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Empire Without Tears: America's Foreign Relations 1921-1933
Temple University Press
1987
4. The Response to Revolution and Instability
I
As the United States exerted its enormous economic power across the world and its statesmen joined those of other nations to work for an enduring peace, Americans in and out of government were forced to become more concerned about local affairs in distant lands. Instability threatened the world order in which American interests, economic and strategic, prospered. Revolution might destroy that order. In the 1920s, to an unprecedented extent, the United States became involved in efforts to cope with revolution and instability in Russia, China, Mexico, and Germany—as well as in its Caribbean protectorates.
Closest to home was the Mexican Revolution, with which successive governments in Washington had failed to come to terms since the dictatorship of Porfino Diaz had been overthrown in 1911. At the conclusion of the world war, tension between the United States and Mexico signaled the possibility of renewed armed conflict. Republican party leaders castigated Wilson for failing to protect the lives and property of U.S citizens south of the border. Secretary of State Robert Lansing maneuvered toward a break in relations with Mexico. Others in the United States recalled Mexico's flirtation with Germany in 1916 and 1917. Wilson recovered sufficiently from the stroke he suffered in September 1919 to avert a break or intervention, but the issues raised by the Mexican Revolution were not resolved and tensions persisted as the Harding administration took office.
In November 1920, after months of unrest and the assassination of Wilson's old antagonist, Venustiano Carranza, Alvaro Obregón was elected president of Mexico. In the contemporaneous election campaign in the United States, both major parties pledged to withhold recognition of a new Mexican government until agreement was reached on the claims of American citizens against Mexico. The outgoing Wilson administration did not extend recognition to Obregón.
Central to the dispute between the two countries was Article 27 of the Mexican Constitution of 1917, through which Mexico tried to reclaim land and resources sold to foreigners by Diaz. Specifically, Article 27 claimed that the land and subsoil rights of Mexico belonged to the Mexican people—at a time when more than 40 percent of the land and 60 percent of the oil industry was owned and controlled by citizens of the United States. Americans who had invested in Mexican lands were outraged by the threat to their investments, and the major oil companies could not tolerate a confiscatory policy that might be imitated by other underdeveloped countries. In addition, the Mexican constitution provided what the historian Charles C. Cumberland called the "most enlightened statement of labor protective principles in the world to that date," 1 perceived by American businessmen as a threat to their profits and the control of their enterprises in Mexico.
The Mexican government, challenging existing interpretations of international law and contracts, asserted the right of its people to their patrimony. The government of the United States supported the claims of its citizens. It was not a question of right and wrong, but of conflicting rights. Historically, conflicts of this sort are resolved in favor of the contestant able to muster superior force. In this instance, a weak nation was challenging its powerful neighbor—the very country which had emerged from the war as the most powerful nation in the world and which had demonstrated its willingness to use force against Mexico on several previous occasions. The odds for the achievement of Mexican aspirations were not good.
Harding and Hughes continued the policy of withholding recognition from the Obregón administration, a strategy which was not without effect. Obregón wanted recognition for the legitimacy it would bestow at home and abroad. Of greater importance was the fact that it would be extremely difficult to borrow needed capital from foreign investors without recognition. Borrowing in the absence of recognition by the United States was particularly difficult in the 1920s, when American investors were the only ones with capital to spare. Obregón was willing to give Harding and Hughes verbal assurances that his government would not enforce Article 27 stringently. They would not accept anything less than a treaty. Obregón could not offer a treaty if he hoped to retain power and some semblance of control over the revolution. There was no progress in 1921, no recognition, and no loan.
Prorecognition sentiment increased in the United States among businessmen eager to export goods to Mexico and even among the smaller oil companies more afraid of the giants in their own industry than of Mexican revolutionaries. Hughes was unyielding, depending for advice on Mexican affairs on Henry P. Fletcher, his undersecretary, and Matthew E. Hanna, chief of the Division of Mexican Affairs—both of whom had served under Wilson and were persuaded he had not been tough enough. Indeed, Fletcher had resigned as ambassador to Mexico when Wilson refused to increase pressure on Carranza. Fletcher and Hanna insisted that Obregón could not be trusted and that even if he could be, he could not deliver on his promise. The impasse continued on into 1922.
At this point, Thomas Lamont came to the rescue. Lamont's principal concern was the collection of Mexico's debt to American bondholders. Settlement of the debt question was improbable without a political settlement and the bondholders, unlike the oilmen and the mining interests, were indifferent to Article 27 and favored recognition. Nor did the bondholders worry at all about new taxes on American oil companies in Mexico when the income could be used by the Mexican government to pay off its debts. Lamont, as was so often the case in the 1920s, emerged as the leader of an International Committee of Bankers seeking to collect from Mexico. Deftly, he persuaded British bankers not to take advantage of American bankers' unwillingness to lend to Mexico: Anglo-American bankers presented a united front. A settlement of old debts would have to precede new loans. Lamont kept his friend Charles Evans Hughes informed of his activities and worked with Hughes's advisers to coordinate with government ends—insofar as they did not jeopardize his purposes.
Obregón wanted a new development loan which only Lamont could deliver. In June 1922 he directed his negotiator, Adolfo De Ia Huerta, to sign an agreement with Lamont. The Lamont-De Ia Huerta agreement contained a Mexican commitment to pay the full service on its debt after five years, in return for which Lamont was willing to waive overdue interest and acquiesce in the Mexican export tax on oil which the oilmen rather than the bankers would have to pay. There was no agreement on a new loan.
Brushing aside the outrage of the National Association for Protection of American Rights in Mexico and the American Association of Mexico (led by William Buckley, father of the Reagan era conservative columnist) demanding intervention against alleged Bolsheviks in Mexico, Lamont persuaded Hughes that Obregón was a man with whom the United States could deal. Hanna, handling Mexican affairs at the middle level of the Department of State, also was persuaded that Obregón had demonstrated reasonableness and durability. With Lamont as broker, the United States and Mexico agreed to hold bilateral talks in 1923. At the Bucareli Conference, the two sides reached a modus vivendi. The United States surrendered its insistence on a treaty and accepted the Doctrine of Positive Acts, an interpretation of Article 27 by the Mexican courts which excluded land which had been developed prior to the coming into force of the Constitution from its provision. The Mexicans compromised further by agreeing to provide compensation (in bonds rather than cash) for expropriated properties up to 1,775 hectares. Shortly thereafter, the new American president, Calvin Coolidge, extended recognition to the Obregón government. The crisis was over—although the oilmen remained angry and even Lamont, the hero of the story, was irritated by Mexico's subsequent inability to meet the repayment schedule as promised.
As usual in world affairs, the 1923 settlement between Mexico and the United States did not prove to be a permanent solution. A year later, Obregón's presidency ended and he was succeeded by Plutarco Elias Calles. Buckley and his cohorts renewed their cries of Bolshevism, and Calles provided grist for their mill with attacks on the Catholic Church and a new law limiting to fifty years possession of oil lands acquired before 1917. And once again J. P. Morgan and Company rode to the rescue.
Part of the problem was the American ambassador, James R. Sheffield, who, like so many diplomats, found his closest associates among the local aristocrats and shared their hostility to the revolution—and their contempt for Calles and the other "Indians." Sheffield was also responsive to demands of American oil companies and other Yankee capitalists whose interests were threatened by Calles's reforms. The new Secretary of State, Frank B. Kellogg, put his trust in Sheffield and declared that Mexico was on trial before the world. He challenged the Mexicans to fulfill their international obligations, specifically the Bucareli agreements. When Calles and the Mexican legislature disregarded warnings from Sheffield and Kellogg, calls for intervention resounded in Washington.
Throughout 1926, the threat of war between the United States and Mexico grew. Complicating relations was the situation in Nicaragua, where the United States was having trouble extricating itself from its protectorate (see below). Kellogg's staff perceived a Mexican plot to dominate Central America by backing the Nicaraguan rebels against the Washington-backed regime. The Mexicans, they argued, were trying to spread Bolshevism, and it was time to send in the U.S. Marines. The Marines landed in Nicaragua in December 1926 and Assistant Secretary of State Robert E. Olds orchestrated a campaign to prepare the American people for the use of force, if necessary, against Mexico. To a skeptical press, Olds outlined the justification for U.S. action in Central America. Kellogg followed in January 1927 by arguing before the Senate Committee on Foreign Relations that Russian agents had been active in Mexico and the Bolsheviks were attempting to undermine American influence in the region.
Few Americans maintained good contacts with the Calles government. Foremost among them was Lamont who, in December 1925, had succeeded in negotiating another debt settlement (the Lamont-Pani agreement) with Mexico. He and his partners lobbied vigorously with Coolidge and Kellogg, but Lamont had yet to win Kellogg's confidence. The Minnesota politician had never been comfortable with the Eastern establishment. As the war scare intensified, however, Lamont found formidable allies in the press, the unions, the peace movement, and the Senate. With Frederick Libby leading, the NCPW and the Federal Council of Churches of Christ in America mobilized public opinion against war with Mexico. In the Senate, Kellogg's prattle about Bolshevism was ridiculed. Unanimously, the Senate called for arbitration, for the peaceful solution of differences between Mexico and the United States.
Coolidge and Kellogg were forced to retreat. Lamont persuaded the president that a mutually beneficial agreement could be reached with Mexico, and Coolidge made the requisite conciliatory gestures in April. Lamont offered and Coolidge appointed another Morgan partner (and college friend of the president), Dwight Morrow, as ambassador to Mexico.
Morrow proved to be an extraordinarily good choice. He was exceptionally sensitive to Mexican aspirations and to the political requirements of Calles. Morrow and Calles developed an excellent personal relationship. Morrow's style, especially when contrasted with that of his predecessor, won friends and eased tensions. He arranged two successful goodwill tours, the first by his son-in-law, the heroic and world-popular aviator Charles Lindbergh, and the second by the humorist Will Rogers. In his hands, substantive issues disappeared almost as easily.
The central problem was still Article 27 of the Mexican Constitution. The American oil companies demanded a complete and permanent guarantee of all their holdings in Mexico. Calles—and all other Mexican leader—were committed to nationalization of subsoil rights. Threats were not likely to be productive, and the government of the United States refrained from any. On the other hand, Morrow persuaded Calles that an intractable stand contrary to what industrial creditor nations considered international law would hurt Mexico, would preclude the possibility of obtaining development loans. Calles would have to settle for a more gradualist, reformist approach. He would have to return to Obregón's doctrine of positive acts. Morrow pointed to a case pending in the Mexican courts that could be used to that end—and lo, the court reaffirmed the doctrine of positive acts. Calles then directed the legislature to amend the law to conform with the court ruling, and the problem disappeared. In March 1928, the U.S. Department of State announced that differences between the United States and Mexico no longer existed. The oil companies were not satisfied, but were denied the support from Washington they demanded. Even the oil companies, however, had avoided what Morrow knew they feared most: a precedent for unqualified nationalization of subsoil rights without compensation.
Morrow also helped Calles out of the mess into which the Mexican president's anticlericalism had gotten him. For three years the Mexican bishops had refused to say Mass and the Cristeros, supporters of the Church, were in armed rebellion. In the United States, publicists for the Catholic Church were among the leaders of those calling for intervention. Buckley was in the happy position of being able to fight simultaneously for his God and his profits. Morrow imported an American Catholic priest, John Burke, who was sympathetic to Calles's reforms and mediated between Calles and the Mexican bishops. Church affairs took a little longer to resolve than economic affairs, but by mid-1929 Morrow's efforts were blessed with a settlement: Mass could be heard again in Mexico and the Cristeros faded away.
Morrow's diplomacy was enormously successful. In an era in which public support for intervention had evaporated, in which gunboat diplomacy was anathema to the public and its elected representatives in Congress, diplomacy had to be cultivated. Lamont and Morrow, even when they worked at cross purposes, as was often the case when Lamont's concern for bondholder interests and Morrow's efforts to help Calles reorganize Mexican finances conflicted, served their country well. Friendly relations with Mexico were reestablished without sacrificing any important interest. Here was one thread woven into the mantle of Good Neighbor with which the United States sought to wrap its affairs with Latin America by the end of the 1920s.
The postwar milieu in which the Harding and Coolidge administrations addressed tensions arising out of the Mexican Revolution also affected the way in which the United States coped with its empire in the Caribbean. Anti-imperialist sentiment was strong among the intellectuals and among Americans caught up in the peace movement. The call for self-determination in Wilson's Fourteen Points tapped a spring of sentiment never far from the surface in American attitudes toward world affairs. If self-determination was good for former subjects of the Austrian, Ottoman, and Russian empires, why not for the peoples of Latin America? Countless books and articles critical of American imperialism in the Caribbean began to appear. Prewar muckraking techniques, so successful in bringing about domestic reforms, were applied to foreign policy issues. A public unwilling to countenance the use of force in world affairs was apprised of the activities of American Marines in the Dominican Republic, Haiti, and Nicaragua. As the influence of American business in Latin America grew, the American public was warned of the dangers of the flag following the dollar, of the marines protecting American investments. And in Congress there was considerable irritation, expressed most vehemently by Borah, at the cost of the empire and at what congressmen perceived as executive usurpation of their constitutional right to declare war whenever the president sent in the marines.
There had to be a change in American policy, given the prevailing climate of opinion. The Republican party recognized political reality in the campaign of 1920 by criticizing Wilson's occupation of the Dominican Republic and calling for the withdrawal of American forces from that benighted country. Moreover, the security concerns with which some American leaders had earlier justified "protectorates" in the Caribbean had vanished with the defeat of Germany in the world war. Businessmen were divided on this as on most foreign policy issues. There was no imperative for keeping American forces in place, and many good reasons for getting out. Hughes came to Washington in 1921 with a plan to withdraw from the Dominican Republic and the hope of reducing the American military presence in the Caribbean.
Hegemony in the Caribbean
Hughes and most other American leaders still viewed the Caribbean, of necessity, as an American lake. The United States could never tolerate the presence of another power in the region, although obviously a weakened British role would persist for the foreseeable future. But there was little interest in controlling any of the Latin American countries. The task was to devise a policy that would facilitate native protection of American citizens and their investments and a degree of order that would preclude an excuse for intervention by any foreign country. There was little in the American experience to suggest that American intervention was an assurance of stability; nonetheless it was difficult to pass the lessons learned by one administration on to the next.
In 1924, the U.S. Marines were finally withdrawn from the Dominican Republic, and political power shifted from the United States Department of the Navy to Dominican leaders. But if the American presence was less obvious, it was still there as the United States retained significant control of Dominican finances by continuing the customs receivership it had established when Teddy Roosevelt decided to intervene nearly twenty years before. When stability came to the Dominican Republic it was provided by Rafael Trujillo, one of the more vicious dictators of recent memory. How Dominicans treated each other was quite another question, however. The government of the United States had proved itself responsive to the will of the American people and begun its retreat from imperialism in the Caribbean.
Nicaragua posed a much more complicated set of problems, from which the United States extracted itself only with the greatest difficulty. It provided the quintessential example of the perils of intervention. No statesman cognizant of the events there would ever send American troops into another nation's civil war without raising serious questions as to his sanity.
In August 1925 the government of the United States, consistent with its plan for liquidating the American military presence in Caribbean countries, brought the marines home from Nicaragua. They had hardly disembarked when the newly elected Nicaraguan government was overthrown by a coup and a bloody civil war ensued. By May 1926 the marines had started to trickle back into Nicaragua, and a major force was landed in December. Mexico, considered by some American officials to be an agent of Soviet Russia in the New World, supported one side and the United States the other. Apprehensive of the administration's intentions, fearful of a major war in Central America, perhaps even an invasion of Mexico, public opposition mounted. Despite tough words by President Coolidge, it was clear that the support necessary to sustain military intervention did not exist in the United States. The president called upon Henry L. Stimson, a lawyer with a distinguished career in public service, to devise a settlement in Nicaragua.
The United States could not impose upon Nicaragua a government of American choice. To attempt to do so would have required the U.S. Marines to destroy opposition forces and to remain in Nicaragua as an army of occupation. It would have meant mounting American casualties, a price few Americans were willing to pay to maintain the empire. The United States might abandon the Nicaraguan political leaders they preferred and let Nicaraguan civil strife be resolved by Nicaraguans. That course, however sensible, was deemed inconceivable in Washington—in large part because of Mexican support for the opposition and fear of surrendering American influence in Central America. Stimson therefore had to find a way to end the civil strife and bring into existence a government satisfactory to the United States, able to sustain itself and protect American interests, without the presence of U.S. Marines.
Stimson quickly concluded that past American policy had failed, that in the absence of free elections Nicaraguans opposed to the existing government could effect change only through revolution, which the United States tried to prevent. As soon as the U.S. forces left, the revolutionary cycle would begin anew. Stimson based his approach on educating the Nicaraguans to appreciate the value of free elections. The U.S. Marines would maintain order only until a local constabulary could be trained to take over.
The task of preparing and supervising Nicaraguan elections proved horrendous, requiring large numbers of American administrators and military personnel to involve themselves in a wide range of complex local affairs. The mission was costly and unpopular in the United States. Although elections supervised by the United States in 1928, 1930, and 1932 were considered fair by both major parties, because of a split within the Liberal party, internal peace did not come. One Liberal general, Anastasio Somoza, became commander of the constabulary, the Guardia Nacional. Another, Cesar Augusto Sandino, refused to accept the agreement Stimson negotiated in 1928, took to the hills with his men, and vowed to rid Nicaragua of Yankee invaders. Somoza became the hated dictator whose family maintained order in Nicaragua for more than forty years. Sandino, an American-killing bandit to the U.S. government, became a folk hero not only in Nicaragua, but in much of Latin America, his legend enhanced by his ultimate betrayal and murder at Somoza's direction. The U.S. Marines, who chased him for years, came close enough to be ambushed, but their quarry always slipped away. It was January 1933 before the last of the marines came home.
Stimson, to be sure, learned a valuable lesson, which he took with him to Washington when he became secretary of state in the Hoover administration. It was relatively easy to involve American forces in the civil strife of another country-and virtually impossible to create in that other country conditions under which the troops could be withdrawn with a sense of mission accomplished. American ideas about the value of free elections for Nicaragua or any other country were doubtless salutary, but if important sectors in the other country chose other means, the price of imposing the American solution was much too high. Never again—at least not for anyone aware of the American experience in Nicaragua in the 1920s.
That experience in Nicaragua reinforced the reluctance of the United States to use force anywhere in the empire, even in Latin America, where the public historically had been less skittish. There were few places left where 100 U.S. Marines could pacify the populace without incurring casualties or requiring reinforcements. An aroused public, quickly mobilized by the organized peace movement, would not tolerate presidential warmaking. The dominion of the United States in the Caribbean would have to be sustained by persuasion, by political means, by diplomacy.
The American government was not willing to deny itself the right to intervene in Latin American countries to protect the lives of its citizens or at some distant time when the security of the United States might be threatened. On the other hand, it was apparent that the wellspring of anti-Americanism that Sandino had tapped had to be diverted. In the United States, the Monroe Doctrine was viewed as a declaration of independence from Europe, a warning to the Old World to keep hands off the New. In Latin America, it was viewed as Washington's declaration that the Western Hemisphere was the private preserve of the United States, its sphere of influence, in which it could do as it pleased. Hughes, Kellogg, Stimson, and the presidents they served all came to understand the need to divest the Monroe Doctrine of the blatantly imperialist overtones that Theodore Roosevelt had contributed in 1904 when his notorious corollary claimed for the United States the right to exercise police power to prevent—"wrong-doing" in the hemisphere.
In 1928 the undersecretary of state, J. Reuben Clark, prepared a long memorandum, published in 1930, in which he denied that the right claimed in the Roosevelt Corollary derived from the Monroe Doctrine. More significantly, neither Clark nor his superiors was prepared to renounce the right to intervene—and Latin America would settle for nothing less from the United States. In the 1920s, the government of the United States perceived itself to be retreating from the imperialism of Roosevelt, Taft, and Wilson in the Caribbean, but the rest of the world was less convinced. An American military presence remained in Cuba, Haiti, and Panama, and American business interests grew throughout the region. Puerto Rico was still an American possession with no prospect of statehood. Nonetheless, sensitivity to Latin American fears and aspirations had penetrated the thinking of elites in the United States. Washington's policymakers were increasingly willing to meet with their Latin American counterparts to negotiate the terms under which the United States might be both hegemon and Good Neighbor.
II
Revolution in China ran roughly parallel to revolution in Mexico. The Ch'ing dynasty had collapsed in 1911, only months after Diaz had fallen. Both revolutions swept forward on promises of social reform that threatened the interests and privileges of foreigners. Like most revolutions, success against the initial target was followed by factionalism among the revolutionaries and the emergence of strongmen. In striking contrast to his policy of "watchful waiting" in Mexico, Woodrow Wilson had moved quickly to recognize the Peking government of Yuan Shih-k'ai—despite the fact that Yuan, like his Mexican counterpart, was responsible for the murder of his principal rival.
Order was not maintained long during the first decade of the Republic of China. Yuan became its first president in January 1912, but was never committed to the reformist principles of Sun Yat-sen's Kuomintang (Nationalist) party, or to a republican form of government. Within a few years of the inauguration of his government he had dissolved the parliament, used force to disperse the opposition, and attempted unsuccessfully to reestablish imperial rule, with himself as emperor. His death in 1916 removed the last semblance of national unity, civil strife intensified, and various regions of China came under the control of local warlords. When the Harding administration arrived in Washington, the Peking government controlled only parts of North China, and changes in its leadership, reflecting shifting coalitions anong northern warlords, resembled a game of musical chairs.
Throughout the chaos in China there was, however, one unifying theme. Chinese intellectuals—broadly defined to include everyone with a high school education—were intensely anti-imperialist, desperately eager to rid their country of the hated "unequal treaties." Beginning with the Treaty of Nanking (1842) after their defeat in the Opium War, the Chinese had been forced to sign a series of treaties conceding special privileges to foreigners that infringed on China's sovereignty. The Chinese had lost control of their tariff, were forced to exempt foreigners from their legal system and to tolerate foreign military forces in their cities and territorial waters. Parts of China were under the de facto control of other nations, in so-called spheres of influence. The rich mineral resources of Manchuria were exploited by the Russians and the Japanese—and denied to the Chinese. Demand for the revision of the unequal treaties became the symbol of Chinese national aspirations. But China's disunity underscored its weakness, and the Great Powers ignored Chinese demands.
Signs of the ability of nationalist intellectuals to mobilize mass support had appeared in 1905 in an anti-American boycott in response to mistreatment of Chinese in the United States and the discriminatory exclusion of Chinese who wished to go there. Far more impressive and enduring were the results of the May Fourth Movement, triggered in 1919 by news that Chinese diplomats at the Paris Peace Conference had failed to regain control of the former German sphere of influence in Shantung. Hundreds of thousands of students took to the streets of Peking and other Chinese cities to protest Japanese imperialism and the impotence of their government. After the initial storm subsided, Chinese intellectuals concluded that nothing short of the transformation of Chinese civilization was necessary: The old order would have to be destroyed before China could become a modern nation-state able to command respect from the world. Widespread demands for social and intellectual change brought a new responsiveness to Western ideas, including Marxism and Leninism, and also the ideas of the great American philosopher John Dewey, who was lecturing at Peking University when the May Fourth Movement erupted.
In the realm of ideas, major transformations usually occur glacially. Change began in Peking, where intellectual leaders like Ch'en Tu-hsiu and Hu Shih pressed for educational reform and social change: educate the masses, simplify the language, elevate women, workers, peasants. No longer would men like Ch'en and Hu allow Chinese to entertain the conceit that they could attain Western wealth and power by copying Western technology while preserving Chinese traditions. "Westernization" was no longer an unacceptable price for modernization. Slowly these new approaches pressed against walls of tradition in the universities and in the cities, hardly touching the larger rural society. In the political realm, the May Fourth Movement seemed to accomplish little other than the intimidation of the more blatantly pro-Japanese leaders. Disunity persisted, north against south, one southern warlord against another, one northern warlord against another. The great opportunity offered by the Washington Conference presented politically mobile Chinese with another round of frustration. Chinese political factions could not even unite long enough to send a delegation all could support. How could China get other nations to take its demands seriously?
Gradually, Sun Yat-sen and the Kuomintang, operating out of Canton, provided a rallying point. The American government had long since lost interest in Sun, who was generally viewed in Washington as an irresponsible visionary, an inveterate conspirator incapable of the kind of leadership China required. Assistance from the Japanese, whom Sun had once courted, was no longer feasible. If, as seemed likely, foreign assistance would be necessary for Sun's new dream of uniting China by force, to whom could he turn?
Once, years before, Sun had written to congratulate Lenin on his successful revolution in Russia. Now, as Sun and other Chinese leaders despaired, Soviet Russia came to their aid. Marxism was little understood or appreciated in China in the early 1920s, but Lenin's theories of imperialism and the anti-imperialist rhetoric of Soviet leaders proved enormously alluring. Ch'en Tu-hsiu went on from the thought of John Dewey and Bertrand Russell to Marxism-Leninism, helping to create and initially leading the Chinese Communist party. Soviet agents combed China looking for potential allies, and found Sun Yat-sen and the Kuomintang receptive.
Conceding that China was not ripe for communism, Soviet Russia agreed to help Sun toward a revolution of the "national bourgeoisie," as Sun's followers were designated by Moscow. In 1923 Soviet agents helped him to reorganize the Kuomintang from a party designed to function in a parliamentary government to a conspiratorial party along the lines of the Soviet Communist party, designed to seize and control power in a one-party state. They persuaded Sun to ally with the infant Chinese Communist party as well as with Soviet Russia. Sun's military aide, Chiang Kai-shek, was sent to Moscow to study the organization of the Red Army, and the Comintern sent a brilliant political organizer, Michael Borodin, to Canton. Chiang returned to become superintendent of the Whampoa Military Academy, where he was assisted ably in the training of officers by Chou En-lai, a young Communist intellectual responsible for political indoctrination. Borodin served as Sun's adviser and also established a school for training political cadres in the art of mobilizing the masses. In addition, in 1924 the Russians signed a convention with the Peking government surrendering some of the privileges of the unequal treaties—and further ingratiating themselves with Chinese patriots.
To all these developments the American government responded with indifference at best and occasional hostility. As Sun prepared to march north, the United States and the other Washington Conference signatories clung to the hated symbols of imperialism, the privileges exacted from nineteenth-century China by force. When Sun attempted to seize the customs surplus at Canton, to deny it to the Peking government which had only a nominal presence there, the powers, including the United States, sent warships to warn him away. In the United States there was little awareness of what was going on in China—and probably even less interest.
Hughes and his adviser on Chinese affairs, J. V. A. Mac-Murray, maintained toward China the same legalistic insistence on order and respect for international obligation that had handicapped dealings between the United States and Mexico 5 Obregón—an attitude that was, in effect, counterrevolutionary. In 1923 and 1924 there was no compelling reason for the United States to modify its policy. There was little public sense of Americans enjoying imperial privilege in China, or that these privileges might prove costly, in blood as well as treasure, to retain.
Early in 1924 the American minister to China, Jacob Gould Schurman, wrote to the new president, Calvin Coolidge, alerting him to Sun's resurgence. He was critical of Sun, whom he described as a cross between "William Jennings Bryan and a red-hot East-side socialist in New York," 2 but warned Coolidge that Sun would have to be reckoned with. Schurman was mostly bemused by reports that Soviet influence was growing and that Sun was becoming a Bolshevik. But one young American diplomat in Canton, J. C. Huston, the first American to undertake a serious study of the Chinese Communist movement, argued that Soviet tactics in East Asia might succeed:
Soviet propaganda was stressing anti-imperialism, blaming all the ills of the region on foreign imperialists, a tune that resonated well with the resentments of Chinese intellectuals. Sun died early in 1925. Nothing happened.
The explosion came in May. On May 30, 1925, an incident arising out of a strike against Japanese-owned textile mills in Shanghai led to a spontaneous outburst of anti-imperialist sentiment that raged through China, reaching the countryside as well as the cities, affecting peasants and workers as well as students. Unlike 1919, in 1925 there were trained agitators serving the Kuomintang-Communist alliance available to fan the flames and to give focus to Chinese demands. China would settle for nothing less than treaty revision, an end to the unequal treaties, to the presence of foreign troops on Chinese soil and foreign gunboats in Chinese waters. Stubbornly, Mac-Murray argued against concessions in the face of threats. To yield, he insisted, would encourage irresponsible actions by Chinese infected with "various Bolshevik and juvenile nationalistic influences." 3
To reject Chinese demands as MacMurray advised, to respond to the calls of the American business community in Shanghai for a show of force, was not an option Kellogg and Coolidge could long contemplate. Neither Congress nor public opinion would tolerate old-fashioned gunboat diplomacy, as events in Central America and Mexico were revealing. Indeed, there had been calls for the withdrawal of American gunboats and troops from China earlier in the decade, and it would require only the use of them to raise another such outcry. The American people were in no mood to use force against an underdeveloped country so that a few American businessmen and missionaries might enjoy profit and privilege abroad. Once again, the scene was set for a retreat from imperialism.
The principal remaining problem was to find a government to which the United States could yield. Chiang's forces began the Northern Expedition in July 1926. In the fall and winter they defeated warlord forces in the south and in the Yangtze Valley. By December the British indicated their willingness to revise the unequal treaties. Kellogg followed suit in January 1927. In February, a few weeks after the unanimous Senate resolution urging the peaceful settlement of Mexican-American differences, the U.S. House of Representatives overwhelmingly (226 to 43) passed the Porter Resolution. It called for negotiations to grant the Chinese the treaty revisions they demanded. There would be no war to retain the privileges of empire, no casualties, no tears. What could be retained through negotiation would be kept; what had to be fought for would be abandoned.
Preoccupation with the military campaign and internal struggles for control of the revolution delayed negotiations. In March, a Communist-led uprising facilitated Chiang's conquest of Shanghai. A few days later, Kuomintang troops occupied Nanking. Shanghai, with its large international settlement, had been taken without serious incident. In Nanking, however, Kuomintang troops attacked foreigners and foreign property, including the consulates of Great Britain, Japan, and the United States. They murdered several foreigners, among them the American vice-president of Nanking University. The looting and killing did not stop until the attackers were bombarded by American and British gunboats. Suddenly MacMurray's approach seemed less unattractive and Kellogg's policy of attempting to befriend Chinese nationalism was in jeopardy.
The events that followed were extraordinarily confusing to the men in Washington. Rumors abounded that the incidents in Nanking had been a deliberate effort by unknown forces to embarrass Chiang. A great power struggle exploded within the Kuomintang in April. Nonetheless, the three major powers, Great Britain, Japan, and the United States, held Chiang responsible and demanded that he pay reparations, punish those guilty of committing the outrages, apologize, and give assurances there would be no further incidents. American and Japanese leaders restrained the British from submitting an even harsher document. No sooner had Chiang received these demands than he ordered the arrest and massacre of Communists and labor leaders in Shanghai. Ignoring the powers, Chiang chose to consolidate his control of the revolution, eliminating the Communists and Soviet influence before Stalin could eliminate him.
By summer the White Terror had swept Kuomintang-controlled China. The surviving Communists had fled to the hills; Borodin and the rest of the Soviet advisers, accompanied by members of the Kuomintang Left, had fled the country. Mac-Murray was instructed to negotiate with Chiang's representatives, but factional struggles within the Kuomintang continued to disrupt the Nanking government. It was March 1928, a year after the Nanking incident, before Chiang was ready to negotiate a settlement.
Chiang accepted American terms; MacMurray grudgingly expressed regret for the naval bombardment in which American gunboats had participated; and the Nanking incident was resolved. Still, the United States withheld recognition, awaiting the outcome of the Northern Expedition. Could Chiang's forces oust the powerful Japanese-backed warlord, Chang Tso-lin, from Peking and the Northeast?
The Japanese Army preempted the battle between the two Chinese armies. In May, Japanese forces in Shantung attacked Kuomintang troops in Shantung, undermining the efforts of Japanese statesmen who saw Chiang as a moderate nationalist and bulwark against communism in Asia. When the government in Tokyo tried to retrieve the situation by ordering Chang Tso-lin to return to Manchuria and concede to the Kuomintang all of China south of the Great Wall, the Japanese Army assassinated Chang in an abortive effort to seize direct control of Manchuria. In the ensuing confusion Sino-Japanese understanding proved impossible, and the Chinese were forced to turn to the United States as the most benign of the imperialists.
Without illusions about Kuomintang unity or the real as opposed t6 nominal authority of Chiang's government, Kellogg chose to interpret the successful conclusion of the Northern Expedition as evidence that the Kuomintang had established itself as the de facto government of all China. Coolidge declared the Chinese Revolution to be a worthy imitation of the American Revolution, an entirely praiseworthy effort by the Chinese to unite their country and free it from foreign control—and both sides were ready to negotiate treaty revision. In July 1928 the United States and China signed a new treaty granting tariff autonomy to China and containing a mutual guarantee of most-favored-nation treatment. The signing of the treaty constituted recognition of Chiang's government and reestablished the position of the United States as China's principal foreign friend.
Americans had enjoyed imperial privileges in China since the mid-nineteenth century. They had worked in collusion with more aggressive imperial powers to obtain these privileges through the creation of the treaty system, and few were eager to surrender them. Although many missionaries believed that their cause was best served by capitulating to Chinese nationalist aspirations, few businessmen were ready to subject themselves to the vagaries of Chinese law and administration. The government of the United States was slow to recognize the imperatives of the situation, slow to respond to Chinese nationalism. When the violence in China finally impinged on the consciousness of American leaders, they understood almost immediately that the United States would have to yield. The ability of the Kuomintang and the Communists to mobilize the masses meant that retention of the privileges of empire would require the sustained use of force by the Great Powers in China, would mean American casualties—and that was not a price the American people or their leaders were willing to pay. Instead they retreated, sought rapprochement with Kuomintang China, and viewed themselves once more as "champions of the sovereign rights of China."
III
Even more remote from immediate American interests was the revolution in Russia. Initially, when the tsar's government was overthrown in March 1917, Wilson and his advisers were pleased, sympathetic to the revolutionaries. Wilson might have seen parallels with his own career and thinking in those of Paul Miliukov, the professorial intellectual who led the Kadet party in the Provisional Government. But when the Bolsheviks seized power in November, the response in Washington was very different. The appeal of Lenin and his follow ers to the masses, over the heads of their leaders, was threaten mg, as were Bolshevik tenets on property. Lenin's determination to withdraw Russia from the war, to sign a separate peace with Germany, further outraged Wilson as well as Russia's allies in Europe. Wilson perceived Lenin as more despicable than Huerta—and far more dangerous.
Among Wilson's advisers there were men like Secretary of State Robert Lansing who were eager to intervene in Russia to destroy the Bolshevik regime. Wilson was not, but he was probably second to none in his mistrust of the Bolsheviks. He never conceded the legitimacy of Lenin's government and would not extend recognition. He sent American troops on expeditions to northern Russia, where they remained until June 1919, and to Siberia, where they remained until April 1920. His reasons were complex and American forces were instructed not to interfere in the Russian civil war, but their presence and activities on Russian soil worked to the disad vantage of the Bolsheviks. Wilson understood the effect of the American military presence—and was not much troubled.
Despite the hostility of its erstwhile allies, the Bolshevik regime survived and sought to establish relations with the Great Powers. Lenin was eager for recognition, eager to come to terms with the United States. Like the Chinese, the new Russian leaders saw the remote Americans as the least dangerous of the imperialist powers. They were prepared to offer Americans economic concessions in return for development assistance and political acceptance. Wilson was offended by the idea, openly promoted by Lenin, that American goodwill could be bought. To the end of Wilson's tenure, recognition of the Bolshevik regime was withheld and contacts remained minimal. Wilson's policy toward Russia was not contested in the election of 1920. Political elites and businessmen were near unanimity in despising the Bolsheviks and opposing recognition of their government.
In July 1920 the Wilson administration finally removed wartime restrictions on trade with Russia, but imposed new obstacles, such as a prohibition against long-term credits, that left trade with the Bolsheviks more difficult than that with more favored nations. In August Wilson's secretary of state spelled out the ideological basis for nonrecognition, intending to bind successor administrations until the Soviet state changed its stripes. First, the Bolsheviks had come to power by force and were therefore not representative of the Russian people. Second, having refused to repay loans to the Provisional Government, the Bolsheviks could not be trusted to meet their international obligations. Third, Bolshevik efforts to stir revolution worldwide were evidence of their hostility to all existing governments.
Soviet leaders gave up hope of a breakthrough while Wilson remained in the White House, but were optimistic about doing business with the incoming Harding administration. Within the limits of their understanding of American political culture, they hoped the Republicans would be more responsive to economic inducement. Vaguely, as always, Harding seemed interested. A number of prominent Republicans, including Borah, vocal as always, favored recognition; but Hughes did not—and he prevailed.
Hughes would not ignore Soviet repudiation of the obligations of its predecessors. The U.S. government had extended a total of $187 million in credits to the Provisional Government. American citizens had purchased approximately $107 million in tsarist bonds. All these debts were brushed aside by Moscow. Moreover, the Soviet government confiscated American-owned property valued at nearly $350 million. And Hughes would not tolerate Soviet support for an American Communist party dedicated to the overthrow of the government of the United States. If American protests were to no avail, then the government of the United States would use the only weapons available to it: nonrecognition and discriminatory trade practices. Soviet expressions of bewilderment at the apparent hostility of the American government were ingenuous, at best.
For the United States in the 1920s, the revolution in Russia was of little relevance. As Harding and Hughes took hold in Washington, the Soviets posed no threat to the security of the United States, and they were of minimal economic importance. Despite the Red Scare in the closing months of the Wilson administration, despite the antiradicalism widespread in the country, American Communists frightened few. Their presence and the existence of the Soviet regime might serve as useful instruments for reactionary forces in American society, but there was little genuine concern—and thus little interest in Soviet Russia. There were no compelling forces for change in the policy Harding had inherited from Wilson, and that policy was not changed.
Still, the Soviet leaders reached out to American businessmen, hoping to exploit the profit motive for first political and then development purposes. In the course of the 1920s they had considerable success, especially in obtaining American financing and technology for Russian modernization. The persistent inability of the American government to harness foreign economic policy to political policy worked to Soviet advantage.
Two early concessions granted by the Soviets to Americans are interesting because of their obvious political motivation. Exploitation rights in historic Russian territory under Japanese occupation were offered to American capitalists. The first of these also provides a ludicrous example of the poverty of Soviet intelligence activities. One Washington Vanderlip, mistaken for his distant relative, Frank Vanderlip, a powerful New York financier, was granted exclusive coal, oil, and fisheries rights for a large chunk of Siberia. Vanderlip, in return, would presumably bring his friends in the Harding administration around to recognition, and the American government would support the Vanderlip concession and Soviet sovereignty against Japan. Vanderlip had no contacts in Washington—and nothing happened.
Harry Sinclair, an oilman with scandalously close ties to one of Harding's cronies, was given the second of these concessions. He signed a contract with the Far Eastern Republic, an allegedly autonomous entity, on the eve of its absorption into the Union of Soviet Socialist Republics. Sinclair was to develop the oil resources of north Sakhalin, an island claimed by the Soviets but occupied by the Japanese. Clearly, when Lenin spoke of contradictions among the capitalist powers leading inevitably to conflicts among them, he was prepared to hasten the process. But for all his influence, Sinclair could deliver no more than Vanderlip. All hope for the project vanished with Harding's death and the revelations of Sinclair's involvement in the Teapot Dome scandal.
After Lenin's death, several hundred more concession contracts were signed by Soviet authorities and American capitalists. All of these appear to have been inspired by the desire to obtain capital and technology rather than to engage the American government as a surrogate for Soviet interests against its foreign adversaries. The Soviet Amtorg Trading Corporation maintained an office in New York and purchased large quantities of American products. By 1930, Americans led all exporters to the Soviet state with 25 percent of the market. By 1928, a fourth of all foreign investment in Soviet Russia was also American. Averell Harriman, a central figure in Cold War relations between the United States and the Soviet Union, received a billion-dollar manganese concession. The Hammer family, Armand and his father Julius, opened a pencil factory in the Soviet Union and diversified their efforts with an asbestos mining contract and art dealing. Major corporations like DuPont, General Electric, and International Harvester signed agreements with the Soviet government for trade and the transfer of technology. Hundreds of American engineers, perhaps a thousand, agricultural and steel industry specialists, went to the Soviet Union in the 1920s to help modernize the Soviet economy.
The Ford Motor Company also developed strong links with Soviet Russia. In 1925, more than a third of the tractors exported by Ford went to the Soviets. By 1927, 85 percent of the tractors used by Russian farmers had been built by Ford. In 1929, Henry Ford signed a contract to facilitate the creation of a Soviet auto and truck industry, enabling the Russians to create a fair imitation of his Model A.
Obviously, American capital and technology contributed enormously to the development of the Soviet economy in the 1920s. It was probably essential to the success of the first Five Year Plan. Equally obvious is the fact that the government of the United States, despite widespread hostility to Bolshevism, made no effort to prevent the transfer of important technology to the Soviet state. In peacetime it was not the practice of the American government to coordinate trade with political policy—and it was just beginning to make an awkward effort to persuade bankers to subordinate their loans to what Washington perceived as the national interest. Moreover, the experience of dealing with a state-controlled economy was a new one, and few American officials anticipated the way in which such an economy could be manipulated for political ends. The ideological assumptions that underlay American abhorrence of Bolshevism, especially the commitment to "free enterprise," precluded the development of an effective foreign economic policy.
The limits of American hostility to the Bolshevik state were apparent also in the response to the famine that struck Russia at the conclusion of the civil war in 1921. Herbert Hoover, probably dreaming that American aid would win the hearts and minds of the Russian people and wean them away from Bolshevism, orchestrated a magnificent relief effort. Raising $50 million from private charities and the federal government, Hoover provided food, clothing, and medicine for an estimated 10 million Russians. Hoover's extraordinary performance strengthened the Soviet government—indeed may have saved it—and won for him its "deepest gratitude," however shortlived.
Interest in recognition of the Soviet regime remained slight through the 1920s, despite the fact that by 1925 England, France, Germany, Italy, and Japan had established formal relations with Moscow. Borah, Lamont, and most elements of the peace movement favored recognition, but it was not their primary cause. Even after the Soviets adhered to the Kellogg Pact, opposition to recognition was too strong to permit advocates to overcome the inertia in Washington. Department of State specialists in Soviet affairs were hostile to the Soviet government, as were Hoover and his aides at the Department of Commerce. They received powerful support from patriotic societies like the American Legion and the Daughters of the American Revolution. More significant was the opposition to recognition that was organized by the Catholic Church and the American Federation of Labor. The Church became intensely hostile to the Bolsheviks after the execution of its vicar general in Russia in 1923. The A.F. of L. perceived itself as serving the interests of a free labor force and had few illusions about the well-being of the proletariat in the Soviet state Major business organizations, despite the opportunism of some of their members, also strongly opposed recognition—until the Depression led to a frantic search for markets.
Soviet attitudes toward private property, the freedom of workers, and religion were only part of the reason for the tension between Moscow and Washington Probably more important to government officials were the activities of the Comintern, created in 1919 to coordinate revolutionary activities around the world. The Soviet government on the one hand sought and generally succeeded in establishing state to state relationships, and on the other sought to subvert governments around the world by manipulating national Communist parties for the ends of the Soviet state. Needless to say, government officials around the world viewed Comintern activities dimly.
The fact that the Comintern botched most of what it touched and had its only notable success in Outer Mongolia eased the threat, but indignation persisted. Stalin maintained effective control over the American Communist party throughout his years as the Soviet leader, and the absurd positions to which he periodically forced it to adhere precluded it from ever becoming a serious force in American politics. Nonetheless, Comintern efforts fueled opposition to recognition. It took new leadership in America, amid world economic crisis and the growing threat of Japanese militarism, to reverse American attitudes and policy toward the Soviet Union.
In the 1920s the American government remained unfriendly toward the Soviet state, but aided it in time of famine and allowed private interests virtually free rein to assist in the modernization of the Soviet economy. Stimson in 1929 offered the Soviet government gratuitous advice during a Sino-Soviet clash in Manchuria. In brief, the Bolsheviks were viewed with contempt rather than fear. All American leaders would have liked to see the Bolshevik regime disappear; none feared it enough during the 1920s to advocate any action to eliminate it. As the economic power of the United States grew, it penetrated even the Soviet state and influenced the development of that country. The larger role of the United States in world affairs in the 1920s is as evident in the Soviet Union as anywhere else in the world—and in few places was it more benign.
IV
The greatest concern of Woodrow Wilson and Allied leaders in 1919 had been the containment of German power. Wilson had understood the need to reintegrate Germany in a stable Europe if the peace won at such great cost from 1914 to 1918 was to endure. Apprehension about the threat of Bolshevism to the east may have intensified his concern, but the problem of postwar policy toward Germany was paramount whether the Soviet system survived or not. Stability in Europe, world peace, the long-term interest of the United States depended on a settlement acceptable to Germany as well as to the victors. To that end Wilson had been willing to sign a defensive alliance with Great Britain and France, as well as lead the United States into the League of Nations.
On almost all counts, Wilson failed. The peace terms imposed on Germany were harsher than he had wished and resented bitterly by most Germans. The alliance was never ratified by the U.S. Senate, nor did the United States join the League. And as the months passed, his concerns seemed excessive. When Harding and Hughes took charge of American policy, they saw a Weimar Republic in Germany that threatened no one. The German economy was a shambles, and the vaunted German military power of a few years earlier dismantled. Great Britain and France dominated Europe. The German navy and German ambitions in the Caribbean, worrisome to American leaders in the years preceding the World War, had disappeared. In 1921 it was difficult for Harding and Hughes to perceive Germany as a major concern.
France did not have the Atlantic to separate it from Germany, nor the demographic and industrial indicators that suggested long-term hegemony over continental Europe. French leaders knew that, left unchecked, Germany would recover quickly. They knew that they could not rely on the United States or Great Britain—and aid from both had been essential to stop the kaiser's forces in 1918. The answer for France was reparations. If the profits of German industry were taxed heavily and that wealth transferred from the German to the French state, France could maintain its edge. German resources, technology, and energy could be harnessed to sustain French power. And in May 1921, the Reparations Commission established at the peace conference concluded that Germany would have to pay $33 billion, of which France would receive 52 percent. There was little expectation of collecting it all; in large part, the figure was designed to meet the expectations of the Allied public. Less than $13 billion was to be collected in the first fifteen years, during which Allied occupation of the Rhineland might be expected to function as an effective means of coercion. Nonetheless, a German state deprived of nearly a billion dollars a year would not soon threaten France. In addition, the French economy would be boosted by half that amount. In sum, the schedule of reparations on which the French insisted at the end of the war was not merely a matter of vindictiveness, but more important, a promising means of protecting the security of France.
French hopes foundered on German recalcitrance. The reparations were deemed excessive by German leaders and most of their people. The war guilt clause justifying the reparations, holding Germany and its allies uniquely responsible for the war, was also rejected by most Germans—and by many analysts in the victorious countries. The German government paid on schedule in 1921. Most economic historians today argue that Germany had the means to continue payments. In 1922, however, Germany defaulted. German leaders across the political spectrum were unwilling to continue reparations payments, certainly not on the scale demanded of them. In part, they objected to reparations as an injustice. Of greater importance was their unwillingness to face the domestic political consequences of imposing taxes to raise the necessary money. Who would be taxed to send money abroad? Could any leader who imposed so heavy a tax burden on his people hope to survive when there was always another leader calling for resistance? Every German leader, including the highly respected Gustav Stresemann, sought revision of the terms of the Treaty of Versailles to relieve Germany of the price of defeat.
France turned to the United States and Great Britain for support, and was not happy with the responses. The Americans professed to see the reparations question as an economic rather than a political question; they feared European efforts to tie reparations to war debts and ultimately to leave the bill for the war in the hands of the American taxpayer. In Washington, the Wilsonian conception of dealing with Germany through reintegration persisted. France should be generous with Germany and realize that a prosperous Germany would be a safe Germany: a fat German would be a good German. Like Wilson, Hughes—and Lamont-favored moderate revision to gain greater German acceptance. If, however, the Europeans would not behave sensibly, the outcome was viewed as less important to American interests in Harding's era than it had been in 1919. Across the channel, the British government had returned to its traditional policy of seeking to balance its most powerful European neighbors. Allied with France, it sought German goodwill so that it need fear neither as it looked to its empire and the stiff competition provided by the United States. Functionally, British attitudes also favored treaty revision to win over the Germans. France's allies among the small successor states of Eastern Europe were of little value. Belgian support counted for little. France was isolated.
In France, the military demanded occupation of the Ruhr, seizure of the heart of the German coal and steel industry. The idea was to operate Ruhr industry for the benefit of the French economy in lieu of reparations—or force the Germans to pay. Contingency plans were ready, and the Germans knew it. The forces for confrontation on both sides prevailed, and in January 1923 the test of wills began as French and Belgian forces occupied the Ruhr and the German government organized passive resistance throughout the area.
The French occupation of the Ruhr was condemned in the United States by the peace movement, journals like the Nation--and Senator Borah. Borah called the invasion "utterly brutal and insane and was quoted and endorsed by the Nation. 3 French action ran counter to the Harding administration's conviction that German prosperity, based on the administrative and territorial integrity of Germany, was France's best hope for security. Probably no event of the 1920s contributed more to the arousal of American sympathy for the defeated enemy—or to a growing sense that French militarism was the greatest threat to the peace of Europe. Perhaps most striking was widespread criticism of the administration's alleged indifference to the Ruhr crisis. Borah warned that unless the United States responded vigorously, a new world war would begin.
Hughes had seen the crisis coming and was eager to head it off. He perceived revolution simmering in Germany. Whether the Germans swung radically left or right mattered less than the impact revolution would have on European stability, the principal aim of American policy. Hughes was restrained before and after the invasion by the unwillingness of first Harding and then Coolidge to risk confrontation with Congress. Even when it was clear there was strong support in Congress, in the press, and in the business community for some kind of action, American political leaders were reluctant to concede the relevance of reparations payments to American economic interests for fear of being maneuvered into an unpopular reduction of war debts. Moreover, neither Hughes nor Hoover was willing to offer the kind of political commitment that would have given substance to American advice.
As a result, the administration persisted in its tactic of pushing American bankers forward, working from behind their skirts to impose an American solution on the problem. In December 1922 Hughes proposed the creation of an independent committee of financial experts, presumably Anglo-American, which would devise a fair plan for reparations payments. He was too late then, but the idea was revived successfully by the British less than a year later—after nine months of French occupation, passive resistance, and hyperinflation had all but destroyed the German government.
German resistance succeeded in raising the cost of the occupation, but Raymond Poincaré, the French leader, perceived no choice but to press on. However questionable the French economy was soon revealed to be, in 1923 it was infinitely stronger than that of the Weimar Republic. Financing the resistance further undermined the shaky German currency and in a few months it collapsed, resulting in devastating hyperinflation. No one in Germany seemed to have the will or the knowledge to save the mark. The foundations of the fragile Republic were shaken, and both its survival and even the unity of Germany seemed at stake by the summer of 1923. In September, under the leadership of Stresemann, the German government surrendered. Resistance had failed to drive the French out. Neither the Americans nor the British had come to the rescue. It was time for a tactical retreat in the struggle for treaty revision. It was essential to reconstruct German finances—not to facilitate reparations payments, but to serve the German state.
The French, however, were unable to benefit from the "success" of their occupation of the Ruhr. There was no way to press their advantage to extract significant revenue out of Germany, in cash or in kind. They too were ready for tactical retreat such as provided by the proposed committee of experts. Poincaré attempted to limit the terms of inquiry to Germany's immediate capacity to pay, hoping to preserve the right to resume full payments in the future, but Hughes balked. The United States, having emerged as the dominant financial power in the world, held the key hand. The French, Germans, and British all wanted American participation, needed American participation, and were forced to play by American rules. In January 1924 the experts assembled in Paris to begin their inquiry. The chairman of the committee was Charles G. Dawes, an American banker.
Despite the pretense that the American representatives on what came to be known as the Dawes Committee were acting as private citizens, the government of the United States left nothing to chance. Hughes and his advisers selected the American participants, Dawes and Owen D. Young (chairman of the General Electric Corporation). Dawes and Young were carefully briefed by Hughes and Hoover. They were provided with background materials collected by the Departments of State and Commerce—and with advisers from those depart ments. They went to Paris to serve the interests of their gov ernment, which retained the freedom to deny responsibility for their actions.
As the Dawes Committee assembled, a financial crisis began in France that ultimately left the French government unable to resist the course which the Americans and British set. France, like Germany, had failed to resolve domestic differences on the question of distribution of the tax burden for postwar reconstruction. French leaders had hoped to avoid a divisive battle by squeezing the costs from Germany and sparing their constituencies additional taxes. By January 1924 it was clear that Germany would not provide the needed funds, that taxation had been postponed too long; the franc collapsed. The French government desperately needed an international loan. Its financial adviser was none other than J. P. Morgan and Company, specifically Dwight Morrow who, with Lamont, would decide whether, when, and how much Morgan might lend. The Morgan partners were highly sympathetic to France's plight, but banking is never intentionally a nonprofit operation. Potential investors had to be assured of a favorable business climate. Specifically, Lamont insisted he be assured that France would not resort to force to collect reparations before Morgan would lend to France. Only a peaceful Germany and a stable Europe would provide the climate desired.
When the French finally capitulated to Morgan's terms, Lamont cleared the loan with Hughes and the pieces of the pattern Lamont and Hughes sought to create began to fall into place. A few weeks later, in April 1924, the Dawes Committee reported its plan which, when implemented at a conference in London that summer, resulted in a de facto scaling down of the German reparations burden, a payment schedule which required Germany to begin small-scale payments immediately and increase payments as its economy improved. Money for the payments would come in part from loans floated by J. P. Morgan and Company, from which the British, Belgians, and French could also anticipate loans so long as the right to impose sanctions on Germany was renounced. Clearly, France sacrificed the most—in terms of reparations payments it might expect from Germany and the leverage French leaders desired in the event Germany reneged on the new payment schedule. France had little choice, given the attitude of the governments in Washington and London—and of the men on Wall Street and Lombard.
The American government and American bankers asked still more of their friends and potential borrowers in Europe. They were interested in seeing the development of a European community in which the animosities of the world war, exacerbated by the Treaty of Versailles, might finally be put to rest. They wanted assurance not only that France would withdraw from the Ruhr and refrain from another invasion, but that Great Britain, France, and Germany would work together to rebuild and stabilize Europe. In January 1925, Stresemann resubmitted his proposal for a four-power guarantee of the German-French border. With British elaborations, Stresemann's idea became the foundation for the Locarno treaties signed in October 1925. Belgium, France, and Germany promised to respect forever the boundaries drawn at Versailles and to keep the Rhineland demilitarized. Additionally, they promised never to attack each other. Great Britain and Italy signed as guarantors. Here was the negotiated settlement of the war issues the United States sought. Now, with the approval of their government, American bankers were ready to underwrite European recovery. Again, the French had reservations about the value of these Anglo-American plans for their security, but Washington and Morgan and Company had left French leaders no doubt that the Locarno arrangements, like the Dawes Plan, were the essential requisites to the financial aid France required. Moreover, French anxieties were assuaged by the integration of both Great Britain and Germany in France's security system.
Clearly, the United States, working outside the League of Nations, uncommitted by the Treaty of Versailles or any security arrangements with the European powers, nonetheless played the central role in stabilizing Europe in the mid-1920s. Conscious of American financial hegemony, the Harding and Coolidge administrations, utilizing American bankers with striking effectiveness—in contrast with failed efforts in China—were able to call the tune. American loans enabled German leaders to rebuild their nation's economy in the hope of integrating Germany into a community with its recent enemies. American loans required France to rely on German commitment to the idea of community rather than the threat of force for its security. As a result, the outlook for peace in Europe was good. Tension between the United States and France over war debts, the French invasion of the Ruhr, and France's obstructive policies in East Asia began to decline. Relations with Great Britain and Germany prospered as well. In Europe, the American approach to world affairs was manifestly successful.
Fueled by American loans, Europe experienced a spurt of economic growth and prosperity after Locarno. Germany paid reparations, the Allies paid installments on their war debts, and all was well in the world. Americans began dreaming of a chicken in every pot, a car in every garage. The key to the success of the American vision for the world was continued world prosperity—a larger pie and a bigger piece for everyone. But the world economic system remained seriously flawed. In the post-Locarno euphoria, too much American money flowed to Germany and too much of it was used for nonproductive purposes, for paying off reparations and earlier loans. The Germans were still not taking the burden of their reparations payments on themselves, and the United States was still not importing anywhere near what the Germans had to sell to repay what they borrowed. The system depended on the continued flow of dollars across the Atlantic. Should American loans to Germany stop, the system was likely to collapse.
A second problem was the persistent German desire for treaty revision, to be relieved of reparations payments and the presence of occupying forces on German territory. Germany joined the League (1926), signed the Kellogg-Briand Pact (1928) promising not to resort to war as an instrument of national policy—and pressed for revision. In 1929, another committee of experts, again led by an American, Owen Young, lowered Germany's reparations bill and called for the evacuation of all foreign troops from the Rhineland. The Young Plan was approved early in 1929 and the last foreign troops were out of Germany by June 1930. German good behavior had won renewed respect and goodwill in Washington and European capitals. The Weimar Republic was not the Germany of the kaiser, and the world at the end of the 1920s might look to enduring peace and prosperity. Americans had every right to feel proud of the contribution of their government—and their bankers.
V
Expanding from traditional areas of economic involvement and government activity in the Caribbean and East Asia, the United States played a role of tremendous importance in Europe as well in the 1920s. American leaders had to respond to three great revolutions, begun earlier but still reverberating in the era of Harding and Coolidge. They were drawn into the principal European drama being played out in Germany. The importance of America's new stature as financial capital of the world was evident in the prominence of Lamont and his Morgan partners in Mexico, China, France, and Germany.
Perhaps most striking was the technique evolved for using nongovernmental leaders like Lamont or Morrow or Young to serve the ends of American foreign policy. Advisers to Presidents Wilson, Harding, and Hoover, some of them no strangers to Wall Street, quickly perceived the value of banker-diplomatists. In theory these men functioned as private citizens. The United States government could deny responsibility for their actions, would not be bound by their agreements. Generally the government could direct the efforts of these representatives from the private sector—select them, inform them, instruct them—almost as easily as if they had been on the payroll. And the government was able to engage in activities that, had they been official, would have aroused the wrath of special interests or congressmen at home and foreign governments abroad. The waters out there were mined and, shrewdly, while the government and people of the United States gained an education in the use and responsibilities of power, Washington sent the bankers ahead to clear the way.
The virtues of the system of reliance on the private sector for conducting public policy were balanced, however, by a flaw most evident in East Asia. However public-spirited the Morgan partners may have been, their interests and those of the American government and people did not always coincide. In such circumstances, patriotism gave way to self-interest. In East Asia, the Department of State was eager to see Lamont and the international bankers with whom he was associated lend money to the Chinese government The government of the United States certainly did not want Morgan financing Japanese imperialism in China, facilitating Japanese exclusion of American business interests. But Lamont had no interest in lending money to a succession of shaky Chinese regimes and was delighted to lend to Japan, surely a safer investment. Indeed, Lamont used his considerable genius to circumvent all efforts by his friends in Washington to prevent Morgan loans to the Japanese government. In brief, private citizens, however gifted, are imperfect instruments of national policy, to be used sparingly and with great caution and skepticism.
Still, the central point is that the United States engaged in enormously expanded activities around the world, often spearheaded by American capital and, in Soviet Russia especially, American industry. The growth of American activity in the world was acceptable to virtually all Americans—there were no cries for a "little America" policy-so long as the use of force was not required. Congressional warnings on policy toward Mexico and China, public distaste for the war in Nicaragua, and ultimately the Kellogg-Briand Pact left no doubt in the minds of American leaders of the restraints imposed by the organized peace movement. "Tomorrow the world"—if it could be ours peacefully.
Endnotes
Note 1: Charles C. Cumberland, Mexican Revolution: The Constitutionalist Years (1972), 347. Back.
Note 2: Schurman to Coolidge, April 8, 1924, Jacob Gould Schurman Papers, Collection of Regional History, Cornell University. Back.
Note 3: MacMurray to Kellogg, quoted in Dorothy Borg, American Policy and the Chinese Revolution, 1925-1928 (1947), 63 Back.
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