Power in America print/mobile Why and How the Corporate Rich and the CFR Reshaped the Global Economy after World War II ...and Then Fought a War They Knew They Would Lose in Vietnam by G. William Domhoff In this document I want to show — in painstaking detail — just why and how the corporate and financial leaders in the United States actively influenced American foreign policy between 1939 and 1941, with the goal of shaping the world to their economic and political liking after World War II. They then financed and eventually openly fought an war to maintain British and French dominance in Southeast Asia from 1945 to 1975 as part of their larger vision. Contrary to the most widespread opinion, a good part of their rationale was economic at a time when the American economy was still suffering from the Great Depression, which was unlike anything seen before or since. They fully believed that they absolutely needed a huge chunk of the world as trading partners, sources of raw materials, and investment outlets if they ever were going to make the American economy highly productive and profitable again without having to accept greater government involvement in the economy, which was anathema to most of them. Nor did they want higher government taxes. They also rejected the idea of having to deal with strong unions, or any unions at all, for that matter, which could cut into both their profits and their control over each and every decision within their corporations, a story that is told in another document on this site. Note again the italicized phrase in the previous paragraph about "greater government involvement in the economy." They warned one and all that increased government control would lead to socialism and a loss of freedom, which supposedly meant a country like the Soviet Union. Some of them may have believed this claim, but most of the American corporate rich — the owners and managers of large incorporated income-producing properties in all sectors of the economy — knew that there are degrees of government involvement, and that it was possible to run a high-employment, private-property market economy with government social supports for low-income people, as well as some government investment in the economy if necessary. Indeed, they knew full well that Sweden, for example, was being written about in the 1930s as a "third way." It is my belief that what they really didn't like about the idea of intervention in the economy by the elected democratic officials of the federal government — that is, by the president and Congress — was that they might lose some of their power, privilege, and profits (ranked in that order), which they had enjoyed without any lasting challenge for many decades until their own short sightedness helped drive the economy into a major depression between 1929 and 1933 (through decisions not unlike those that led to the financial collapse of 2007-2008). It was the Great Depression that led a large majority of American voters to put the Democrats in power in a desperate situation; about 25% were unemployed by 1933. The result was a "New Deal" that led to some improvements in the economic situation, more government support for low-income people, however meager and temporary, and to more authority for elected officials and the hired employees they appointed to carry out their directives. This document has three major parts, so it is not for the faint of heart. It tells a step-by-step story. It is assembled from various chapters I wrote for books in the past, and then updated on several points based on new research in archives by a wide range of scholars. In those past chapters I was writing about these events in order to argue that rival theorists were wrong on one or another issue, but here I put aside old academic disputes. Suffice it to say that everything that follows refutes any academic theory that denies that there is a corporate-based dominant class in the United States that has far more power than unions, environmentalists, consumer activists, various kinds of independent experts, or government officials. The account that follows also implicitly disagrees with those many people outside the academy called conspiracy theorists, or conspiracists, who start with the premise of an alleged secretive worldwide elite that has been out to rule the world since the late 18th century, with full success always just over the horizon for the last 80 years now, but never materializing. They overstate the power of the corporate rich, fail to appreciate the divisions between internationalists and nationalists in the corporate community, misunderstand the motives and goals of the corporate rich, misunderstand and distort the role of the policy-discussion groups I discuss, make many inaccurate historical claims, and make false claims about alleged connections between the top American leaders and elites in rival countries. Since this document has a strong focus on one particular organization — the Council on Foreign Relations — this introduction is important in explaining my general viewpoint in a way that I hope will make sense to all but the most conventional or conspiratorial of thinkers. I see general policy-discussion organizations such as the Council on Foreign Relations, along with the "think tanks" that provide advice to them, as the main ways in which corporate leaders attempt to reach policy consensus among themselves and impress their views upon government. As I have claimed since the early 1970s (e.g., Domhoff, 1970a, 1971, 1974, 1979; 2014, p. 93), they have four main functions within the corporate community and three roles in relation to the general public: They provide a setting in which corporate leaders can familiarize themselves with general policy issues by listening to and questioning the experts from think tanks and university research institutes. They provide a forum in which conflicts between moderate conservatives and ultraconservatives can be discussed and compromised, usually by including experts of both persuasions within the discussion group, along with an occasional liberal on some issues. They provide an informal training ground for new leadership. It is within these organizations that corporate leaders can determine in an informal fashion which of their peers are best suited for service in government and as spokespersons to other groups. They provide an informal recruiting ground for determining which policy experts may be best suited for government service, either as faceless staff aides to the corporate leaders who take government positions or as high-level appointees in their own right. In addition, the policy groups have three useful roles in relation to the rest of society: These groups legitimate their members as serious and expert persons capable of government service. This image is created because group members are portrayed as giving of their own time to take part in highly selective organizations that are nonpartisan and nonprofit in nature. They convey the concerns, goals, and expectations of the corporate community to those young experts and young professors who want to further their careers by receiving foundation grants, invitations to work at think tanks, and invitations to take part in policy discussion groups. Through such avenues as books, journals, policy statements, press releases, and speakers, these groups try to influence the climate of opinion both in Washington and the country at large. Turning specifically to the Council on Foreign Relations ("CFR" or "the Council"), it was never a secret. Nor was it secretive about its relationship with the British Institute of International Affairs, established in 1920 with the same purposes as the CFR. (In 1926 its name was changed to the Royal Institute of International Affairs.) In the case of the CFR, it had little or no influence between its founding in 1921 and the late 1930s, which were years in which the more ultraconservative and nationally oriented leaders within the corporate community were the dominant segment of the corporate community in terms of foreign affairs, especially in terms of their closer relationship with the isolationist Republicans in Congress (Schulzinger, 1984, Chapters 1-2; Wala, 1994, Chapters 1-2). Thus, it is their relative policy weakness, not their strength, which explains why the more internationally oriented corporate leaders created the Council on Foreign Relations. They hoped to convince at least some of the ultraconservatives, along with the general public and elected officials, to take a different direction. The CFR publishes annual reports, makes it positions known through articles in its highly regarded journal, Foreign Affairs, and has sponsored events and historical pamphlets commemorating what it considers to be significant milestones. This picture is opposite of what conspiratorial thinkers claim, as I showed in a detailed critique of three well-known and widely read conspiracists of the 1960s, Dan Smoot, Phyllis Schlafly, and Reverend William S. McBirnie (Domhoff, 1970b, Chapter 8). This was all to no avail, of course, except that it now can be confessed that the main targets of the chapter were those mainstream scholars that called anyone they disagreed with a conspiratorial theorist. However, this covert stratagem failed as miserably as the ostensible goal. After the role of the CFR's role in shaping postwar foreign policy is demonstrated in the first section of the chapter, I turn in the second section to a detailed account of how international corporate leaders, Wall Street financiers, and policy experts concerned with international relations worked through the war-peace study groups to develop the plans that shaped the economic framework for an increasingly internationalized postwar economy, starting with the creation of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development, commonly known as the World Bank. At the same time, I also show how the plans for the IMF were modified, watered down, and made more pliable to American interests by the New York bankers and the ultraconservative corporation leaders in the corporate community. To emphasize the power of the nationalists, pejoratively called isolationists by the internationalists, I note here in passing that they were able to block Congressional approval of the International Trade Organization, the forerunner of the World Trade Organization, forcing the executive branch to make do with a limited version of the full panoply of what corporate planners had hoped to create (R. Gardner, 1980). Then, in the final section, I make the case that the postwar planning I describe in the first two sections, and especially the first section, provided the context and explicit policy guidelines that led step-by-fatal-step to 30 years of warfare in Vietnam, first by the French, with military and financial aid from the United States, and then by the Americans themselves. At the same time, I express my agreement with the magisterial work of historian Fredrik Logevall (1999, 2012) that American foreign policy leaders could have chosen a different course at many different critical junctures, but they somehow always managed to fall back on their longstanding geopolitical concern for economic and political predominance in the world. They wanted to hold, and succeeded in holding, a preponderance of power (Leffler, 1992) The Council on Foreign Relations and the postwar world It is my contention that the starting point for understanding how and why a new conception of the American national interest and a new framework for the postwar world economy were developed between 1939 and 1942 can be found in the work of the war-peace study groups that were sponsored by the CFR, which worked closely with the State Department in those years. This claim builds on detailed studies by historian Laurence Shoup (1974; 1977) and my own historical research in several different archives, but it is grounded in the research of many other scholars as well. In putting great emphasis on the Council and its war-peace study groups, I am not denying that other private organizations and internationally oriented mass media played a role in influencing government officials and public opinion. As Robert Divine (1967) showed in detail, there were at the time many such organizations supported by internationalists around the country. Moreover, the magazines of publisher Henry Luce, and particularly Time and Fortune, pushed very hard for postwar planning from 1940 to 1944, often chiding the White House and State Department for failing to keep up with a public opinion that increasingly favored American involvement in the war and in postwar planning once France fell and Germany attacked Great Britain. As early as January 1940, for example, a 19-member Fortune Roundtable discussion group, consisting of a cross section of business leaders, lawyers, and association officials, called for United States participation in organizing for the postwar peace discussions. Despite the existence of several organizations, complete with personal and financial rivalries among their leaders, it is still the case that many of the leaders of the other organizations were members of the Council or its postwar planning groups, including Luce and the organizer of his roundtable discussion groups. In fact, the Luce empire's published reports were sometimes versions of what academic experts were proposing to the State Department as part of their confidential work for the CFR. In short, the Council was the sustained and well-financed core of an internationalist corporate perspective that projected a very large role for the United States in the postwar world. Its function was to create and organize the policy goals of the internationalist segment of the dominant class. The Council on Foreign Relations had its origins in the years after World War I when many American leaders returned from the Paris Peace Conference dissatisfied with both their preparation for the negotiations and the outcome of the conference. They also believed that the growing economic power of the United States should lead to greater involvement and leadership in world affairs than the nation previously had shown. The formal founding of the CFR in 1921 was based on the merger of a New York businessmen's discussion group and a fledgling Institute of International Affairs, which consisted in good part of statesmen and academic experts. As Divine (1967, p. 20) summarizes, the new CFR was restricted to 650 members, 400 from New York and 250 from the rest of the country, and had a membership roster that read like a Who's Who of American leaders. Partners from Wall Street's J. P. Morgan and Company interacted with professors, international lawyers, corporate leaders, syndicated columnists, clergymen, and State Department officials. This small membership constantly has to be kept in mind because the CFR from the 1920s to the late 1960s cannot be directly compared without more detailed study to the much larger CFR that came to be in the 1970s. In any event, there is ample systematic evidence to support Divine's contention that the Council way back then was the province of internationally oriented bankers and corporate executives in New York and surrounding areas, as well as of academic experts and journalists. It also is well established that its funding for projects came from large foundations directed by business leaders who were members of the Council in significant numbers (e.g., Domhoff, 1970b, Chapter 5; Schulzinger, 1984; Shoup & Minter, 1977, Chapters 1-3; Wala, 1994). Both then and now, the Council endeavors to realize its internationalist aims through discussion groups, research studies, book length monographs on a wide variety of countries and issues, and articles in Foreign Affairs. In attempting to foster its perspective, the Council has seen its primary adversaries as isolationists in Congress and the nationally oriented ultraconservative business executives who do not want the United States to become entangled in world affairs outside America's own "backyard," the southern half of the Western Hemisphere. In the early 1930s, its leaders vigorously entered a national debate in opposition to "self sufficiency" and greater government control of the economy, and supported such steps toward internationalism as the Export Import Bank of 1933 and the Reciprocal Trade Act of 1934 (L. Gardner, 1964; Shoup, 1974; Woods, 2003). Any private group seeking to influence the White House and State Department must know who is making decisions, when secret decisions are likely to be discussed and made, and what kinds of arguments and information are being utilized in making these decisions. Furthermore, to influence decisions a private group must have legitimacy in the eyes of decision makers and access to them (Shoup, 1974, pp. 16-17). There is reason to believe that the Council had such information, legitimacy, and access by the 1930s. Respected scholars conducted its studies. Its leaders were regarded as highly informed about foreign affairs. Government officials were often members of its discussion groups. Then too, many members had served in government positions or as government advisers, and maintained close social relations with key decision makers when they returned to private life. For example, CFR director Henry L. Stimson, a New York corporation lawyer for most of his adult life, had been secretary of war under Taft, secretary of state under Hoover, and was named secretary of war by Roosevelt in June 1940, a position he held until the end of the war. However, perhaps the best single example of this point about access and legitimacy for the crucial era under consideration in this document is banker Norman H. Davis, president of the CFR from 1936 until his death in 1944. His relationships with top decision makers in the State Department and White House were long standing and close, particularly with Secretary of State Cordell Hull and Roosevelt. The son of a successful businessman in Tennessee, Davis became a millionaire by means of financial dealings in Cuba between 1902 and 1917. Through his friendships with Henry P. Davison, a partner in J. P. Morgan, and Richard M. Bissell, president of Hartford Fire Insurance, Davis became a financial adviser to the secretary of treasury on foreign loans during World War I. Davis also was a financial adviser to the American delegation to the Paris Peace Conference in 1919, where he worked with Thomas Lamont, another Morgan partner. He then served briefly as an assistant secretary of treasury and undersecretary of state before turning to a banking career in New York in March 1921. At this point Davis involved himself in the affairs of the Democratic Party, through which he became friends with fellow Tennessean Cordell Hull, then a congressman and chairman of the national party. During this time he also became friends with Roosevelt. In 1928 Roosevelt had begun work as a private citizen on an international development trust to stimulate foreign trade, and Davis helped him with the project (L. Gardner, 1964, p. 19, and see also the letter from Roosevelt to Davis dated October 8, 1928, in the Davis Collection in the Library of Congress). In addition, Davis was a delegate to international conferences under Republican presidents in 1927 and 1932, and Roosevelt made him an ambassador at large in 1933 and then head of the American Red Cross in 1938. Outside the political sphere, Davis was considered a "well known friend of the Morgan Company," according to former Roosevelt adviser Raymond Moley (Shoup, 1974, p. 27). (For Davis' own detailed account of his relation to the Morgan interests, see his undated memorandum to Hull in the Davis Collection in the Library of Congress). Davis became the Morgan partners' Cuban representative as early as 1912, and negotiated a $10 million loan from Morgan for the Cuban government in 1914. In 1926, when Sumner Welles, a friend of Roosevelt's who became his undersecretary of state, wanted a job with the Morgan affiliated Guaranty Trust Bank, "he wrote Davis, who offered to arrange for Welles to see the officials of the Guaranty" (Shoup, 1974, p. 27). By the time he was elected CFR president, Davis also was a trustee of the Bank of New York and Trust Company. Davis had direct and frequent access to Roosevelt and Hull in the years between 1940 and 1942, when postwar planning was in its crucial formative phase. For example, there were two telephones in Davis' office at the American Red Cross, one for normal calls, the other a direct line to the White House. As for Hull, his appointment calendar shows that Davis met with him in his office several times a week; he also played croquet with Davis most nights of the week (Shoup, 1974, p. 30). Similar relationships between council leaders and foreign policy leaders will become apparent as the story of postwar planning unfolds. However, the more important questions is whether government officials relied upon and reshaped their thinking based the information and recommendations of CFR experts later hired by the state department to do government planning. It is that critical issue that I address in the next section, showing that the postwar planners of the Council on Foreign Relations in fact provided the bulk of the State Department's postwar planning in 1940 and 1941 from the outside, and became part of the State Department in 1942, when serious planning within the government finally was undertaken. Why isn't there more focus on the CFR? However, before I turn to the role of the CFR in shaping the postwar world and setting the stage for the Vietnam War, I want to discuss the possible reasons why most historians and political scientists that study international relations, American foreign policy, and American diplomatic history do not pay any attention to the Council on Foreign Relations, even though they often mention many of the same people I do as being crucial in creating new policies. Their accounts in effect trace the role of a network of individuals, sometimes noting their former positions as financiers, executives, or professors, but they do not discuss the organizational network (in this case, the policy-planning network) of which the individual networks are a part (Breiger, 1974; Dreiling & Darves, 2011). The possibility of considering the CFR as a source of policy ideas and personnel for the government may have been laid to rest as far as most scholars are concerned by a 1984 history of the organization, the Wise Men of Foreign Affairs (1984), by diplomatic historian Robert Schulzinger, the author of several books before and after that date, including several editions of his textbook on U.S. Diplomacy Since 1900 (2002). Schulzinger portrays the Council and its study groups as conventional and banal, not at all innovative. He quotes a letter of resignation from the CFR in 1972 by the witty left-liberal Harvard economist John K. Galbraith, which says that it is "the seat of boredom" and only "serviceable" for those who want to know "what the latest cliché is" (Schulzinger, 1984, pp. ix and 209). In addition, Schulzinger concludes that the CFR's war-peace study groups had minor and marginal impacts at best, and were usually ignored by the real decision-makers, such as Secretary of State Cordell Hull and Secretary of Treasury Henry Morgenthau. In doing so, he focuses on discussions of scenarios for postwar disarmament, which of course went nowhere, and on ambitious plans for a world government that were watered down to the United Nations (in which the CFR planners in fact had a considerable influence as what Roosevelt called "my postwar advisers" (Shoup & Minter, 1977, p. 170). Schulzinger (1984, p. 77) also points out that many of the ideas talked about by a study group concerned with territorial issues were "overtaken by events," such as the Nazi invasion of the Soviet Union and the Japanese attack on Pearl Harbor. Turf wars between CFR leaders and other international organizations, along with their competition for funding from foundations, are discussed in a fair amount of detail, revealing their all-too-human pettiness, self-importance, and ambition (e.g., Schulzinger, 1984, pp. 109-111). The possibility that the Council should be taken seriously becomes even less likely when Schulzinger notes that conspiracists on the right have written about it as the current incarnation of the secretive one-world movement that I alluded to earlier. Nor does it provide any encouragement to researchers when he adds that the CFR has been written about as The Imperial Brain Trust by two "radical scholars," who claim that it "produces results that are against both the interests of the American people and of the people of the world." He strengthens this point, and links the conspiracists on the right to the radical scholars, by citing a highly critical review of The Imperial Brain Trust by William P. Bundy, a wealthy Bostonian and a prominent member of the CFR from the 1950s through the 1980s, as well as an architect of the Vietnam War as a member of the Kennedy and Johnson administrations. Bundy wrote that the two radicals mentioned by Schulzinger were "avowed Marxists" whose views bore "a striking resemblance" to the "picture of the Council" that is presented by the Far Right" (Schulzinger, 1984, p. 227). Since I am neither a Marxist nor a conspiracist, and hopefully not banal and conventional, somewhat different problems may explain why my new archival findings in my earlier efforts did not attract any attention or interest on the part of scholars who specialize in foreign relations (Domhoff, 1970b, Chapter 5; 1990 Chapters 5, 6, and 8). Knowing that the academic world is organized into small circles of experts that do not want to spend valuable time dealing with claims by outsiders of unknown abilities and qualifications, I realize it is unlikely that scholars on any aspect of foreign policy or international relations would take seriously the claims of a political sociologist who focuses primarily on the general nature of the American power structure. Because I never spent more than two or three years at the time doing interviewing and archival research on the specific substantive issue I was dealing with, whether it was the Agricultural Adjustment Act, the Social Security Act, the National Labor Relations Act, urban renewal in New Haven, or the war-peace studies of the CFR, I recognize that the depth of my knowledge on any given topic is suspect to lifelong specialists. However, I always took the time to learn the names of the established academic authorities on a given topic, and to read their work and the reviews of their work. I then situated my own efforts in relation to theirs. My past work on foreign policy also may have been ignored because I am not prepared to steer clear of new findings simply because they were developed by a historian that theorizes within a Marxian framework. Although my work on the National Labor Relations Act and Social Security Act convinced me that Marxists are far off base on the New Deal (Domhoff & Webber, 2011, pp. 235-241), I find the empirical work on the CFR and postwar foreign policy by Marxist historian Laurence Shoup, one of the two "avowedly Marxist" scholars referred to by William P. Bundy (Schulzinger, 1984, p. 227), to be excellent on the basis of my own reading and re-reading of the reports and recommendations written by the war-peace study groups, along with my further archival research on the origins of the IMF and the World Bank. However, I do find the presentation of Shoup's findings in his 1974 dissertation at Northwestern to be better formulated than in The Imperial Brain Trust (1977), his co-authored book with William Minter. I therefore generally prefer to cite Shoup's dissertation more than the co-authored book, as can be seen in the citations in this document up to this point. But I do not back away from my positive characterization of the main findings in the book, based for the most part on Shoup's dissertation, which I extolled in a Foreword to the book. With the likely objections to my emphasis on the role of the Council on Foreign Relations fully in mind, and with the charge of conspiratorial thinking always lurking in the background, I now turn to my account of how the American vision for the postwar world was shaped and realized, with the Vietnam War as one important consequence of that vision. The CFR and the "Grand Area" strategy World War II began in Europe in early September 1939. By September 12, CFR leaders were meeting with Assistant Secretary of State George Messersmith, a longtime member of the Council, to offer their services on postwar planning. Messersmith spoke later in the day with Undersecretary of Welles and Secretary of State Hull, both of whom expressed interest in the idea. Shortly thereafter CFR president Norman Davis talked with his friend Hull and received verbal approval of the plan (Shoup, 1974, p. 64). The State Department also conveyed its approval of the plan to the Rockefeller Foundation, which gave the Council $44,500 on December 6 to begin its work. This foundation support continued for the life of what turned out to be a five year project, and it amounted to over $10 million in 2013 dollars. Members of the State Department and the CFR met at Messersmith's home in mid December to finalize the arrangements. According to the plan, the Council would set up study groups to "engage in a continuous study of the courses of the war, to ascertain how the hostilities affect the United States and to elaborate concrete proposals designed to safeguard American interests in the settlement which will be undertaken when hostilities cease" (Shoup, 1974, pp. 64-66, quoting a CFR Memorandum). In short, the postwar national interest was to be the main concern of the Council's work. "Studies of American Interests in the War and the Peace," as the project was officially named, began with five study groups: Economic; Financial; Security and Armaments; Territorial; and Future World Organization. However, the first two were quickly made into one Economic and Financial Group, and the Future World Organization Group became the Political Group. Later, in May 1941, a Peace Aims Group was created to ascertain the peace aims of other countries through private discussions in New York with their leaders and representatives. Each group had a leader, or "rapporteur" in council language, along with a research secretary and 10 to 15 members. Three of the groups had co-rapporteurs. Almost 100 people participated in the groups between 1940 and 1945. They were a cross section of top level American leadership in finance, business, law, media, universities, and the military, and they included academic experts in economics, geography, and political science as well as White House advisers and other government advisers. "Through these individuals," Shoup (1974, p. 68) reports, "at least five cabinet-level departments and fourteen government agencies, bureaus, and offices were interlocked with the War Peace Studies at one time or another. They collectively attended 362 meetings and prepared 682 separate documents for the Department of State and President. Up to 25 copies of each recommendation were distributed to the appropriate desks of the Department and two for the President." Unknown to anyone until 1945, the several Soviet spies working in the State Department and White House at the time very likely sent copies of these reports to the Politburo and Stalin, so the American plans were probably accessible to Soviet strategists at the time (Haynes & Klehr, 1999; Haynes, Klehr, & Vassiliev, 2009; Weinstein & Vassiliev, 1999). Isaiah Bowman, president of Johns Hopkins University, a director of the Council, and one of the nation's leading geographers, was the leader of the Territorial Group. His role within the CFR and in the government from the 1920s to 1950s has been outlined in impressive detail in a biography by geographer Neil Smith (2003). Whitney H. Shepardson, a lawyer businessman in New York, headed the Political Group; he had served as an assistant to Woodrow Wilson's closest adviser, Colonel Edward M. House, at the Paris Peace Conference and helped found the Council. In 1942 he went to London to help set up a parallel set of committees with the Royal Institute of International Affairs, which was the British counterpart to the CFR. International lawyer Allen W. Dulles, later the president of the CFR in the late 1940s and the head of the CIA in the Eisenhower Administration, along with The New York Times' military expert, Hanson W. Baldwin, were co-leaders of the Security and Armaments Group. Hamilton Fish Armstrong, editor of the Council's Foreign Affairs and a major figure in the overall war peace studies as vice-chairman under Davis, was the leader of the Peace Aims Group. The key figures in the Economic and Financial Group, which played the most prominent role in several of the issues of primary concern in this document, were two former presidents of the American Economic Association, Jacob Viner and Alvin H. Hansen. Viner, a professor at the University of Chicago, was the most highly regarded international economist of his era. He began his career of advising government and policy groups during World War I and was an adviser to the Council on Foreign Relations throughout the 1930s as well as an advisor role to the Department of Treasury. Hansen, who went to Harvard in 1938 from the University of Minnesota at the time, was the most visible and renowned Keynesian economist in the country (Galbraith, 1971, pp. 49-50). He had numerous advisory roles within the federal government, serving as a consultant to the State Department, Federal Reserve Board, and National Resources Planning Board, among others, during the time of his involvement with the Council project. On the basis of their backgrounds, neither Viner nor Hansen could be considered a likely candidate for an important advisory position. Both were raised in modest financial circumstances far from the centers of American wealth and power. Viner was born in Canada and did not become a citizen until he was 22 years old; however, he did receive his Ph.D. at Harvard and rose quickly in the professorial ranks at the University of Chicago. Hansen was born and raised in South Dakota, the son of immigrants from Scandinavia, and he worked as a schoolteacher and school principal before earning his Ph.D. at the University of Chicago at the age of 32. He did not arrive at Harvard until he was nearly 50, about the same time he became a Keynesian. Both Viner and Hansen, then, are testimony to the social mobility that is possible through involvement in American academic circles. Despite differing theoretical orientations, Viner and Hansen worked closely in the Economic and Financial Group, and they were joined by other economists with a similar range of views, including Percy Bidwell, Winfield Riefler, Eugene Staley, and Arthur Upgren. William Diebold, Jr., served as research secretary. The fact that experts of diverse orientations were hired by the CFR for its project suggests a flexibility and farsightedness said to be lacking in the higher circles by many skeptics about the ability of at least some corporate leaders to look at the big picture and think ahead. The Economic and Financial Group had two direct connections to the White House. The first was economist Lauchlin Currie, an early Keynesian who had worked at the Federal Reserve Board in the mid I 930s and joined the White House in 1939 as Roosevelt's administrative assistant with special duties in the field of economics, a position he held until 1945. He was considered the White House liaison to the group (Roosevelt Papers: Official File 3719, November 27, 1941). He joined the discussion group officially in February 1943. (He was also a Soviet spy, it turned out (Haynes & Klehr, 1999; Haynes, et al., 2009).) Benjamin V. Cohen, a New York corporation lawyer famous for his partnership with Thomas Corcoran in crafting important New Deal legislation, including the Securities and Exchange Commission Act and the Public Utilities Holding Company Act, was the other Economic and Financial Group connection to the White House was. He joined the in September 1941. The Economic and Financial Group later developed ties with a new policy discussion group, the Committee for Economic Development (CED), which was created in 1942 by moderate conservatives within the corporate community that had close relationships with the Department of Commerce. One of the founders of the CED, business executive Ralph Flanders, joined the Economic and Financial Group in July 1942. Another important connection between the CFR and the CED was provided by one of the aforementioned economists, Arthur Upgren, who had a major role through the Commerce Department in organizing the CED (Collins, 1981; Domhoff, 2013, for details on the origins and ongoing efforts of the CED). At the same time as the CFR was organizing its study groups, the Department of State created its own internal structure for postwar planning. In mid September 1939, after a series of meetings with council leaders, Hull appointed a special assistant, Leo Pasvolsky, to guide government postwar planning. Shortly thereafter, on December 12, Pasvolsky drafted a plan for a new departmental division to study the problems of peace and reconstruction (Shoup, 1974, p. 70). Then, in late December, the department formed a policy committee named The Advisory Committee on Problems of Foreign Relations, with Undersecretary Welles as chairman. All members were officers of the State Department except Davis of the CFR and lawyer George Rublee, a founding member of the CFR and the director of the federal government's Inter-governmental Committee on Political Refugees. It is important to look more closely at the State Department's planning structure and personnel in order to understand the central role played by the CFR. First, the special assistant to Hull, Leo Pasvolsky, had been an employee of the Brookings Institution, a private think tank, from 1923 to 1935, and then received his Ph.D. in international economics from Brookings in 1936. He also had been a member of the CFR since 1938. After working for the Bureau of Foreign and Domestic Commerce in 1934-35 and the Division of Trade Agreements within the Department of State in 1935-36, he became a special assistant to Hull from 1936 to 1938, and then again from 1939 to 1946, when he returned full time to the Brookings Institution until his death in 1953. All this suggests that Pasvolsky was as close to private postwar economic planners as he was to the decision-makers on foreign policy. The division of policy studies envisioned by Pasvolsky in his memorandum of December 12, 1939, did not come into being until early in 1941 due to the lack of personnel in the department. Indeed, Pasvolsky's memorandum indicated that the division's own research would be minimal at first and stated that it "would stress assembly of materials and the attempt to influence the research activities of unofficial organizations (Shoup, 1974, p. 71, his paraphrase of the memorandum). Not to mince words, any early planning would come from the Council under the general guidance of the State Department. Much of this guidance came from Pasvolsky himself, who regularly attended meetings of the Economic and Financial Group. As for the state department's policy level Advisory Committee on Problems of Foreign Policy, it did very little before it became defunct in the summer of 1940 because the pressure of immediate events was too great for thinking about postwar problems in the understaffed department as the war in Europe escalated in 1940. It was not replaced until late December 1941, after the United States had entered the war, when it was enlarged and renamed the Advisory Committee on Postwar Foreign Policy. It is in this context of meager state department postwar planning, then, that the Council carried out its own postwar planning efforts. Furthermore, as the previous several paragraphs demonstrate, the CFR had direct connections with Hull, Welles, and Pasvolsky. It was an ideal situation in which an outside group could have great influence. That is, the part of the government concerned with foreign policy was both understaffed (and therefore "weak") and permeable, which meant that outsiders such as the members of the CFR might be able to influence it directly. As already noted, the earliest and most important council planning for the purposes of this section took place within the Economic and Financial Group. It began modestly with four papers dated March 9, 1940. They analyzed the effect of the war on United States trade, concluding that there had been no serious consequences up to that point. Similarly, five papers dated April 6 were primarily descriptive in nature, dealing with the possible impact on American trade of price fixing and monetary exchange controls by the belligerents. Two papers dated May 1 provide an indication of the direction council planning might take. The first of these papers warned that a way would have to be found to increase American imports in order to bring about a necessary increase in exports. The second concluded that high American tariffs had not had a big influence in restricting American imports. Although reducing tariffs would help to increase imports, boosting industrial activity and consumer income would do even more to increase them. Given the almost exclusive emphasis Hull put on reducing foreign and domestic tariffs to foster the international economy he single mindedly sought, this conclusion is the first piece of evidence that the Council was going to develop its own analysis rather than reinforcing the State Department's usual conception of the national interest in relation to economic issues. Thus, because many scholars who study international relations and American foreign policy believe that State Department economic policy was based on an amorphous "Wilsonianism" between 1940 and 1947, any divergences between Hull and the Council perspective are evidence for CFR influence. The Nazi invasion of France in May 1940 and the subsequent attack on Great Britain turned the attention of both the State Department and the Council to the problem of stabilizing the economies of Latin American countries that previously had depended upon their exports to continental Europe. There were numerous meetings and exchanges of information between State and the Council from May to October in relation to this work. At a plenary meeting of all council groups on June 28, the project's official contact with the State Department, Hugh R. Wilson, urged that materials given to the department should be couched as practical recommendations (Shoup, 1974, p. 91). Pasvolsky then outlined the close relationship that had developed, stating that: He had gone over many details with Mr. Hansen, had suggested some directions of work, and had pointed out to Mr. Hansen the great usefulness of the work already done. The relations between the groups and the State Department were such that, for economic matters, he might be asked at any time about the usefulness of a proposed investigation. He did not think lack of knowledge of general policies ought to prove a serious obstacle. (Shoup, 1974, p. 91, quoting CFR Memorandum E-A10, June 28, 1940). On June 10, State Department planners suggested it might be necessary to set up a single trading organization to market all surplus agriculture production in the Western Hemisphere. This would make it possible to bargain in the face of Germany's great economic power. However, it was realized that this kind of solution was not in keeping with American values and would be criticized by the corporate community. When Roosevelt asked on June 15 for a recommendation by June 20 on what to do about the economic problems of Latin America, it was decided that as an interim measure the government's Reconstruction Finance Corporation should supply the money to buy the surplus products. On September 26, Congress gave the Reconstruction Finance Corporation $500 million to carry out this policy. Moreover, the Economic and Financial Group had concluded in a paper of June 7, three days before the first State Department memorandum, that a "Pan-American Trade Bloc" would not work because it would be weak in needed raw materials and unable to consume the agricultural surpluses of Canada and the southern half of Latin America. There were too many national economies in the hemisphere that were competitive with each other rather than complementary. Furthermore, economic isolation in the Western Hemisphere would cost the United States almost two thirds of its foreign trade (Shoup, 1974, p. 102). As if that were not enough, CFR planners shortly thereafter concluded that any Western Hemisphere cartel for selling to Germany was doomed to failure because the self-sufficiency of the German bloc was such that it could not be forced to trade with the Western Hemisphere (Shoup, 1974, p. 106). It was in analyzing this problem that the Council began to define the national interest in terms of the minimum geographical area that was necessary for the productive functioning of the American economy without drastic controls and major governmental intervention, both of which were out of the question for the entire corporate community and Wall Street. A report of June 28, entitled "Geographical Distribution of United States Foreign Trade: A Study in National Interest," showed both the increasing importance of the country's manufacturing exports as compared to agricultural exports and the increasing importance of Asia and Oceania for both exports and imports. As Shoup (1974, pp. 107-108) summarizes, "They concluded that the Far East and Western Hemisphere probably bore the same relationship to the United States as America had to Europe in the past — a source of raw materials and a market for manufactures." Equally important, and essential in understanding the hegemonic role undertaken by the United States, other studies soon concluded that the economies of Great Britain and Japan could not function adequately in harmony with the American economy without a large part of the world as markets and suppliers of raw materials. It was emphasized that Japan's trade needs could be accommodated as part of a larger solution to world economic problems, but that the United States' problems could not be solved if Japan excluded the American economy from Asia. This economic argument, as argued in detail in section three, provides the starting point for the policies that later led to the application of a communist containment policy to Southeast Asia and then to war in Vietnam. While strategic and ideological dimensions were later added to concerns about Southeast Asia, it is the critical economic issue in relation to the British and Japanese economies that is usually overlooked in most standard accounts of American postwar foreign policy. The council refined its analysis from July through September with "detailed study of the location, production, and trade of key commodities and manufactures on a world wide basis and within the framework of blocs [of nations]" (Shoup, 1974, p. 109). The four blocs were (1) the Western Hemisphere, (2) continental Europe and Mediterranean Basin (excluding the Soviet Union), (3) the Pacific area and Far East; and (4) the British Empire (excluding Canada). Due in good part to the export competition between the southern countries of Latin America on the one hand and Australia, New Zealand, and India on the other, Great Britain itself was seen as an essential market for dealing with agricultural surpluses. Only with Great Britain included was there a non German area that was self sufficient and harmonious, as a memorandum of September 6 concluded (Shoup, 1974, p. 110). These economic issues were embodied in CFR Memorandum E-B19 of October 19, 1940 that was the first full statement of the national interest from the CFR. It "set forth the political, military, territorial and economic requirements of the United States in its potential leadership of the non German world area including the United Kingdom itself as well as the Western Hemisphere and the Far East" (Shoup, 1974, p. 111, quoting E-B19). After summarizing changes in the nature and direction of American trade, it stated that "the foremost requirement of the United States in a world in which it proposes to hold unquestioned power [my italics] is the rapid fulfillment of a program of complete re armament" (Shoup, 1974, p. 113, quoting E-B19). The maintenance of British resistance to the Nazis would have to be supported through new forms of aid, as had been suggested in a brief memorandum of October 15. Also necessary was the "coordination and cooperation of the United States with other countries to secure the limitation of any exercise of sovereignty by foreign nations that constitutes a threat to the minimum world area essential for the security and economic prosperity of the United States and the Western Hemisphere" (Shoup, 1974, p. 113, quoting E-B19). Finally, there would have to be new monetary, investment, and trade arrangements, which are discussion in the second section of this document. The introduction to this document makes quite clear what the American political and economic interests were in aiding Great Britain in its war with Germany: political concessions by the British and more favorable economic arrangements for the U.S. economy. It is astoundingly blunt: The most important features of the immediate war situation — the continued resistance by Britain and certain military and naval implications growing out of it — are considered. These relate to the extent to which the United States, by more extensive expenditures in both a geographic and a financial sense, some of which may be actually a quid pro quo for desired political arrangements, may secure a larger area for economic and military collaboration, thus minimizing costs of economic readjustments that would be greater for a smaller area. (CFR Memorandum E-B19, 1940, p. 1, italics in the original) This breathtaking memorandum was discussed by members of all four study groups then in existence, and with Pasvolsky present as well, on October 19, 1940, the date it was issued. When the question of Japanese expansion arose, Pasvolsky suggested a study of economic warfare, including an emphasis on the effectiveness of the American trade sanctions against Japan that were beginning at the time. The result was a memorandum of November 23 detailing the great vulnerability of Japan to such sanctions by the United States. Secretary of War Stimson and several other cabinet members already were advocates of an oil embargo, but military leaders feared the United States was not yet prepared militarily for any hostilities (Langer & Gleason, 1953, pp. 34-35). Members of the Political Group present at the plenary session doubted that Germany would settle for a stalemate in the war, so Pasvolsky suggested that the Political Group might "suggest blocs that it thought might result from the war, and then see what could be done in economic terms within each area. There would be two cores to start on; the first, Germany and the minimum territory she could be assumed to take in the war; the second the United States. Working outward from these cores, one could build up several possible blocs on a political basis, and then examine their economic potentialities" (Shoup, 1974, p. 11, quoting E-A10). State Department planners at the staff level, inactive from July to October on postwar questions, resumed their meetings on October 15. They had been organized as the Interdepartmental Group to Consider Postwar Economic Problems and Policies because the group now included representatives from the Tariff Commission, the Federal Reserve Board, and the Agriculture, Treasury, and Commerce departments. Pasvolsky, as chair of the group, proposed a series of commodity studies that paralleled those already completed by the Council; he also gave all members a set of the CFR studies (Shoup, 1974, pp. 124-127). The interdepartmental group's work on commodity issues was more extensive than that of the Council because of the greater resources the departments and agencies had received by that point, but the "the Council's initial goal of giving direction to the work of the government had clearly been achieved" (Shoup, 1974, p. 128). As the State Department resumed its planning studies, the Political Group at the CFR refined its questions about several of its basic assumptions in an October 19 report for the Economic and Financial Group. It reaffirmed its belief that Germany would not cease its efforts against Britain under any circumstances, meaning that the prolonged coexistence of a German bloc and an American led bloc was politically unlikely even if it were economically feasible. The Political Group also questioned the political viability of one non German bloc dominated by the United States; such a large area might bring charges of imperialism and perhaps alienate some Latin American countries. The Political Group therefore raised the possibility of two democratic blocs in the non German world, one led by Britain, one led by the United States, with close coordination between the two. Finally, the Political Group raised the possibility that economic sanctions would not make Japan more open to negotiations (Shoup, 1974, pp. 132-134). In other words, there were differences in perspective between the Political Group and the Economic and Financial Group that needed to be ironed out. Members from all council planning groups attended a general meeting to discuss these issues on December 14, 1940, still a full year before American entry into the war. While some disagreements remained after the meeting, a general consensus was reached on three key issues. First, most participants thought there was a need to plan as if there would be a Germanized Western Europe for the immediate future; however, everyone agreed they preferred the defeat of Germany and the integration of Western Europe into the Western Hemisphere/Asia/British Empire bloc, which was now being called the "Grand Area." Second, there was general agreement that the Grand Area could not be broken into two democratic blocs because of the danger that Great Britain might try to maintain its empire and exclude the United States from free trade and investment within it. Third, it was agreed that important American economic and strategic interests in Asia were being threatened by Japanese expansionism. The conclusions concerning American interests in Asia were considered so pressing that they were embodied in a memorandum dated January 15, 1941, under the title "American Far Eastern Policy." Using one quote from within this policy report, Shoup (1974, p. 137) summarizes the new perspective on the American national interest in Asia as follows, and in the process demonstrates the strategic factors that combined with economic issues in shaping postwar policies toward Southeast Asia: The main interests of the United States in Southeast Asia were dual in nature. The first was purely economic. The memorandum stated that the "Philippine Islands, the Dutch East Indies, and British Malaya are prime sources of raw material very important to the United States in war and peace; control of these lands by a potentially hostile power would greatly limit our freedom of action." The second CFR concern was a strategic one that had political, economic, and psychological aspects. A Japanese takeover of Southeast Asia would impair the British war effort against Hitler, threatening sources of supply and weakening the whole British position in Asia. It was feared that many people might view a Japanese takeover in that region as the beginning of the disintegration of the British Empire. In addition, there was concern that Australia and New Zealand might decide to focus on home defense (Shoup, 1974, p. 137). The report therefore suggested that the United States should take the initiative by (1) giving all possible aid to China in its war with Japanese invaders, (2) building up the defenses of countries in Southeast Asia, and (3) cutting off American exports to Japan of such materials as steel armor, machine tools, copper and zinc under "the excuse of our own defense needs" (CFR Memorandum E-B26, January 15, 1941, p. 3). In late February 1941, when trade sanctions already were being imposed on Japan, the State Department began its own studies of the possibilities of full economic warfare with Japan. Sixteen commodity committees were created "to determine which United States exports to Japan were essential to that country" (Shoup, 1974, p. 140). Two reports were completed by late March and early April, and 38 additional studies by August 1. Inevitably, these studies led to the abandonment of postwar planning by the aforementioned Interdepartmental Group because the commodity studies required the services of all available government staff. The CFR was once again left with the main planning capability on postwar issues. In early 1941, two closely related issues dominated the planning of council leaders now that the conception of the Grand Area had been firmly established in general discussions at the end of 1940. The first was to gain the acceptance of the Grand Area strategy by both American and British decision makers. This goal was pursued by pressing for a joint British American statement of war aims. The second issue concerned the planning of the economic and political organizations that would be needed to integrate the Grand Area; this problem led to a report on tariffs and preferences as integrating mechanisms in February 1941 and to several reports in the second half of 1941 on new international monetary, investment, and development organizations. The issue of war aims turned out to be an immensely tangled one for a variety of reasons that will be explained shortly. The issue of economic integrating mechanisms is not central to my purpose here, so it is dealt with in great detail in the second section to show the role of CFR planners in the creation of the IMF and the World Bank. Before turning to the problem of establishing war aims, it is important to state that CFR leaders and planners began to take positions within the government in 1941, a process that was to be intensified greatly a year later. For example, when an Economic Defense Board headed by Vice President Henry Wallace was established on July 30, 1941, to consider postwar economic issues, Wallace appointed economist Riefler of the Economic and Financial Group as his chief adviser. About the same time, Upgren, an economist in the same planning group, became head of the newly created National Economics Unit within the Department of Commerce. It was from this position that he performed staff functions in creating the Committee for Economic Development. Finally, Hansen was appointed as the United States chairman of the Joint Economic Committee of the United States and Canada (Shoup, 1974, p. 160). It is likely that these positions provided CFR economists with new avenues for arguing the Council perspective. At the least, they were listening posts from which more could be learned in terms of government thinking concerning postwar planning, making the government even more vulnerable to penetration by private elites. The first report from the Economic and Financial Group concerning war aims, dated April 17, 1941, began with an analysis of what government leaders in various countries had said up to that point relating to war aims. After characterizing the main themes, it noted that both Churchill and Roosevelt had avoided specific statements because they believed that defending freedom by defeating the Nazis was war aim enough. Rather than recommending specific war aims at the time, the report ended with several suggestions for the "tenor" of war aims. These suggestions were based on the assumption "that the United States and Great Britain have a somewhat similar interest in a more closely integrated world economic order" (CFR Memorandum E-B32, p. 13). First, national self determination should be qualified because "a more closely integrated world economic order will almost certainly require some restrictions on sovereignty." Second, "stress should be laid on economic harmony as basic to political liberty and national security." Third, government should guarantee the economic security of individuals. Fourth, specific aspects of reconstruction should be discussed. Fifth, "the benefits of a world economy should be contrasted with autarchy." Finally, no war reparations should be demanded of enemy countries, and aims should apply to the whole world (CFR Memorandum E-B32, p. 14). Council leaders pushed their concern for a war-aims statement more vigorously at the dinner meetings held by Vice President Wallace to discuss postwar goals. A meeting on May 3, 1941, was especially important because it produced a lengthy memorandum to the president. Thirteen of the nineteen people present at the dinner were connected with the CFR, including such important figures in the war peace studies as Armstrong, Bowman, Dulles, Hansen, Riefler, and Viner. A detailed history of the Atlantic Charter of August 1941, which was the first public statement of American British war aims, treats this memorandum at great length and concludes that "It is notable that a good many of the phrases in the 'Memorandum' recur in the Atlantic Charter" (Wilson, 1969, p. 299, footnote 12). I think this overlap in language provides another type of evidence for the importance of the CFR planners within government at this point, which supplements evidence based on personal access to decision-makers and direct appointments for CFR members,. The memorandum urged a conference between the president and Churchill. It stated as a first principle that America "should and would take much more responsibility in the coming peace than in the peace which is now past" (Wilson, 1969, p. 176, quoting the memorandum). It said the United States should claim a dominant position in the postwar world. It stressed that "it is important to come to agreements while Great Britain is willing to deal" and that there should be "an immediate opening of conversations leading to the establishment of common institutions." In addition, it suggested that an agenda for such discussions should include "immediate and joint action," discussion of access to raw materials, and plans for postwar cooperation. Finally, the memorandum suggested "a statement of our alternative to Hitler's new order," and reminded the president that "the need for a vigorous lead was repeated over and over.... Without outspoken leadership, we are in the position of fighting something with nothing" (Wilson, 1969, pp. 177-178). The council made a formal recommendation concerning war aims on June 22 in a document that is seen as providing important background for postwar planning by historian Alfred Eckes (1975, pp. 37-38). It began with the two functions of war aims — propaganda and the definition of the national interest — and analyzed the relationship between them: Statements of war aims have two functions: propaganda and definition of national interests. The latter is undoubtedly the more difficult and is of basic importance, as a failure of propagandistic and promissory war aims to correspond to the accepted view of national interests might jeopardize the entire peace settlement. Therefore, our national interest must first be defined so that promises incompatible with it may be avoided. It is with this aspect of war aims that the present memorandum is concerned. (CFR Memorandum E-B36, June 22, 1941, p. 1) The document then defined the national interest as: (1) the full use of the world's economic resources implying full employment and a reduction in business cycle fluctuation; and, (2) the most efficient use of the world's resources implying an interchange of goods among all parts of the world according to comparative advantages of each part in producing certain goods. (CFR Memorandum E-B36, 1941, p. 1) Based on these interests, it called for postwar international anti-depression policies, new policies on monetary stabilization and investment, international commissions for special purposes, and a lowering of trade barriers. It concluded: One clear and explicit statement must accompany any such list of American war aims: A declaration that the United States, because it recognizes that its interests are in the proper functioning of a world economy, has worldwide responsibilities, and will take part in schemes of international economic cooperation, whether involving new international institutions or only negotiations between governments and will make concessions in its own economic policy to help establish the new requirements provided, of course, that other countries will do the same. (CFR Memorandum E-B36, 1941, p. 5) The Political Group added a political dimension to the issue of war aims on July 10. It said that the most important aim was "the decisive defeat of the Axis aggressors as rapidly as possible," calling for total American mobilization and full military collaboration with Great Britain, "regardless of risk." The second aim was the restoration of civil order, including the political reconstruction of Germany to make it an "acceptable member of the international community." Third, there was a need for the establishment of an effective system of international security, essentially through a joint policing effort by the United States and Great Britain (CFR Memorandum P-B23, July 10, 1941, pp. 1-2). The CFR statements on war aims are also notable for what they do not emphasize as a panacea: the simple doctrine of free trade espoused by Hull. In the April 19, 1941 memorandum, the emphasis on a world economy is coupled with a criticism of making free trade the central focus. "Positive measures of government policy," meaning the kind of international economic organizations envisioned by the planners, are essential, and there was an explicit rejection of mere "free trade." However, it continued: ...the issue should not be cast in terms of free trade versus autarchy. It is doubtful if the idea of free trade now has very much appeal save to a small group of businessmen and economists. Nor is it likely that anything approaching free trade will be achieved for a long time to come. Rather, we should stress the value to all concerned of a greater interchange of goods, to be brought about in part by a removal of trade barriers and in part by positive measures of government policy. (CFR Memorandum E-B32, April 1941. p. 14) Similarly, the report on war aims of June 22, 1941, contained a paragraph on free trade that is even more openly critical of Hull's approach: Old shibboleths should play no part in a statement of war aims. For instance, "free trade" sounds attractive to relatively few people and conveys an idea of reversion to the past rather than a willingness to accept a flexible approach to new problems. Such phrases also tend to paralyze the thinking of those addicted to them, by appearing as cure alls. When used, these ideas should be conjoined with other proposals indicating awareness of the new techniques required by complex difficulties. (CFR Memorandum E-B36, 1941, p. 3) Council planners also emphasized their criticisms of the free trade approach in published statements. For example, the research secretary for the Economic and Financial Group, William Diebold (1941, p. 111), in his book on New Directions in Our Trade Policy, stated the larger and more power oriented view of council planners as follows: "The war has made it crystal clear that trade policy is an instrument of foreign policy which must be made to serve the national interest as a whole rather than the limited ends implied in the slogan 'to promote foreign trade.'" What the Council leaders had in mind for the postwar world, then, was far more than "Wilsonianism" based in "Lockean liberalism," as many academic experts on international relations would have it. Instead, CFR spokespersons saw the United States as a nation that should use its political and military power to create the international economic and political institutions necessary for the expanding world economy they believed essential for the proper functioning of the American, British, and Japanese economies. However, two problems faced council planners in trying to establish this outlook as the national interest, and it was not until 1942 that these obstacles were fully overcome. The first was that Roosevelt did not want to go beyond general statements of objectives because he did not want arguments with allies, and in particular the British, over specific policies and institutions (Dobson, 1986, p. 65). He also wanted to avoid arousing the strong isolationist voices in Congress who were speaking against any statements or steps that might commit the United States to join the actual fighting. The second problem was that the British wanted to delay discussions of common economic actions as long as possible with the hope they would be able to obtain better terms if the United States entered the war. That said, persuading Roosevelt to make war aims explicit was not an insurmountable task because he already shared an internationalist vision. For him such a statement was a matter of timing, which is the rightful province of a brilliant political leader in charge of a government during a time of war. But persuading Britain was another matter. It was greatly weakened financially by American demands that it pay cash for goods from 1939 to 1941, sell off assets in the United States to pay for goods, and limit commercial exports, which made it difficult to develop financial reserves. Great Britain thus feared it would be totally subordinated after the war by the United States, as indeed it was. Furthermore, the British were not confident the Americans would adopt the economic policies that would be needed to prevent another world depression. Although their planners were in fairly close formal and informal contact with council planners, as demonstrated in section two of this document, there would still be the problem of dealing with Congress after the war. There even was doubt among the British that Hull was serious about his emphasis on free trade. The American position in talks in 1941 over trade in wheat, for example, was highly discriminatory in favor of American farmers, and completely contradicted Hull's grand principles even though he claimed otherwise (Dobson, 1986, pp. 80-84 and Chapter 4). It is therefore not surprising that the British-American statement on postwar economic aims in the Atlantic Charter was satisfactory to neither Hull nor the Council leaders. The statement had an escape clause on free trade that disappointed Hull, and its lack of any statement beyond free trade and equal access to raw materials was not enough for council leaders. The upshot of several days of cagey bargaining between American and British leaders, recounted in detail in Wilson (1969, Chapter 9) and Dobson (1986, Chapter 3), was a laudatory general statement of war aims that only spoke as follows on key economic issues: "They will endeavor, with due regard for their existing obligations, to further the enjoyment by all States, great or small, victor or vanquished, of access on equal terms to the trade and raw materials of the world" (Wilson, 1969, p. 200). CFR leaders reacted to this statement with five brief reports that analyzed its implications and suggested ways to spell out economic cooperation more fully. The fifth of these reports, formally dated January 3, 1942, but already shared and discussed with State Department officials two months earlier, suggested a joint British-American declaration devoted to economic issues. It was similar to what State Department officials had been proposing to the British in the context of other negotiations to be discussed shortly, but it emphasized positive government measures and international collaboration as well as freer trade: A just and durable peace requires that governments make it their purpose to collaborate on an international basis for the promotion of full employment, increased production, higher living standards, improved labor conditions, social security, and economic stability, in their own countries and throughout the world. In recognition of this fact, the two Governments declare that: (A) In their relations with each other and with other countries, they intend to pursue appropriate and coordinated economic policies, in which all countries are invited to participate, that have as their objective the effective world wide use of the world's productive resources of men and material, to further the purposes set out above. (B) In order to achieve and maintain the full and most effective world wide use of the world's productive resources of men and material, they intend to pursue within their respective countries on the basis of international collaboration, appropriate internal economic policies that have as their objective the full use of each country's domestic productive resources of men and material. (CFR Memorandum E-B45, 1942, p. 1) Dissatisfaction with the Atlantic Charter as a statement of war aims also strengthened the resolve of state department officials and CFR leaders to obtain a more explicit statement of British cooperation in the context of the ongoing "lend lease" negotiations. These negotiations were an attempt to establish what "considerations" Great Britain would provide after the war in exchange for the vast amount of free war aid the United States had been providing since late March 1941. (Here a brief historical reminder may be in order: A congressional bill, passed on March 11, 1941, gave the president a free hand in deciding the nature of what future British repayment would be in exchange for the lend-lease aid of war materiel, foodstuffs, and other necessities to support the British against the Nazi attack.) In early discussions of what the considerations should be, officials in the Treasury Department thought in terms of such noncash repayments as returning undamaged military equipment and providing raw materials. When the State Department took over the negotiations in May 1941, however, the emphasis switched to "considerations" relating to the ordering of the postwar world. The idea was to use the Lend Lease Agreement to force the British to open up their empire to the American economy and to join the United States in creating a multilateral world economy (Dobson, 1986, pp. 41-46). It was in part British resistance to these demands that led the State Department to try to use the meeting between Roosevelt and Churchill in August 1941 to realize its objectives. When that approach was only partially successful, the battleground returned to the Lend Lease Agreement. Finally, in February 1942 (and here I am telescoping an extremely complicated set of negotiations that will be discussed again in the second section), Roosevelt insisted on closure on the issue. Shortly thereafter, the British agreed to a statement more acceptable to the State Department. Hull later called the statement the "foundation" for "all our postwar planning in the economic field" (Eckes, 1975, p. 40). Council planners also were satisfied with it because it did not begin and end with free trade, and clearly incorporated some of their thinking. The key statement contained several echoes of the Council's proposed joint statement cited above: "In the final determination of the benefits to be provided to the United States of America by the Government of the United Kingdom in return for aid furnished under the Act of Congress of March 11, 1941, the terms and conditions thereof shall be such as not to burden commerce between the two countries, but to promote mutually advantageous economic relations between them and the betterment of world wide economic relations. To that end, they shall include provision for agreed action by the United States of America and the United Kingdom, open to participation by all other countries of like mind, directed to the expansion, by appropriate international and domestic measures, of production, employment, and the exchange and consumption of goods, which are the material foundations of the liberty and welfare of all peoples; to the elimination of all forms of discriminatory treatment in international commerce, and to the reduction of tariffs and other trade barriers; and, in general, to the attainment of all the economic objectives set forth in the Joint Declaration made on August 14, 1941, by the President of the United States of America and the Prime Minister of the United Kingdom" (R. Gardner, 1980, pp. 56-59). This statement reveals the considerable congruity between council statements and official government aims. So do other public statements, reports, and actions by government officials during 1941 concerning the national interest, which are very similar to what is found in council memorandums in 1940. On February 21, for example, Assistant Secretary of State Dean Acheson, who was involved in planning discussions based on war-peace documents within the state department, spoke on "World Crisis and the American Farmer" to a farm audience in Des Moines, Iowa. He began by saying that "Future solidarity of the Americas in the interest of hemisphere defense involves economic problems of a long range character. The Western Hemisphere, as its economy is organized today, produces vast surpluses of agricultural and other extractive products which have hitherto been disposed of in markets outside the Western Hemisphere" (Shoup, 1974, p. 142, quoting Acheson). Although some steps could be taken to deal with these surpluses within the hemisphere, Acheson went on, the fact was that the economies of countries in the Western Hemisphere were closely related to those in other parts of the world. Because the hemisphere "does not contain the essential characteristics of a self contained economic area," it had to look elsewhere for market outlets for large surpluses of extractive products. Above all, this hemisphere must continue to have unrestricted access to the great British markets" (Shoup, 1974, p. 142, quoting Acheson). Lynn R. Edminister, a special assistant to Hull, gave a speech similar to Acheson's on May 21. Three key statements paralleling the CFR's Grand Area analysis read as follows: "Every possible advantage would be taken by totalitarian dictatorships of the dependence of this hemisphere upon over seas markets for the sale of its vast surpluses of agricultural and other extractive products. It follows from all this that our country should exercise leadership, in policy and action, in an endeavor to establish and maintain the largest possible sphere in the world within which trade and other economic relations can be conducted on the basis of liberal principles and of cooperation to the mutual advantage of all nations which are witting to participate. In laying the groundwork for future international economic cooperation, it is essential that we take all possible immediate steps to assure that the largest possible grouping shall be formed as the nucleus of such cooperation. To that end the closest possible cooperation between the United States and British empire is indispensable" (Shoup, 1974, pp. 167-168, quoting Edminister). Reports from the state department's Division of Research, which finally had been created in February 1941 with a three-person staff, also reflected similar postwar goals. Shoup (1974, p. 186) summarizes a report of September 11 as follows: Trade barriers had to be reduced and discrimination abolished to give all countries equal access to world markets and to increase trade generally. International monetary structures had to be set up, free from exchange controls and in such a way as to allow balancing of international payments with stable exchange rates. Also necessary were adequate facilities for international investment of capital and action to avoid depression. Another striking parallel appears in the rationale that was used in preparing for possible military action against Japan in late 1941. After Japan moved into Southeast Asia in July of that year, government leaders imposed an immediate embargo that led to lengthy and tense negotiations. The negotiations broke down in late November because Japan would not agree to the key American demand that it evacuate Chinese territory. The three top government decision makers who functioned as the War Council, Hull, Stimson, and Secretary of Navy Frank Knox, then decided that "Roosevelt should inform Congress and the American people that if Japan attacked Singapore or the East Indies the security of the United States would be endangered and war might result" (Shoup, 1974, p. 196). In a declaration that was preempted by the Japanese attack on Pearl Harbor on December 7, 1941, they stated the national interest in terms of assumptions very similar to those developed by council planners in the latter half of 1940. The first and sixth paragraphs read as follows: "This situation, precipitated solely by Japanese aggression, holds unmistakable threats to our interests, especially our interest in peace and peaceful trade, and to our responsibility for the security of the Philippine Archipelago. The successful defense of the United States, in a military sense, is dependent upon supplies of vital materials which we import in large quantities from this region of the world. To permit Japanese domination and control of the major sources of world supplies of tin and rubber and tungsten would jeopardize our safety in a manner and to an extent that cannot be tolerated. If the Japanese should carry out their now threatened attacks upon and were to succeed in conquering the regions which they are menacing in the southwestern Pacific, our commerce with the Netherlands East Indies and Malaya would be at their mercy and probably be cut off. Our imports from those regions are of vital importance to us. We need those imports in time of peace. With the spirit of exploitation and destruction of commerce which prevails among the partners in the Axis Alliance, and with our needs what they are now in this period of emergency, all interruption of our trade with that area would be catastrophic (Shoup, 1974.p. 197, quoting the document). Indeed, even the wording in this statement by the War Council has similarities to the "American Far Eastern Policy" report by the CFR's Economic and Financial Group dated January 15, 1941. That report began with the words "It is to the interest of the United States to check a Japanese advance into southeastern Asia," and then provides the following explanation in the second paragraph: The Philippine Islands, the Dutch East Indies, and British Malaya are prime sources of raw materials very important to the United States in peace and war; control of these lands by a potentially hostile power would greatly limit our freedom of action. Toward the Philippines we have special obligations of a historical and moral nature. A Japanese occupation of the countries of southeastern Asia would further injure our interests by weakening the British war effort against Hitler, as it would threaten the chief source of supply for the war in the Near East, lead the Australians and New Zealanders to concentrate on home defenses, and would have serious psychological repercussions throughout the world particularly in Asia, since it would appear to many as the beginning of the disintegration of the British Empire. Conversely, the frustration of Japanese plans for expansion would appear as a defeat for the totalitarian partners in the Tripartite Pact. (CFR Memorandum E-B26, p. 1) Once the United States entered the war with a definition of the national interest that at the very least can be called consonant with the aims of the CFR, council leaders worked closely with appointed officials to intensify planning efforts inside the government and to assure that these efforts were controlled within the State Department, not some other agency or department. On December 28, 1941, President Roosevelt decreed "all recommendations on postwar problems of international relations from all departments and agencies of the government should be submitted to the president through the Secretary of State" (Shoup, 1974, p. 200). This decision put the Department of Treasury and Vice President Wallace's Economic Defense Board, now renamed the Board of Economic Warfare, in subordinate roles. On the same day, the president also approved a new 14 member Advisory Committee on Postwar Foreign Policy. Council president Norman H. Davis had a large hand in its formation: "The immediate origins of the Advisory Committee on Postwar Foreign Policy can be traced to a September 12, 1941, memorandum drafted by Leo Pasvolsky in consultation with Norman H. Davis. Pasvolsky, acting on directions from Secretary Hull, proposed an Advisory Committee structure, noting that this suggestion was 'the result of a recent conversation between Mr. Norman Davis and myself, arranged in accordance with your desires in the matter. It has been read and approved by Mr. Davis" (Shoup & Minter, 1977, p. 148). The members of the Advisory Committee came primarily from the State Department and the CFR, which is worth reporting in detail to provide evidence that the CFR and the government were as tightly linked on postwar planning as I have claimed they were. Nine were government officials and five were private citizens chosen "because of their high personal qualifications for policy consideration and because of their capacity to represent informed public opinion and interests" (Notter, 1949, pp. 72-73). Four of the five private citizens (Armstrong, Bowman, Davis, and former United States Steel chairman Myron Taylor) were members of the Council on Foreign Relations. The fifth, New York Times journalist Anne O'Hare McCormick, could not be a council member because it was a male only organization until the 1970s. Of the government officials, four were also members of the CFR or its war peace groups, including White House adviser Cohen and planner Pasvolsky. (Later, in early 1943, after the Advisory Committee faded in importance, six of the members (Hull, Welles, Davis, Taylor, Bowman, and Pasvolsky) took the main responsibility for political issues and became known as the Informal Political Agenda Group. Roosevelt called them "my postwar advisers" (Shoup, 1974, p. 203). All but Hull were members of the Council, and two, Davis and Bowman, were highly involved in the war peace studies.) During 1941 and 1942, the Advisory Committee worked primarily through a series of subcommittees. Once again, the details on the members of these subcommittees are important in providing evidence of the close ties between the CFR and government planning at this point. Bowman, rapporteur of the CFR's Territorial Group, also chaired the government's Territorial Subcommittee. Davis chaired both the Security Subcommittee and the Coordination Subcommittee, whose function was to provide "contact with private organizations actively discussing postwar problems," a vague-sounding mandate that certainly included the CFR, and thereby legitimated its role as a governmental link to the private sector (Notter, 1949, p. 80). Welles chaired the Political Subcommittee. When a Special Subcommittee on European Organization was created in May 1943 to consider boundary questions and region-wide organizations, Armstrong chaired it. Of the eight members of the special subcommittee drawn from other subcommittees, five were members of the CFR or its war peace groups. As for the two members of the special subcommittee from outside the already established subcommittees, they were Percy W. Bidwell and Jacob Viner, revealing once again the importance of experts from the CFR's Economic and Financial Group to the government. Although the Advisory Committee and subcommittee appointments provided a close liaison between the CFR and the State Department at the policy level, council leaders nonetheless sought similar coordination at the research level as well. The issue was discussed at a meeting between council leaders and department officials on February 21, 1942: Early in this meeting Armstrong proposed that a decision about liaison and coordination between the Council on Foreign Relations and the Advisory Committee should be made. Welles then asked if the Advisory Committee could take over the research staff of the Council without disrupting its endeavors. Armstrong replied that the Council's labors might be seriously impaired and proposed instead that the research secretaries of the Council should work in the Department two or three days each week, attending the subcommittee meetings. The Council would thus be in 'close relation to the actual functioning of the Advisory Committee.' Welles agreed, stating that he 'wished to have the most effective liaison that could be devised' (Shoup, 1974, p. 208, with the two internal quotes drawn from the minutes of the meeting). Due to this rather extraordinary degree of coordination, the CFR's war-peace discussion groups held their meetings early in the week, freeing the research secretaries to meet with the departmental subcommittees later in the week. This allowed the secretaries the opportunity to communicate the research needs of the department to the Council groups. They were given the title of "consultants" and received travel expenses and a per diem allowance from the government. In my view, this combination of appointments at both the policy and research levels of the state department's postwar planning structure is powerful evidence that the Council played a major role in defining the postwar national interest. Moreover, additional evidence for the importance of these appointments arises from the fact that some regular staff members believed that the consultants were dominating the research work through prior consultation with each other and council leaders. In particular, Harley Notter, who later wrote the official departmental history of postwar planning, complained bitterly of the Council takeover in several memos to Pasvolsky in early 1942 (Shoup, 1974, pp. 247-249). Finally, in September, Notter drafted a letter of resignation stating his situation was no longer tenable for two reasons. The first was that he was receiving one set of instructions from Welles and another from Pasvolsky, which reflected a power struggle between Hull and Welles that included both personal conflicts and complex issues concerning the structure of the projected United Nations. The second concerned the power of the CFR within the department's Division of Research: I have consistently opposed every move tending to give it increasing control of the research of this Division, and, though you have also consistently stated that such a policy was far from your objectives, the actual facts already visibly show that Departmental control is fast losing ground. Control by the Council has developed, in my judgment, to the point where, through Mr. Bowman's close cooperation with you, and his other methods and those of Mr. Armstrong on the Committee, which proceed unchanged in their main theme, the outcome is clear. The moves have been so piecemeal that no one of them offered decisive objection; that is still so, but now I take my stand on the cumulative trend. (Shoup, 1974, p. 250, quoting a letter in the Notter File in the National Archives) Notter apparently changed his mind about resigning. The letter was never sent even though nothing changed in the relationship between the Council and the department. In his official history Notter (1949) gives no real sense of how large the Council's role was nor of his dissatisfaction with it. Tellingly, his superficial account of postwar planning is a major source for many inadequate histories of postwar planning. In addition to the personnel evidence for CFR involvement in government decision-making, it is also possible to show that the expressions of the national interest in 1942 were similar to the perspective advocated by the CFR. First, Shoup (1974, Chapter 8) summarizes a number of reports and speeches that provide evidence of this nature that is congruent with evidence I mentioned earlier in the document for 1941. Second, council planners inside and outside the State Department were the earliest and strongest proponents of an unconditional surrender by Germany and Japan, which was considered essential by CFR planners if their plans for a new world economic and political order were to be realized. Members of the Council's Political and Security/Armaments groups repeatedly emphasized the difficulties that arose after the armistice with Germany in World War I. The issue of armistice versus unconditional surrender was debated within the State Department in the Security Subcommittee headed by Davis. His call for unconditional surrender was supported by the army and navy representatives on the subcommittee, both of whom had been active in council groups and were selected for the subcommittee by Davis (Shoup, 1974, p. 232). According to a memorandum from Notter to Pasvolsky dated April 8, 1943, Davis and the two military officers dominated the proceedings of the subcommittee (Gaddis, 1987, 8; Shoup, 1974, p. 233). Third, the planning for international organizations to integrate the postwar world also provides evidence that the substance of the Council's earlier concerns was being taken as part of the national interest. The plans for the United Nations, worked out within the Informal Political Agenda Group with the aid of Pasvolsky and others, reflected the Council's interest in the political integration of the postwar world (Shoup, 1974, pp. 238-246). However, it is also true that such an organization was sought by other private groups and Hull as well (Divine, 1967). It further can be shown that the CFR's monetary objectives were embodied in the planning for the IMF within the Treasury Department, as will be demonstrated in great detail in the next section. There is much more than could be said about the scores of planning problems that had to be faced on economic, transportation, political, territorial, population, and reconstruction issues in the years between 1942 and 1945, and the war-peace groups produced hundreds of reports for government agencies relating to them. The task of analyzing these reports and their impact is one for future researchers. However, I believe enough has been said to show that the postwar international policies of the United States grew out of economic and strategic considerations that reflect the concerns, analyses, and goals of the CFR's war peace study groups between the years 1940 and 1942. In addition, the Council's definition of the postwar national interest had been accepted within the government by the end of 1942 at the latest. The only new postwar policy issue of major import that faced council planners and government decision-makers between 1943 and 1946 was the incorporation of the German economy and Western Europe into the Grand Area. Council planners worked diligently on this issue with State Department officials to defeat a last minute Treasury Department plan to deindustrialize Germany, which Morgenthau slipped into the appendix of a Roosevelt Churchill meeting at which the State Department was not represented. It turned out to be a tempest in a teapot, with the Morgenthau plan having no chance of being adopted (Shoup & Minter, 1977, pp. 189-195). In concluding this section, it is worth noting that the war-peace groups devoted little or no time to discussing the Soviet Union or communism, and offered no recommendations on these topics. While it is clear that none of the members of these groups liked the Soviet Union or communism, they were discussed primarily in connection with Eastern Europe. Recognizing the weak and underdeveloped nature of the fragmented economies in the small countries of that region, some council planners suggested the creation of an Eastern European customs union. Such a customs union might lead to a regional economy that could serve as a market for Western Europe and as a buffer against the Soviet Union (Shoup, 1974, p. 241). However, CFR leaders and government decision makers were divided as to the possibility of such an outcome. When Armstrong argued at a State Department subcommittee meeting on March 7, 1942, that steps should be taken to keep those countries from becoming communist, Assistant Secretary of State A. A. Berle, Jr., "immediately reminded Armstrong that Soviet help was indispensable for a United Nations victory and that the department should be cautious about moves to put hostile states on that country's borders" (Shoup, 1974, p. 241, paraphrasing State Department minutes). When Armstrong pressed the same point at a meeting of the department's Territorial Subcommittee on October 9, 1942, Bowman thought there was no choice but to accept a Soviet takeover of those countries (Shoup, 1974, p. 242). Historian John Gaddis (1972, p. 137) also uses comments by Bowman to suggest that by 1943 American decision makers were prepared to acquiesce in Soviet hegemony in Eastern Europe. In short, there was neither strong emphasis nor great unity on the question of Eastern Europe, the primary area where there was a threat of communism at the time. Germany and Japan were the dangers to the Grand Area as the necessary living space for the American economy, and neither the Soviet Union nor Eastern Europe was a part of that area. Thus, it seems very unlikely that the Cold War was due to any American desire to liberate or trade with Eastern Europe. It was a later development that has been intensely studied for many decades, and this document has nothing to add to that discussion except for the case of the Vietnam War. The Origins of the IMF and World Bank The starting point for understanding American postwar monetary policy and its growing economic dominance is in the policy discussions in 1940 and 1941 in the war-peace study groups of the Council on Foreign Relations. My case for this claim builds on the work of Eckes (1975), Notter (1949), Robert Oliver (1975), Shoup (1974), my own reading of the war-peace documents that relate to the origins of the IMF and World Bank, and my research in the Morgenthau Diaries and the papers of Jacob Viner and Alvin Hansen. The Economic and Financial Group, led by Viner and Hansen, was once again the most important of the study groups on a critical long-range economic issue. Viner was not only active in the CFR throughout the 1930s, he also was an adviser to Secretary of Treasury Henry Morgenthau during the New Deal; in 1934 he helped create and manage the exchange stabilization fund within the Treasury, which was a precursor of the IMF. In 1935 he helped Morgenthau in negotiating a pact with Great Britain and France through which national exchange stabilization funds were used to stabilize currency values (J. Blum, 1959, Chapter 4). This Tripartite Pact, which grew to include several smaller democratic countries as well, was only a step or two from an international stabilization fund, which was the original and 