V. What Do International Bankers Want?

America's Unknown Enemy: Beyond Conspiracy

Editorial Staff of the
American Institute for Economic Research


Although reliable evidence supports several of the claims made in conspiracy literature, the preoccupation among conspiracy proponents with the distant historical "connection" between Wall Street bankers and the Bolshevik Revolution may also have diverted attention from banking policies that influence international events. According to conspiracy theory, that Wall Street banking firms with Jewish managers helped to finance the Bolshevik Revolution is proof that many international bankers were Jewish Communists in league with the "bigger conspiracy to control the world." These conspirators allegedly had (and have) little fear of Socialists because they are confident they could (and can) control them. We agree that the policies advocated today by some international bankers, academicians, and multinational corporate leaders, if implemented, would introduce central control over global economic activity. But while the Bolshevik precedent may have indicated the bankers' willingness to engage in commerce with totalitarian regimes (as they evidently have throughout recorded history), there simply is no other relevant and demonstrable relationship to link that past episode with present policy. The case against "global management" will not be strengthened, in our opinion, by tortuous attacks against "Jewish plotters" or "Wall Street Communists." The case against central management of economic activity (with its overriding importance to individual sovereignty) can be supported with much more telling argument and evidence than that offered by conspiracy theorists.

There is, to be sure, corroborating evidence from a variety of sources indicating that Wail Street bankers did help to finance the Bolshevik Revolution. But this does not establish that they, themselves, were Communists. According to Antony C. Sutton, in Wall Street and the Bolshevik Revolution, three independent sources, including his grandson, maintain that Jacob Schiff (who was Senior Partner in Kuhn, Loeb, and Company and father-in-law of Felix Warburg) provided an approximately $20 million loan to the Bolsheviks. Sutton also offers documentation that a consortium of banking interests, including inter alia the Morgan group and the Rockefeller-Standard Oil group, were involved in providing financial support for the new regime. Gary Allen attempts to implicate Paul Warburg also. According to Allen, Lenin "took some $5 to $6 million in gold" into Russia through a deal "arranged by the German High Command and Max Warburg." "The picture," he writes, "takes on another dimension when you consider that the brother of Max Warburg was Paul Warburg."

Contrary to conspiracy notions, however, such financial deals are not necessarily evidence that the bankers were Communists, or even that they wanted the Bolsheviks to triumph. While it is understandable that conspiracy theorists express disbelief that international bankers would finance a regime whose professed goal was to strip men such as themselves of their wealth unless they were committed Socialists themselves or expected to direct the course of revolution, there are several other possibilities.

For example, that the German banker Max Warburg participated with the German High Command in arranging financial backing for Lenin seems consistent with the aims of German military strategy. The Germans wanted Russia out of the war, and they obtained such assurances from Lenin in return for financial aid. However, there is no evidence that Paul Warburg -- who resigned from the Federal Reserve Board as a result of combined anti-German and anti-Semitic sentiment -- played any role whatsoever in the matter, or that he acted in any other treasonable way. He may have, but the fact of opportunity does not establish a fact of culpability. Indeed, many Americans had close relatives fighting for enemy countries at that time, yet those Americans were not thereby guilty of treason.

The Ethnic Element

Nor was the aid that Jewish American bankers gave to the Bolsheviks conclusive evidence that they sympathized with the Communist cause. Antony Sutton suggests that individuals such as Jacob Schiff were willing to invest millions of dollars in the hope that such aid might contribute to the emancipation of Russian Jewry, which for centuries had suffered discrimination at the hands of czarist regimes. An illustrative telex message appealing for aid from Russian Jewish bankers to prominent New York Jews (Jacob Schiff, Louis Brandeis, Oscar Strauss, Louis Marshall, and Henry Morgenthau) conveys an innocent context in which financial aid might have been extended:[1]

We Russian Jews always believed that liberation of Russia meant also our liberation. Being deeply devoted to country we placed implicit trust [in] temporary Government. We know the unlimited economic power of Russia and her immense resources and the emancipation we obtained will enable us to participate [in the] development [of our] country. We firmly believe that [a] victorious finish of the war owing [to the] help [of) our allies and United States is near.

When, a year after the Revolution, Schiff learned from Russian Jewish bankers of "Bolshevik devastation," he appealed to the U.S. State Department to give consideration to pleas for allied intervention against the Bolsheviks.

Although some Jews no doubt were Communists, widespread early Jewish support for the Bolshevik Revolution apparently was prompted not by ideological sympathy for the Communists but by sympathy for the oppressed members of the Russian Jewish community and by expectations that as Jews they might get preferential treatment should Jewish bankers attain positions of influence in the new regime. Russian bankers who appealed to Schiff and others for aid to the Bolsheviks may have had a special interest in the cause -- but not necessarily because they subscribed to Communist dogma. As events transpired, the Communist regime perpetuated anti-Semitism, and many of the same bankers in Russia who initially supported the revolution subsequently suffered death, exile to Siberia, or deportation. They paid a dear price for their miscalculation.

What some people interpret as a "Jewish conspiracy" also may more likely be a reflection of a broad cultural tendency. Thomas Sowell, in his recent The Economics and Politics of Race; An International Perspective, has chronicled the economic behavior of Jews in many countries over many centuries. In nearly all cases, Jews distinguished themselves as highly productive workers -- indeed, so much so that in many societies they were restricted to certain professions (such as money lending) for fear they would gain too much control. As a group Jews are, Sowell concludes, culturally advantaged in the marketplace by virtue of their habits of thrift, hard work, and entrepreneurship. Indeed, in relation to their numbers in the total population, Jews are overrepresented in nearly all of the profession: medicine, science, law the media professions, and music as well as in banking and finance. Within these groups, vast disagreements among Jewish practitioners preclude the operation of any "conspiracy." To cite their prominence per se in any one of these professions as evidence of a "Jewish conspiracy" is no more warranted than it would be to conclude that Hispanics have "conspired" to remain at the bottom of the U.S. economic heap.

It also is hard to conceive that a Rockefeller or a Morgan -- neither of whom was Jewish -- would entertain much ideological sympathy toward the Bolsheviks since they, themselves, were prime targets of communist agitators and terrorists in the United States. (They earlier had loaned funds to the czarist government.) In April 1919 a nationwide plot hatched by communists was uncovered after a large bomb was discovered in Seattle Mayor Ole Hansen's mailbox following a general strike led by Bolsheviks and the IWW. A quick investigation of the New York Post Office revealed 16 bomb packages. They were addressed not only to public officials such as Attorney General A. Mitchell Palmer and Postmaster General Albert S. Burelson, but also to the international bankers John D. Rockefeller and J. P Morgan. In September 1920 a wagonload of explosives was set off in front of J. P. Morgan & Company in New York, killing 38 people and injuring more than 200. What seems most astonishing is that the Rockefellers or Morgans would continue to do business with the Bolsheviks at all after such ruthless attacks, but of course Bolsheviks could disavow knowledge of or participation in them.

Because the Wall Street-Bolshevik alliance was neither a "Jewish" nor a "Communist" conspiracy is not to say that it revealed nothing about the behavior of the international bankers then. Surely international bankers had some reason(s) for providing funds to the Communists. Antony Sutton claims that the "alliance between international political capitalists and international revolutionary socialists" benefited both. The benefits to communist revolutionaries are obvious. Bankers benefited, he asserts, because "the totalitarian socialist state is a perfect captive market for monopoly capitalists, if an alliance can be made with the socialist powerbrokers." Clearly, such an alliance requires no ideological commitment one way or the other on the part of Wall Street. Indeed, the historical record confirms that, except for wartime, international bankers have been willing to do business with virtually any regime -- socialistic, fascistic, and monarchistic centralized states as well as with more decentralized "free" economies. One way or another, the bankers evidently have rationalized their business dealings, no matter what the costs were to the people who lived under the rulers who received the bankers' funds.

International "Development" Banking

Whatever was its political character, the distant Wall Street-Bolshevik connection casts only a sidelight on the international banking situation today at least for now. Attention given to World War II, the Civil Rights Movement, and the cold War has clued the public (even if in slanted fashion) to at least some of the connections between politics and international trade and finance. In view of media attention accorded such activities as bribes to foreigners for contracts, the sale of American grain to Russia, the export of equipment for use on the Siberian pipeline, American investments in South Africa, the threat to some U.S industries from imported goods, and the continuing "international debt crisis," it is unlikely that American-based international banks or multinational corporations would be able to engage in surreptitious commercial or financial activity for long.

Yet, the mere public awareness that some types of activities are occurring does not ensure that the public accurately perceives the significant implications of the activities and, through the political process, will restrain those not In the public's interests. In different words, the public must be educated to the probable consequences from the financial and monetary deals being worked out. A case in point is the highly publicized focus of international finance and investment in countries of the Third World during the past 2 decades or so. Penetration of international financial and commercial markets has been pursued in the name of economic "development," purportedly designed to foster the twin goals of a "more equitable New International Economic Order (NIEO)" and a more peaceful world, ordered by an international bureaucracy charged with the responsibility of ''managing international interdependencies.''

For more than a decade, the programs of would-be "global managers" have been tested. A powerful coalition of international bankers, corporate leaders, academicians, and government officials in the United States, Western Europe, and Japan -- allegedly has sought to bring economically backward countries quickly into modern-economy status. Private international bankers, U.S Government agencies, agencies of governments in other developed countries, and international lending agencies have bureaucratically directed large flows of funds into "developing countries, overriding the market process for allocating funds. As the historical record presaged, international bank loans, government-to government (bilateral) aid, and international agency (multilateral) grants have been channeled for the most part through and to the politically powerful (regardless of their political or economic persuasion). In the recipient countries, the funds have been distributed according to who-know-what criteria, but always -- where government or government-connected parties have been involved -- according to the criteria established by a few "managers." Thus far, the most notable result has been the continued impoverishment of the masses in most recipient countries, heightened social unrest that provides the excuse for even more government control of the people, and the much-publicized "international debt crisis" that threatens to bring more debilitating inflating to the United States.

Perhaps the private international bankers genuinely believed that their own loans (mostly "guaranteed" by some government entity) plus direct government aid funds would promote real economic growth and a greater investment opportunity. If they did, they failed to analyze the situation properly. Perhaps, on the other hand, the private international bankers did analyze the situation correctly and could see that the funds most likely would promote more government corruption and intrusion, less economic advancement, and ensuing political and economic turmoil bur reasoned either (1) that they could get in, reap high profits, and get out again before the longer-term problems became costly to them, or (2) that once the countries became dependent on aid grants and bankers' credits, the bankers and their allies in the aid agencies would have the power to dictate appropriate reforms" -- perhaps political as well as economic.

The actual motives behind the credit that bankers extended, or the aid grants of the United States and other governments will never be known. We should guess that the motives were as many as the decision-makers over the period involved.

Flawed Economic "Theory"

Whatever the motives were, the economic "theory" that elected U.S officials used to justify the passage of laws enabling the political process to override private market allocations of funds could have been analyzed and its defects uncovered. Indeed it was, explicitly by some and implicitly by others. For the most part, private creditors and investors were not ready to commit these sums of funds to private entities in Third World countries without Western Government participation (direct aid, loans, or guarantees) of some type. This was a sign that something essential to the economic process was missing: among possibilities are political and economic freedom, economic "infrastructure," skilled or otherwise prepared labor, or attractive enough economic projects. The significant point is that enforceable political decisions replaced voluntary market decisions, and that is a nearly certain prescription for economic failure.

The danger today is that the failed policies will be the excuse bankers and government officials use to justify even more central planning and even greater government involvement in international economic affairs. Even "reluctant" supporters of IME and World Bank bailouts of the profligate creditors including Presidents Reagan and Bush have warned of the "economic nightmare that could plague generations to come" if more funds and more of the product of Western producers are not directed by the international managers.

Virtually every Secretary of the Treasury since the loans were made has said that failure to support the IMF would result in loan defaults, major bank losses, sharp costs in bank lending, a major decline in world trade, and lost jobs. Economics Nobel laureate Wassily Leontief described the consequences of failing to support the IMF more tersely: "Either we save the third world and the banks now, or we create political turmoil now, save the banks later, and give up entirely on the countries." In response, a hesitant Congress in 1983 appropriated and additional $8.4 billion to the IMF, and commercial bankers continue to lobby for billions more.

Critics of the international banking establishment and the IME are justifiably angered by the use of government power to force money transfers that will end up in the pockets of the very bankers whose unsound policies based at least part on greed were instrumental in creating the crisis. For the market system to function effectively, the reward of profit for economically sound decisions and the punishment of loss for unsound decisions must not be circumvented. Among other things, this process increases the control over resources of those who demonstrate success and reduces the power of those who prove themselves incapable. In contrast, government-directed economic failure often receives the reward of more funds, and the persons responsible gain greater power to direct resources. Government bailouts of private-sector mistakes likewise perpetuate in economic power the demonstrably incompetent.

Thus, long-term harm to the potential for Third World economic growth -- and to the economic well-being of producers in the industrialized counties -- will result from continued reliance on "global management" to solve "problems" and promote "economic order." Already in Brazil, Mexico, Argentina, Bolivia, and 142 other developing countries, the IMF and the World Bank -- with the active participation of international banks such as Citicorp and Chase Manhattan -- have imposed so-called "austerity measures" as a condition of continued credit. These measures have placed a wide range of controls on economic policies in debtor countries: e.g., lowering of subsidies to producers of domestic staples and export commodities; restructuring of indexed wage agreements; and currency devaluations. Even so, the debtor nations continue to be unable either to stabilize their own currencies or to pay their debt obligations.

Plainly the overindebted countries had to take steps to end the domestic overconsumption that the earlier excessive debt growth financed. But on the basis of the record so far, there is little reason to expect that the specific programs designed by the World Bank and IMF central managers will succeed. Like other "managed" programs, they rely on present institutional structures and in the process more firmly entrench them. Yet, the present institutional arrangements -- political, social economic, legal -- may be the chief obstacles to economic improvement. Many debtor countries have protested that the austerity measures have hindered their economic progress and undermined the fragile authority of their elective governments. Several countries have already canceled their previous agreements with the IMF -- which casts even greater uncertainty on the future operation of international financial markets.

Plainly, some "adjustment" is required if international financial transactions are ever to reflect economic realities. This will not be accomplished by ever-greater reliance on policies that were designed to restructure the world economy according to some vague notion of an "equitable world order." A durable process of "adjustment" will involve a greater adherence to market signals - domestic and international. This seems the only genuine hope for progress.


  1. Antony C. Sutton, Wall Street and the Bolshevik Revolution (New Rochelle, NY Arlington House, 1974, pp.194-195.