Brave New World
Chapter 2 (Part 4 of 4) of the book
The Discovery of First Principles, Volume 3
Edward J. Dodson
The Ascendancy of Neo-Keynesians
In May of 1946, Truman signed legislation that provided Federal
insurance to lending institutions offering long-term, mortgage loans
to borrowers who could afford to make only small down payments. The
door was now opened for millions of families in the United States to
achieve home ownership. At the same time, Federal funds began to pour
into the construction of an interstate highway system. These highways
would eventually reduce the travel time between major cities while
also serving as a catalyst for the mass exodus of people from the
central cities. The era to come was to contain many contradictions,
but there was very little critical reflection on the longer-term
consequences of government programs and actions. Although there was to
be no wholesale return to
laissez-faire protectionism, subsidies and protective tariffs
would continue based not on societal acceptance of economic
nationalism or any other holistic rationalization but on the give and
take of political favors granted. This was the essence of Liberalism
that was to become the basis for public policymaking in the United
States. Under Truman, the professional and the expert were coming into
their own as managers and beneficiaries of a permanent bureaucracy
dedicated to social engineering funded and directed at the Federal
level. Burdened by the enormous debt incurred during the war, the
people of the United States were nonetheless about to attempt what no
other nation had for long successfully been able to do -- remain the
most militarily powerful nation in the world, provide a majority of
citizens with the public and private goods necessary for a high
minimum standard of well-being, and do so without significantly
attacking privileges within existing socio-political arrangements.
Two of Truman's immediate domestic objectives during the transition
to a peacetime economy were to maintain full employment and to
stabilize prices. Reduction of the national debt was not even on the
agenda. Interest had to be paid to those who had invested in U.S.
government bonds; and yet, the nominal yields earned by investors
remained throughout the decade below the rate of inflation. Although
this meant the government was able to make interest payments (or, as
was the case with a large percentage of government debt, allow the
interest to accrue until maturity) with what amounted to depreciated
paper currency, a few economists warned this happy circumstance could
not continue for long -- particularly after the war came to an end.
Harry Gunnison Brown, for one, wrote in 1943 that such heavy borrowing
would later show up in even steeper reductions in purchasing power of
the currency, generating a dramatic shift of investment activity into
highly speculative (but potentially high yielding) alternatives.
Nominal interest rates would have to rise in response to such
inflationary expectations in order to lure investors back to
government securities. Following a strict Keynesian discipline, the
national debt could have been retired by replacing existing bonds with
a fully amortizing variety, the interest and principal repaid
regularly from revenue generated by taxation -- ideally in the form of
a Federal surtax on the rental value of locations and natural
resource-laden lands -- and fees generated by leasing of public lands
to the highest bidders for environmentally-sensitive and otherwise
appropriate productive activities. This, of course, did not happen.
To protect the Federal government from market pressures and to reduce
speculation in securities, Marriner Eccles proposed, among other
things, legislation to require that commercial banks hold government
bonds as reserves against deposit balances. Needless to say, the
nation's bankers strenuously opposed this measure as overly
restrictive. Eccles later put much of the blame for inflation on "Treasury
procedures" that "encouraged investors to sell
[government securities] to banks, and thus ... indirectly forced the
Federal Reserve System to buy more than would have been necessary"
and adding "to the money supply and the postwar inflationary
pressures."[100] One cannot blame the economists for these
misguided policies, for, as a group, they did not yet play a central
role in the development of policy and/or legislation. Necessity,
combined with self-imposed limits on the range of policy choices
considered, resulted in an increase in the national debt by nearly
$200 billion between 1941-45. Beyond direct expenditures for the U.S.
military, nearly $50 billion in material assistance had gone out
during the war years, including $32 billion to the British, $11
billion to the Soviets and $3 billion to the French. These debts could
not be repaid by these nations, who were themselves virtually
bankrupt. At best, repayment might begin some years down the road. In
the meantime, the U.S. government needed to raise the revenue to
service the debt until the bonds matured and could be refunded.
Adherents to a balanced budget doctrine would later criticize
Roosevelt era advisers for not pressing hard for higher marginal tax
rates on incomes. In fact, Roosevelt's budget message in 1944 included
a plea for $10 billion in additional tax revenue from that very
source; once again, however, the Congress declined to ask the wealthy
to pay a higher share of the war expenses. Only about 40 percent of
$400 billion raised during the war came from taxation; the remainder
came from borrowing. Roosevelt had been repeatedly warned over the
years by Eccles (who had independently come to conclusions similar to
those of Keynes) that the government was engaging in a very dangerous
game. His position in the business world gave him instant credibility,
and what he had to say attacked much of what his peers and colleagues
accepted as conventional wisdom. He realized, for instance, that when
the nation's banks sold off securities and forced the liquidation of
loans in order to honor depositor demands for their paper currency,
they "were contributing to collective ruin."[101]
Either the Federal Reserve System or some other means of government
intervention was needed to prevent this type of dramatic contraction
in credit. Equally important, he argued, an expanding and widely held
level of purchasing power was the key ingredient to maintenance of an
industrial economy dependent upon repeated sales of low priced goods.
Along with Harry Gunnison Brown, Eccles recognized that the
disappearance of the frontier and access to free or cheap land placed
enormous stresses on the American System. Control over raw
materials was now in the hands of a small number of large corporations
who did all in their power to fight against having to operate under
a fair field with no favors. The result was a dysfunctional
system prone to periodic and deep unemployment leaving millions of
people without purchasing power. What the system needed, Eccles
argued, was continuous access to the financial reserves required to
nurture technological advances. His own experiences convinced him --
the preachings of mainstream economists aside -- that there were no
such things as purely competitive markets:
Economics is merely the production and distribution of
wealth brought about by the application of labor to raw materials.
It is all man-made and has developed by the application of the human
intellect... The moment the production and distribution of wealth
moved beyond a hermit's cave and affected two or more people,
economics became artificial in character, in the sense that it was
subjected at once to man-made rules and regulations, which were
changed constantly in accordance with the needs of a dynamic
society.
What passed for the God-given aspect in the operation of economics
was nothing more than a determination of this or that interest,
specially favored by the status quo, to resist any new rules that
might be to their disadvantage. ...[M]en with great economic power
had an undue influence in making the rules of the economic game, in
shaping the actions of government that enforced those rules, and in
conditioning the attitude taken by people as a whole toward those
rules. ...[102]
Despite these important insights, Eccles still did not recognize in
existing socio-political arrangements that the private appropriation
of rent and the resulting monopolization of nature were the base upon
which the other rules of privilege rested. In fact, Eccles had no
concrete systemic reforms to offer. Rather, Eccles suggested that
government needed, once and for all, to establish a reasonable minimum
standard of well-being and use its powers of progressive taxation and
investment in infrastructure to achieve a proper balance between
societal good and private wealth accumulation. His recovery plan also
emphasized "relief of taxation that rests on the consumer;
the reduction of sales taxes, or real-estate taxes, or tariffs, and of
public service charges."[103]
Though never a member of Roosevelt's brain trust, Eccles (through a
chance meeting with Stuart Chase) was given an opportunity to express
his views to Rexford Tugwell. George Dern, Roosevelt's first Secretary
of War, also received a long memorandum from Eccles urging the
administration to abandon its balanced budget posture and adopt other
economic stabilization efforts to prop up the banking system. He
strongly opposed Roosevelt's move toward what he saw as state
socialism embodied in the National Industrial Recovery Administration.
Late in 1933, Tugwell brought Eccles to Washington for discussions
with Dern, Mordecai Ezekiel, Henry Wallace, Harry Hopkins and Jerome
Frank. Together, they worked out a set of policies remarkably similar
to those soon to be linked with the name of John Maynard Keynes and
which Eccles called logical radicalism. In January, Treasury
Secretary Henry Morgenthau, Jr. solicited a written report from Eccles
on how to rebuild the nation's monetary system and asked him to join
the department as his special assistant. From this point on until the
beginning of the Second World War, Eccles advocated policies designed
to leverage public spending -- to prime the pump and allow private
activity to flow with a minimum of government interference. A year
later, Eccles was hard at work in his new role as Governor of the
Federal Reserve Board. His proposals formed the basis for the Banking
Act of 1935. Soon he was at odds with Morgenthau and the nation's
wealthy by pressing for a heavy surtax on undistributed corporate
profits as a method of reducing the Federal deficit while
simultaneously putting financial reserves into the hands of those most
likely to use the funds for consumption or investment in plant and
equipment. After 1940 he and others advancing the program of logical
radicalism were fighting what Eccles described as a "civil
war within an international war."[104] Liberalism emerged,
but without the fiscal discipline or corrective tax policies essential
to deal with the ups and downs of the business cycle. James MacGregor
Burns seems to have summarized the nature of the problem as well as
any historian of the period:
[T]he legislative branch was not adapted institutionally
for making unified economic policy, the executive branch was not
well organized to administer it, and [Roosevelt] was not
temperamentally inclined to press for it when the political risk
seemed high.[105]
Economic policy limped along during the war years, becoming
increasingly important as the discussions and conferences on postwar
needs progressed. One measure of how poorly understood were the
consequences of perpetual debt financed spending is that serious
criticism of the U.S. government as a whole only emerged during the
late 1950s. In 1959, former Budget Director Maurice Stans was forced
to finally acknowledge that "most students of wartime
economic developments now agree that we did not tax ourselves nearly
enough" and "did not pay enough of the costs of the
war out of current income."[106] Roosevelt had actually
called for a $25,000 ceiling on after-tax incomes and heavy taxes of
business profits gained under wartime conditions. Morgenthau made what
must be described as only a token effort to generate support in the
Congress for a heavily graduated income tax. For its part, the
Congress seemed intent on passage of a national sales tax. With
Roosevelt's personal prestige involved, a moderately progressive
income tax bill was eventually adopted. Entrenched wealth remained
entrenched, however; and, the Federal government was left with a
national debt of nearly $300 billion. Eccles put the blame squarely on
the unwillingness of elected and appointed officials to take more than
half-measures. There was, as Eccles explains, no one to speak for the
public interest, only for narrow constituencies:
In the period after V-J day, as in the war years, every
economic group in the land wanted the benefits of inflation for
itself, to be paid for by a different group. The farmer wanted a
floor for his prices, but not a ceiling. The real-estate people, the
building-materials people, wanted easy credit so that at inflated
prices they could readily dispose of the houses and materials they
had to sell. But they certainly resisted an excess-profits tax that
would help the government recapture some of the profits that were
thus made. Labor always wanted price controls, but vigorously
resisted wage controls. The bankers wanted higher interest rates,
but they did not want the federal banking agencies to have any other
powers over the expansion of credit.[107]
With the removal of wartime wage and price controls, the pent up
demand for consumer goods placed a strong upward pressure on prices.
From the conservatives, led by Senator Robert A. Taft, came a
determined effort to lift all economic controls. Truman and his
advisers saw only disaster in such a rapid return to the market. As
Truman later wrote, "[b]y December it was obvious that
decontrol of prices would not work" because "[t]he
economy was certain to be plagued by war-born shortages for a
considerable time."[108] The Office of Price Administration,
ably run by Chester Bowles for most of the war, had its staff greatly
reduced in early 1946. Late in January, Bowles also departed after
warning Truman that the nation was facing an imminent inflationary
crisis. To help guide the country through this treacherous period,
Secretary of State James Byrnes now called upon Bowles to become
Director of the Office of Economic Stabilization, to, in effect "control
not only ... prices, rents and rationing, but also ... wages and
production."[109]
On February 20, Truman signed into law the Employment Act of 1946
which, for the first time, ostensibly committed the resources of the
Federal government to maintaining full employment. A Council of
Economic Advisers[110] was created to assist the President on economic
policy and planning. Truman was now fully committed to the development
of a truly global economy. "My view was that, in the long run
our economic prosperity and the prosperity of the whole world were
best served by the elimination of artificial barriers to international
trade, whether in the form of unreasonable tariffs or tariff
preferences or commercial quotas or embargoes on the restrictive
practices of cartels."[111] Yet to be seen was whether the
reserve strength of the U.S. economy was sufficient to fill global
demand for basic and capital goods while simultaneously providing the
credit for such purchases.
In the months following the end of the war, Truman's efforts were
severely threatened by labor unrest and strikes all across the
country. He would demand and eventually get legislation requiring
unions and companies to submit to independent arbitration when
collective bargaining could not yield reasonably quick settlements. In
the meantime, he used the power of the Executive and of public opinion
to keep coal, oil and steel moving over the rails to markets. Bowles
did his best to stall the dismantling of wage and price controls in
the face of tremendous pressures from farmers, business owners and
organized labor. The key to controlling the rise in prices was, he
believed, largely a function of keeping a lid on wages and prices
until the production of consumer goods began to match demand. Neither
he nor any of the economists he worked with had paid any attention to
Harry Gunnison Brown or others who warned of rising prices associated
with a new period of land speculation. An onslaught of lobbying by
every sort of special interest effectively killed renewal of wage and
price controls. Bowles resigned in frustration. No longer able to
prevent the forces of supply, demand, hoarding, speculation and
privilege from operating, prices of almost everything climbed
dramatically during 1946 and thereafter.
COLD WAR, UPHEAVAL, AND REVOLUTION
German and Italian fascism, then Japanese imperialism had been
crushed. In the process, the global hegemony of the early twentieth
century was left in disarray. What role would the leaders of the
United States now undertake for their nation? Would Stalin, in
victory, moderate the despotism of his rule in the interest of Soviet
expansionism? Would the remaining Old World powers peacefully
relinquish their tenuous hold over foreign territories and the lives
of other peoples? Questions over sovereignty, trade, militarism and
territorial integrity brought representatives of fifty nations to San
Francisco late in April of 1945 to review the proposed charter for the
new international organization, to be called the United Nations. The
smaller nations were looking for guarantees and for a means of
protection against incursions by neighbors and others. These concerns
were being raised during the early stages of the
Cold War and, as a consequence, would be responded to in that
context.
Molotov headed the Soviet contingent, giving notice by his demands
that the era of cooperation was closing and that the Soviet attitude
as a member of the United Nations was to be one of obstructive
self-interest. To some extent, the U.S. played the same game, pressing
for instance for the admission of the Argentines -- whose government
had been sympathetic to German aggression. Secretary of State
Stettinius led the U.S. delegation,[112] supported by a considerable
advisory staff comprised of representatives from more than forty
private organizations. Ronald Steel describes Stettinius in not very
flattering terms as "a white-haired, toothy businessman with
an affable manner and a nodding acquaintance with foreign policy."[113]
Thomas M. Campbell adds that Stettinius was not a good choice for such
a crucial role in the postwar negotiations because he "was
intellectually shallow and poorly read." Moreover, "[h]is
experience in diplomacy was meager, his slight knowledge of
international affairs having come indirectly through his involvement
with the Lend-Lease program."[114] Stettinius was joined in
San Francisco by Senator Arthur Vandenberg, who had been persuaded by
Walter Lippmann and James Reston to abandon his prewar isolationism
and champion the new global role for the United States. Temporarily
under Lippmann's spell, Vandenberg even delivered a speech
conciliatory in tone toward Soviet ambitions in eastern Europe. At San
Francisco, however, the limelight was captured by Averill Harriman,
now the U.S. Ambassador in Moscow, who publicly condemned the Soviets
for their actions in eastern Eurasia. Vandenberg soon recanted. The
beginnings of an organized anti-Soviet crusade were underway, destined
to broaden into a hard line opposition to communists, socialists and
anyone critical of the American System, generally. Harriman,
Vandenberg, John Foster Dulles and Joseph Grew (now Acting Secretary
of State[115] ), along with Stettinius, formed the core group.
Roosevelt's ambassador to Moscow, Joseph E. Davies, tried to convince
Truman there was little to gain by public denunciation of the Soviets,
that a rapprochement was both desirable for postwar reconstruction and
in the best interests of both Americans and the Soviets. Harry
Hopkins was subsequently dispatched to Russia to meet with Stalin, to
apprise the Soviet dictator in candid fashion that Soviet actions were
generating in the U.S. a growing opposition to U.S. reliance on Soviet
promises or commitments. Hopkins returned optimistic that Stalin
understood and wanted to work with the U.S. on matters of mutual
concern. Yet to be decided upon was the role to be played by the
United Nations.
After two months of debate and compromise, the United Nations charter
was finally readied for widespread distribution. The U.S. delegates
had fought for and gained nominal references to the protection of certain
human rights. A permanent role was also created for non-governmental
groups. What they could not agree upon was the peaceful dismantling of
Old World colonialism and imperialism. As Clark Eichelberger, a key
member of the U.S. group, later wrote:
The Russians and some other delegations ... wished the
eventual objective of trusteeship to be independence. The British
and other colonial powers wished the objective to be
self-government; only the French wished to restore their ancient
colonial empire without change.[116]
As for the U.S., its military commanders were arguing their case for
maintaining bases on key islands taken from the Japanese in the
Pacific. Their Soviet counterparts in the Caucasus and the Balkans
viewed these occupied areas similarly and for much the same reasons.
Stalin and his successors, as well as Truman and his, were by acts of
commission and omission in the process of setting the stage for a
tremendous drain on financial reserves and other resources always
associated with empire. George Kennan, assigned to the U.S. embassy in
Moscow late in the Second World War, advised his superiors that only
by accepting Soviet domination over those territories then under
Soviet control was there a chance for better relations in the future.
"I saw no reason why we should go out of our way to make
things easier for the Russians in this area either by aid programs of
one sort or another or by sharing moral responsibility for what they
were doing,"[117] Kennan later wrote. Stalin was showing his
true colors and would, perhaps, invite disaster by attempting to
impose his despotic brand of state socialism on the ethnically and
religiously diverse peoples of eastern Eurasia. Supporting communist
regimes in these buffer territories would drain the Soviet Union of
scarce resources desperately needed at home, inevitably weakening
Stalin's grip over the Russian-dominated federation. Kennan's new
boss, Averill Harriman, understood that short of war little could be
done to get Stalin to pull back from eastern Europe. Additionally, a
very real risk existed that communism might eventually expand into the
rest of Europe. For the foreseeable future, Stalin had installed
regimes dominated by Soviet interests as a buffer against a resurgent
German state. Harriman's response to the broader Soviet threat was to
advocate isolation of the Soviets and use of U.S. military and
economic strength to finally build an Anglo-U.S. dominated alliance
with the remaining free peoples of Europe included. Each side
began to believe that time and internal corruptions would eventually
weaken the other side.
The last real opportunity for rapprochement occurred at the Potsdam
conference. In these meetings, held over the summer months of 1945,
the lines of demarcation were set down, and the destinies of millions
of people were bartered. A quarter of Germany's prewar territory was
placed under Soviet administration. Millions of Germans fled or were
uprooted and moved into the western sectors, where the Allies
introduced measures to decentralize how Germany would be governed when
military occupation finally ended. National Socialism and all its
institutions had to be dismantled, its military capability eliminated
and those Nazis not prosecuted for war crimes removed from office. At
the same time, General Lucius Clay (governor of the U.S. zone) and
British officials took steps to preserve enough of Germany's
productive capabilities to facilitate a rapid return to economic
self-sufficiency and political stability.
Despite growing opposition, the U.S. Congress passed and Truman
signed legislation expanding the lending authority of the
Export-Import Bank. Remarkably, the primary beneficiary was expected
to be the Soviet Union, earmarked to receive $1 billion of the bank's
$3.5 billion authorization. Among those already accepting the
inevitability of having to deal with an anti-democratic Soviet regime
for years to come were Henry Stimson and Dean Acheson, who argued long
and hard after Hiroshima and Nagasaki -- without success -- for an
international agreement to destroy existing nuclear bombs and prevent
their further construction by means of international inspection.
Others, including Secretary of State, James F. Byrnes (appointed in
late June to succeed Stettinius) were determined to use the U.S.
nuclear capability to political advantage with the Soviets. Indeed,
much had changed in the course of just a few months. Roosevelt was
dead, and key members of his administration were either gone or on
their way out of office. When Truman, Churchill and Stalin met in
Berlin during July, Churchill's own position and that of the
Conservatives in Britain hinged on elections scheduled that month; he
returned home just in time to be turned out of office by a Labour
Party victory. The British electorate were thankful to have had
Churchill as leader of their war government, but they now wanted an
expansion of the social democracy in return for their sacrifices and
did not trust Churchill to lead them in such a direction. The election
went badly, and Churchill behaved even worse; he asserted that the
Labour leaders would destroy the institution of private property,
dismantle the democracy and create their own version of the German
Gestapo. From London, journalist and radio commentator Edward R.
Murrow reported: "Seldom, if ever, has a war ended leaving
the victors with such a sense of uncertainty and fear, with such a
realization that the future is obscure."[118] Morrow sensed
correctly that a price would have to be paid by Europe's privileged to
avoid a full-fledged socialist program nationalizing natural
resources, communications, transportation systems and industrial
plant. Max Aitken (Lord Beaverbrook) warned as much on the eve of the
British elections:
Nationalisation or continued free enterprises are the
alternatives between which the electors will have to choose --
control for control's sake or its abolition at the earliest feasible
moment.[119]
Out of power, Churchill would later observe that what the British
people remembered most about the Conservatives was not Churchill's
leadership in war but "the Tory Party's association with mass
unemployment."[120] Britain under Labour, one must conclude,
took some rather strange twists and turns. Clement Attlee, called upon
to form the new government, brought in Ernest Bevin (who distrusted
the Soviets as much or more than did Churchill) as Foreign Secretary.
Keynes (who would not live through 1946) joined with British bankers
urging that the government solicit financial assistance from the U.S.,
whose negotiators demanded in return that Britain dismantle its
protectionist system of Imperial Preference, use the credit extended
only for the purchase of goods produced in the U.S. and implement the
agreements reached at Bretton Woods. The British gave in, and Attlee
then imposed on his people the type of austerity program the
International Monetary Fund (created at Bretton Woods) would
repeatedly apply to debt-ridden nations, with one difference -- the
imposition of a highly progressive tax system, the revenue from which
was used to create the British system of social welfare rather than
merely make interest payments to foreign creditors.
To be sure, the British government needed funds to begin rebuilding,
as did the Dutch, French, Italians and Germans. The Belgians and
Norwegians, on the other hand, had experienced little physical
destruction and were rapidly able to concentrate their efforts on
restoring peacetime production. Elsewhere across Europe, communication
systems had to be restored before goods could be efficiently produced
and brought to markets. Underground markets thrived in France and
Italy as prices skyrocketed. As currencies lost value, individual
savings disappeared and already weak economies came precariously close
to collapsing. The strongest of the colonial and imperial outposts of
Old World empire now made their moves for independence. Syria and
Lebanon severed their ties with France. Jordan gained independence
from Britain. Indonesia, liberated from Japanese occupation, fought
the Dutch for four years and finally won independence in 1949. Both
the Hindu majority and Moslem minority of India pressed Britain for
independence, which was finally granted in mid-1947. The quest for
sovereignty was also rapidly developing in the African lands under
European domination. Algerians unsuccessfully challenged French rule,
and, two years later the process was repeated in French-controlled
Madagascar.
Seemingly overnight, the many peoples of the world long forced to
live under foreign domination were overtaken by the prospect of
finally regaining their sovereignty. For the last two centuries
decisions by the European powers forced tribal peoples of distinct
ethnic, cultural and religious heritages to live under the same
regimes. Now, they would begin to compete with one another for
territorial control. At the same time, the aspirations of these groups
for sovereignty were threatened by the conflict between Soviet
expansionism, U.S. anti-communism and the influence of multinational
resource extracting corporations over the foreign policy decisions of
their governments. As the new world order emerged, intellectuals were
contemplating an entirely new system of world government that gave
almost no consideration to the rise of ethnic nationalism. World
government, in some form or other, was thought to be the only way to
avoid the next and assuredly most destructive global war ever
experienced by humankind. The transnationals were desperate to take
advantage of the temporary calm to achieve the basis for a lasting
peace. In an interview published in the November 1945 issue of Atlantic
Monthly, for example, Albert Einstein expressed what was on the
minds of many transnationals:
The release of atomic energy has not created a new
problem. It has merely made more urgent the necessity of solving an
existing one. One could say that it has affected us quantitatively,
not qualitatively. As long as there are sovereign nations possessing
great power, war is inevitable. This does not mean that one can know
when war will come but only that one is sure that it will come. This
was true even before the atomic bomb was made. What has changed is
the destructiveness of war.[121]
Einstein's particular solution was to recommend that the U.S.,
Britain and the Soviet Union join to form a constitutional world
government -- a development he feared less than he feared the
inevitability of the next global war. His views were paralleled by
economist Emery Reves, whose book The Anatomy of Peace had
been published earlier in 1945.[122] The idea of a global
confederation also had been advanced for some years by Mortimer J.
Adler. In 1944, Adler called for a world constitutional convention to
be held as soon as possible after the fighting ended. He believed that
a world faced with the destructive power of nuclear weapons would
quickly reconcile itself to the need for world government. In October,
Einstein joined with a long list of highly respected members of the
scientific and governmental communities in signing an open letter to
Americans published in The New York Times, the essence of
which was to warn against the inadequacies of the United Nations
charter. There were, however, numerous if not well-understood
obstacles attached to their alternative proposal. For one thing, peace
would last only under conditions where societies were cleansed of
privileges and monopolies. As Adler, for one, saw rather clearly, the
rising tide of struggles for sovereignty carried enormous risks and
would sometimes involve long conflicts and the shedding of blood:
Men everywhere (whether leaders or followers) must
exercise their freedom to participate in and accelerate all social,
economic, and political reforms, which aim to enact in practice the
democratic principles enshrined in constitutions.
Where constitutions exist, this can be accomplished by their
amendment or through due process of law. Where no constitutions
exist, the natural right of rebellion against every form of
injustice remains the inalienable prerogative of man. Justified
rebellions in any part of the world should enlist the sympathies,
and even the active support, of peace-seeking men elsewhere, whether
or not the declared policy of their own governments is that of
nonintervention.[123]
Unfortunately, the communitarian elements of tribal societies had
long ago been corrupted by the imposition of hierarchical regimes,
whether indigenous or imperial. Independence from foreign domination
carried with it no promise of participatory government, equality of
opportunity or other fundamental tenets of cooperative individualism.
As the Old World powers retreated, even cruder forms of tyranny
emerged to fill the void. In the communist-dominated societies,
Stalinism rivaled and in some ways exceeded Nazism as the epitome of a
police state wholly devoid of respect for the individual. In the
United States, elements of laissez-faire protectionism
survived the Second World War in conjunction with a permanent
expansion of direct and indirect government intervention in private
affairs; the result was a narrowing of the range of public policy
choices given consideration. Liberalism meant that the two primary
political parties would begin to look and sound very much alike
(usually at different times). War planning also catapulted scientific
research from the isolation of university laboratories into the realm
of large-scale corporate and government sponsorship. For the United
States, the overriding importance of containing the expansion of
communism and the power of the Soviet Union resulted in the harnessing
of control over both science and the economy, to be used as tools in
the ongoing struggle. Within the nation's leadership structure, there
now appeared with increasing regularity a disastrous knee-jerk defense
of virtually any form of despotism positioned as anti-communist.
When Adler wrote in 1944 and Einstein campaigned on behalf of world
government in 1945, relations between the United States and the Soviet
Union had not yet quite hardened into the cold war. As the year
progressed, Einstein, J. Robert Oppenheimer and other scientists were
joined by Walter Lippmann in collaboration on a book to alert the
public to the new political realities imposed by nuclear energy.
Soviet scientists were at the last minute also invited to contribute
essays but declined, indicating they were hampered by insufficient
technical information and (accurately enough) the short notice given.
Any pretense to cooperation between the wartime allies disintegrated
after the Soviets declined to become a member in the World Bank or to
contribute to the International Monetary Fund. Despite the fact that
the Soviet economy was in shambles and its treasury empty, the U.S.
refused to entertain any further loans to Stalin without certain
political guarantees in return. Around the world, other Marxist
movements and communist factions were growing independent of Soviet
interests or control.
In France, Italy, Greece, Yugoslavia and Albania, communists had
organized their own underground armies -- to fight against the Germans
and to set the stage for their own ascendancy to power. In Greece, it
took the commitment of British troops to dislodge them from the
countryside, allowing Greece to preserve its conservative traditional
institutions - with some prospect of incremental movement toward
social democracy. In the Balkans, communists led by Tito (Josip Broz)
emerged to form a coalition government dominated by Serb and Croat
communists. Communist partisans also took power in Albania after the
German withdrawal. On the strength of the Soviet military presence,
Stalin installed communist regimes in Rumania, Bulgaria and Hungary.
He also wanted Poland and Czechoslovakia, but moved more cautiously in
the face of U.S. and British pressure. The Poles, more than any other
population targeted by Stalin, had to be subdued by force. In France,
communists won the largest number of seats in the first postwar
elections, forcing de Gaulle to appoint five communists to posts as
ministers. In Italy, the communists and socialists awaited elections
scheduled for May of 1946. In February, Stalin delivered a speech in
Moscow in which he foresaw a renewal of warfare between the
non-communist nations. The Soviet Union, he declared, must remain
militarily prepared to resist any aggression; therefore, Stalin called
upon his people to make even greater sacrifices in a drive for
industrialization. A Western response was not long in coming. On March
5, 1946, Winston Churchill, speaking to an audience of Americans at
Westminster College in Fulton, Missouri, made a plea for a "fraternal
association of English-speaking peoples" and "mutual
security by the joint use of all Naval and Air Force bases in the
possession of either country all over the world." He ended
with a stern warning: "From Stettin on the Baltic to Trieste
on the Adriatic, an iron curtain has descended across the Continent."
Once again, the skies over much of the world were darkening.
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