American Business and Foreign Policy

1920--1933

Joan Hoff Wilson

• Publisher: The University Press of Kentucky
• Year: 2021
• ISBN:
  9780813186788
• Topic: Histoire
• Subtopic: Histoire de l'Amérique du Nord

With increasing world economic interdependence and a new position as a creditor nation, the American business community became more actively and vocally concerned with foreign policy after World War I than ever before. This book details the response of American businessmen to such foreign policy issues as the tariff, disarmament, allied debts, loans, and the Manchurian crisis.

Far from presenting a monolithic front, the business community fragmented into nationalist and internationalist camps, according to this study. Division over each issue varied with the size, type, and geographic region of the various business interests, and despite their formidable economic power, business internationalists are shown to have played a more limited role on certain issues than has been formerly assumed.

Unfortunately for the future development of United States diplomacy and world stability, no institutional means for tempering business influence on the formulation of foreign policy, or for coordinating economic and political foreign policies, were developed in the twenties.

Chapter One

General Business Views & Foreign Policy Trends, 1920

Almost as soon as the United States entered World War I, American businessmen began to speculate about the impact that conflict would have on the country. There had been, of course, some discussion in business journals about postwar issues, such as the problems of world peace and foreign trade, before April 6, 1917. But only after America’s entrance into the war did the significance of the role the United States was destined to play in both the peace settlement and the economic reconstruction of Europe become obvious to most businessmen; they predicted that the nation would emerge from the war as the economic and moral leader of the world.

Such a grandiose view of America’s world role had often been expressed during the last quarter of the nineteenth century by a variety of individuals and groups. It was the First World War, however, that transformed this ideal into reality.¹ Several internal conditions concomitant with the war effort confirmed in the minds of businessmen this belief in the economic and moral leadership of the United States. The first was the country’s spectacular economic recovery following the 1913–1914 depression. Prosperity had returned as a direct result of the nation’s ability to meet the demands placed upon its productive capacity by the Allied and neutralist powers.²

The second was the no less spectacular moral consciousness about foreign affairs which, under the wartime tutelage of Woodrow Wilson, reached new heights through exploitation of the crusading attitude and sense of dedication to high ideals that characterized the Progressive movement. This movement had always been strongly moral and nationalistic; the concern of Progressives about foreign policy was sporadic and usually subordinate to internal reform projects until Europe erupted in war. Then, like most Americans, they focused their attention ever increasingly on world affairs. Such a shift in emphasis did not initially represent any basic change in the philosophy or tenor of Progressivism, for nationalism and domestic reform were not necessarily antithetical concepts when viewed as part of the traditional “American mission” to serve as an example at home and abroad of social justice and democratic strength. So the Progressive movement, if not all of its membership, generally came to accommodate the morally righteous war that Wilson ultimately championed. Not only did the Progressive spirit permeate the American war effort, but Progressive tactics and language had become so pervasive by 1917 that they were used during and after the war to proselytize opposing foreign policies.³

Before the war businessmen had been intimately involved with certain Progressive economic reforms.⁴ Some had also played prominent roles in peace societies and antiimperialist groups, while others had supported a number of the foreign, political, and military interventions under Presidents Roosevelt, Taft, and Wilson. As a matter of course, practically all businessmen shared with the liberal and conservative elements of society the prevailing ideas about America’s unique moral mission in world affairs and the necessity of economic expansion abroad. Because of their association with the diverse domestic and diplomatic aspects of the Progressive era, businessmen were far from impervious to Progressive rhetoric by 1917. Consequently, when wartime prosperity and an intensely moral, Wilsonian approach to international relations occurred simultaneously between 1914 and 1918, clothed in Progressive terminology, the American business community succumbed to the idea that the enhanced moral and economic positions of the country were two sides of the same coin. More than at any time in the past, businessmen were convinced that the United States had become economically powerful because it was essentially moral in its dealings with other countries. For them the First World War fleetingly represented that illusive amalgamation between the morality of democratic foreign policy and economic expediency which Americans in general and the business community in particular have for so long pursued and so often confounded by equating democracy with capitalism.⁵

Confident in American righteousness, individual business spokesmen and publications made innumerable simplistic statements in which the traditional American concepts of hard work and thrift were combined with a sense of social service and patriotic responsibility and then morally associated with the country’s military and economic successes. By 1920 leaders of the business community were firmly and publicly committed to these basic premises of the ideology known as corporate liberalism. At the same time they rhetorically equated their own self-interest and economic achievements with the notion not only that they were serving their country through their endeavors, but that what they did was a “glorious service to all humanity.”⁶ The idea of business as a civilizing and uplifting force was certainly not new. But now the war had reinforced the idea by producing examples of voluntary business leadership and personal sacrifice in government service.

Thus the word “service” literally became synonymous with the community effort of winning the war and continued as the single most important slogan of the business community in the postwar years down to the Great Depression. It should be noted, however, that during and after the war businessmen themselves admitted that only the “best upper class men in business are really genuine in their belief [in service] and are consistent in its practice.” Obviously popular and governmental criticism of the rapid growth of certain large corporations during the Progressive era, as well as the close cooperation of these corporations with government officials during the war, limited the development of such a sense of social responsibility to primarily a business elite. Although service became the byword, it was imperfectly practiced even by this privileged group, let alone by the average businessman.⁷ It remained, nonetheless, a rhetorical indication of the way in which the business community generally rationalized its belief in the nation’s economic and moral superiority by 1920.

Another indication of this belief can be found in ideas about what would constitute normal economic conditions following the armistice. If businessmen had expected to return to prewar conditions, it would have been somewhat difficult for them to justify logically the “new” moral and economic position achieved by the United States. They did not, however, anticipate any such return to an older era. Despite the fact that businessmen came to live under, and ostensibly approve of, the “normalcy” rhetoric of the Harding and Coolidge administrations, they were predicting by 1920 that the future economic development of the country would be atypical or antinormal. Even the demands for a return to the traditionally high Republican tariff were tempered by this realization of changing conditions.

A semantic difficulty should be noted here. Quite often individual businessmen and business editorials referred to a “new normal” for the postwar years, meaning that economic standards and living conditions would be different from the prewar normals. For example, banker Lewis E. Pierson referred to what he called a “new peace normality,” while financier Paul M. Warburg said that “the normal of the past is not likely to be the normal of the future, which raises the question of what the normal ultimately will be.” Looking back on the immediate postwar years, economist Wesley C. Mitchell confirmed in 1929 that “it was not ‘business as usual’ to which Americans returned . . . but business dominated by postwar conditions.”⁸ Thus, while business spokesmen often used terms such as normal, new normal basis, normality, and even normalcy, they used them optimistically to describe antinormal economic conditions in the sense that they were unprecedented according to prewar standards. Once this semantic ambiguity is recognized it becomes clear that American businessmen were neither predicting nor desiring a return to any former state of economic normalcy.⁹ They did not, therefore, give to such terms the negative meaning traditionally attributed to them by historians studying Republican politics of the 1920s. Since this was the first decade in which the ideology of corporate liberalism prevailed, the same may well have been true of other groups.

Operating on a dual base of optimism and antinormal sentiment, businessmen came to believe that a different and better world was emerging from the war experience. Gradually they expanded their antinormal views to include not only postwar economic conditions, but to a lesser degree social, political, and diplomatic expectations as well. Since most business organizations are structured to anticipate economic changes, speculation within the business community about postwar developments in these other fields was not abundant. Nevertheless, with few exceptions, by 1920 business spokesmen had committed themselves to the notion that the war had brought about several positive changes outside the realm of economics. These included, for example, many vague statements about an improvement in human nature and personal relationships resulting from the war effort.¹⁰ More specifically, Charles M. Schwab, president of Bethlehem Steel, predicted that the democratic social order within the United States had been strengthened because “all aristocracies except the one of merit” were disappearing as a result of the “leveling process” set in motion by the war. Or, as a delegate to the twenty-third annual convention of the National Association of Manufacturers (NAM) said: “We are all going to be more on a common level . . . because the men who have risked their lives in defense of a principle [democracy] are never going to allow that principle to fall . . . in the future.”¹¹

These ideas about a “social renaissance” were closely related to anticipated changes in labor-management relations. Concern about this postwar development was expressed mostly by representatives of the Commerce Department, large corporations, and important banking houses, such as Herbert Hoover, George W. Perkins, Otto Kahn, Owen D. Young, Charles M. Schwab, John D. Rockefeller, Jr., Henry Ford, Elbert H. Gary, Gerard Swope, Edward A. Filene, and Alfred P. Sloan. Obviously these men did not become advocates of trade unionism, but they did pride themselves on their particular brand of conservative labor leadership, known as welfare capitalism or industrial paternalism. They generally perceived that the overt hostility toward unions, so common on the part of large and small businessmen alike since the 1890s, should be replaced with incentives and forms of cooperation.

Such prominent business leaders consciously attempted to draw laborers away from union radicalism by encouraging employee profit-sharing plans, lowering working hours, raising wages, sponsoring company unions with pension and welfare programs, providing savings and loan facilities, and utilizing technological innovations to improve working conditions and production efficiency. They also resorted to public relations tactics including not only massive advertising campaigns and well-publicized contributions to public health and welfare agencies, but also to educational programs designed to promote the “Americanization” of immigrant workers. Many of these ideas had been bandied about before the war but did not become commonplace in business thought until the 1920s, when they were linked to the concept of service by spokesmen for the most influential corporations. Accordingly Rockefeller asserted that the purpose of modern industry was “as much the advancement of social well-being as the production of wealth,” and Ford urged the adoption of the principles of “social engineering” because “service always pays better than selfishness.”¹²

By 1920 speculation about political changes more often than not centered on greater cooperation between government and business. Although the business community in general did not approve of the retention or extension of governmental control over industries introduced during the war, it did expect the government to lower taxes, to subsidize an American merchant marine and the development of air transportation, to protect and facilitate economic expansion abroad, and to provide “helpful and encouraging advice” on all economic matters. In particular, powerful corporate interests hoped for a new era in government-business relations in the postwar world. Ideally this would mean more institutionalized cooperation in the form of legislation promoting business combinations in foreign trade and encouraging trade associations. It also would mean fewer attempts by Washington officials to prohibit mergers and monopoly growth at home while an ever-increasing number of competent businessmen would begin to utilize the federal bureaucratic structure to regulate themselves with governmental approbation.¹³

This process whereby the government delegated growing amounts of its power to business-dominated agencies had been greatly accelerated during the war with the creation of the War Industries Board and its major subdivisions, the commodity committees. Both were dominated by “dollar-a-year men” from the executive ranks of industry and finance who were in turn assisted by War Service Committees made up of private trade associations. Before and after the war such regulatory bodies came to rely upon special-interest groups for their expertise, personnel, and support; hence, private sectors ended up in control of the public boards and commissions which were originally established to regulate their activities. Thus, the distinction between public and private enterprises, in the area of military procurement and as far as civilian regulatory agencies were concerned, was becoming more apparent than real by 1920. Particular cases in point can be seen in the history of the Federal Trade and Tariff commissions, both of which were disowned by Progressives and embraced by business after 1925 because they had fallen into very permissive regulatory practices.¹⁴ Business statements after World War I reflected recognition of this trend and the determination to promote what was considered a very desirable political change in government-business relations.

Just as the business community believed that the unity and cooperation demanded by the war were hastening the formation of new domestic relationships, so it also forecast altered relations in international affairs. With the signing of the armistice in November 1918, American businessmen were released from the patriotic necessity of disguising the fact that they were much more concerned with the economic than with the political aspects of foreign policy. For banking, investment, and import-export interests, the problem of restoring the economic health of the world loomed large; these businessmen believed that the war had removed the last remnants of economic nationalism and that economic interdependence had become the rule rather than the exception in international relations. Thus they reasoned that the most important practical and humanitarian responsibility of United States diplomacy was to take the lead in the economic reconstruction of war-torn Europe. Large manufacturing concerns, on the other hand, were more interested in protecting markets gained and technological advances made at the expense of European nations between 1914 and 1918.

These two positions were not mutually exclusive and were overshadowed by the agreement among all segments of the business community that economic expansion, in all of its various forms, should now take precedence over politics in foreign relations. This consensus was based on two conclusions that businessmen, with varying degrees of understanding, had reached after examining the impact of the war on the economy of the United States. First, vaguely sensing that the democratic nations of the world were moving in the direction of greater economic interdependency, most businessmen viewed enduring world peace as an economic rather than a political matter. Second, they recognized that the unusual prosperity created during the war had turned the United States into a creditor nation for the first time in its history. Naturally enough, in the ensuing decade, economists, politicians, and businessmen did not fully understand the complex ramifications of this dramatic change in American balance of payments and other economic dislocations arising after 1920.

In retrospect, however, it is relatively easy to see that certain prewar problems, accelerated during the years 1914–1918, “completely altered the equilibrium of international payments” in the postwar period. These economic maladjustments between nations were largely the result of overproduction in agriculture, the failure of the United States to adapt its commercial policies to its new creditor status (a condition the country probably would have attained by 1920 without the aid of wartime sales), and increased competition for dwindling foreign markets as manufacturing production increased, not only in the major industrial nations, but in the non-European areas of the world and in the new states created by the Treaty of Versailles. This latter trend is sometimes referred to as the “reversal of the process of international specialization” which was so characteristic of nineteenth-century colonialism. In other words, the war itself contributed only one new ingredient to the international economic problems that had been building up for most of the previous century: the payment of war debts and reparations.¹⁵ What the First World War did was to accelerate existing balance-of-payment problems and to create the opport...