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From New Militant, Vol. II No. 4, 25 January 1936, pp. 1 & 4.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
In the investigations by the Nye Senatorial Commission of the part played by the House of Morgan in the last world war, the fact – previously so well known to Marxists – that the real cause of America’s entrance into the war was furnished by the interests of finance capital, has now become clearly established. The quest for profits by the great financiers determined, in each decisive instance, the policy of the Wilson administration. Their fear of the loss of hundreds of millions, already invested, together with the fear of cutting off profits and prosperity for American business finally decided the issue.
The voluminous evidence introduced into the committee hearings should remove all doubt of this fact even in the minds of the greatest sceptics. Viewed in the light of the present Roosevelt neutrality policy all this evidence should receive added attention.
On several occasions the President has chided the Wall Street bankers. Two years ago we had the Pecora investigations. Today the Roosevelt administration sponsors the Nye committee hearings. We were told that its purpose was to “take the profits out of war.”
No doubt this is still accepted widely amongst the masses as a genuine objective of the investigations. To this extent they serve to strengthen illusions in regard to the “peace” policies pursued by the Roosevelt administration. As such they are also quite in accord with the general methods of the New Deal schemes. In a bourgeois democracy governmental policy to be successful must have popular mass support. This is something the Roosevelt administration understands particularly well. Therefore the New Deal policy was carried on under such slogans as: increasing the purchasing power of the masses, safeguarding their collective bargaining rights, their minimum wage, limitations on working hours, etc. Likewise the war preparations in the Rooseveltian system must have popular slogans, such as: taking the profits out of war. Besides Wall Street can still be consoled with the comment by the New York Times on these investigations, that the “financial sensations have all been exploded, with little or no damage.”
It is to be expected that the bankers like these investigations about as much as they now like the New Deal. But for Roosevelt this is one way of applying pressure for his specific aims. In his recent messages to Congress the neutrality policy stood out prominently. Yet his budget message proposed to set aside about a billion dollars for the 1936 armament expenditures.
It is one thing to investigate the bankers, but it is something entirely different to take steps toward a change of the system that makes Wall Street possible. The Wilson administration also had its period of “opposition” to the bankers. On the whole much in the present situation is reminiscent of those days;and where in the decisive moments the real and the important pressure was applied has been shown very clearly by the records of the Department of State, brought out in the hearings of the Nye committee.
At a very early stage of the world war the Wilson administration was committed to a policy of strict neutrality, according to the records of the committee. When the question of loans to the allied powers by the American bankers was first broached, W. Jennings Bryan, who was then Secretary of State, formulated an adverse opinion set down in a letter of January 20,1915, saying that, “money is the worst form of contraband because it commands everything else.” Wilson expressed the wish that such loans should not be made. Shortly thereafter, Robert Lansing, as Councillor of the Department of State, authorized the bankers to extend credits, advising them, however, not to submit the question to the government for a formal opinion. Purchases of munitions and other war material by the allied powers increased in volume at a rapid pace. From then on began the real intervention of American finance capital, and especially of the House of Morgan.
Apparently following the advice of Lansing the House of Morgan carried on secret negotiations for a $100,000,000 loan to the allied powers. But the task of changing the government policy against loans still remained, and an opportunity to do so soon came. In August 1915 there was a crisis of exchange. The pound sterling rate declined. Previously the House of Morgan had supported sterling, a policy it now suddenly abandoned it and for obvious reasons. Bankers, including governors of Federal Reserve Districts, quickly made their presentation to the Department of State. In the language of the Nye committee, they “turned the heat on”. They visualized the danger that the decline of sterling would wipe out all profits on goods sold even before it was actually delivered. Robert Lansing, now Secretary of State, wrote his famous letter to Wilson – a letter never included in Lansing’s Memoirs. He estimated that for the year 1915, excess exports over imports would reach the stupendous sum of two and a half billion dollars. The pre-war average had been about half a billion. “It is estimated that the European banks have about three and one-half billions of dollars in gold in their vaults,” said Lansing. He insisted it would be disastrous to withdraw any considerable amount, and if the European countries cannot find the means to pay they would have to stop buying, thus causing a proportionate shrinkage of American export trade.
“The result,” said Lansing, “would be restriction of outputs, industrial depression, idle capital and idle labor, numerous failures, financial demoralization and general unrest ...”
It would therefore be necessary, according to Lansing, to adopt a policy of extending loans.
In the characteristic manner of secret diplomacy Wilson answered:
“... we should say that ‘parties will take no action either for or against such a transaction,’ but that this should be orally conveyed, so far as we are concerned, and not put in writing.”
The policy on war loans thus changed. The House of Morgan floated not a mere $100,000,000 but loans totalling in excess of one billion dollars. Morgan “turned the heat on” the munition manufacturers inducing them to subscribe heavily. The House of Morgan became the sole purchasing agency for the allied powers, placing orders to the tune of a total of three billion dollars for which it received the handsome commission of $30,000,000. Contracts for war materials were let to a total of 888 firms in which Morgan had what he described to the committee hearings as a “negligible interest.” As one example of this there is the United States Steel Corporation, organized by the elder Morgan, who received a promotion fee of $125,000,000 in cash and common stocks. This alone would suggest the degree of interest held by the House of Morgan in U.S. Steel.
Still after this change of policy on war loans and after the initial heavy deliveries of war materials to the allied powers, Wilson managed to put Congress on record against what he called the intolerable attitude of Britain’s interference with the freedom of the seas. Wilson’s intervention for peace at that particular time, has been characterized by Senator Clark, of the Nye committee, as an effort to “draft terms definitely to the advantage of the Allies, terms which Germany was sure to refuse, thereby opening the way for our entrance into the war on the Allies’ side.” Nevertheless in the presidential elections of 1916 Wilson could roll up a plurality vote on the slogan: “He kept us out of war.” In reality the way had already been opened for America’s entrance into the war on the side of the Allies.
In March, 1917, Wilson proposed his fateful declaration of war, proclaimed to be the result of the loss of “lives of peaceful and innocent people,” in the unrestricted submarine warfare that Germany put into effect. But in the voluminous documentation, the state correspondence and the correspondence of the international bankers, nothing of importance is said about the unrestricted submarine warfare, except insofar as its results could be used as a cover for the deliberately planned policy of entry into the war.
In this respect the cable addressed by Ambassador Page from London to the State Department, under date of March 5, 1917, is most revealing. In terse language it states the real cause for America’s entrance into the war. Ambassador Page stated that the international condition was “most alarming to the American financial and industrial outlook.” Page complained that the allied powers could not make shipments in gold to pay for purchases in the United States and said that:
“The almost immediate danger, therefore, is that Franco-American and Anglo-American exchange will be so disturbed that orders by all the allied governments will be reduced to the lowest minimum, and there will be almost a cessation of transatlantic trade.”
He felt that the pressure of this approaching crisis had gone beyond the ability of the Morgan financial agency – meaning that it was time for the U.S. government to intervene directly.
“If we should go to war with Germany”, said Ambassador Page, “the greatest help we could give the Allies would be such a credit.”
Further on in the same cable he added:
“Perhaps our going to war is the only way in which our prominent trade position can be maintained and a panic averted ...”
A few weeks later the United States declared war on Germany; and when it was over 120,000 American soldiers had lost their lives while another 182,700 were wounded. But according to testimony of Charles A. Beard, in his American Leviathan, the American corporations, which became the merchants of death, filled their coffers with gold. These corporations made profits of thirty-eight billion dollars, over and above all deductions, including excess profit taxes. For them America’s entrance into the war became an exceedingly lucrative business.
Thus the real causes of America’s entrance into the world war are revealed. While the House of Morgan became the principal object in the investigations now about to be concluded, we do not, of course, face the problem of one individual, or some individuals, as the actual instigators of war. On the contrary. What we face is the system that inevitably produces wars; and a class, the bourgeoisie, the representatives of finance capital and of the industrial corporations, in collusion with their agents in governmental positions, that engineer the plans and preparations for war. To the working class this is the real enemy.
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