"Will the real oligarchs please stand up," by
Nicholas Strakon, part five.
Our Walter Karp table
TOC for Strakon's article
Karp's "state autonomy" theory leads him to argue that political leaders his party oligarchs can go to war in the face of opposition from the great banks and corporations. To illustrate how my assumptions on American warmongering differ from Karp's, I will devote considerable space to the War with Spain, which is the first American war Karp investigates in both Indispensable Enemies and The Politics of War. Militarily, the 1898 war was an exceedingly minor affair, but its historical importance was gigantic: it laid the foundation of the American foreign empire, just as Lincoln's suppression of the Confederate Revolution guaranteed the continental empire run from Washington City. 
Regarding the War with Spain, Karp writes:
The only economic interest involved, namely Wall Street investors in Cuba, opposed the prospective war, since they preferred doing business with Cuba's Spanish overlords rather than with the insurgents. When McKinley started the war, however, the great "powers" of Wall Street promptly shut up and went along. (p. 261)
When one thinks of Wall Street powers of the 1890s, with or without those skeptical quotation marks, one thinks first of the Morgans. And Ron Chernow, in The House of Morgan, supports Karp: "The Morgans ... opposed the war, and Jack [J.P. Morgan Jr.] ... lamented the 'needless waste of life & property.'" 
However, the same Morgans who confined themselves to passive laments in 1898 had somehow been able to act a little more aggressively with respect to doings in Washington City just three years before, during the gold crisis of 1895. That was when the patriarch J.P. Morgan Sr. bulled his way into Grover Cleveland's office and announced that he, Morgan, was going to marshal Morgan and Rothschild resources to save the government's bacon. (Chernow, p. 75)
In fact, singling out the 1895 incident almost seems myopic after reading Rothbard. "Grover Cleveland ... spent virtually all his life in the Morgan ambit," Rothbard writes, beginning with his service as a lawyer for a Morgan-dominated railroad. Cleveland's Cabinets "were honeycombed with Morgan men, with an occasional bow to other bankers." (p. 3) Of greatest relevance to our discussion of the Spanish War is the fact that Cleveland's foreign minister during his second regime (1893-97) was none other than the prominent Morgan fugleman Richard Olney.
There's no escaping it: on the question of the big bankers' support for the war, Rothbard and Karp are in flat disagreement. Yes, Rothbard says, the initial Wall Street response to the outbreak of rebellion in Cuba and the accompanying threat to American investments there was to support Spain. However:
By the fall of 1895, Olney concluded that Spain could not win, and that, in view of the "large and important commerce between the two countries" and the "large amounts of American capital" in Cuba, the U.S. should execute a 180-degree shift and back the rebels, even unto recognizing Cuban independence. The fact that such recognition would certainly lead to war with Spain did not seem worth noting....
Ardently backing the pro-war course [were millionaire sugar grower and Morgan partner] Edwin F. Atkins, and August Belmont, on behalf of the Rothschild banking interests. The House of Rothschild, which had been longtime financiers to Spain, refused to extend any further credit to Spain, and instead underwrote Cuban Revolutionary bond issues, and even assumed full obligation for the unsubscribed balance. (p. 8)
During McKinley's War with Spain, the United States seized the Philippines as its principal booty. According to Rothbard, that imperial acquisition (and, I would add, the annexation of Hawaii as well) reflected "a new turn in the United States' attitude toward the Far East." (p. 8) "A major impetus," Rothbard writes, "was provided by the lure of railroad concessions." Pressing for those concessions was "the American China Development Company, organized in 1895, and consisting of a consortium of the top financial interests in the U.S.," including both the Morgans and the Rockefellers. (p. 9) Clearly, McKinley continued the Wall Street foreign policy when he succeeded Cleveland.
Even if Karp conceded that Morgan et al. did support the War with Spain, he would insist that their position toward it was still of no account politically: bankers don't wield power, politicians do. But surely their support, conjoined with the fact that Morgan men surrounded both Cleveland and McKinley as their close advisors, must create at least an inkling of doubt about Karp's view of power relationships.
Karp strenuously denies that business in general had anything to gain from the imperialism that got underway in the 1890s:
Some investors, of course, make money but ... the costs of financing imperialism are levied on the great majority of capitalists to secure profits for a small minority of them. This is an odd way for the dominant economic interest to arrange things, although it is just what one would expect if the political rulers practiced imperialism for political reasons of their own. (p. 259)
Indeed, for laissez-faire entrepreneurs willingly operating in the free market, the watchwords are minimal government, free trade, honest money, and peace. But the political-economic story of the 20th century, as recounted by revisionist historians such as Rothbard and Gabriel Kolko, is one of how a "small minority" of political operators gradually became the "great majority," or at least the dominant influence, among the big capitalists.  It is also the story of how, thanks to the Federal Reserve System (designed by Morgan, Rockefeller, and Rothschild agents) and deficit financing, the "costs of financing imperialism" have been imposed, not on the general run of big capitalists at all, but on ordinary Americans.
In The Creature from Jekyll Island, G. Edward Griffin formulates succinctly the financiers' compelling interest in war: "All that is necessary ... to insure that a government will maintain or expand its debt is to involve it in war or the threat of war. The greater the threat and the more destructive the war, the greater the need for debt."  Those sentences should be engraved on lintels and shouted from rooftops.
With respect to the early years of World War I, Rothbard writes:
Long connected to British, including Rothschild, financial interests, the Morgans leaped into the fray, quickly securing the appointment, for J.P. Morgan & Co., of fiscal agent for the warring British and French governments, and monopoly underwriter for their war bonds in the United States. J.P. Morgan also became the fiscal agent for the Bank of England, the powerful English central bank. Not only that: the Morgans were heavily involved in financing American munitions and other firms exporting war materiel to Britain and France. J.P. Morgan & Co., moreover, became the central authority organizing and channeling war purchases for the two Allied nations....
Deep in Allied bonds and export of munitions, the Morgans were doing extraordinarily well; and their great rivals, [the investment house of] Kuhn-Loeb, being pro-German, were necessarily left out of the Allied wartime bonanza. But there was one hitch: it became imperative that the Allies win the war. It is not surprising, therefore, that from the beginning of the great conflict, J.P. Morgan and his associates did everything they possibly could to push the supposedly neutral United States into the war on the side of England and France. (pp. 15-16)
As military stalemate or, worse, the strangulation of England by submarine warfare loomed in early 1917, pressure for a U.S. declaration of war mounted to the bursting point among the higher circles. Griffin writes that on March 15, 1917, U.S. ambassador to England Walter Hines Page (a Rockefeller fugleman) sent the State Department
a telegram ... outlining the financial crisis in England. Since sources of new capital had dried up, the only way to keep the war going, he said, was to make direct grants from the U.S. Treasury. But since this would be a direct violation of neutrality treaties, the United States would have to abandon its neutrality and enter the war....
The Morgan group had floated one and a half billion dollars in loans to Britain and France. With the fortunes of war turning against them, investors were facing the threat of a total loss. (p. 239)
On April 16, Congress declared war at the behest of Woodrow Wilson. "Eight days later," Griffin writes, "Congress dutifully passed the War Loan Act which extended $1 billion in credit to the Allies." (p. 258) (Remember that $1 billion was real money in those days; the Fed had been in the counterfeiting business for only a few years.)
Karp portrays Wilson as an autonomous warmaker autonomous, at least, with respect to institutions and persons outside the regime. I question Wilson's autonomy vis-à-vis Wall Street, but I do not claim that he was exactly its puppet, either. I conceive of some presidents as mere puppets or hired hands, but not Wilson. I am sure he had his own political or idealistic reasons for making war, which dovetailed nicely with those of his many Wall Street friends and sponsors.  At this point, I am seeking only to undermine Karp's contention that U.S. entry into the war served the interests of the party oligarchs only, and that no other "American interest" was being addressed (unless, as admittedly is tempting, we decide that Wall Street is un-American).
Two decades later, Wall Street interests again dovetailed with those of the Washington "oligarchs," with as Griffin writes "FDR wanting a jolt to the economy for political reasons, and the financiers, gathered behind J.P. Morgan, wanting the profits of war." (p. 502) Counted among their profits would be those derived from financing the war debt, including the hidden profits flowing to bankers from the hidden tax of inflation. And all on a scale much vaster than during the first war.
Out of American victory in World War II would come clanking and rumbling the whole financial-imperialist machinery of Bretton Woods, the World Bank and International Monetary Fund, and the Marshall Plan.  The ostensible rationale of the Marshall Plan should remind us of another, often-neglected form of state action that awarded lucky American corporations an overwhelming competitive advantage for decades after the war: strategic bombing. We may debate how many American political capitalists plotted for it in 1941, but few of them ever protested the U.S. military's invaluable service in blasting their competitors' plants into rubble and their workers into blackened husks. Without the wholesale physical wreckage of Europe and Japan, the "American Century" of world financial imperialism would surely have been impossible.
To the next part: "Fascist circles"
Posted June 8, 2002
Posted in 2002 by WTM Enterprises.
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