means and methods of persuasion and manipulation to sustain capitalist accumulation. In the American epicenter of world capitalism where abundance was the greatest and living standards were envied by the rest of the world, the mission of capital was not only to subject labor to its command but to extend its domination in the realm of mass consciousness. It is here where the market mentality prevailed, where consumerism triumphed over citizenship, and where non-terrorist fascist processes based on persuasion, deception, and manipulation aimed at the domination of capital itself were forged.
When war erupted in Europe in 1914, America was considered a backward society by haughty Europeans of high culture. Jonathan Norton Leonard, a writer whose 1939 book Three Years Down offered a highly readable account of the worst years of the Great Depression, described the United States in 1914 as “large and rich” but “a provincial country and none too sure of itself.” Americans in pursuit of quality higher education and who wanted to become doctors, scientists, or philosophers went to German universities. “Paris ruled the elegancies,” while “‘the latest thing’ in every field was usually of European origin.” Before the First World War, Leonard wrote, Americans “were definitely importers of culture, not exporters of our own.” He added:
Our technical progress was not much considered. Our movies, comic strips, popular music and fashions had not yet begun to Americanize the leisure moments of the world. Our financiers, except when they wanted to borrow money abroad, were completely wrapped up in domestic affairs. Our foreign policy, except for a habit of absent-minded felony toward Latin America, did not exist. Our navy was an expensive gesture and our army a small, hairy-chested farce.2
The coming of the Great War changed all that as the United States became a global leader whose many powers seemed magical.
THE FIRST WORLD WAR AND THE ORIGINS OF THE GREAT BOOM
Of all the changes in the international capitalist order following the First World War, the most significant was the emergence of the United States as “the great creditor nation of the world.”3 This underscores what William Leuchtenburg, a highly respected American historian of the 1920s and 1930s, meant when he declared that America’s postwar global role was one “of those great shifts in power that occurs but rarely in the history of nations, a transition with formidable consequences.”4 Even before it entered the conflict in 1917, its massive economic potential, tapped by the needs of total war in Europe, had put it on that path. From 1914 to 1916, U.S. trade with the Allies rose from $825 million to $3.2 billion.5 By the time American troops arrived on the Western Front, total exports of U.S. merchandise to the Allies had reached $6.2 billion, about 11 percent of GNP.6 The more strategically placed enterprises reeled in the biggest catches; for example, United States Steel’s profits rose from $76 million in 1914 to $478 million in 1917.7 National income nearly doubled from 1914 to 1918, as living standards improved dramatically for millions of Americans employed in wartime production and services. The war also made America the world’s leading energy producer. By 1920, its 60 million tons of oil production was two-thirds of the world’s total.8
Globally, America took a decisive step in ascending to the level of a preponderant economic power, making real President Woodrow Wilson’s desire for an active and engaging postwar U.S. foreign policy that would facilitate an “open door” for American goods around the world. The Marxist economist Lewis Corey in 1934 emphasized that the most important result of the war was America’s ascendance at the expense of its competitors. In 1919–1920, U.S. exports reached $16.1 billion, the highest to date; exports exceeded imports by almost $7 billion.9 Moreover, the United States, as the world’s new banker, exported more capital than ever before. By 1919, foreigners owed American investors almost $3 billion, not including the more than $10 billion the United States had lent foreign countries, mainly the Allies, to remain in the war.10 Indeed, when the fighting stopped, America was positioned to exert tremendous economic and political power throughout the world, though the “reluctant giant” failed to do so in the coming decades, at least to the degree required given its new global role.11
All this startling growth was the result of a historic partnership joined by Big Business and the U.S. government that was designed to produce whatever the Allies needed. At President Wilson’s urging, Congress passed the Military Appropriations Act in August 1916, from which came a Council of National Defense. Cabinet members sat on the council, but its main work was done by business leaders. America’s entry into the war the following year led to the creation of the War Industries Board. Other new agencies quickly followed, for example, the Food, Fuel and Railway Administrations, the Shipping Board, the War Trade Board, and the Selective Service Administration. All were needed by the federal government to coordinate production, prices, and labor for the purpose of establishing an effective wartime economy. The waging of imperialist war had made planning a necessity in the workings of capitalist production and exchange. Of course, none of this hurt Big Business. For the first time in the history of capitalism, the state became a highly conscious and informed manager of business interests. Some other wartime European governments had moved in this direction but none as far as the United States in achieving a new benchmark for state power.
Meanwhile, organized labor argued that its commitment to wartime production had earned it a rightful place at the decision-making table with employers and politicians. The AFL contended that business and government needed to take stock of its longtime commitment to reformism and also recognize the hard line it had taken against the IWW. Moreover, its ability to keep workers in line with concessions for higher wages and better working conditions had helped to dampen sentiments for strikes and walkouts. The fact that wartime prosperity had found its way downward to parts of the working class, especially those engaged in war-related production, had raised wages and levels of comfort and security. Nevertheless, whatever gains workers received were undermined by the deepening compromise struck between Samuel Gompers and other AFL leadership with Big Business. The ideological disposition of the AFL could not be clearer. In its deliberate aim to reject any hint of socialism, it sought harmonious relations with capital in the hope that it would lead American workers to become partners with business.12
Here were the combined forces at home—government, business, and labor—that turned the United States into a preponderant global power by war’s end. This required a foreign policy to open doors for the export of American capital and goods, though the main intent of economic planners and strategists was for the door to swing outward. As mentioned, exports exceeded imports in the billions. The export of American capital also soared to new heights as leading businessmen saw profitable opportunities to invest their capital reserves in underdeveloped areas of the world economy, especially in Latin America. The creation of the American International Corporation in 1915, which included some of the largest U.S. companies and banks, facilitated such investment.13 By 1918, U.S. banks had established branches in sixteen European and Latin American countries, and the rise of their leadership of the capitalist world coincided with New York replacing London as the world’s financial center. That the war had qualitatively advanced the global reach of the American empire at the expense of European capitalist countries was clear to capitalists and communists alike. Even as early as 1915, Thomas W. Lamont of J. P. Morgan and Company gleefully noted that the increase in war business had greatly swung America’s trade balance in its favor, enabling American capitalists to buy back U.S. securities from foreign concerns, which eliminated the drain on foreign exchange. Instead of paying interest and dividends to foreigners, American investors were now the recipients. Nine years later, the Soviet economist E. A. Preobrazhensky saw this even more clearly by connecting America’s imperial rise to the dollar as the new, dominant currency in the global capitalist system.14
Nevertheless, the contradictions of wartime capitalist enterprise ushered in a sharp recession not long after the Armistice was signed in November 1918. Government subsidies had resulted in a combination of huge surpluses in agricultural and manufacturing goods, highly profitable investments, and price inflation. But the coming of peace brought their abrupt end. As the War Department quickly
