The victory of the Allies in 1945, confirming the right of peoples to self-determination in their Atlantic Charter declaration, seemed to signal the end for the world’s colonial empires. Colonized peoples in Asia, Africa, and the Middle East had seen the armies of Britain, France, and the Netherlands defeated in 1940-41, and knew that the European imperial powers now had neither the military nor the financial resources to enforce their rule for long. Moreover, the two strongest powers, the U.S. and the Soviet Union, seemed to stand on the anti-imperialist side. The U.S. had long pursued an “open door” policy advocating formal independence for developing countries. The Soviet Union had denounced imperialism since its birth in 1917, and the communist movement it led had wide appeal in parts of the colonial world as a result.

Nevertheless, the European colonial powers tried to hang on to their possessions as long as they could. Britain did finally “quit India” in 1947, but fought insurgents in Kenya, Cyprus, and Malaya before granting those countries independence. France fought losing, divisive wars in Indochina and Algeria to retain its bit of imperial gloire. Still, around the world the tide of history was clearly running in favor of self-determination. The quandary for Western elites was how to manage this process. Would new Third World leaders attempt to strike out on their own, taking control of their countries’ resources in order to build their own national industries? Or—worse—would they ally with the Soviet bloc or would nationalist campaigns prepare the way for takeovers by communist parties?

For Western Europeans, loss of access to colonial resources and markets would be an enormous blow: their weakened economies were only slowly recovering from World War II and they planned to force the colonies to help pay for reconstruction. For its part, the U.S. feared that colonial independence would weaken its European allies and might well lead to the expansion of Soviet influence in Europe. And U.S. business leaders were concerned about a postwar return to the depression that had marked the 1930s and so were eager to preserve access to resources and possible new markets.

Events in Iran, Guatemala, and Egypt in the 1950s marked a new turn in Western policies in what was becoming known as the Third World. In 1951, Iranian prime minister Mohammad Mossadegh nationalized the country’s oil industry, which had been run by the Anglo-Iranian Oil Company (since renamed British Petroleum). A democratically elected nationalist, Mossadegh (Time’s Man of the Year for 1951) not surprisingly resented the fact that 92 percent of the profits from Iranian oil went to AIOC, a longstanding arrangement reflecting British domination of Persia early in the century. Winston Churchill had recently returned for a second term as prime minister and was determined to restore the UK’s finances and prestige in the face of this challenge from a newly assertive client state. Churchill ordered a blockade of the Persian Gulf to prevent Iran from exporting oil to other purchasers, and he was joined in a boycott of Iranian trade by the United States. More muscular action was not possible, however: the Korean War absorbed the attention of the U.S. and Britain, and Soviet intervention in support of Iran was a threat. A more subtle approach was needed, and the CIA devised Operation Ajax, directed by Kermit Roosevelt. The first step was to create political turmoil to undermine Mossadegh’s political support: a CIA disinformation campaign worked overtime spreading rumors designed to split secular democrats from Islamic nationalists. Finally, the military made its move in August 1953, and Mossadegh was arrested, a new prime minister was appointed, the Shah was restored to power, and the oil industry was denationalized. The U.S. did demand a price for its help, however: British Petroleum now had to share its access to Iranian oilfields with several U.S. companies. U.S. military and foreign policy leaders were cheered by the success of their plan, recovering Iran at a low cost politically, militarily, and financially.

Guatemala was the next test case for this indirect method of policing empire. In May 1952, President Jacobo Arbenz announced a land reform program that would have nationalized unused land belonging to landlords and, especially, the holdings of Boston’s United Fruit Company, the country’s largest landowner. His inspiration was Abraham Lincoln’s Homestead Act of 1862, with Arbenz hoping to enable peasants and rural laborers to become independent small farmers. But apparently Lincoln was too radical for the Eisenhower administration, especially with Secretary of State John Foster Dulles and CIA Director Alan Dulles sitting on United Fruit’s Board of Directors. Kermit Roosevelt gave this description of Alan Dulles’ reaction to plans for the CIA’s Operation PBSuccess: “He seemed almost alarmingly enthusiastic. His eyes were glistening; he seemed to be purring like a giant cat. Clearly he was not only enjoying what he was hearing, but my instincts told me that he was planning as well.”² Arbenz was overthrown in a coup in June 1954; some 15,000 of his peasant supporters were killed.

Following the success of covert methods of intervention in Iran and Guatemala, the Suez Crisis of 1956 illustrated the dangers of old-style direct intervention. Egyptian President Gamal Abdel Nasser announced nationalization of the Suez Canal in July 1956; the canal was a key national resource then in the hands of European investors, and Nasser hoped to use canal profits to pay for his ambitious Aswan High Dam project. His plans energized several enemies: Britain, the former colonial power, since a British company ran the canal; France, since Nasser supported the Algerian rebels that France had been fighting since 1954; and Israel, which hoped to settle accounts with a pan-Arab nationalist who supported the Palestinians. Israel invaded Egypt on October 29, 1956, and Britain and France quickly occupied the canal region despite Egyptian resistance. This resort to direct military intervention posed a problem for the United States. The Eisenhower administration was dealing with Soviet intervention in Hungary to depose reformer Imre Nagy. The U.S. hoped to use the Hungarian crisis to undermine the appeal of communism, which had already suffered a serious blow to its prestige earlier in the year with Khrushchev’s revelation of Stalin’s crimes at the Soviet Twentieth Party Congress. Western intervention in the Suez therefore undercut the U.S. position. The U.S. response this time was creative: Britain was pressured to withdraw, and the intervention collapsed—underlining the weakness of the old colonial powers, speeding decolonization, and enhancing the prestige of the United States in the Third World.

From then on, the United States would have to compete with the Soviets for influence in the Third World as dozens of newly independent countries flooded the halls of the United Nations.

As Third World leaders began to take responsibility for their nations, they emphasized tackling the problem of economic underdevelopment. Their efforts were based on state-led development models, influenced by current thinking in the U.S. and Western Europe. Typically, colonial governments had been heavily involved in economic planning and regulation, and new leaders like Kwame Nkrumah of Ghana, Jawaharlal Nehru of India, and Léopold Senghor of Senegal had been educated in Europe and influenced by socialist and social democratic programs. Moreover, the new states started economic life without their own entrepreneurial class capable of leading economic development.

Not surprisingly, then, many countries concentrated on Big Projects—showpiece government development projects that could be the motor for economic transformation, such as Ghana’s Volta River Project, which involved construction of the Akosombo Dam in the early 1960s to form the world’s largest artificial lake and building aluminum smelters to take advantage of the country’s bauxite resources. And most countries followed policies of import substitution—developing local production capacity to replace expensive imports from Europe and North America. However, these and other industrialization projects all required massive loans, from banks, export credit agencies, or international development institutions such as the World Bank.

Again Western elites faced a problem: how could they preserve their access to Third World resources and markets? Independence offered the West an opportunity to shed the costs of direct rule—responsibility for administration, policing, and development—while maintaining all the benefits of empire. But independence also carried dangers: Asian, African, and Latin American nations might indeed become masters of their own economies, directing them to maximize their own development. And there were alternative models: Cuba and Vietnam, to name the most prominent. After all, the point of empire was not simply to import oil or coffee from Latin America, or copper or cocoa from Africa, but to import these goods at prices advantageous to the West—in effect, a built-in subsidy from the former colonies to their former rulers. Empire, whether based on direct rule or indirect influence, is not about control for its own sake: it is about exploitation of foreign lands and peoples for the benefit of the metropolis, or at least its ruling circles.

At some point, the alternative that Claudine Martin laid out to John Perkins in 1971, as recounted in Confessions of an Economic Hit Man,³ must have become an obvious element of the West’s strategy. The U.S. and its allies were competing with the Soviet bloc to provide loans for development projects of a myriad kinds. Why not embrace this burden—and use the debts to bring these countries into the West’s web of control economically and politically? They could be lured by economic hit men like John Perkins to take on debt to build grandiose projects that promised modernization and prosperity—the debt-led theory of economic development. Moreover, the large sums flooding in could be useful in winning the allegiance of new Third World elites, who were under pressure to deliver prosperity to their political followers, allies, and extended families. The possibilities for corruption were seemingly endless and would provide further opportunities for enmeshing the leaders in relationships with the West while discouraging them from striking out on their own on what could only be a more austere, and much more dangerous, path.