National Security and the Loss of Innocence
Chapter 3 (Part 1 of 4) of the book
The Discovery of First Principles, Volume 3
Edward J. Dodson
We are fond of saying ... that
the United States is a government of laws, not men. However,
that isn't entirely correct. We are primarily a government of
laws, but it takes men to supply the "spirit" and "honor"
to make the laws work with precision and efficiency and
truth.[1] [Barry Goldwater]
|
The moment of glory for most of the military men and women who fought
the Second World War had come and gone. Now, the question was what
type of global order would emerge. The Italians, Germans, Japanese and
their allied states lay prostrate and under foreign military
occupation. Germany, Japan, Poland, Czechoslovakia, Ukraine, Georgia
and much of Russia were in ruin. Agricultural and industrial
production were at a standstill. Yet, hardly had the weapons of the
combatants fallen silent -- leaving the survival of tens of millions
of people in the balance -- than new struggles for geo-political power
erupted around the world. The occupation forces of the United States
and Britain suddenly found themselves charged with filling
administrative voids left by fallen governments, responsibilities that
challenged resources and organizational capabilities to their limit.
Douglas MacArthur, firmly in control of Japanese affairs, quickly
realized just how ill-prepared the victors were to act as enlightened
stewards of the peace. " If we do not now devise some greater
and more equitable system," he exclaimed, "Armageddon
will be at our door."[2] Albert Einstein, interviewed shortly
after the war, expressed a view shared by a sizable minority that "the
only salvation for civilization and the human race lies in the
creation of world government, with security of nations founded upon
law."[3] At the urging of Italian journalist Antonio Borgese,
the University of Chicago's Robert M. Hutchins agreed to chair a
Committee to Frame a World Constitution. Hutchins joined many others
who feared for the future, seeing very little in the new United
Nations that removed the basis for confrontation between
nation-states:
You can not at one and the same time join a world organization and
stay out of it. You can not have all the advantages of membership in a
world organization and none of the disadvantages. You can not have all
the attributes of sovereignty and give up some of them. ...
Equally pernicious is the doctrine that all right lies with the big
powers and that their security and spheres of influence are the
primary concern of the world. This is the surest foundation for the
next war. ...We cannot pretend to have a world society unless all the
members of it are equally subject to law and unless the society is
founded on justice, not to our allies alone, but also to our defeated
enemies. An unjust peace and an unjust world organization make the
next war inevitable.[4]
As the Allied forces closed in on Japan, Hutchins had enlisted many
of the top atomic scientists in an attempt to convince U.S. President
Harry S. Truman not to use the atom bomb on the Japanese people. James
Byrnes met with physicist Leo Szilard but would do nothing to
intervene. Byrnes reportedly told Szilard, "Congress would
never understand how you could appropriate and spend two billion
dollars and have nothing to show for it."[5] What a sad and
sorrowful commentary on the human condition. The response of the West
to the absence of moral values on the part of the Japanese militarists
was to demonstrate a willingness to be even less moral. Rather than
dropping the bomb offshore but close enough for the Japanese
leadership to see, the military and political leadership of the United
States elected to wipe out two entire population centers on the
Japanese mainland. With so much of the world lying in ruins, the only
questions now were what the new world order would look like and how
long it might survive.
For a glimpse into the future and the possibility of Armageddon just
over the horizon, the thoughtful had only to look at the Philippines.
The liberation of the Filipinos by U.S. troops had ironically
facilitated the reinstitution of prewar socio-political arrangements.
The hopes of millions of propertyless peasants for relief from
centuries of agrarian landlordism were thwarted, as well as the
efforts of those who held to democratic principles and pressed for
incremental reform. In the frenzy of anticommunist policy making, the
U.S. then adopted in the Philippines a pattern of assistance that had
the effect of exploiting the most vulnerable portion of the population
in favor of U.S. corporate business interests:
The Congress came up with a series of legislative acts
which, in effect, protected American agricultural interests through
quotas, protected American manufactured goods through tariff
agreements, and protected American investments through currency
controls and parity with Filipinos for U.S. citizens doing business
in the Philippines. ...The United States lost the opportunity for
leadership while it still held the reins, using its great power
instead to bully and blackmail the Filipinos into concessions to
special interests.[6]
Douglas MacArthur unwittingly served these interests by supporting
Manuel Roxas for the presidency of the Philippines Republic. Roxas had
collaborated with the Japanese in order to preserve the position of
the Filipinos privileged elite. After liberation, his agenda amounted
to defending the interests of the propertied and maintaining order.
William Manchester observes that "MacArthur -- with the full
approval of ... Truman -- was supporting the Manila elite as a
counterpoise to Filipino Marxists."[7] For the United States,
then, already there were contradictions in the execution of foreign
policy: sovereignty and the self-determination of peoples came to mean
independence from direction by the Soviet Union, at whatever cost to
individual liberty and freedom from oppression might be required.
A somewhat similar attitude eventually emerged toward Japan; however,
while under MacArthur's firm control Japanese socio-political
arrangements and institutions were subjected to a much more thorough
overhaul. The majority of Japanese seemed to be breathing a final,
exhausted sigh of relief, aware somehow that their island society was
under the protection of this new shogun in a U.S. military officer's
uniform. Almost nowhere else did the war's end have such a cleansing
result. The fate of European societies awaited the peace conference
and the test of will to be exercised by the victors. Not yet
recognized for its significance on the future was the army of European
Jewish refugees making their way to Palestine. All the ingredients
were there for a major power confrontation: control of the
Mediterranean, access to the oil and gas fields, the Zionist quest for
a permanent Jewish state and rising Arab nationalism. Within a few
weeks of Harry S. Truman taking over the U.S. Presidency, Secretary of
State Stettinius brought him up-to-date on the situation in the Middle
East:
It is very likely that efforts will be made by some of
the Zionist leaders to obtain from you at an early date some
commitments in favor of the Zionist program which is pressing for
unlimited Jewish immigration into Palestine and the establishment
there of a Jewish state. As you are aware, the Government and people
of the United States have every sympathy for the persecuted Jews of
Europe and are doing all in their power to relieve their suffering.
The question of Palestine is, however, a highly complex one and
involves questions which go far beyond the plight of the Jews in
Europe.
There is continual tenseness in the situation in the Near East,
largely as a result of the Palestine question, and as we have
interests in that area which are vital to the United States, we feel
that this whole subject is one that should be handled with the
greatest care and with a view to the long-range interests of the
country.[8]
Others in the State Department and the U.S. Congress as well as
transnationals outside the government were already having second
thoughts about what these vital interests were that Stettinius
alluded to. The Philippines was something of a special case because
the U.S. had formally guaranteed independence to the people of the
Philippines. Among the American population there was no support for a
prolonged and global U.S. presence. Even as the U.S. military prepared
for the assault on the Japanese mainland, the U.S. military apparatus
was already unraveling under public pressure for rapid demobilization.
Faced with these circumstances, the U.S. military could hardly be
relied upon to intervene in far-flung corners of the globe. All that
can be said in favor of the U.S. position is that none of the other
victorious European nations were in much of a position to take
advantage. What the Soviets did have were armies of occupation
sufficient in size to subdue any nationalistic uprisings (reasonably
certain that the U.S. would refrain from military intervention). Thus,
when Stettinius stepped down in favor of James F. Byrnes, the new U.S.
Secretary of State had very few cards to play when dispatched by
Truman to Paris and charged with reaching an accord with Bevin and
Molotov -- his British and Soviet counterparts.
Byrnes joined the Truman administration with expectations of laying
the final cornerstones for a brave new world of peoples ready to
embrace democratic principles and institutions.[9] He eventually came
to understand that almost none of the world's other public figures
shared this vision. After such a war, during which the losses in human
lives and physical capital had been so enormous, one had to have
possessed a deep commitment to transnational values not to focus on
making the defeated enemy pay for all that had occurred. Only a very
few had the insight and a position of influence at the conference
table.
With seeming reluctance but with its economic engine running at full
throttle, the United States now moved to the center of the core powers
among the surviving (or, more accurately, emerging) social
democracies. What neither Truman nor most of the key decision-makers
in the U.S. initially or fully understood was the depth to which the
Old World had been shaken. For the peoples of the Old World, there was
no clear blueprint developed for taking the next steps toward social
democracy, particularly in those nations where oppression and foreign
domination had been a way of life for centuries. That MacArthur was
able to partially accomplish such a transition in Japan was an
accident remarkable in history. To the good fortune of MacArthur and
the Japanese, Truman's attention was focused elsewhere. MacArthur was
able to take actions he deemed necessary to remove the last vestiges
of Japanese feudalism and replace them with socio-political
arrangements embracing a broader citizen participation in government.
MacArthur realized the uniqueness and historic importance of his role;
and, the Japanese people on the whole welcomed the opportunity
MacArthur presented to them. They adapted and recovered from the war's
destruction with remarkable resilience. Churchill, who by 1947 was at
least as concerned with communist expansion as by the troubles
plaguing Britain's empire, took notice of MacArthur's accomplishment:
In spite of what happened in the war, I have a regard
for the Japanese nation and have pondered upon their long, romantic
history. ...I am so glad you have been able to raise them up from
the pit into which they had been thrown by the military castes, who
only had a part of the facts before them. They ought to be our
friends in the future, and I feel this wish has been a key to many
of your important decisions.[10]
One might legitimately ask whether Churchill's admiration for General
MacArthur's independence of action would have been so readily extended
had MacArthur been a British commander rather than American. Truman
later wrote:
We wanted Japan controlled by an American commander,
acting on behalf of the Allies, who might co-ordinate their desires
through a conference or council which we proposed to call the Far
Eastern Advisory Commission.
I was determined that the Japanese occupation should not follow in
the footsteps of our German experience. I did not want divided
control or separate zones. I did not want to give the Russians an
opportunity to behave as they had in Germany and Austria. I wanted
the country administered in such a manner that it could be restored
to its place in the society of nations.[11]
Churchill would later point to MacArthur's accomplishments in Japan
(achieved, in part, by side-stepping British interference) as an
example of what postwar reconstruction might have looked like had
Eisenhower pursued a more aggressive military course in Europe. In any
event, the political drama unfolding across Europe was of a manner few
in the United States or Britain had foreseen. Those in the West were
getting their first real look into the true nature of Bolshevism under
the Stalinist regime.
In response to intense public pressure on their governments, British
and U.S. occupation forces were being withdrawn from European
territory despite the threat of Soviet military intervention in
virtually every country with which the Soviets shared a common border.
Stalin was determined to prevent the return to power of any government
that might someday align with a resurgent Germany. He also recognized
the significant challenge to his ambitions inherent in any extension
of U.S. economic and military power. "What Stalin was really
after," George Kennan wrote, "was the expulsion of
American influence form the Eurasian land mass generally, and its
replacement by that of his own regime."[121] As Kennan goes
on to conclude, Truman's decisions to strongly support postwar
reconstruction in Europe and to oppose communist expansion in Asia
created a dangerous situation because Stalin was becoming less and
less rational in his thinking and behavior.
Those in the U.S. and Britain who had distrusted Stalin and hated
communism as much or more than they had feared Hitler and fascism were
provided with strong ammunition for a full break with the Soviets. Few
were as yet cognizant of the deteriorating situation in China, where
communist forces were filling the void left by the departing Japanese
in northern China, Manchuria and the Korean peninsula. Chiang Kai-shek
desperately needed financial and military assistance from the United
States, but with so many reports of corruption coming from U.S.
military and government officials stationed in China, support for his
regime was fast disappearing. Moreover, U.S. military strength in the
Pacific had already fallen to the point that the remaining forces were
having enormous difficulty performing routine maintenance on equipment
or see to its transport for storage. By early 1946, in fact, nearly
seven million personnel had been discharged from the U.S. Army alone.
A RETURN TO NORMALCY
For most Americans, the consequences of having a large portion of the
world falling under communist domination had not yet entered into
their thoughts or concerns. Even Truman could devote only a small
portion of his energies to global issues. At the top of his list of
domestic problems was how to remove wage and price controls without an
automatic and devastating round of price increases. On the other side
of the economic equation, war contracts were being canceled and
millions of workers left idle, waiting for consumer demand to replace
government buying. The executives of the nation's major industries had
already embarked on a crusade to take back the gains made by workers
during the war years, and the resulting conflict brought on nationwide
strikes and walk outs. Truman realized that people whose jobs were
disappearing or whose incomes were falling were bound to take out
their frustrations on his administration and the Democratic Party. He
had to use -- or create -- government powers to soften the impact of
transition to a peacetime economy and somehow preserve something close
to full employment without unleashing a broad increase in prices for
consumer goods. The problems had already been anticipated by
Roosevelt's advisers. Early in 1945, Marriner Eccles raised the issues
with Fred Vinson, Roosevelt's price control czar:
Smart money is already going into capital assets for
speculative purposes and to take advantage of a loophole in the tax
structure. Blocked off by allocations, by rationing, and by price
controls applying to scarce materials and goods, these liquid funds,
including billions now invested in war bonds, could be used to
produce a disastrous inflation of capital values that are not now
subject to effective controls.[13]
Eccles later specifically (but mistakenly) described the dramatic
increases in the value of agricultural land and of locations for
housing and industrial development as the capital assets most
affected. The solution, he believed, was to introduce a high tax on
any gain from the sale of these assets. Inasmuch as capital goods are
almost always losing exchange value through depreciation or functional
obsolescence, the tax policy advanced by Eccles amounted to a heavy
tax on the selling price of natural resource-laden lands and locations
in the nation's cities and towns. Such a tax would have seriously
reduced the supply of the source of production, as owners not pressed
by cash flow needs would have simply pulled available landholdings off
the market or offer them for lease rather than for sale. To his
credit, however, Eccles realized that at the base of the upward
pressure on prices was the problem of intense land speculation. He
might have benefited by a visit with Harry Gunnison Brown, who in the
early postwar years was still doggedly lecturing his students and
professional colleagues on the principles of just and efficient
taxation. Many of Brown's essays were published in the American
Journal of Economics and Sociology, of which he was a member of
the Board of Editors. His writing was often hard-hitting and critical
of conventional wisdoms:
One of the most important illustrations of parasitism --
perhaps, in our society, the most important -- is to be found in the
private enjoyment of the rent (including royalties) of natural
resources and sites. Yet because of long habituation and, too, the
common and unanalytical use of the term "real estate" to
include both land and constructed capital such as buildings,
the beginning student of economics ordinarily, has not even thought
of such rent as involving parasitism or as essentially different
from any other property income. ...
Whatever may be said as to an appropriate remedy, I believe it can
be fairly insisted that a study of economics which claims any
semblance of completeness -- which claims to deal at all adequately
with the principles and significant phenomena of the subject -- but
which does not bring the student face to face with the
problem of parasitism, including in parasitism the institutional
land rent system to which he is habituated, is pretense and
sham.[14]
Brown's advice remained consistent. Society must capture the rental
value of natural resource-laden lands and locations by means of
taxation -- and free from confiscation the income from production and
commerce. There was more to be done, most significantly the
elimination of government's ability to arbitrarily expand the supply
of currency in circulation (i.e., to self-create credit) by simple
exchanges of government debt instruments for central bank notes -
which could be used to make purchases of goods and services and to pay
the salaries of government employees. However, as Harry Gunnison Brown
knew, absent fundamental reform in the manner by which governments
raised revenue no society could ever approach or sustain full
employment. Half measures even in the right direction would not, Brown
argued, do the job. "Taxation of future increases only, in
the value of land, is at best, and even apart from its administrative
complications and difficulties, a poor and inconsequential substitute
for the socialization of rent,"[15] he wrote in an
accompanying guide to his text on economics. Unfortunately, even among
his peers, few were listening. Most had become captivated by the
demand management strategies lifted from Keynes and expanded upon by
economists anxious to create a new orthodoxy.
The absence of attention given to Harry Gunnison Brown's objections
and proposals notwithstanding, the Congress of the United States
instinctively rejected adding a heavy capital gains tax at a time of
economic uncertainty. In fact, such was the rush to demobilize that
the wartime excess profits tax was repealed as well -- long before
industry returned to full production of peacetime goods. As one would
expect, prices began to rise and the effects of these increases
filtered throughout the economy. Eccles observed the general price
inflation with great concern. Perhaps he did not have a full
appreciation for the distinction between nature (as the source of
wealth) and capital goods (as wealth); he did have a fair grasp of the
nature of people:
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.[16]
Truman's response to these various pressures was to move as rapidly
as possible to allow the forces of demand and supply to find an
equilibrium price level. His advisers did what they could to bring
this off without creating severe economic destabilization, but their
efforts were feeble in the face of market pressures. It seems that not
a one amongst them understood that the so-called price mechanism
failed as a market clearing device when it came to natural
resource-laden land and locations. Once the excess profits tax was
removed, and in response to the extraordinarily low effective annual
tax applied to land (i.e., the percent of location rent collected for
societal purposes), another round of speculation in land was
triggered. A similar investment climate hit the equities markets.
Banks, flush with cash, were more than anxious to extend credit,
fueling the fires of speculation-driven inflation even more.
Harry Gunnison Brown, sounding very much like a member of the rational
expectationist school of economists, warned that faced with the
probability of a prolonged period of rising prices people would spend
rather than save. Doing so was only rational in an environment where
paper currency experienced a continuously diminishing purchasing
power. Those who had no real consumption needs (i.e., the truly
wealthy) now renewed their investment activity into natural
resource-laden lands or locations, where the prospects for gain over
the longer run were strong. They quickly surmised that the nation's
population was about to explode and that the demand for land on which
to construct entire new communities would soon escalate. Precious
metals, fine art work and anything considered a collectible -- with a
tendency to outpace the general decline in purchasing power -- might
also suffice as an investment. So long as consumers could absorb price
increases for the goods and services they needed and wanted, producers
could hold onto their profit margins and workers their jobs.
Unfortunately, household incomes in the first years after the war
ended did not keep pace, and markets were becoming saturated with
goods a dwindling number of people could pay for. "The right
solution," offered Harry Gunnison Brown, "would be
to carry out a consistently anti-monopoly policy and thereby to be
able to maintain both steadily active business and a stable general
level of prices."[17] Absent the policies Brown advocated,
the tenuous balance between those who controlled land, those who owned
little more than themselves, and the owners of capital intensive
industries moved dramatically in favor of the agrarian and industrial
landlords. Movement much further in this direction would bring
widespread unemployment and recession. Intervention was certainly
needed to mitigate and hopefully prevent recession. Instead of
structural reform, however, the only course that occurred to Truman
and his advisers was to embrace the redistributive social programs
long advanced by socialists.
Housing was an immediate problem of enormous proportions for the
United States. Late in 1945 Truman ordered the sale (at little more
than demolition cost) of some 320,000 temporary housing units built
for workers in war plants all across the nation. He called upon the
Congress to provide financing for the construction of five million
housing units, and $400 million was appropriated to subsidize the
production of scarce materials. Truman had asked for but did not get
housing price controls. Government-insured mortgage financing, with
little or no down payment required, so dramatically increased the
number of potential home buyers that the price of an average building
lot and house in 1950 doubled from that of 1940. Land was almost
universally under-assessed; thus, as market prices increased the
effective rate of taxation became almost nominal in many regions of
the country. Harry Gunnison Brown and other adherents to the
principles of political economy developed by Henry George understood
the nature of the problem but were without power or influence to
affect change. They could do little more than sound a distress signal
from the wilderness. Their principal communications vehicle was the
American Journal of Economics and Sociology:
Today [1946] an even larger proportion of the housing
demand is in the low-price range than was true in 1940. During the
1930-40 decade the aggregate supply of housing exceeded the demand
over most of the price range where new construction could seriously
compete with existing dwellings, but increase in effective demand,
that for which people could pay, was all concentrated at the lower
end of the price scale, hence a good replacement market could not
develop.
Since demand right along has exceeded supply insofar as cheap
housing was concerned, few buildings were demolished and many
socially undesirable dwellings had to provide shelter whether they
were fit for it or not. It was about in this situation that we
entered the war and, now that it is ended, it will be hopelessly
impossible for the housing industry soon to supply sufficient
dwellings to meet legitimate demands. ...
... Prices of existing structures have been marked up shockingly
and without severe control will go much higher still, simply because
it is physically impossible for us to construct houses as rapidly as
we can sell and occupy them for sometime to come. (Here we speak
only of structures; the speculative rise in urban land
values, a special obstacle to adequate housing, is in addition to
this.)[18]
The above analysis was offered by T. Swann Harding, a senior
information specialist with the U.S. Department of Agriculture, and
Will Lissner, executive editor of the American Journal of
Economics and Sociology. For his part, all Eccles could think of
was to sound a continuous warning against "unwarranted
expansions of bank credit"[19] while he fought the
Secretaries of the Treasury (Morganthau and then Vinson) to end the
practice of allowing banks to borrow from the Federal Reserve Banks at
below-market rates in order to purchase U.S. Government securities.
Nothing seemed to be working very well for Truman as he faced 1946.
He was still in the process of bringing together cabinet officers of
his own choosing and struggling to retain the support of fellow
Democrats in the Congress. The nation was also reacting to the first
signs of an awakened African-American minority, as many of this
group's younger men returned from service in the military unwilling to
suffer any longer the absence of equality of opportunity that
prevailed everywhere for people whose skin was the wrong color.
A large number of African-Americans had left the southern states for
wartime employment in the northern cities. They arrived into northern
cities ill-prepared to deal with an influx of poor people in need of
housing and schooling. Racial tensions hardened. Detroit had exploded
with racial violence during the war, and the return of millions of
young white men to the cities - competing for jobs held during the war
by minorities - heightened the fears of more race riots. Truman
responded by creating a committee to recommend methods of improving
the protections of civil rights for minorities. The committee's report
infuriated Southerners by calling for the use of Federal authority to
end segregation across the country. Truman had other worries as well.
With Americans focused on the difficult problem of assimilating
veterans and with industry concentrating on shifting to peacetime
production, the President feared the nation would foolishly ignore the
lessons of the last twenty-five odd years and turn inward. This he
could not permit to happen, regardless of the consequences to his own
political future. Yet, he was not yet convinced of the need to
preserve the nation's state of military preparedness at anything like
that required to fight the Second World War. What he championed was "a
system of universal training during peacetime which would provide
th[e] country with a well-trained and effectively organized citizen
reserve to reinforce the professional armed forces in times of danger…"[20]
The people and the Congress were not yet persuaded such a drastic
break with the nation's past was necessary or under any circumstances
a good thing.
Success in the foreign policy arena required that Truman operate in a
way Franklin Roosevelt never thought of. Roosevelt's reliance on
personal diplomacy had been foolish and egotistical, with results one
expects when sound analysis and broad expression of opinion is ignored
in favor of intuition. One consequence, writes George Kennan, was that
"[t]he virtual elimination of the State Department as a
factor in policy-making during the war, in favor of the military,
carried over into the postwar period insofar as the military still had
forces and occupational responsibilities abroad."[21] We can
recall that to Eisenhower his priorities and objectives were wholly
military, whereas those of his Soviet counterparts were always
inherently political. Stalin was, of course, more than willing to
accept the loss of hundreds of thousands of his troops and civilians
in the interest of achieving political objectives. Roosevelt and
Truman could not do so even had they been willing. For some time after
the war, Truman shared the desire of most Americans to bring the
troops home. George Kennan became a catalyst for a change in Truman's
thinking and directives. It was Kennan who warned that a similar
withdrawal of U.S. troops from Japan would open the door to communist
infiltration. In October of 1947 he detailed his concerns to George
Marshall, who had replaced James Byrnes as Secretary of State. Truman
was by now wholly committed to anticommunism and to an anti-Soviet
foreign policy, whatever the public rhetoric might be on particular
issues.
Kennan's early and correct insights into Soviet intentions had
enhanced his credibility and influence within the Administration, so
much so that in February of 1948 he was dispatched to Japan to meet
with MacArthur. He later recalled that their discussions centered on "the
economic rehabilitation of Japan and the restoration of her ability to
contribute constructively to the stability and prosperity of the Far
Eastern region."[22] As a matter of strategic concern, the
cornerstone of relations between the Americans and the Japanese was to
establish Japan as a bulwark against communism. MacArthur's efforts to
introduce democratic socio-political reforms -- some of which would
have moved Japan closer to cooperative individualism than existed even
the U.S. -- were subverted and sacrificed to anti-Soviet expediencies.
And, not coincidentally, MacArthur's efforts to break up the zaibatsu
(i.e., Japan's industrial cartels) were challenged by certain business
interests in the United States. Defending his program of reform,
MacArthur had written in late October of 1947 to Secretary of the
Army, Kenneth C. Royall:
Involved in the failure or success of this program is
the choice between a system of free private competitive enterprise
... [and] a system of private socialism largely owned and operated
by and for the benefit of only 10 family clans.[23]
Some months later, a letter from MacArthur on what he had learned
during his tenure a military governor of Japan was read to the entire
U.S. Senate:
In any evaluation of the economic potential here in
Japan it must be understood that the tearing down of the traditional
pyramid of economic power which has given only a few Japanese
families direct or indirect control over all commerce and industry,
all raw materials, all transportation, internal and external, and
all coal and other power resources, is the first essential step to
the establishment here of an economic system based upon free private
competitive enterprise which Japan has never known before. Even more
it is indispensable to the growth of democratic government and life,
as the abnormal economic system heretofore in existence can only
thrive if the people are held in poverty and slavery.
The Japanese people, you may be sure, fully understand the nature
of the forces which have so ruthlessly exploited them in the past.
...These things are so well understood by the Japanese people that
apart from our desire to reshape Japanese life toward a capitalistic
economy, if this concentration of economic power is not torn down
and redistributed peacefully and in due order under the occupation,
there is no slightest doubt that its cleansing will eventually occur
through a blood bath of revolutionary violence.[24]
What Japan really needed -- and what MacArthur clearly saw was needed
-- were firm institutional guarantees for individual liberty and an
economic system sanctioning a fair field with no favors;
instead, U.S. government representatives forged an alliance with the
tightly-knit group of Japanese industrial-landlords, allowing them to
continue to operate in quasi-monopolistic fashion behind protective
walls. Additionally, Japanese producers gained access to the vast U.S.
consumption economy. In return, Okinawa was maintained as a U.S.
military base from which Soviet moves could be effectively checked. At
the time, this seemed to U.S. policy makers as a key ingredient in
their strategy of containment. Virtually no one thought the Japanese
could one day compete with U.S. producers on anything but an
inconsequential scale. Nor did many U.S. policy makers give much
thought to the costs associated with maintaining a global military
presence.
There was another tragic outcome associated with the ascendancy of
Cold War anti-communist strategies. MacArthur's efforts to introduce a
program of land redistribution was curtailed. Although nearly two
million hectares of land was purchased and transferred to former
tenant-farmers, doubling the number of agricultural landowners, the
problems associated with Japan's system of land tenure were merely
mitigated and, therefore, allowed to remain as a weight on the
Japanese productive capacity. Urbanization and increasing population
would eventually combine with seriously flawed systems of land tenure
and taxation to drive up the price of land in Japan to astronomical
levels. As the quantity of good agricultural land provided by nature
was extremely limited in the first place, the land redistribution
program as carried out actually reduced Japan's food producing
capability. As observed by Peter Grilli and Yoshio Murakami, "[o]ne
unexpected consequence of the reform program [was] the high degree of
fractionalization of farmlands into small patches, separately owned
and farmed."[25] None of the efficiencies associated with the
introduction of modern farming equipment could be achieved in Japanese
agriculture. Moreover, because the Japanese government failed to
collect in taxation any of the annual rental value of these
agricultural lands, the new owners were able to hoard land and engage
in land speculation. Many became extremely wealthy as expanding
Japanese industries purchased their holdings for construction of
industrial plants and office centers. The number of Japanese who might
have acquired personal fortunes from the sale of land was essentially
fixed after 1947 when the land redistribution effort stalled. The
result of all this was that Japan became an export driven economy, its
people accepting enormous hardship and deprivation in the so-called
national interest. Its industrial-landlords, in the meantime,
consolidated and integrated their holdings and gradually improved the
quality of their production -- becoming immensely wealthy in the
process.
One must grant that from the vantage point of 1947, the future of the
Japanese was none too clear. George Kennan returned to the U.S.
greatly concerned that the Japanese government would be unable to cope
with a determined (and Soviet-backed) communist uprising. He urged
Marshall to direct MacArthur to strengthen the Japanese police force,
create a maritime defense system and reach an accord with the
zaibatsu. MacArthur intuitively had a better understanding of how
communism could be thwarted; the key was to open up Japanese
socio-political institutions to broad participation, promote the free
exchange of goods and ideas and prevent monopolies from retaining a
strangle hold over wealth production and distribution. MacArthur,
almost alone among those who held positions of power, seemed to grasp
as few others did, that monopoly was the real enemy of
social-democracy. Unfortunately, neither the Soviets nor the economic
nationalists and anti-communists in the U.S. gave MacArthur sufficient
time to carry out one of the most ambitious programs of
socio-political reform ever undertaken. Even so, MacArthur became the
primary author of a new Japanese constitution, drafted along
democratic lines (the then-existing constitution having been in effect
since the nineteenth century Meiji restoration). His sense of mission
in Japan was made crystal clear in a message he delivered in January
of 1946:
A New Year has come. With it, a new day dawns for Japan.
No longer is the future to be settled by the few. ...The removal of
this national enslavement means freedom for the people, but at the
same time it imposes on ... the individual [the] duty to think and
act on his own initiative. The masses of Japan now have the power to
govern and what is done must be done by themselves.[26]
If the fate of the Japanese people and their society was one of the
great uncertainties in the aftermath of the war, circumstances
elsewhere around the globe were even more chaotic. Once again, the
boundaries and frontiers of nation-states were altered by the outcome
of warfare. Soldiers of foreign armies occupied cities and towns
previously governed by autocrats of defeated would-be empires.
Millions of people were cast adrift, attempting to return to their
homelands or find refuge elsewhere. Some had been gone for five or six
years -- in exile, in hiding, or fighting any number of enemies as
part of some country's military effort. A much smaller elite had
traveled around the globe engaged in diplomacy, transnational
conferences, journalism or political agitation. Eurasians of every
ethnic group were among the millions of displaced persons, their
family members missing or dead, their towns and villages destroyed,
their populations disbursed or killed. None were more affected than
those Jews who had found refuge within or outside of Europe or
miraculously survived captivity. Millions of their brethren had been
murdered by fascist executioners or by others who harbored ancient
hatreds, prejudices and jealousies. The Second World War had unleashed
the worst that ethnic nationalism had to offer. Nowhere was the
slaughter greater than in Poland. Out of a population of over three
million Polish Jews in 1939, less than five percent survived the war.
Then, in the cruelest of fates, many who survived Nazi brutality later
met their deaths in other lands at the hands of other enemies, or at
sea while desperately trying to reach Palestine. Despite the risks,
several hundred thousand Eurasian Jews risked everything in the
migration. Abba Eban writes that "[a]n ardent urge overtook
these homeless survivors to emigrate to Palestine." What for
many had been a latent desire now became an imperative linked to
ethnic survival. "Hitler," adds Abba Eban, "had
made them nationalists."[27] Most had nowhere else to go or
resources to get them there.
Before long, a new nation-state would emerge out of this desperate
struggle by the Jewish people for a homeland, a sanctuary. Standing in
the way of their quest for sovereignty were the region's Arab
inhabitants as well as British authorities charged with preserving the
status quo. Clement Attlee had pledged the Labour Party's support for
open Jewish immigration to Palestine, but nothing had been done to
facilitate the absorption of such a large influx of people from all
over Europe. Arabs rejected a United Nations plan to partition
Palestine into separate Arab and Jewish states. Tensions between Jews,
Arabs and the British intensified until, finally, in mid-1946 fighting
broke out between the Jewish Haganah and the British occupation
forces. Unwilling and unable to commit the financial reserves and
troops necessary to maintain order, Churchill called for the United
Nations to release Britain from its responsibilities in Palestine. The
opportunity for negotiating anything approaching peaceful
establishment of a Jewish state had disappeared; desperate peoples,
fearful of one another and unable to reconcile themselves to a joined
future, hurled their fury at one another in a fight to the end. Jews
nominally now had space on the earth set aside for themselves alone.
They did not see it this way, but the leaders of the world's most
powerful nation-states had decided to grant them an enormous privilege
-- monopoly access to what nature provided in that one small part of
the globe. For the Jews and Arabs destined to fight for control of
Palestine, a critical mass was fast approaching. And yet, the fate of
the Jews was merely one of the high stakes games being played out
around the globe. As things turned out, there was to be no such thing
as normalcy where affairs of state were concerned. Only a very few
nation-states enjoyed the luxury of moving toward social democracy in
a relatively peaceful, incremental fashion.
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