aspect of the evolution of American international finance capital, politically motivated and initiated and dominated by government, was unique in history. This is not to say that other governments had not in the past financed one or another side in foreign wars, as suited their political aims. But on no previous occasion had any nation employed government capital to become unquestioned creditor vis-à-vis the world. It was something new in international finance. It represented the accumulation and concentration of international assets in the hands of a government, not in the diverse holdings of private capital accretions, however concentrated these might be.
This unique development of U.S. international finance capital departed from the norms of finance, certainly from what had been foreseen by Hobson, Kautsky and Lenin. It not only was unforeseen, it was unforeseeable in the evolving economic and international relations of the period in which their thinking was formed. What had been anticipated was that the growth and concentration of finance capital in the international sphere was an unavoidable stage of the general accumulation and concentration of capital. Kautsky and Lenin shared this view with Hobson, as did Hilferding. Kautsky reasoned that this could lead to war, or to peace if adequate and binding agreements were reached among the international cartels of finance capital.
Lenin disagreed. War not only could, but must result from internationalization of the role of private finance capital. Governments in a capitalist world were the executive committees of the national bourgeoisies. The conflicts of interest among competing national groupings of finance capital must, ipso facto, become international disputes involving governments. It followed that war must ensue, and the wider the industrial and geographic range of the conflicts of interests, the wider the war would be.
Neither Kautsky nor Lenin anticipated or analyzed the unique aspects of emergence of the United States as the one great creditor nation. Not only were they both in error on this account, but so were the people of the United States, including the majority of its scholars. Attention was riveted on the transfer problems inherent in the massive intergovernmental debts and on technical adjustments in the transfer mechanism. But the real question that called for examination by scholars, and was not examined, was what it portended for the world that a leading government would subordinate the interests of its national bourgeoisie to the autonomous interests of the national government. Under such a condition the resources of the nation’s private capitalists would be regulated to serve the ends considered appropriate by government. Not only would international financial resources of overwhelming magnitude accrue to such government, but obligations would be levied, as borrowings and taxes, by foreign governments upon their own citizens, including their bourgeoisies.
In 1925 a European theorist of imperialism, Gerhart von Schulze-Gaevernitz, wrote: “When the history of our time someday is written, what will be deemed the most important upshot of the Great War? The destruction of the royal dynasties that ruled Germany, Russia, Austria and Italy? The rise of France, destroying the balance of power which Great Britain promoted to preserve its own security?” No, he answered. The key effect was not to be found in Europe at all, for all these experiences were overshadowed by a single fact: the shift in the world’s center of gravity “from Europe, where it had existed since the days of Marathon, to America.”34 He concluded that a new era of world politics was opened, which one could call Super Imperialism (Überimperialismus). “In order not to be misunderstood,” he explained, “I turn the concept of imperialism upside down. I understand by Super Imperialism that stage of the capitalist epoch in which finance capital mediates political power internationally, to acquire monopolistic control – and monopoly profits – from natural resources, raw materials and the power of labor, with the tendency towards autarky by controlling all regions, the entire world’s raw materials.”35
Schulze-Gaevernitz saw that something was new, and that it was finance, but he missed the point that it was more in the hands of governments than in those of private investors. Nor did he follow up the implications of the fact that it was based on collecting money by selling arms, yet went beyond warfare, being based on the financial power of a single government as the antithesis of territorial military strategy and private interests alike.
No clear economic ends for the collectivity of private U.S. interests could be gained by the policy that was pursued by the U.S. Government. This distinguished its arrival on the world scene as the dominant creditor from, for example, the more gradual and military initiatives of Britain toward its earlier attainment of such status. Britain’s economic and territorial objectives had been as obvious as their clash with comparable aims in Germany was inevitable. But the United States occupied no such position. Territorial gain was neither a purpose nor a result of U.S. intervention in World War I. When the war was won, no clash of imperialist ambitions followed in the traditional colonial sense.
Instead, the U.S. Government undertook further capital issues to Europe, to recent foe as well as friend. The overwhelmingly governmental nature of U.S. international finance capital, initiated during the war, was further emphasized when the war ended. What was being experienced was the earliest manifestation of what was to evolve in other countries, though in far cruder form, into National Socialism. Germany under Hitler, Italy under Mussolini and Spain under Franco subordinated the individual interests of their separate capitalist groupings to a national political purpose without injuring these interests, but subjecting them to more or less effective regulation depending upon the character of the regime. Precisely this, but in far more benign fashion, was implicit in assumption of the role of the nation’s and the world’s main credit functions by the government of the United States.
There was no resistance to this usurpation of power by even the most formidable of domestic or international finance capital aggregations. On the contrary, the world financial order came to rest on the dominant role in world finance not only able to be played but actually played by the government of the United States.
In the world of capitalism this assumption of lending power by a single national government proved as revolutionary as the Bolshevik Revolution. The United States became all-powerful in the capitalist world; the more so since, immediately after World War I, it reduced the rate of dissipation of its assets by reducing its military budget. The ability of the U.S. Government to pursue political objectives abroad by impassive lending to other countries was reinforced by the government’s decision not to burden itself with the cost of attempting to attain these same objectives by the more traditional military means.
From the outset, therefore, the role of government in U.S. overseas investments was decisive. It was government that, however circuitously, determined the growth and direction of U.S. investments abroad, not the investment of private finance capital that determined the foreign policies of the United States. Without this perception one cannot comprehend the seemingly contradictory and apparently self-defeating policies pursued by the United States toward its World War I allies and during the years that followed. Nor can a foundation be laid for understanding the financial-imperial policies of the United States after World War II until one has grasped the power-seeking context within which the United States conducted itself in the interwar period with respect to German reparations and the Inter-Ally war debts.
| 2 | Breakdown of World Balance, 1921–33 |
Nearly 80 per cent of bond flotations in the United States, and 60 per cent in Britain, during 1921–25, were by government entities: $3.6 billion in New York, nearly $2 billion in London (Table 2.1). These sums reflect the magnitude of the postwar shift from private to governmental borrowings. Although these bond issues were vast for the period, they were insufficient to enable the European Allies to pay their war debts to the U.S. Government, as repayment out of German reparations was not guaranteed.
Foreign government borrowings in London of almost $2 billion (at a parity of $5 to the pound) were a mere 7 per cent of the Inter-Ally war debts, and little more than 2 per cent of the total Inter-Ally war debts plus German reparations obligations. Yet they overwhelmed private sector issues of $1.1 billion on London during 1921–25.
These years of postwar recovery were of comparative prosperity for most of Europe. Yet the burden of Inter-Ally debt imposed by the United States compelled the governments of Europe,