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War Deal

Dwight Macdonald

The War Deal

(6 October 1939)

From Socialist Appeal, Vol. III No. 76, 6 October 1939, p. 2.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

This week I should like to develop a little further the theme of my last column: that modern war is so vast a social undertaking and the capitalism it expresses is by now so closely integrated with the bourgeois state, as to make it impossible for old-style “private enterprise” either to fight a war or even to meet the problems of neutrality. The state simply must step in and handle matters.

In 1914–1917 the dynamic leadership of the war drive came from Wall Street, with the Wilson Administration up to the last putting on at least an appearance of opposition. This time the Roosevelt Administration is openly playing a war game, with Wall Street rather inclined to keep in the background. This is by no means to imply that this war is not, like the last one, Wall Street’s war. The basic motivation of Roosevelt’s war drive is to protect the interests and profits of American big business. And the final, fateful decision as to the time and conditions of our entry into the war will be determined in Wall Street and not in the White House.

Instrument of Big Business

The Roosevelt Administration is as much the instrument of the big bourgeoisie as was that of Woodrow Wilson. Even more so, indeed, since in the last two decades there has taken place, a gradual coalescence of big business and the government. This means that the relationship of Wall Street and Washington in this war is far more subtle and complicated than it was in the last war. It is not enough to perceive the basic fact that the country is being dragged into a second world slaughter in the interests of American capitalism. We must also understand just how this is being done this time. We must be aware of certain differences in technique which in turn reflect twenty-five years of development of our monopoly capitalism.

The other day the U.S. Chamber of Commerce reported to its members on the outlook for foreign trade. This report was a sermon in caution and scepticism, warning that war booms produce bad economic hangovers, and advising its members against “over-confidence.” This tone of moderation and wariness is characteristic these days of the whole financial press. On the other hand, the President whips up the war spirit with ever-increasing abandon, the current climax being his personal announcement – such dirty jobs are usually left to minor officials – that submarines “of unknown nationality” had been sighted off our coast. This bit of frank war-mongering, released just as the Congress was about to start debating neutrality legislation, got the front-page scareheads it was intended to.

The Morgan Myth

There is a widespread illusion, sometimes to be found even in the pages of the Appeal, that J.P. Morgan & Co. is playing exactly the same role in maneuvering America into this war it did in the last. This emphasis does not correspond with the known facts.

When the last world war hit the American economic system, no governmental measures whatever had been taken to cope with it. The financial community was hastily mobilized by the Governors of the N.Y. Stock Exchange and by the leading Wall Street bankers, headed by Mr. Morgan. But this mobilization was insufficient. The impact of war abroad and the hasty selling of large blocks of American securities by foreign holders, these caused a temporary financial panic. The Stock Exchange had to be closed for several months. There was an industrial slump before the Allies began to buy over here in big quantities.

This time, J.P. Morgan, symbolically enough, happened to be on the high seas when the war began. It would have made little difference if he had been on the spot, as he was in 1914. For one thing, the present Morgan is rather stupid, carries little weight in Wall Street, and for many years has had very little to do with running the House of Morgan. But even if he possessed the brains and the influence his father had in his day, the present J.P. Morgan would have played a rather small part in the drama. Months ago the arrangements to meet the impact of a European war on our financial system had been made, and when war actually came they were merely put into effect. This job was done neither by the Stock Exchange governors nor by the big bankers of Wall Street, but rather by the Federal agencies which now dominate the nation’s financial system: the Securities & Exchange Commission, the Federal Reserve Board, and the U.S. Treasury Department. Working in close collaboration with the British Exchequer and the Bank of England, these powerful state agencies drew up plans so effectively that from the firing of the first gun in Poland, stocks began to soar, and an uninterrupted war boom began over here.

So it has been also with two other functions which the House of Morgan fulfilled for the Allies in the last war: the raising of credits over here, and the purchase of American war materials. In the first week of the war, Administration officials announced they were prepared to extend credits to the Allied nations through two governmental agencies: the Reconstruction Finance Corp, and the Export-Import Bank.

It is true that when J.P. Morgan got off the boat the other day, he said something about it being “reasonable” to assume that the Allies would call on his firm “to repeat our performance.” But this remark, which caused a great flutter in left-wing journals, turned out to be merely an indication of how much out of touch with things Mr. Morgan is these days. His partners promptly denied any such possibility, and so did the British and French governments. Officials of the War Deal disclosed that Roosevelt had advised the British government against allowing the House of Morgan to give an encore of its famous 1914 performance. As T.R.B. cynically notes in the Sept. 27 New Republic:

“The advice was sensible. To create pro-English sentiment among the mass of voters here, the House of Morgan should be kept out of sight ... In 1914–1917, the English government had Ambassador Page to help them influence American opinion: in this war they seem to have done much better.”

A Matter of Scale

But it is not only for propagandistic reasons that the House of Morgan is not being called in again by the Allies. The main reason is that today Government agencies rather than Wall Street bankers control the technical workings of our financial system. (The basic control of the system, of course, remains in the hands of big business. It has merely been found advisable, for the benefit not of “the people” but of business interests, to centralize technical management in Washington.) This is true in times of peace, and it is truer than ever now that war has enlarged the problems of capitalism to abnormal size.

An anonymous “financier” put the essence of the matter pretty well when he was quoted in the N.Y. World-Telegram of Sept. 14 as follows:

“Buying materials is not a banking firm’s function anyway. When J.P. Morgan & Co. went into it in the last war, everyone thought the fight would be over quickly and the work could be done. Then it turned out to be a gigantic undertaking. It expanded tremendously. Buying for this war is expected to begin at the same scale and may go on from there to something which would dwarf the imagination.”

The French have already announced that all their purchases will, for the time being, clear through the commercial attaché of their embassy in Washington. There is also a semi-official report that a Franco-British joint purchasing agency will be set up in Canada to arrange all purchases in North America. This agency, it is expected, will work closely with the procurement division of the U.S. Treasury.

War today is just, too vast an enterprise for even the most powerful private bankers to handle. If war hasn’t been exactly socialized, it has at least reached the stage of government ownership. It goes without saying that, as in the case of other forms of government ownership under capitalism, the change is made in the general interests of monopoly capitalism.

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Last updated: 17 February 2018