THE POLITICAL ECONOMY OF AMERICAN WARFARE, PART TWO

Paul A. C. Koistinen, Mobilizing For Modern War: The Political Economy of American Warfare, 1865-1919 (Lawrence: University of Kansas Press, 1997) ("By the eve of World War I ... the federal government, the industrial community, and military services had developed complex, modern, and professional structures, each dependent upon the others in terms of national defense. Economic mobilization for World War I ... forcefully demonstrated this institutional interdependence. The quantity and sophistication of military demand meant that increasing and diverting civilian production was no longer adequate; market forces could not be relied upon. Production had to be maximized and industries had to be converted in order to manufacture the often specialized military hardware. Priority, allocation, price, and other controls had to be introduced, an existing governmental departments and agencies were unequal to the task. New mobilization bodies had to be created, the most important being the War Industries Board (WIB). Through the board, centralized control over a planned economy was established and carried out by representatives of the government, the business community and the military. The process obscured institutional lines. Civilian and military, private and public activities once again combined." Id. at 4. "The role of financial intermediaries was to coordinate saving and investment. Almost all intermediaries, including commercial and savings banks, trusts, building and loan associations, and insurance companies, grew vigorously in size and assets from 1865 to 1910 and served the purposes of encouraging saving, providing investment funds, and increasing the mobility of capital. The outstanding institutions for the rise of big business were the investment banking houses, the most important of which was J. P. Morgan and Company." "The economic reach of these firms became so substantial that some scholars and other observers have concluded that in the late nineteenth and early twentieth century the American economy entered a phrase of 'finance capitalism' becoming in effect an economy dominated by bankers. If such conditions did exist, they were only temporary and had ended before the close of World War I. The twentieth-century American economy was basically one of corporate, not finance, capitalism." Id. at 17. "In taking the Philippines, the nation did not innocently stumble into the Asian tinderbox but rushed forward to begin achieving dominance in the Pacific and to play a leading role on the Asian mainland. As William Appleman Williams and his students have explained, America's imperialism was formulated and executed by a civilian elite and fueled by a complex mixture of economics, power politic, and idealism. The United States could have expanded into Latin America and still remained aloof from international tensions while maintaining a defensive military strategy. Once expanded into the Pacific and Asia, however, the United States joined seriously in the ongoing restructuring of international power balances, which increased the possibility of war. To match strategy with diplomacy, an offensive American navy became a necessity." Id. at 26-27. "Various authors have rightly pinpointed the construction of the new navy as originating the military-industrial complex (MIC) For the first time the nation experienced military-industrial relations of a new order on a continuing basis." Id. at 55. "Several characteristics of the new order of civil-military relations are of central importance and distinguished the experience of the navy in the late nineteenth and early twentieth centuries from the past. First, the building of a new fleet required a production team composed of government official, naval officers, and industrialists that eroded the barriers between private and public, civilian and military,.On a limited basis, personnel began to circulate among the various institutions because of the interrelationship and the need to fulfill special functions. [] Second, this production team was permanent, not temporary, phenomenon. It had come into being because of the sophisticated nature of military technology; it would remain in being in different forms because technology continued to advance, making ships larger and more complex and their predecessors obsolete or inferior. [] Third, these developments had started and would have continued with the construction of a defensive navy; they were exaggerated manyfold by the creation of an offensive fleet." Id. at 56. "The transformation of the economic and political systems during the Gilded Age and the Progressive Era created the modern American 'power elite.' The elite consists of those people controlling a core of about 200 corporations, largely in heavy and high-technology industries, and high officials in the federal executive, particularly the president, his chief advisers, and the most important cabinet members." "These two component of the elite have separate, though hardly unrelated power bases with definite upper-middle- to upper-class orientations. Although both groups share a common capitalist ideology, significant differences over means exist within and between the corporate and governmental spheres. The federal executive is not an executive committee for the people who own and run the economy. The operations of power are much too complex and tangled for such a simple formula." [] "Most top corporate managers reflect the values of the owners and have substantial investments in the companies they direct. Where such circumstances are not the case, because ownership (broadly defined to include financial institutions as well as individual and family stockholders) is highly concentrated, the owners and their associates can usually set the major strategies for their corporations and hire and fire managers at will. Control of all the intricacies of the so-called technostructure of a corporation is not essential for determining its larger policies even through elaborate bureaucracies tend to posses a rather intractable quality." "Consistently throughout the twentieth century, this corporate structure, along with its financial and legal allies, has provided the staffing for most of the important offices of he federal executive. As the government has grown in size and scope during the twentieth century, the ties between it and the corporate community have naturally become both greater and more complex. Those ties are more homogeneous in areas involving foreign and defense policies ... than the ties concerned with domestic policy, where more variety in appointments prevails and the presence of the corporate structure is less consistent." [] Whenever the nation explicitly planned its economy--during World War I, with the National Recovery Administration during the Great Depression, and during World War II--the power of corporate America within government was made blatantly clear as were the close relationships between the corporate structure and the military services. Id. at 100-101.).