The relentless revolution: a history of capitalism (45 page)

The attack on America’s Pacific fleet at Pearl Harbor at the end of 1941 was enormously successful, destroying eight battleships and damaging seven others. The Japanese followed up this feat with devastating strikes on the Philippines and Hong Kong. At Singapore, they surprised British naval officers by invading overland. They immobilized America’s military presence in the Pacific for more than a year. The United States now faced enemies in both the Atlantic and the Pacific, but enjoyed the advantage of being the world’s greatest industrial power. In battles depending upon mobility on the sea, in the skies above Europe, and on the ground everywhere, this proved decisive. Once Japan’s military campaigns were folded into World War II, the “Co-prosperity Sphere” became a front behind which the Japanese manipulated local puppet governments with slogans like “Asia for Asians.” The unintended consequence of this rhetoric was to promote fierce national identities in Japan’s occupied territory.
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A successful Japanese offensive in 1944 linked Japan to its empire, stretching from Korea to Malaya. Now the way to the Indies was opened just in time for prosecuting an all-out war, made more urgent by Japan’s need for oil, bauxite (for aluminum), and rubber from the islands of the Dutch East Indies and Burma, all of which it eventually occupied. At last Japan had the raw materials required for prolonged hostilities, but alas, the new possessions were far away, leaving its merchant and naval fleets vulnerable to attack.

Japan executed its air strikes brilliantly, but it had already made a fatal mistake in not developing a full antisubmarine program. The German U-boat successes of World War I had convinced American and British strategists that both submarines and defenses against these new underwater vessels would play a crucial role in future wars. The United States had several companies producing the electric diesel motors used in submarines, so it was well positioned to speed up production of submarines when war broke out. It also had in place a well-thought-out antisubmarine doctrine, which included training its naval crews to fight fires ignited by enemy submarines. After the United States broke the Japanese code used to track its ship movements, the American submarine fleet wreaked havoc on the Japanese merchant marine plying the waters between Japan and the East Indies. It destroyed a third of Japan’s naval vessels and, by the summer of 1945, three-quarters of its commercial fleet.
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Impressive Wartime Production

The critical need for producing war material put maximum pressure on the economies of all the belligerents. Great Britain, Germany, the United States, and the Soviet Union mobilized in ways congruent with their differing industrial strengths and war goals. They initially met wartime demands by providing employment to those left unemployed by the Depression rather than having to preempt domestic production. This government spending brought the Great Depression to a close. A year into the conflict, one-half to two-thirds of the industrial work force had been drawn into war production. War aims interacted with the character of the political system of each belligerent to fine-tune its conversion to a wartime economy.

As the aggressor Germany devised the strategy of lightning war, which, as its title suggests, emphasized speed and mobility. German production was geared to replacing the weaponry its blitzkrieg forces would need for the next campaign, whereas England and the United States did not know where or how Germany would attack, so they had to plan for diverse scenarios in a more protracted struggle.
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Air and sea power became integral to their strategy, in large part because they didn’t have the manpower or material available to return to France. The Russians copied the superior features of the German tank divisions entering their country. The Soviets showed an impressive capacity to improve its models throughout the war. Up-to-date weaponry was scarce in the Far East, so most belligerents there fought with rifles and light artillery when not actually using knives and swords.
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The Germans clung to their tradition of fine craftsmanship and performance-enhancing detail while the Americans relied on their mass production expertise.
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Karl Benz met Henry Ford. The Germans also pursued many designs for tanks while the Americans churned out nothing but Sherman tanks until the Pershing tank replaced them. Most large American firms became defense contractors, but none got the publicity of Ford Motors, which built the world’s largest factory at Willow Run, Michigan. By late 1943 three hundred B-24 bombers were rolling off the Willow Run assembly line each month though General Motors actually surpassed Ford in its war production. In another example of productive wizardry, in Richmond, California, Henry Kaiser built more ships than any other manufacturer and even managed to pioneer a company health plan at the same time. When the war in the Pacific drained the Japanese and American navies in 1942–1943, Japan built seven new aircraft carriers. American shipyards turned out ninety.
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In wartime, all economies become command economies, so in this sense war production in Communist Russia did not differ so much from that of its free market Allies. Confronted with a fight for national existence and with a considerable part of its land occupied by Germany, Russia carried out the most intense war effort. More important and surprisingly, Soviet mobilization was far more effective than that of Nazi Germany. Even the United States, with the least experience in state planning, did a much better job of prioritizing war production. By 1944 American factories were sending a mighty stream of tanks, trucks, armored cars, even canned food for the defense of Russia. With an industrial plant much larger than any of the other combatants, the United States still outdid itself, supplying through lend-lease agreements up to a third of Great Britain’s material needs and a quarter of those of the Soviet Union.

Wars have always acted as a catalyst for technology, but in World War II science made spectacular contributions with the development of radar, computers for charting ballistics, rocketry, jet-propelled aircraft, and a slew of synthetic products developed to substitute for the natural resources no longer available to the belligerents through trade. Small advances sometimes had large impacts. America’s two-way radios enabled the Russians to improve their tank tactics. Another technological breakthrough, the atomic bomb, brought the Pacific war to an end two months after Germany surrendered in May 1945.

With millions of lives hanging in the balance, the warring nations made exertions of heroic proportions, a tragic reminder that human beings perform at their highest pitch when threatened with annihilation. World War II exacted a terrible cost from its belligerents, civilians suffering even more than combatants. As might be expected with the perfecting of new weaponry, the casualties of World War II topped those of World War I. A total of seventeen million combatants died, with civilian deaths reaching thirty-three million, the preponderance of them Russian and German, with six million Jews of many nationalities eliminated in Nazi concentration camps. Millions more were displaced by the war, wounded, or left to die from starvation. Heavy aerial bombardments leveled houses, ships, bridges, railway lines, factories, airfields, docks, and sometimes whole cities. Only the Western Hemisphere escaped war’s awful fury.

World War II put the far-flung empires of Great Britain, France, Belgium, Italy, Portugal, and the Netherlands on life support if not actually writing finis to them. During the war Japan had seized the American Philippines, the Dutch East Indies, French Indochina, and British Burma and Malaysia. In defeat, the Japanese played the spoiler and encouraged agitators for independence as they were departing from what was to become Indonesia. A new federation of Malaysia emerged from which Singapore became a separate republic in 1965. Great Britain accepted the creation of two nation-states, India and Pakistan, in 1947. Bangladesh broke away from Pakistan, and the island of Ceylon formed Sri Lanka. The United States granted independence to the Philippines in 1946, almost fifty years after promising it.

France waged protracted war with Algeria until 1962, but the other North African Arab states escaped European domination more easily. The French fought in Indochina as well. Laos and Cambodia gained independence, but the United States took over France’s war against Vietnam as part of its Cold War effort to halt the spread of communism. It suffered defeat there in 1973. Portugal fought off national liberation movements in Angola and Mozambique. Only with the toppling of the Portuguese dictatorship did its colonies gain freedom in 1975. The British, after a decade of brutal fighting, finally yielded in 1963 to the Mau Mau to make Kenya the thirty-fourth independent African nation. The British Empire came to an official end when in 1997 the Union Jack was lowered over Hong Kong, a city it had leased from China for a century. The wars of national liberation came to an end just as thirty-five nations gathered in Helsinki to sign accords on the right to self-determination in 1978.

People sometimes refer to a great power as a juggernaut. They perhaps are not aware that a juggernaut, according to Hindu myth, is one of the eight avatars of Vishnu, whose devotees throw themselves under the wheels of the vehicle carrying a statue of the god in annual processions. By the end of World War II capitalism could be compared to a juggernaut. Its direction was uncertain, its power was conspicuous, and its devotees were capable of great self-destruction. In 1945 the capitalist juggernaut faced a radical challenge coming from its wartime ally the Soviet Union. They had truly been strange bedfellows, the one with an economy run on venture capital eager to get other countries to adopt its ways, the other a command economy with the mission of spreading its Communist institutions globally. Of the fifty million military and civilian deaths, Russia sustained twenty million. Despite these truly horrific losses, the Soviet Union came out of the war stronger than ever once it established control over the countries of Eastern Europe, including a third of Germany. Now capitalism with its prejudice against the centralization of power confronted a block of countries determined to expose, intensify, and exploit its flaws.

Those persons born in 1880 who watched the construction of roads for the automobile, the proliferation of electrical tools and appliances, and the refashioning of city centers with skyscraping office buildings and opulent department stores would have lived long enough to suffer from a world war, a decade of depression, and the resumption of hostilities in an even more catastrophic world war. In old age they could have contemplated an utterly new kind of rivalry between the United States and the Soviet Union in what seemed at the time to be a gigantic struggle about fundamental truths rising above opposing economic systems. And while the United States and Western Europe confronted the Soviet Union and the countries of Eastern Europe, the peoples colonized by Europeans demanded the self-determination that was denied them in 1918. No longer could places on world maps be designated with a few European imperial colors. Two world wars and a worldwide depression had demonstrated capitalism’s capacity for destruction. The time had arrived to prove its beneficent qualities.

A NEW LEVEL OF PROSPERITY

U
NDER THE EXTREME
pressures of World War II, the men and women of the belligerent countries performed near miracles of effort and endurance. In this they were helped by the heavy industry that now dominated capitalist economies, making possible a level of production that broke all records. Necessity again proved to be the mother of invention with all the contenders innovating in synthetics, medicine, communication, aviation, and, of course, weaponry. When hostilities ended, the destructive power that had been unleashed sobered everyone, vanquished and victorious alike. It had been a dreadful thirty-one years, but most had survived.

For a second time in a quarter of a century, Europe had been devastated. For a second time the United States flexed its remarkable industrial muscles. For the first time a country implacably hostile to capitalism appeared on the world scene. Spurred by two world wars with a depression in between, governments learned to play a larger role in economic matters. Both Keynesian economics and socialist prescriptions provided rationales for maintaining a permanent role in economic matters, if only to prime the economic pump during persistent downturns.

In World War II the belligerents set rules for producers and laborers, freezing prices and wages. They even took over some private companies and commandeered whatever resources were deemed necessary for the war effort. By 1945 there were many bureaucrats experienced in telling investors, entrepreneurs, managers, and laborers what to do. Quite naturally they looked upon their recommendations as constructive. Many advised continuing government oversight of the economy. Prominent socialists in Great Britain, Italy, and France called for the abandonment of laissez-faire policies. It was an open question whether capitalism would move back into a modern version of the political orbit that it had escaped in the eighteenth century.

Three paths opened up for postwar leaders as they confronted the task of reestablishing their physical plants, transportation systems, financial institutions, and the trade arrangements that had structured their global economy. We might call these paths the indicative, imperative, and informative. In the first, the road forward is indicated; in the second one, it is ordered; and in the third, the coded language of markets informs participants about their choices. The government too responds to information rather than acts out of ideological imperatives. The most powerful commercial players after the war were corporations, many of them international, but the catch basin of capitalism contained hundreds of smaller outfits and even more people detailing projects on the backs of envelopes.