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.


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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