The relentless revolution: a history of capitalism (42 page)

Because of the spectacular speed with which the United States outpaced all other countries in the opening decades of the twentieth century, its mass production and managerial organization have taken on the aura of an inexorable and optimal development generated from within the very logic of capitalist enterprise. This orthodox interpretation is misleading. By no means inevitable or sealed off from larger trends, the mergers and reorganization of American corporations were very much the product of political circumstances and social values. To name three: the weakness of government, an abundance of cheap labor, and a large public receptive to standardized products. Americans readily took up the role of consumer, snapping up cheap goods, even if they all looked and tasted alike. This receptivity to standardized items meant that companies could benefit from the cost savings of mass production, a reaction businesses could not always count on in Europe, where buyers still appreciated handcrafted goods.

American Federal Power

The first serious curtailment of corporate power came in 1887, when Congress created the Interstate Commerce Commission, which could regulate transportation lines that extended beyond state lines. Three years later, the Sherman Antitrust Act made a first stab at regulating large corporations whose size could be interpreted as restraining trade. But the horses had already left the stable. Corporations made their moves toward consolidation before the era of big government began. Within twenty years, fewer than six hundred corporations controlled half the assets of the country’s four hundred thousand corporations. Only when the Supreme Court ruled that trusts came under the Antitrust Act did mergers taper off a bit.

Forced to dissolve his trust, Rockefeller created a cluster of smaller Standard Oils. And therein lies a capitalist morality play. When in 1909 a federal court ordered the dissolution of Standard Oil, managers who had chafed under the centralization of authority in the company’s New York City headquarters had the chance to try new techniques. There’s almost a law hidden here, a corollary to Joseph Schumpeter’s famous remark that capitalism involved creative destruction. Capitalism benefits from periodic liberation from established authorities, freeing those who yearn to experiment, innovate, and learn from fresh ideas.
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Corporate power in the United States waxed strong as the nineteenth century came to an end. The imperialist forays of Western governments into Africa and Asia made them more accommodating of their domestic capitalists. It took ratification of the Sixteenth Amendment to the Constitution in 1913 before the federal government had an effective way to raise revenue, but the difficulty of passing an income tax gives a sense of the unusual limits on government power when confronting business interests in the United States.
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On racial and sexual matters, on the other hand, states drastically restricted the movement of African Americans and dictated the norms of intimate behavior.

When the twentieth century began, Western nations, most of them monarchies, had embarked on their own capitalist adventures, carrying modern objects, attitudes, and institutions to Asia and Africa along with attitudes of cultural superiority. They exercised overwhelming, not to mention overweening, power over those they considered backward, and they congratulated themselves on their civilizing mission. Within the private sector, there had been a weeding out of small firms as giant corporations consolidated their markets. With a more populous planet and more mechanized production the use of natural resources, particularly fossil fuel, increased at an alarming rate. Small countries outside the West and advocates for the public realm within the West struggled to come to terms with the fact that imperial states and expanding corporations were in the driver’s seat and likely to run roughshod over them.

WAR AND DEPRESSION

I
N 1914 WAR CAME
to Europe through the measured minuet of mobilizing armies. It was a slow dance. When discretion suggested to some countries to start early to get their forces ready, prudence dictated to others that they must not be left behind. Many nations had sought safety in numbers as international tensions tightened. These alliances only multiplied the occasions for triggering hostilities. Germany and the Austro-Hungarian Empire, later joined by the Ottoman Empire, faced Great Britain, Russia, and France. The wealth that capitalism had generated in the preceding half century enabled all these prospective belligerents to build big armies and trade in their wooden naval vessels for steel-plated battleships. The military scoured industrial plants for promising improvements. Corporations like England’s Vickers poured its profits into the development of armament, as did its competitor Krupp, the German manufacturer of iron and steel. The heady feeling that came from their worldwide resources created feelings of invincibility among Europe’s leaders.

The race for industrial superiority that had fueled Germany’s impressive development in the nineteenth century entered a second lap in the competition for colonies with Great Britain at the end of the nineteenth century. Both stoked the fires of national militancy. The jingoism that had justified the imperial ambitions of each country soon justified an arms race. Propaganda, a word that got a new meaning in this period, spread aggressive messages about national superiority. The eagerness with which the combatants in World War I cultivated the means and motives for going to war still astounds. It is hard not to see its outbreak in 1914 as overdetermined, even though there weren’t really any causes for it, if you except widespread imprudence and massive miscalculations.

Contemporaries’ skill at solving international disputes did not match their demonstrated capacity to create wealth. The expectation that any war would be a short one like the Franco-Prussian War of 1870–1871 contributed to the rampant bellicosity. Few bothered to remember the bloodbath of the American Civil War in 1861–1865.

Europe had not seen a total war since the sixteenth century. Perhaps Americans’ vivid memories of their civil war explains why the United States didn’t enter the European conflict until 1917, after it had been raging for three years. By that time everyone had been disabused of the notion that the fighting wouldn’t last long. Instead grinding, stupid, indefensible trench warfare took on a kind of permanence along what came to be known as the western front. Just how bad things were going to be became apparent in the first three months of the war, when a million and a half soldiers died in battle.

Such casualties only increased the two sides’ determination to prevail. Making sense of such horrendous losses to the public meant ratcheting up descriptions of the villainy of one’s enemy. At least sixty-four million Europeans were mobilized in addition to three million outside Europe. Russia alone had an army of twelve million. Of the total sixty-four million soldiers and sailors, eight and one-half million died, twenty-one million were wounded, and another seven million were declared missing in action. Total war meant that industrial production at home went at full tilt. Many women joined the work force, especially on the assembly lines turning out munitions. (The Germans fired a million shells on the French fortress of Verdun in one day.)

Every participating country, except the United States and Japan, survived this war of attrition tired, disillusioned, and deeply in debt. These statistics pale only when they are compared with the casualties of World War II, which broke out twenty-one years later. The grimmest reaper of all remained disease. The great flu epidemic of 1918 and 1919 killed twenty million men, women, and children, worldwide. As in the Thirty Years’ War of the sixteenth century, civilians suffered even more than did the combatants.

The most spectacular event in the war came before its end when a sequence of revolutions dispatched the Russian monarchy and installed the world’s first Communist regime. The Union of Soviet Socialist Republics startled the world with its rejection of both the monarchy and its parliamentary successor. During the next seventy-two years of its existence, the USSR repeatedly affronted the Western world with its flaunting of its indifference to property rights and free enterprise. Central planners began immediately running the Soviet economy. Any domestic resistance to Soviet initiatives met severe repression. The USSR signaled its intention to break with conventional political forms when it released confidential czarist state papers that embarrassed European diplomats. Few could doubt that a new era had dawned.

Karl Marx had imagined a country with an advanced economy like Great Britain or Germany becoming Communist, not a backward one like Russia that needed to catch up even to maintain its autonomy. After withdrawing from the war, Soviet leaders devoted Russia’s resources and man and womanpower to modernizing the country, an effort that ranged from promoting women’s rights and literacy to imposing new standards in hygiene. Collective farms took over from private farming, despite tenacious resistance from the peasantry. Soviet leadership announced a five-year plan that put before the world the agenda of a command economy. It signaled its disdain for conventions like the gold standard and withdrew as much as possible from international trade. A deep suspicion of communism took root in the homelands of capitalism as the gravity of the Soviet challenge sank in.

After such a bloodbath as World War I, wisdom was in short supply. Europeans and Americans proved more adept at producing heavy artillery, chlorine gas, machine guns, submarines, tanks, war planes, and artificial limbs than at getting along with their neighbors. Wartime propaganda had depicted both sides as ravenous monsters. Victory gave the Allies the smug conviction that they had been correct. Their ally Russia, having dropped out of the war, lost any hold on the victor’s moral triumph. Revenge animated the French and English when they sat down at the various peace tables to work on the complex problems left at the end of hostilities. As textbooks frequently note, the drafters of the treaties redrew the map of Europe. Knowing that they would be creating new nations out of old empires, the Library of Congress assembled a superb collection of maps and placed them at the disposal of delegates to the peace talks in a chic Paris hotel. No one ever visited the collection. The diplomats preferred working on scraps of paper.

Global Reactions to World War I

The war spelled the end to the Austro-Hungarian and Ottoman empires as well as the German monarchy. President Woodrow Wilson, who represented the United States at the peace negotiations, thrilled suppressed people around the world with his stirring call for self-determination for all peoples. To fight a world war, the European nations had mobilized all their resources, which included their vast colonial holdings. Participation made the colonial people themselves aware of a larger world in which they might take an independent place. Though in retrospect, Wilson seems to have been thinking only of Europe, his summons to build nations around the ethnic identities of the people made him a hero to nationalists in Egypt, China, India, and French Indochina. They too read his speeches. A young Vietnamese named Ho Chi Minh actually scraped together enough money to go to Paris in the vain hope of talking to Wilson.

Having entered into secret agreements about how to split up the territory of the Middle East, the leaders of France, the Netherlands, and Britain clearly thought imperialism had a second life. Since they had won, they were not to be deterred in enjoying the full fruits of war. The colonial powers brutally suppressed any moves toward independence. They now had access to German holdings in Africa too. After the war, the countries of Asia, the Middle East, and Latin America were even more tightly integrated into the Europe-centered commercial world. The moment of independence from European domination had not arrived, but the crushing disappointment that nationalists throughout Asia and the Middle East experienced when Wilson acquiesced to the punitive terms of the peace treaties laid the foundation for enduring anti-American feelings. Remembering is selective. Those wronged hold on to their memories longer than do their suppressors.

There was one brilliant exception to this dismal pattern of squelching national self-determination. Mustafa Kemal Atatürk turned the center of the Ottoman Empire into the secular nation of Turkey. Atatürk and his “young Turks,” as his followers were known, abolished the Muslim caliphate and embarked on a crash course in modernization. Atatürk appealed to the young to participate in raising a republic. He turned out to be a brilliant nation builder with a legacy very much alive today, In Atatürk’s Turkey even women could become judges. With a toehold on the European continent, Turkey could be considered Europe’s single Muslim country.

At war’s end, Germany was a devastated country, on the verge of starvation. Kaiser Wilhelm II had fled to the Netherlands. The successor government, the Weimar Republic, was established in early 1919, if “established” is the right word. It had to struggle for stability against paramilitary socialist groups and the defeated military leaders who longed for the return of the monarchy. Perhaps what happened is best captured in the Theodor Plivier book title
The King Goes, the Generals Remain
. The Versailles Peace Treaty very much complicated Germany’s recovery by taking away 13 percent of its territory and assigning 10 percent of its population to other countries. The industrially rich Alsace-Lorraine was given back to France, and the Allies occupied the Rhineland for fifteen years. Behind these simple statements lies the reality of hundreds of thousands of lives turned upside down and bitter memories sown that were not likely to be forgotten.

Crushingly high reparation payments were exacted from Germany as well. This was payback from the French who had been forced to pay reparations to Germany after the Franco-Prussian War thirty-eight years earlier. The victorious leaders set up the League of Nations in hopes of settling future disputes openly with guarantees of collective security to replace the treaty system that had led to war in 1914. The U.S. Congress declined to join the League, but it did participate in a number of conferences that the League sponsored. More significant, it played a major role in the postwar financial arrangements as the principal creditor nation. It actually contributed to the financial turmoil by demanding the repayment of the large debts that France and Great Britain had run up to pay the staggering costs of waging war.