Global Governance
in the Twenty-First Century
======================
An Overview of the Elite Forces Controlling the World Economy
=====================
Written and Edited
By
Michael L. Chadwick
Boise, Idaho: Global Affairs Publishing Company
P. O. Box 16184. Boise, Idaho 83715
Copyright © 2007 by Michael L. Chadwick. All rights reserved.
Copyright © 2007 of Electronic Texts by Michael L. Chadwick. All rights reserved. No part of this electronic text may be reproduced, distributed, stored in electronic databases, personal computers, search engine databases, web sites or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods without the prior written permission of the publisher. Electronic fingerprints have been placed in the text to prevent copyright violations.
A Question of Freedom and Slavery
"I consider it as nothing less than a question of freedom or slavery.... Should I keep back my opinions at such a time, through fear of giving offense, I should consider myself as guilty of treason towards my country, and of an act of disloyalty towards the majesty of heaven, which I revere above all earthly kings."
Patrick Henry
March 23, 1775
A Deliberate & Systematical Plan of Slavery
"Single acts of tyranny may be ascribed to the accidental opinion of a day; but a series of oppressions, begun at a distinguished period, and pursued unalterably through every change of ministers, too plainly prove a deliberate, systematical plan of reducing us to slavery."
Thomas Jefferson
August, 1774
Dedication
This trilogy is respectively dedicated to James Madison, Thomas Jefferson, Andrew Jackson and Abraham Lincoln. Their fierce devotion to the principles of freedom and liberty was unequivocal, relentless and exemplary. Their dedication to the principles of a constitutional monetary system was unparalleled the history of the Republic. Their unwavering courage and steadfast opposition to the elite financial oligarchies in their respective days has earned them the adoration and praise of true patriots forever. The last of these noble and great men gave the last full measure of his devotion to America and its free institutions--even his life in the ongoing war between the forces of freedom and tyranny.
This trilogy is also dedicated to the courageous men and women of the 19th and 20th centuries who opposed the elite financial oligarchies in their day.
Table of Contents
Part I Preface
i. The Doctrines of Machiavellianism Permeate the World of Business and Society--Ida M. Tarbell
ii. The Development of the European Banking System Throughout the World
iii. The Emerging System of Global Governance--A Review of Current Literature
Part II Introduction
1. Global Governance or Global Tyranny?
Part III The Engineers of Global Governance
2. Multinational Corporate Directors--The Takeover of the World
3. International Bankers--A World of Intrigue
4. International Investment Bankers--Financial Engineering of Corporate Takeovers
5. The Impact of Wall Street on the World
6. The Arrogance of Wall Street--The Mexican Peso Bailout
Part IV Global Interdependence--Spinning a Web of Control
7. The Emerging Global Community
8. The Third Try at World Order
9. Economic Disarmament--the Role of the International Chamber of Commerce
Part V The Development of a Central Management System
10. Trilateralism--Blueprint for Global Governance
11. Economic Summitry--Institutionalizing Trilateral Supranational Rule
Part VI The Central Engines of Global Governance
12. Organization for Economic Cooperation and Development--Central Economic Planning at the Global Level
13. International Monetary Fund--Moving Toward a Global Central Bank
14. General Agreement on Tariffs and Trade--Economic Disarmament of the World
15. International Bank for Reconstruction and Development--Redistributing Income on a Global Basis
16. Bank for International Settlements--The Banker's Secret Conclave
17. Federal Reserve System--Controlling the Issuance of Money and Credit
18. World Trade Organization--Managed Trade on a Global Scale
Part VII Ideological Manipulation of the Intellectual Community
19. Tax-Exempt Foundations--Their Impact on the Educational System of America
20. Movement Toward a Global Society--The Role of Interdependence Education
21. The Introduction of Legal Positivism into America
Part VIII Institutes of International Affairs--Molding the Minds of the Sub-Elite
22. Education for a New World Order--A Global Network of International Affairs Institutes
23. Global Ideology, Humanistic Studies and the Aspen Institute
24. Council on Foreign Relations--Elitism and the Eastern Establishment
25. Bilderberg Meetings--Annual Conference of the World's Power Elite
26. Foreign Policy Association--America's Transition from Isolationism to Globalism
27. National Education Association--Education for World Order
28. World Affairs Council and Global Interdependence
29. Declaration of Interdependence
30. Fabian Society and the Age of Democratic Socialism
Part IX Regional Trade Agreements
31. European Community--Towards a Socialist Super-State for Europe
32. North American Free Trade Agreement--Merging the Americas
Part X Media World--Thought Control over the Inhabitants of the Earth
33. Impact of the Media on America and the World
34. Hollywood--Corruption of the World Morality
Part XI International Institutions
35. League of Nations & the United Nations
Part XII Conclusion
36. The Establishment of an Imperial World State
Appendix A
Appendix 1 Billionaires Throughout the World
1. Foreign Billionaires
2. American Billionaires
Appendix 2 Major Corporations Throughout the World
1. 50 Largest Corporations in the World
2. 25 Largest Public Foreign Companies
3. Countries with the Most Companies
4. Biggest Companies in World by Industry
5. World's Largest Industrial Corporations
6. World's Largest 100 Banks by Assets
7. World's Largest Corporations by Country
8. Europe's 100 Largest Fund Managers
9. America's Leading Investment Houses
10. America's Biggest Brokers
11. America's 100 Largest Multinational Corporations
12. Leading Commercial Banks in Foreign Exchange Market
13. America's Leading Merger & Acquisition Specialists
14. America's Leading Corporate Underwriters
15. America's 800 Most Powerful People
16. America's 500 Largest Industrial Corporations
17. America's 500 Largest Private Companies
18. America's 100 Largest Foreign Investments in the U.S.
Appendix 3 Interviews with Influential Leaders in U.S., Europe and Japan
1. David Rockefeller
2. A. W. Clausen
3. William McChesney Martin
4. Henry Fowler
5. Yves Andre Istel
6. Michael David Weille
7. Leland S. Prussia
8. Frank X. Stankard
9. David Rockefeller, Takeshi Watanabe and Georges Berthoin
10. George Franklin - Part I
11. George Franklin - Part II
12. John Temple Swing
13. Winston Lord
14. William P. Bundy
15. Joseph E. Slater
16. Martin J. Hillenbrand
17. Joseph E. Johnson
18. William P. Bundy
19. George Ball
20. Ernest H. Vander Beugal
21. Richard Burke
22. Carter L. Burgess
23. Karl Kaiser
24. David Watt
25. Theodore C. Achilles
26. Francis O. Wilcox
27. Christoph Bertram
28. Dianne Hayter
29. John F. Reichard
30. Braulio Alonzo
31. Joseph Standa
32. John Ryor
33. Jim Cochran
34. World of David Rockefeller--Excerpts from Interview with Bill Moyers
Appendix 4 Central Banks of the World
Appendix 5 International Organizations
1. Membership of the U.N. and Its Specialized Agencies
Appendix 6 Charter of the United Nations
Appendix 7 U. S. Contributions to U.N. Organization--1994
Appendix 8 U. S. Government Securities Dealers
Appendix 9 Directors of International Institutions
1. Managing Directors of the IMF
3. Presidents of IBRD
4. Presidents of BIS
Appendix 10 Economic Summit Declarations
1. Chateau de Rambouillet, France
2. Puerto Rico
3. London, England
4. Bonn, Germany
5. Tokyo, Japan
6. Venice, Italy
7. Ottawa, Canada
8. Versailles, France
9. Williamsburg, VA, USA
10. London, England
11. Bonn, Germany
12. Tokyo, Japan
13. Venice, Italy
14. Toronto, Canada
15. Paris, France
16. Houston, TX, USA
17. London, England
18. Munich, Germany
19. Tokyo, Japan
20. Naples, Italy
21. Halifax, Nova Scotia
Appendix 11 Trilateral Commission Leadership and Membership
1. Trilateral Commission Leadership and Membership--October 15, 1978
2. Trilateral Commission Leadership and Membership--October 15, 1982
3. Trilateral Commission Leadership and Membership--1995
Appendix 12 The Bilderberg Meetings
1. John Pomain--The Origin of the Bilderberg Meetings
2. Dr. Jospeh H. Retinger--Bilderberg Meetings
3. Alden Hatch--The Hotel de Bilderberg
4. List of Bilderberg Meetings Throughout the World
5. Bilderberg Discussion Papers
6. Graham T. Allison--Young Americans' Attitudes Toward Foreign Policy
7. Karl Kaiser--Priorities in Foreign Policy
8. Alastair Buchan--Power Relationships in the Far East: A European View
9. George W. Ball--The New Situation in Europe and the Far East
10. Ernest H. van der Beugel and Max Kohnstamm--Western Europe and America in the Seventies
11. W. Michael Blumenthal--Economic Issues Between Industrialized Countries for the Seventies
12. Walter J. Levy--An Atlantic-Japanese Energy Policy
13. Lord Greenhill--Prospects for the Atlantic World
14. C. Fred Bergsten--Prospects for the Atlantic World: An American Perspective
15. Karl Kaiser--Prospects for the Atlantic World
16. J. Zijlstra--Inflation and Its Impact on Society
17. Michael Crozier--Non-Governability of Democracies: The European Case
18. Herbert Giersch--International Aspects of Inflation
19. John J. Deutsch--Inflation, 1950-1975: A Social and Political Perspective
20. Richard N. Cooper--Developed Country Reaction to Calls for a New International Economic Order
21. Lester C. Thurow--Problems in the Mixed Economy
22. Christoph Bertram--Defense, Security and the Western Alliance
23. Bilderberg Meetings--Notice to Participants
24. Bilderberg Meetings--List of Participants--1978
25. Bilderberg Meetings--List of Participants--Saltjoboden Conference--May 11-13, 1984
Appendix 13 Council on Foreign Relations
1. Officers and Directors--1994-1995
2. Summary Description
3. Council on Foreign Relations Committees
4. Membership
5. 75th Anniversary Capital Campaign
6. Statement of Revenues, Expenses and Changes in Fund Balances--Year Ended June 30, 1994
7. Historical Roster of Directors and Officers
8. Editors of Foreign Affairs
9. Corporate Member Roster
10. Membership Roster
Appendix 14 U. S. Government--Departments and Offices
1. Head of State
2. The Cabinet
3. Officials with Cabinet Rank
4. Government Departments
5. Executive Offices of the President
6. Independent Agencies
Appendix 15 U. S. Foreign Aid--1946-1994 by Country
Appendix 16 U. S. Contributions to GATT and OECD
Appendix 17 U. S. Cost of Involvement in Foreign Wars
Appendix 18 Membership of Executive Branch of U. S. Government: 1795--1995
1. Secretaries of Treasury
2. Secretaries of Commerce
3. Secretaries of Defense
4. National Security Agency Directors
5. Secretaries of State
6. Coordinators of Information and Directors of Strategic Services
7. Directors of Central Intelligence
Appendix 19 Treaties and Executive Agreements
1. Treaties and Other International Agreements concluded--1789-1989
2. Treaties and Other International Agreements concluded--1980-1992
3. Treaties and Other International Agreements concluded--1980-1994
Appendix 20 North Atlantic Treaty Organization
1. Text of Treaty
2. NATO: FACT Sheet
3. U. S. Financial Contributions to NATO
Appendix 21 U. S. Contributions to International Organizations--1945-1992
1. U. S. Contributions to the IMF
2. U. S. Contributions to IBRD
Appendix 22 U. S. Government Foreign Loans and Loan Guarantees: Managing Subsidies
Appendix 23 U. S. Financial Contributions to Inter-American Organizations--Fiscal Years 1946-1995
Appendix 24 U. S. Financial Contributions to Regional Organizations--Fiscal Years 1946-1995
Appendix 25 U. S. Financial Contributions to the U.N.--Fiscal Years 1946-1995
Appendix 26 U. S. State Department Budget
1. Department of State Budget--1781-1980
2. Department of State Budget--1962-1994
3. Foreign Affairs Spending and the State Department Budget
Appendix 27 Department of Defense
1. Department of War and Department of Navy Budget--1900-1909
2. Department of Defense Budget--1910-2001
Appendix 28 U. S. Exports and Imports
Appendix 29 U. S. Financial Contributions to the Marshall Program During World War II
1. The Marshall Plan: Design, Accomplishments and Relevance to the Present
2. Funds Made Available to ECA for European Economic Recovery
3. European Recovery Program Recipients--April 3, 1948 to June 30, 1952
4. Expenditures under the ERP by Type
5. The Sum of Its Parts--Evaluating the Marshall Plan
Appendix 30 U. S. Financial Contributions to Lend-Lease Program During World War II-- 1940-1954
Appendix 31 U. S. Government Receipts and Expenses--1789-1994
Appendix 32 U. S. Government Debt, 1790-1994
Appendix 33 Leading Donors for President George W. Bush's Presidential Election--1988
Appendix 34 Center for Strategic and International Studies
Appendix 35 Atlantic Council of the United States
1. Program on Regional European Issues
2. Program on Atlantic Cooperation
3. Program on NATO and European Security
4. Program on Atlantic-Pacific Interrelationships
5. Program on International Security
6. Harriman Chair for East-West Studies
7. Program on Energy and the Environment
8. Program on Nuclear Policy Issues
9. Atlantic Council Board of Directors
10. Atlantic Council Councillors
11. Atlantic Council Sponsors
Appendix 36 Business Roundtable
1. Policy Committee
2. Task Forces
3. Member Companies and Chief Executives
Appendix 37 Aspen Institute
1. Aspen Policy Programs
2. Policy Programs at Aspen Institute Berlin
3. Policy Programs at Aspen Institute Italia
4. Policy Programs at Institut Aspen France
5. Collaboration Within the Aspen Network
6. Disseminating the Conclusions of Aspen Policy Programs
7. The Aspen Campus
8. International Officers
Appendix 38 Carroll Quigley--Tragedy and Hope: A Review of Current Literature
1. Section I--Western Civilization to 1914
2. Section II--The Buffer Fringe
3. Section III--The Resurgence of Japan to 1918
4. Section IV--Finance, Commercial Policy and Business Activity--1897-1947
5. Section V--Changing Economic Patterns
6. Section VI--The Pluralist Economy and World Blocs
Appendix 39 Triangle Papers: A Review of Current Literature
1. Triangle Paper No. 1--Towards a Renovated World Monetary System--Excerpts
2. Triangle Paper No. 2--The Crisis of International Cooperation--Excerpts
3. Triangle Paper No. 3--A Turning Point in North-south Economic Relations--Excerpts
4. Triangle Paper No. 11--The Reform of International Institutions--Excerpts
5. Triangle Paper No. 12--The Problems of International Consultations--Excerpts
6. Triangle Paper No. 13--Collaboration with Communist Countries in Managing Global Problems: An Examination of the Options--Excerpts
7. Triangle Paper No. 14--Toward a Renovated International System--Excerpts
8. Triangle Paper No. 23--The Trilateral Countries in the International Economy of the 1980s--Excerpts
9. Triangle Paper No. 24--East-West Trade at a Crossroads--Excerpts
10. Triangle Papers No. 41--Global Cooperation after the Cold War: A Reassessment of Trilateralism--Excerpts
11. Triangle Paper No. 42--Regionalism in a Converging World--Excerpts
12. Triangle Paper No. 43--Keeping the Peace in the Post-Cold War Era: Strengthening Multilateral Peacekeeping--Excerpts
13. Triangle Paper No. 44--International Migration Challenges in a New Era--Excerpts
14. Triangle Paper No. 45--An Emerging China in a World of Interdependence--Excerpts
15. Triangle Paper No. 46--Engaging Russia--Excerpts
Appendix 40 Articles in Foreign Affairs
1. Theodore C. Sorensen--Why We Should Trade with the Soviets
2. Robert Triffen--The Thrust of History in International Monetary Reform
3. C. Fred Bergsten--Taking the Monetary Initiative
4. Henry Owen--Foreign Policy Premises for the Next Administration
5. Arvid Pardo--Who Will Control the Seabed?
6. Raymond Vernon--Economic Sovereignty at Bay
7. Francis M. Bator--The Political Economics of International Money
8. Richard N. Gardner--Can the United Nations Be Revived?
9. Raymond Vernon--The Multinational Enterprise: Power Versus Sovereignty
10. Charles W. Yost--The Instruments of American Foreign Policy
11. Zbigniew Brzezinski--Japan's Global Engagement
12. Kingman Brewster, Jr.--Reflection on Our National Purpose
13. William Diebold, Jr.--The Economic System at Stake
14. Escott Reid--McNamara's World Bank
15. Hamilton Fish Armstrong--1893-1973
16. Richard N. Gardner--The Hard Road to World Order
17. Isaiah Berlin--The Bent Twig: A Note on Nationalism
18. Kei Wakaizumi--Japan's Role in a New World Order
19. Joseph S. Nye, Jr.--Multinational Corporations in World Politics
20. Richard G. Darman--The Law of the Sea: Rethinking U. S. Interests
21. Harold R. Isaacs--Nationality: End of the Road?
22. Richard H. Ullman--Trilateralism: Partnership for What?
23. Recommended Reading in Foreign Affairs
Appendix 41 Tax Exempt Foundations--Reece Committee Reports
1. Reece Committee Final Report on Internationalism and the Effect of Foundation Power on Foreign Policy
2. Thomas M. McNiece--Reece Committee Staff Report on Relations Between Foundations and Government
3. Reece Committee Final Report on Relations Between Foundations and Education
4. Thomas M. McNiece--Reece Committee Staff Report
Appendix 42 European Community
1. Glossary of Terms Used by European Economic Community
2. European Community Information Service--The European Community: An Overview
3. Leo Tindemans--European Union
4. Carter S. Wiseman & Edward Behr--Roy Jenkins: The New Commission President
5. Roy Jenkins--The United States and a Uniting Europe
6. Stephen Milligan--European Monetary System--How It Works and Will It Work?
7. Jeremiah Novak--The Geopolitics of the Dollar
8. Robert Jackson--Prospects for Europe's Parliament
9. Garret Fitzgerald--Political Cooperation: Toward a Common EC Foreign Policy
10. Peter Blackburn--Getting Ready for Lome II
11. Carl H. Pegg--The European Idea On Trade Between the Wars
12. James Carter--The United States and Europe: The Future President's View
13. Boyd France--A Short Chronicle of the United States European Community Relations
14. A Brief Chronology of the European Community
Appendix B
Appendix 43 World Communism: A Critical Review
1. Michael L. Chadwick--The East-West Dilemma
2. Aleksandr Solzhenitsyn--The Third World War Has Ended
3. Aleksandr Solzhenitsyn--America, We Beg You to Interfere
4. Aleksandr Solzhenitsyn--Communism: A Legacy of Terror
-5. Aleksandr Solzhenitsyn--Henry Kissinger
-6. Aleksandr Solzhenitsyn--The Need for a Few Great Men
7. Aleksandr Solzhenitsyn--The Fate of the West: How Will It Avoid Falling into Totalitarism?
8. Aleksandr Solzhenitsyn--The West Has Lost Its Courage
9. Antony C. Sutton--Western Technology Builds Soviet Power
10. Miles Costick--The Dangers of Economic Detente
11. Miles Costick--The Soviet Military Power as a Function of Technology Transfer from the West
12. Miles Costick and Brian Green--The Arming of Red China
13. Aleksandr Solzhenitsyn--Misconceptions about Russia Are a Threat to America
Appendix 44 Trilateralism: A Critical Review
1. Jeremiah Novak--New World Economic System Dawns
2. Jeremiah Novak--World Economic Changes Due to Trilateralism?
3. Jeremiah Novak--Trilateral Agony: The OECD Interfutures Report
4. Jeremiah Novak--North-South Dialogue: Background to the Paris Talks
5. Jeremiah Novak--The United States and World Order: An Inquiry into the Background of Trilateralism
6. Jeremiah Novak--Carter and the Giant Corporations
7. Jeremiah Novak--Trilateral Report Hints Foreign Policy Shift
8. Jeremiah Novak--Peking, Moscow and Washington: Collaboration with Communist Countries
9. Jeremiah Novak--Carter Team Plans International Financial Revolution
10. Jeremiah Novak--Trilateral Governance
11. Jeremiah Novak--Development of a Renovated International System
12. Jeremiah Novak--A New World Economic Order
13. Jeremiah Novak--The London Economic Summit
14. Jeremiah Novak--In Defense of the Third World
15. Jeremiah Novak--Trilateralism: A New World System
16. Jeremiah Novak--The Trilateral Connection
17. Jeremiah Novak--Trilateralism: A New Global Political Party
18. Jeremiah Novak--Beyond North and South: The Second Coming of the World Economy
Appendix 45 Fabian Socialism
1. Ludwig von Mises--Socialism: A Critical Review
2. Socialist International--Aims and Tasks of Democratic Socialism
3. Harry W. Laidler--Fabianism
4. Fabian Tract No. 1--Why Are the Many Poor?
5. Fabian Tract No. 2--A Manifesto
6. Fabian Tract No. 3--To Provident Landlords and Capitalists
7. Fabian Tract No. 4--What Socialism Is -- I
8. Fabian Tract No. 13--What Socialism Is -- II
9. Fabian Tract No. 51--Socialism: True and False
10. Fabian Tract No. 107--Socialism for Millionaires
11. Fabian Tract No. 113--Communism
12. Fabian Tract No. 132--A Guide to Books for Socialists
13. Fabian Tract No. 180--The Philosophy of Socialism
14. Executive Committee of the Fabian Society 1978-79
15. Rules and By-Laws of the Fabian Society
Appendix 46 The Aspen Institute for Humanistic Studies
1. Joseph E. Slater--The President's Letter on Governance
2. Stephen P. Strickland--Aspen Institute on Financing the Future
3. Directors of Aspen Institute--Proposals for President Carter's Agenda
4. Francis Keppel--Education for a Changing Society
5. Harlan Cleveland and Charles W. Yost--International Affairs
6. Waldemar Nielsen--Pluralism and the Commonwealth
7. Robert McKay--Justice, Society and the Individual
8. Walter O. Roberts--Science, Technology and Humanism
9. Abraham M. Sirkin--Living with Interdependence: The Decades Ahead in America
10. Ward Morehouse--A New Civic Literacy
11. Communism Report--Coping with Interdependence
12. Commission Report--Organizing for Interdependence: The Role of Government
Appendix 47 International Banking
1. Newsweek--Investment Bankers: The Men
2. T. A. Wise--Lazard: In Trinity There Is Strength
3. C. M. van Vlierden--Global Banking Services for the Oil Industry
4. C. M. van Vlierden--New Era for International Banking and Finance
5. Robert Ball--International Banking Gets the Team Spirit
6. Michael C. Jensen--The Lazard Freres Style: Secretive and Rich--Its Power Is Felt
7. Business Week--The Inside Story of Lazard Freres' Merger and Acquisition Star: The Remarkable Felix G. Rohatyn
8. Wright Patman--Other People's Money
9. C. M. van Vlierden--Perspectives on the Changing World Business Environment
10. Peter Landau--Will SDR's Become the New Super Currency?
11. C. M. van Vlierden--The Organization of International Banking Operations
12. A. W. Clausen--Multinational Corporations: Potent Change Agents in the World
13. John Dornberg--Financing the Communist Countries
14. G. A. Constanzo--Lending to the Developing World
15. A. W. Clausen--The Transnational Citizen: A Broadening Perspective
16. David Rockefeller--World Economic Trends and U. S.-Soviet Trade
17. Francis X. Stankard--Banking on the Global Economy
18. Annual Report--The Global Reach of J. P. Morgan & Co.
19. Joseph Gold--The Second Amendment of the Fund's Articles of Agreement
20. J. J. Polak--Thoughts on an International Monetary Fund Based Fully on the SDR
21. Jeremiah Novak--The Geopolitics of the Dollar
22. A. W. Clausen--Future Economic Trends and Their Effect Upon Banking and Other financial Services
23. Jeremiah Novak--Crisis in International Banking
Appendix 48 Institutes of International Affairs
1. The Atlantic Institute for International Affairs
2. Historical Summary--The Atlantic Institute
3. The Atlantic Council of the U. S.--1976
4. The Royal Institute of International Affairs
5. Stephen King Hall--Chatham House: A Brief Account of the Origins, Purposes and Methods of the Royal Institute of International Affairs
6. The Observer--An Institute of Foreign Affairs
7. The Times--The Institute to Be a Powerful Factor in Alerting Public Opinion
8. The Yorkshire Post--Tribute of Foreign Affairs
9. The Morning Post--A Neglected Study
10. The Saturday Review--The British Institute of International Affairs
11. Royal Institute--The British Institute of International Affairs
12. International Institute--The International Institute for Strategic Studies
13. International Institute--The First Five Years of the Institute for Strategic Studies
14. International Institute--The International Institute for Strategic Studies (1957-1972)
15. Institute of International Affairs--The Institute of International Affairs (Instito Affari Internazionali)
16. Institute of International Affairs--The Organs and Staff of the Institute of International Affairs (1977)
17. German Society--The German Society for Foreign Affairs and Its Research Center (Deutsche Gesellschaft fur Auswartige Politik)
18. Brookings Institution--The Brookings Institute
Appendix 49 The Trilateral Commission
1. Zbigniew Brzezinski--Trilateral Relations in a Global Context
2. Trilateral Commission--Major Institutional Reform Ahead
3. Kinhide Mushakoji--Reform of International Institutions
4. Harold Brown--New Leadership Needed for Transition to the World of the Year 2000
5. Henry Owen--The Summit Process
6. Time--Carter's Brain Trust
7. Robert C. Christopher--The World's New Cold War
8. Lawrence Stern--Carter Taps Establishment for Brain Trust
Appendix 50 Secular Humanism: A Critical Review
1. John W. Whitehead and John Colon--The Establishment of the Religion of Secular Humanism and Its First Amendment Implications
2. Rousas John Rushdoony--The Attack on Religious Liberty
3. M. J. Sobran--The Established Irreligion
4. William L. Johnson--Evolution, The Past, Present and Future Implications
Appendix C
Appendix 51 Council on Foreign Relations
1. Council on Foreign Relations--Annual Report 1993-94
2. Council on Foreign Relations--The Council on Foreign Relations: A Summary Report
3. Winston Lord--The President's Report 1978-79
4. Council on Foreign Relations--The 1980s Project: A General Description
5. Richard Ullman--The 1980s Project
6. Council on Foreign Relations--1980s Project: Books
7. Whitney H. Shepardson--Early History of the Council, on Foreign Relations
8. John W. Davis--The Council on Foreign Relations: A Record of Twenty-Five Years 1921-1946
9. Joseph Kraft--School for Statesmen
10. Richard H. Rovere--Notes on the Establishment in America
11. Arnold Beichman--Council on Foreign Relations
12. Flora Lewis--Examining an Establishment Member
13. Richard H. Rovere--The American Establishment
14. Carroll Quigley--Cecil Rhodes' Secret Society
15. John Franklin Campbell--The Death Rattle of the Eastern Establishment
16. J. Anthony Lukas--The Council on Foreign Relations
17. Elizabeth Jakab--The Council on Foreign Relations
18. Council on Foreign Relations: Council on Foreign Relations Publications--1978-1980
19. Council on Foreign Relations--Foreign Affairs--An American Quarterly Review: A List of Articles Published 1922-1979
Appendix 52 Secular Humanism
1. Humanist Manifesto--1933
2. Humanist Manifesto II--1973
3. Corliss Lamont--The Humanist: the Meaning of Humanism
4. Lloyd Morain and Oliver Reiser--Scientific Humanism: A Formulation
5. Carl Becker--Four Forms of Collectivism
6. Corliss Lamont--The Cultural Roots of Humanism
7. Corliss Lamont--The Humanist Tradition: Forerunners
8. Julian Huxley--Evolutionary Humanism as a World Unifying Philosophy
9. Edward W. Strong--John Dewey's Humanism: Man Making Himself--Part I
10. Edward W. Strong--John Dewey's Humanism: Man Making Himself--Part II
11. Warren Allen Smith--Authors and Humanism
12. Edwin H. Wilson--Humanism: The Fourth Faith
13. Julian Huxley--Evolutionary Humanism--Part I
14. Julian Huxley--Evolutionary Humanism--Part II
15. Henry Walter Brann--Hegel, Nietzsche and the Nazi Lesson--Part I
16. Henry Walter Brann--Hegel, Nietzsche and the Nazi Lesson--Part II
17. The Humanist--John Dewey: Humanist and Educator
18. George Gaylord Simpson--Darwin Led Us into this Modern World
19. Corliss Lamont--John Dewey and the American Humanist Association
20. Julian Huxley--The Coming New Religion of Humanism
21. Edwin H. Wilson--The Religions Element in Humanism Pervades: Its Origin, Inspiration and Support
22. Erich Fromm--A Global Philosophy of Man
23. Gerald A. Ehrenreich--Humanist of the Year--1966: Erich Fromm
Appendix 53 Articles About Global Governance
1. George W. Alger--Miss Tarbell's History of the Standard Oil Company
2. William L. Letwin--The English Common Law Concerning Monopolies
3. Peter C. Dooley--The Interlocking Directorate
4. Gus Tyler--Multinationals: A Global Menace
5. Howard V. Perlmutter--A View of the Future--The Multinational Corporation: Decade One of the Emerging Global Industrial System
6. UNESCO--Concentration in the Communications Industry
Appendix 54 Bank for International Settlements
1. Roger Auboin--The Bank for International Settlements--1930-1955
Appendix 55 An Act to Issue U. S. Notes
Appendix 56 Articles About Central Banking
1. J. Z. Rowe--European Central Banking in Early America
2. A. Jerome Clifford--The Ownership of the Federal Reserve Bank Stock as an Issue of Independence
3. A. Jerome Clifford--The Case for Congressional Control of the Federal Reserve
4. A. Jerome Clifford--Congressional Means for Control of the Federal Reserve System
5. M. H. DeKock--Central Banking
6. M. H. DeKock--Constitution and Administration of Central Banks
7. David A. Martin--Metallism, Small Notes, and Jackson's War with the Bank of the U. S.
8. Robert Craig West--The Influence of Paul Warburg
9. Donald F. Kettl--The Struggle for Independence of the Fed from the U.S. Treasury
Appendix 57 International Organizations Memberships in the IMF, IBRD and WTO
1. World Trade Organization Members
2. World Trade Organization Observer Governments
3. World Bank Members
4. IMF Members
Appendix 58 Budget of the U. S. Government--1994
Appendix 59 OECD--From Marshall Plan to Global Interdependence
Appendix 60 Alexander Hamilton's Report on Manufacturers
Appendix 61 Bank of the United States: A Critical Review
1. Thomas Jefferson--Opinion on the Constitutionality of the Bill for Establishing a National Bank
2. James Madison--Notes on Banks
3. Andrew Jackson--Veto Message
Appendix 62 Governing Documents of America
1. The Declaration of Independence
2. U. S. Constitution
3. Bill of Rights and Amendments to the Constitution
4. George Washington's Farewell Address
5. Monroe Doctrine
Appendix 63 Treaty Law Manual
Appendix 64 Lawrence B. Krause--Sequel to Bretton Woods: A Proposal to Reform the World Monetary System
Appendix 65 Miriam Camps--Collective Management
Appendix 66 Miriam Camps--The Management of Interdependence: A Preliminary Review
Appendix 67 Lincoln P. Bloomfield and Irrangi C. Bloomfield--The U. S. Interdependence and World Order
Appendix 68 Miriam Camps--First World Relationships: The Role of the OECD
Appendix 69 Atlantic Council--Beyond Diplomacy: Decision-Making in an Interdependent World
Appendix 70 Richard A. Falk--Future World
Appendix D
Appendix 71 Marina v. N. Whitman--International Interdependence and the U. S. Economy
Appendix 72 Marina v. N. Whitman--Coordination and Management of the International Economy: A Search for Organizing Principles
Appendix 73 Atlantic Council of U. S.--Harmonizing Economic Policy: Summit Meetings and Collective Leadership
Appendix 74 Lester R. Brown--The Interdependence of Nations
Only One Earth
Economic Interdependence
Ecological Interdependence
Resource Interdependence
Technological Interdependence
Social Interdependence
Toward a Global Community
Appendix 75 American Tariff League--A Brief Tariff History of the United States
Appendix 76 Bill Montague--U. S. Economy Hangs on Japan
Appendix 77 Akio Morita--Toward a New World Economic Order
Appendix 78 Joseph S. Nye, Jr.--Multinational Corporations in World Politics
Appendix 79 Recommended Reading List
Appendix 80 Committee on the Judiciary, U. S. House of Representatives--Index to the U. S. Constitution and Amendments
Appendix 81 Speeches in Favor of Global Governance
1. Woodrow Wilson--Declaration of War
2. Colonel Edward M. House--The United States, the League of Nations and World Peace
3. Carter Glass--The Integrity of a U. S. President
4. Charles G. Fenwick--The Future of the League of Nations
5. Franklin D. Roosevelt--Reorganization of Federal Government Administration
6. Franklin D. Roosevelt--Reorganization of Federal Judiciary
7. Homer S. Cummings--Reasons for President's Plan and the Remedy
8. Franklin D. Roosevelt--The Constitution: Lawyer's Contract?
9. Nicholas Murray Butler--The United States Must Lead
10. Franklin D. Roosevelt--The New Deal Must Continue
11. Nicholas Murray Butler--Toward a Federal World
12. Franklin D. Roosevelt--This Nation Will Remain Neutral
13. P. J. Noel Baker--Toward a New World Order
14. Franklin D. Roosevelt--Declaration of War
15. Franklin D. Roosevelt--The State of the Union
16. Nicholas Murray Butler--There Can Be No Isolation
17. Dorothy Thompson--The Future World Order
18. Cordell Hull--The Seriousness of the War
19. Amos J. Peaslee--A Permanent United Nations
20. A. A. Berle, Jr.--The Realist Base of American Foreign Policy
21. Harold E. Stassen--World Affairs
22. Amos J. Peaslee--Future Fundamentals
23. Sumner Wells--Safeguarding Our Interests
24. Franklin D. Roosevelt--Another Link in the Chain
25. Cordell Hull--Moscow Pact a Basis for World Organization
26. Frank G. Tyrrell--Sovereignty Not Impaired by World Federation
27. F. H. LaGuardia--Interpreting the Atlantic Charter
28. Frederick R. Coudert--The Role of the Lawyer in Future World Organization
29. Amos J. Peaslee--An International Judicial System
30. Dean Acheson--The Interest of the American Businessman in International Trade
31. Charles W. Tobey--Plan for World Cooperation and World Peace
32. Amos J. Peaslee--How Much International Government Do We Want?
33. Franklin D. Roosevelt--The Bretton Woods Proposals
34. Franklin D. Roosevelt--The Crimea Conference
35. Franklin D. Roosevelt--Good Start Toward Lasting Peace
36. Edward R. Stettinius--Invitations to United Nations Conference
37. Harold E. Stassen--San Francisco--The Golden Gate to Pace
38. Frank G. Tyrrell--International Police Power
39. Frederick R. Coudert--Force, Justice and Law
40. Philip C. Nash--Spring Leaves on Dumbarton Oaks
41. Herbert Hoover--The San Francisco Conference and Peace
42. Tom Connally--United Nations Charter
43. Arthur H. Vandenberg--United Nations Charter
44. Harry S. Truman--Objectives of the Charter
45. Edward R. Stenninius--The United Nations Charter
46. James F. Byrnes--Neighboring Nations in One World
47. James F. Byrnes--Common Interest For Outweighing Conflicting Interests
48. C. Wayland Brooks--Proposed Loan to Great Britain
49. Fred M. Vinson--British Loan Agreement
50. Harry S. Truman--A Year of Decision
51. James F. Byrnes--International Trade Organization
52. Harold W. Dodds--Woodrow Wilson
53. J. William Fulbright--The Outlook for Peace
54. Harry S. Truman--UNO Charter Based on Religious Principle
55. Trygve Lie--International Solidarity and Collaboration
56. Harry S. Truman--United States Will Support the United Nations
57. William E. Knox--The Foreign Trade Myth
58. William Benton--My World--My Human Race
59. Arthur H. Vandenberg--Our Mutual Problem with the World
60. Harry S. Truman--Foreign Economic Policy
61. Warren R. Austin--United States Aid to Greece and Turkey
62. Harry S. Truman--World Unity
63. Harry S. Truman--Permanent World Peace
64. Harold E. Stassen--Marshall Plan, Europe's Only Alternative to Communism
65. Jaime Torres Bodet--Consolidate the United Nations
66. James Forrestal--Strength Alone Averts War
67. Thomas E. Dewey--Aid Program Vital
68. Bernard M. Baruch--Woodrow Wilson's Claim to Greatness
69. George C. Marshall--European Recovery and Peace Treaties
70. Arthur H. Vandenberg--Emergency Aid for Europe
71. Walter Lippmann--Philosophy and United States Foreign Policy
72. Harry S. Truman--Marshall Plan Proposals
73. Harold E. Stassen--United Nations Charter Revision
74. George C. Marshall--The European Recovery Program
75. Clement Attlee--Europe Must Have a Planned Economy
76. Eric Johnston--Partners for Peace
77. William L. Clayton--The Proposed International Trade Organization
78. Wesley A. Sturges--The Quest for World Law and Order
79. Winthrop G. Brown--Reciprocal Trade Agreements
80. George C. Marshall--Strengthen the United Nations
81. Winston Churchill--The Voice of Europe
82. Elvin H. Killheffer--International Trade Organization
83. Trygve Lie--A United Nations Guard Force
84. Ernest Bevin--United Nations' Problems
85. George F. Kennan--United States and the United Nations
86. Alben W. Barkley--Politics and Trade
87. John Moseley--Training for Citizenship in a World That Is To Be
88. Dean Acheson--The Atlantic Pact
89. Herbert V. Evatt--Worldwide Security Found Only in Worldwide Organizations
90. Omar N. Bradley--Military Security Significance of Atlantic Pact
91. Henry Cabot Lodge, Jr.--Military Aid to Western Europe
92. Harry S. Truman--National Health Insurance Program
93. Dean Acheson--Economic Policy and the ITO Charter
94. Harry S. Truman--International Economic Policy
95. Crawford H. Greenewalt--Bigness and Monopoly
96. Walter Cenerazzo--Practical Internationalism
97. Winthrop G. Brown--Why Private Business Should Support the ITO
98. Millard E. Tydings--World Disarmament
99. Alberto Lleras--The Organization of American States
100. Herbert Hoover--World Peace and the United States
101. Paul H. Douglas--The Welfare State
102. Omar N. Bradley--A New Power Is Born
103. Dean Acheson--Soviet Barriers to Peace
104. Thomas E. Dewey--Enlarge North Atlantic Treaty
105. Ralph J. Bunche--Prospects for Peace
106. Anthony Eden--The Interdependence of Nations
107. Lord Halifax--Unbreakable Association of United States and Commonwealth
108. Robert E. Wilson--Is Big Business Bad?--Fact v. Fiction
109. Harry S. Truman--Appeal for Foreign Aid
110. Walter Hallstein--The Schuman Plan and the Integration of Europe
111. James I. Dolliver--The Electoral College
112. Paul A. Dever--The Record of the Last Twenty Years
113. Dean Acheson--United Nations Must Face the Issues
114. Karl Brandt--The Unification of Europe
115. Ole Bjorn Kraft--The Development of the Atlantic Community
116. Winthrop W. Aldrich--The Basis for a New Foreign Economic Policy
117. Richard Glenn Gettell--Nudging the Inevitable
118. John Foster Dulles--United Nations Charter Needs Revision
119. Henry Ford, II--The Free World Can't Trade on a One-Way Street
120. Henrik Kauffmann--The United Nations and Your and Me
121. Henry Ford--II--United Nations Not a Superstate
122. H. Alexander Smith--Treaty Amendment Not Necessary
123. Stuart Chevalier--Goals of the United Nations
124. Charles P. Taft--Trade Agreements Should Be Extended
125. Allan Sproul--Reflections of a Central Banker
126. Robert N. Wilkin--The United Nations--10 Years Old
127. Albert C. Wedemeyer-- World War II Strategy
128. James P. Warburg--Foreign Aid and United States Policy
129. Mark J. Fitzgerald--The International Labor Organization
130. Allen W. Dulles--Woodrow Wilson
131. John J. Sparkman--Foreign Aid Spending
132. Carlos Sanz De Santa Maria--A United Future for the Americas
133. Robert Delson--Internationalization of Foreign Aid
134. David Rockefeller--Gold, the Dollar, and the Free World
135. Pedro G. Beltram-- A Family of Nations
136. Albert I. Nickerson--The Role of International Oil Companies
137. M. Ann Joachim--The World Court
138. Geroge Champion--Foreign Aid
139. H. R. H. Prince Bernhard--The Developing Nations of the World
140. David Rockefeller--New Trends in the Financial Markets
141. Lynn A. Townsend-- A Common Market for North America
142. Harlan Cleveland--The Political Year of the Quiet Sun
143. Craig Raupe--The Success of Foreign Aid
144. Robert T. Oliver--Education in the Year 2,000 A.D.
145. Edward Lamb--The United Community of North America
146. George W. Ball--Cosmocorp: the Importance of Being Stateless
147. David Rockefeller--International Financial Challenges
148. Robert S. McNamara--Foreign Aid
149. Philip H. Trezise--Multinational Corporation
150. William S. Gaud--Overseas Private Investment in Today's World
151. Donald C. Platten--A New Monetary System for the 1980s
152. Athur F. Burns--International Monetary Reform
153. Irving S. Shapiro--One-World Economics
154. Carl H. Madden--The Multinational Corporation
155. Walter B. Wriston--The World Corporation
156. C. M. van Vlierden--Prospectives on the Changing World Business Environment
157. Henry A. Kissinger--The Challenge of Interdependence
158. Weldon B. Gibson--A New International Order
159. A. W. Clausen--Multinational Corporations--Potent Change Agents in the World
160. George W. Ball--Capital Formation in a One-World Economy
161. David Rockefeller--World Economic Trends and U. S.-Soviet Trade
162. A. W. Clausen--The Transnational Citizen--A Broadening Perspective
163. David Rockefeller--America's Future
164. Andrew R. Cecil--Enlightened Capitalism
165. Lawrence B. Krause--The Pacific Economy in an Interdependent World
166. G. William Miller--The International Financial Institutions
167. Otto Graflambsdorff--Trade Policy Challenges of Today
168. Robert E. Kirby--On to the 21st Century
169. Arthur Burck--Banking Will Be Dominated by a Handful of Giants
170. Harlan Cleveland--The Future of International Governance
171. John C. Whitehead--Towards a Stronger International Economy
172. Takashi Uyeno--Japan's Role in the Changing World Order
173. Carl Spielvogel--The Americas
174. Roger B. Porter--United States Investment Policy
175. Boris D. Pankin--The Dangers of Nationalism
176. Felix G. Rohatyn--The U. S. Must Remain the Preeminent Superpower in the World
177. C. G. Kelly Holthers--Potential Banking Opportunities
178. Joseph L. Brand--The New World Order
179. Stephen D. Harlan--Becoming a Global Thinker
180. Gerald M. Levin--Publishing in the Global Village
181. Robert F. Keeley--Glonat
182. Michel Camdessus--The International Monetary Fund
183. Edwin J. Feulner--A New Conservative Internationalist Foreign Policy
Appendix E
Appendix 82 Speeches Opposed to Global Governance
1. Senator Henry Cabot Lodge--The Treaty-Making Powers of the Senate
2. Albert A. Doub--Election of United States Senators
3. J. Reuben Clark, Jr.--Slavery Is Banned in America
4. Congressman Charles A. Lindbergh--The Federal Reserve Act
5. Congressman Towner--Wall Street Control of the Federal Reserve System
6. Congressman Stephens--The Stature of the Money Power
7. Senator William E. Borah--The Establishment of a Central Bank in America
8. Congressman Charles A. Lindbergh--The Federal Reserve System Is a Gift to the Money Trust
9. Congressman Bradegee--The Crisis in Constitutionalism
10. Senator Henry Cabot Lodge--The League of Nations: Abandonment of the Principles of George Washington
11. J. Reuben Clark, Jr.--A Government of Limited Powers
12. J. Reuben Clark, Jr.--The Principles of the U. S. Constitution
13. J. Reuben Clark, Jr.--The Matchless Wisdom of Abraham Lincoln
14. Congressman Louis T. McFadden--The Federal Reserve System and the Bank for International Settlements
15. Congressman Louis T. McFadden--Bank for International Settlements
16. Congressman Louis T. McFadden--International Finance
17. Congressman Louis T. McFadden--Basis of Controls of Economic Conditions
18. Congressman Louis T. McFadden--International Politics and Finance As They Affect the Federal Reserve System
19. Congressman Louis T. McFadden--Why Not an American Policy
20. Congressman Louis T. McFadden--America's Interest in the Bank for International Settlements
21. Congressman Louis T. McFadden--Financial Foreign Entanglements
22. Congressman Louis T. McFadden--Present National and International Banking Situation
23. Congressman Louis T. McFadden--War Debts and Reparations, I
24. Congressman Louis T. McFadden--War Debts and Reparations II
25. Congressman Louis T. McFadden--War Debts and Reparations III
26. Congressman Louis T. McFadden--War Debts and Reparations IV
27. Congressman Louis T. McFadden--War Debts and Reparations V
28. Congressman Louis T. McFadden--Reparations, Bonds and Foreign Securities
29. Congressman Louis T. McFadden--The Treacherous and Disloyal Conduct of the Federal Reserve Board and the Federal Reserve Banks
30. Congressman Louis T. McFadden--We Will fight It Out Until Every Dollar Stolen from the American People Is Repaid with Compound Interest to the United States
31. Congressman Louis T. McFadden--Resolution to Impeach the Federal Reserve Board
32. Congressman Louis T. McFadden--Taxes
33. Congressman Louis T. McFadden--Financial Interest Should Not Dictate Policy of the United States
34. Congressman Louis T. McFadden--Franklin D. Roosevelt, Apostle of Irredeemable Paper Money
35. Congressman Louis T. McFadden--Public Interest Must Not Be Suppressed by Partisanship and an Abandoned Constitution
36. Congressman Louis T. McFadden--Bankhead Cotton Control Bill
37. Congressman Louis T. McFadden--Present Day Government
38. Congressman Louis T. McFadden--Freedom and Planning
39. Congressman Louis T. McFadden--Analysis of Freedom and Planning
40. Congressman Louis T. McFadden--Communistic Propaganda in the U. S.
41. Congressman Louis T. McFadden--The Constitution or Its Disapproval
42. Congressman Francis H. Shoemaker--The Federal Reserve Bank: The Greatest Steal in American History
43. James M. Beck--Shall We Abandon Ship?
44. J. Reuben Clark, Jr.--The Principles of George Washington
45. George W. Maxey--The Re-Making of Human Society
46. Herbert Hoover--The American Bill of Rights
47. Senator William E. Borah--Our Foreign Policy
48. Henry W. Taft--James Madison and the Obligations of Citizenship under the Constitution
49. Herbert Hoover--Criticism of the New Deal
50. George W. Maxey--The Constitution: Guarantee of Human Rights and Economic Liberalism
51. James A. Reed--False Banners
52. George W. Maxey--What America Must Decide
53. William J. Donovan--The Case Against the New Deal
54. Charles C. Tansill--The American Doctrine of Judicial Review
55. Herbert Hoover--A Holy Crusade for Liberty
56. Arthur A. Ballantine--Erosion by Government Finance
57. Whose Constitution? The Peoples' or the President's--George W. Maxey
58. The Future of Free Enterprise--Samuel B. Pettengill
59. Senator William E. Borah--Our Supreme Judicial Tribune: Proposed Changes and the People
60. Josiah W. Bailey--The Supreme Court, the Constitution and the People
61. George R. Farnum--Storm Over the Supreme Court
62. James Trusloaw Adams--What the Supreme Court Does for U. S.
63. Alf M. Landon--Mr. Roosevelt Is a Changed Man
64. The Problem in 1787 and How It Was Met--George W. Maxey
65. Constitutional Government--Senator William E. Borah
66. How Long Will the American Republic Last?--Senator Edward R. Burke
67. Religious Liberty--Judge John P. McGoorty
68. Brigadier General Bruce P. Disque--Our inheritance from Washington: May His Spirit Guide Our Destiny
69. Senator William E. Borah--Our Imperative Task: To Mind Our Own Business
70. Walter E. Spahr--A Government Creed for Americans
71. O. R. McGuire--The Executive Power in the Federal Government
72. Herbert Hoover--It Is In Our Blood: Political, Intellectual and Spiritual Freedom
73. George W. Maxey--The Descent to a Dictatorship
74. Herbert Hoover--Morals in Government: The Yearning for Freedom Is Not Dead
75. J. Reuben Clark, Jr.--Constitutional Government--Our Birthright Threatened
76. James D. Mooney--Paper Money: A National and Industrial Hazard
77. Senator Robert A. Taft--Let Us Stay Out of War
78. Senator Millard E. Tydings--How Far Should Government Control Business: No Constitutional Power to Control
79. Mark Eisner--The George Washington Tradition: Its Great Value Today
80. J. Reuben Clark, Jr.--America--"A Land Choice Above All Other Lands"
81. Senator Arthur H. Vandenberg--Peace or War for America: It Is Not Cowardice to Think of America First
82. Governor John A. Bricker--The New Patriotism
83. Senator David L. Walsh--Keep America Out of War
84. H. W. Prentis, Jr.--Our American Heritage: Revive Patriotism and Religious Faith
85. Congressman Joseph W. Martin--Let Us Now Go Forward: Every Economic Hallucination Has Been Tried
86. Herbert Hoover--Compulsory Cooperation Is Slavery
87. George A. Dondero--Our Form of Government: A Republic
88. Major General J. G. Harbard--The Relative Position of the Individual Under Democratic and Totalitarian States
89. Congressman Joseph W. Martin, Jr.--The Heart and Spirit of America: The Inspirations of Freedom
90. Senator William E. Borah--Retain the Arms Embargo: It Keeps Us Out of the War
91. C. M. Chester--Industry's Stand Against War
92. Senator George W. Norris--American Neutrality: Let Us Keep the Dollar Sign Off the American Flag
93. Senator Robert A. LaFollette, Jr.--The Neutrality Issue
94. J. Steele Glow--War--Its Economic Impact on the United States: The Path to Destruction and Bankruptcy
95. Walter E. Spahr--The Relation of Government to Business
96. Congressman Martin Dies--Insidious Wiles of Foreign Influence: Have We Forgotten Washington's Advice?
97. Merwin K. Hart--Are There Subversive Activities in Our Schools?
98. Benjamin M. Anderson--Government Economic Planning
99. Thomas S. Gates--The Strength of the Creeds of Our Fathers
100. John Hamilton--Liberalism: It Has Become Popular Catchword
101. J. Reuben Clark, Jr.--Lincoln: The Man of Inspired Leadership
102. Congressman Bruce Barton--The Faith of Abraham Lincoln
103. Merwin K. Hart--Did You Say Democracy?
104. Robert R. McCormick--Our Republic Is at Stake
105. J. Reuben Clark, Jr.--Why I Am an American
106. Harry Emerson Fosdick--The Crisis Confronting the Nation
107. Senator Burton K. Wheeler--Marching Down the Road to War
108. Robert Gordon Sproul--Character: The First Line of Defense
109. J. Reuben Clark, Jr.--Federal Regulation of Insurance
110. George Barton Cutten--Your Freedoms at Stake
111. Congressman James E. Van Zandt--Keep America Out of War
112. General Robert E. Wood--Our Foreign Policy: The Course We Are Pursuing Leads to War
113. O. R. McGuire--Political Ideologies in This Changing World
114. Senator Rush D. Holt--The American People Want Peace
115. H. W. Prentis, Jr.--The Citadels of National Defense
116. J. Howard Pew--Preserving the Private Enterprise System
117. Senator Burton S. Wheeler--America's Present Emergency
118. J. Reuben Clark, Jr.--Lincoln and the Civil War
119. George F. Barrett--The Future of Our States and Cities in Our Governmental Structure
120. O. R. McGuire--The Third American Revolution
121. H. W. Prentis, Jr.--Preserving the Roots of Liberty
122. Robert I. Gannon--Lincoln
123. Daniel L. Marsh--The American Canon
124. Governor Frank M. Dixon--Federal-State Relationship: The Dangers of Centralization in Government
125. Harley L. Lutz--Can Local Government Survive?
126. Senator Joseph C. O'Mahoney--The Declining Power of the States
127. Governor Frank M. Dixon--Crossroads Democracy: Concentration of Powers is Dangerous
128. J. Reuben Clark, Jr.--Some Factors of a Now Planned Post-War Government and Economic Pattern
129. Senator Jospeh C. O'Mahoney--Preserving the Constitutional Authority of the U. S. Senate
130. Senator Robert A. Taft--International Commitments Violate U. S. Sovereignty
131. Senator Francis Maloney--Regaining Congressional Power Over Trade Issues
132. Senator Harry F. Byrd--Economy in Government
133. Francis Biddle--Cartels
134. William LaVarre--Government Control of Foreign Commerce
135. Congressman Jerry Boorhis--Oil Workers Go on Record for Constitutional Monetary System
136. Congressman William A. Pittenger--The Relation of the Federal Government to Sovereignty
137. Senator Kenneth S. Wherry--What About Our American Economy?
138. Congressman E. E. Cox--How Can Business Help Preserve Constitutional Government and Free Enterprise?
139. Senator Dennis Chavez--The Importance of Maintaining the Integrity of the U. S. Constitution
140. Congressman Louis Ludlaw--The Proposed Treaty Ratification Change Violates Integrity of the Origin and Document
141. Harry V. Dougherty--The Lord Chord: Government Is the Servant: Not the Master
142. J. Reuben Clark, Jr.--The World Crisis Today
143. Governor William M. Tuck--Improvement and Preservation of State and Local Self-Government
144. Lindsey C. Warren--States Must Assert Leadership
145. O. R. McGuire--Erosion of Constitutional Landmarks
146. Howard W. Jackson--Our Constitution: Our rights and Our Responsibility as Citizens
147. J. Reuben Clark, Jr.--Inroads upon the Constitution by the Roman Law
148. J. Reuben Clark, Jr.--American Free Enterprise
149. J. Reuben Clark, Jr.--Slipping from Our Old Moorings
150. William J. Walker--The Taft-Hartley Law
151. Harry S. Truman--Tyranny vs. Freedom
152. Frank P. Holman--Our American Heritage
153. O. R. McGuire--Structure and Substance of Constitutional Government Endangered
154. Frank E. Holman--An International Bill of Rights: Proposal Has Dangerous Implication for U. S.
155. Walter E. Spahr--The March into the Death Valley of Socialism
156. Collectivism and the Modern Lawyer--Senator Joseph C. O'Mahoney
157. Philip Cortney--International Trade Organization Charter: A Dishonest Document
158. Senator George W. Malone--The North Atlantic Treaty
159. J. Reuben Clark, Jr.--The North Atlantic Treaty
160. Emerson P. Schmidt--Socialism--The American Pattern
161. Emerson P. Schmidt--Distance Traveled Along the Road to Statism
162. Senator George W. Malone--American Workers vs. Free Trade
163. Thurman Sensing--Is It Too Late to Save America
164. George A. Finch--Genocide Convention Does Not Prohibit Mass Killing of People by Governments
165. The Ageless Lincoln--Robert L. Kincaid
166. The American Way--Otto E. Koegel
167. Clarence Manion--The Lust for Power
168. Senator Herbert R. O'Conor--Stop Asking Washington to Do It
169. Arthur Mieghen--The Welfare State
170. William H. Fitzpatrick--Government by Treaty
171. Frank E. Holman--Treaty Law-making: A Blank Check for Writing a New Constitution
172. Congressman Noah M. Mason--Uncle Sam, Inc.
173. H. W. Prentis, Jr.--The Price of Freedom
174. General Douglas McArthur--The Battle to Save the Republic
175. Congressman John T. Wood--The Story of the United Nations: Duplicity and Intrigue
176. Congressman John T. Wood--Report to the American People on UNESCO
177. W. C. Mullendore--The American Retreat from Freedom
178. Ruth Alexander--What Price the Welfare State?
179. Fred G. Clark--Not by Bread Alone
180. F. A. Harper--What to Do about Preserving the Free Market
181. Wheeler McMillen--The Federals Are Coming
182. J. Reuben Clark, Jr.--Our Dwindling Sovereignty
183. Donald J. Cowling--What Did Our Forefathers Try to Accomplish?
184. Senator Capehart--International Schemes of the 20th Century
185. Senator George W. Malone--Postpone Ratification of Japanese Treaty
186. Congressman Shafer--Is There a Subversive Movement in the Public Schools?
187. O. R. McGuire--The American Way of Life and the U.N.
188. Frank E. Holman--The Constitution and the U. N.
189. General Douglas MacArthur--America Now Stands at a Crossroads
190. General Douglas MacArthur--American Tradition
191. W. M. Cornelius--Corporations Do Not Pay Taxes
192. Senator John W. Bricker--America's Greatest Danger: Domestic Legislation by Treaty
193. Senator William F. Knowland--The Survival of Our Nation
194. J. J. McLarney--The Context of Freedom
195. General Douglas MacArthur--Misdirection of Domestic and Foreign Policies
196. William H. Fitzpatrick--Government by Treaties
197. Congressman Usher L. Burdick--Should the U.S.A. Continue to Support the U.N.
198. Congressman John T. Wood--Should the U.S.A. Continue to Support the U.N.
199. Myra C. Hacker--Opposition to Global Governance
200. Mrs. James B. Patton--The Danger of World Government
201. John B. Trevor--Opposition to World Government
202. Congressman Lawrence H. Smith--Should the U.S.A. Support a Federal Union of All Nations?
203. Congressman William E. Jenner--Should the U.S. Supports Federal Union of Atlantic Pact Nations
204. Senator George W. Malone--International Organizations Will Destroy U. S. Sovereignty
205. Senator Robert A. Taft--Restore Government Based on American Principles
206. Walter E. Spahr--Our Currency Should Be Redeemable in Gold
207. Senator Pat McCarren--The Communist World Conspiracy
208. Senator John W. Bricker--Should the U.S. Constitution Be Amended to Curb the Use of the Treaty Power?
209. Senator Pat McCarren--The Torch of Freedom
210. Mrs. James B. Patton--The Surrender of National Sovereignty
211. George A. Finch--Limiting the Treaty-Making Power of the Executive Department
212. J. Reuben Clark, Jr.--Let Us Not Sell Our Children into Slavery
213. Thomas H. Kuchel--Let Our Constitution Be Supreme
214. Carl F. H. Henry--Christianity and the American Heritage
215. Frank E. Holman--The Greatest Threat to Our American Heritage: John W. Bricker Amendment Will Protect Our Bill of Rights
216. Senator William F. Knowland--High Noon for United Nations
217. Frank E. Holman--Let's Stop Giving America Away
218. Clarence Manion--How Is Your Constitution
219. Senator Hugh Butler--The Bricker Amendment: Why It Is So Vital
220. Harry Sears--The Conspiracy Against Gold
221. Herbert Hoover--The Protection of Freedom
222. George E. Stringfellow--How Tyranny Is Born
223. Walter E. W. Spahr--The Outlook for Sound Money in the United States
224. R. Carter Pittman--George Mason: Architect of American Liberty
225. Frank E. Holman--The Greatest Threat to American Freedom
226. O. R. Strackbein--Look Out for the GATT
227. Governor Arthur B. Langlie--States Rights and State Duties
228. William F. Knowland--The United Nations--Impotent and Paralyzed
229. Senator George W. Malone--The Constitutionality of the 1934 Trade Agreements Act
230. Senator John W. Bricker--Preserving the Freedom and Sovereignty of America
231. Eberhard P. Deutsch--The Importance of the Bricker Amendment
232. Frank E. Holman--The Relevance of the Bricker Amendment
233. Clarence Manion--The Need for the Bricker Amendment
234. Omar B. Ketcham--Supremacy of the Constitution Will Be Maintained with the Bricker Amendment
235. Senator Sam J. Ervin, Jr.--Alexander Hamilton's Phantom
236. Senator Strom Thurmond--The Constitution and the Supreme Court
237. Cardinal James Francis McIntyre--The Spirit of America: Freedom Under God
238. William L. McGrath--Tree of Freedom
239. William L. McGrath--The Strange Case of the International Labor Organization
240. J. Reuben Clark, Jr.--Civil Law and Political Emigres
241. Roger A. Freeman--Our Federal System at the Crossroads
242. Admiral Arthur Radford--Battle for Freedom
243. Senator James O. Eastland--Must American Agriculture Be a Controlled Industry
244. Congressman Emanuel Celler--Concentration of Economic Power
245. George C. Cworshak--Subsiditis
246. Congressman Cleveland M. Bailey--Organization for Trade Cooperation: Congress Alone Has Power to Regulate Foreign Commerce
247. Herbert Hoover--Inflation, Spending and Taxes
248. Noah M. Mason--The Preservation of Our Constitution
249. Donald R. Richberg--Individualism: A Fundamental Evil in Big Government
250. Senator Henry F. Byrd--Financial Stability as a Natural Resource
251. Senator William F. Knowland--The United States and the United Nations
252. Fred G. Clark--Is Socialism Irreversible
253. Senator Barry M. Goldwater--The Preservation of Our Basic Institutions
254. Judge Clyde S. Shumaker--At Last a Citizen
255. J. Reuben Clark, Jr.--Some Fundamental Principles of Our Constitution
256. Leonard E. Read--Making the Case for Private Property
257. Congressman Philip J. Philbin--Constitutional Integrity and Foreign Trade
258. Howard E. Kershner--The Moral Basis of a Free Society
259. Charles S. Rhyne--Individual Freedom Under Law
260. Senator Strom Thurmond--Constitutional Government
261. Senator William E. Jenner--What Has Happened to Our Country?
262. Mrs. Wilson K. Barnes--Patriotic Principles of Americanism
263. Congressman James B. Utt--None Is So Blind As He Who Will Not See
264. Congressman Paul Findley--America's Greatest Invention: Our Constitution
265. Augustin G. Rudd--Symbols, Traditions and Liberty: The Birth of the Republic
266. Donald I. Rogers--There Goes Free Enterprise
267. John R. Van De Water--Lincoln's Leadership: Today
268. Senator Harry F. Byrd--Massive Federal Spending: Concentration of National Spending
269. Senator William F. Knowland--The Real Strength of Our Nation
270. E. F. Scoutten--The American Free Enterprise System
271. Admiral Ben Moreell--The Right to Be Wrong
272. Edwin P. Neilan--Supermarket for Subsidies
273. Senator Barry Goldwater--Economic Realities
274. Senator Strom G. Thurmond--Our National Relationship to God
275. Justice Millord Caldwell--Judicial Usurpation
276. Prime F. Osborn, III--Strengthening America's Heritage
277. Alan H. Newcomb--Free Enterprise
278. Senator Strom Thurmond--The Federal Judiciary: The Usurpation of Power
279. Congressman Wright Patman--The ABC's of America's Money System
280. Senator Barry Goldwater--Peace through Strength
281. Senator Strom Thurmond--A Choice for Americans
282. Senator Strom Thurmond--The Cult of Relativism
283. Congressman Wright Patman--The Federal Reserve: A Separate Government
284. Senator Sam J. Ervin, Jr.--Separation of Powers
285. Tom Anderson--A Constitutional Government Under God
286. Congressman Wright Patman--One Bank Holding Companies
287. Senator Barry Goldwater--The Federal Government
288. Congressman John H. Dent--Protectionism versus Free Trade
289. Ed W. Hiles--What's Happening to the Spirit of America
290. Governor Meldrin Thomson--The States' Side to New Federalism
291. Senator James McClure--Private Gold Ownership
292. Senator Sam Ervin, Jr.--Our Basic Liberation
293. Anne Armstrong--America's Bicentennial
294. Clarence E. Manion--To the Republic
295. Edmund A. Opitz--Why Do They Turn to Socialism
296. Cornell C. Maier--The Free Enterprise System Is Dying
297. Lee Loevinger--The Impacts of Government Regulation
298. Ralph Y. McGinnis--What Did Abraham Lincoln Stand For?
299. President Ronald Reagan--200th Anniversary of the Signing of the Constitution
300. Diane P. Pikcunas--The United States Constitution
301. Alfred Eckes--An America First Trade Policy
Part I
Preface
i. The Doctrines of Machiavellianism Permeate the World of Business and Society
By
Ida M. Tarbell
Some four hundred years ago there was living quietly in a little villa not far from the City of Florence Italy, a man about forty-five years old, Niccolo Machiavelli by name. His serious occupation--followed at night after a day spent in superintending his estate and drinking wine with his rustic neighbors--was writing a treatise explaining how, in his judgment, the then existing government of Florence could bring that city back to a power and glory which it had lost. Signor Machiavelli was very well fitted for his task. He was not a scholar, in the strict sense of the term, but he was a man thoroughly familiar with his world. He knew its literature and its history. He was an able writer, perhaps the first prose writer Italy had ever produced. He was a man of large experience in politics, diplomacy, society. For fifteen years before taking to his little villa he had been the private secretary and confidential agent of the most powerful factor in the Florentine Republic--the Council of Ten, and in this position he had seen from the inside some of the most extraordinary events of the period. He had been with Cesare Borgia when that crafty general, having lured a large number of his enemies to a conference to discuss terms of peace, cut off their heads--for the good of his country! He had passed months at the court of Francis I, one of the greatest of French Medieval sovereigns, begging men and money to help Florence keep off her enemies. He had matched cunning with cunning; deceit with deceit, bullying with bullying, logic and logic in the leading diplomatic circles of Europe. He was a man of his world, too, always in the thick of the cleverest circle of his city, gossiping, carousing, agitating. He could run an enemy through with a sword, if need be; he could play the gallant with the best of them; he could turn a sonnet to suit the critical taste of his day; and he could write a pamphlet or a creed for the city gate as no other man in Florence. In short, Machiavelli was a versatile, brilliant, learned man of his times--but he was something more than most of such gentlemen, of whom Florence had many. He had a mind of extraordinary analytical power, a genius for construction, a warm devotion to his native city, and a patriotic passion for her glory.
Machiavelli Teaches Despots How to Make Themselves Impregnable
Signor Machiavelli was altogether too young and too much in love with life and action to be spending his nights in writing a treatise on government if he could have helped himself. But he could not. He had lost his office by the overthrow of the Republic of Florence and the restoration of the old despotic power of the Medici. Machiavelli saw no chance for a restoration of the republic. But he believed he did see the way for an able Despot to make Florence all powerful in Italy. He decided to explain his views to the Medici. The world has always been divided as to why Machiavelli, a Republican and practically an exile because of his principles, should have attempted to teach a Despot how to make himself impregnable and his state glorious. There are those who say it was that he might be restored to place--and certainly Machiavelli, when he came to offer his treatise to the Medici, offered his services along with it, pleading that the work itself proved his fitness to serve a Despot,--which it certainly did; but there was a great deal more than a desire for a position in Machiavelli's mind. He loved his Florence--ardently, passionately desired her glory. He saw no chance for the success of a Republic. He believed a powerful and wise Despot could make a state glorious and it mattered little to him how Florence became a stable power if she only achieved the end, and so Machiavelli wrote his Prince--a work destined to become one of the few treatises which have crystallized a political theory into permanent form, a work that fits any age and will continue to fit any so long as human nature remains what it is.
The Business of a Prince Is to Make His State Great
And what was this theory that Signor Machiavelli worked out so well? So direct, so lucid, so comprehensive, and so frank is the Prince that a very brief analysis makes it clear. It opens with a definition of "the business of a Prince," which, says Machiavelli, "is to make his state great and to extend its borders." In Machiavelli's day the Prince so generally came into power by force or by adventurous brigandage that it was this class of rulers alone which he seriously considered in his Treatise. Obviously the first requirement of a Prince who has secured power is an army, his chief art is the art of war. Even the prophets themselves stood or fell by their power to back up their teachings by force, Machiavelli claimed. Thus Moses succeeded because he had an army to back up his laws. Savonarola failed because "when the multitude ceased to have faith in him he was destitute of the means either to compel faith or to inspire confidence." It was a Medieval application of the more modern saying, "Trust in God and keep your powder dry."
The Prince Should Use Secret Intrigue and Treachery
But while Machiavelli places full stress on the necessity of making war in the most scientific and approved manner, he by no means limits his Prince's duties to raising and disciplining troops and to conducting aggressive campaigns. In his judgment there is another and no less important field of action for every Prince, It is that of secret intrigue and treachery, the place in which states are most surely undermined and destroyed. The chief weapons in this field are lying, treachery, cruelty; and Machiavelli calmly advises the use of each, always supporting his contention with ample historical illustrations.
Lying and Craftiness Is a Necessity for a Prince
Lying, in his opinion, is a sacred necessity. "A prudent prince cannot and ought not to keep his word," he says, "except when he can do it without injury to himself, or when the circumstances under which he contracted his engagement still exist." Craftiness is to be cultivated sedulously. Indeed, Machiavelli impresses it upon his Prince that the fox is a worthy example to emulate. "As a Prince must learn how to act the part of a beast sometimes, he should make the fox and the lion his patterns, but the fox often wins when the lion would fail: I could give numerous proofs of this and those who have enacted the part of the fox have always succeeded best in their affairs.
A Prince Should Not Be Afraid of Cruelty
Nor should he be afraid of cruelty. Like lying and treachery it is often necessary. In an army it is useful in helping keep troops in order. In governing a city it prevents uprisings.
It is Better to Be Feared Than Loved
These are hard practices and evidently make a man feared and hated. Machiavelli calls attention to this fact and argues it out logically: "It has sometimes been asked," he says, "whether it is better to be loved than feared, to which I answer that one should wish to be both, but that is a hard matter to be accomplished and I think if it is necessary to make a selection it is safer to be feared than to be loved. Men are generally more inclined to submit to him who makes himself dreaded than to one who merely strives to be beloved; and the reason is obvious, for friendship of this kind being a mere moral tie, a species of duty resulting from a benefit, cannot endure against the calculations of interest; whereas fear carries with it the dread of punishment, which never loses its influence.
The Prince Must Renounce Good
As a general rule, Machiavelli lays it down that hatred is as easily incurred by good actions as by evil--and that when the strongest party is corrupt the Prince must comply with their disposition and content them. "He must renounce good or it will prove his ruin."
To Maintain Power a Prince Should Not Be Good
It is not a high notion of humanity that such doctrines as these presupposes. Machiavelli admits this frankly. Indeed, throughout his treatise he repeatedly claims that it is only possible to practice the methods he advises because men are generally so cowardly, so treacherous, and so selfish. For instance, in explaining the wisdom of not keeping promises he says, "I should be cautious in inculcating such a precept if all men were good; but as the generality of mankind are wicked and ever ready to break their words, a prince should not pique himself in keeping his more scrupulously, especially as it is always easy to justify a breach of faith on his part." And again in cautioning His Prince against having any pride in being considered just and good he says, "The manner in which men live is so different from that in which they ought to live, that he who deviates from the common course of practice and endeavors to act as duty dictates necessarily insures his own destruction. A Prince who wishes to maintain his power ought therefore to learn that he should not be always good.
The Use of Force and Treachery
It is thus by force, craft, and treachery and by a wholesale application of the principle that every man has his price that the great Italian taught that power is to be secured. But this means enemies, for, whereas, a man beaten in an open contest waged according to the rules of war, may become a friend, he who has been stripped of his possessions by craft and treachery combined with force rarely, if ever, can be trusted.
The Prince Should Take Men into Partnership or Crush Them
How shall he deal with them? It is simple in Machiavelli's judgment. "Either make a man your friend or put it out of his power to be your enemy," he says. That is, take him into partnership or crush him. "He may revenge a slight injury, but a great one deprives him of his power to avenge. Hence the injury should be of such magnitude that the Prince shall have nothing to dread from his vengeance." That is, the only safe way to deal with a conquered enemy is to destroy him, and particularly is this true if that enemy has ever known freedom.
The Prince Should Not Help a Rival Power
Not only must you destroy all those you conquer, but under no circumstances should you help a rival power in any of its enterprises, even if those enterprises be quite foreign to those in which you are interested--nothing in which as far as you can foresee you ever will be interested, for the prince who contributes to the advancement of another power runs the risk of ruining his own. The rival may, through the help given him, so advance in power that it may one day ruin the Prince himself--that is, never help in any way anybody outside of your domain.
The Rules for Securing and Increasing Worldly Power
But while Machiavelli lays down forcibly. and clearly the above rules as essential to securing and increasing worldly power, he repeatedly advises against the unguarded use of them. For instance, cruelty must always be "well applied"—that is, only exercised when it is absolutely necessary. Again, although a Prince must do evil when required to preserve and strengthen his domain, he must, above all, preserve an appearance of always doing good. "A prince should earnestly endeavor to gain the reputation of kindness, clemency, piety, justice, and fidelity to his engagements. He ought to possess all these good qualities, but still retain such power over himself as to display their opposites whenever it may be expedient.
The Prince Should Maintain an Outward Appearance of Kindness and Piety
"I maintain that a Prince, and especially a new Prince, cannot with impunity exercise all the virtues, because his own self-preservation will often compel him to violate the laws of charity, religion, and humanity. He should habituate himself to bend easily to the various circumstances which may, from time to time, surround him. In a word, it will be as useful to him to persevere in the path of rectitude, while he feels no inconvenience in doing so, as to know how to deviate from it when circumstances dictate such a course. He should make it a rule, above all things, never to utter anything which does not breathe of kindness, justice, good faith, and piety; this last quality is most important for him to appear to possess, as men in general judge more from appearances than from reality. All men have eyes, but few have the gift of penetration. Every one sees your exterior, but few can discern what you have in your heart."
The Doctrine of the End Justifies the Means
These, briefly, are the famous principles of Machiavelli. In a word, it is the doctrine that the end justifies the means, that whatever is necessary in order to secure the glory of your country is right. Men should love their country more than their souls.
Machiavelli Sought to Teach a Tyrant How to Become Impregnable
Machiavelli gave the Prince to the Florentine Despot, but he did not get his reward. Whether the treatise was too strong for the stomach of Lorenzo or not, we do not know. It was only after Machiavelli's death that the work was published, and no sooner was it out than a storm of indignation broke over it. Impious,. infernal—no adjective was too strong to describe the popular judgment. The Republicans called him traitor because he sought to teach a tyrant how to become impregnable. The Despots hated him because he showed their hand. The church, outraged by his frank accounts of the discrepancies between her practices and principles, put the Prince under its ban and burnt Machiavelli in effigy. And yet Machiavelli had not invented Machiavellianism. He simply described as clearly and succinctly as he could the methods which his observation and study had taught him to be the most successful in ruling Italian cities. He had considered not at all the morality of methods—no despot who won glory did that. He had considered not at all that a man might lose his soul, might drive other men to destroy their souls, by these practices.
Machiavelli Revealed the Formula for Worldly Success
The glory of the state—that in Machiavelli's mind was the end of all political action. If it cost men their souls why still the glory of the state justified the price. Italy had taught him this, yet Italy, when she saw her own theory stated in black and white, turned on the man who had analyzed her so plainly, and called him traitor. The world took up the cry and from that day to this has characterized the theory that the end justifies the means with the opprobrious title of Machiavellian. It has made an adjective of reproach of the great Florentine's name, as if he had let loose the evils inherent in the theory which bears his name. As a matter of fact, all that Machiavelli did was to work out the formula for worldly success followed by the ablest rulers of his own time. His crime in the eyes of Florence was that he revealed the formula.
The Principles of the Prince Are in Active Operation Throughout the World
But though the world repudiated the Machiavellian theory as soon as it saw the light, it by no means abandoned it. Again and again since the Prince first was written, four hundred years ago, its principles have been in as active operation as in the age of despots. Again and again those who hated and feared the theory have risen to overthrow it. What was the Reformation in essence but a revolt against Machiavellianism in the church. What was the French Revolution? Every age, indeed, has seen this theory intrude itself in Church or State, and has seen an attack upon it. Every country has had repeated struggles with it, so has every institution; indeed, so does every individual who aspires.
Machiavellianism Arises in America in the 1880s
There has always been a trace of Machiavellianism in American life, but never in the history of our country has the formula been applied and openly defended, until the last two decades.
A Modern Treatise in the Art of Acquiring and Extending Power
Today, however, one could easily reconstruct out of the mouths of our captains of industry a modern edition of the Prince which would serve quite as well as a textbook for the aspirant to financial power as the Prince of' Machiavelli would have served Lorenzo Medici if he had the brains, the daring, and the dexterity to apply it. The object of this modern treatise, like that of the Medieval one, would be to instruct in the art of acquiring and extending power; but while four hundred years ago it was acquiring power in order to make a state rich and glorious, today it is acquiring power in order to make oneself rich and glorious. Four hundred years ago it was a state which the Prince aspired to control, today it is a great business—a natural product like iron or coal or oil, a great food product like beef, a great interstate transportation line like the railroad, a great deposit for the savings of the poor like a life insurance company. These are the Kingdoms for which the modern man sighs. They do not come to him as an inheritance any more than in the fifteenth and sixteenth centuries Italian cities came to Despots by inheritance. They come by force, and today, as in Machiavelli's time, the chief art of the would-be captain of industry is war, the end of which is to acquire that which other men now control.
Business Is War
It matters not at all that the man who owns the enterprise desired to extend the captain's power may have been a pioneer in the industry, may have been one of the first in the country to make sugar, or produce oil, raise cattle, or ice cars; it matters very little that he has developed his own markets, invented his own processes and machines; his property is wanted and he cannot be allowed to live free any more than in Machiavelli's judgment Cesare Borgia should have allowed the Italian princes whose domain skirted his and who were weaker than he to live free. Business is war, then, not a peaceful pursuit.
The Art of Developing Monopolies
And this commercial warfare has been developed by our modern captains to a science as perfect as the militarism of the nations. Its tactics are as admirable, its plans of campaign as clear and able.--You want to control beef, for instance—an excellent kingdom to master, so steady and sure are its resources in a prosperous land. But how can you do it? It is an industry as old as the nation. It has been built up and is owned and managed by ten thousand cattlemen on a thousand hills and plains, by hundreds upon hundreds of dealers in the numberless cities and villages and country-sides of the land, by scores upon scores of railroads and steamship lines which compete to carry its products. Where is the central position which, controlled, will bring them all, cattle-raiser, transporter, marketman, under your direction or, if you prefer, drive them from the industry? Any modern captain will tell you it is in transportation. If you can, by any means, so control the railroads and steamships which ship the cattle first and the dressed meat later as to obtain better rates than anybody else, you can control ranchmen and dealers. For if you can ship what you buy cheaper than your competitors, you can afford to sell cheaper. The world buys where it can buy cheapest. In time the world's market is yours and when it is yours you can pay the ranchman your own price for cattle. There is nobody to offer him another. You can make your own rate for the transportation; you are the only shipper. You can demand of the consumer the highest price. There is nobody to offer him one lower.
The Development of Financial Monopolies
Secure the special favor of the railroad then and the rest will be easy, as it is in all great military campaigns where the key to the position has been found and where all resources have been concentrated on its capture. And this favor secured, go after the dealer. If you are a courageous and plausible person, tell him frankly that his business belongs to you, and he had better sell at once. But he does not wish to sell. He has queer ideas about the business being his. He stands on what he calls his rights and a fight is as inevitable as it was in Machiavelli's time when some little Italian town accustomed to governing itself refused to turn over its keys to a big neighbor. And it is beautifully clear from the revelations of our captains of industry during the last thirty years of investigation on what plans the fight will be fought. Cut off his supply of meat. If he has none he sells none. But cattlemen cannot be prevented from selling. No, but if it costs the obstinate dealer more to get that meat to his market than it does you to get it to yours, he cannot sell at the price at which you sell. And here enters the railroad rebate—the modern battering-ram for crushing those who fight to save their own. Crushing them by preventing them getting the supply on which they feed at livable rates of transportation. We all understand it. For nearly forty years we have had it illustrated constantly before our eyes. Recently we have had it ad nauseam. Small dealers in oil and coal and lumber and salt, and a hundred other things forced into combination, into bankruptcy, or into new lines of business—because they could not get a rate which enabled them to ship; the big shipper forcing the discrimination until his rival succumbed like a wall weakened by incessant battering.
The Attacks on Recalcitrant Businesses
But the besieging captain of today has other weapons than his formidable special rate. Have you ever watched, month after month, an attack on a recalcitrant business by some great leader? It is quite as interesting in its way as the study of the siege of Toulon, of Vicksburg, or of Port Arthur. Mines are run under the man's credit and exploded at the moment when they will cause the most confusion, abatis are constructed around his markets until whenever he would enter them he falls into entanglements which mean retreat or death, a system of incessant, deft sharp-shooting is kept up, picking off a bit of raw product here, delaying a car-load there; securing the countermand of an order at this point, bullying or wheedling into underselling at that, trumping up lawsuits, securing vexatious laws. For fertility of invention in harassing maneuvers I recommend the campaign of a modern captain of industry as far superior to the annoyances of the famous guerrilla warfare of the Spaniards.
The Modern Captains of Industry Use Machiavellian Tactics to Destroy Free Enterprise
Now we will all admit that under the competitive system, in a sense, business is war; that is, men are each rightfully seeking to make his own venture as big and as powerful as his ability and energy permit, but in all war, even that of four hundred years ago, there are rules. Compare the use of the ancient battering-ram with the use of the modern one—the rebate. The former was recognized as a legitimate instrument, and the latter has always been declared illegitimate. That is, when an Italian Despot sallied forth to knock down the walls of a city he wanted to add to his domain he used an instrument which the laws allowed—but our modern captain uses as his principal weapon of conquest an instrument forbidden by all the laws of the game. As far as weapons of war are concerned, he really goes the Italian Despot one better. Not only that; he equals him easily in those practices which have always been supposed to be an Italian specialty, and which, as has already been pointed out, form the backbone of Machiavellianism as it is developed in the Prince. Consider the parallel. Our modern captain, like our medieval tyrant, must be prepared for cruelty. If he cannot win over a man and make him a convert to his scheme, or if he does not want him in his aggregation—he must put it out of his power to be his enemy—that is, he must crush him. Machiavelli suavely advises to do him an injury of such magnitude that the Prince shall have nothing to dread from his rival's vengeance. This will make you feared, of course, but the consoling observation Machiavelli offers to those who may gulp a bit at wholesale slaughter is that it is safer to be feared than loved.
People Fear the Captains of Industry on Wall Street
What is today half the power of a half-dozen of our leading captains of industry? It is that they are feared by thousands of men. What is it that drives many a railroad president to grant rebates—a crime in the eyes of the law for which he knows that if the government does its duty he will be fined and imprisoned? Fear of a warfare on his freight, his bonds, his stocks. Why do so many men with righteous causes of complaint throw up their hands at the approach of the captain of their particular industry? Because they know that resistance almost inevitably has ended in failure. Every one who knows Wall Street—the railroad business, the copper-steel, oil, beef business—knows that half the popular stock in trade of the leaders is that they have intelligently and persistently cultivated Machiavelli's counsel that it is safer to be feared than loved.
Wall Street Business Leaders Lie to the American People
It is not only cruelty which is necessary in modern businesses. It is lying. Follow the testimony in the great insurance investigations of the past fall and compare it with the investigations of other years, and perjury sticks out at every corner, perjury so obvious in many cases that it is laughable. Follow the testimony of the leader of the great oil trust—that of many railroad men. When it is necessary they lie.--No Borgia or Medici ever followed more wisely and carefully than our captains Machiavelli's great rule—"A prudent prince cannot and ought not to keep his word except when he can do it without injury to himself."
Lying for the Sake of Business
But while the Machiavellian rule that a Prince should do evil or good according as the one or other serves his interests can be shown by a multitude of documents to be followed faithfully and intelligently by the modern captain of industry, he is no less scrupulous in obeying Machiavelli's injunction not to do evil unnecessarily, that is to do it only when it is necessary to attain the end. Our modern captains of industry rarely lie or break the laws, bribe or practice cruelty, save for the sake of the end that is they do not do these things for the sake of doing them as a Caligula or a Nero would have done. They do them for the good of the business. Listen to one of our railroad officials who, recently on the stand, testified to granting a rebate. "We knew it was illegal but it was the only way we could get our share of the business;" that is, the law is less important than the share of business.
In the Minds of Commercial Leaders the End Justifies the Means
In one great concern where for nearly forty years there is an unbroken record of lawbreaking and of spying and of hard dealings, the repeated explanation has been that it was for the good of the business. Not long ago a Western Senator of the United States was found guilty of stealing public lands. A former colleague openly justified him on the ground that by this robbery the land had been opened up more quickly than it otherwise would have been. Wherever a case comes to the surface it is promptly justified as necessary to keep up the dividends, expand race, meet competition, get your share of the business, stimulate commerce. That is, in the minds of our commercial leaders the end justifies the means as much as it ever did in the mind of Cesare Borgia, the monks of the Spanish Inquisition, of Napoleon Bonaparte, or of Count Metternich.
Modern Captains of Industry Use Charitable Giving to Deceive People
Probably at no period of the world's history where the Machiavellian formula has been the chief working one of a great social institution has its crowning principle—to give the whole fabric the color of charity—been so universally practiced as it is today by our captains of industry. Cesare Borgia, Machiavelli's great model and that incredible villain, his father, Pope Alexander VI, troubled themselves precious little about screening their deeds with clemency and charity—their failure to do so was a chief cause of their final failure. Machiavelli realized this and it was his reason for repeatedly putting emphasis on the necessity of posing as a saint, however great a devil we may be. Today there is hardly to found in American industry a leader, however Machiavellian in practice, who does not seek to justify himself in the eyes of the public by some form of benefit to society. He may cultivate the arts, he may establish lectureships, he may endow colleges, he may build hospitals, but whoever he is—however truly a commercial brigand he is, he follows Machiavelli in appearing a social benefactor. It is instinct with him primarily— not calculation. There are few men, whatever their practices, who do not instinctively desire to be called honorable and generous, and to be considered gentlemen.
When the People Become Alarmed Create a Distraction
The world has so advanced since Machiavelli's days, too, that few men are so unconscious of the social obligations that they do not try to square themselves with God and man for what they take contrary to the legal or the moral code. But what may be instinct at first inevitably becomes a calculation as they grow in brigandage. They see it pays to be known as public benefactors. That such a reputation will keep the public silent longer than any other. That a great gift may often head off a legislative investigation. It is an application of Napoleon's wisdom: When the people are restive, "gild a dome," that is, give them something new to see and talk about, distract their attention; that done, their sense of injustice is soon asleep.
Commercial Machiavellianism Is the Accepted Business Code of Today
Now this parallel between our modern industrial code and that of the Prince is not a mere fanciful one. It is a legitimate historical parallel easily reinforced by a multitude of documents as every one must admit who knows the industrial records of the United States for the last forty years. Commercial Machiavellianism is the accepted industrial formula. It is not only accepted and defended as necessary to our national prosperity and our happiness by those who practice it and profit by it, but the Nation, as a whole, winks at it. How often do we hear from the lips of eminently respectable citizens the words: "Business is business"? How often in justification of lying, "Everybody lies"? How often in defense of bribery the words of the Missouri judge, "Bribery at worst is merely a conventional crime"? How often the words of Tim Campbell of New York "What's the Constitution between friends"? That is, the public as a whole is coming to admit Machiavellianism as a business necessity and to justify it by the end.
The Accumulation of Private Wealth and Power
Now looked at a little more closely what is the business end our captains of industry seek? It certainly is not—never has been—except in rare cases, the mere accumulation of private wealth, the mere winning of personal power. These men who control the industrial world today are, as a rule, men of "great imagination—men who have looked over a vast field of scattered forces and seen how they might bring them into harmony and direct them to definite ends, how in thus combining and organizing they might not only build in their own land one great and splendid industry in the place of the thousands of little ones now doing the work, but they might extend this great creation into foreign lands, thus enlarging American empire, piling up American power, enriching the American people.
The Dream of Universal Empire
Our captains of industry are poets in their ways—poets who rhyme in steel and iron and coal, whose verses are great ships and railways and factories and shops. They create that the world may have more food and light and shelter and joy.--They create for the joy of it—for the sake of feeling themselves grow, for the sake of doing for those they love. This, to a degree, is the vision of them all. These are noble ends, but they can only be kept so by noble means. Yet, almost immediately comes the realization that this dream of universal empire cannot be reached by the means which human law and justice prescribe. What of it? The man, hot with his vision, sees his end as greater than truth, than righteousness, than justice. He gradually, and perhaps unconsciously at first, works out a modern version of the half-pagan formula of Machiavelli to apply to a modern and Christian situation, and the world, dazzled by the magnificence of his achievement, justifies him as he does himself.
Great Monopolies and Trusts in Existence
Now, is he right? Are we right? Is the Machiavellian system today so firmly implanted justified by its results as we see them today? What are the results? Take the material ones. Is there a great monopolistic trust in existence today which has carried out its avowed purpose of better and cheaper products, because of combination? In my judgment not one. The whole history of the trust aiming at monopoly has been that it never gave a pound of beef or a gallon of oil of any better quality or cheaper price than it is forced to do by competition. And why should we expect it to? Suppose that a trust builder started out honestly, fired by the vision of a world-wide machine—a benefit to man and a glory to his nation—and to accomplish this end he breaks laws, crushes rivals, lies, is cruel, treacherous, unscrupulous. How long will his vision resist his evil doing? Let us who have seen our visions fade by the hardening of our hearts which let us grant that the man may have had at the start, is killed by the wrong doing necessary to secure his end. A selfish greed of power and gold replaces it. It cannot be otherwise. The ideal must deteriorate if the means used to realize it are vicious.
Unbridled Greed Leads to Downfall of Powerful Business Leaders
Look at the history of the Life Insurance Companies as revealed recently. The men at their heads have wrought their own ruin by deliberately doing evil—doing evil because of their unbridled, increasing greed. Yet, no doubt, the day was when many of the men foremost in these scandals were fired by the nobility and the sacredness of their business, and looked with pride and exultation on the amount of the return they could by careful and devoted management, make to the thousands upon thousands of the poor who saved and denied themselves and struggled to provide for dependent wife or child. And yet these men came to struggle to secure for themselves and their families and friends the bulk of all the earnings coming from the money of those who had trusted them. Never, indeed, have we had a more perfect example of the ultimate result of the Machiavellian formula—and that is the moral downfall of the man who practices it.
Machiavellian Practices Corrupt Employees and the Youth
But the formula not only ruins the men who practice it--what does it do for the great body of young men who, as employees of a great corporation, must, of necessity, know the meaning of the practices? Take the matter of bribing clerks in railroad freight offices to turn over information concerning the shipments of rival concerns. In at least one great trust this practice is so extensive as to have become a matter of elaborate bookkeeping. No clerk can be so stupid as not to know he is doing a wrong and harmful act when he betrays private information. He knows the money paid him for the information is a bribe. Yet the money comes from a great and powerful corporation. Even if he wants to refuse it he dares not lest he lose his position. His honor is sullied—his manhood shaken—his soul corrupted. There can be no estimation of the corruption of manliness which this practice alone has caused. There can be no condemnation too bitter of the men who have devised the system. They are corrupters of youth.
Machiavellian Practices Teach That Lying Is Part of Business Strategy
Think again of what must be the effect on a great body of young men employed by a trust, when they know their president has lied deliberately on the witness stand, has lied for the good of the business. There are plenty of such cases revealed in our commercial investigations. The young man loyal to his employer and yet trained to honor the truth must almost inevitably come to the conclusion that lying is one of the necessary implements in successful business—and as time goes on he probably will conclude that it is all right if it will aid in getting you anything you want. If the good of the business justifies lying, it justifies all other things—law-breaking, cruelty, treachery; unconsciously the young man becomes a Machiavellian in his theory of the relation of honor to business.
The Young Men in America are Learning the Art of Commercial Machiavellianism
Not only does he come to defend these practices to himself; he soon will be adept in defending them to others. Let us suppose that the private secretary of some great captain of industry of today—a man who, for the good of the business, has found it necessary to put into practice the methods we have been considering--suppose this man's confidential secretary to be a man of keen and analytical mind, of clear power of expression, of an ardent enthusiasm for business, loving the particular industry whose captain he serves as Machiavelli loved Florence; ambitious to see it all-powerful as Machiavelli was ambitious to see his beautiful Florence powerful; and let it come to a point in his career, as it came in Machiavelli's when he was about forty-five years old, that his industry, after the loss of its first powerful head, retrogrades from a first to a second or a third place in the order of business industries—that it is in danger of falling still lower. The secretary sees the reason—the new management has loosened its grip. It no longer fights for the privileges the law forbids—no longer tracks its competitors in secret and in secret undermines them, no longer bribes or lies. Can you not imagine this secretary reared to believe that these things are essential in business and that business success is a paramount duty; can you not imagine him sitting down to frame for the guidance of those who, in his judgment, are ruining the business—the code which alone in his experience and judgment can make a business great? That is, our young men the country over are not only learning the essentials of commercial Machiavellianism and accepting them, but they are becoming their defenders. And when they reach this point clear thinking and unselfish actions will be as impossible to them as recent revelations show that they have become to an appalling number of our financial leaders. They are men lost to society—men lost to the state. There is but one name for this and that is treason. Indeed, I doubt if this trust question has a more serious phase than this corrupting of the minds and the hearts of youths.
Machiavellianism Is the Working Formula of the Major Political Parties in America
But this Machiavellian formula affects more than our industrial life today. It is, to an alarming degree, the working formula of our political parties. It has reduced at least one great sport to a degradation which is a national scandal. It crops out in every art and profession. It has invaded even the field whose teachings are most fundamentally antagonistic to it—the field of the Christian religion. What are the scandals of our political life but the gross application of the great Italian's principles. We buy votes that our party may succeed. It is illegal, it is corrupt; but the success of the party is higher law, to which we must sacrifice our common creed of morals. We stuff ballot boxes, run in repeaters, vote in blocks of five, juggle the returns all for the glory of the party. We take the funds of corporations whose only object we know to be to provide a future protection and favor for themselves, we do it though it is in many places contrary to law, and everywhere contrary to sound morals. We tolerate, even support, in their aspirations unspeakable politicians like Addicks of Delaware, Depew of New York, Quay of Pennsylvania. The good of the party requires it. If by any chance scandals occur, bribery is too flagrant, the alliance between the Campaign Committee and the Corporations too obvious, the activities of the politicians too pernicious, we do our best not to force out the truth that we may correct the wrongs; we cover them with plausible explanations, condone them with scriptural quotations on the sin of judging our fellow man—as if the whole basis of government by the people was not judging him—protect them with the pious challenge "let him who is without sin cast the first stone," silence all critics by a bluster of righteous indignation as to the impossibility of people whose aims and words are so noble doing these vile things. It is the Machiavellian game of affirming you are virtuous whatever your practices. It is a great game, and, well played, it works a long time.
The Machiavellian Creed Influences All Aspects of Life Including Literature
But it is impossible in a nation where business and politics are the two absorbing interests that the dominating creed of those interests should not influence all departments of life. It is inevitable that our art and our literature should not escape the Machiavellian hand which rules us. We see it in the overweening respect that we have for the "best-sellers" among books, the big prices of the artists. Quantity and price, not the integrity, sincerity, and freshness of the product, are unquestionable, powerful motives in artistic life today.
The Influence of Machiavellian Doctrines on Christianity
Most deplorable of all is the influence these doctrines have on the Church. In a poem published not long ago in a leading religious journal this line is found, "The Union right or wrong, still this will be my song." It is nothing but a new version of the Middle Age theory that for the glory of a country a man should be willing to sell his soul. And could anything be more brutally Machiavellian than the arguments recently brought to bear upon one great captain of industry by certain of those who were trying to induce him to contribute to foreign missions, that quite apart from the persons converted the mere commercial result of missionary effort to our land is worth a thousandfold every year of what is spent on missions!
Commercial Machiavellianism Is the Most Alarming Phase of American Life Today
It is this threatening saturation of all our active ties with commercial Machiavellianism which is the most alarming phase of American life today. Unless it is checked it means a general demoralization of the sense of fair play, a general lowering of our intellectual honesty. Our indifference to it up to this point has, perhaps, been natural enough. The nation, as a whole, has been dazzled by its material success. There is no one of us with blood in his veins, with the love of great games and great fights in his heart, that is not stirred by the sight of growth, of expansion, of the piling up of wealth and power. These mammoth enterprises of ours, extending around the earth, fill us with exultant pride. We are an achieving people, we say. We recall, too, that these great material successes mean other things. They mean endowments for our colleges, buildings and equipment for our hospitals, fresh funds for our missions, parks in our cities, pictures in our museum. It is, perhaps, natural that in our pride at the magnificence of our results we should overlook the integrity of the means by which they are achieved, should fail to ask ourselves whether clear thinking, honest living, aspiring ideals, unselfish devotion to unselfish ends were growing as fast as endowments and buildings. It is certainly easy enough for any one to persuade himself for a time at least that material growth is its own justification, particularly when that success contributes to one's pet enterprises.
Growing Public Indifference at How Men Make Money
At all events for many years warnings against the corruption inherent in our illegal and immoral business practices have been received by the majority of those to whom our public morals are entrusted with silence or apology. "Judge not lest ye be judged," "Let him who is without sin cast the first stone," they tell us. Can there be greater blasphemy than to apply these noble Christian counsels to men convicted repeatedly of betraying their trusts, of perjuring themselves for business sake, of breaking and evading laws for greed. Even the continued revelations of these practices and the awful results in destroying character which are and have been coming to us daily this fall have not been sufficient to disturb the complacency of many a smooth-tongued teacher. We still hear "wait—judge not lest ye be judged " uttered by eminent mouths as proof after proof is laid before us of the ruin of character which has been wrought by our long indifference to how a man made his money if he only made it and gave it to the church or college or city. This is no advocacy of hasty condemnation. To accuse without proof is a crime, but to excuse when you have proof is likewise a crime.
The People Must Declare For or Against the Machiavellian Doctrines
The issue is coming to be too distinct to evade. We must either declare for or against the Machiavellian theory. I am told that it is useless to trouble ourselves, that it will right itself. And that is true. It will right itself in the long run. We all of us may accept, root and branch, the Machiavellian theory, accept it, practice it in our business, in our homes, in society. We may make this country as truly Machiavellian as was the Age of Despots, but that will not defeat the ultimate triumph of eternal justice. The Good is the stronger principle. It finally prevails. All that we can do is temporarily to accelerate or to delay the stream of righteousness. We can help make our age Machiavellian, but all of the men of the earth combined cannot entrench that theory so firmly that a future age will not destroy our work. We cannot build so gloriously with it that a future age will not condemn us as we do the Despots of Italy. The question is whether we are going to throw our weight for or against the present system—whether we are going as a nation to tolerate it and let the future overthrow it or whether we are going to try to take care of it ourselves.
Commercial Machiavellianism Is Our Great Problem Today
There are many signs that we are choosing do our own housecleaning, that we have intention of going down to history along with Cesare Borgia and Alexander VI, the Monks of the Inquisition and Count-Metternich; that we are recognizing frankly that commercial Machiavellianism is our great present-day problem.
The Most Effective Strategy Is to Expose the Machiavellian Principles Practiced by Businessmen Today
And if so, what is there to do about it ? The first and most effective work is to air the formula, drag it out into the light, put it down in black and white, state it exactly as it is and as our captains practice it. How many of the very men who practice the Machiavellian formula would be willing to stand by it in the open if it were put to them in its bald truth ? How many of them would openly put their names to the following creed ?
The Modern Machiavellian Creed
"Success is the paramount duty. It can be attained in the highest degree only by force. At times it requires violence, cruelty, falsehood, perjury, treachery. Do not hesitate at these practices, only be sure they are necessary for the good of the business and be very careful to insist upon them always as wise and kind and that they work together for the greatest good of the greatest number." We all know that there is scarcely one of them so hardened that he would not pale at the thought of signing that creed and yet it is constructed substantially out of their own words as spoken at one time or another on the witness-stand.
A System Which Requires That Men Sell Their Souls for Worldly Glory
The truth is the Machiavellian formula carries its own death potion with in. It cannot stand the light. It is only strong when is out of sight—when it is unuttered. Today, as four hundred years ago, state it bluntly and men disown it. Why was Machiavelli repudiated by Italy as soon as the Prince was published? Why has his name remained to this day in all nations an adjective of reproach? Because he set forth uncondemned a system which demands that men sell their souls for worldly glory. And never in any age, blind and hard and temporizing as men may have been, have they been fling to admit aloud that it pays to buy wealth or power or glory at the cost of the soul. They are willing to practice the formula so long as they can avoid hearing it; those who profited by their success have been willing to support them so long as they could deaden their intellects by repeating "judge not lest ye be judged," but when it came to defending the Machiavellian creed aloud, they dared not do it.
Truth Is the Cure for Commercial Machiavellianism
And herein lies our safety. The truth, nothing but the truth, ugly and cruel and relentless as it may be, is the cure for commercial Machiavellianism. ("Commercial Machiavellianism," McClure's Magazine, Vol. XXVI, March, 1906, No. 5, pp. 453-463.)
ii. The Development of the European Banking System Throughout the World
A World System of Financial Control in Private Hands Able to Dominate the Political System of Each Country and the Economy of the World As A Whole
"... [T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank, in the hands of men like Montagu Norman of the Bank of England, Benjamin Strong of the New York Federal Reserve Bank, Charles Rist of the Bank of France, and Hjalmar Schacht of the Reichsbank, sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.
"In each country the power of the central bank rested largely on its control of credit and money supply. In the world as a whole the power of the central bankers rested very largely on their control of loans and of gold flows.... [T]hese central bankers were able to mobilize resources to assist each other through the B. I. S., where payments between central banks could be made by bookkeeping adjustments between the accounts which the central banks of the world would keep there. The B. I. S. as a private institution was owned by the seven chief central banks and was operated by the heads of these, who together formed its governing board. Each of these kept a substantial deposit at the B. I. S., and periodically settled payments among themselves (and thus between the major countries of the world) by bookkeeping in order to avoid shipments of gold. They made agreements on all the major financial problems of the world, as well as on many of the economic and political problems, especially in reference to loans, payments, and the economic future of the chief areas of the globe.
"The B. I. S. is generally regarded as the apex of the structure of financial capitalism whose remote origins go back to the creation of the Bank of England in 1694 and the Bank of France in 1803.
"... It must not be felt that these heads of the world's chief central banks were themselves substantive powers in world finance. They were not. Rather, they were the technicians and agents of the dominant investment bankers of their own countries, who had raised them up and were perfectly capable of throwing them down.
"The substantive financial powers of the world were in the hands of these investment bankers (also called 'international' or 'merchant' barkers) who remained largely behind the scenes in their own unincorporated private banks. These [bankers] formed a system of international cooperation and national dominance which was more private, more powerful, and more secret than that of their agents in the central banks. This dominance of investment bankers was based on their control over the flows of credit and investment funds in their own countries and throughout the world. They could dominate the financial and industrial systems of their countries by their influence over the flow of current funds through bank loans, the discount rate, and the rediscounting of commercial debts; they could dominate governments by their control over current government loans and the play of the international exchanges.
"Almost all of this power was exercised by the personal influence and prestige of men who had demonstrated their ability in the past to bring off successful financial coupes, to keep their word, to remain cool in a crisis, and to share their winning opportunities with their associates. In this system the Rothschilds had been preeminent during much of the nineteenth century, but, at the end of that century, they were being replaced by J. P. Morgan whose central office in New York, although it was always operated as if it were in London (where it has, indeed, originated as George Peabody and Company in 1838). Old J. P. Morgan died in 1913, but was succeeded by his son of the same name (who had been trained in the London branch until 1901), while the chief decisions in the firm were increasingly made by Thomas W. Lamont after 1924. " (Carroll Quigley, Tragedy and Hope: A History of the World in Our Time, New York: The Macmillan Company, 1966, pp. 324, 326-327.)
Ignorance of the Nature of Coin, Credit and Circulation Lead to Perplexities in America
"All the perplexities, confusion, and distress in America arise, not from defects in the Constitution or confederation, not from the want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation." (John Adams, Letter to Thomas Jefferson, 1787. Quoted in Robert L. Owen, National Economy and The Banking System of the United States, Senate Document No. 23, 76th Congress, 1st Session, Washington, D. C.: Government Printing Office, 1939, p 99.)
Banking Institutions Are More Dangerous to the Liberties of People Than Standing Armies
"If the American people ever allow the banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied. The issuing power of money should be taken from the banks and restored to Congress and the people to whom its belongs. I sincerely believe the banking institutions are more dangerous to our liberties that standing armies. Already they have raised up a monied aristocracy that has set the Government at defiance." (Thomas Jefferson. Quoted in Olive Cushing Dwinell, The Story of Our Money, p. 84 and Robert L. Owen, National Economy and the Banking System of the United States, p. 99.)
The Importance of Controlling the Issuance of Money in a Nation-State
"Permit me to issue and control the money of a nation, and I care not who makes its laws." (Mayer Anselm Rothschild, 1790. Quoted in Robert L. Owen, National Economy and the Banking System of the United States, p. 99.)
The European Banking System is Based on Debt
"Let the American people go into their debt-funding schemes and banking systems, and from that hour their boasted independence will be a mere phantom." (William Pitt, Chancellar of the Exchequer, England, 1791. Quoted in T. Cushing Daniel, Real Money Verses False Money--Bank Credits, p. 32.)
The European Banking System Is Designed to Enslave Individuals, Communities and Nations
Of all aristocracies, none more completely enslave a people than that of money; and in the opinion of your committee, no system was ever better devised so perfectly to enslave a community as that of the present mode of conducting banking establishments. Like the siren of the fable, they entice to destroy. The hold the purse-strings of society, and by monopolizing the whole of the circulating medium of the country, they form a precarious standard by which the property in the country--homes, lands, debts and credits, personal and real estate of all description--are valued, this rendering the whole community dependent upon them; proscribing every man who dares to expose their unlawful practices." (Report of the Legislative Committee, State of New York, 1818. Quoted in T. Cushing Daniel, Real Money Verses False Money--Bank Credits, p. 33.
The European Banking System Is Designed to Build Up a Money Aristocracy
"There never has been devised by any man a plan more specious by which labour could be robbed of the fruit of toil than the banking system. The people not only take bank paper as money, paying interest on it, but when banks suspend, the people lose the discount while the bankers gain it.
"The people wonder why financial panics occur so frequently. I can tell them why. It is to the interests of the bankers and brokers that they should occur. It is one of the specious methods by which these despotic and utterly useless knaves rob the producing, manufacturing and mercantile classes of their honest earnings. It is one of the chief plans by which this infamous ring is riveting the chains of slavery upon the limbs of labour. It is one of the chief means adopted to build up a money aristocracy that shall live in idle luxury and ape the pretentious airs of European nobility." (Daniel Webster. Quoted in Olive Cushing Dwinell, The Story of Our Money, pp. 139-140.)
The Elite Will Support the European Banking System Throughout the World
"The few [elite] who can understand the system (check money and credits) will either be so interested in its profits, or so dependent on its favors, that there will be no opposition from that class, while on the other hand, the great body of the people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests. (Letter written by the Rothschild Brothers of London, England to a New York firm of bankers, June 25, 1863. Quoted in Robert L. Owen, National Economy and the Banking System of the United States, pp. 99-100.)
Under the European Banking System Wealth is Aggregated In the Hands of the Elite
"Yes, we may congratulate ourselves that this cruel war is near the close, but I see in the future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of the war corporations have been enthroned, and an era of corruption will follow and the money power of the country will endeavor to prolong its reign by working on the prejudices of the people until wealth is aggregated in a few hands and the Republic is destroyed. I feel at this moment more anxiety for the safety of my country that ever before, even in the midst of war." (Abraham Lincoln. Quoted in Olive Cushing Dwinell, The Story of Our Money, p. 202.)
National Debts Are a Form of Taxation
"National debts paying interest are simply the purchase by the rich of the power to tax the poor." (John Ruskin. Quoted in T. Cushing Daniel, Real Money Verses False Money--Bank Credits, p. 41.)
Wall Street Investment Banker Predicts Panic in America
"Unless we have a central bank with adequate control of credit resources, this country is going to undergo the most severe and far-reaching money panic in its history." (Jacob Schiff, Senior Partner, Kuhn, Loeb Co. Speech, Chamber of Commerce, New York, 1907.)
The U. S. Government is a Foster Child of Special Interests
"Suppose you go to Washington and try to get at your government. You will always find that while you are politely listened to, the men really consulted are the big men who have the biggest stakes--the big bankers, the big manufacturers, the big masters of commerce.... Every time it has come to a critical question, these gentlemen" have been yielded to, and their demands treated as the demands that should be followed as a matter of course. The government of the United States is a foster child of special interests." (Woodrow Wilson, 1912, Quoted in The Nation, November 19, 1990, p. 589.)
The Greatest Monopoly in America
"The greatest monopoly in this country is the money monopoly. So long as that exists, our old variety and freedom and individual energy of development are out of the question. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men.... This is the greatest question of all; and to this, statesmen must address themselves with an earnest determination to serve the long future and the true liberties of men. " (Woodrow Wilson, Quoted in Louis D. Brandeis, Other People's Money and How Bankers Use It. New York: Frederick A. Stokes. Co., 1932 edition, pp. 1-2.)
The Money Trust is Not a Myth
"The control of credit also became dangerously centralized.... The financial resources of the country are [controlled by] small groups of capitalists.... The great monopoly of this country is the monopoly of big credits.... A great industrial nation is controlled by its system of credit. Our System of credit is privately concentrated. The growth of our nation, therefore, and all our activities, are in the hands of a few men.... This Money Trust ... is not a myth.... " (Woodrow Wilson, Quoted in Carter Class, Adventures in Constructive Finance, pp. 77-79.)
The Power of International Bankers and Monopolists
"Don't deceive yourselves for a moment as to the power of the great interests which now dominate our development. They are so great that it is almost an open question whether the Government of the United States can dominate them or not.
"Monopoly means atrophy of industry. If monopoly persists, monopoly will always sit at the helm of government. I do not expect to see monopoly restrain itself. If there are men in this country big enough to own the government of the United States, they are going to own it; what we have to determine now is whether we are big enough, whether we are men enough, whether we are free enough, to take possession again of the Government which is our own. We haven't had free access to it; our minds have not touched it by way of guidance, in half a generation.... " (Woodrow Wilson, Quoted in Olive Cushing Dwinell, The Story of Our Money, no date. p. 190.)
Federal Reserve Act Established the Most Gigantic Trust on Earth
"This Act [Federal Reserve Act] establishes the most gigantic trust on earth. When the President [Woodrow Wilson] signs this bill, the invisible government by the monetary power will be legalized. The people may not know it immediately, but the day of reckoning is only a few years removed. The trusts will soon realize that they have gone too far for their own good. The people must make a declaration of independence to relieve themselves from the monetary power. This they will be able to do by taking control of Congress. Wall Streeters could not cheat us if you Senators and Representatives did not make a humbug of Congress. The division of Congress into political parties is a crime. The main object of the bosses in both political parties is to get offices and grant special favors at the people's expense. This is inherently a national government, and that is why party government is unsuccessful in dealing with economic problems. If we have a people's Congress, there would be stability. The greatest crime of Congress is its currency system. The worst legislative crime of the ages is perpetrated by this banking and currency bill. The caucus and the party bosses have gain operated and prevented the people from getting the benefits of their own government." (Congressman Charles A. Lindbergh, Congressional Record, December 23, 1913.
The Elite Financial Oligarchy is Dominated by International Investment Bankers
"The dominant element in our financial oligarchy is the investment banker. Associated banks, trust companies and life insurance companies are his tools. Controlled railroads, public service and industrial corporations are his subjects. Though properly but middlemen, these bankers bestride as masters America's business world, so that practically no large enterprise can be undertaken successfully without their participation or approval. These bankers are, of course, able men possessed of large fortunes; but the most potent factor in their control of business is not the possession of extraordinary ability or huge wealth. The key to their power is Combination--concentration intensive and comprehensive--advancing on three distinct lines:
"First: There is the obvious consolidation of banks and trust companies; the less obvious affiliations--through stockholdings, voting trusts and interlocking directorates--of banking institutions which are not legally connected; and the joint transactions, gentlemen's agreements, and 'banking ethics' which eliminate competition among the investment bankers.
"Second: There is the consolidation of railroads into huge systems, the large combinations of public service corporations and the formation of industrial trusts, which, by making businesses so 'big' that local, independent banking concerns cannot alone supply the necessary funds, has created dependence upon the associated New York bankers.
"But combination, however intensive, along these lines only, could not have produced the Money Trust--another and more potent factor of combination was added.
Third: Investment bankers, like J. P. Morgan & Co., dealers in bonds, stocks and notes, encroached upon the functions of the three other classes of corporations with which their business brought them into contact. They became the directing power in railroads, public service and industrial companies through which our great business operations are conducted--the makers of bonds and stocks. They became the directing power in the life insurance companies, and other corporate reservoirs of the people's savings--the buyers of bonds and stocks. They became the directing power also in banks and trust companies--the depositaries of the quick capital of the country--the life blood of business, with which they and others carried on their operations. Thus four distinct functions, each essential to business, and each exercised, originally, by a distinct set of men, became united in the investment banker. It is to this union of business functions that the existence of the Money Trust is mainly due.
The development of our financial oligarchy followed, in this respect, lines with which the history of political despotism has familiarized us:--usurpation, proceeding by gradual encroachment rather than by violent acts; subtle and often long-concealed concentration of distinct functions, which are beneficent when separately administered, and dangerous only when combined in the same persons. It was by processes such as these that Caesar Augustus became master of Rome...." (Louis D. Brandeis, Other People's Money And How Banker Use It, New York: Frederick A. Stokes 1914, 1932 edition, pp. 4-6.)
International Investment Bankers Devise An Ingenious System to Use Other People's Capital to Enrich Themselves
"The goose that lays golden eggs has been considered a most valuable possession. But even more profitable is the privilege of taking the golden eggs laid by somebody else's goose. The investment bankers and their associates now enjoy that privilege. They control the people through the people's own money. If the bankers' power were commensurate only with their wealthy, they would have relatively little influence on American business. Vast fortunes like those of the Astors are no doubt regrettable. They are inconsistent with democracy. They are unsocial. And they seem peculiarly unjust when they represent largely unearned increment. But the wealth of the Astors does not endanger political or industrial liberty. It is insignificant in amount as compared with the aggregate wealth of America, or even of New York City. It lacks significance largely because its owners have only the income from their own wealth. The Astor wealth is static. The wealth of the Morgan associates is dynamic. The power and the growth of power of our financial oligarchs comes from wielding the savings and quick capital of others. In two of the three great life insurance companies the influence of J. P. Morgan & Co. and their associates is exerted without any individual investment by them whatsoever. Even in the Equitable, where Mr. Morgan bought an actual majority of all the outstanding stock, his investment amounts to little more than one-half of one percent of the assets of the company. The fetters which bind the people are forged from the people's own gold.
"But the reservoir of other people's money, from which the investment bankers now draw their greatest power, is not the life insurance companies, but the banks and the trust companies. Bank deposits represent the really quick capital of the nation. They are the life blood of businesses. Their effective force is much greater than that of an equal amount of wealth permanently invested. The 34 banks and trust companies, which the Pujo Committee declared to be directly controlled by the Morgan associates, held $1,983,000,000 in deposits. Control of these institutions means the ability to lend a large part of these funds, directly and indirectly, to themselves; and what is often even more important, the power to prevent the funds being lent to any rival interests. These huge deposits can, in the discretion of those in control, be used to meet the temporary needs of their subject corporations. When bonds and stocks are issued to finance permanently these corporations, the bank deposits can, in large part, be loaned by the investment bankers in control to themselves and their associates; so that securities bought may be carried by them, until sold to investors. Or these bank deposits may be loaned to allied bankers, or jobbers in securities, or to speculators, to enable them to carry the bonds or stocks. Easy money tends to make securities rise in the market. Tight money nearly always make them fall. The control by the leading investment bankers over the banks and trust companies is so great, that they can often determine, for a time, the market for money by lending or refusing to lend on the Stock Exchange. In this way, among others, they have power to affect the general trend of prices in bonds and stocks. Their power over a particular security is even greater. Its sale on the market may depend upon whether the security is favored or discriminated against when offered to the banks and trust companies, as collateral for loans.
"Furthermore, it is the investment banker's access to other people's money in controlled banks and trust companies which alone enables any individual banking concern to take so large part of the annual output of bonds and stocks. The banker's own capital, however large, would soon be exhausted. And even the loanable funds of the banks would often by be exhausted, but for the large deposits made in those banks by the life insurance, railroad, public service, and industrial corporations which the bankers also control...." (Louis D. Brandeis, Other People's Money And How The Bankers Use It, New York: Frederick A. Stokes, 1914, 1932 edition, pp. 16-21.)
Government by Oligarchy
"Now to bring about government by oligarchy masquerading as democracy, it is fundamentally essential that all authority and control be centralized in our National Government." (Franklin D. Roosevelt, The Public Papers and addresses of Franklin D. Roosevelt, Volume I, The Genesis of the New Deal, 1928-1932, Radio Address on States Rights, March 2, 1030, New York: Random House, 1938, pp. 569-575.)
A Financial Element Controls the United States Government
"The real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson--and I am not wholly excepting the Administration of W. W. [Woodrow Wilson] The country is going through a repetition of Jackson's fight with the Bank of the United States--only on a far bigger and broader basis." (Franklin D. Roosevelt, Letter to Col. Edward Mandell House, November 21, 1933, F.D.R.: His Personal Letters, New York: Duell, Sloan & Pearce, 1950, p.373.)
The Masters of Industry and Commerce
"Whoever controls the volume of money in any country is absolute master of all industry and commerce. " (President James A. Garfield, Quoted in a speech by T. David Horton,, 'Monetary Crisis: Its Threat to Liberty," Congressional Record, May 11, 1972.)
Concentration of Political Power in the United States
"During these times of great concern about the nation's political institutions, the press and the populace-at-large have expressed growing discontent about the vague, informal concentrations of political power that so often appear to exercise a hold on the working of our democracy. Whatever the genesis of such concentrations, they seem to have a number of characteristics in common: They are in part invisible, they are self-perpetuating, and they deal in a kind of power that never was mentioned in the Constitution. Some of these entities are quite real... " (John Thackray, Institutional Investor, May 1974, p. 58.)
The United States is Dominated by a Hierarchy of Wealthy Families
"The United States is owned and dominated today by a hierarchy of its sixty richest families, buttressed by no more that ninety families of lesser wealth. Outside this plutocratic circle there are perhaps three hundred and fifty other families, less defined in development and in wealth, but accounting for most of the incomes of $100, 000 or more that do not accrue to members of the inner circle.
"These families are the living center of the modern industrial oligarchy which dominates the United States, functioning discreetly under a de jure democratic form of government behind which a de facto government, absolutist and plutocratic in its lineaments, has gradually taken form since the Civil War. This de facto government is actually the government of the United States--informal, invisible, shadowy. It is the government of money in a dollar democracy." (Ferdinand Lundberg, America's 60 Families, New York: The Citadel Press, 1946, p. 3.)
Mere Executives for the Main Groups of Banking Capital
"It is a common popular error to suppose that men like Owen D. Young, of the General Electric Company; Walter S. Gifford, of the American Telephone and Telegraph Company; Thomas W. Lamont, of J. P. Morgan and Company; Albert H. Higgens, until recently head of the Chase National Bank; Alfred P. Sloan, Jr., of General Motors; and Walter C. Teagle, of the Standard Oil Company of New Jersey, are leaders in the entourage of great wealth. Such figures, carefully publicized, are merely executives for the main groups of banking capital that represent the golden dynasties. These men have no independent power,; they do not speak for themselves any more that do actors on a stage. " (Ferdinand Lundberg, America's Sixty Families, p. 32.)
Thomas Lamont--An Agent of the Invisible Directory of High Finance and Politics
"An extraordinarily complex and resourceful personality like Thomas W. Lamont, who has been the brains of the J. P. Morgan and Company throughout the postwar period and was a mentor of Woodrow Wilson ... as well as of President Herbert Hoover ... has exercised more power for twenty years in the Western Hemisphere, has put into effect more final decisions from which there has been no appeal, than any other person. Lamont, in short, has been the First Consul de facto in the invisible Directory of postwar high finance and politics, a man consulted by presidents, prime ministers, governors of central banks, the directing intelligence behind the Dawes and Young Plans." (Ferdinand Lundberg, America's Sixty Families, p. 32.)
Private Banking Partnerships
"The private banking partnerships and the informal alliance are the ramparts behind the dominant families. In order of importance these private banking partnerships are J. P. Morgan and Company; Kuhn, Loeb and Company; Brown Brothers Harriman and Company; Lehman Brothers; Dillon, Read and Company; Bonbright and Company (Morgan); Lazard Freres; J. and W. Seligman; Speyer and Company; Goldman Sachs and Company; Hallgarten and Company; and Ladenburg, Thalmann and Company. " (Ferdinand Lundberg, America's Sixty Families, p. 34.)
Silent Economic Forces Control the Destiny of Man
"The destinies of man are being molded by silent economic forces, which it is folly to resist, and that it is only by acting with and not against them that he can hope to advance his fortunes.... It is unwise to neglect forces, the strength of which you are unable to measure. The power of Central Banks in cooperation, on the scale contemplated in the formation of the Bank for International Settlements, has never yet been put to the test. (Sir Charles Addis, K.C.M.G., Director, Bank of England, Journal of the Institute of Bankers, Volume 3, 1930, pp. 247-254.)
The Powers Which Preside Over Nations
"It is strange that the powers which preside over the fate of nations should not have called into being such an institution [Royal Institute of International Affairs, London] as this long ago.... Not one of the great blessing for which we pray, the aspirations to which we give vent when we talk of the federation of the world and the parliament of man, not one of these things will come to us unsought." (J. R. Clynes, Member, British Parliament, The British Institute of International Affairs, July 1922, 32-33.)
Three Hundred Men Control the Destiny of Europe
"Three hundred men, all of whom know one another, direct the economic destiny of Europe and choose their successors from among themselves. " (Walter Rathenau, Quoted in Quigley, Tragedy and Hope. p. 61.)
The Supreme Money Power
"The hinge of the whole situation was this: the government itself was not to be a substantive power in matters of Finance, but was to leave the Money Power supreme and unquestioned. " (William Gladstone. 1852, Chancellor of the Exchequer, Quoted in Quigley, Tragedy and Hope, p. 61.)
Bankers Do Create Money
"I am afraid the ordinary citizen will not like to be told that the bankers can and do, create money... And they who control the credit of the nations direct the policy of Governments and hold in the hollow of their hands the destiny of the people. " (Reginald McKenna, Quoted in Tragedy and Hope, p. 325.)
Corporate Monopolies Could Not Exist Without the Aid of Government
"Our thesis is that the current concentration level [of corporations] cannot be explained simply in terms of technological or economic imperatives. Monopoly is not the result of spontaneous generation or natural selection. On the contrary, it is often the outgrowth of unwise, discriminatory, privilege-creating governmental measures which throttle competition and restrict opportunity. It is the concomitant of unimaginative, shortsighted, or corrupt exercise of governmental power. Government today is, in many instances, a promoter of monopoly. It frequently puts together the very power concentrates which the anti-trust authorities are later called upon to break asunder. In short, government often supports, rather than countervails, the forces making for concentration and monopoly. (Monopoly ... denotes an industry situation where a single firm or a small group of firms--by virtue of horizontal, vertical, or conglomerate integration--possess substantial economic power.)
"Given neutrality by the government, concentration could be reduced and competition enhanced in many industries. If government is to resist subversion by special interest groups, it must encourage a diffusion of power. If our goal is a free economy and a democratic society, government must maintain an arm's length relationship with business as well as other power concentrates. As Mr. Dooley so shrewdly observed: '... th' on'y thing to do is to keep pollyticians an' business men apart. They seem to have a bad infloonce on each other. Whiniver I see an alderman an' a banker walkin' down the street together I know th' Recordin' Angel will have to ordher another bottle iv ink.'
"... There appears to be under way a gradual but unmistakable retreat from the traditional anti-monopoly policy which for over three hundred years has prevailed in the Anglo-Saxon community toward an ambiguous and somewhat apologetic acceptance of monopoly as a necessary, even desirable, form of economic organization. This movement, long under way but proceeding slowly, has been accelerated in recent years, particularly since 1940, and now comes perilously close to the point of no return, where a reversal of direction becomes institutionally difficult, if not impossible, and the nation is committed irretrievably to a monopolistic way of life.
"This retrograde movement exacts a twofold price in terms of policy. With every backward step federal anti-trust policy becomes more debilitated, confused, and circumscribed, less vigorous in maintaining competition, less courageous in resisting the aggressions of monopoly; with every advance of monopoly toward greater economic power and more general social acceptance, the federal government becomes more subservient to it, more dependent on it, more disposed to favor it with grants of privilege, protection, and subsidy. The effect of these concomitant changes is to accelerate the decline of competition, on the one hand, and the aggrandizement of monopoly, on the other. The ultimate destination, if this trend continues, will be the abandonment of competition, both as an economic practice and as a social ideal, and the emergence of legalized private monopoly as the dominant form of economic organization. This is the familiar 'unification of political and economic power' exemplified by modern totalitarianism." (Walter Adams & Horace M. Gray, Monopoly In America: the Government as Promoter, New York: The Macmillan Company, 1955, pp. vii-viii, 1.)
Convergence of Capitalist and Communist Systems
"The Communists believe that the world will converge, but into an essentially communist form of government. In the West, on the other hand, the widespread theory of convergence assumes that the fundamentally important aspects of the democratic system will be retained after America and Russia 'converge' at some future, indeterminate historical juncture. Although probably there will be more economic planning and social ownership in the West, the theory sees the Communist Party and its monopoly of power as the real victims of the historical process: both will fade away. Thus on closer examination it is striking to discover that most theories of the so-called convergence in reality posit not convergence but submergence of the opposite system. Hence the Western and the communist theories of convergence are basically revolutionary: both predict a revolutionary change in the character of one of the present systems. The Communists openly state it. In the West, it is implicit in the prevalent convergence argument.
"...The Soviet and the American political systems, each in its own way, have been highly successful. Because they have been successful, they are not likely to change drastically. Yet for the two systems to converge there would have to be a drastic alteration of course--in a historical sense, a revolutionary change of direction--in the path of development of one of them. " (Zbigniew Brzezinski & Samuel P. Huntington, Political Power: U.S.A./U.S.S.R..--Similarities and Contrasts--Convergence or evolution. New York: The Viking Press, 1964, pp. 419, 136.)
The Creation of International Money
"... Central bankers have participated actively in the last years in the extensive discussions that have gone on concerning the next steps in the evolution of the international monetary system. These have focussed on the means of making the creation of international reserves a matter of international responsibility. I believe that sooner or later we shall have to take a major step forward in providing the machinery for creating reserves by deliberate collective action.... " (Louis Rasminsky, Governor, Bank of Canada, "The Role of the Central Banker Today," Per Jacobsson Lecture, November 6, 1966, Altieri Palace, Rome, Italy.)
Development of a New Imperial System to Govern the World
"The economic benefits of global integration will be unevenly spread and some areas will gain very little. The resulting inequality is likely to breed conflict. Moreover, even if multinational corporations distribute industrial production more evenly about the globe than is now the case, they will tend to centralize strategic decisions in regional coordinating centers and at global corporate headquarters. As Stephen Hymer put it, high level decision-making about what technologies and which areas to develop will be taken in a few key cities in the advanced countries, surrounded by regional sub-capitals, while the rest of the world will be confined 'to lower levels of activity and income, i.e., to the status of towns and villages in a new Imperial System...."' (Joseph Hye. Quoted in George W. Ball, ed., Global Companies, the Political Economy of World Business, Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1975, p 162.)
Imposing International Rules on Nation-States
"The planners of the postwar international economic structure, under the leadership of the United States, were determined to move away from economic nationalism toward international cooperation and interdependence. To achieve these goals intergovernmental organizations were created with the authority to adopt rules of international behavior and to impose those rules on member states.
"These organizations were the International Trade Organization (ITO), the International Monetary Fund (IMF), and numerous others established for specific purposes, including the International Bank for Reconstruction and Development (or World Bank), the Food and Agricultural Organization (FAO), and the International Labor Organization (ILO). The ITO was to be the international institution for trade relations. Because the U.S. Senate failed to ratify the Havana Charter, the ITO was never born. As an interim measure, a General Agreement on tariff and Trade (GATT) was hurriedly negotiated and concluded in November 1947. This general Agreement embodied most of the principles that were to be the foundations of ITO. It is this 'interim measure' that provides again today the facilities for multilateral trade agreements and for the reduction of reciprocal tariffs among member countries. It is, thus, at the same time a multilateral agreement and an institution.... (Pierre Lortie, Economic Integration and the Law of GATT, New York: Prague Publishers, 1975, p. viii.)
Shaping a System That Embraces the Entire Global Community Including Russian and China
"We have to seek cooperation with the communist states, pointing eventually to a political and ultimately even philosophical accommodation with them. The differences that divide us are the products of 19th century thought, increasingly less relevant to the conditions of the 20th, not to speak of the 21st century. But at the same time, we have to be aware of realistic limits to the scope of possible cooperation with communist states at this time in history. In my own view, we are neither historically or philosophically prepared to engage jointly in a global architectural effort. We still need to seek cooperation step by step, functionally and regionally, as opportunity permits...
"The moment may be right for some joint American-Soviet arrangements in the Middle East. Certainly in SALT the strategic relationship is belong codified by the United States and the Soviet Union. And there is room for much more trade with the communist states.
"But when it comes to the large, immediate, architectural issues of the day, it seems to me that the first priority still is that of the trilateral relations. It is here where the philosophical basis preconditions for cooperation surely exist. It is clear, it seems to me, that there is the opportunity for real architecture and initiative. I thus see, in the emerging world, our three regions still representing the more cooperative, the more vital center. I would hope that because of this we would fashion new or additional procedures for more effective consultations, for the shaping of joint initiatives for the central and global problems of our times. I would hope to see the emergence of new political caucuses spanning our trilateral regions is some existing international institutions. But I would argue that the focus must not be the preservation of the status quo, but arrangements which increasingly co-op and embrace the Third and Fourth Worlds in a cooperative endeavor.
"This will be a very prolonged process. The international system created in 1945 was, so to speak, created through an act of will and human initiative in a relatively restricted period of time. This was possible because one power had over-whelming might and influence, and others were closely associated with it. In contrast. a renovated international system will now require a process of creation--much longer, much more complex--a process in which prolonged negotiations will have to be engaged and developed. It will require a process which recognizes the need for global adjustment in wealth, while creating additional wealth. It will, in any case, be a slow process....The process will clearly be a long one, and one has to anticipate enormous difficulties along the way.
"Nonetheless, we confront today an era of extraordinary opportunity, and an era to which democracies particularly ought to look forward with confidence. For all of the travails of our time, this century has been one of unprecedented progress. As the beginning of this century, approximately 1% of the world's population lived in conditions above those of minimum human survival. Today, with a population three times higher, 30% of the world's population has reached that level, and modern democracies have pioneered much of that progress. In 1945, existing democracies shaped an international system which has been particularly efficient and desirable from the standpoint of trilateral democracies. Today the challenge which we ought to welcome is to shape a system which embraces the entire global community, and our trilateral regions can find a special opportunity in moving towards that end. " (Zbigniew Brzezinski, Trilogue, New York: The Trilateral Commission, 1975, No. 7, p. 13.)
Toward A Global Convergence with Russia
"Humankind is entering an era in which ideological rigidities are giving way to the pragmatism of nation-state competition. It is an era of convergence. Not so much a convergence of capitalism toward communism; nor a convergence of communism toward capitalism. Rather, the convergence is toward a model of the National Security State in which traditional ideology is a secondary factor in government policy. It is a convergence toward a corporate elite rule based on national security logic rather than ideology.
"For reasons given above, including the danger of an abrupt change of self-image, both superpowers can be expected to continue to deny (for another five years or more) that this convergence is happening. Meanwhile, both have their isolated New Classes who, under the rubric of national security, make decisions that profoundly determine the lives of the people.
"Both have their masses locked out of the decision-making process under the same rubric. Both are corporate states dominated by corporate goals. Both give verbal homage to their principal philosophers of human liberation (Marx and Jefferson) while precluding most of the humanistic values of these philosophers from the criteria for public policy. " (Gerald and Patricia Mische, Toward A Human World Order--Beyond the National Security Straitjacket, New York: Paulish Press, 1977, pp. 164-165.)
Time Table For New World Order
"The time frame is in the final quarter of the twentieth century....
"Within this time frame, three phases are generally projected as marking progressive development toward world order: consciousness raising, politicization and transformation. A general
strategy progression can be seen in relationship to these phases:
"I. Consciousness Raising
"The main strategy objective in this first phase is to develop widespread public consciousness about the WHY, WHAT and HOW of world order. The major effort is to enable citizens and leaders to see that true national interest and security and true personal interest and security lie in a world security system. A central focus is on the straitjacket of the present National Security State system and the powerlessness it engenders. Also included, however, is an awareness of alternative world order scenarios...and the practical dimensions of multi-issue coalition strategies....
"II. Politicization
"In this phase the question of world order moves into the sphere of politics as a public issue of true national interest and security. Building on the general consciousness raised in the first phase, the main strategy effort here is to mobilize grass-roots coalitions into effective movements for political change. When possible, the focus is on catalyzing 'the people' as agents of change. In democratically closed societies, however, the actors would be the New Class of managers and technical elites.
"The political task is a double one: to demonstrate to political leaders that 'the people' declare ownership in the world-order movement by contributing their own insights and preferences in the conceptualization of the functional agencies of a world-order system.
"III. Transformation
"This is the period in which the various components of the world-order system take concrete form. A major focus here is to develop the functional agencies of a world-order system and delegate effective global authority needed by these agencies to accomplish their functions.
"Obviously these three phases are not mutually exclusive. The processes of consciousness raising, politicization and transformation, to varying degrees, are all already in evidence and will continue to be operative throughout the next twenty to twenty-five years. It is a question of emphasis. Consciousness raising about the WHY, WHAT and HOW of world order--already begun in many countries--will be predominant in the late 70's and early 80's but continue through the late 80's and 90's. Similarly, the politicization processes, evidenced now in limited form, will strengthen in the 80's and continue into the 90's. Transformation of the present world system, is also a process that will be operative throughout the next decades. " (Gerald and Patricia Mische, Toward A Human World Order--Beyond the National Security Straitjacket, pp. 278-280.)
Limitation of National Sovereignty
"Every international agreement which amounts to anything involves some limitation of national sovereignty and interdependence will in the long run relegate this over-glamorized term to its relatively minor order of importance. " (Sir Eric Wyndharn-White, Beyond Diplomacy: Decision-making in an Interdependent World, Policy Papers, Washington, D. C.: The Atlantic Council of the United States, no date, p. 83.)
A Period of Transition in the International Banking System
"... There is not now in place a permanent and operable worldwide monetary system with strong institutionalized safeguards to cushion and counter balance major disruptions. It is important not to overstate the problem, because negotiations are underway to fashion the outline of a new system or systems...." (F. Robert Abboud, Chairman. First Chicago Corporation, Institutional Investor, December 1979, p. 51.)
Steps Toward a Global Monetary System
"The impact of the European Monetary System and the International Monetary Fund's special drawing rights substitution accounts on the structure of markets will not be clear for quite some time. Both of these developments represent steps toward a global monetary system. The diminution of national control implied by these developments is widely acknowledged as an obstacle to their acceptance. Indeed, international economic integration in whatever form necessarily results in a loss of a measure of control over national markets and institutions...." (John G. Heimann, Comptroller of the U.S. Currency, Institutional Investor, December 1979, p. 136.)
America Has Lost Its Economic and Financial Independence
"More than two hundred years after the Declaration of Independence, the United States has lost its position as an independent power.... Out increasing dependence on foreign capital is not just an economic issue. It is also a security issue, as well as a political issue with major implications for foreign and domestic policy.... This country will not be able to deal politically with its economic problems until a simple, basic requirement is recognized: to recapture our lost financial independence." (Felix Rohatyn, "Restoring American Independence,: New York Review of Books, February 18, 1988.)
Creating the Nucleus of a New World Economic Order
"The proposal I ask you to consider is that we begin to seek the ways and means of lowering all economic barriers between North America, Europe, and Japan--trade, investment, legal, and so forth--in order to begin creating the nucleus of a new world economic order that would include a harmonized world business system with agreed rules and procedures that transcend national boundaries. You, as political leaders, have the power to take the steps necessary to make the increasing de facto globalization of business the most creative, positive, and beneficial force it can be, rather that than the source of new international conflict. I believe that if we can go down this road together, we will also establish the basis for a much more equitable sharing of the burdens, responsibilities, and cost of international leadership....
"During the Gulf War, U. S. President George Bush spoke about the need for a "new world order." What he meant by that was a new political and military--security order to deal with the challenges of the post-Cold -War period. Certainly we need that. But the world also needs a new economic order, focused on international economic security." (Akito Morita, Chairman, Sony Corporation. Open Letter to the G-7 Leaders--the Presidents and Prime Ministers of the United States, Japan, German, France, Britain, Italy, and Canada (Atlantic Monthly, June, 1993, pp. 88-89.)
Preparing the Global International System for the Millennium
"Never before have so many structural changes in the international system occurred simultaneously. Some elements are now global--for example, economics and communications--while politics remains confined to the nation-state or is reduced to ethnic units....
"Let me focus on three areas likely to present the greatest challenges in the next century: Asia, the Persian Gulf, and the transatlantic region encompassing the NATO countries and the territory of the former Soviet bloc.
"In Asia, China will emerge as an incipient superpower. When it reaches the per capita income of South Korea (about a third of ours), its GNP will be double that of the United States. Such an economic colossus is bound to have a major impact. China's vast market, reinforced by its growing military power, will, in the hands of skillful and determined leaders, provide a vehicle for growing influence....
"For the first time in its history, China is tied to the world economy and a global international system....
"Discussion about the Middle East tend to focus almost exclusively on the Arab-Israel issue. While it is demonstrably explosive, there exists an established and tested framework for dealing with it. Below the surface of the Gulf, however, lurk even more dangerous structural issues. There, states of very limited power possess the capacity to cause nearly infinite international damage. When, in 1973, the Gulf states found themselves in a position to raise oil prices by 387 percent in a three-month period, they triggered a 10-year financial and economic crisis that threatened the global economic and financial systems and undermined the governability of the industrial democracies.
"Today the consequences of a crisis in the Gulf are no less ominous. But the structure on which its stability depends is even more brittle. The two strongest nations--Iran and Iraq--are outlaw states....
"But if we can find no way to modify the building blocks in the Persian Gulf, we had better prepare ourselves for an inevitable blow-up....
"The return of Russia to a major international role will be another seminal event. Early in the next century, after many ups and downs, Russia is likely to have restored its central authority. It may well be closer to the political structures favored by Pinochet or Salazar than to a Western pluralistic system--though it will be freer than communism. Once a legal system is established and a measure of predictability introduced, the economy should recover as well.
"At that point, the nations bordering the Atlantic will have to get used to a far more assertive Russia. The task of the Atlantic Alliance will become to give Russia an opportunity to participate fully in the political constructions of the new millennium, while ensuring that its traditional nationalism does not spill across it borders....
"The enlargement of NATO to include the former Soviet satellites in Central Europe can provide the essential safety net for this task. At the same time a body for political cooperation embracing the key members of the Atlantic Alliance plus Russia must also be created. The appropriate forum for this is the Organization for Security and Cooperation in Europe....
"Whatever my doubts about the suitability of economic sanctions for spreading democracy in Asia, I consider it essential to promote the democratic ideal by fostering close cooperation where it already exists, especially among the nations bordering the Atlantic and within the Western Hemisphere. Military conflict among these nations is nearly inconceivable. It is among the established democracies that we should reinforce the values and institutions we treasure. The Western Hemisphere Economic Free Trade Area ... and its ultimate merging into an Atlantic Free Trade Area are crucial steps toward realizing these goals.
"The American foreign policy challenge for the next millennium is different from anything in our previous experience.... In the period ahead our biggest challenge will be to help construct a system in which the rewards and penalties are conducive to a broader sense of global well-being...." (Henry A. Kissinger. Newsweek, January 27, 1997, pp. 74, 77-81.)
Foreword
iii. The Emerging System of Global Governance--A Review of Current Literature
Leading Futurist Believes That the U. S. Constitution is Obsolete and Should Be Replaced
"To the Founding Parents:
"You are the revolutionists dead. You are the men and women, the farmers, merchants, artisans, lawyers, printers, pamphleteers, shopkeepers, and soldiers who together created a new nation on the distant shores of America. You include the fifty-five who came together in 1787 to hammer out, during a broiling summer in Philadelphia, that astonishing document called the Constitution of the United States. You are the inventors of a future that became my present.
"That piece of paper, with the Bill of Rights added in 1791, is clearly one of the stunning achievements of human history. I, like so many others, am continually forced to ask myself how you managed--how you were able, in the midst of bitter social and economic turmoil, under the most immediate pressures--to muster so much awareness of the emerging future. Listening to the distant sounds of tomorrow, you sensed that a civilization was dying and a new one was being born.
"I conclude you were driven to it--were compelled, carried along by the tidal force of events, fearing the collapse of an ineffectual government paralyzed by inappropriate principles and obsolete structures.
"Seldom has so majestic a piece of work been done by men of such sharply divergent temperaments--brilliant, antagonistic, and egotistic men--men passionately committed to diverse regional and economic interests, yet so upset and outraged by the terrible 'inefficiencies' of an existing government as to draw together and propose a radically new one based on startling principles.
"Even now these principles move me, as they have moved countless millions around the planet. I confess it difficult for me to read certain passages of Jefferson or Paine, for example, without being brought to the edge of tears by their beauty and meaning.
"I want to thank you, the revolutionary dead, for having made possible for me a half-century of life as an American citizen under a government of laws, not men, and particularly for the precious Bill of Rights, which has made it possible for me to think, to express unpopular views, however foolish or mistaken at times--indeed, to write what follows without fear of suppression.
"For what I now must write can all too easily be misunderstood by my contemporaries. Some will no doubt regard it as seditious. Yet it is a painful truth I believe you would have quickly grasped. For the system of government you fashioned, including the very principles on which you based it, is increasingly obsolete, and hence increasingly, if inadvertently, oppressive and dangerous to our welfare. It must be radically changed and a new system of government invented--a democracy for the twenty-first century.
"You knew, better than we today, that no government, no political system, no constitution, no charter or state is permanent, nor can the decisions of the past bind the future forever. Nor can a government designed for one civilization cope adequately with the next.
"You would have understood, therefore, why even the Constitution of the United States needs to be reconsidered, and altered--not to cut the federal budget or to embody this or that narrow principle, but to expand its Bill of Rights, taking account of threats to freedom unimagined in the past, and to create a whole new structure of government capable of making intelligent, democratic decisions necessary for our survival in a new world.
"I come with no easy blueprint for tomorrow's constitution. I mistrust those who think they already have the answers when we are still trying to formulate the questions. But the time has come for us to imagine completely novel alternatives, to discuss, dissent, debate, and design, from the ground up, the democratic architecture of tomorrow.
"Not in a spirit of anger or dogmatism, not in a sudden impulsive spasm, but through the widest consultation and peaceful public participation, we need to join together to reconstitute America.
"You would have understood this need. For it was one of your generation--Jefferson--who, in mature reflection, declared: 'Some men look at constitutions with sanctimonious reverence and deem them like the ark of the covenant, too sacred to be touched. They ascribe to the men of the preceding age a wisdom more than human, and suppose what they did to be beyond amendment.... I am certainly not an advocate for frequent and untried changes in laws and constitutions . . . But I also know that laws and institutions must go hand in hand with the progress of the human mind.... As new discoveries are made, new truths disclosed, and manners and opinions change with the change of circumstances, institutions must advance also, and keep pace with the times.'
"For this wisdom, above all, I thank Mr. Jefferson, who helped create the system that served us so well for so long, and that now must, in its turn, die and be replaced.
"An imaginary letter . . . Surely in many nations there must be others who, given the opportunity, would express similar sentiments. For the obsolescence of many of today's governments is not some secret I alone have discovered. Nor is it a disease of America alone.
"The fact is that building a new civilization on the wreckage of the old involves the design of new, more appropriate political structures in many nations at once. This is a painful yet necessary project that is mind-staggering in scope and will no doubt take decades to complete.
"In all likelihood it will require a protracted battle to radically overhaul--or even scrap--the United States Congress, the Central Committees and Politburos of the Communist industrial states, the House of Commons and the House of Lords, the French Chamber of Deputies, the Bundestag, the Diet, the giant ministries and entrenched civil services of many nations, the constitutions and court systems--in short, much of the unwieldy and increasingly unworkable apparatus of supposedly representative governments.
"Nor will this wave of political struggle stop at the national level. Over the months and decades ahead, the entire 'global law machine'--from the United Nations at one end to the local city or town council at the other--will eventually face a mounting, ultimately irresistible, demand for restructuring.
"All these structures will have to be fundamentally altered, not because they are inherently evil, nor even because they are controlled by this or that class or group, but because they are increasingly unworkable--no longer fitted to the needs of a radically changed world.
"This task will involve multimillions of people. If this radical overhaul is rigidly resisted it may well trigger bloodshed. How peaceful the process turns out to be will depend on many factors, therefore--on how flexible or intransigent the existing elites prove to be, on whether the change is accelerated by economic collapse, on whether or not external threats and military interventions occur. Clearly the risks are great.
"Yet the risks of not overhauling our political institutions are even greater, and the sooner we begin, the safer we all will be.
"To build workable governments anew--and to carry out what may well be the most important political task of our lifetimes--we will have to strip away the accumulated cliches of the Second Wave era....
"We need far better agencies to regulate out-of-control currencies. We shall need alternatives to--or complete transformations of--the IMF, the World Bank, COMECON, NATO, and other such institutions. We shall have to invent new agencies to spread the advantages and limit the side effects of technology. We must speed the construction of strong transnational agencies for governing outer space and the oceans. We shall have to overhaul the ossified, bureaucratic United Nations from the ground floor up...." (Alvin Toffler, The Third Wave, Bantam Books, New York, 1980, pp. 416-419, 432.) (See also Alvin & Heidi Toffler, Creating a New Civilization: the Politics of the Third Wave. Washington, D. C.: The Progress and Freedom Foundation. 1974, pp. 73-75.)
The International Banker Has Played An Important Role for Over Two Centuries
"In the last two centuries it is the financier far more than the artist or the industrialist whose influence has been unquestionable: the man who directly or indirectly finances princes. Like the priest or man at arms of earlier times, he gambles on the development of events and power and attempts to use his influence to bring about the outcome he desires. He supplies men of ambition with the material means to their ends, and in order to be sure of his due, seeks to predict what will be the state of the world at the point when he expects to recover his loan. However, his hopes are based on reason, which must lay the groundwork for the accuracy of his calculations: the financier is not a speculator. He does not gamble, he reasons. This has often been the cause of his ruin in the face of the madness of those in power.
"No doubt some will be surprised to see cropping up here in the forefront of history, in the narrow margin left between the actions of nations and the whims of tyrants, a galaxy of almost unknown people of great talent and strong character. They were almost always very rich, though not always very ethical, linked to each other in a close and almost dynastic network--a parallel aristocracy lodged at the head of every regime. It may also be something of a surprise to discover for better or worse, the Warburgs, Rothschilds, Schiffs, Lehmans, Melchoirs, Hambros and Mayers have played as great a role as the princes and politicians in our destiny--not to mention the part played by the Bardis, Fuggers, Morgans or Barings, or individuals like Abs, Monnet, Caccia or Rockefeller.
"These strange and enigmatic men of influence have always had to try to look far into the future, to imagine new sources of wealth, to get money into circulation so to prevent it becoming worthless in times of war. Sometimes they have been mistaken, deluded by their own unbounded ambition, and have had a hand in the ruin of their world. Occasionally, too, they have seen the arrival of a worse catastrophe that the one they had delayed--either because the reciprocal cancellation of debts and wealth required it, in hatred of the lender, or because reason was shattered by ideology. As pioneers of capitalist rationalism and founding witnesses of the merchant order, they are essential links in our history and a magnificent reflection of the relative powers of money and reason." (Jacques Attali, A Man of Influence: Sir Siegmund Warburg, 1902-82, London: Weidenfeld and Nicolson, 1986, pp. 5-6.)
British Merchant Banks Become Bankers to Europe and America
"London was then [1853] at the heart of Western capitalism and dominated world industry. Its bankers, insurers, shipowners and captains of industry supplied the country with raw materials and organized the export of textiles, machinery and capital. Britain produced more than half the world's industrial goods and the increasing earnings of its shipping fleet, its banks, insurers and merchants more than compensated for its external trade deficit which was worsening throughout the century. These surpluses were not invested in industry, however, but directly abroad and earned even more, to the point where income on capital alone came to balance the trade deficit. The surpluses fed the extensive need for capital of the woollen and cotton mills, the shipyards, steelworks, railways, paper mills and rubber manufacturers of the whole world.
"London's business centre, known as the City, became the major world foreign exchange warehouse. The pound attained the status of an international currency, even draining off savings from the Continent to finance the industrialization of faraway countries. The City consisted of many increasingly distinct professions: alongside the commercial banks, special departments or separate merchants banks were developing, lending over the long term and advising commercial concerns. In order to buy or sell British shares on the Stock Exchange, these banks had to go through the intermediary brokers and jobbers, although they could operate freely in foreign shares.
"The British merchant banks thus became bankers to the great of Europe and America: Barings, founded in 1762, was official financier not only to the imperial family and government of Russia, but to the whole of South America. The English Rothschilds fixed the world price of gold and financed most of the governments of Europe. Morgan Grenfell, founded in 1833, forged links with the United States through the Morgan family which had emigrated there, and managed British investments in America. Hambros Bank, named after a family which had come from Altona at the beginning of the century, took up an interest in Scandinavia, where it had originated.
"Things were becoming organized. In 1844 a law introduced by Robert Peel gave the Bank of England a monopoly on the issue of banknotes, banned the creation of any other issuing institutions and defined the steps to be taken to maintain the country's gold reserves.
"Amsterdam, Hamburg and Paris received their share of the money from England, and thanks to this were able to finance ventures in Northern Europe, Germany and Russia. At this time also the United States saw the birth of firms specializing in long-term lending to companies and advice to shareholders, which took British money and drew off local savings. The first of these investment banks, the American form of merchant bank, was set up in 1826 in New York by Nathaniel Prime; the second, set up in 1830 in Baltimore was Alex Brown and Sons. The same year Vermilye and Co. made its appearance, and a little later Jay Cooke set up his bank in Philadelphia.
"During those years a number of German[s]... arrived in the United States to do business and some later became investment bankers, as for instance the three Lehman brothers--Henry, Emmanuel and Mayer--who went from Frankfurt to open a cotton-broking business first in Alabama, then in New Orleans and New York, before launching themselves into banking." (Attali, A Man of Influence, pp. 25-26.)
The Rise of Investment Banking in America
"In America the mid nineteenth century saw the first appearance of those who would be the leaders of investment banking, such as the Morgans who organized British investment in America, and others like Kidder Peabody. In addition, after the riots of 1848 a number of German[s]... left for America and became bankers alongside Speyer, Belmont, Lehman and Salinger who were already established there. At first they financed the federal government during and after the Civil War, then became a way station for capital coming from Europe to finance the development of the American continent.
"So it was that two brothers-in-law, Abraham Kuhn and Salomon Loeb, left Worms around 1850, to be wholesale textile merchants in Cincinatti. On 1 February 1867 they made their way to New York with the $500,000 they had earned and set up a bank at 31 Nassau Street. It was a well-timed move: the Civil War had finished, the steelworks were built land the telegraph operated across the whole continent. The railways under construction opened up enormous sources of profit for the banks. The Union Pacific was progressing westwards and the Central Pacific eastwards, and the federal government put $60 million at their disposal for the purchase of land. The banks were needed to organize groups of investors to finance the rest of the operation, and there was much money to be made from forming 'syndicates' of potential lenders and charging commission on these loans.
"This led to some degree of specialization in certain sectors among the banks: Jay Cooke, J. P. Morgan and Kuhn Loeb made loans to railways and steelworks, while Lehmann Brothers and Goldman Sachs financed the distribution of goods. The first guaranteed placing was carried out in 1869 by Jay Cooke for a loan of $2 million to the Pennsylvania Railroad. So as to pull in savings from Europe the American banks strengthened their agreements with London banks, for example, J. P. Morgan with Morgan Grenfell, Kidder Peabody with George Peabody, Kuhn Loeb with Rothschild.
"In the opposite direction, European banks began to establish offices in New York and Boston, and other German...bankers, attracted by American expansion, emigrated to these two cities; the Guggenheims, Morgenthaus and Lewisohns all opened businesses with great expectations....Attali, A Man of Influence, pp. 31-32.)
International Banking Develops into a Dynastic Elite Based on Culture and Money
"Banks had by then [1930] reached the top of the social scale. Starting off amongst the commercial professions in the eighteenth century, and supporting industry during the nineteenth, they developed by the beginning of the twentieth century into a dynastic elite based on culture as well as money.
"It was primarily an elite of money: here was where the great fortunes of Europe were to be found--no longer only in cotton, railways industry or land, though Friedrich Krupp was still by far the richest German of the age, richer than the Emperor himself.
"However, it was also a cultural elite; as though this profession which used intelligence and watched for signs predisposed adepts towards the sophisticated use of wealth.
"In the end their taste for power led them to copy the style of the dynasties they served; firstly and most visibly by using their name as a means of marking out territory. Their alliances were therefore still very carefully studied: marriages were between banking families...in order to extend empires, avoid their break-up and keep business secrets within the narrowest possible circle. The rare departures from this rule always caused a sensation....
"However, wealth gave the young dynasties not power, but only influence over the men in power. Admittedly everywhere in Europe and in the United States investment rather than commercial bankers...were doing their best to play a direct political role. The Barings, the Gibbs, the Smiths, the Hottingers and the Bleichroeders joined openly in the politics of the young democracies: as liberals to defend the opening up of international trade, conservatives to defend their wealth, reformers to bring about the mobility of capital and cultural and social modernization. Through their loans they did all they could to keep the economy going, striving to speed up growth so as to finance repayment, and unintentially even causing a war to organize a moratorium on debts....
"Elsewhere on the old Continent the situation was different. The German banks increasingly financed their own industry, from M. M. Warburg to the Deutsche Bank, from Stein to the Berliner Handels-Gesellschaft, whether they were general banks or dealt only in investments, and whether they had one cashier's's desk or five hundred. In France, too, the investment banks made direct loans to French companies, even though the Rothschilds or the Hottingers drew the main part of their income from financing foreign trade and the budget deficit. Austrian bankers financed the industry of the Ottoman Empire: Moritz de Hirsch, for example, financed the Orient Express from Vienna.
"The United States, still a debtor nation, attracted as much capital as possible from Europe, and with this capital its investment banks wielded enormous power in a country where money was already of major importance. John Pierpont Morgan had succeeded his father and set up a new subsidiary, Drexel, Morgan & Co. He financed the railways and organized General Electric and US Steel. At the time he was undoubtedly more influential in the development of America than the President of the United States himself. In 1901 a battle for control of Northern Pacific Railways brought him up against the other great Wall Street operator, Jacob Schiff. Each of them tried to buy shares from big holders. In five days the stock went from $110 to $1,000 and the whole Stock Exchange was in uproar. When Rockefeller sided with Morgan, he won and increased his enormous fortune. (Attali, A Man of Influence, pp. 48-50.)
Paul Warburg--A Prominent German Develops Plans for the Federal Reserve System
"At the beginning of the century the United States became a great power and the dollar a great currency. The latter was based on gold, even though the Gold Standard Act of 1900 did not completely exclude silver, with its limited striking, from the American monetary system.
"So, the same way that every nation which becomes a storehouse of goods soon becomes a storehouse of money, twenty years after its rise to industrial power America, making more profits than it could use at home, began to invest and lend its currency to companies or other countries. The investment banks of Boston and New York not only continued borrowing from Europe to lend to America, but also began to operate in the reverse direction.
"Kuhn Loeb, for example, was still importing a lot of European capital to finance American industry; in 1906 it borrowed $48 million in France to finance the Pennsylvania Railroad and in 1909 was the intermediary through which a French group loaned $5 million to the Southern Pacific. In order to do this, Schiff used his links with Rothschild and Warburg. However, in the reverse direction, Kuhn Loeb also invested American money in loans for Shell and for the governments of Sweden, Germany and Japan.
"At the time of this reversal of financial flows which was to last three-quarters of a century, the American banking system was still very rudimentary. There was no central organization; the banks, whatever their activity, set up anywhere they wanted to and their growing interconnection made their failures contagious. Since the 1880 crisis about twenty of the biggest banks in the country had made a habit of consulting together regularly to harmonize their policies. However, there was no mutual guarantee, and no control over the issuing of banknotes, so when banking panics broke out they led to numerous bankruptcies which it was difficult to limit.
"In place of this, Paul Warburg suggested to Jacob Schiff in 1903 the creation of a control system on German lines. On the eve of becoming an American citizen he published a short book, Plan for a Central Bank, in which he suggested--in the image of what had existed in the German Empire since 1875--the creation of a Central Bank, serving as a mutual guarantee to the private banks, and owned in equal shares by the Government, the big private banks and about ten regional federal banks which would alone be authorized to issue banknotes, backed by gold and nothing else. His plan aroused much interest on Wall Street and in Washington and Paul gave many lectures on the subject in the United States. But he was only a rich German banker living six months of the year in New York. His plan was not put into effect.
"Everything changed in the autumn of 1907. The collapse of the Kinckerbocker Trust Co. and the threat hovering over Trust Company of America brought about a particularly severe crisis: the banks were accused of making too much money by giving ill-considered loans and of not having foreseen the crisis. Paul's plan became topical again.
"In 1910, at the age of forty-two and after many hesitations, he finally became an American citizen. That same year the Association of New York Bankers gave official support to his plan, which he was continuing to defend everywhere. Though the previous President, Theodore Roosevelt, had not consulted him, Nelson Aldrich, a senator from Rhode Island, saw him often and took an interest in his ideas. Aldrich, the father-in-law of J. D. Rockefeller, Jr. was an adviser to the current President Taft and chairman of the National Monetary Commission of which Paul [Warburg] was also a member. In addition, the financial situation in America was beginning to be problematical and the banks were gradually being placed under supervision.
"In 1912 the Monetary Trust Investigation Committee of the Senate investigated the activities of Kuhn Loeb, J. P. Morgan, Kidder, Lee Higginson and the National City Bank. Some states passed laws to control banks.
"In November 1912 President Wilson, only just elected against Taft and Roosevelt, asked Paul [Warburg] to draft a law based on his book, and was pleased with the result. He decided to submit it to the Senate as quickly as possible. Everything was settled at a secret meeting at the beginning of 1913 at Sea Island, Georgia, between Paul Warburg, the president of the National City Bank of New York and Senator Aldrich. The bill drafted by Paul was introduced to the Senate by Robert Owen and to Congress by a representative from Virginia, Carter Glass, and thus became the Owen Glass Act. Passed in the summer of 1913, it set up twelve regional reserve banks and one federal reserve bank in Washington.
"A bridge between Germany and the United States, Paul thus managed to organize the American banking system in German style. The main architect of this structure, he was proposed by Wilson for the chairmanship of the Federal Reserve Bank. But as a German ... only just naturalized, he declined this, and would accept only a vice chairmanship, though another chairman had not been appointed. Benjamin Strong, the son-in-law of J. Pierpont Morgan who died that same year, was appointed to the chairmanship of the regional bank of New York, immediate rival of the central bank." (Attali, A Man of Influence, pp. 52-54.)
International Bankers Finance Japanese War with Russia
"At the beginning of the century Japan was forcing the pace of its modernization. Robbed of its conquests in China in 1894, it attacked Russia on 8 February 1904 without declaring war. To the amazement of the Europeans, Japan then revealed itself as a modern military power, but in order to win it needed money and a vice-governor of the Bank of Japan and financial commissioner to the Japanese Government, Baron Korekiho Takahashi, was sent to London and New York in June 1904 to ask the bankers of Europe and America to subscribe to a loan to the imperial Japanese Government of L30 million sterling at 4.5 per cent. Jacob Schiff had been trying to arrange a financial blockade of the Tsar, whom he had called 'the enemy of humanity' since the programs of 1894, and agreed with pleasure to finance this war. That year he even refused to participate in a Wall Street loan to France for fear that the money might go to the Russians, who were great borrowers in Paris at that time. Jacob Schiff then wrote to Max Warburg to ask him to join in the loan to Japan. Max as always checked with the Ministry of Foreign Affairs that such a loan would not go against the foreign policy of Berlin, and noted in his diary: 'I did what every good banker would do in this case: I went to the Ministry of Foreign Affairs in Berlin.' He was immediately given the green light, as Krupp, who was then playing an extensive role in affairs of state, hoped that this participation in the loan would lead to orders for arms from Japan to Germany.
"Max then received Korekiho Takahashi, sent to him by Jacob [Schiff]. On 28 March 1905 he undertook to place L1 million of the loan. He immediately placed L900,000 in Germany, which made him big money, since M. M. Warburg earned a commission equal to 1.5 per cent of the amount of the loan.
"On 11 July of the same year, just as the war began to turn in its favour, Japan floated a second loan, this time of L30 million. M. M. Warburg, in association with the Deutsch Asiatische Bank, undertook to place one-third in Germany itself. It was a huge success: the loan was ten times oversubscribed. A few months later Japan's victory was complete and the Portsmouth treaty awarded her control of Manchuria and Korea.
"Max Warburg and Jacob Schiff then became officially appointed suppliers of capital to Japan. The following year John Schiff made a triumphal tour of the country and the daughter of Baron Takahashi went to live with the Schiffs in New York for several years. Taskahashi himself later became Finance Minister, then Prime Minister before being assassinated in 1936.
"Max and Jacob [Warburg] also became industrial advisers to the great family groups in Japan. In 1906 Baron Mitsui, the owner of a large part of Japanese industry, went to Hamburg by the Trans-Siberian railway in order to meet Max. As family tradition has it, the conversation went like this:
"Mitsui: We are a great family with many business interests, and so are you. Tell me, how do you manage not to fight amongst yourselves?
"Max: To tell the truth we do fight among ourselves, all the time.
"Mitsui: I did not come all the way across Siberia to hear that!
"Max: Let's be serious. To avoid problems, I advise you to group all your family's activities into one holding company and to give control to a single authority. We Warburgs did this long ago, and it is working very well.
"Thus was born the Mitsui group, one of the foremost in Japan.... (Attali, A Man of Influence, pp. 54-55.)
Max Warburg Helps Finance Military Buildup of Germany
"Europe slid slowly towards another war, yet it was neither necessary nor inevitable. Russia, France and Britain became allies. Germany and Austria feared that Russia would carve up the Turkish Empire, where the nationalities were restive, to its own advantage. North and South Germany did not always have the same attitudes: the industrial capitalism of the Ruhr chose the prospect of war which could alone--it was thought-keep the factories working at full capacity. The more financial North, turned more towards the Atlantic, was hostile to war: Max [Warburg] thought that a war would kill 'his' Germany and did his utmost to oppose the Ruhr in Berlin. However, the fact is that like the whole of German banking, Max himself was not without responsibility in the circumstances which were to lead to war. To keep up his profits he actually lent money to industry and to the state to finance armaments. (Attali, A Man of Influence, p. 59.)
The Reasons for World War I
"In 1912 the hostilities between Italy and the Ottoman Empire, and the first Balkan War, exercised both men and armies. Then the size of the forces on either side of the Rhine increased. From then on, Conrad von Hotzendorff, chief of staff of the Austrian army, and Moltke, who had just replaced Schlileffen at the head of the German army, wanted a quick war. They knew that Britain did not yet have an army worthy of the name, and that France had disturbingly been rebuilding its own for some time. Chancellor Bethmann-Hollweg was also on the side of those who wanted to wage war in Europe in order to gain territory, give work to industry and maintain the social order." (Attali, A Man of Influence, pp. 59-60.)
The Beginning of World War I
"In June 1914 all the armies of Europe were on the alert and the economies of the Continent were working only for them or through them. Peace was at the mercy of an incident, and that one should occur was in the interest of many. Max went to London three times, twice at the beginning of the month, then again on 27 June, after a discussion with the Chancellor and the Kaiser on 14 June in Hamburg on the best way to avoid an Anglo-German war. On 28 June the assassination in Sarajevo, Bosnia, of a liberal Austrian prince, Archduke Franz-Ferdinand, a nephew of the Kaiser, allegedly by a Serb, passed almost unnoticed. The next day, as he did every year, the Kaiser left for the Kiel regatta, the Chancellor was on holiday and Moltke was taking the waters at Carlsbad. However, still convinced of British neutrality, Bethmann-Hollweg and the German general staff thought to profit from the incident by launching a lightning attack on Serbia, then on Russia, supporting an Austrian response to the assassination to 'finish the Serbs'. However, the Austrians did not seem decided on a battle and it was difficult for Germany to declare war if the ally 'offended' by the outrage had not done so itself.
"At the end of July, a strange month of waiting with everything at stake, the Kaiser met Max once more in Kiel: 'Should we declare war or wait, Mr. Warburg?' 'Wait, Sire. Every year of peace strengthens Germany and gives us more means of winning. Waiting can only be beneficial.'
"Max knew then that war was inevitable, for there were too many pressures in favour of it and the Kaiser had weakened. He knew that 'his' Germany was almost certainly finished. Resignedly he cut back his operations and cashed in his securities, before the Stock Exchange fell as he predicted. On 28 July the cable link between Germany and the United States was cut. Max Warburg moved his London representative, Pieter Vuyk, to Amsterdam. On the same day Austria, urged on by Bethmann-Hollweg, finally declared war on Serbia.
"The war began in confusion: Serbia believed it was supported by Russia, which in turn believed it had French support. On 30 July Russia mobilized the whole of its army, the Tsar having been convinced by his general staff that partial mobilization was impossible. Seeing this, Austria did the same on 31 July. That evening Jaures was assassinated at the Cafe du Croissant in Paris. The dice were rolling.
"The same day there was a rush for gold on all the European exchanges and currency rates fell. The Hamburg exchange was closed. The world's leading currencies suspended convertibility to gold and began to float: the barely established gold standard was thus inoperative. It would only be restored for a few short years long after this war.
"In Germany companies asked the state for a moratorium on their debts. On 1 August Max, [Warburg] with other banks, tried his best to calm the situation. But things had gone too far. That day, Germany declared war on Russia and on 3 August on France; on 5 August Austria declared war on Russia. At the beginning of August the Germans still believed that Great Britain would not enter the conflict against them. When on 12 and 13 August Paris and then London declared war on Austria, this was the beginning for the European Continent of what would become the First World War, with an absurd celebration of arms, the dismay of financiers, the misery of nations and, soon, the twilight of the eagles.
"The German press, largely controlled by Ruhr industrialists, mobilized public opinion and created a special association. This tried to obtain, from the banks and the Government, cheap loans and a moratorium on debts. On 6 August Max Warburg and other great bankers called to Berlin by the Chancellor opposed any general moratorium which they said would ruin the banks or require huge public spending to support them. Instead, Max proposed the establishment of banks specializing in 'war lending', that is with more flexible lending rules and lower rates than others. Bethmann took up the idea and imposed it on the Ruhr. Carl Melchior and Max Warburg set up the first bank of this kind, the Hamburgische Bank; others followed throughout Germany." (Atalli, A Man of Influence, pp. 60-61.)
International Bankers Finance Both Sides of World War I
"America was still benefiting from the war of others and did not yet wish to take sides: she was selling wheat, raw materials, machinery and arms to both sides. Her banks competed in ingenuity in lending money to whoever wanted it, in exchange for huge commissions. Even Kuhn Loeb, heavily committed to the German side, was attracted by the huge profits to be made and issued loans for the British Royal Dutch Petroleum and for the big French cities (Paris, Bordeaux, Lyon and Marseilles) alongside the loans it continued to make to Germany and to the big American companies (Westinghouse, American Smelting and Refining Co., Baldwin Locomotive Works, US Leather Co., US Rubber Co., Western Union Telegraph)." (Attali, A Man of Influence, pp. 66-67.)
Warburg Bank Helps Finance World War I
"Never has our financial destiny been so closely linked to the political destiny of Germany. This has clearly demonstrated the invalidity of the idea that a private company can remain independent of the political and economic situation of the Empire in time of war. Probably no single German private bank has guarantee more German Empire loans than we have. From this point of view, we have certainly contributed to financing the war, particularly by giving our guarantee for purchases from neutral countries." (Max Warburg, Diary, quoted in Attali, A Man of Influence, p. 69.)
Development of an International Central Bank
"On 15 June 1919, even before the signature of the Treaty of Versailles, Max [Warburg] and Melchior returned to Hamburg disappointed, humiliated and worried to rebuild the drained bank. In June 1919, as Max von Baden has done in October 1918, Ebert asked Max and then Melchior to become Finance Minister in the Bauer Government. Each refused in order to return to work at M. M. Warburg which was then in great difficulty. They had to find employees, re-establish contact with clients and, even more urgent, obtain payment of overdue debts. This was almost impossible and Max was in anguish. As he had predicted in 1917, without new capital his bank was haded for failure. Where could he find money except in America? He therefore wrote to his two brothers to ask them to come and see him, and help him. Paul and Felix did not hesitate and came to Europe. Max arranged to meet them in Switzerland where he was sent by Scheidemann in July to request a loan for Germany from the Swiss Government and banks. The three brothers met in St. Moritz in August 1919 for the first time in six years. Max asked them for 6 million marks, a huge amount, to save the bank. Paul and Felix advised him not to be obstinate, but to close down the bank and join them in America.
"'Germany is lost as you well know--you refused to sign at Versailles. Europe will go backwards and tip over into Communism. What are you staying for?'
'No. Look, we shall become a great bank again and Hamburg will be the new capital of industrial Germany.'
"They parted without coming to a decision. Felix went back to New York. Paul [Warburg] stayed on in Europe for some time, in search of a part to play in organizing the financing of European debt. For him this problem was likely to lead to a world catastrophe if it was not treated in the same way as the problem he had contributed to solving in America itself [Federal Reserve Bank]: instead of lending to Europe over the short term, a sort of international central bank should be established, to organize these movements of capital in the form of long-term loans.
"He believed this would not be done without bringing in private as well as public funds, public and private banks. He went to Basel, then Amsterdam where at the beginning of October and partly on his initiative a group of British, French, American and German bankers and academics met for the first time since the war (among them [John Maynard] Keynes and Max Warburg). They discussed the coming reparations and their consequences for the European economy. Paul floated the idea of a bank specializing in financing the reparations, which would be used to revive international trade. Several institutions were to be born from this idea, including today's Bank for International Settlements and the World Bank.
"His plan was much discussed during the Amsterdam meeting, but without any immediate result. On 12 October Keynes, who was still there, telegraphed Melchoir in Hamburg asking him to come and see him. On 15 October Melchior arrived and introduced Keynes to Paul Warburg. The next day all three went walking in the city, which Melchior knew well from the time when he had negotiated loans for Germany, then at war....
"The Amsterdam meeting greatly affected all those who took part in it. All the bankers present, seers of their world, saw the urgent need to link Germany with the Allies, put Europe back on its feet and get out of the mesh of short-term debts by consolidating them. (Attali, A Man of Influence, pp. 79-80.)
American Taxpayer's Dollars Used to Rebuild Europe
"America now wanted to help Germany, beginning to understand the dangers of her weakness. Since breaking the London agreement in December 1921, Germany had paid almost nothing, apart from the proceeds of the under-subscribed loan of April 1923. The Reparations Commission established by the Treaty of Versailles finally met on 30 November 1923 and chose Charles G. Dawes, an American banker from the Midwest, to rethink the reparations at a realistic level. It is true that at the beginning of 1924 monetary stabilization caused a return of confidence and the beginnings of German economic renewal. However, Schacht's monetary stringency limited bank lending, since he insisted that any new lending should be preceded by repayment of existing loans. Bankruptcies ceased. Unemployment replaced inflation and Germany still did not have the means of meeting the payments set in London
"On 8 February 1924, when Schacht saw Charles G. Dawes for the first time, he explained that he was willing to pay reasonable amounts, but on condition that he did not have to borrow abroad on a short-term basis in order to do this. He therefore wished to encourage foreign investment in Germany and urge German companies to borrow abroad to bring in foreign exchange, which would again improve the economic situation. In the spring of 1924 the Dawes commission, after three months' work, recognized that it was in the interests of the Allies that the German economy should recover, even if this meant agreeing to postpone or reschedule the payment of reparations: this had been the view of Max Warburg and John Maynard Keynes ever since Versailles. It had taken nearly five years for the Allies to accept it. Five years too long.
"In April Dawes proposed the granting of an initial loan from America of 800 million gold marks at 8 per cent in exchange for Allied control over the railways and the Reichsbank. The indemnity was still set at 132 million gold marks, but with annuities increasing from 1 to 2.5 billion; Germany was to pay this off over five years.
"Also in April 1924 M. M. Warburg and the International Acceptance Bank in New York put together some loans to German companies in rediscounted dollars. Among these was rediscounted loan for first $5 million and then $25 million to the Golddiskontbank, whose board Max joined. In the same month Hugo Stinnes died, leaving a huge group ranging from banking to steel and from cement to paper.
"The same year, a few months apart, the other European currencies still floating in search of a theoretical return to pre-war parities were hit by the previous year's German inflation.
"In France, despite the exchange control introduced in 1918 and strengthened in 1924, the victory of a left-wing alliance set off speculation against the franc, especially from Hamburg: M. M. Warburg's role in this has not been established.
"The Lazard and Morgan banks then financed counter-speculation, and by throwing its full weight into the battle the French Government managed to stabilize the exchange rate of the franc. In May the Hamburg speculators suffered such heavy exchange losses that in order to save companies who had speculated, Max Warburg had to arrange a support fund of L110,000, subscribed by the city's leading banks. A little later, in 1926, a government of national unity brought the value of the dollar in France down from 40 to 25 francs.
"On 30 August 1924, as provided for in the Dawes plan, a new law simplified and unified the German banking system under Allied protection: the Rentenbank was abolished and the Reichsbank again became the sole issuing institution, completely independent of the Government, with a ruling council consisting of seven Germans and seven foreigners. Max Warburg was appointed a member at the request of Schacht, whose friend and adviser he was gradually becoming. The bank's capital was 300 million gold marks. The reichsmark once more became the national currency, backed by gold. In fact the notes in circulation were only 40 per cent covered by the bank's reserves, and one-quarter by foreign exchange. Parity was set at one reichsmark, or one trillion paper marks, to 0.3583 grams of gold.
"The Dawes plan was ratified on 1 September 1924 by a vote of the new Reichstag, elected in May. The Ruhr was then evacuated by the Belgians and the French, and Germany was to live for five years on loans from America, reaching $250 million a year. These loans were arranged by Dillon Read and the International Acceptance Bank in New York, Sullivan & Crownwell, headed by J. F. Dulles in the United States, and Schroder in London. Half of the money would go through the big three German banks: Deutsche Bank, Commerzbank and the Darmstadter Bank, and the rest through three investment banks, among them M. M. Warburg, which made a big profit from this. The greater part of these loans went to Krupp and Stinnes, into steel and coal. In order to issue the loans in dollars, arrange the bank syndicate and place the securities, the German and American banks set up a network of high-quality experts in Berlin and Hamburg." (Attali, A Man of Influence, pp. 88-89.)
Birth of the Bank for International Settlements in Basle
"Europe was now dependent on America to make ends meet. However, the US was not yet conscious of its responsibilities and the old continent was to pay dearly. Very dearly. As Michel Aglietta writes:
"'...the replacement of British loans by American loans in order to support the fragile banking systems of Central Europe and Latin America put the latter at the mercy of a speculative wave set off by the purely nationalist monetary policy of the United States, a phenomenon which came about from 1928 onwards.'
"As for Britain, she was still clinging to her absurdly fixed parity.
"At the end of 1928 the Allies though that the time had come to reopen the question of reparations, which weighed very heavily on Germany from then on. From February to June 1929 another conference in Paris brought together France, Great Britain, Belgium, Germany, Italy, Japan and the United States--Hoover had just arrive in the White House--to attempt to give a final ruling on the matter. Owen D. Young, number one at General Electric, was appointed chairman. Schacht, determined to secure the result that Germany should cease paying these excessive installments, came to Paris on 11 February 1929 to lead the German delegation himself, without however giving up his duties in Berlin.
"In April, in the name of the Allies, Young asked Germany to pay amounts even higher than those provided for by the Dawes plan. He proposed the creation of a sort of world bank to manage the loans needed to finance the reparations. Schacht accepted the principle, but not the amount. In the end there was agreement on a reduction of the reparations to 38 billion gold marks, payable in thirty-six annual installments--instead of the 132 billion of the Dawes plan and the London agreement--and on a mechanism for issuing international loans to pay for the reparations, to be organized by a new semi-public, semi-private international institution, to be called the Bank for International Settlements.
"What Paul [Warburg] had tried to do with his International Acceptance Bank was therefore now being carried out on a large scale. The plan was initialled by Young and Schacht in the name of Chancellor Muller on 7 June 1929, despite the furious opposition of Adolf Hitler.
"On 3 October 1929, the day Stresemann died, Max [Warburg] noted: 'This is a hard loss for Germany and for all those in search of a new and better world.' On the same day a committee chaired by the American banker Jackson E. Reynolds worked out the final form of the BIS. Its capital was to be guaranteed by the central banks of Germany, Belgium, France, Great Britain, Italy, a group acting for the Bank of Japan and a group of three American banks (J. P. Morgan & Co., the First National Bank of New York and the First National Bank of Chicago). Other central banks would be able to subscribe within two years. The following month in Rome, governors of the banks of signatory countries signed the constituent instrument for the BIS, which established itself in Basel. This was officially adopted at The Hague conference in January 1930, and France undertook to evacuate the left bank of the Rhine before the end of June of that year. The international inspections of Germany and the reparations commission of the Treaty of Versailles were abolished. On 11 march 1930 the Young plan was adopted by the Reichstag at the end of a stormy debate. On 17 May the BIS began its work, in the midst of the Great Crash.
"Many people then began to see what Paul had been trying to establish for more than ten years: a world central bank. Thus a week after it came into being the spirit and outlook of the BIS were outlined at a lecture in Paris by Jacques Rueff, a young and unknown French inspector of finance, then Financial Attache in London, He summed up:
"'The bank spares the governments concerned from having to guarantee their foreign payments themselves, and to this end keeping the various reserves in foreign currencies required by these payments--reserves which would duplicate those of the issuing banks, set up with exactly the same object in view.... This brings us to the concept of a real 'BIS currency', freely convertible into any currency at that currency's rate of exchange. Following this surmise--lightly, as one travels in the realm of dreams--one can well imagine a time when the basis of central bank lending will consist only of gold or the undefined BIS currency. A true international currency will then exist.'" (Attali, A Man of Influence, pp. 98-100.)
Paul Warburg Predicts the U.S. Depression
"There was also euphoria in New York. Paul [Warburg] was almost alone in expecting a crisis. He thought that world debt was too great, with companies borrowing ever more in order to meet annual payments on earlier debt. In New York share prices and speculation raced ahead, and Paul knew that when money goes for the short term rather than the long, the economy is in danger. Everyone was trying to speculate on stocks and shares: more than one million Americans were playing the market. In February almost $10 billion were in speculative positions. The demand for speculative capital was such that interest rates went up to 9 per cent, but despite this rate, $500 million worth of stock was still placed each month. So as to get in on the issue market, the commercial banks then increased their investment agencies across the country.
"Paul realized that his own efforts had done no more than postpone the day of reckoning and that a time would soon come when the general indebtedness of the country, worsened by speculation, would have to be paid for: whether by the debtors or the creditors.
"At the beginning of 1929, in the last annual report of the International Acceptance Bank, shortly before it became the International Manhattan Co., Paul wrote:
"'The rise in stock exchange prices, in the majority of cases, bears no relationship to the growth of the companies, their assets or prospects of profit and if this orgy of uncontrolled speculation is not slowed down the final collapse will affect not only the speculators, but will cause a depression affecting the whole of the country.'
"He had said it all. Paul then warned his friends to get out of the market and sell their shares. Some did, among them Max and Felix, in part. Most sneered.
"The volume of trading on Wall Street reached a high point on 3 September. That month Max relaunched Warburg & Co. in Amsterdam with a capital of 5 million florins, to represent the interests of M. M. Warburg and those of the International Manhattan Co. of New York. Paul was appointed managing director. On 24 October Wall Street began to falter. Bank intervention held up prices for five days, but on 29 October they could no longer hold and collapsed: 16,419,000 shares changed hands. In ten days the market lost in total $30 billion in value.
"After that 1930 was a nightmare year for American banks. Stuart, Merrill Lynch and Blyth scarcely suffered; but Kuhn Loeb, Goldman Sachs, Kidder Peabody and Lee Higginson almost had to stop payments. In September, 305 American banks were in liquidation; in October, 522." (Attali, A Man of Influence, pp. 100-101.
U.S. Government Helps Finance World War II
"On 2 December British reserves were exhausted, and Winston Churchill in 'one of the most important letters he ever wrote' sent Roosevelt an appeal for help: 'We need ships, planes and arms,' he wrote, 'and the time is coming when we shall no longer be able to pay.' On 10 December Jimmy Warburg wrote in the New York Tribune that if the law forbade America to lend to Britain, she should give her the amounts she needed, and he campaigned for a positive answer to be given to the British requests. On 17 December Roosevelt replied to Churchill that one 'cannot refuse to lend a firehose to a neighbor whose house is on fire', and prepared to authorize loans to Britain. He only insisted that before borrowing anew Great Britain should repay its previous loans and that she should mobilize all her financial resources. Morgenthau, who feared that Britain was hiding some of her reserves, insisted that the British should assemble all their gold at the Cape, where an American naval vessel would come to pick it up. The British agreed. On 10 January 1941, in the greatest secrecy, the Louisville took on board L42 million worth of gold which arrived in the United States on 26 January....
"On 11 March 1941 ... Roosevelt decided to make a real increase in aid to Britain and have Congress pass the Lend-Lease Act. The idea had first come to Jean Monnet, who with Siegmund Warburg was undoubtedly one of the greatest men of influence of this century. The innovation was that since it was not possible to lend, one should lease. While Britain had only survived the last eighteen months by selling her securities, she now received semi-loans and even gifts to buy arms and equipment in America. However, before Lend-Lease was put into operation, wide negotiations took place between London and Washington on its terms. Lord Keynes represented Britain. Congress effectively required that before the Lend-Lease Act came into operation, all British assets in the United States should be considered as collateral for the new loans and that all previous loans--i.e. $700 million--should be repaid before the new plan was implemented. In May Morgenthau even suggested to Keynes that he should ask the American Government for a loan of $400 million to pay off the earlier British loans. With a presentiment of probable refusal by Congress, Keynes suggested instead that this loan should be granted not by the American state but by the Reconstruction Finance Corporation (RFC) created before the New Deal, which would be more discreet. On 10 June, in order to make this operation possible, a bill increased the resources of the RFC and authorized it to lend to foreign governments, without specifying which ones. Thus it was able to lend without over-ostentation $425 million for fifteen years to the British Treasury, on the security of British assets in the United States. The conditions of use of the goods received under this agreement were discussed later....
"On 7 December 1941 the attack on Pearl Harbor was not a surprise to everyone. In London the United States' entry into the war was welcomed with both relief and irony: they have been waiting for this for too long. In New York the investment bankers--Morgan, Kuhn Loeb, Dillon Read--swept aside from public business by the New Deal, came back in force to finance the war economy. The American Government awarded $175 billion worth of military contracts and the military-industrial complex developed around the banks. The Reconstruction Finance Corporation financed Lend-Lease for the whole of the American economy and spent up to $55 billion. Some people in America, rather sketchily no doubt, identified eight financial groupings then in control of the major part of the American industrial economy engaged in the war: the Du Pont group (General Motors, Du Pont, US Rubber), the Mellon group (Gulf Oil, Westinghouse), the Morgan group (United States Steel, General Electric, Kennecott Copper, ATT), the Rockefeller group (Standard Oil, Chase National Bank), the Kuhn Loeb group (all public services) and the Boston group (United Fruit, First National Bank of Boston). Even if this is a simplified list, it is not too far from reality.
"At that time the attitude of American capital was not without ambivalence, and its links with Germany remained important: thus even in 1942 some Americans set up a syndicate of banks in Vichy with some French and German nationals to operate in occupied Europe under the name Societe de Credit Intercontinental. Among these were the Banque d'Indochine, the Banque Schneider, the Syndicat des Assureurs, the DeutcheKreditbank and the French subsidiaries of Ford and IBM. However, America quickly restored order and the association rapidly fell apart. (Attali, A Man of Influence, pp. 154-157.)
Post War Planning by the Elite
"From October 1941 talk began about the management of the post-war world and each American military concession was exchanged for a political concession from Britain, or in other words the rest of the world....
"The two leading monetary plans which were to clash over the next two and half years were drawn up at the very beginning of 1942. The authors were respectively Harry Dexter White, Assistant Secretary of the American Treasury, and John Maynard Keynes.
"White in his 'Program for inter-Allied monetary action' proposed the creation of two institutions, an inter-Allied fund intended to stabilize exchange rates, and an inter-Allied bank, aimed at assisting reconstruction and the development of international trade: the idea was to link this bank's granting of loans to the establishment of liberal trade and monetary policies. Nothing was said of the mechanism by which the exchange rates would be regulated, nor of the nature of the exchange standard, though it was implicitly admitted that this could only be the dollar, with or without theoretical reference to gold.
"Keynes proposed a very different and extremely centralized system. In his 'Proposals for an International Monetary Union', he wrote that the 'ideal system would surely consist in the establishment of a supranational bank which would have with the national central banks a relationship similar to that which exists between each central bank and the subordinate banks'. As far as he was concerned, 'this world central bank with a supra-national status, escaping the gold standard as well as the hegemony of one currency over the others, should have all the attributes of a central bank, with a supra-national currency for settlements between central banks. This bank for central banks, known as 'the Union' would manage accounts denominated in 'Bancor', an international currency defined in relation to gold; the member countries would receive 'Bancors' in exchange for their gold; balances would be repaid. In cases where authorized drawings were exceeded, the member country would be able to adjust its exchange rates in agreement with the Union and would have to take the measures of adjustment it recommended.'
"So began an extensive theoretical debate. But it was already certain that the American plan, which ensured dollar control of the international institutions, would be the winner.
"On 23 February 1942, two months after the German rout before Moscow, the British and the Americans undertook in a Mutual Aid Act to encourage free trade, without explicitly mentioning 'imperial preference'. In April 1942 White unveiled a more specific plan 'in favour of a Untied National Stabilization Fund and a Bank for Reconstruction and Development of the associated countries'. For him the fundamental point lay in the limitation of America's obligation as a creditor, and in its right, along with other creditors, to a blocking majority on any important decision, particularly in the matter of loans. Constituted by subscription, the Stabilization Fund would have the power to buy the currency of this or that country. It would be in control of the exchange rates at which transactions would be carried out, and would be able to impose adjustment measures; an exchange rate should only be altered when this proved necessary to correct imbalances; only countries with credit balances in gold would be able to benefit from Fund loans. According to Keynes, this new version of the White plan, though better than the first, still did not allow enough adaptation liquidity to what was needed, and again gave to much power to the Americans.
"In May 1942 Great Britain had to sell off its shares in the American armaments industry in order to pay the latest installments on its earlier loans. (Attali, A Man of Influence, pp.157-159.)
U.S. Taxpayers Provide Funds to Rebuild Europe
"In 1947 he [Siegmund Warburg] met George Ball, then still a lawyer, one of the Americans most interested by European questions, who would become a close friend and one of his main channels of influence in Washington at the time of the Kennedys. Siegmund [Warburg] did his utmost to convince all sides to use American aid to build a united Europe. Then came the Marshall plan, named after a general who had just failed in his mission to conciliate between Chang Kai-shek and Mao Tse-tung, and who in January 1947 had become Truman's Secretary of State in place of Byrnes. On 5 June in a speech at Harvard he put forward a plan for European reconstruction which a year later would take over from bilateral aid.
"At that time, in May 1947, the IMF made its first drawing, of $25 million, or 5 per cent of its quota for France. Two other drawings of the same amount were carried out in June and July for the same country. However, this was in vain: on 25 January 1948 the first devaluation condemned by the IMF--because it was connected with the establishment of a two-tier exchange market--was that of the franc.
"On 28 June 1948 President Truman signed the bill authorizing under the Marshall Plan $4 billion in loans annually and $2 billion in different forms of aid to sixteen countries, and the Organization for European Economic Co-operation (OECD), set up six months previously, was to be in charge of managing this American aid.
"At the same time, the Bank for International Settlements was resuming its function as an agent for the distribution of American loans in Europe. Its former president, McKittrick, became vice-president of Chase National Bank--now Chase Manhattan Bank--and an adviser to Averell Harriman, then in charge of economic co-operation in Europe. Gold plundered during the war, valued at 3,740 tons, was paid back and the BIS was retained. (Attali, A Man of Influence, p. 182.)
A Global Financial System
"International finance is the pivot around which the world economy twists and turns, and it affects politics and economics in every nation. Money and capital markets around the world are part of a global financial system in which all firms and investors compete continually with their counterparts in other countries. Every day hundreds of billions of dollars in stocks, bonds, and currencies speed electronically from trading room to trading room in search of a higher rate of return, so that Singapore and Paris, or London and Panama, are financially as close as midtown Manhattan and Wall Street. These enormous capital flows have blurred the lines between national financial markets, and have changed the environment within which investors, managers, workers, and politicians operate.
"The United States is not immune to the rigors of this global financial integration." (Jeffry A. Frieden, Banking On The World: The Politics of American International Finance, New York: Harper & Row, 1987, p. 1.)
International Bankers Promote Global Financial Integration
"Global financial markets are the centerpiece of the contempory world economic world order, which was built largely by the United States in the aftermath of World War II. America's international bankers, indeed, led the charge toward today's global economic integration. In the 1950s, after twenty-five years of depression, war, and reconstruction, a few large banks from New York, Boston, Chicago, and San Francisco began to expand their foreign operations. The cautious early moves toward international financial openness were not controversial; the growing global banking system was barely noticed, for the United States was fully able to lead and manage world economic interaction...." (Jeffry A. Frieden, Banking On The World, p. 2.)
Wall Street Becomes Banker to the World
"The First World War and its aftermath pulled the United States into the world economy with a vengeance. Wall Street became banker to the world, and American corporations set up shop all over Europe and Latin America. Nonetheless, the size of the American market and the insularity of American politics tempered the enthusiasm of many Americans for international adventures. The American political system was torn between 'internationalists' who wanted the United States to tap its potential for world economic and political leadership, and 'isolationists' content to steer clear of European entanglements and rely on America's traditional sphere of influence. After a brief flurry of Wilsonian engagement, the country beat a partial retreat during the 1920s and stayed out of the international political arena as much as possible--even as American bankers came to dominate the world economy." (Jeffry A. Frieden, Banking On The World, p. 11.)
American Financiers Guide the World Toward Economic Integration
"After World War II, American finance and industry, led the capitalist world toward economic integration." (Jeffry A. Frieden, Banking On The World, P. 12.)
International Bankers Help Finance Wars
"American bankers were indeed of increasing international importance. The firm of Kuhn, Loeb and the National City Bank, in concert with British and German partners, lent $410 million to Japan during the Russo-Japanese war of 1904-1905. Jacob Schiff--head of Kuhn, Loeb, America's leading ... investment bank--was especially pleased to be able to assist the Japanese war against the ... 'enemy of mankind' sitting in St. Petersburg. The British government itself borrowed some $200 million from the firms of Morgan and Kidder, Peabody between 1900 and 1902 to help finance the expensive Boer War." (Jeffry A. Frieden, Banking On The World, p. 24.)
American Bankers Finance World War I
"By the time the United States entered the war, [WWI] its private financiers had lent some $2.6 billion to Britain, France, and their allies. Most of the lending was managed by [J. P.] Morgan, who also acted as the American purchasing agent for the Allies. Morgan's purchases on behalf of its Allied clients averaged over a billion dollars a year between 1914 and 1917, and accounted for one-quarter of American exports. We can get an idea of the magnitude involved by noting that the $2.6 billion in lending between 1914 and 1917 was more than twice the federal government's debt at the time, while Morgan's purchases for the Allies were greater that 1910 federal government spending. More generally, since the U.S. economy today is about one hundred times as large as it was at the time of World War I, owing to both inflation and economic growth, we might multiply the figures by 100 to get a sense of their present-day equivalents." (Jeffry A. Fieden, Banking On The World, pp. 26-27.)
The U.S. Government Helps Finance World War I
"In March 1917, indeed, Morgan's firm told the British Treasury that private lending was no longer feasible. At much the same time, however, the Germans, in a serious miscalculation, resumed unlimited submarine warfare. The ensuing American declaration of war, on April 4, 1917, came just in time to save Allied finances. The U. S. government replaced the private bankers, issued five series of war bonds, and lent $9.6 billion to the Allies between May 1917 and April 1919." (Jeffry A. Frieden, Banking On The World, p. 28.)
International Bankers Become the Greatest Force in International Relations
"World War I put American international bankers at the center of world politics, and they faced the aftermath of World War I with great enthusiasm. In the years following the war, the financiers became unarguably the greatest economic force in international relations. Yet their ambitious plans for a postwar world congenial to their interests were continually waylaid by political opponents within the United States, who made it very difficult for the U.S. government to back up U.S. bankers overseas. As Woodrow Wilson discovered in his unsuccessful fight for the United States to join the League of Nations. It was far easier to have one's way with war-weary Europe that it was to win over the representatives of America's heartland in Washington.
"The nation's international financiers, though, saw clearly the course they wanted to follow. The time had come for America 'to seize and hold her rightful heritage--the material and moral leadership in world affairs,' in the words of New York financier A. J. Rosenthal. Otto Kahn of Kuhn, Loeb told his countrymen: 'Whether we like it or not we must take part in the economic affairs of Europe.' This meant supervising European reconstruction--and, if necessary, financing it." (Jeffry A. Frieden, Banking On The World, pp. 29-30.)
International Bankers Draft Postwar Plans
"American bankers' participation in planning for the postwar settlement began as soon as the United States entered the war. Thomas Lamont, the prominent Morgan partner, sailed to Europe in the autumn of 1917 as a confidential financial advisor to the all-important mission of Colonel E. M. House to discuss wartime and postwar plans with the British and French. After the Armistice, Lamont once more set off for Europe. This time he was an official U.S. Treasury representative to the complex negotiations at the Paris Peace Conference. Lamont and fellow Wall Streeters Norman H. Davis, Bernard Baruch, and a young John Foster Dulles spent most of the first half of 1919 working on the crucial economic components of the Versailles treaty. The Americans were especially concerned to moderate the Anglo-French demands that Germany pay exorbitant war reparations, in excess of $100 billion; they eventually obtained an acceptable reparations agreement, although one still too punitive and imprecise for Lamont.
"After the Versailles negotiations were over, the bankers returned to the private sector, but continued their efforts at international crisis management. As Thomas Lamont later put it, Wall Street held Europe together in the 1920s: 'Bad as were the economic and financial conditions in Europe following World War I, nevertheless they were sufficiently within control to be handled largely by private banking and investment interests.'
"During the 1920s, United States private bankers initiated, supervised, and funded most of the central developments in the world economy. They built international organizations, stabilized currencies, and oversaw government economic programs in Europe and Latin America. Decision making in the 1920s international economy centered on Wall Street; the United States was a crucial component of the decisions taken; and the world operated in large part on a dollar standard.
"When, for example, the economies of Central and Eastern Europe nearly collapsed in the 1920s, stabilization programs were worked out, funded, and overseen by American and British bankers, generally joined by the Federal Reserve Bank of New York, the Bank of England, and the Financial Committee of the League of Nations. The combined influence of the major New York and London bankers, the world's leading central bankers, and the League of Nations was used to halt economic disintegration...." (Jeffry A. Frieden, Banking On The World, pp. 30-31.)
International Bankers Build Network of Decision Makers and Opinion Molders in America
"America's international bankers after World War I also went about building a network of decision makers and opinion leaders inside the United States sympathetic to their internationalist views and capable of implementing them. The National City Bank helped American universities introduce foreign trade into their curricula. In 1914, New York University set up the nation's first course sequence on overseas commerce; within a year, seventeen universities had similar programs. The bankers also helped found professional schools for study of overseas conditions, such as Columbia University's School of International Affairs and Princeton's Woodrow Wilson School. They were instrumental in creating the think tanks and research institutions that have since been at the center of America's foreign policy establishment. The Foreign Policy Association, the League of Nations Association (now the United Nations Association), and the Carnegie Endowment for International Peace were all designed to develop a foreign policy, and foreign policy makers, worthy of America's new international role. The most important of these institutions was the Council on Foreign Relations (CFR), formed right after the end of the war. Morgan's chief counsel was the CFR's first president, and Wall Street was overwhelmingly represented on its board. When the council began publishing the journal Foreign Affairs to serve as the center for foreign-policy debate, Morgan's Thomas Lamont arranged for the man who had edited Lamont's New York Evening Post to become the first editor of the journal.
"Some important sectors of the U.S. government shared the bankers' vision of world leadership. The State Department was a bastion of internationalism, and Charles Evans Hughes, secretary of state from 1921 to 1925, was extremely sympathetic. The new Federal Reserve System, dominated by Benjamin Strong, the powerful chairman of the Federal Reserve Bank of New York, was a reliable ally. 'We feel in New York,' Strong told his fellow Fed governors in 1921, 'that the general recovery of trade around the world is going to be brought about by our making New York a good market in which the world can borrow money.'" (Jeffry A. Frieden, Banking On The World, pp. 33-34.)
The International Bankers Well Laid Plans Encounter Opposition From Nationalists
"The economic influence of American bankers was extraordinary in the 1920s, and yet the decade was one of repeated political failure and frustration for them. Ironically, the single biggest hurdle to their well-laid out plans turned out to be within the United States itself. After the internationalist interlude of the war, traditional nationalists quickly reasserted their powerful position in American politics.
"Despite the fundamental change in America's international economic position, within a couple of years following the end of World War I most of the bankers' international plans ran into serious opposition within the American political system, and with a few exceptions this opposition blocked their full implementation. This is especially striking since most of the bankers' program--trade liberalization, U.S. aid for European reconstruction, American international monetary and financial leadership--was implemented with little difficulty in the late 1940s. After World War I, however, domestic political opposition to 'internationalism,' as the new interest in American world leadership came to be called, was so powerful that the bankers and their allies faced round after round of grueling battles and partial defeats in the U.S. Congress and much of the cabinet.
"The first major failure of the 'internationalists' was the refusal of the U.S. Congress to approve American entry into the League of Nations.... Congress voted down virtually all legislation committing the country to the international organizations American bankers had worked so hard to design and implement.
"The bankers' second great failure was in their attempt to move the United States away from its traditional protectionism. Unless the United States bought more from Europe, the Europeans would not have enough dollars to repay their debts. Otto Kahn told his country: 'Having become a creditor nation we have got now to fit ourselves into the role of a creditor nation. We shall have to make our minds to be more hospitable to imports.'
"The United States had some of the world's highest trade barriers before World War I, although Woodrow Wilson had brought tariffs down in 1913. The war so disrupted world trade, though, that the effects of these lower tariffs were barely felt. By 1920, a postwar depression had rekindled the debate, and the bankers fought long and hard to keep the American market open to their European clients.
"These bankers knew that reducing the American tariff meant giving up some of the domestic market to foreigners, but they saw this as a small price to pay to gain access to foreign markets for American goods and capital....
"The bankers' third major failure was over what soon became known as the 'war debts-reparations tangle.' By the end of World War I, America's allies were saddled with some $10 billion in war debts to the U.S. government, which they attempted to counterbalance by extracting reparations from a defeated Germany. The European victors complained endlessly about the burden of their payments to the United States, while Germany deeply resented the ignominy of its reparations payments to the vicars. With Europe's economic and political relations hamstrung by war debts and reparations, Europe's capacity to borrow from American bankers and buy from American exporters was seriously limited.
"Jack Morgan was blunt. 'Those debts should be cancelled,' he told the New York Times in 1922. The bankers lobbied tirelessly for the United States to write off all or part of Europe's war debts to the U.S. government, which would allow the British and French to scale down their demands for German reparations; the European economies would be sounder, and American lending to Europe would be able to resume. Kuhn, Loeb's Paul Warburg told President Harding in 1921, 'It is of infinitely greater value to the United States to reconstruct a world in which we can trade in peace and security than to have on our books obligations of our comrades in arms which they cannot pay.'
"Yet inside the United States, opposition to canceling Europe's debts to the U.S. government was overwhelming. There was, of course, the 'moral' issue: 'They hired the money,' as Calvin Coolidge said. A more practical objection was that interest on the government's loans to Europe was expected to be about one-seventh of all U.S. government revenue, and a cut in these interest earnings would require a domestic tax increase, which the heartland's industrialists believed would prolong the postwar recession....
"Herbert Hoover, Commerce secretary in the post-Wilson administrations and the principle economic policymaker in the cabinet, was himself suspicious of the bankers. Hoover was primarily concerned with American industry, not finance. He wanted American exports to grow, and he wanted the country's industries to have access to the cheap raw materials he had worked to find as a mining engineer abroad. Yet loaning money to the overseas competitors of American business was far less desirable. 'A billion dollars spend upon American railways,' Hoover insisted, 'will give more employment to our people, more advance to our industry, more assistance to our farmers, than twice that sum expended outside the frontiers of the United States." (Jeffry A. Frieden, Banking On The World, pp. 34-35, 36, 37-38,39.)
New York Federal Reserve and State Department Officials Cooperated in Secret With Private International Bankers
"The result of the international bankers' economic expansion and their frequent political defeat within the United States was a curious patchwork of private involvement in, and public disengagement from, European economic affairs. While Wall Street became more and more committed to the international economy, the U.S. government drew back from Wilsonian internationalism. No American officials participated in international organizations, and American government involvement in European economic affairs was minimal. To be sure, the New York Fed and the State Department cooperated with the bankers, usually in secret; but the executive branch for the most part simply observed while private American bankers tried to reshape the world economy." (Jeffry A. Frieden, Banking On The World, p. 39.)
International Bankers Develop Postwar Plans After World War II
"Wall Street built a cohesive network of wealth, power, influence, and intellect in the years after 1914. Individual bankers and their allies accumulated a storehouse of contacts and experience that proved essential during and after World War II. John Foster Dulles, to take one prominent example, cut his teeth on international affairs was a Wall Street lawyer in the 1920s. Among other things, he helped supervise the Polish financial stabilization of 1927 as counsel to the American banks involved (Chase; Blair and Co.: and Bankers Trust). Along with learning about European politics and finances, the experience brought him together with Jean Monnet, Chase's Paris representative, who built the European Common Market during Dulles' reign as U. S. secretary of state in the 1950s.
"An entire generation of American foreign-policy makers and shakers, many of them bankers, lawyers for bankers, and financial journalists, formed its view of the world in the turbulence of Versailles, the boom of the 1920s, and the disasters of the 1930s. Much of the powerful cohort of wartime and postwar leaders who would rebuild the world after 1945 came from Wall Street. Dean Acheson, John Foster Dulles, James Forrestal, W. Averell Harriman, Robert Lovett, John McCloy, and Edward Stettinius were all major Wall Street figures who molded American foreign policy after World War II, fired by a determination not to repeat the mistakes of the 1920s." (Jeffry A. Frieden, Banking On The World, p. 49.)
International Bankers Develop the Most Powerful Financial System in World History
"The international banking business was slow, but American international bankers were anything but inactive. They were powerful people with strong ideas about the proper path for the country to take. In the 1930s and 1940s, American international financiers redoubled their efforts to lead the United States toward a course of action they deemed appropriate. The successive waves of economic, political, and eventually military cataclysms that swept the world after 1930 clearly made it impossible to return to the pattern of the 1920s, in which American international bankers had tried to rebuild the world economy with the committed support of the U.S. government. As Thomas Lamont wrote in 1947, what he and his colleagues in private banking had done in the 1920s, 'today can be undertaken only through the cooperation of governments themselves,' for 'the chaos in Europe is so complete that only strong government action can hope to reduce it to some degree of order.'
"The bankers were able to get much of what they wanted in postwar international reconstruction, for domestic resistance to American international economic and political involvement diminished in the 1940s. Foreign competitors were few and far between at the end of World War II. Even so, there was quite a residue of domestic hostility to internationalism. Perhaps most important in overcoming this hostility was the connection made within a few years of the war's end between economic internationalism and the broader American program of building a Western anti-Soviet alliance. On this basis, despite lingering popular uneasiness about overseas commitments, America's international bankers were able to play a central part in building the new international economic order.
"The Depression and World War II indeed led the U.S. government to embrace many of the bankers' ideas, and many of the bankers themselves, in the process of planning a postwar world. After the war, the government took on the task of remaking the international economy, with the enthusiastic participation of the bankers in this second chance at postwar reconstruction. On the basis of the new economic order that ensued, America's international banks rebuilt their shattered networks abroad and led the way toward the largest and most powerful international financial system in world history." (Jeffry A. Frieden, Banking On The World, pp. 51-52.)
Wall Street Financiers and Lawyers Design the Postwar World After World War II
"As war began in Europe, Wall Street's economic internationalists flooded into the administration to plan for the postwar economic settlement. Some of the country's most prominent wartime and postwar figures came to government from the financial community. W. Averell Harriman--son of financier and railroad man E. H. Harriman and senior partner in the firm of Brown Brothers, Harriman--was perhaps America's best-known international envoy from 1941 to 1953. Harriman served successively as coordinator of Lend Lease assistance to Britain, ambassador to the Soviet Union, ambassador to Great Britain, secretary of commerce, American overseer of the Marshall Plan, chief foreign affairs advisor to the president, and director of mutual security. Robert Lovett was a long-time associate of Harriman's, both in railroads and at the firm of Brown Brothers, Harriman; he started as assistant secretary of war for air, then became under secretary of state to George Marshall, then Marshall's deputy secretary of defense, and finally secretary of defense in his own right. James Forrestal, a close friend of Lovett's left the presidency of the investment bank of Dillon, Read to serve as under secretary of the navy, then secretary of the navy, then secretary of defense until mental illness drove him from office and to suicide.
"A number of Wall Street lawyers also served prominently. Dean Acheson came back to the administration in 1941, and progressed from assistant secretary to under secretary to secretary of state. John Foster Dulles, a Republican, was an important advisor to the Democratic administrations an then succeeded Acheson as secretary of state when Eisenhower took office. John McCloy was assistant secretary of war, then president of the World Bank, then American high commissioner in Germany. These veterans of the American financial establishment, and others less well known, spent most of their time and energy between 1939 and 1955 in or around the government, helping to design the postwar world.
"The internationalists, both those who went to Washington and those who remained in the private sector, wanted a reconstructed world to be based on free trade, sound currencies, and international economic cooperation under American leadership. The United States would have to discard once and for all the foreign-policy ambivalence international bankers had confronted in the frustrating 1920s." (Jeffry A. Frieden, Banking On The World, pp. 57-58
International Bankers Oppose Efforts for European Nations to Become Self Sufficient
"To American postwar policymakers, the incessant attempts of Europe's small nations at economic self-sufficiency on a national basis seemed both absurd and inherently warlike. The best way to avoid another Continental war was to tie the Western European economies together in a web of economic interdependence." (Jeffry A. Frieden, Banking On The World, p. 71.)
International Bankers Control the Euromarket
"Today's international financial markets constitute a pool of capital of almost unimaginable size. The offshore markets in which most international banking takes place hold almost $3 trillion. If one subtracts transactions among banks themselves, the market's net size is well over a trillion dollars. Even the lower figure is staggering: it is equal to the entire output of China's 1 billion people in four years. The market's trillion dollars could buy every manufacturing corporation in the United States, as well as the livestock, crops, buildings, and machinery on all of America's farms.
"This huge pool of capital is not stagnant. In an average year, banks and other investors in the offshore markets lend $300 billion to governments and nonfinancial corporations. Since the early 1970s, about half the borrowers have been from North America, western Europe and Japan; a third from the non-OPEC developing countries; and the rest are from the non-OPEC developing countries; and the rest are about evenly split between OPEC and Communist borrowers. The approximately $300 billion that internatinal financial markets lend out every year is roughly equal to what America's corporations borrow in three normal years, or what they invest in a normal year. In other words, every year international banks lend enough to purchase every new factory, railroad, port, ship, power plant, and other productive facility built in America in that year, along with all the new machinery inside them; or to buy all of the new private homes and apartment houses built in the United States during three average years.
"Banks all over the world are tied electronically to these enormous international financial markets. They can shift millions of dollars around the globe, or trade billions of yen for Deutsche marks, in a matter of minutes. They can put together billion dollar loans for major governmental and multinational corporations in a few days. Their ability to respond instantaneously to economic and political events has transformed the world economy." (Jeffry A. Frieden. Banking On The World, pp. 79-80.)
Leading Banks Determine the Contours of the American Financial Market
"Today the Euromarkets tie the world's investors, borrowers, and banks together in a network that is at the same time part of no national financial system and part of them all....
"Eurobankers deal primarily with other Eurobankers; over half of all offshore business is between banks. Most of the rest is with major multinational corporations, big institutional investors, and governments. This is a market for the 'heavy hitters' seeking to borrow, trade currencies, and make deposits in multiples of a million dollars. Loans in the billions are not rare.
"The offshore markets are indeed attractive to large depositors and borrowers. The relative insulation of these markets from the whims of national authorities makes them appealing to governments that might be subject to financial intervention for political purposes, as well as to large private investors interested in evading taxes. The fact that banks doing business on the offshore markets are generally free from national financial regulations, and that international banks deal only with very large deposits or loans, allows the offshore markets to pay more to depositors, charge less to borrowers, and use the latest in telecommunications technology and financial innovations. The combination of state-of-the-art technology and relative freedom from government interference makes the offshore markets the financial marketplace of choice for the world's leading banks and corporations.
"This great international financial system is important, both for its size and because it forms the apex of a pyramid who base is the national economies of the entire capitalist world. The huge financial institutions that dominate the offshore markets in turn hold sway over the financial markets of their home nation. The United States is a good example. Nine American commercial banks--Citibank, Chase, Morgan Guaranty, Manufacturers Hanover, Bankers Trust, and Chemical, all of New York; and First Chicago--account for the vast majority of American international financial activities. They are joined abroad by five leading investment banks--First Boston, Morgan Stanley, Salomon Brothers, Merrill Lynch, and Goldman Sachs. These few internationally prominent banks from the United States largely determine the contours and direction of the entire American financial market. The five investment banks do two-thirds of all bond underwriting in the United States. The leading commercial banks have about one-third of the resources of th entire American banking system among them, and each of them is several hundred times the size of the average American bank. When Chase or Citibank lowers or raises is prime lending rate, other banks follow suit.
"Around the world, the largest banks from every major non-communist nation have become international, and with several dozen counterparts from other countries, they lead the international banking system. All nations are drawn into the international financial whirlwind: Their economies depend on their domestic financial system, the financial system are led by a few big banks, and these few banks are part of the tightly knit world of international finance.
"The offshore financial markets contain more capital that has ever been brought together in all of world history, and they are a major force in the economies of all of the world's nations. No corporation, investor, or government is insulated from trends in international banking. Investment, production, and commerce all rely on the banks; international currency movements, international trade, and international investment flow through the banks; governments plan and execute their policies with a close eye on the international financial reaction." (Jeffry A. Frieden, Banking On The World, pp. 90, 91-92.)
International Bankers Possess Veto Power Over National Governments
"The ability of the contempory international financial system to shift billions of dollars from place to place in minutes gives the markets something akin to veto power over domestic or international decisions. All the world's companies and governments are interested in having access to funds as cheaply as possible. The great integration of contempory financial markets means that this battle for finance is global; companies and governments compete against each other for the confidence of the international financial system. Actions that reduce confidence will raise the cost of capital to firms or countries, so they must be concerned with maintaining the markets' goodwill.
"For international bankers, the markets' ability to restrain the behavior of politicians is a profoundly good thing. International finance thrives in large part because national governments do not interfere with it. More generally, the international financial system depends so entirely on the free movement of capital across border that any attempt to restrict these movements is a threat to the markets as they are currently organized. The international financial community, has a vested interest in convincing the world's governments, and their people, that intervention in their business will be counterproductive, and may even be impossible." (Jeffrey A. Frieden, Banking On The World, p. 113.)
International Bankers Rule Over the Nation-States
"Walter Wriston is the most prominent spokesman for the American international banking community, and there is little doubt that his conscience coincides with his needs. In the decade up to 1984, Wriston was one of the world's leading bankers as chairman and chief executive officer of Citibank. He helped engineer Citibank's extraordinary international expansion in the 1970s, and even in retirement he is a participant in efforts to keep world markets open....
"Wriston believes that the battle between markets and politics is nearly over, and that politicians have already lost to what he calls 'the information standard'--the ability of firms and individuals to communicate globally and instantaneously. Wriston spoke to me in his Citicorp Office:
"'The gold standard, replaced by the gold exchange standard, which was replaced by the Bretton Woods arrangements, has now been replaced by the information standard. Unlike the other standards, the information standard is in place, operating, will never go away, and has substantially changed the world. What it means, very simply, is that bad monetary and fiscal policies anywhere in the world are reflected within minutes on the Reuters screens in the trading rooms of the world.
"Money only goes where it's wanted, and only stays where it's well treated, and once you tie the world together with telecommunications and information, the ball game is over. It's a new world, and the fact is, the information standard is more draconian that any gold standard. They think the gold standard was tough. All you had to do on the gold standard was renounce it; we proved that. You cannot renounce the information standard, and it is exerting a discipline on the countries of the world, which they all hate. For the first time in history, the politicians can't stop it. It's beyond the political control of the world, and that's the good news.'
"The size and speed of today's international financial transactions, Wriston says, makes it impossible for politicians to override the market's judgment.
"'There not enough money in the world to support a currency with dumb fiscal and monetary management. The president of the United States goes out in the Rose Garden and says something dumb. The trading lights of the world light up, and ti's all over. In France, Mitterrand announced all those ridiculous moves, and they lost a third of their foreign exchange in a week.
"'There are 60,000-odd terminals out there in the trading rooms of the world, and those guys are about as sentimental as a block of ice. If they're going to sell, that's it. This is new in the history of the world, and I don't think it can be structured or contained, and I think that's good news over a longer frame. There's no place to hide.'
"Wriston realizes that market signals can be uncomfortable for political leaders or systems.
"'The last thing the political process wants is to be accountable. But there's nothing the politicians can do. The information standard, the information-intensive society, moves accountability from a few knowledgeable men and women to the population. Internationally, it moves it to a judgment of the way your policies look to the international markets.
"'At the end of the day, it's a new world and the concept of sovereignty is going to change. Politically, the new world is an integrated market in which nobody can get away with what they used to. You can't control what your people hear, you can't control your capital flows. The idea of fifteenth-century international law is gone. It hasn't laid down yet, but it's dead. It's like the three-mile limit in a world of Inter-Continental Ballistic Missiles.'" (Jeffry A. Frieden, Banking On The World, pp. 114-115.)
Third World Countries in Financial Bondage to the International Bankers
"Developing countries in Latin America, Africa, and Asia owe over $600 billion to international banks. Since 1982, debtor after debtor has gone to the brink of default, and the Third World debt crisis has been the most prominent and controversial issue in international finance." (Jeffry A. Frieden, Banking On The World, p. 123.)
National Governments Are Powerless in the Face of International Bankers
"The world economy is entering uncharted waters. For hundred of years, economic and political systems have been primarily national and coterminous; business people and workers have taken their economic grievances to national governments. No government responds for the actions of international financial markets, and national policies are increasingly powerless in the face of a truly global banking system. Nonetheless, while capital may be extraordinarily mobile, most people--and most businesses--cannot move from activity to activity, or from place to place, in response to marginal economic changes.
"In every country with well-developed international economic relations, the dictates of global markets are in increasing conflict with the demands of firms, industries, and groups at the national level. International bankers, and many other economic actors around the world, have a vital interest in maintaining and deepening international financial and economic integration. Yet global markets threaten the livelihood of more insular business people and workers, who want to stop or even reverse international economic interdependence.
"In the United States, as in the rest of the world, the country's international financial relations are deeply entangled in domestic politics. The United States is increasingly subject to developments on international capital and goods markets. For some, this financial openness is the source of enormous profit opportunities, and they do what is possible to reinforce and protect contempory international financial integration. For others, the country's exposure to international competition is a disaster, and they fight to restrict economic integration. The resultant battles can pit industry against industry, region against region, workers against management, and eventually, perhaps, country against country.
"The future of the international political economy, and of international finance, depends on how conflicting interests concerning the new economic realities are fought out in the political systems of the world's nations. The international political economy might move even further toward economic and political integration, an outcome which could subject nations and peoples to the ever-increasing, and often unpleasant, discipline of international market forces. The world might divide into more self-contained and protected investment and trading alliances, which might undermine existing international political relations. Or international economic relations might stumble from problem to problem, raising the specter of uncertainty and even collapse.
"The starting point for whatever direction the international political economy takes is today's highly integrated Western world economy. Robert Slighton, Chase Manhattan Bank's chief international economic forecaster, points out that strong and deep financial and trading ties bring together every capitalist nation: 'The single broad trend of the postwar period has been increased economic interdependence. The proportion of world trade to world output has increased dramatically. Even more dramatic has been the increased interdependence of world capital markets, to the point where it is almost a misnomer to talk about a national capital market. There is a global capital market, period. The United States is just a part, although a very major part, of the global financial market.'" (Jeffry A. Frieden, Banking On The World, pp. 162-163.)
International Bankers Have a Powerful Interest in a Financially Integrated World Economy
"Since World War II, the economic and political leaders of all Western nations have been generally committed to international economic integration....
"Political consent made the global financial integration of the past thirty years possible, and political consent will be needed for this integration to advance. The most concerted political support for a continuation of current trends comes from the international business community. This includes both global banks and multinational industrial corporations with truly international production, distribution, and technological networks. International financial leaders and their allies around the world have battled to maintain international economic openness against the more insular pull of national politics.
"International bankers have powerful and concentrated interests in a financially integrated world economy, since their business is central to such a world. The more international trade and investment increase without government interference, the more scope there is for private international financial institutions to extend trade credits, exchange currencies, take deposits, and make loans. The material interests and ideological tenets of the world's bankers lead them to insist that policymakers heed, not controvert, even untoward international market trends.
"If economic internationalists prevail politically, and the postwar trend toward greater international economic integration is simply projected forward in a straight line, the result will be a capitalist world with truly global financial and goods markets and general political acceptance of market judgments. Walter Wriston believes that a fully integrated world economy immune from political interference is on the near horizon. 'Today,' Wriston has said, 'except is a very few instances, national borders are no longer defensible against the invasion of knowledge, ideas, or financial data.... We now have a new calculus, which, I believe, will in the end be beneficial to the world. It exerts global pressure on all governments to pursue sounder economic policies because it is becoming increasingly obvious that it is now impossible to hide in our new electronic world.'
"Should the political influence of such market globalists as Walter Wriston be as strong as their preferences, the capitalist world will move toward economic integration free from political interference. In such a world, firms and individuals, labor unions, and politicians would all accept the verdict of international markets on the most efficient use of their time and energy. The economic role of government would be restricted to smoothing the transition of workers and capitalists from uncompetitive to competitive industries or regions, helping to organize markets, and providing a sympathetic judicial and social environment for private international transactions.
"The organization of the world's businesses on a global basis will, in this view, allow the market to decide how resources can most effectively and profitably be mobilized. International banks and corporations are the leading edge of the new order, says Wriston: 'The reality of the global marketplace has been the driving force pushing us along the path of developing a rational world economy. Progress that has been made owes almost nothing to political imagination. It has been the managers of the multinational corporations who have seen the world whole and moved to supply mankind's needs as efficiently as politics would allow'
"The attraction of market globalism is that it subjects all economic decisions to the scrutiny of international investors who can weigh potential profit opportunities around the world and encourage those that make the most economic sense. The argument is vaguely Social Darwinian: because economically impractical enterprises cannot survive in the long run, it is better that they never be started in the first place, or if they exist, that they be closed as quickly as possible. Globally integrated markets would not allow firms, workers, and governments to make costly mistakes--investing in unprofitable industries, acquiring unnecessary skills, adopting misguided policies....
"Nevertheless, stubborn domestic groups and political leaders can erect important obstacles between national and international markets. They can impose trade barriers on imported goods or grant subsidies to exporters.... (Jeffry A. Frieden, Banking On The World, pp. 165, 166-168.)
Economic Interdependence Has Made National Sovereignty an Illusion
"Walter Wriston says impatiently, 'As a general rule, the politicians have been engaged in fragmenting the world, while the multinational corporations have been viewing the planet as a single marketplace.' Wriston's dismay is echoed by policymakers restless about the recalcitrance of national governments to respond to this changing international reality. Anthony Solomon, then president of the Federal Reserve Bank of New York and second only to Paul Volcker among the U.S. government's financial decision makers, worried in 1982 that 'the pronounced increase in interdependence we have seen has so far done little to dislodge deeply ingrained opinions. Instead, most governments, whether in the industrial countries or in the developing world, still cling to unrealistic notions of national autonomy.... It is an illusion that full national freedom of action exists in the kind of world we have, and it is wiser to be honest about that and let go of the illusion.'
"Given the formidable obstacles to global economic integration, even the most fervent believers in the desirability and inevitability of the process recognize that it will hardly be smooth. What they hope and expect is that the trend is in the direction they desire. Walter Wriston told me, '... We're in a revolution right now, and its being driven by technology. There is nothing the politicians can do--they can play King Canute for a minute, but the political process eventually catches up with technological innovation. That doesn't mean the halcyon days are here, or the wonders of world government, but I would argue that it's putting a closer noose in a shorter time frame on the political action of every country.'
"Increasing economic interdependence, Wriston believes, already so restricts the maneuvering room for national politics that it cannot be reversed. The economic attractiveness of every major nation, sector, and firm is being evaluated continually by thousands of bankers, traders, and investors around the world. Since government decisions affect profit opportunities, international currency markets pay close attention to political trends, and new policies are almost immediately reflected in currency values and capital flows.
"The sheer size and speed of global financial markets makes them an economic force in their own right. As Wriston puts it, 'The fact is that the foreign exchange market now amounts to around fifty trillion dollars a year and is just too big for any one entity to move. If you took all the capital of all the banks in the United States and sold it in the foreign exchange market, it would amount to about ten minutes of trading...'
"Many international bankers thus believe that the ability of international financial markets to move funds toward congenial political systems and away from hostile ones will eventually bring reality closer to their ideal world in which governments are unable to control them. As Walter Wriston said to me, 'the political process has to be altered; the marketplace will work in politics as it does in economics.' He anticipated that politicians unable to attract capital to their jurisdictions will be turned out of office as their economies stagnate, and will eventually be replaced by leaders who can instill confidence in international investors." (Jeffry A. Frieden, Banking On The World, pp. 168-170.)
Tens of Millions of U.S. Jobs Will Become Extinct in the Future Interdependent World
"In an ideal interdependent world, the capital-rich and highly educated nations of North America and Western Europe would produce only goods that are intensive in capital and knowledge, concentrated in such sectors as high technology; labor-intensive manufacturing would be carried out in the labor-rich areas of the Third World. This may be rational and efficient, but it implies the extinction of tens of millions of jobs in the United States alone, and current jobholders cannot be sure that they would find employment in new lines of business. Politicians from America's industrial centers can hardly relish the prospect of the gradual demise of the industrial workers and industrialists they represent. True international economic integration radically reduces the room for independent action by governments to protect their constituents' jobs and living standards.
"For a large number of groups and industries, the rest of the world is an economic threat rather than an opportunity...
"The impact of international financial affairs on domestic economies and politics is often unwelcome. Firms, groups, and politicians in industrial societies have thus tried to restrict the scope of international economic forces. Pressure for trade protection has mounted steadily in the United States sine 1970, reaching its highest level during the early 1980s. Many European firms have turned away from volatile international markets toward more predictable bilateral contracts with customers in Eastern Europe and the Soviet Union; Western European politicians of all political views aggressively promote Eastern bloc trade. Traditional European industries have been vociferous in their demands for national, or Common Market, support against foreign competition." (Jeffry A. Frieden, Banking On The World, pp. 170-172.)
National Sovereignty Threatens the Power of the Multinational Corporation
"In 1975, Henry Kaufman, a senior partner of the important investment bank Salomon Brothers and one of Wall Street's most respected leaders, expressed concern about the political difficulties facing international business leaders. 'Nationalism is on the rise again,' Kaufman wrote. The implications were serious. 'Unless we can arrest the rise of extreme nationalism, the multinational corporation will no longer be a growing force in international markets. Accelerating nationalism will mean increasing conflict between the economic rationality of the multinational corporation and the objectives of the sovereign state.'
"At the same time, Paul Volcker expressed similar fears to an interviewer from Euromoney...'My experience in recent years has made me very conscious of the difficulty of getting a cohesive co-ordinated policy when there is this much dispersal of basic power centers and a kind of self-consciousness of separate political and economic identities that goes with the dispersal. It increases the danger in my mind that one country or another, running into economic adversity, is going to adopt fairly self-serving policies....' (Jeffry A. Frieden, Banking On The World, pp. 174-175.)
The World's Leading Private Bankers Pressure Congress to Give $8.4 Billion in U.S. Taxpayers Money to the IMF
"An important demonstration of how domestic economic distress in the United States might affect the international financial system came at the height of the debt crisis. In 1983, the Reagan administration asked the U.S. Congress to approve an $8.4 billion increase in the U.S. contributions to the International Monetary Fund. The international financial community regarded strengthening the IMF as essential, while many domestic political forces in the United States opposed the use of taxpayers' money to strengthen a system they did not support.
"The battle over the U.S. quota increase became the most hotly contested and closely fought struggle over American foreign economic policy since the 1940s. It pitted the world's leading private bankers and business people, and the combined weight of the Reagan administration, against domestic American political forces with little sympathy for international financial integration. The extraordinary difficulty the IMF's supporters had in the United States is an indication of how hard it may be to reconcile national politics with the needs of global capital markets.
"The International Monetary Fund plays a central role in international finance.... The debt crisis that began in 1982 gave this international financial police officer more to do that ever before. By 1983, dozens of countries--compared to one or two in the normal year--were in different stages of IMF programs designed to enforce good financial behavior. The fund had made so many stabilization loans that it was in danger of running out of cash. The IMF's available funds had to be increased; since these funds are met by quotas from member nations, each member had to increase its contributions. Agreement was eventually reached on an approximately 50 percent increase....
"In the United States, opposition to an $8.4 billion additional American contribution to the IMF arose almost immediately. The international financial community looked on aghast at the possibility that provincial Congressmen might bring international financial markets to a standstill. Jacques de Larosiere, managing director of the IMF, voiced widespread fears that failure to increase the fund's resources 'would cripple this institution' and have 'incalculable consequences for economic and financial stability worldwide.'
"The Banker's Association for Foreign Trade (BAFT) coordinated and led much of the bank lobbying for passage of the IMF bill. This sixty-five-old lobbying group describes itself as 'the leading spokesman for the international banking community.' The Washington-based organization, with about 135 American banks as full members and another hundred foreign banks as nonvoting members, is a concentrated and specialized political organ of the American international banks.
"Washington lawyer Gary Welsh was centrally involved in the IMF quota conflict; he worked for BAFT during the legislative struggle. Welsh knows well both the principle obstacles to financial internationalization and the reasons for the bill's eventual passage. 'There's a strong political resistance to the internationalization of our economy,' he told me two years after the quota debate....
"The strange political lineup drew the labor movement, the New Right, and import-competing industrialists together as critics of the banks and the IMF....
"Most of the protestors were primarily interested in using the debate as a symbolic opportunity to raise long-standing concerns over U.S. government support for international banking; few had strong feelings about the quota increase itself. Even so, as Gary Welsh recalls, 'the bill was only approved because St. Germain (Jake Garn, a Utah senator and chairman of the Senate Banking Committee, and Fernand St. Germain, a Rhode Island congressman and head of the House counter-part) combined the IMF bill, which probably would not have passed the House on its own, with a whole series of bills on housing, community development, and a half dozen other things.'
"With few public supporters in their battle for the bill, the bankers had to rely on a behind-the-scenes network in the executive and legislative branches. 'In the international area,' Welsh says, 'a very small club carries the stuff through Congress, and you've got to be in good communications, working together.' Welsh lists the principal supporters activated during the debate. 'The Fed, obviously, was crucial. Volcker saw the implications of everything much sooner than the Treasury did. We worked very closely with the Fed, particularly in responding to initiatives that came out of the Congress about regulating the banks. We would need to come back, particularly through Volcker, and say they were a bad idea. Sometimes you don't want the banks to say it; you want the regulators to say it. There are ways to make your views known, and generally we'd talk to the Treasury, to the Fed, to the Comptroller (the Office of the Comptroller of the Currency, a Treasury agency that regulates many banks) and tell them the problems we saw. Then they would get up and testify, and say they had problems with this or that. So we had a very close working relationship with those three agencies.'
"... In their attempt to rally support for the IMF quota increase, bankers tied the bill in with everything from international economic stability to the dire consequences for American national security if Latin American debtors staggered from financial crisis to revolution. James Robinson III, chairman of American Express--one of the country's major international financial powerhouses, even though it is not a bank--drew graphic connections between financial leadership and unrest south of the border. 'It's been labeled a bank bailout bill,' Robinson complained to a Fortune reporter...
"Despite the best efforts of the bankers' allies in the executive branch, by the time the bill reached Congress it was already so politicized that chances for its approval were considered slim. Only backroom deals and the assistance of Fernand St. Germain allowed the banks and their supporters to guide the bill through the House, where anti-bank sentiment was concentrated. Early on, the Administration and the bankers convinced St. Germain to support the bill, but he insisted that he needed to take a public position hostile to the financial community in order to maintain his political reputation and defuse opposition.
"Welsh describes the process by which St. Germain shepherded the quota increase through the House in private, while attacking international financiers in public: 'In the House Banking Committee there was a delicate balancing act. St. Germain said, 'Okay, I understand what's at stake here, but I know the House. I know that wer'e only going to sell it to the members of the House if we can convince them that we're beating you guys on the head.' We were totally dependent on him to get it through the House, because he was the chairman of the committee. And because he is such a vocal critic of the banks, a lot of people believe him. So St. Germain played a critical role in dealing with the popular political sentiment for punishing the banks; he had to convince people that it was being done.'
"Indeed, St. Germain was a major bank critic during the debate. He opened one day of his committee's hearings on the bill, for example with reference to 'the deep concern that the international situation is, indeed, fragile and that the United States must ignore all else and ride quickly to the rescue. U. S. banks, trapped in their international adventures, have used this genuine concern to direct attention from their failings.
"U.S. banks have ignored prudent practices and domestic needs,' St. Germain continued, 'in search of the quick buck and sky-high interest rates offered by desperate borrowers caught in an international financial squeeze.... It ill behooves the Congress, the administration, financial regulators, or journalists to paper over banking excesses with flag-waving statements about the glories of financial colonialism.'
"Even while he engaged in some politically prudent bank-bashing, St. Germain assured the bankers that the bill would go through. He also promised that a variety of restrictive amendments approved in the House version would be jettisoned in the joint House-Senate conference committee. As Welsh recalls, 'The bills that came out of the House were terrible from an international banking standpoint. To get the IMF thing through St. Germain had to say, 'Banks won't be able to do this, they won't be able to do that; we're going to make them put up big reserves on all international loans.' It was a conscious strategy on his part to get it through the House. He'd tell us, 'Once we get in conference, I'll throw out all this stuff.'' The objectionable restrictions on international banking were indeed removed in conference committee once the bill passed the House.
"Although American international bankers eventually got the IMF funding they wanted, the battle was extraordinarily protracted and difficult. Gary Welsh summarizes the lessons of the IMF debate for the political future of American international bankers: 'What the bankers found out from the IMF process was that they weren't popular, which they always thought they were, and that there was a tremendous misunderstanding of what international lending was all about. The banks learned a tremendous lesson from that: they had done a bad job of communicating with their representatives and senators. We're now trying to build a whole system to disseminate information. We can equip our bankers with material they can go to their community with about the internationalization of the economy, about how we're dependent upon export markets, how imports play an increasingly important and beneficial role in many sectors of our economy, and how banks are a crucial element in financing these flows.'
"The bankers' interests conflict with those of many opponents with political clout and public relations will not eliminate the fundamental disagreement. Welsh concludes that American international bankers will have to rely on their ties with strategically placed policymakers: 'The banks have realized that they don't really have any independent political support in the Congress. Banks can't be up front on the issues; they've go to work very closely with the executive branch. The only way you can get this stuff through is with a strong administration, strong support from the Fed, and strong support from a dozen or so key legislators in Congress--the chairman of the Senate and House Banking Committees, Foreign Relations Committees, the Speaker, people like that. You have to depend on the leadership to carry it through, so that's what everybody's working on.'
"The bankers' harrowing experience of very nearly losing the IMF battle demonstrates that the continued internationalization of financial and goods markets cannot be taken for granted. The IMF quota increase was a relatively small matter that only international bankers and some policymakers felt strongly about. The bill's opponents regarded it primarily as a symbol of overseas economic commitments that irritated them. Even so, the bill would certainly have lost without intensive administration lobbying and skillful work by the bankers' allies in Congress." (Jeffry A. Frieden, Banking On The World, pp. 181-182, 183, 184, 185,186-192.)
Foreign Ownership of American Based Companies
"While foreign firms have been expanding their exports to the United States, foreign corporations have been moving massively into the country. Foreign investors control American affiliates worth over $800 billion...." (Jeffry A Frieden, Banking On The World, p. 198.)
The Most Serious Challenge to International Financial Institutions is Economic Nationalism
"The most serious challenge to America's international financial institutions is the growth of 'economic nationalism,' including everything from trade protection to distaste for the IMF." (Jeffry A. Frieden, Banking On The World, p. 231.)
International Bankers Promote Global Interdependence
"For forty years America's international bankers have been at the center of a world economy whose organizing principle was the free movement of capital and goods, and whose slogan was interdependence....
"The leaders of international finance, along with their allies in the business community, in government, and elsewhere, hope and work for a deepening of contemporary international economic integration." (Jeffry A. Frieden, Banking On The World, p. 235.)
International Bankers Deceive the American People Into Supporting Economic Integration
"During and after World War I, American bankers shot to the pinnacle of the world economy. With the House of Morgan in the lead, American international financiers helped restructure European economies, papered over the war debts controversy, and lent billions of dollars to bankroll rapid economic growth in Europe and Latin America. Yet the bankers' worldwide economic interests often conflicted with the concerns and ideas of American isolationists, who blocked many of the policies preferred by the economic internationalists. Political divisions over America's international economic role reached their high point in the early years of the Depression, when Congress voted sky-high tariffs that helped bring the fragile international financial system crashing down.
"From the depths of the Depression, Americas financial leaders and foreign policymakers cautiously began rebuilding the international financial order. American political support for economic internationalism grew in the late 1930s, and especially during and after World War II. The war destroyed most of the country's fiercest economic competitors and made trade liberalization less threatening. With the onset of the Cold War, international economic cooperation was presented to the public as a necessary weapon in the anti-Soviet arsenal.
"Since World War II, American international bankers and their counterparts in Western Europe and Japan have constructed the largest international financial system in world history. Most contempory international banking has migrated 'offshore,' to Euromarkets that are largely independent of any single national government. Technological advances allow international fund transfers, lending, and currency trading to take place almost instantaneously between markets thousands of miles apart.
"Modern global banking, and the new international economic realities it has created, challenges the world's political systems. The linkage of national money and capital markets constrains government policies in all countries; billions of dollars ricochet from country to country in response to changes in international interest rates and currency values. Massive international loans helped finance rapid industrial development in parts of the Third World, and made many of the developed world's traditional industrial plants uncompetitive. Since 1980, the U.S. government has become the world's largest international debtor, and the United States as a whole has become a net debtor nation for the first time since World War I.
"In virtually every nation, the consequence of international financial integration has been domestic political conflict among groups with contending economic interests." (Jeffry A. Frieden, Banking On The World, pp. 237-239.)
National Sovereignty is an Obstacle to Managing an Interdependent World
"The countries of Western Europe and North America, together with Japan, need to collaborate if their own policies are to succeed.... Yet cooperation among these countries encounters serious obstacles, rooted in national sovereignty and democratic politics. The history of the [economic] summit meetings held annually since 1975 between the leaders of the seven largest industrial democracies [Canada, United States, England, France, Germany, Italy and Japan], joined by the European Community, illustrates both the prospects and the problems of managing an interdependent world." (Robert D. Putnam & Nicholas Bayne, Hanging Together: Cooperation and Conflict in the Seven-Power Summits, 1987, p. vi.)
Institutionalization of Economic Summitry by Members of the Trilateral Commission
"...The key positions in the new [Carter] administration were staffed by alumni ... of the Trilateral Commission. These Trilateralists were acutely conscious of the tensions between interdependence and domestic politics and of the need to craft a system of collective management to replace American hegemony.
"During 1976 Trilateral Commission task forces had considered how international processes and institutions could be reformed to address these problems. Consultation should be designed to strengthen 'transnational networks of like-minded officials', to foster 'transnational coalitions' among 'the outward-looking forces within each government'. To improve consultation among Europe, North America and Japan a 'Trilateral Staff Group' should be established, composed of 'senior governmental advisers with the personal confidence of the heads of government'. This group would oversee consultations among the trilateral countries, identify unresolved policy problems and seek solutions, and monitor the effectiveness of international institutions. The Trilateralists recognized the importance of 'political will'. But in this framework, summit meetings among heads of state should cap a process of intensive consultations among officials....
"Not limited to atmospherics and warm fellowship, this Trilateralist image of summitry was more ambitious than the Library Group image. The Trilateralist conception took seriously the prospect of international policy co-ordination, along with the necessity for hard bargaining, transnational coalitions and package deals that might require substantive changes in national policies. If such coalitions were to be forged and such bargains struck, the roots of the summit process would have to reach deep into each government. The horizons of those charged with formulating 'domestic' policy would have to be broadened to include international concerns.
"The Trilateralists did not believe that summits would necessarily take formal and mutually binding decisions, but they did believe that summits should seek to resolve differences over substantive policy issues, not merely 'exchange views'. 'We can't bring the President halfway around the world for a seminar,' Henry Owen, President Carter's personal representative, told his colleagues. The New York Times captured the American mood on the eve of the first London summit: 'The most important thing [the leaders] can do is to agree on directives and follow-up machinery for closer co-ordination of economic policy... [This summit] must produce results or begin a slide away from collaboration.' A results-oriented summit, addressing tough, complex issues, would require more organizational infrastructure. Intensive preparation and attentive follow-up were the most distinctive features of the new conception of summitry.
"... [C]areful preparations had been crucial for the monetary accord at Rambouillet, and deficiencies in preparation and follow-up had begun to concern some of the participants at Puerto Rico. Under the aegis of the Trilateralists, the summit process became increasingly institutionalized. Preparations lengthened, and their rhythm accelerated....
"Without question, the single most important factor that encouraged the institutionalization of the summit after 1976 was steady pressure from the Americans. American emphasis on 'co-operative decisions' and summit 'follow-up' was already evident in Henry Kissinger's's remarks before Rambouillet in 1975. This more structured approach to summitry reflected both institutional features of the American presidency and a national desire to share the burdens of world leadership. The American propensity for institution-building received a powerful boost from the Trilaterlists' carefully elaborated theory about how to manage interdependence collectively. Throughout the Carter years it was the Americans who tended to press for more elaborate summit preparations and for greater specificity in the language of summit communiques....
"...Conflict in the Western political economy arises, as we have seen, because of international inconsistencies among the policies of interdependent countries. In seeking to resolve such conflicts, summit participants have attempted four types of policy co-ordination:
--Mutual enlightenment, that is, sharing information about national policy directions.
--Mutual reinforcement, that is, helping one another to pursue desirable policies in the face of domestic resistance.
--Mutual adjustment, that is, seeking to accommodate or ameliorate policy divergences.
--Mutual concession, that is, agreeing on a joint package of national policies designed to raise the collective welfare...." (Putnam and Bayne, Hanging Together, pp. 48-49, 60, and 260.)
The Awesome Power of the Federal Reserve
"The Federal Reserve System was the crucial anomaly at the very core of representative democracy, an uncomfortable contradiction with the civic mythology of self-government. Yet the American system accepted the inconsistency. The community of elected politicians acquiesced to its power. The private economy responded to its direction. Private capital depended on it for protection. The governors of the Federal Reserve decided the largest questions of the political economy, including who shall prosper and who shall fail, yet their role remained opaque and mysterious. The Federal Reserve was shielded from scrutiny partly by its own official secrecy, but also by the curious ignorance of the American public. " (William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country, New York, Simon and Schuster, 1987, p. 12.)
Financial Power in the United States
"The legendary 'Wall Street' survived in one respect: New York City was still the center of financial power in America. Despite the rise of new banking centers in other regions, New York remained dominant, rivaled only by California. A crude map of the nation's financial concentration could be drawn from the locations of the largest commercial banks, the core institutions of the financial system. Across the fifty-states, there were more than fourteen thousand banks, but most of them were very small enterprises. Only one hundred and fifty or so banks held deposits of more than $1 billion. In 1979, only sixteen banks held deposits totaling $10 billion or more. Together, these sixteen mega-banks accounted for nearly one-fourth of all the bank deposits in the nation.
"The geography of financial power looked like this: eight of the sixteen largest banks were in New York. Five were in California. Two were in Chicago, one in Pittsburgh. A less arbitrary map might also include Boston, whose First National Bank (better known as the Bank of Boston) had $8.7 billion in deposits, and Texas, which had four banks with deposits between $4 and $6 billion. In 1979, the nation's largest bank was the Bank of America in San Francisco ($86 billion in deposits), but New York had much more aggregate girth than California, led by Citibank ($70.5 billion), Chase Manhattan ($49 billion), Manufacturers Hanover Trust ($38 billion) and Morgan Guaranty ($30 billion).
"Wall Street's banks were surrounded, moreover, by hundreds of brokerages and investment banking houses that traded stocks and bonds for clients, and, more importantly, raised large blocks of new capital for corporations and governments. A handful of these firms were large enough to be regarded as peers, if not quite equals, of the largest New York banks. Merrill Lynch, leader of the all-service brokers that tended large national client lists, managed $70 billion in money-market accounts for more than one million customers. Even the largest brokerages, however, depended on the commercial banks as a source of credit, for loans to finance their own investment packaging in stocks and bonds and other ventures.
"The aristocrats of finance, more prestigious and powerful than their dollar volume indicated, were the major investment-banking houses--led by Salomon Brothers, Morgan Stanley, Merrill Lynch Capital Markets, First Boston, and Goldman, Sachs. Some declared their office suites to express the confidence of wealth--darkened paneling and fine old antiques, precious artwork and silver tea services for visiting clients. This is where the nation's most important corporations, along with state and local governments, came in search of capital for their largest projects.
"Capital formation--the flow of accumulated savings into the creation of new productive facilities--was arguably Wall Street's most important function. Capital formation fundamentally determined the distant future, the pace of expansion that created more products, new jobs and expanding incomes. From their lists of wealthy clients, both individuals and institutions, the investment bankers raised the billions lent for sewers or highways or hospitals, to pay for a new factory or the retooling of an old production line. Many ventures were so large that even the most important banking houses were compelled to collaborate with their competitors, pooling the capital each raised and sharing the risks and profits. In 1979, not an especially good year for capital markets, Salomon Brothers would raise $17 billion for corporations through the sale of bonds and notes and another $1 billion in new stock issues, plus $17 billion in tax-exempt bonds for state and local governments across the nation. Like commercial banking, investment banking was highly concentrated. In 1979, the top five brokers managed 65 percent of the capital market, bonds and new stock issues for corporations. The top ten firms managed 87 percent.
"Finance was international, however, and all the largest banks and brokerages operated as multinational financiers. Like oil and wheat, wealth was fungible. It could flow across national boundaries without losing its value, seeking opportunities wherever it found the highest return at the least risk. While the major U.S. banks and brokerages dominated American finance, they were also players on a global stage where they did not seem so imposing. Of the twenty largest banks in the world, only three were American. Germany had six in 1979, Japan had five, France had four and Great Britain had two. The 16th largest bank on the American map, Mellon Bank of Pittsburgh, was 114th in the global geography, hardly in a position to bully its international competitors.
"Banking power was less concentrated in the United States partly because America's pluralist tradition and federal law prohibited Citibank or Chase or the others from operating nationwide as the major foreign banks could. Collectively, however, U.S. finance was more powerful than other nations'. Nearly a fifth of the world's five hundred largest banks were American, and they were led and dominated by a mere handful of institutions--the nine largest known as the money-center banks, global institutions that operated worldwide and connected American finance to all the pools of international capital.... (William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country, pp. 25-27.)
The U . S. Financial System and the Federal Reserve
"...The largest borrower in the markets of Wall Street was the government in Washington, which managed a debt of nearly $1 trillion, raised by government securities, from ninety-day Treasury bills to two-year notes to long-term bonds that would mature in 2009. In one dimension, Treasuries were the safest investment available. After all, if someday the U.S. government failed to pay its obligations, then the country would no doubt be in riotous anarchy anyway and no private property would be safe. In another dimension, however, government securities confronted investors with the same risk as other long-term issues--the risk of the dollar losing its value. The price of U. S. bonds, new and old, was, therefore, highly sensitive to the prospects of future inflation.
"All in all, the financial system resembled the dynamics of a pump house, not an accountant's static balance sheet, and functioned according to physical laws that a hydraulic engineer might understand. It was like a fantastically complicated labyrinth of pipes and storage tanks and boilers, with pressure valves and plumbing and auxiliary pumps, all elaborately interconnected. Inside this system flowed the financial wealth of the nation, back and forth through many channels and tanks, always seeking higher return and less risk, searching out investments that best promised both. To grasp the larger action of finance, one had to visualize its physics. Indeed, that is how financial analysts themselves spoke of it, using hydraulic metaphors to describe its conditions--the 'liquidity' of banks, the 'flow of funds' analysis, 'circulation' and 'float' and 'velocity,' the surge and ebb of 'market pressures.'
"The Federal Reserve Board stood alongside the system like a governor, like a supervising engineer who had the power to alter the flows inside the plumbing. Its decisions could slacken the pressures of the fluids or intensify them; its policies could stimulate the flow of lending or choke it off or nudge it toward different channels. The Fed accomplished this, primarily, by injecting more fluid into the system or withdrawing it--that is, by creating or destroying money. The ability to create money was the power of sovereigns, almost magical in its simplicity. Central banks inherited the power from kings and, before them, the temple priests of ancient civilizations, leaders endowed by God with the authority to consecrate, en fiat, the currency their societies would accept and use. In the technocratic present, the process of money creation remained a powerful mystery to most citizens.
"The Federal Reserve System operated like the modern equivalent of the king's keep--a separate storehouse alongside the private economy and independent of its forces. But the Fed could influence the financial flows inside the plumbing through two tiny valves--mere pinpricks in size compared to all the wealth in circulation. One valve was the Discount window at each of the twelve Federal Reserve Banks, where commercial banks routinely borrowed hundreds of millions, even billions, every day to make up for temporary shortages in their required reserves. The other, more important valve was the Open Market Desk at the New York Federal Reserve Bank in the middle of Wall Street, where the Fed bought and sold government securities in the open market, in daily transactions usually running from $500 million up to several billion. In both cases, the Fed created money with a key stroke of the computer terminal (computer accounting having replaced 'the stroke of the pen'). When the Federal Reserve bought Treasury bonds from a dealer or lent through the Discount window to a bank, the central bank simply credited the amount to the bank account of the dealer who sold the bonds or the bank receiving the loan. In either case, it did not matter which bank or which dealer got the new money. Once it was created, it increased the overall money supply and was free to float from one account to another through the entire banking system. In reverse, when the Fed's Open Market Desk sold bonds or a commercial bank repaid its Discount loan, money was extinguished by the Fed. By a simple entry in the ledger, the money was automatically withdrawn from circulation in the private economy.
"As any hydraulic engineer could explain, the impact from the Federal Reserve's actions-injecting or withdrawing money--depended entirely on what was already going on inside the plumbing. When the gauges on a boiler show that pressure is dangerously high, then the slightest hydraulic change can send a strong pulse throughout the system, a displacement that spreads like the ripples on a pond. The financial system was similar. If, for instance, the market demand for credit already exceeded supply and interest rates were rising, then a substantial withdrawal by the Fed would send rates soaring. On the other hand, if credit pressures were slack and interest rates were already falling, the same action might hardly be noticed.
"Day by day, the Federal Reserve exerted a powerful influence over Wall Street, but it was not all-powerful. It influenced everything, but it did not control everything. It could set the dials and turn valves, but it could not repeal the fundamentals of economics anymore than an engineer could suspend the laws of physics. Sometimes, despite the Fed, markets pursued their own direction, driven by contrary perceptions or real economic forces that overpowered the desires of the Federal Reserve Board. Sometimes, trying to change the flow, the Fed turned the wrong valve and produced unintended results. Sometimes, it turned the valve and nothing seemed to happen.
"In Wall Street, therefore, everyone watched the Fed. Every bank and brokerage of any size had full-time economists--'Fed watchers' like David Jones--who did nothing else. The scores of Fed watchers analyzed the weekly banking numbers, the credit trends and the general economic news and tried to predict Fed decisions ahead of the crowd. They made daily forecasts of the sales and purchases they expected the Open Market Desk to make, but, more importantly, they attempted to foresee the major 'sums' in Fed policy--easing the money supply and credit conditions or tightening. A significant change in direction would send large ripples across the three great financial markets, through the banking system and, ultimately, to the real economy of producers and consumers.
"Of the three great financial arenas, the money market reacted first to Fed moves. Short-term credit rates rose or fell, almost instantly, in reactions to even small changes in the money supply and the Fed's strongest, most direct control was over this market. In the stock market, a Fed 'sum' could launch a major rally or squelch it, but transient gyrations in the stock market did not much worry the Fed.
"The financial market that the Federal Reserve cared about most, respected and even identified with, was the bond market--the place where institutions and wealthy individuals made long term investments and their commitments were most sensitive to the distant future. If the Federal Reserve failed to maintain stable money values, then the bondholders suffered most dramatically." (William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country, 1987, pp. 31-33.)
Japan--the World's Best Socialist Society
"'Japan is really the world's best example of socialism,' a Nomura investment banker once observed. 'The Russians and the Chinese should come to Tokyo to find out how to mix a planned economy with a market economy. (Quoted in Daniel Burstein, Yen! Japan's New Financial Empire and Its Threat to America. New York: Ballantine Books, 1988, p. 106.)
Economic Warfare Among Nations
"Foreign trade is a war in which each party seeks to extract wealth from the other. " (Honda Rimei (1744-1821), Japanese Philosopher. Quoted in David Burstein, Yen! Japan's New Financial Empire and Its Threat to America, p. 123.)
The Opening of U.S. Markets It is an Ill Advised Policy
"Opening American markets wider than any financial markets had ever been in world history, subjecting them to increased volatility and risk of every kind, and removing even the semblance of coordinated oversight was an ill-advised course under optimum circumstances. But the confluence of those policies with the rise of Japan as a financial superpower has written the recipe for the loss of American financial leadership." (Daniel Burstein, Yen! Japan's New Financial Empire and Its Threat to America, pp. 160-161.)
Japan It is the World's Richest Nation
"Japan became the world's richest nation, surpassing the United States in national assets for the first time with $43.7 trillion worth of land, factories, stocks and other wealth. " (New York Times. Quoted in Daniel Burstein, Yen! Japan 's New Financial Empire and Its Threat to America, p. 237.)
The World Will Be Dominated by a Small Group of Mega-Financial Institutions
"If we believe that the world in the year 2,000 will be dominated by a small group of mega-financial institutions, we must assume there will be many mergers and acquisitions along the way. Nomura's [Securities] capitalization is more than $50 billion. It could buy the top ten American investment banks for that. Daiwa's [Securities] is also very big." (Daniel Burstein, Yen! Japan's New Financial Empire and Its Threat to America, p. 237.)
A Merger of Japan and the United States
"...[M]irroring America's economic decline will be Japan's continued rise, as its financial assets are turned into investments in new technologies and the complete renovation of its domestic infrastructure.
"Two alternatives are likely to present themselves as this contradiction intensifies. Either the United States will be forced to develop a much closer cooperative relationship with Japan, based on a more clearly defined shared agenda, or else the United States will be pushed into sharper conflict and rivalry with Japan.
"As to the first alternative, some strategists and economists both in the United States and Japan see salvation in the so-called nichibei economy--a merged symbiosis of Japan and the United States. The word itself is made up of two Japanese characters signifying sun and rice--Japan, the land of the rising sun, and America, land of amber waves of grain--rice, in the Japanese mind. The nichibei economy is already a reality in broad strokes: the United States provides Japan's defense, Japan enjoys access to American markets and invests its trade surpluses back in the United States to help keep the economy going. On the brainstorming list of an upgraded nichibei accommodation are ideas like a transpacific common market, a joint U.S.-Japan currency, joint industries, and shared defense burdens.
"Thinking along these lines, former National Security Adviser Zbigniew Brzezinski has called for 'a new global bargain' and the evolution of his own version of nichibei, which he dubs 'Amerippon.' In Brzezinski's view this would take the form of 'en informal complex of overlapping elites, corporate structures, and increasingly joint political planning' with the United States and Japan effectively 'commingling...business and financial institutions.'
"C. Fred Bergsten, another former Carter administration official, has suggested the formation of' G-2'--a joint U.S.-Japan approach to world leadership that would replace the unwieldy 'G-7 and G-5' groups that include other major Western powers. Crumbling American hegemony, Bergsten has suggested, could feasibly be replaced with the 'hegemony' of the United States and Japan leading the global economy together." (Daniel Burstein, Yen! Japan's New Financial Empire and its Threat to America, pp. 265-266.)
All Nations Are Loosing Their Independence
"This book [Yen! Japan's New Financial Empire and Its Threat to America]... has sketched out large forces at work reconfiguring the global map of wealth and power, triggering the rise of Japan's empire, and draining America of its economic vitality. The dangers of foreigners dictating American interest rates, practicing competitive trade policies that effectively undermine the solvency of large sectors of corporate America, and gaining disproportionate influence over strategic elements of American life from the banking system to the political process on Capitol Hill are not remote nightmares of the future, but increasingly visible realities of the present. As Felix Rohatyn suggests, America has already ceased to be an independent economic power.
"Economists may argue that all nations are losing some of their independence as the world melds into a single globalized economic realm. But as we have seen, what Japan needs from the United States is diminishing in importance; what the United States needs from Japan is growing in importance. The Japanese, moreover, are far more cautious than Americans when it comes to discarding systems that protect national interests. The result is a process of interpenetration that is actually working to make Japan stronger economically and the United States weaker. Globalization, in a sense, has become a code word for Japanese expansion at the expense of vested interests in the world, mostly American. " (Daniel Burstein, Yen! Japan's New Financial Empire and Its Threat to America, pp. 293-294 ).
The United States Has Lost Control Over Its Economy
"At 9:30 a.m. on Monday, October 19, 1987, the bell rang on the floor of the New York Stock Exchange signaling the start of the most tumultuous day in the history of U.S. financial markets. A wave of sell orders that had built up over the weekend cascaded over the stock market, pushing its computerized trading system beyond the limits and driving the Dow-Jones Industrial Average down at an unstoppable pace.
"The chaos was repeated at the futures exchanges in Chicago, where harried traders could not keep track of orders, let alone keep up with them. Back in New York, the Federal Reserve Board was forced to demand that the nation's biggest banks provide billions of dollars in credit to keep brokerage houses open. In Washington, the nation's financial regulators conducted frantic telephone conferences in a fruitless attempt to stanch the financial hemorrhage.
"As news of the crashing markets spread, small investors across the country tried to call their brokers at Merrill Lynch and Prudential-Bache and countless other retail brokerages to dump shares at any price before they were wiped out. The sell orders were so vast that phone lines were jammed and thousands of people could not even get through.
"In this era of the global economy and instantaneous communications, the panic spread, and stock markets in Tokyo, Hong Kong, Sydney, and London quivered and prices plummeted.
"By the end of what quickly became known as Black Monday, John Phelan, chairman of the New York Stock Exchange, was saying that the nation's markets had nearly suffered 'a meltdown,' appropriating the terminology of a nuclear disaster to describe a momentous financial disaster.
"The New York Stock Exchange dropped 508 points in a single day, losing 22 percent of its total value and wiping out $1 trillion worth of wealth. An incredible 604 million shares were traded, three times the volume of a heavy day and double the previous one-day record. The reverberations continued throughout the week.
"For millions of Americans, October 19, 1987, came to symbolize the new vulnerability of their once-invincible nation. It was one of those rare days in history when the shift in power from one empire to another can be marked, precisely and indelibly.
"Behind the stock market crash was a bitter lesson for the United States, a lesson that still has not been learned by the nation's business and government leaders. The crash demonstrated dramatically that the Untied States has lost control over its own economy, that decisions made in Tokyo can affect the standard of living and well-being of millions of Americans.
"Commissions and panels were created to search for causes in the wreckage of the crash, and they found plenty of villains among the professional speculators and giant institutional investors who had pumped up the market like a giant balloon and then abandoned it in a matter of hours.
"But none of the reports put the official blame on the shoulders of the Japanese investors whose actions had triggered the collapse. The nation's financial markets and the very financing of the federal debt had become too dependent on the Japanese to risk the repercussions of placing responsibility on the investors they had been wooing throughout the 1980s.
"The United States has become addicted to foreign investment....
"No country has invested at the pace of the Japanese, who are benefiting from their own huge trade advantages and basic thriftiness. And no country has carried out its investments with the strategic mandate that motivates the Japanese. As a result, they have gained enormous leverage over certain sectors of the American economy, a fact demonstrated clearly by the stock market crash of 1987....
"But by October 1987, Japanese investors were the dominant players in the U.S. bond market. They basically financed the rising federal deficit by loaning money to the U.S. government through their purchases of treasury bonds. And they were able to push it to the brink of collapse.
"The crash was a graphic example of what happens when a nation loses economic sovereignty to an outside power, even a friendly one. It was a lesson in the perils of the rising levels of foreign investment in the United States, particularly the concentrated investments being made by the Japanese.
"Foreign investment evolves from benign to dangerous when decisions affecting a nation's economic, political, and military destinies are made in foreign capital cities. With it comes a loss of sovereignty, putting the nation in danger of becoming a colony of its foreign owners.
"It is quite possible that within a decade, the Untied States will find itself in the position of being a satellite of the powerful industrial machine of Japan. When that happens, the life of every American will be touched by the power of foreign investment, from conditions on the job to the cost of a home mortgage.
"Already the Untied States is a poorer nation because of the vast amounts its citizens owe foreign investors. Real earnings of workers have fallen, and health, retirement, and vacation benefits are less generous than they once were. Although the productivity of U.S. workers has risen about 6 percent since 1977, real hourly wages have dropped 6.5 percent.
"Already the growing U.S. foreign debt has made the country more vulnerable to pressure from foreign investors that influence U.S. interest rates, the value of the dollar, economic stability, political policy, and employment patterns....
"The position of the United States as the world's largest debtor worsened dramatically in 1987, largely as a result of increased foreign investment to finance the federal government's deficit spending. That means a larger portion of the national income will have to be earmarked to pay the interest for years to come. A mammoth foreign debt creates a chronic drain on the vitality of the U.S. economy and strengthens the power of the foreign nations that hold U.S. debt and use their cash surpluses to acquire more and more U.S. industrial facilities and real estate....
"Since the late 1970s, American corporations have abandoned core businesses, often selling them to foreigners. They have lost their technological edge in industry after industry to foreign companies. As a result, the standard of living of most Americans has declined. Average wages have fallen, the gulf between rich and poor has widened, and foreign investors have gained unprecedented control over the nation's future.
"No nation holds more leverage over the United States than Japan, which increased its U.S. investments faster any other foreign country in the 1980s.
"For unlike the United States, when corporate plans are measured by the year or the quarter, the Japanese have a centuries-old tradition of thinking twenty or thirty years ahead. This ability enables them to foresee causes and effects of economic policies and manufacturing decisions from a perspective not used by Americans. It allows them to be patient in laying the groundwork for economic domination of the United States. (Douglas Frantz and Catherine Collins, Selling Out: How We Are Letting Japan Buy Our Land, Our Industries, Our Financial Institutions, and Our Future, Chicago: Contemporary Books, Inc., 1989, pp. 5-6, 7, 9-11.)
Foreign Investment in the United States
The 1987 data showed that the British remained the biggest direct foreign investor in the United States, meaning they owned the greatest amount of tangible items, such as factories and real estate. The Netherlands was second, partly as a result of investment that flows through the secrecy haven of the Netherlands Antilles that could actually belong to anyone in the world.
"Japan replaced Canada in third place in direct investments at the end of 1987, according to Commerce Department statistics....
"Further, because Japan lacks the rich soil of the American breadbasket and the oil fields of the Arab nations, its exports must be manufactured goods in exchange for the raw materials it simply doesn't have. Thus, the Japanese are compelled by the simple need for survival to conquer the world's markets with their export-driven economy. The largest of those markets is the United States. And what could be a better way to conquer an economy than to buy it?
"And they have bought huge chunks of the United States' choicest real estate and invested in its most influential and vital industries.
"Investors from the Land of the Rising Sun have gobbled up huge portions of the most desirable land in Hawaii. They own three-fourths of the beachfront hotels in Honolulu, and in 1987 they bought four out of every ten condominiums that went on the market along world-famous Waikiki Beach. They are buying office buildings and golf courses. And the biggest development project in the history of the islands--the $3 billion Ko Olina resort--is a joint venture between a local businessman and the deep-pocketed Japanese construction giant, Kumagai Gumi.
"There is a joke on the islands: Two captured Japanese officers are surveying the wreckage of Pearl Harbor. One Japanese officer says to the other, 'Next time, we'll just buy Hawaii.'
"Downtown Los Angeles is 70 percent owned by foreigners, and half of those foreign-owned towers belong to the Japanese. The imprint of the Japanese on the city's skyline will be felt most strongly when Mitsui Fudosan completes a fifty-two-story structure of polished Brazilian and Swedish granite on the most prestigious location in the Los Angeles business district, the corner of Wilshire and Figueroa. Japanese investors own the buildings that house Bank of America's headquarters in Los Angeles as well as the West Coast headquarters for New York's Citicorp and Chase Manhattan banks.
"Far more importantly, the Japanese own five of the ten largest banks in California, which has the richest state economy in the Untied States, with an output that makes it the eighth largest economy in the world. By 1988, an estimated 100,000 Californians worked at nearly 1,000 U.S. subsidiaries of Japanese companies....
"Hawaii and California, with their view toward the Pacific Ocean and their cultural diversity, are the favorite investment havens for the Japanese; estimates of Japanese holdings in those two states range as high as $7.2 billion in Hawaii and $7 billion in California.
"But rather than the stopping point, those two states are only the beginning of the Japanese investment invasion. Across the United States, they own skyscrapers in any city worthy of having a tall building. Of the fifteen largest purchases of existing office buildings by foreigners in the United States since 1986, all have been by the Japanese. They have included the $640 million acquisition of Arco Plaza in Los Angeles by Shuwa Investments and the $610 million Exxon Building in New York City by Mitsui Fudosan. Both were the highest prices ever paid for buildings in the respective cities.
"In Chicago alone, the Japanese have bought or built thirteen major downtown buildings in recent years. Nissei Realty paid $141 million for the forty-one-story Prudential Plaza in 1986 and announced plans to finance a sixty-four-story tower next door. Dai-Ichi Kangyo Bank, the world's largest bank, paid about half that amount for an office building at 101 Wacker Drive. Another giant Japanese bank, Sumitomo Trust, paid $50 million for the Xerox Center in the heart of downtown Chicago, and a joint venture between a Japanese life insurance company and a Japanese bank expects to complete the $360 million AT&T Corporate Center in downtown Chicago in 1989.
"Late in the summer of 1988, Kato Kagatsu, a Japanese corn syrup firm, struck a deal to acquire the 2,000-room Chicago Hyatt Hotel, one of the world's largest, for $260 million.
"'American real estate is cheap, especially to Japanese firms and families,' said Robert Aliber, professor of international economics and finance at the Graduate School of Business at the University of Chicago. 'The Japanese came into Chicago tepidly at first, and now are moving more aggressively.'
"In New York, Japanese interest have acquired at least a dozen major office buildings and hotels in Manhattan. The 1987 acquisitions alone included a $670 million interest in two of Citicorp's Manhattan office buildings by Dai-Ichi Mutual Life Insurance Company; 666 Fifth Avenue, $500 million, Sumitomo Realty and Development; 919 Third Avenue, $325 million, Nomura Securities, and the Essex House hotel on Central Park South by Nikko Hotels, which also developed a giant river front hotel in Chicago.
"In Washington, the list is almost as long and includes such transactions as Nissei Realty's purchase of the American Medical Association building at 1101 Vermont Avenue NW for $367 million; Mitsubishi Bank's development of a $200 million office complex called Washington Square on Connecticut Avenue NW; and the $87 million acquisition of Judiciary Center at 555 Fourth Street NW by the investment firm of Kondo Bosekei.
"Shuwa Investment's $80 million purchase of the U.S. News and World Report complex in Washington in 1987 amounted to $480 per square foot, the highest per-square-foot price ever paid for a building in the nation's capital.
"At the end of September 1988, the Japanese made their largest single acquisition of American real estate--the worldwide Inter-Continental Hotel group for $2.27 billion in cash....
"A report by the Los Angeles-based accounting firm Kenneth Leventhal & Co. said Japanese invested in real estate ventures worth $13 billion in 1987 alone, bringing their total U.S. real estate holdings to $26 billion. The study predicted that Japan's real estate investment in the United States could rise by another $19 billion in 1988.
"While real estate is often the most visible Japanese investment, it is not the one that raises the most concern for the nation's sovereignty. The real estate will remain here, regardless of what the Japanese do or where they go.
"The truly dangerous penetration of the American economy comes from Japanese investments in financial services companies and manufacturing plants. It is there acquisitions that represent the opportunity to wield power and influence.
"Japanese financial firms have purchased big stakes in some of Wall Street's most respected investment houses, most notably Goldman, Sachs & Co., Salomon Brothers, and Paine Webber. Japan is now home to all ten of the world's biggest banks, and every major U.S. city has branches of the dominant financial institutions. No. U.S. bank ranks among the world's twenty-five largest....
"Clearly the Japanese are not the only foreigners filling up their shopping carts in the United States. Great Britain, the Netherlands, Canada, West Germany, Switzerland, France, Kuwait, Saudi Arabia, Australia, and Sweden have traditionally made forays into the U.S. economy, taking advantage of America's addiction to foreign capital and its openness to foreign investment. They have taken over factories, advertising agencies, farms, mines, dairies, publishing companies, and casinos.
"Some of the most common names on American grocery shelves--and sometimes, the shelves themselves--are actually owned by foreigners. Alka-Seltzer is owned by West Germans, who also have a controlling interest in the A&P Grocery chain. West Germany's Bertelsmann communications firm paid $500 million for Doubleday & Company. Stouffer, Beach-Nut, Carnation, and Beringer Vineyards--which was founded by one of the half-dozen original Napa Valley families--are owned by Nestle, the Swiss conglomerate. The French own big stakes in Mack Trucks and American Motors. Timex is owned by Norwegians. Santa Fe International, a leading energy company, is owned by Kuwaiti investors.
"Saudi Arabia spent $1.2 billion in June 1988 to buy half of three Texaco refineries, 1,450 gas stations owned by Texaco, and a distribution network of more than 10,000 independently owned Texaco-brand stations in twenty-three states in the southern and eastern United States.
"In the biggest acquisition yet by a British firm in the United States, British Petroleum Co. paid $7.4 billion for the 45 percent of Standard Oil Co. it did not already own in 1987. The purchase was only one of several huge acquisitions that helped the British remain the biggest foreign investors in the United States in 1987.
"A year later, British-owned Batus agreed to pay $5.2 billion to acquire the Los Angeles-based Farmers Insurance Group, the biggest acquisition in California history and a deal that caused a ripple of concern among industry regulators in several states where Farmers does business.
"The drive by the British to repurchase their former colony was strong in 1987 and 1988. Within days of each other in 1987, for example, two deals allowed Britain to replace the United States as the world's premier owner and operator of quality hotels. Allegis Corporation sold Hilton International to the British-owned Ladbroke Group, and Bass PLL took over the international network of Holiday Inns from US Holiday Corp.
"At the same time, Hanson Trust, one of Britain's top ten companies, consumed the New Jersey-based Kidde, Inc., including its assets of Jacuzzi whirlpools and Farberware kitchenware. Hiram Walker of Canada, a subsidiary of the British conglomerate Allied-Lyons, also owns one of California's largest wineries, Clos du Bois. The British also own Smith & Wesson handguns, Ball Park Franks, and a part of Washington's famed Watergate complex.
"Canadians have bast investments in U.S. newspaper, magazine, and book publishing and cable television. Just two Canadian corporations, Thomson Newspapers and International Thomson Organization, own 100-plus newspapers and forty publishing subsidiaries. Seagram, the Canadian brewer, acquired Tropicana Products from Beatrice Companies. And in a hotly contested battle with R. H. Macy over Federated Department Stores in 1988, Canadian developer Robert Campeau paid $6.6 billion for a retailing and real estate empire that included sixteen branches of Bloomingdale's and 549 other stores. A Canadian company already owned Brooks Brothers clothiers.
"The determination of these foreign bargain hunters was demonstrated by Michael Dornemann, a director of West German publishing giant Bertelsmann AG. He flew to the United States more than fifty times between 1984 and 1986 while deciding how to invest $1 billion in his company's shopping spree. He visited more than twenty American firms before selecting two targets, RCA record and Doubleday publishing.
"Although Dornemann thought the possibility of acquiring both companies was extremely unlikely, he wooed publisher Nelson Doubleday and John Welch, the chairman of RCA parent General Electric, diligently. Finally, having acquired neither by September 1986, he arranged separate meetings with each company on the same day and he gave the impression that his company could afford to buy just one. 'Either you sell to us, or we'll go to the others,' each company was warned. By the end of the day, Dornemann had a double victory: both companies for a total price of $805 million.
"Still it is the Japanese who have poured the most money into the United States in recent years, spurring soaring real estate values and turning Main Street Midwest into a virtual subsidiary of the Japanese auto industry....
"For one thing, it is growing much faster. The amount invested in the United States by the Japanese nearly tripled from 1980 to 1985, and the pace of investment has been faster than that of any other foreign nation since 1984. Figures compiled by the U.S. Commerce Department for 1986, while incomplete, illustrate the trend.
"In 1986, Japanese private and government direct investments here outstripped those of any other nation. Of the 1,051 reported transactions, 351 originated in Japan. The total Japanese investment amounted to $9.3 billion on 170 of those deals, and the government failed to list amounts for the remainder. Great Britain was second with 178 transactions and 83 identified values totaling $8.1 billion. Canada was third with 114 transactions and 57 identified values totaling $6.8 billion.
"At the end of 1987, the Japanese were third in total investments in the United States behind the British and the Dutch. Once the final figures are in for 1988, many experts predicting that the Japanese will have surpassed the Dutch to rival the British as the leading foreign owners of the United States.
"Second, the strategy is different from that of other foreign investors. The Japanese are not interested in simple return on their capital or in the type of passive, safe haven Arabs sought for their oil dollars in the 1970s.
"The Japanese are determined to buy access to a country where growing sentiment for trade protectionism threatens to shut them out. In addition, the Japanese also exhibit a definite tendency to target either a geographic area--Hawaii, for instance--or a specific segment of the economy--the auto manufacturing and related parts industries, for example.
"While the strength of the yen made it less expensive for Japanese companies to invest abroad and triggered much of the surge in the late 1980s, the Japanese also diversified, buying more foreign corporations and investing in research and development projects abroad.
"Japanese investments are no longer relegated to securities and government bonds and traditional real estate. They have switched to direct seizures of power by purchasing control of companies. That fact becomes important when coupled with the growth rate of Japanese investment here.
"A 1988 survey of Japan's Economic Planning Agency documented the expansionist drive. After years of shunning takeovers, one out of every three big Japanese companies planned to expand into foreign markets during the year by purchasing existing companies. The market of preference: the United States.
"More than any other nation, Japan is buying the United States with America's own dollars. The huge trade surplus racked up in Japan is being used to buy control of the world's richest consumer market.
"There is another difference, and it may be the most critical. Decades of European investments in the United States have been the result of a free flow of trade; with some exceptions and more restrictions than Americans apply, European nations tend to be open to foreign investments.
"But the Japanese are taking advantage of the U.S. commitment to free trade while maintaining the industrialized world's most stringent restrictions on foreign access to its markets. For instance, while Japan's giant construction firms built more than $3 billion worth of projects in the United States in 1987 alone, U.S. firms have been virtually shut out of the construction market in Japan....
"But throughout those decades, the United States maintained an open door to foreign investors while the Japanese have marked their nation with a 'No Trespassing' sign....
"It is essential to recognize that foreign investment in the United States, particularly the strategic purchases by the Japanese, threatens to rob the nation of the ability to control its economic and political destiny. Decisions affecting the jobs of millions of Americans and the health of the economy will be made in Tokyo, not Washington.
"The dilemma may have been best stated by Clyde V. Prestowitz, Jr., former counsel on Japan affairs at the U.S. Commerce Department and author of the excellent 1988 book Trading Places: How We Allowed Japan to Take the Lead. At a breakfast with Los Angeles Times reporters in Los Angeles in May 1988, Prestowitz was asked about the impact of Japanese investment on U.S. competitiveness, and he said: 'Let's remember that British investments in India turned it into a colony.' (Frantz & Collins, Selling Out, pp. 20, 21-22, 23-24, 26, 27-29, 30-33.)
The Emergence of Japan as a Powerful Economic Force in the World
"The pivotal year in the American decline was 1985. For the first time since 1914, the United States became a debtor nation. Just three years earlier, in 1982, the United States was the world's largest creditor nation. But the figures released in 1985 by the U.S. Commerce Department showed that, for the first time since before World War I, the amount of U.S. assets owned by foreigners exceeded the amount of foreign assets held by U.S. investors. And the difference was not small: foreigners owned $111.9 billion more in U.S. assets than U.S. investors held in foreign assets.
"The deterioration continued. By 1986 the figure more than doubled. Foreigners held $1.331 trillion in assets in the United States, while U.S. investors owned $1.068 trillion in assets overseas, for a difference of $263.65 billion. In 1987, the difference jumped another $100 billion.
"By simple terms, that means the United States, like Mexico, Brazil, and a host of other lesser developed countries, took in more foreign capital than it invested abroad.
"The United States has become what Rohatyn called 'a classic model for a failing economic power: increasing levels of foreign debt, a constantly depreciating currency, and a continuing negative trade balance almost regardless of currency levels.'
"This huge international debt means that the standard of living in the United States will decline as the country is forced to make interest payments to foreigners.
"By 1988, the federal government was already paying $24 billion in interest to foreigners, more than it spends on schools. And interest rates were higher because the United States had to lure foreign investors to finance its profligate spending.
"'We are much like a wealthy family that annually sells acreage so that it can sustain a lifestyle unwarranted by its current output,' Warren Buffett, the legendary investor from Omaha, Nebraska, told Fortune magazine in May 1988. 'Until the plantation is gone, it's all pleasure and no pain. In the end, however, the family will have exchanged the life of an owner for the life of a tenant farmer.'
"Or, as Congressman John Bryant, a Texas Democrat, put it: 'America has been selling off its family jewels to pay for a night on the town.'
"During the U.S. decline, Japan emerged as the world's most powerful economic force. IN industry after industry, from automobiles to machine tools to electronics, the Japanese knocked the Americans out of first place in the world. In late 1985, when the United States surpassed Brazil and Mexico and became the world's biggest debtor nation, Japan emerged as the world's largest creditor. Japan's governmental and private holdings abroad surpassed those of Britain and other industrialized nations.
"Richard Rosecrance of Cornell University predicted in 1988 that 'If things continue as they are now, it won't be much beyond 2010 before Japan becomes a leading power in world politics.'
"Statistics tell the story. In 1950, Japan had only 1 percent of the world's exports, and it was a follower in world trade. Not blessed with an abundance of natural resources, Japan imports mineral fuels, crude oil, industrial raw materials, and foodstuffs and grinds them through the machinery of its high-powered economy to export high-tech scientific, electronic, and transportation equipment. Japan's leading exports are autos, communications equipment, audiovisual equipment, office equipment, scientific and optical instruments equipment, and ships.
"As the end of the 1980s approached, Japan had done far more than simply catch up; its share of world trade had grown tenfold, and it had built a trade surplus of $100 billion.
"Much of that surplus was in dollars, for Japan's success came at the expense of the United States. Import-hungry American consumers have been spending billions of dollars on Japanese cars and video equipment while the nation's manufacturers were buying sophisticated components from Japan. The Japanese then use the surplus dollars to step up their direct investments in the United States.
"'Basically, the VCRs and the Toyotas are coming back,' explains David G. Shulman, director of real estate research at Salomon Brothers in New York.
"America's fading dominance began to cause fear of this rising ride of foreign investment, which in turn fueled calls for controlling foreign purchases and setting up quotas to protect American industries from the threat of foreign competition, particularly the Japanese.
"The Japanese were predictably concern about the threat of protectionism and bashing of their interests in the United States. They responded by stepping up a relatively new trade pattern: setting up plants in the United States. Much of the increase in Japanese investment in the United States has come in the form of new factories or acquisition of existing U.S. plants.
"It's like an insurance policy: Japanese industries evade restrictions on imports by manufacturing goods in the United States through subsidiaries, and thereby also avoid being damaged by the falling dollar. There is also the added benefit of using their U.S. operations to increase their share of the nation's market without boosting the U.S. trade deficit. Such concerns were on the minds of Toshiba executives when the Japanese electronics giant decided to expand in the United States.
"'We first started talking about moving our personal computer production to the Untied States three years ago,' Daniel M. Crane, vice president for marketing at Toshiba America in Irvine, California, said in late 1987. 'We wanted to insulate ourselves from currency fluctuation; we wanted to be an insider.'
"The increasing presence of Japanese goods in the Unite States has been referred to as 'judo economics,' a policy that deflects protectionist pressure because of Japan's huge strength in U.S. markets. Often when the United States tries to retaliate against Japanese companies for violating international trade rules, the U.S. actions must be softened because its domestic economy is hurt, too, as demonstrated in the Toshiba incident.
"This is all part of a long-term plan being followed by Japanese corporations driven by the necessity of exporting. The initial phase called for grabbing a big share of the U.S. markets, frequently be reducing prices sharply and sometimes settling for a loss on exports. Establishing a capability in the United States to assemble components made in Japan and thus evade protectionism is the second phase. And the third will be shifting full manufacturing to the United States, including setting up an array of Japanese suppliers to ring its big manufacturing plants. ( Douglas Frantz and Catherine Collins, Selling Out, pp. 39-41.)
Identifying Foreign Ownership in America
"John Bryant first became interested in foreign investment while serving as a state legislator in Texas in the 1970s. The issue surfaced when Arab investors were believed to be behind the purchases of large parcels of agricultural land in the state.
"When Bryant tried to trace the source of the purchases, he found that most owners were hiding behind a screen of dummy corporations registered in the Netherlands Antilles, a Caribbean haven for investors and other moneymen seeking anonymity. The U.S. Agriculture Department listed 270,000 acres of Texas agricultural land owned by residents of the Netherlands Antilles--one acre per man, woman, and child on the tiny island. Bryant was dubious.
"Most significantly, Bryant was amazed at the ease with which a foreign investor could conceal his identity under U.S. law. He discovered what anyone who makes the seemingly simple inquiry "Who bought what and for how much?" discovers: there is no single U.S. agency tracking such information, collating it, or analyzing it. Although private organizations and individuals have tried to study foreign investment, their efforts are stymied from the start because of the lack of complete information....
"After Bryant was elected to Congress in 1982 from a district that included downtown Dallas and some affluent suburban neighborhoods, he was determined to create a more thorough mechanism for monitoring foreign investment....
"Bryant's initial legislation was more than a simple 'signing in at the door.' The measure would have required foreign investors to register each new investment publicly with the Department of Commerce, disclosing their true identities, nationality, the purchase price of the investment, and their source of financing.
"These requirements amounted to no more than what publicly held American corporations must divulge in annual reports to the U.S. Securities and Exchange Commission or whenever they make a new acquisition. And the requirements were still far less than what most other nations demanded of Americans when they invested abroad. But the proposal would generate outrage from foreign investors and their supporters.
"A more significant element of the proposed legislation was the reciprocity section. It would have prohibited investment in American assets by foreigners unless Americans were permitted to invest in the investor's home country on the same terms.
"Testifying at a committee hearing on his proposal on May 8, 1986, Bryant said, 'As ownership of our economic assets is transferred overseas, so is the power to make decisions affecting the independence and prosperity of Americans. Foreign access to sensitive high technology and research capabilities narrows our strategic and competitive edge. Foreign influence in vital energy and defense industries may endanger our national security; our oil industry is particularly vulnerable at this time. And our economy is becoming so dependent on foreign capital that many respected economists warn that its sudden withdrawal could send us into an economic tailspin.'
"The Reagan administration, which had financed the deficit with big help from foreign investors, was steadfastly opposed to the legislation. Officials from various government agencies countered that Bryant's amendment was, at best, redundant and that current efforts to monitor investment were adequate. They objected to the reciprocity section on the grounds that enforcement would crate a bureaucratic morass land place American businesses abroad at risk of reprisals.
"In an apparent coup, Bryant had arranged for supportive testimony from Richard Perle, assistant secretary of defense for international security and a leading voice for the administration on arms matters. However, on the morning of the day his testimony was scheduled, Perle's secretary telephone to say that he had a conflicting appearance in the Senate and would be unable to appear.
"George Slover, Bryant's legislative counsel at the time, later explained what had happened: 'We knew from things he had said publicly in the past that Perle was very concerned about foreign investment and how little we know about it. There was no official explanation, but what we heard later was that his testimony was not approved by the Office of Management and Budget. It wasn't approved because it didn't' toe the party line.'
"Opposition to the proposal centered on the reciprocity section, so in January 1987, Bryant submitted a new version to the House that was titled the Foreign Ownership Disclosure Act. The reciprocity section had been dropped, and Bryant was able to line by thirty-one cosponsors.
"In March, the measure was attached to an amendment to the omnibus trade legislation then under consideration in the Energy and Commerce committee. The bill was adopted by the narrow margin of 21 to 20, after fierce opposition from every Republican on the committee.
"There was a further modification of the disclosure section: it would apply only to the big players, foreign investors with a 'significant interest' of more than 5 percent in any U.S. business or real estate property with assets of more than $5 million or annual sales of more than $10 million, and those with a controlling interest of 25 percent or more in a U.S. business enterprise with assets or annual sales of more than $20 million. The information required would be simpler: identity, nationality, address, date interest was acquired, percentage of investment and purchase price, name and location of U.S. property, and terms and conditions of acquiring interest.
"The amendment included severe penalties or noncompliance and stipulated that the information would be public, indexed by name, nationality, and industry of the foreign investor and by name, state, and industry of the U.S. property.
"Until its passage as part of the trade bill by the Energy and Commerce Committee, Bryant said, his amendment had benefited from Congressman Richard Gephardt's more controversial proposal for trade reciprocity, which distracted the administration from the Bryant measure.
"But once the bill passed the committee and headed toward the floor of the House, the amendment met with vigorous lobbying from a variety of sources with links to or dependencies on foreign investment. Among those fighting the measure were First Boston, the New York investment bank owned in part by a Swiss bank, Credit Suisse; Shell Oil, a wholly owned subsidiary of Royal Dutch shell; and the White House.
"J. D. Williams, a high-powered Washington attorney representing First Boston, called on Bryant to express his concerns about the amendment. He used the good-old-boy routine, cautioning Bryant in a friendly fashion, 'I've been around a lot longer than you, son. If we have to, we can stop you. Too bad, son.'
"In Washington, there is no better measure of a proposal's significance than the amount of money its opponents are willing to spend to defeat it. And the Bryant proposal caused plenty of spending, though there is no way to determine precisely how much. But the list of corporations, domestic and foreign, lined up in opposition to the proposal reads like a Who's Who of business in the United States: the American subsidiaries of the Big Three Japanese automakers, Honda, Toyota, and Nissan; British-owned Standard Oil; Swiss multinational Nestle; American Express, the biggest U.S. financial services company; Fujitsu; and even the U.S. Chamber of Commerce.
"Slover fielded more than 100 telephone calls himself from representatives of foreign investors and governments in a six-week period. Most of the callers were lawyers who refused to say which foreign investors or corporations they represented.
"'The world on the street was that more money was spent on defeating the Bryant amendment than on both sides combined on any other provision to the trade bill,' said Slvoer. 'But it was all very quiet. The foreign lobby did not want to arouse any public sentiment. It would be virtually impossible to stir up any grass-roots support for keeping foreign investment secret.'
"Ultimately, the concerns of Shell Oil and First Boston and other big foreign investors were satisfied by a round of modifications. But the Reagan administration kicked its lobbying efforts into high gear and called up heavy hitters such as Paul Vocker, then chairman of the Federal Reserve, and Treasury secretary James Baker to lead the charge.
"'As soon as the amendment hit the full committee, Baker started working the Congress hard,' Bryant said. 'For someone who usually calls on chairmen of the various committees, Baker walked the halls of Congress, calling on members, like a common lobbyist.'
"...Bryant began looking for a Senate sponsor. Several senators expressed interest, but then backed off in the face of political pressure. Finally Senator Tom Harkin, a Democrat from Iowa, took the ball.
"Lobbying intensified in the Senate, where representatives of blue-chip foreign and American multinationals joined in opposition with some of Washington's most powerful law firms--on the payroll of foreign corporations and governments--trade organizations, foreign ambassadors, and of course, the White House.
"One lobbyist representing a large multinational corporation called Senator Harkin's office and threatened, 'How would you like it if we pulled everyone right out of Iowa?' An amused member of Harkin's staff said the threat was not taken seriously, and Harkin didn't waver.
"Gary J. Campkin, director of international affairs for the Confederation of British Industry, sent a dragooning letter to the Metrocrest Chamber of Commerce, located in a district neighboring Bryant's outside Dallas. Leaving all subtlety aside, Campkin wrote that if the Bryant amendment were to become law, 'its effect would be to impact negatively on British operations in the United States and also to deter new and future investment proposals. This in turn would mean less job opportunities and economic benefits in the U.S. In addition it opens the door to retaliatory and mirror actions by other countries which could affect British and American investments.'
"Foreign ambassadors threatened that such legislation would send their investors and their money elsewhere. The White House claimed it would undermine the president's efforts to break through other countries' trade barriers.
"Surprisingly, there was also opposition from many American business groups, such as the U.S. Chamber of Commerce and the National Association of Manufacturers. Adopting one of the administration's lines, they said they were worried that foreign governments would retaliate by imposing harsher reporting requirements on U.S. firms in their countries.
"Harkin, speaking on the Senate floor, addressed that brand of reasoning as well as the concerns over chasing away foreign investment: 'There are those who say that this bill will discourage foreign investments. I take issue with that. business people bring their money here because it is a good place to invest and because they can make money in this country. Who is concerned with anonymity? Drug traffickers, the PLO, other foreign investors who do not want us to know how much they are acquiring on certain sensitive businesses in this country?
"Harkin argued that no legitimate business would be afraid to disclose the information required by the Bryant amendment. He pointed out that the disclosure was neither more nor less than required of publicly owned U.S. companies.
"He concluded by crystallizing the danger posed by the laissez-faire attitude toward foreign investment: 'The short-term advantages of foreign investment should not prevent us from considering the potential long-term effects on our economy and our national security. Over time, as ownership of our assets is transferred overseas, so is the authority to make important business and economic decisions affecting the prosperity and independence of our nation.'
"The threats by foreign companies to abandon the United States and the fears that investments would be withdrawn, however, carried the day. The opposition won a clear victory, sending the proposal down to defeat by a vote of 83 to 11.... (Douglas Frantz and Catherine Collins, Selling Out, pp. 45-46, 48, 49-52, 52-54.)
Japanese Buy Influence in Washington, D.C.
"The defeat of the Bryant Amendment and the evisceration of the Toshiba sanctions only hint at the power of the network of paid influence peddlers who work on behalf of the Japanese in Washington and in state capitols across the country.
"In 1988, 152 Japanese companies and government agencies hired 113 firms to represent them in Washington. The next most-represented country was Canada, with 61 organizations representing its interests, followed by the British, with 44.
"Indeed, as Japanese investments in the United States have increased, so has Japan's determination to protect those interests by trying to shape U.S. policy through paid lobbyists, campaign contributions by American subsidiaries, public-relations and advertising campaigns, and even charitable contributions.
"Overall, Japan's government, foundations, and corporations spent at least $310 million on a range of activities from lobbying to sponsoring public television programs aimed at influencing U.S. opinion, according to an estimate by Business Week magazine.
"'They are interested in creating an environment in which they can make money,' Bernard Karsh, director of the Center for East Asian Studies at the University of Illinois, told Business Week. "I see this as a major effort to come in and stay, to legitimate their presence.'
"It should come as no surprise that the Japanese and other citizens of foreign nations want to safeguard their interests by shaping U.S. policy and influencing debate on issues critical to their well-being. Quite surprising, however, is the cooperation provided to them by dozens and dozens of former high-ranking U.S. government officials who are willing to serve as hired guns for these foreign nations.
"The list reads like a Who's Who from the White House to the Department of Commerce to Congress. Senior statesman Elliot Richardson, who has held three cabinet posts and more than a dozen other high-level government positions, represents foreign interests, including an umbrella organization known as the Association of Foreign Investors in U.S. Real Estate.
"James H. Lake, a key adviser to George Bush's presidential campaign, has been one of the most effective lobbyists for Japanese and European interests because of his close ties to the U.S. trade representative's office. During a six--month period in 1987, he met or spoke with U.S. trade representative Clayton Yeutter or his assistants twelve times on behalf of Mitsubishi Electric Corp., just one of his firm's Japanese clients. Mitsubishi paid the firm $129,000 during the period.
"Richard Allen resigned as national security adviser to former President Ronald Reagan after disclosures that he had accepted funds from Japanese interests. During a Justice Department investigation that determined he did not engage in any illegal activity, Allen acknowledged that during his time as national security adviser, he met with Japanese auto firms while the United States was negotiating import quotas for Japanese automakers. Immediately after leaving government, Allen opened a firm that represented Japanese interests.
"George Bush's former chief of staff, retired Admiral Daniel Murphy, works for a powerful public relations firm, Hill & Knowlton, as head of its international division. Some of Japan's largest companies are clients of the firm, including Hitachi and the Electronic Industries Association of Japan.
"Peter G. Peterson, chairman of the Blackstone Group, a Wall Street firm with major Japanese clients, is a former commerce secretary and also former chairman of the Council of Foreign Relations and the Institute for International Economics. While not a registered lobbyist for the Japanese, Peterson has emerged frequently as a defender of Japanese interests.
"William Eberle, a former U.S. trade representative, and Robert Strauss, a one-time special trade envoy with the title of trade representative and one of Washington's most effective lobbyists, represent or advise foreign interests, including those of Japan. So does Roderick Hills, former chairman of the Securities and Exchange Commission. former Defense Secretary Clark Clifford represents foreign interests, and so does William Colby, the former director of the Central Intelligence Agency.
"Former Democratic Congressmen Michael Barnes of Maryland and Jim Jones of Oklahoma were among the army of lobbyists mobilized by Toshiba to weaken congressional sanctions against the company in 1988.
"When Toyota wanted federal approval for a questionable special trade zone in Kentucky so it could receive imported auto parts from Japan duty-free for uses at its new auto plant there, it enlisted the aid of Republican Party Chairman Frank J. Fahrenkopf, Jr., to set up a meeting between Toyota representatives and Commerce Secretary Malcolm
Baldrige. The trade zone was approved.
"When Eric Garfinkel was deputy assistant director of commerce and trade in the Reagan administration, he was a key player in the debate over whether to offer the U.S. machine tool industry the option of imposing sanctions on the Japanese in order to protect the American industry. When he left the White House in 1983, he went to work at a law firm where he represented the Tool Builders Association of Japan.
"Walter Lenahan, a deputy assistant secretary in the Commerce Department, was the leader of the U.S. negotiating team for discussion of the extension of an international agreement governing trade in textiles and apparel, two U.S. industries that had suffered enormously as a result of imports.
"Lenahan was given proprietary information by U.S. companies and various American trade associations representing the two industries. He knew what the top priorities of the companies would be, and he was well aware of the concessions the U.S. negotiators were prepared to make in order to get the agreement renewed or at least extended.
"Just days before the team's departure for the talks in Geneva, Lenahan quit the Commerce Department and went to work for the International Business and Economic Research Corporation, a Washington lobbying firm that represented Japan, Hong Kong, South Korea, and the Philippines, the very nations on the opposite side of the table from the United States. He even attended the meeting in Geneva, saying that he was not attempting to influence U.S. policy, but merely advising Hong Kong.
"When a bill was introduced in the Senate in 1985 that threatened to increase U.S. tariffs on Japanese telecommunications equipment, Stanton Anderson, a Washington lawyer and one-time Nixon White House aide with strong ties to the Reagan administration, helped organize the opposition.
"One Washington reporter who covers trade issues said of Anderson: 'He's a very effective lobbyist. Stan Anderson knows within hours what happened at any high-level White House meeting dealing with Japan.'
"At the time of the threatened tariffs, Anderson's law firm represented the Communications Industries Association of Japan, and he was chairman of Global USA, a lobbying firm with a client list that included two Japanese high-technology companies, Kyocera and Fanuc, and a Japanese airline, All Nippon Airways.
"The Senate was unable to muster support for a bill with any teeth. Later Robert Angel, former chief of the Japan Economic Institute, a Washington research organization funded by the Japanese government, told Eduardo Lachica of the Wall Street Journal: "Japan hasn't lost a battle since Nixon acted against Japanese textiles. It can buy its way out of any trouble.' Angel quit the institute in a dispute over what he viewed as undue influence over its affairs by Japan's Ministry of Foreign Affairs.
"A study by the General Accounting Office, the chief investigative arm of Congress, raised the image that virtually any sort of expertise acquired while working for the U.S. government is for sale in "Washington to foreign interests.
"The GAO identified seventy-six federal officials who went to work on behalf of foreign interests in Washington after leaving office between 1980 and 1985. Among them were eighteen senior White House officials, twenty-two other high-ranking officials from the executive branch, six senators, nine members of the House, four military officers with the rank of general, and seventeen senior congressional staffers. (Douglas Frantz and Catherine Collins, Selling Out, pp. 57-61.)
Japanese Practice Protectionism in Trade Matters
"Reciprocity is the concept that best exemplifies the unfairness behind Japan's invasion of the United States. It also is a concept as important as quality and hard work in understanding why Japan has emerged as a world economic power since the end of World War II.
"Reciprocity is the notion that the trade door should swing open both ways. Philip Trezise of the Brookings Institution, a Washington think tank, said it simply: 'Reciprocity need only mean balanced opportunities to trade. That indeed is a sensible objective.'
"Along with being a sensible objective, reciprocity is the standard by which many believe trade relations should be measured. When that measure is applied to the Japanese, the world's emerging industrial power fares poorly. A congressional study in 1987 found Japan 'among the nations with the most stringent investment restrictions.'
"A confidential report prepared by the U.S. trade representative's office was even blunter. The language is not shielded in the usual diplomatic tones because nowhere in the forty-page report is its source indicated. The author, a high-ranking official within the trade office, was therefore free to speak his mind in what was expected to be an internal assessment of U.S. access to the Japanese markets.
"Although the report was prepared in mid-1985, it has not previously been quoted from, and more importantly, its arguments are as true today as when they were composed.
"'The issue of access to the Japanese market is one of deep concern to the United States,' said the report. 'Layers of regulatory control, together with the ability of many industrial associations to exercise considerable control over activity in their sectors, makes the Japanese market one of the most difficult to penetrate. This assessment of the Japanese market is held not only by American businessmen, but by businessmen from around the world. It is reflected in the low levels of manufactured imports in the Japanese market.'
"What this means is that the Japanese can sell their autos and stereos and computers in the United States. And U.S. companies are restricted or prohibited from selling the same products, or the ones at which they excel, in Japan.
"What this means, too, is that Japanese corporations can build new plants and acquire anything from office buildings to factories without U.S. governmental restrictions in the United States. Yet whole industries are off limits to U.S. buyers in Japan.
"The degree to which Japan's markets are closed is demonstrated by the trend there to limit imports while its exports have soared. Clearly there are other international economic factors at work. Among them are the monstrous deficit spending of the American government, which has required huge sums of foreign capital, and the unbridled appetite of American consumers for imports.
"But the impact of Japan's protectionism cannot be ignored in assessing the trade numbers.
"Between 1980 and 1985, Japan's exports rose 35 percent and its imports fell 8 percent. The decline in imports came during a period when the Japanese standard of living was improving dramatically. And it came during a period when developments in the United States were going to the opposite direction. U.S. exports declined 3 percent while imports rose 41 percent.
"The numbers on the U.S.-Japan trade deficit show how Japan has benefited from open American markets and closed domestic ones.
"Between 1982 and 1987, the U.S. trade deficit with Japan increased more than 200 percent, rising from $17 billion to $56.9 billion. U.S. imports of Japanese goods more than doubled, going from $37.7 billion to $84.6 billion. Exports of U.S. goods to Japan, however, rose only about one-third, from $20.7 billion to $27.7 billion.
"Many factors played a role in the trade imbalance, but one of them again was Japanese protectionism. American exporters face enormous difficulties in cracking Japan's closed markets, as shown by the years of effort to ship beef there without smothering restrictions.
"Japan's Livestock Import Promotion Council is an example of a misnomer if ever there was one.
"The semigovernmental body was created not to promote imports of beef to Japan, but to restrict them. As one example of the industry associations mentioned in the confidential U.S. trade representative's report, the council controls all distribution of beef and sets prices, often three times higher than the actual import price. The tactic depresses demand among Japanese consumers and allows the economically weak but politically powerful Japanese agriculture sector to survive.
"In addition, the council restricts U.S. beef imports to a specific quota. The quota specifies not only how much can come in, but what cuts--lots of cheap chuck and ground meat, very little sirloin. for instance, in 1987 the quota for all U.S. beef imports was 214,000 tons. Of that amount, only 52 tons could be sirloin.
"The only meat that American firms can export to Japan in unlimited quantities is offal, the collection of scrap meats that the Japanese then turn into a product called 'formed steak.' As a result, the imported U.S. beef most widely available to Japanese consumers is of the poorest quality....
"On a more substantive side, the Japanese have been far less willing to make compromises that would open their critical industries to competition from Americans or other nations. In such fields as steel, autos, computers, and semiconductors, the Japanese government's protectionism
(Douglas Frantz and Catherine Collins, Selling Out, pp. 85-87.)
The Japanese Strategy for Gaining Control of the World Economy
"At a meeting of the U.S.-Japan Businessman's Conference in Honolulu in February 1986, the chairman of Ford Motor Company spoke the lament that characterized American industry in the 1980s.
"'I wish someone would tell me that manufacturing is not un-American,' said Ford boss Donald Petersen.
"Yukuo Takenaka, a Japanese-American who advises many of Tokyo's leading industrialists in addition to hundreds of the Japanese companies setting up shop in the United States, used nearly the same language in early 1988 as he sat in his office in downtown Los Angeles.
"'Americans seem to have given up on manufacturing.' said Takenaka, head of the Japan section at Peat Marwick Main, the world's largest accounting firm. 'Americans somehow think that manufacturing is second-class work. No one in this country is concerned about manufacturing anymore. It is no longer a desired job to work in a factory. It has become almost un-American.'
"Where does the blame lie? A substantial measure of its belongs to the decade-long orgy of merger mania that swept the nation in the 1980s. It is no coincidence that the economic decline of the United States occurred at precisely the same time that the investment bankers and corporate raiders began their destructive transformation of corporate America.
"Instead of increasing spending to modernize plants and boost budgets for research and development to retain America's competitive position, the nation's manufacturers allowed Wall Street to push them into a self-destructive game of corporate checkers that drained capital and energy and creativity.
"A side effect: until the early 1970s, only about 12 percent of the Harvard Business School graduating class each year went to Wall Street; by the 1980s, fully one-third of each class was going there. Wall Street became the magnet for the nation's brightest young business school graduates, the people who once would have gone to work at General Motors or Lockheed. The money was being made in moving paper, not in creating products. If manufacturing did not look un-American to the nation's brightest young MBAs, it certainly looked unappetizing.
"Another consequence of the merger mania is that U.S. managers have been forced to focus on short-term profits at the expense of long-term development plans. Operations that do not drive the bottom line, such as the development of new products, are jettisoned. If it is cheaper to buy sophisticated components abroad and simply assemble them in U.S. plants, what does it matter that a company sacrifices technical innovation and devalues inventive and engineering skills?
"By contrast, the biggest companies in Japan are often owned partly by their lenders, so they are able to borrow at lower interest rates and focus more on long-term outlooks than American business does. Richard Drobnick, director of the International Business Education and Research program at the University of Southern California in Los Angeles, said, 'In Japan, you can invest more, ask for lower prices, develop market share, because you don't need to pay it back so quickly. That's no fault of any American company. That's the fault of American economic policy.'
"But the warning signs of a nation at risk were visible well before merger mania was under way.
"The nation seemed to take the wrong fork in the road in the 1970s. The Vietnam War damaged the national psyche, the oil embargo threatened U.S. economic independence for the first time in more than a century, and unemployment and inflation both rose throughout most of the decade.
"The manufacturing sector, weakened by malaise, came under attack from foreign producers. Market after market fell to cheap goods produced abroad--cars from Japan, shoes from Italy, apparel from Hong Kong and Taiwan.
"American industry was disheartened, and its leaders stopped minding the shop. They stopped paying attention to quality and no longer were willing to invest the energy and capital that had paved the way for the post-World War I ascension of American capitalism.
"While America went into decline and began living off foreign capital and developing an addiction to imported goods, Japan was reaping the fruits of an industrial development that had begun in the ashes of World War II.
"Japan's principal aim in World War II had been to gain control of land that would provide the natural resources vital to its economic prosperity. After its defeat, Japan's leaders recognized that they would have to find another way to build the economic sovereignty of their nation. The alternative was evident: the nation's economic power would have to be built on a foundation of manufacturing and exports. The resources would have to be bought, rather than seized, and the value added through a new industrial base.
"In order to develop that base, Japan would keep its markets closed to protect its fledgling industries, and its people would sacrifice through hard work and by paying more for domestically produced goods than they would have paid for American imports. The driving force was the strategic development of a national industrial base, not the desires of consumers for inexpensive goods--a sharp contrast to the laissez-faire policies of the United States.
"Here another factor surfaces that played a role in what has become known as 'the Japanese miracle.' That factor is the homogeneous nature of the Japanese society. The historic sense of community and national purpose, which had been reinforced by the stinging defeat in the war, is not only unrivaled in a nation as diverse and young as the United States. It is barely understood.
"Perhaps no two cultures are as different as those of the United States and Japan. Americans pride themselves on individual initiative and outstanding personal accomplishments. The Japanese operate within a framework of team play in which the individual's needs are always secondary to the goal of the whole.
"Japanese society extols hard work, loyalty to the company, and a desire to resolve conflicts through cooperation, consensus, and a strong dose of deference to authority. The necessity of building an economy based on manufactured goods became part of the textbooks from elementary schools on up. It was preached by government officials and business leaders and implemented with the help of the nation's most powerful government agency, the Ministry of International Trade and Industry, or MITI....
"Indeed, few American business leaders have been able to understand the concerted nature of the competition they face from Japan. One reason is that the type of coordinated effort embodied in the 1986 meeting of Japanese industrialists is completely antithetical to the U.S. mind-set. The very idea that the chief executives of IBM, General Motors, and Citicorp would sit down for a similar session in unthinkable.
"A few Americans recognized the significance of a new Japanese investment pattern that emerged in the middle to late 1980s as Japan switched from passive purchases of stocks and bonds to direct purchases of U.S. companies and the creation of new plants on American soil.
"The Japanese found that their skills could be exported to the United States, where they could manufacture goods without fear of protectionist tariffs or the volatility of international currencies. (Douglas Frantz and Catherine Collins, Selling Out, pp. 103-106, 114.)
The U.S. Economy Is Under Siege
"The U.S. economy is under siege, and the battlefronts are many--from the New York Stock Exchange to Hawaii's hotel industry. To the victor will go rich spoils--possibly entire sections of the U.S. economy, such as the auto industry. As in a military war and its resulting loss of political sovereignty, economic sovereignty will be tough to rebuild.
"When viewed in the terminology of war, the competition can be divided clearly into various fronts; corporation's assume the role of battalions; and the victories can be counted for what they really are--steps toward conquest.
"One of the single most important fronts today is the auto industry, where the siege by Japanese companies has stripped away jobs and profits from U.S. automakers and threatens to overrun what for years has been the U
