pointed not so much toward national planning as toward finding a new frontier in such areas as foreign trade.

And despite his concern and preoccupation with immediate domestic relief measures, Roosevelt quickly indicated that he was thinking along those lines. Hull understood this. The true source of the Secretary’s anxiety (and resentment) resided in the signs that Roosevelt was attracted to the idea of expanding foreign trade through bilateral balancing and bartering with a steadily increasing number of countries. The issue was never whether or not to continue America’s overseas economic expansion, but rather the question of how it should be furthered. The showdown came over such a bilateral deal negotiated with Germany by George N. Peek, who was challenging Hull for control of foreign trade matters. Hull won. The victory not only opened the way for the reciprocal trade program, but offered one of the earliest indications that Hull was not in fact the kind of secondary figure in New Deal diplomacy that many commentators and historians later assumed. Roosevelt swung over to Hull’s policy with an enthusiasm based upon his own commitment to the basic objective. “The full measure of America’s high productive capacity is only gained,” he warned in 1935, “when our businessmen and our farmers can sell their surpluses abroad.” The President went on to reveal (and dramatize) his acceptance of the same either-or attitude that had characterized American thinking on the subject ever since the 1890s. Prosperity and democracy were contingent upon the program. “Foreign markets must be regained if America’s producers are to rebuild a full and enduring domestic prosperity for our people. There is no other way if we would avoid painful economic dislocation, social readjustments, and unemployment.”

Administration leaders connected with the trade program left no doubt as to its underlying philosophy. Diplomat George S. Messersmith held, for example, that any other approach “would call for a complete rearrangement of the entire economic setup of the United States.” But the most significant spokesman was Assistant Secretary of State Francis B. Sayre, a law professor and the son-in-law of Woodrow Wilson, who became chairman of the President’s Executive Committee on Commercial Policy. Sayre’s departmental and public documents offer an illuminating example of how American policymakers had consciously accepted, and were acting upon, the same analysis developed in the 1890s. “By that time [the 1890s],” Sayre explained, “our national surpluses which could not be sold profitably in this country had come to assume formidable proportions, and it was becoming clear that the loss or curtailment of foreign markets would mean severe economic dislocation.” He even quoted McKinley to cinch the point: “The expansion of our trade and commerce is the pressing problem.” Sayre laid great and persistent stress on the idea that trade offered the only way to avoid changing the existing political economy. “Unless we can export and sell abroad our surplus production, we must face a violent dislocation of our whole domestic economy.”

It is not surprising, therefore, that trade was defined in a most particular and narrow manner. On the one hand, it meant finding and expanding markets—and making them “secure for the products of the United States.” [Italics mine.] On the other hand, it involved careful studies to pinpoint the countries supplying raw materials to American industry, followed by negotiations to tie those economies to the United States through reciprocal trade treaties.

This New Deal conception of trade as an integral part of the overseas expansion of the economy had three consequences of major importance. All of them operated and influenced events over the long-run as well as during the decade of the 1930s, and all of them contributed significantly to the maturation of the broader tragedy of American diplomacy.

The first was the role of the New Deal in reinvigorating, extending, and sustaining, in the mind of the general public as well as the policy-makers, the traditional view of overseas economic expansion. Lord Keynes and other economists who stressed the role of public spending and other measures to counteract underconsumption and underinvestment did influence New Deal thinking and policies. But they did so within the old system of thought. Their ideas did not displace the existing outlook. Thus the pattern of either-or thinking about representative government and economic welfare was reasserted and even intensified. Different solutions were dismissed because they would undercut the existing order of business and politics.

Secondly, the emphasis on trade expansion, and upon the Open Door Policy, served to define the nature and the causes of danger and conflict in international affairs. As Sayre explained, the trade expansion program was “an instrumentality for throwing the weight of American power and influence against the current disastrous movement toward economic nationalism.” It was “only” as the American program was adopted that the United States could “recover her foreign markets.” For the New Deal administration as for its predecessors, therefore, American recovery and prosperity were made dependent upon the acceptance of American policies by the rest of the world. By externalizing good, so also was evil externalized: domestic problems and difficulties became issues of foreign policy. In the immediate context of the mid-1930s, and as Roosevelt, Hull, Sayre, and others explicitly noted as early as 1935, that meant that Germany, Italy, and Japan were defined as dangers to the well-being of the United States. This happened before those countries launched military attacks into or against areas that the United States considered important to its economic system. It occurred instead as those nations began to compete vigorously with American entrepreneurs in Latin America and Asia. In the broader sense, the American outlook defined as a danger any nation (or group) that challenged or limited such expansion. The successful drive by the United States in 1962 to define any “Marxist-Leninist” government as an alien and dangerous outlaw in the Western Hemisphere was a projection of the same basic idea.

The third major consequence of New Deal trade philosophy was the way it sustained, and even deepened, the pattern of free trade imperialism or informal empire that had evolved out of British economic policy in the nineteenth century. America’s relationship with the chief suppliers of raw materials became economically and politically ever more imbalanced in its own favor. And, at the same time, the policy reinforced the existing internal political economy of those poorer, weaker nations. For the changes introduced by American penetration served primarily to create islands of modernism that intensified the skewed and inequitable character of those societies.

In response, many people in these nations began to wonder if the United States was not merely a more subtle—and hence more dangerous—imperial power. Americans were shocked or angered by this reaction, arguing that their policies increased the national wealth and prestige of the raw-material areas. On the surface, this seemed to be true in most cases, but the American operators took much of the wealth back to the United States. Their actions, and those of American political leaders, also strengthened groups and classes in the underdeveloped regions that prevented the wealth that remained from being distributed equitably—or even wisely from a conservative point of view—or used in a way to initiate and sustain the balanced development of a poor country. For the most part, moreover, the pro-American groups were not very democratic in political and social matters. This further weakened American leadership.

Not only did this aspect of New Deal foreign policy serve to stockpile explosives for future social upheavals, but it can almost be said to have lit the fuses. The tragedy is that none of it was done with evil intent. Good intentions granted, however, that was nevertheless the basic dynamic inherent in the program. For having defined overseas economic activity as essential to the welfare of the United States, American policymakers were exceedingly prone to view social revolution in those countries as a threat to the vital national interests of their own nation. The irony is that while the New Deal did gradually become less militant in defending individual American business interests against the actions of underdeveloped countries, it continued at the same time to consolidate the traditional definition of such economic activities as essential to domestic prosperity and political welfare of the United States.

However more openly humanitarian (and more adept with the polished phrase), New Deal leaders did not in action go very far beyond the foreign policy of Hoover until the economic needs of American overseas business enterprise, and the competition from Axis rivals, forced it to do so. Since this may seem too severe a judgment, particularly for the generations which either led or came to maturity under the New Deal, it may be useful to make two points very explicit. The first concerns the sincerity and the liberal sentiments of New Deal policy-makers. No question, direct or indirect, is raised about either characteristic. The second involves something that is generally overlooked; namely, the basic denotation about conduct that is inherent in the famous phrase, “The Good Neighbor Policy.” Here the issue is very important even though it is implicit. By American definition, and practice, good neighbors do not rock the boat.

But rocking the boat is precisely what Latin Americans were doing, at least by the standards current in the United States, throughout the 1930s. It was only after many years of intervention and intermeddling that New Deal leaders began to act as well as talk like good neighbors in a more mature and sophisticated manner. The early attitude was revealed by Hull’s remark after he had signed a hemispheric pledge in 1933 holding that “no state has the right to intervene in the internal or external affairs of another.” Speaking privately, the Secretary commented that the proposition was “more or less wild and unreasonable.”

Hull, Roosevelt, and Ambassador Sumner Welles proceeded to act in keeping with the Secretary’s judgment in connection with the Cuban Revolution that was under way when they came into office. Pressure exerted through and by Welles first contributed to the final collapse of the old regime headed by Gerardo Machado y Morales. But it was in dealing with the new government headed by Grau San Martin that New Deal interference became persistent and determined. Though it ran Cuba from September 1933, through January 1934, the Grau Government was never recognized by the United States. Secretary Hull and Ambassador Welles made it clear that the ability of Grau to maintain order was not the issue. “No government,” Welles remarked to Hull during a phone conversation in mid-September, “will be able to maintain absolute order here for some time to come.” Both men accepted that as natural under the circumstances. Welles was extremely upset, however, by any and all indications that “a social revolution” was in progress. “Our own commercial and export interests in Cuba,” Welles warned in October, “cannot be revived under this government.” Viewing the Grau Government as composed of “the most irresponsible elements,” the Ambassador was determined to replace it by an instrument of “all the better classes of the country.”

Three Cuban groups opposed Grau: the officer corps, the communists, and the business community and its associated politicians. Grau crushed two attempted coups by the officers, a demonstration of power and general support that impressed the British representative but served only to intensify American antagonism. And though certainly spearheaded by Welles, the opposition to Grau was supported by Hull and Roosevelt. Indeed! By the end of 1933, for example, the United States had some 30 Navy ships on station around Cuba. Even more important, at least in some respects, was the way that nonrecognition disrupted the Cuban economy. For that weakened the Grau Government as effectively, if more subtly, as detachments of American Marines doing guard duty throughout the country.

By all accounts, it would seem that President Roosevelt enjoyed his games of verbal hide-and-seek with American reporters who asked him whether or not his policy amounted to intervention. He once told them adamantly that the United States was not intervening at almost the precise hour that Welles was busily engaged in trying to organize a coalition against Grau. Even Welles once admitted to Hull that he was rather embarrassed by “the measure of control” he was exercising in Cuba. Finally, after many false starts, the support and encouragement that Welles and the United States gave to Batista led to the overthrow of the Grau Government.

By the end of the decade, Roosevelt had modified his method of handling Latin American affairs. The change nevertheless came very slowly. Bolivia found that out in March 1937, when it annulled the oil concession held by Standard Oil and confiscated the company’s property. The United States supported the firm in two ways. It brought pressure on other Latin American countries to prevent Bolivia from obtaining help in developing or selling its oil, and it refused to give Bolivia any economic aid (loans or technical assistance). The latter position was stated bluntly in a memorandum of December 26, 1939. “In order to secure the necessary support and cooperation of American private interests [for such aid],” the State Department explained, “it is believed to be essential before American financial assistance is given that a settlement will have been reached.” That document revealed not only the kind of economic intervention that was used against Bolivia, but also the relationship between official policy and the views of large corporate spokesmen. This connection between big business leadership and the government is often misconceived as a simple, direct kind of push-or-pull relationship in which outsiders lean on insiders—or vice versa. Many businessmen as well as many reformers are prone to make that kind of an interpretation. But it is misleading, particularly by the time of the mid-1930s, even though there were (and still are) many examples of such interaction.

But thinking of the New Deal so narrowly (or wholly) as a reform movement tends to blind both its critics and its defenders to the way that it steadily drew more and more of its leadership from the community of large, established corporation executives, their counsels, and their economic advisors. This does not necessarily mean that the New Deal became less reformist. It does mean, however, that the reforms were of a certain kind; namely, they rationalized the system as it existed, and did not lead to significant modifications of its character.

This aspect of New Deal leadership offers an important insight into the developments in American policy specifically toward Latin America, but also more generally, between 1937 and 1941.^* It helps explain, for example, the gradual willingness (after mid-1939) to grant a loan to Bolivia on the basis of a gentleman’s agreement that Standard Oil would then be given prompt satisfaction on its claims. This slow and halting process of change was brought about by four principal factors. On the basis of the available evidence, they can be ranked in the following order of importance.

There was first a general reassertion during and after the sharp and serious recession of 1937–38 of both central themes of American diplomacy as it evolved during and after the Crisis of the 1890s: that vigorous overseas economic expansion was essential to the functioning of the system; and that, as stated so explicitly by Secretary of State Root in 1906, policy had to be formulated so “that the door, being open, shall lead to something.” This feeling, and the new urgency behind it, was manifested by government spokesmen and also by leaders of the corporate system who did not hold public office. Official policy-makers like Lawrence Duggan, Eric Johnston, and Nelson Rockefeller, for example, advanced this view with great vigor. But corporation leaders outside the government shared the same outlook. A group of them meeting in 1939 under the auspices of Fortune magazine agreed that it was important to “provide adequate economic opportunities to the so-called ‘have-not’ countries.”

Secondly, American private and official leaders were by 1939 very disturbed by German and Japanese economic competition in Latin America (as well as in Asia). It may be, indeed, that this factor was most important of all. On the other hand, there were many important Americans who felt as late as 1940 that it would be possible to work out some kind of economic compromise with the Axis powers. Two things, however, are certain: Axis competition worried a significant number of men in policy-making positions after 1938, and that concern served to convince some of them that it was necessary to modify some of the existing practices of America’s overseas economic expansion in order to protect the expansion itself. Sumner Welles offers a good example of the way that kind of interaction altered earlier attitudes and actions.

The third consideration was the determination on the part of some of the larger Latin American countries, such as Mexico, to stand firm in their efforts to reform, control, and restrict American business activities in their countries. This resistance unquestionably speeded up the modification of American policy.

Fourth, the humanitarian idealism of American policymakers affected their decisions. Never absent in the making of American policy, it enjoyed a renaissance in the late 1930s. This is no doubt partly explained as a reaction against Axis domestic and foreign policies whose nature was growing more obvious and more disturbing after 1936. But it was also the result of a few strong and even assertive reformers having positions of some authority, probably the best example being Josephus Daniels as Ambassador to Mexico. He not only softened some of Hull’s outbursts to the Mexicans, but also enjoyed a direct correspondence with Roosevelt. More significant, however, the existence of a growing crisis by nature involved Roosevelt more directly in all relations with Latin America. And that brought his sense and spirit of noblesse oblige more actively into the policy-making process.

The developing and on-going interaction of these four factors can be seen and followed in the renewed crisis with Mexico over American oil properties. The election in 1934 of President Lázaro Cárdenas led to a resurgence of revolutionary enthusiasm and a program of vigorous reform legislation. After concentrating on domestic property issues for two years, Cárdenas pushed through in November 1936, a law providing the government with authority to move against foreign companies that controlled oil resources. The American response was prompt and negative. Hull minced no words. “It would be extremely unfortunate,” he commented in August 1937, “if any action should be taken by the Mexican authorities which would jeopardize the [American oil] industry in any manner.”

Hull was concerned about the Mexican situation for several broad and fundamental reasons. The threat in Mexico was only the specific issue. For one thing, he was worried about the impact of Mexico’s action in countries like Venezuela, where Standard Oil had developed huge operations, or in Bolivia, which would be encouraged in its own expropriation battle. It might also slow down or disrupt entirely the efforts that were under way to win a favorable settlement of outstanding economic issues with Brazil. Thus the United States made it clear, even before any expropriation had actually taken place, that loans to Mexico would be held up indefinitely.

Other considerations made it difficult, however, to settle upon a policy of unmitigated opposition to Mexico. Ambassador Daniels in Mexico City and Secretary of the Treasury Henry Morgenthau were both beginning to fear Axis economic competition. Daniels argued that it was imperative to expand trade with Mexico, both for its own sake and to keep the door closed against Germany and Japan. Morgenthau was even more emphatic, probably because of his deep horror at Nazi persecution of Jews. “We’re just going to wake up and find inside of a year,” he fretted in December 1937, “that Italy, Germany, and Japan have taken over Mexico.” In a similar way, State Department policy-makers like Adolph A. Berle, Jr., and corporation leaders like Juan Trippe of Pan American Airways, were upset by German airline activity in the region. “We initiated a campaign,” Berle remarked tartly, “to clear these lines out.”

Some policy-makers were emphasizing the need for developmental loans that would lead to expanded trade and investment throughout Latin America. This need had been intensified by the recession of 1937. Along with businessmen who experienced the difficulties in their daily operations, men like Duggan understood one of the fundamental problems of dealing with the Latin American economies. They were in many respects so backward and rudimentary that it was almost impossible to link them up with the economic system of the United States in any effective, efficient, and profitable manner. It did little good, for example, to have the Export-Import Bank grant a loan to an American manufacturer to finance a shipment if he could not even transport the goods inland to potential consumers. Similar difficulties faced Americans who wanted to expand and rationalize the collection and shipment of raw materials. Beginning in 1938 with a loan to Haiti for building roads and drainage projects (and followed by a similar arrangement that Welles negotiated with Brazil in March 1939), the New Deal began to finance the very kind of operations that Hoover had called for a decade earlier. There was, of course, one rather significant difference. Hoover wanted American entrepreneurs to make the loans. The New Deal used public funds supplied by taxpayers.

The complications and complexities of these efforts to cope with the problems of economic expansion in Latin America were certainly sufficient to account for the intensity of the American reaction to Mexico’s move against the oil companies. Granted Hull’s assumptions, it does not require much imagination to understand his anger, worry, and concern. Those feelings were intensified, at the very time it became clear that Mexico was going to use the expropriation law, by Japan’s renewed military operations in China in July 1937. Hull’s commitment to the Open Door Policy in Asia was complete and unequivocal, and Japan’s attack unquestionably influenced the New Deal’s handling of the crisis with Mexico. Indeed, President Cárdenas expropriated American oil properties on March 18, 1938, at the very moment the Congress was considering President Roosevelt’s request for a dramatic increase in the Navy. In response, Hull forgot the rhetoric of the Good Neighbor Policy and fired off an ultimatum. It was fortunately deflected by Ambassador Daniels and finally ricocheted into the Mexican Foreign Office as an unofficial document. Daniels was deeply concerned with better relations and “increased trade” with Mexico, and he realized that Hull’s initial fear and anger might create a situation which could be resolved only through force. And Daniels had learned about the diminishing returns of military action while serving in the Navy Department when President Wilson had tried that method of dealing with Mexico.

Hull acquiesced in Daniels’ maneuver (a fact often slurred over by those who praise the Ambassador); but he and other policy-makers in Washington retreated only far enough to pick up the weapon of economic coercion. They planned to force Mexico to accept arbitration of the issue. The ban on loans was continued. An effort was made to cut into Mexican dollar reserves by manipulating the price it received for its silver exports. And, finally, the government gave unofficial approval to the efforts by the oil companies to keep Mexico’s newly nationalized industry from developing the country’s resources and entering the world market with its petroleum.

There the crisis rested until July 1940, when the United States agreed, in view of “circumstances presently impending,” to go along with the Mexican counterproposal to settle the conflict by appointing a joint commission to work out a compromise.^† That diplomatic phrase about circumstances obviously referred to the accelerating pace of German and Japanese expansion, and to the increasing opposition manifested by the United States. Those were the most important considerations in determining the timing of the American decision to sit down with the Mexicans at the negotiating table. Even so, the community of American policy-makers was still split as late as the fall of 1941 over whether to hold out in the joint commission talks until Mexico’s need for American investment capital modified its offer on compensation to the oil companies.

Considered alone, the combined economic and strategic challenge from the Axis could, and might well, have prompted the United States to maintain its intransigence (and even to increase its economic pressures). That was, after all, the course followed in dealing with Argentina. Such a might-have-been proposition is useful primarily to help clarify the reason that it did not occur. And that seems clearly to have been because Roosevelt was reached and persuaded by those policy-makers who insisted upon the need for a sophisticated reform in the methods of America’s overseas economic expansion. The Duggan-Rockefeller-Johnston group had worked out a broad tactical conception which, as Professor Lloyd Gardner has described it, amounted to modifying the laissez faire system of Adam Smith so that separate national economies rather than individuals were defined as the entrepreneurs.

Now it is true, at least in one sense, that this was not so much an adaptation of Adam Smith as simply a decision to honor in practice the precepts of the theory as originally stated. Smith did lay great emphasis on the international division of labor, and that one point could be (and was) interpreted to mean that raw-material producing countries remained raw-material producing countries even though they became more efficient. But Smith also stressed freedom of enterprise where the resources existed, and many nations which in 1939 were still raw material producers enjoyed human and material resources that were capable of building and sustaining far more diversified economies. To a certain extent, and one still to be controlled and structured by the economy and the policies of the United States, this latter interpretation of Smith is the one advanced by the sophisticated American reformers. The idea was to create somewhat more diversified political economies under the direction of the United States. The economic objectives were more markets and more efficiently produced raw materials. The political objective was middle-class government stabilized in a pro-American posture.

Roosevelt himself put it as neatly—and as revealingly—as anyone ever did in his casual remark of 1940. “[There is] a new approach that I am talking about to these South American things. Give them a share.” It was to be a more generous share. It was to be a more intelligently defined share. And it was to be a share that might ultimately produce more psychological and social welfare along with a larger gross national income in the South American countries. But it was still a share to be granted by the United States.

Since Mexico is often pointed to as the glowing example of the success of this New Deal version of the Open Door strategy, it seems useful to digress briefly and examine the claim. Mexico unquestionably benefited from its ever more intimate economic integration with the United States after 1940. The economy became more diversified, the national income increased significantly, and the daily lives of some Mexicans became easier and more affluent. Let this be granted as the achievement.

The caveats and questions which remain are nevertheless very crucial. First: it should be recalled that the policies of the open door and the good neighbor were supposed to create prosperity and welfare in the underdeveloped countries as well as in the United States, and to do so short of war. They should be judged by their own claims. And by that standard they have not succeeded. The difference between the Mexico of 1935 and the Mexico of 1972 is not the result of the Open Door Policy and the Good Neighbor Policy functioning in a period of peace. The improvement that has been made since 1935 is very largely the product of World War II and the Cold War.

Second: the claim as stated neglects entirely the psychological, social, and even economic results of American expansion into Mexico. Here again the evidence is strongly negative. Mexicans discovered by 1961 that they were steadily losing effective control of some areas of their economy. Indeed, it was a conservative government that began in that year to consider and act upon measures designed to regain some measure of that authority. As for the oil industry itself, American companies won their secondary objective: because of being excluded from the private international government of oil and because of Mexico’s shortage of investment capital over which it exercised full control, the nationalized industry has never contributed its potential share of the nation’s development.

Third, and in a more general sense (that is often neglected), it is hardly too much to say that the Mexican political economy maintains a precarious stability only because it sloughs off into the United States, in the form of legal and illegal migratory and transient labor, a sizable portion of its own population. That group of braceros is increasing by a million people a year. Americans think of those men, women, and children as employed workers. But they actually form a huge unemployment problem in Mexico. Neither the existence of that mass of ill-used human beings, nor the way they are dealt with, can be adduced as proof of a sound and healthy system.

Finally, millions of Mexicans still live in poverty. They are not just middle-class people in debt beyond their means. They are not simply poor. They live in poverty. Hence it is both practically and morally necessary, before praising American policy as the benefactor of the Mexican Revolution, to consider the sober and yet deeply moving estimate presented by anthropologist Oscar Lewis in his classic study of The Children of Sánchez. His judgment on the migratory workers, for example, is this: “Were the United States suddenly to close its borders to the braceros, a major crisis would probably occur in Mexico.” But his most telling comments come in the context of his stark review of American penetration. American investment totalled almost $1,000,000,000 as of 1960. And the major television programs are sponsored and controlled by American firms. But the chronic inflation since 1940, when American influence began to rise so dramatically and continually, has raised the cost of living for workers in Mexico City some 400 per cent. And the “uneven distribution of the growing national wealth has made the disparity between the incomes of the rich and the poor more striking than ever before.” “At least the lower third of the rural and urban population” know only what Lewis calls “the culture of poverty.” He characterizes it as a “constant struggle for survival, unemployment and underemployment, low wages  .  .  .  child labor, the absence of savings, a chronic shortage of cash  .  .  .  crowded quarters, a lack of privacy,  .  .  .  a high incidence of alcoholism, [and] frequent resort to violence” As for the improvement and development that has occurred, Lewis offers a judgment that is far closer to the truth than any explanation which stresses the role of American influence. “It is the poor who emerge as the true heroes of contemporary Mexico, for they are paying the cost of the industrial progress of the nation.” Unfortunately, the New Deal adaptation of Adam Smith did not prove sufficient unto the task of transforming the promises of the Open Door Policy into reality.

American policy-makers also discovered, again in a way contrary to its axioms and expectations, that the strategy of the open door did lead to war. None of them wanted war. They did not plot to involve the United States in armed conflict with the Axis. Indeed, and as symbolized by Roosevelt’s support of the Munich Agreement of 1938 between Nazi Germany and Great Britain, they tried very seriously and persistently to accomplish their objectives without war. But given their Weltanschauung, their explanation of how the prosperity and welfare of the United States was to be achieved and maintained, they had no recourse but war. And as it happened, the United States was engaged in a shooting conflict with Germany before Japan struck Hawaii. The question of how and when that combat would have formally been joined if the Japanese had not attacked Pearl Harbor is fascinating but nevertheless irrelevant to an understanding of how American leaders came to accept the necessity of violence. It is also possible, perhaps even probable, that they would have reached that decision even if they had not entertained a frontier-expansionist conception of history. But again, and however pertinent it may be for later consideration, that hypothetical question is not germane to an explanation of how the United States did actually become involved in World War II.

Perhaps the most helpful way to approach that problem is by reviewing the attitudes toward foreign policy that existed after Roosevelt had been in office two full years. Encouraged by the economic revival that seemed in 1935 to herald a general recovery from the depression, the community of public and private decision-makers looked ahead to a continuing extension of overseas economic activities. Those men also reasserted their conviction that such expansion would prevent foreign revolutions (and future depressions in the United States itself) and that peace was essential to recovery at home and profitable operations abroad.

Beyond those areas of agreement, however, the policy-makers split into differing—and often bitterly antagonistic—groups. Two main features of their dialogue and argument must be kept in mind if the evolution of policy is to be understood.

First: these divisions over policy not only cut across political lines, but also across what was by then an increasingly artificial boundary between private economic (including labor) leadership and formal office holders. The decision-making community at all times included men of great power and influence outside the government as well as those inside the nation’s official establishment. Thus the support for a given policy always came from men in both groups. The natural corollary was that both the private leadership and the government bureaucracy disagreed among themselves as well as with members of the other bloc. One striking result of this hammering out of a consensus on policy between 1935 and 1941 was that a consolidated corporate group emerged under the banner of bipartisanship for security and prosperity. That coalition was an elite which came to enjoy a very extensive measure of control over foreign policy. Often, for example, the internal debates were not even known to—let alone participated in by— their critics or the general public. And the elite’s broad authority over both private and official information and news media further closed down the discussion of alternatives.

It is vital to understand this pattern of power if the role and the authority of the military itself is not to be exaggerated. Beginning in 1938 and 1939, the evolving corporate elite of private and official leaders called in the military to execute a policy that they—the civilians—were formulating and adopting. It was the civilians who defined the world in military terms, not the military who usurped civilian powers. Once the military had been called in, they quite naturally gained more influence because the situation had been defined in a way that put a premium on their particular knowledge and experience. But a change in the definition of reality would decrease the power of the military. Even granting a generous measure of new authority, the military did not even in the 1960s establish themselves in an independent and superior position.

Second: the argument within the policy-making community developed around four issues. At the outset, by 1935, the debate concerned whether or not it was possible to work out some compromise with the Axis powers. That discussion shaded into an argument about whether the effort to remain neutral in another war would lead to an economic depression through the loss of overseas markets. Then, in 1937, the majority, who still held that it was feasible to arrange some kind of accommodation without war, began to divide over whether or not to coerce the Axis into an acceptable settlement by using economic sanctions and the threat of military force (if not its actual use in combat short of a formal declaration of war). Finally, and beginning in 1939 after the Nazi victory over Poland, there opened a final argument over whether or not it would be necessary for the United States to become a total and formal belligerent. Though that angry debate was settled by the Japanese, it seems apparent that the policy-makers and the public were reaching, however reluctantly, the conclusion that war was necessary.

The detailed reconstruction of that evolution into trial by arms has yet to be made by any historian or group of historians.^‡ But it is possible to characterize the changing attitudes of various groups and personalities within the corporate leadership of the country, and to outline the main phases of the debate. One of these was the argument over neutrality policy that began early in the 1930s with a discussion of blocking the sale of munitions to belligerents in another war. American leaders (and the public at large) generally agreed on the wisdom of that restriction, but they rapidly drew back from any commitment to full neutrality when it became apparent that such a policy would undercut existing and prospective overseas economic expansion.

Along with the strikingly frightened reaction of American leaders to the threat posed to exports and foreign investments by the outbreak of World War I, this marked fear in the 1930s about the economic consequences of real neutrality offers impressive proof of the degree to which Americans thought their domestic welfare depended upon overseas economic activity.^§ Theoretical and statistical arguments concerning the actual extent of that dependence are of course relevant, particularly in connection with any consideration of alternate foreign policies, but this idea about its great importance is the crucial factor in understanding and interpreting American foreign policy in the 1930s—and in subsequent decades. Americans thought and believed that such expansion was essential, and their actions followed from that supposition.

This became apparent early in the discussion which developed around the ideas of Charles Warren, an international lawyer who had served President Wilson as an Assistant Attorney General prior to 1917. Warren argued that the only way to avoid involvement in a future war was to abandon all claims to neutral rights and rest content with whatever trade the belligerents would permit. In the face of prompt opposition, he shortly modified his original proposal by suggesting that trade with belligerents be limited to the average amount carried on during a five year period prior to the outbreak of hostilities.

Secretary Hull and other key advisors in the State Department, and such quasi-official figures in the corporation community as Allen Dulles, continued to criticize even Warren’s revised plan as a surrender of traditional rights and as a body blow to American commerce. As might have been expected, many businessmen joined the attack on Warren. No doubt influenced by Senator Gerald P. Nye’s investigation of the traffic in munitions at the time of World War I, and even in the period of peace thereafter, the pro-trade group accepted the need for an arms embargo. But everyone involved in the debate, if not all those who followed it in the popular press, knew that the commerce in arms was not the central issue.

The crucial point involved trade in other manufactured goods, and in raw or semi-processed materials. Not only were those the products sought by belligerents, but they were the items that Americans wanted to sell abroad. Senator Nye understood and defined the dilemma as early as 1935. “My own belief,” he concluded, “is that a complete embargo on trade is the only absolute insurance against the United States being drawn into another prolonged major war between great powers. I am convinced that drastic legislation to accomplish this could not be passed even in time of peace.” ^¶

Nye had strong reasons for reaching such a conclusion. Secretary Hull and Herbert Feis of the State Department argued quite openly that restrictions of that kind on American overseas economic activity would be extremely harmful if not disastrous to the nation’s economy. In a typical bit of calculated understatement, for example, the Secretary observed that a general embargo would be “undesirable.” The bipartisan nature of this resistance to real economic neutrality was indicated by the agreement of Henry Cabot Lodge, Jr. And Roosevelt was warned in 1935 by the President of the New York Chamber of Commerce that “exporters and merchants on our eastern seaboard are now more interested in the freedom of the seas for American ships than at any time since the World War.” The same view was advanced by General Motors, the giant cotton firm of Anderson, Clayton, and even by the Business Advisory Council of the Department of Commerce.

One of the bluntest analyses of these economic considerations was offered by Edwin Borchard, an outstanding professor of international law at Yale who was deeply concerned to strengthen American neutrality. Commenting in 1936 on proposed legislation that followed some of Warren’s early ideas, Borchard warned that “we are likely to begin to lose our markets the minute this bill is passed.” “Nobody,” he feared, “has apparently thought through the full effects of this legislation.” Those consequences would be “revolutionary” because they involved the issue of “self-sufficiency.” Neutrality of that kind was dangerous because it would “incite disorders and distress at home.”

Senator Key Pittman’s judgment of the situation in 1936 made it clear that Borchard underestimated the extent to which government and business leaders had very carefully “thought through the full effects of this legislation.” “The necessity for foreign commerce is so great and political pressure at this particular time is so strong,” Pittman explained, that it was unrealistic to expect real neutrality legislation. The compromise was Cash-and-Carry Neutrality, a concept and an idea apparently conceived by Bernard Baruch. The long-term result of that approach was clear even at the time of its adoption by the Congress—it created an economic alliance between the United States and Great Britain.

Even before that implicit connection led to formal political and military discussions and agreements, however, American leaders were defining the Axis powers as dangerous economic rivals in Latin America. That conflict played an early and significant role in the thinking of decision-makers about the possibilities and probabilities of war with Germany and Italy, and even with Japan. Much of the shift toward a policy of vigorous opposition short of formal belligerence took place in connection with Axis activities in Latin America. In the intellectual and emotional sense, that is to say, an important number of American leaders began to go to war against the Axis in the Western Hemisphere.

This attitude was intensified in those who already held it, and adopted by others, as a result of two events during 1937-1938. One was the Spanish Civil War, and the other was the Japanese attack in China. Although the Spanish conflict generated more emotional involvement and more vociferous agitation, particularly in the populous Eastern part of the country, the Japanese action made a more significant impact within the policy-making community. This was in part due to the triumph in Spain of General Francisco Franco, who was openly supported by Germany and Italy. His victory liquidated the issue. If the Republican Government had held out for a longer period, as did the Chinese, it is conceivable that the Spanish Civil War would have brought the United States into a general European coalition against Germany before Japan attacked Pearl Harbor. Possible but not probable. Spain served to arouse and involve two rival groups in the United States, but they were quite unevenly matched in power and influence. The reformers who opposed fascism and thought it was time to slow or halt its ideological, political, and military momentum mounted a dynamic public campaign in behalf of their policy. But it is highly doubtful that a majority of those reformers favored direct American intervention. The opposition, and especially the hierarchy of the Catholic Church and a broad segment of private and public Protestant leaders, enjoyed much more influence. As a result, the Roosevelt Administration followed a policy of strict and formal neutrality which weakened the Republican Government. American policy in its deeper nature is rather well characterized by a bit of chronology: Franco captured Madrid on March 28, 1939, and the United States recognized his government on April 1, 1939.

Japan’s attack in China on July 7, 1937, which followed upon its withdrawal from the London Naval Conference in 1936, had a far greater effect on American policy-makers. Several considerations explain this difference. The most important of these was the emphasis on Asia as the Eldorado of America’s overseas economic expansion ever since the time of the Sino-Japanese War in 1894, which had led to the strategy of the Open Door Policy. This had always been focused on China, even though tactical and other considerations had prompted economic and political dealings with Japan that sometimes seemed to create a different impression. It is at most a slight exaggeration to say that China was by 1937 firmly established in the minds of most American policy-makers, and even below the level of conscious thought, as the symbol of the new frontier of America’s ideological and economic expansion. This was as true for those who advocated working through and with Japan as it was for others who presistently agitated for a stronger direct effort in China. The commitment to China was much greater than the identification with any European power except England—and possibly France. This cast of mind and emotion, this utopian image, was strengthened and infused with new substance between 1935 and 1937 by very practical economic developments. A significant number of private and official decision-makers became convinced during those years that the long-awaited blossoming of China as a market was finally under way. There was, as one of them phrased it, a “new spirit” of confidence that the open door was about to lead to vast and profitable economic activity.

This enthusiasm was the offspring of two developments. One involved the way that China had finally begun to modernize its own system; that meant it was buying more and more industrial goods and services from the United States. The other concerned American trade with China. After a slump during the 1920s, it began to increase very rapidly. In 1932, for the first time in over a decade, American-Chinese trade totalled more than Chinese-Japanese trade. That exciting trend continued, moreover, through the next two years. This led, in 1935, to a little remembered but. very significant liaison between the National Foreign Trade Council and various people and groups (including a bloc in the State Department) within the Roosevelt Administration. Men inside the government who favored implementing the Open Door Policy by dealing directly with China and taking a firmer stand against Japan became more active in policy discussions. And the N.F.T.C. organized a quasi-official American Economic Mission to the Far East. Headed by W. Cameron Forbes, it visited Japan and China for the purpose of gathering data upon which to base future policy.

Upon his return, Forbes announced that there was little enthusiasm for the mission in Japan. “In China, on the other hand,” he reported, “American participation and American investment along all lines was sought.” He then spelled out the implications by reminding American businessmen that in 1935 they had outscored Japan in trade with China to the amount of some $22,000,000. Finally, he made it clear that it was time to use firm pressure to keep the door open. “This policy of the open door does not seem to have been observed in the conduct of affairs in Manchuria.” Should that Japanese conduct be extended to more of China, he warned, “there will inevitably be built up a greater and greater resistance.” Japan’s attack was particularly disturbing to Forbes and men who shared his outlook because it came at a time when American economic activity in China “was considered especially bright.” “Probably never in its history,” Forbes remarked in his judgment on the assault, “has China offered greater promise for its future trade, industry, and general economic progress than  .  .  .  just prior to the outbreak of the present hostilities.” Nor were the implications limited to China, or to Forbes and his followers. In 1937, for example, Asia furnished 51.5 per cent of all raw and crude materials imported into the United States. British Malaya and the Dutch East Indies supplied 86 per cent of its crude rubber and 87 per cent of its tin. Asia provided, in addition, 85 per cent of its tungsten, a third of its mica, 99 per cent of its jute, and 98 per cent of its shellac.

This confrontation between America’s specific and general economic interests and expectations and Japan’s move south into China, directly affected the posture and the policy of the United States. Through September and October 1937, the issue was debated vigorously within the State Department in preparation for the Brussels Conference on the Far East. The argument took the traditional form: some wanted to make a strong stand with China, a smaller group suggested working with the Russians, and others reiterated that it was necessary to follow the tactic of trying to control Japan.

At this juncture, the Soviet Union renewed its bid for an entente with the United States. Its spokesmen warned American officials at Brussels that, while the offer was wholly sincere, it might well represent the last stand of those in the Kremlin who advocated collaboration with the Western Powers against the Axis. Russia felt it “had taken some terrible beatings” while striving to work out such an alliance, and it might very soon change its policy and emphasize unilateral moves to insure its own security. (The general assumption that the Soviets can never be trusted in such situations is not borne out by the Brussels experience. The failure of the conference did verify the warnings given to American policy-makers. The decline in influence of Maxim Litvinov, and of the pro-Western views he advocated, can be dated from that time. American policy-makers nevertheless continued to make this kind of error in dealing with the Soviet Union.)

Roosevelt seems to have considered, however briefly, a more positive response to this overture. But his final instructions followed the pro-Japanese line. He defended his choice by arguing that, short of war, Japan could be stopped only by arranging a truce in China. Even so, the American policy at Brussels was based on extracting extensive concessions from China. It may be that the President had even then concluded that war was all but inevitable, and was only buying time with a down payment provided by the Chinese. It seems more probable, however, that Roosevelt and Hull felt that unilateral American economic and military pressure would force the Japanese to retreat. They were no doubt encouraged in this traditional assumption behind the strategy of the Open Door Policy by the speed with which Japan accepted American demands for an apology, reparations, and promises for the future in connection with the sinking of the Navy river gunboat Panay in December 1937.

There is no doubt, in any event, that the United States proceeded very quickly after the Brussels Conference to reassert and act upon both its frontier-expansionist outlook and its traditional strategy of the Open Door Policy. Hull clarified that with one blunt remark on February 19, 1938, shortly after the administration had asked for a huge increase in naval construction. “There can be no military disarmament,” he explained, “without economic appeasement.  .  .  .  Only healthy international trade will make possible a full and stable domestic economy.” And by “healthy international trade,” Hull obviously and exclusively meant trade defined in American terms.

Assistant Secretary Sayre reviewed the events of 1937 and 1938 a bit more laconically: “The economic world became a battlefield in which the issues were sometimes political as well as economic.” And military as well as political, he might have added. But the most classic explanation of the crisis was offered by William S. Culbertson, who had begun his service as an economic advisor and policy-maker on trade matters under President Wilson, had continued to exercise such influence in the 1920s, and was still active in the New Deal period. “Our economic frontiers,” he remarked, “are no longer coextensive with our territorial frontiers.” No one ever offered a more succinct description and interpretation of the single most important aspect of twentieth-century American diplomacy—either in general, or pertaining explicitly to the nation’s involvement in World Wars I and II.

Administration leaders in Congress made the same point in less striking style during the consideration in the late winter of 1938 of Roosevelt’s bill for the expansion of the Navy. In a long debate that was far more revealing of the nature of American foreign policy than were the arguments over the Neutrality Acts of 1935, 1936, and 1937, New Deal Senators David I. Walsh and Tom Connally stressed two factors. They began by pointing to German and Japanese activity in Latin America and cautioned that it was necessary to be “very careful” about such competition. Their conclusion was a warning that the danger might rapidly become greater.

Then they compared the American economic system to the British Empire. “We, too, have trade routes,” Walsh explained. “It is estimated by our experts that unless we are able to keep open certain trade routes the United States could not maintain itself more than two years without being defeated by a powerful enemy.” Any delay in building a big Navy would court final surrender. “We cannot build battleships in time of war unless we keep the trade routes open to bring in manganese. We cannot make munitions in time of war unless we keep the trade routes open to bring in certain essential raw materials.” Backed by such leadership and logic, the bill passed the House of Representatives 294 to 100, and the Senate 56 to 28.

Armed with this steel in his diplomatic glove, Secretary Hull called for a moral embargo on shipments to Japan in June 1938. Six months later the United States loaned China $25,-000,000. And in July 1939, it denounced its commercial treaty with Japan. One group of policy-makers was clearly moving to stop the Japanese by economic pressure and the threat of force. One spokesman who was also an active member of the Council on Foreign Relations put it bluntly. “Seen in its Far Eastern setting,” William Diebold, Jr., explained, “our concept of commercial policy expands.  .  .  .  It becomes our most potent instrument of foreign policy, a long-range weapon with which to settle the fate of nations.”

That intensity and tempo of opposition was not apparent, however, in dealings with Germany in 1938 and 1939. And it slacked off for more than a year in affairs with Japan. The reason for this lies in the ambivalence and the split among the policy-makers. Fears of war and hopes of compromise with the Axis were still very strong. John L. Lewis and other leaders in the C.I.O., for example, manifested that combination of attitudes very clearly. Aware and concerned by 1939 that the United States was “gradually being driven out of trade relationships with the various markets of the world,” Lewis did not turn to war or preparations for war as a solution. He first accepted the reality that “the open door is no more” in Asia. Then he advocated an increased effort in Latin America to take up the slack. Government loans should be granted to provide the peons with buying power. Lewis shared the feeling of the steel workers that foreign policy should not “be formulated or made dependent upon the protection of the vested or property interests in foreign countries of the large corporations in this country.” Of course, labor leaders feared such preparations for war as the draft, because the government—and its industrial contractors—could then control the conditions and the market for labor. Lewis saw the squeeze and disliked it. “Unless substantial economic offsets are provided to prevent this nation from being wholly dependent upon the war expenditures,” he cried out in anguish in 1940, “we will sooner or later come to the dilemma which requires either war or depression.”

Corporation leaders and their associates were caught in the same corner, as were other policy-makers in the government. The great majority of American leaders emerged from World War I fearing war as the midwife of international revolution and domestic unrest. A good many of them remained unconvinced even by 1939 that it was the greater part of wisdom to make war in order to make peace. Worried about “worldwide ruin,” and frightened of the political and social consequences of “another generation of misery,” such leaders opposed war as a “great destroyer and unsettler of their affairs.” Bernard Baruch, for example, thought that “the institutions of government, as we have known them, [would] fall down  .  .  .  and that the whole moral attitude of the world would change.” Many corporation leaders and a significant though probably smaller number of national politicians extended that line of reasoning on through the 1930s. They argued that serious preparation for war would subvert the kind of political economy they equated with freedom and democracy. “As certain as night follows day,” asserted the editors of Iron Age in 1939, “while we were fighting to crush dictatorships abroad, we would be extending one at home.”

“It is fairly certain,” agreed a corporation executive who was prominent in the financial and policy affairs of the America First Committee, “that capitalism cannot survive American participation in this war.” Others broadened the analysis, seeing American intervention as leading “to the end of capitalism all over the world” with a resulting “spread of communism, socialism, or fascism in Europe and even in the United States.” Winthrop W. Aldrich spoke from a similar estimate in his remarks to the National Foreign Trade Council shortly after the Munich Agreement of 1938 had been signed. “We ought to take full advantage of the opportunity for the continuance of peace which has resulted from the events of the last few weeks,” he advised in very strong terms. “It is of paramount importance that the efforts of the diplomats and of the heads of governments should speedily be reinforced by measures of economic appeasement.” The depth and power of the crosscurrents within the community of policy-makers is clearly revealed by Aldrich’s remarks. He was head of the Chase National Bank, which not only was a very powerful element in the Federal Reserve System, but also handled most of the Soviet Union’s transactions in the United States. He was advising conciliation with the Axis while Secretary of State Hull was militantly fighting the pressures for such economic appeasement.

Tormented by their estimates of the consequences of intervention, leaders of the Aldrich bent argued, when pressed to the wall, that America could and should avoid war by building and integrating an impregnable empire in the Western Hemisphere or that it could and should assert America’s ultimate supremacy by waiting for the belligerents to exhaust themselves. Senator Harry S Truman was one of the politicians who inclined toward the latter proposal. “The role of this great Republic,” he explained in October 1939, “is to save civilization; we must keep out of war.” Later, after the Nazis attacked Russia, he went so far as to suggest aiding both of them in such a way as to promote their mutual exhaustion.

The way those attitudes began to change was nicely revealed in the course of a discussion among leading businessmen held late in 1939 under the auspices of Fortune magazine. The participants formally and vigorously rejected entry into the war. But almost everything else they said indicated either that they expected American involvement or that they were still trying with considerable success to avoid facing the fact that the things they did want could not be obtained short of war. No war, they agreed, and then voted “unanimously” to oppose giving way to Japan’s New Order in Asia. No war, they reiterated, and then flatly refused even to discuss the possibility of a more self-contained economy. Overseas economic expansion was mandatory. No war, they repeated, and then agreed that the Philippines had to be defended in order to protect “the rich resources” of Southeast Asia. No war, they concluded, and proceeded to reject “abandonment of the U.S. world position through surrendering neutral rights, adopting economic self-containment, or acquiescing in Japanese demands in the Orient.”

The contradictions became almost ridiculous when they went on to discuss “the important tasks confronting the next peace.” “What interests us primarily,” the businessmen explained in perfect candor, “is the longer-range question of whether the American capitalist system could continue to function if most of Europe and Asia should abolish free enterprise.” Their conclusion was not too surprising: the next peace settlement would have “to organize the economic resources of the world so as to make possible a return to the system of free enterprise in every country.”

It required very little more Axis expansion to push men who were that ambivalent over to the side of intervention. They were further exhorted and encouraged by industrial leaders like James A. Farrell of the steel industry, who had been agitating for more expansion, and more militant opposition to the Axis, for at least two years. “Our internal economy,” Farrell explained in 1938, “is geared to export trade on an increasingly higher level.  .  .  .  We must be prepared,” therefore, “to increase our outlets abroad for manufactured products or make adjustments of far-reaching consequences.” Hence to Farrell it was “imperative that business interests and government agencies act together to assure American business a proportionate and equitable share in the [world’s] trade.  .  .  .  The door of equal opportunity to all trading areas should be kept open.” Farrell strongly implied that war was certain. “It suffices to say that no compromise seems possible between [economic] doctrines so wide apart in principle.”

The Business Advisory Council of the Roosevelt Administration gave Farrell the assurances he wanted. “An enlargement of our opportunities for trade and investment in foreign countries is now essential to maximum national prosperity.” In addition, many of those who had in 1938 and 1939 feared the totalitarian consequences of going to war had by 1940 turned the argument upside down. They began to assert that staying out of the war would bring the end of free enterprise and democracy. Lewis W. Douglas, who had served as Budget Director in the early days of the New Deal, typified such thinking. “To retreat to the cyclone cellar here means, ultimately, to establish a totalitarian state at home.”

Such a convergence of thinking among corporate policy-makers encouraged the administration to act more openly. It continued to lie about, and in other ways conceal, some of its key policy decisions. But Roosevelt and Hull felt strong enough by September 1940, to embargo aviation gasoline and end iron shipments to Japan. Germany’s rapid conquest of France brought even more support for their policies. Hitler might be said to have provided the deciding vote that passed the first peacetime draft in the same month of September. Thereafter events and decisions moved in an ever-accelerating spiral downward into war. Within a year, on September 4, 1941, the United States was engaged in undeclared naval warfare with Germany. Japan attacked three months later.

The final explanation of the tragedy at Pearl Harbor has yet to be made. It most certainly lies in some combination of American arrogance and negligence and of Japanese brilliance. But there is no doubt about the final convergence of thought between the Roosevelt Administration and the leaders of America’s corporate economic system. For by mid-1943, when the issue of postwar foreign policy came to the fore and was thrashed out in Congressional hearings and departmental discussions, it was apparent that the Roosevelt Administration was dominated by men whose personal experience and intellectual outlook were conditioned by their careers as leaders or agents or students of the large corporation. Dean Acheson, Averell Harriman, Donald M. Nelson, Edward Stettinius, Adolf A. Berle, Jr., John Foster Dulles, Eric Johnson, Paul Hoffman, William C. Foster, and James Forrestal are but the most obvious names from the top layer of American leadership in foreign affairs.

These men symbolized a consensus that had been foreshadowed in the winter of 1939–1940, when American economic leaders began to support Roosevelt’s policy toward the Axis. By January 1940, key leaders of America’s large corporations were defining crucial problems in terms of economic stagnation at home and postwar peace terms. Having had the central issue spelled out for them in that fashion, the editors of Fortune devoted their attention to the questions of “The Dispossessed” at home and a redefinition of “The U.S. Frontier.”

From the candid admission that the American system was in serious trouble (“For nearly one-fourth of the population there is no economic system—and from the rest there is no answer”), the editors of Fortune drew three major conclusions. First, they acknowledged that “the U.S. economy has never proved that it can operate without the periodic injection of new and real wealth. The whole frontier saga, indeed, centered around this economic imperative.” Second, and in consequence of this fact, the editors defined two new frontiers. A new emphasis on enlarged consumer sales at home would have to be paralleled by a tremendous expansion of “foreign trade and foreign investment.” Secretary of State Hull’s trade agreements program was “a step in the right direction,” but to “open up real frontiers, under a general policy of raising the standard of living of other countries, we shall have to go much further.”

In outlining its conception of such a program, Fortune argued that “the analogy between the domestic frontier in 1787, when the Constitution was formed, and the present international frontier is perhaps not an idle one. The early expansion of the U.S. was based upon firm political principles; and it may be that further expansion must be based upon equally firm—and equally revolutionary—international principles.” Fortune’s third point concerned the importance of having more and more corporation leaders enter the Roosevelt Administration and subsequent governments.

As they devoted more of their attention and energy to the challenge of extending the new American frontier, many economic leaders became enthusiastic converts to the mission to reform the world. The convergence of a sense of economic necessity and a moral calling transformed the traditional concept of open door expansion into a vision of an American Century. In this fashion, the United States entered and fought World War II. Americans were convinced that they were defending an anticolonial democracy charged with a duty to regenerate the world. They also had come firmly to believe that their own prosperity and democracy depended upon the continued expansion of their economic system under the strategy of the open door.

* My general knowledge and understanding of New Deal diplomacy has been vastly increased as a result of many long discussions with Professor Lloyd Gardner. We have exchanged research notes and ideas on an extensive and wholly reciprocal basis. He has contributed greatly to my comprehension of the development of American policy in Latin America during the years 1937–1941.

† Mexico’s offer to embargo the shipment of certain strategic minerals to the Axis powers contributed to the change in American policy.

‡ The two volumes by W. L. Langer and S. E. Gleason, The Challenge to Isolation, and The Undeclared War (New York: Harper and Bros., 1952, 1953), have a general but undeserved reputation as being the last word. Another approach, fairly represented in a collective volume edited by H. E. Barnes, Perpetual War for Perpetual Peace (Caxton, Idaho: Caxton Printers, Ltd., 1953), is challenging but by no means definitive. The best single volume is P. W. Schroeder, The Axis Alliance and Japanese-American Relations (Ithaca: Cornell University Press, 1958).

§ Some of the most revealing evidence concerning this response to the World War I situation is to be found in the Hearings before the Special Senate Committee Investigating the Munitions Industry (39 parts: Washington: Government Printing Office, 1934–1936).

¶ This analysis and interpretation was originally prepared from materials in the National Archives, manuscript collections of such figures as President Roosevelt and Senator Borah, the Congressional Record, and the various investigations into neutrality undertaken by the Congress during the late 1920s and the 1930s. Just as this manuscript was going to press in 1962, however, I had the good fortune to receive an advance copy of R. A. Divine, The Illusion of Neutrality (Chicago: University of Chicago Press, 1962), which deals with the fight over neutrality within a similar framework. I have borrowed this quotation from Nye, and a later one from Pittman, from Professor Divine, who found them during his research in the manuscript files of the congressional committees.