The major effort to coordinate industrial policies, the National Recovery Act, ran afoul of one of the strongest and most distinctive American values, the commitment to freedom over social planning, to individual rights over the general welfare. Two kosher butchers had been fined and jailed for so-called destructive price cutting. Fighting this verdict all the way to the Supreme Court, the Schechter brothers won a unanimous decision that the industrial code embedded in the NRA legislation was unconstitutional. Blocked by this decision, Roosevelt tried to increase the size of the Supreme Court, enabling him to make congenial appointments. Americans didn’t like tampering with their Supreme Court either, and he backed down. After the Court declared parts of the National Recovery Act unconstitutional, Congress extracted the sections dealing with labor and put them in the Wagner Labor Act of 1937, which greatly enhanced opportunities for successful union negotiations with employers. Quickly unionized nonagricultural labor accounted for 36 percent of the work force, its highest level ever.
Probably the most successful New Deal program was the Civilian Conservation Corps, which gave jobs for six months to two years to young men between the ages of eighteen and twenty-three who promised to give most of their pay to their families. Working principally on federal land, the CCC helped the Bureau of Reclamation fight soil erosion with seeding and terracing, the National Park Service build campgrounds and picnic sites, and the U.S. Forest Service protect timber from fire, disease, and insects. The government had to borrow to fund these programs, thus upsetting the goal of balancing the federal budget, but the classical economists’ conviction that the market would balance itself no longer convinced the public, which rewarded Roosevelt with four elected terms as president. Still, as is frequently the case with new ideas, leaders hedged their bets. The old budget-balancing orthodoxy reasserted itself. After his landslide victory in 1936, Roosevelt raised taxes and cut spending, and as Keynes had predicted, unemployment went up again. An international crisis then took over. When war broke out in Europe, the United States girded its loins to help Great Britain. Government spending reached levels high enough to bring the nation out of the Depression.12
If the causes of the Great Depression elude experts, it’s because there are too many of them interacting in hidden ways. This underlines the point that in a free market economy, though some people have much more power than others, no one is in charge. All the material aspects of the economy—available capital, plant capacity, fiscal instruments, transportation, and communication systems—rely on personal and institutional choices. More perplexing, not only do the individuals making decisions have different cultural values, but their attitudes will vary according to whether they were old enough to have lived through the last depression at the end of the nineteenth century or have just entered the world of commerce. The economy is not so impenetrable that governments can’t pass measures to prevent a rerun of the latest downturn, but an unforeseen development is usually in the offing.
Lingering Grievances from World War I
As it sadly turned out, the worst consequence of the First World War was not economic but political. The day after the inauguration of Roosevelt in March 1933, Adolf Hitler received full power to govern Germany by decree. The experiences of the 1930s tarnished the reputation of liberal democracies with their representative legislatures and civil rights, free markets and personal political freedoms. Hitler’s success, as did Mussolini’s, fed on the discontent that accompanied the tanking economies of the postwar period. Ambitious in his plans for Germany, which after all had been the second-largest economy before World War I, Hitler spent massively to provide jobs as he rearmed Germany in defiance of the Versailles Peace Treaty. Like Mussolini, whom he admired, he used the minions in his Nazi Party to suppress unions and all independent political institutions like newspapers. Hitler too had uniformed followers whose enthusiasm he sustained with military parades and giant convocations, where he harangued them for hours on end. He stoked his countrymen’s rage at their treatment after the First World War and played on their anti-Semitic prejudices with a horrendous campaign to rid the world of Jews and their culture.
Hitler had unilaterally abrogated many of the terms of the treaty that ended World War I. He seized Austria and Czechoslovakia, but it was not until he invaded Poland in September 1939 that Britain and France woke up to the threat that he posed and declared war. They now faced Hitler’s strategy of lightning war, which exploited all of the technologies of mobility—airplanes, tanks, and motorized infantry. He succeeded famously in the first year, polishing off Poland in concert with his new ally the Soviet Union, and then invaded Denmark, Norway, Belgium, the Netherlands, and France. By the end of 1940 Britain was confronting Germany alone, saved from invasion by the Royal Air Force working with the new radar and antiaircraft defenses. After Germany forced the evacuation of all English forces from the Continent in June 1940, most of Europe was his. The British turned to defending the Suez Canal and India while the United States began tooling up to send them material support. This decision gave Britain something of a breather.
Fresh from victory over France, Germany invaded Russia a year later. Hitler’s expectation of another quick victory got ground down by the unexpected ferocity of the Russian defenders of their homeland. They successfully blunted the German offensive and threw the invaders on the defensive. Both Russia and Germany suffered horrific losses. While Russia didn’t definitively defeat Germany, it delivered the crippling blow that tilted the war in the Allies’ favor. Britain and the United States pounded German factories and the civilian population from the air, cutting their productivity and diverting precious German resources to defending against these attacks. With improved navigational aids the Royal Air Force could switch to bombing at night. After a steady stream of aviation improvements, the United States turned out the first intercontinental bomber, the Boeing B-29, nicknamed the Superfortress. By the summer of 1944, when the Allies were ready to take the war back to France, the Americans had mobilized all the D-day units for a fully mechanized invasion, the largest in world history.13
When Japan entered World War II, as an ally of Hitler’s Germany and Mussolini’s Italy, it had already been pursuing for almost a decade an aggressive campaign under the rubric of the Greater East Asia Co-Prosperity Sphere. The “Co” in the title was illusory; this was a program to bring its neighbors under the control of imperial Japan. One wag turned Rudyard Kipling’s famous line about the white man’s burden upside down when he said that Japan would now relieve the white man of his burden. Japanese opinion makers cultivated the idea that as descendants of the sun goddess the Japanese had the moral purity and cultural superiority to lead Asia out of the quagmire Western powers had made. While some Japanese intellectuals responded to the promise of replacing Western imperialists with a pan-Asian community of nations, the government’s goals were more concrete and exploitative, focusing upon garnering the raw materials that Japan lacked and monopolizing Asian markets.
The brutality of the Japanese Army squelched any possibility for genuine cooperation. After achieving a protectorate of Manchuria in 1933, Japan moved into Inner Mongolia and China proper. There Japanese forces met those of Chiang Kai-shek, who, despite cooperation from the country’s Communists and help from the United States, failed to halt their advance. While pacifying China, Japan moved into Indochina and points west and south. American opposition to these acts took the form of an embargo of scrap steel and oil, providing a motive for Japan’s attack on Pearl Harbor four years later. Western snubs, like its unwillingness to include a racial equality clause in the League of Nations Covenant and the immigration exclusions in the United States and Australia, kept alive the anger that fueled much of Japan’s expansion. The outbreak of full-scale war had the effect of stifling a nascent domestic opposition movement against the Japanese military’s dominance in foreign policy.14
The attack on America’s Pacific fleet at Pearl Harbor at the end of 1941 was enormously successful, destroyi
ng eight battleships and damaging seven others. The Japanese followed up this feat with devastating strikes on the Philippines and Hong Kong. At Singapore, they surprised British naval officers by invading overland. They immobilized America’s military presence in the Pacific for more than a year. The United States now faced enemies in both the Atlantic and the Pacific, but enjoyed the advantage of being the world’s greatest industrial power. In battles depending upon mobility on the sea, in the skies above Europe, and on the ground everywhere, this proved decisive. Once Japan’s military campaigns were folded into World War II, the “Co-prosperity Sphere” became a front behind which the Japanese manipulated local puppet governments with slogans like “Asia for Asians.” The unintended consequence of this rhetoric was to promote fierce national identities in Japan’s occupied territory.15
A successful Japanese offensive in 1944 linked Japan to its empire, stretching from Korea to Malaya. Now the way to the Indies was opened just in time for prosecuting an all-out war, made more urgent by Japan’s need for oil, bauxite (for aluminum), and rubber from the islands of the Dutch East Indies and Burma, all of which it eventually occupied. At last Japan had the raw materials required for prolonged hostilities, but alas, the new possessions were far away, leaving its merchant and naval fleets vulnerable to attack.
Japan executed its air strikes brilliantly, but it had already made a fatal mistake in not developing a full antisubmarine program. The German U-boat successes of World War I had convinced American and British strategists that both submarines and defenses against these new underwater vessels would play a crucial role in future wars. The United States had several companies producing the electric diesel motors used in submarines, so it was well positioned to speed up production of submarines when war broke out. It also had in place a well-thought-out antisubmarine doctrine, which included training its naval crews to fight fires ignited by enemy submarines. After the United States broke the Japanese code used to track its ship movements, the American submarine fleet wreaked havoc on the Japanese merchant marine plying the waters between Japan and the East Indies. It destroyed a third of Japan’s naval vessels and, by the summer of 1945, three-quarters of its commercial fleet.16
Impressive Wartime Production
The critical need for producing war material put maximum pressure on the economies of all the belligerents. Great Britain, Germany, the United States, and the Soviet Union mobilized in ways congruent with their differing industrial strengths and war goals. They initially met wartime demands by providing employment to those left unemployed by the Depression rather than having to preempt domestic production. This government spending brought the Great Depression to a close. A year into the conflict, one-half to two-thirds of the industrial work force had been drawn into war production. War aims interacted with the character of the political system of each belligerent to fine-tune its conversion to a wartime economy.
As the aggressor Germany devised the strategy of lightning war, which, as its title suggests, emphasized speed and mobility. German production was geared to replacing the weaponry its blitzkrieg forces would need for the next campaign, whereas England and the United States did not know where or how Germany would attack, so they had to plan for diverse scenarios in a more protracted struggle.17 Air and sea power became integral to their strategy, in large part because they didn’t have the manpower or material available to return to France. The Russians copied the superior features of the German tank divisions entering their country. The Soviets showed an impressive capacity to improve its models throughout the war. Up-to-date weaponry was scarce in the Far East, so most belligerents there fought with rifles and light artillery when not actually using knives and swords.18
The Germans clung to their tradition of fine craftsmanship and performance-enhancing detail while the Americans relied on their mass production expertise.19 Karl Benz met Henry Ford. The Germans also pursued many designs for tanks while the Americans churned out nothing but Sherman tanks until the Pershing tank replaced them. Most large American firms became defense contractors, but none got the publicity of Ford Motors, which built the world’s largest factory at Willow Run, Michigan. By late 1943 three hundred B-24 bombers were rolling off the Willow Run assembly line each month though General Motors actually surpassed Ford in its war production. In another example of productive wizardry, in Richmond, California, Henry Kaiser built more ships than any other manufacturer and even managed to pioneer a company health plan at the same time. When the war in the Pacific drained the Japanese and American navies in 1942–1943, Japan built seven new aircraft carriers. American shipyards turned out ninety.20
In wartime, all economies become command economies, so in this sense war production in Communist Russia did not differ so much from that of its free market Allies. Confronted with a fight for national existence and with a considerable part of its land occupied by Germany, Russia carried out the most intense war effort. More important and surprisingly, Soviet mobilization was far more effective than that of Nazi Germany. Even the United States, with the least experience in state planning, did a much better job of prioritizing war production. By 1944 American factories were sending a mighty stream of tanks, trucks, armored cars, even canned food for the defense of Russia. With an industrial plant much larger than any of the other combatants, the United States still outdid itself, supplying through lend-lease agreements up to a third of Great Britain’s material needs and a quarter of those of the Soviet Union.
Wars have always acted as a catalyst for technology, but in World War II science made spectacular contributions with the development of radar, computers for charting ballistics, rocketry, jet-propelled aircraft, and a slew of synthetic products developed to substitute for the natural resources no longer available to the belligerents through trade. Small advances sometimes had large impacts. America’s two-way radios enabled the Russians to improve their tank tactics. Another technological breakthrough, the atomic bomb, brought the Pacific war to an end two months after Germany surrendered in May 1945.
With millions of lives hanging in the balance, the warring nations made exertions of heroic proportions, a tragic reminder that human beings perform at their highest pitch when threatened with annihilation. World War II exacted a terrible cost from its belligerents, civilians suffering even more than combatants. As might be expected with the perfecting of new weaponry, the casualties of World War II topped those of World War I. A total of seventeen million combatants died, with civilian deaths reaching thirty-three million, the preponderance of them Russian and German, with six million Jews of many nationalities eliminated in Nazi concentration camps. Millions more were displaced by the war, wounded, or left to die from starvation. Heavy aerial bombardments leveled houses, ships, bridges, railway lines, factories, airfields, docks, and sometimes whole cities. Only the Western Hemisphere escaped war’s awful fury.
World War II put the far-flung empires of Great Britain, France, Belgium, Italy, Portugal, and the Netherlands on life support if not actually writing finis to them. During the war Japan had seized the American Philippines, the Dutch East Indies, French Indochina, and British Burma and Malaysia. In defeat, the Japanese played the spoiler and encouraged agitators for independence as they were departing from what was to become Indonesia. A new federation of Malaysia emerged from which Singapore became a separate republic in 1965. Great Britain accepted the creation of two nation-states, India and Pakistan, in 1947. Bangladesh broke away from Pakistan, and the island of Ceylon formed Sri Lanka. The United States granted independence to the Philippines in 1946, almost fifty years after promising it.
France waged protracted war with Algeria until 1962, but the other North African Arab states escaped European domination more easily. The French fought in Indochina as well. Laos and Cambodia gained independence, but the United States took over France’s war against Vietnam as part of its Cold War effort to halt the spread of communism. It suffered defeat there in 1973. Portugal fought off national liberation movements in Angola a
nd Mozambique. Only with the toppling of the Portuguese dictatorship did its colonies gain freedom in 1975. The British, after a decade of brutal fighting, finally yielded in 1963 to the Mau Mau to make Kenya the thirty-fourth independent African nation. The British Empire came to an official end when in 1997 the Union Jack was lowered over Hong Kong, a city it had leased from China for a century. The wars of national liberation came to an end just as thirty-five nations gathered in Helsinki to sign accords on the right to self-determination in 1978.
People sometimes refer to a great power as a juggernaut. They perhaps are not aware that a juggernaut, according to Hindu myth, is one of the eight avatars of Vishnu, whose devotees throw themselves under the wheels of the vehicle carrying a statue of the god in annual processions. By the end of World War II capitalism could be compared to a juggernaut. Its direction was uncertain, its power was conspicuous, and its devotees were capable of great self-destruction. In 1945 the capitalist juggernaut faced a radical challenge coming from its wartime ally the Soviet Union. They had truly been strange bedfellows, the one with an economy run on venture capital eager to get other countries to adopt its ways, the other a command economy with the mission of spreading its Communist institutions globally. Of the fifty million military and civilian deaths, Russia sustained twenty million. Despite these truly horrific losses, the Soviet Union came out of the war stronger than ever once it established control over the countries of Eastern Europe, including a third of Germany. Now capitalism with its prejudice against the centralization of power confronted a block of countries determined to expose, intensify, and exploit its flaws.
The relentless revolution: a history of capitalism Page 34