V. What Do International Bankers Want?
America's Unknown Enemy: Beyond Conspiracy
Editorial Staff of the
American Institute for Economic Research
[1993]
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.
NOTES
- Antony C. Sutton, Wall Street and the Bolshevik Revolution
(New Rochelle, NY Arlington House, 1974, pp.194-195.
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