From Colony to Superpower: U.S. Foreign Relations Since 1776 (79 page)

A mounting economic crisis in Europe and especially in Germany in 1931 forced Hoover to launch a new and courageous initiative. A banking crisis that began in Austria and quickly spread to Germany and France threatened not only economic collapse in Western Europe but also political upheaval. In addition, the United States had invested huge sums of money in Germany, and a collapse could be disastrous. The situation had moved far beyond the old issues of reparations and war debts, but those twin scourges of the postwar era retained huge symbolic importance. Germany's announcement that it could no longer pay reparations forced the United States to act. After dawdling for days, Hoover finally accepted Stimson's pleas for decisive action. Without consulting the Allies, he announced in June 1931 a one-year moratorium on war debt payments conditional on Allied acceptance of a one-year moratorium on reparations. This boldest move yet proved too little, too late. Worldwide stock prices rose sharply, and U.S. exports increased. Annoyed at the administration's unilateral move and certain that it would be more beneficial to the
United States, the French stalled approval. The economic surge quickly ended, and worse yet threatened.
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T
HE MYTHS REGARDING
1920s U.S. foreign policy refuse to go away. After its "two-year-Wilsonian internationalist binge," Arthur Schlesinger Jr. wrote in 1995, the United States returned to the "womb" of "familiar and soothing isolationism."
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To be sure, the Harding and Coolidge administrations eschewed the sort of bold, imaginative steps on such crucial issues as war debts, reparations, and European security that would have been required to prevent the Great Depression and another world war. Some Americans, mostly businessmen and bankers involved in global operations, saw the need for such measures. But most did not, and it would have taken rare courage and exceptional political skills on the part of policymakers to implement them. At a time when the United States did not appear threatened and the nation, after Wilson's Great Crusade, had turned sharply inward, it is not surprising that such boldness did not emerge. Most Americans saw no compelling need to depart from their nation's long-standing tradition of non-entanglement in European politics.

To say that America in the 1920s returned to the womb of isolationism, however, is to grossly misread what actually happened. While scrupulously avoiding binding political commitments, the Republicans took unprecedented measures and managed significant accomplishments. Cautious they were. They were also non-ideological and commendably pragmatic in dealing with daunting international problems. They took the first baby steps toward ending the obnoxious unequal treaties and accommodating with Chinese nationalism. They began to liquidate the military occupations of Central American and Caribbean nations, reverted to Blaine-like efforts to set relations with hemispheric nations on a more equitable basis, and came to terms with the Mexican Revolution without sacrificing basic U.S. interests. Exploiting the worldwide postwar mood, Hughes pulled off achievements in naval arms limitation that look even more impressive after a century of frustrating efforts to contain the proliferation of increasingly menacing weapons of mass destruction. Within limits set by their own vision and powerful domestic political constraints, the Republicans assumed leadership in addressing issues of European economic recovery and political security. They recognized the growing interdependence of the world economy. They creatively
used the private sector to find solutions. To some extent, perhaps, they were victims of their early successes. The return of peace, relative stability, and prosperity to Europe in the mid-1920s seemed to validate rather than raise questions about the measures taken, removing any sense of urgency for new and bolder steps. Hoover and Stimson thus tweaked programs already in operation rather than devise new ones.

The Great Depression after 1931 would shatter late-1920s complacency. Along with World War II, it would change the world beyond recognition and eventually call forth from the United States the sort of bold measures postwar commentators believed necessary in 1921.

"Our international trade relations, though vastly important, are in point of time and necessity secondary to the establishment of a sound national economy," Franklin Delano Roosevelt proclaimed in his March 4, 1933, inaugural address. "I favour as a practical policy the putting of first things first."
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Indeed, in this speech to a nation laid low by economic catastrophe, FDR focused exclusively on domestic programs and appealed to Americans' self-reliance. He devoted but one long, and notably vague, sentence to foreign policy—less than Grover Cleveland in 1885. A clear sign of the times, these observations about national priorities also distinguish the 1930s from the preceding decade. During the 1920s, the United States actively participated in resolving international problems. After 1931, involvement without commitment gave way to a pervasive and deeply emotional unilateralism along with congressional safeguards against intervention in war.

Only toward the end of that tumultuous decade, when the reality of war seemed about to touch the United States directly, did a reluctant nation, led by Roosevelt himself, shift course. The shockingly rapid fall of France to the Nazi blitzkrieg in June 1940 spurred a great transformation in attitudes toward what was now being called national security.
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For the first time since the early republic, many Americans feared that in a world shrunken by air power their safety was threatened by events abroad and concluded that the defense of other nations was vital to their own. The flaming wreckage of the fleet at Pearl Harbor on December 7, 1941, provided a graphic visual image marking the end of one era and the beginning of another.

The major cause of the chaos that was the 1930s was the Great Depression, the economic crisis that gripped the world throughout much of the
decade and provided a major stimulus for conflict and war. Faced with a sharp economic downturn after 1931, panicky governments across the world to save themselves took autarkic measures such as raising tariffs and manipulating currencies. In a tightly interconnected world economy, such tactics proved disastrous.
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The collapse of a major Austrian bank in 1931 set off a banking crisis in Germany that in turn dealt a staggering blow to France. In the nineteenth and early twentieth centuries, Britain had stepped in to meet economic crises. In the early 1930s, economist Charles Kindelberger has tersely concluded, "the British couldn't and the United States wouldn't."
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In September 1931, an embattled Britain abandoned the gold standard, which the United States had pushed it to adopt in the mid-1920s. Across the industrialized world, banks failed, production fell off drastically, and unemployment rose to unprecedented levels. World trade fell by one-third from 1928 to 1932. The international economy ground to a standstill.

Economic catastrophe set off seismic political shocks, rocking to its foundations the rickety structure of peace cobbled together by the great powers in the 1920s. To cope with a crisis unprecedented in its magnitude, governments abandoned cooperation. Their egocentric efforts to revive their own economies provoked further conflict among potential rivals and erstwhile allies. Even the causes of the depression became an issue of bitter debate, Europeans pointing at the United States, President Herbert Hoover, more accurately, blaming Europe. Economic crisis caused profound and pervasive political unrest. Amidst nervous and increasingly angry publics, extremism replaced moderation, caution gave way to adventurism. Fragile democracies in Spain and Germany gave way to fascist dictatorships. Japan abandoned cooperation with the Western powers for rearmament, militarism, and a quest for regional hegemony. At the very time when the postwar system came under grave challenge, the democracies were least inclined to uphold it. Absorbed in domestic crisis and still haunted by bitter memories of the Great War, they reduced armaments and sought protection through the chimera of appeasement. Divided within itself, at times seemingly on the verge of civil war, France passed to Britain responsibility for upholding the world order. Significantly weakened and without the will to maintain its traditional international position, overextended and unsure of the United States, Britain lurched from "agitation to agitation," in the words of
Prime Minister Ramsay MacDonald, without developing a comprehensive policy.
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The boxing aphorism "The bigger they are, the harder they fall" applies to the U.S. economy in the 1930s. The acknowledged world economic powerhouse in the 1920s, the United States was devastated by the depression. Because its economy was less regulated and therefore more volatile, it had fewer cushions against the shocks. After a brief upturn in 1930, it was driven to rock bottom by the European crisis. The gross national product fell by 50 percent between 1929 and 1932, manufacturing by 25 percent, construction by 78 percent, and investment by a stunning 98 percent. Unemployment soared to 25 percent. With growing hunger and homelessness, traditional American optimism gave way to despair. The internationalism that had competed with more conventional attitudes during the 1920s was replaced by a new isolationism.
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The major trends of international politics in the 1930s were graphically displayed during the Manchurian crisis of 1931–32, the first step on the road back to war. One and one-half times larger than Texas, strategically located between China, Japan, and Russia, Manchuria had been a focal point of great-power conflict in Northeast Asia from the start of the century. Underpopulated, fertile in agricultural output, and rich in raw materials and timber, it drew outside powers like a magnet, especially Japan, whose dreams of national glory required external resources. Manchuria had traditionally been part of China—indeed, the last dynasty had come from there. As Imperial China fell on hard times, however, the great powers increasingly intruded. Conflict over Manchuria helped provoke the 1905 Russo-Japanese War. In 1907 and again in 1910, the two nations divided it into spheres of influence. Shielded by these agreements, Japan established preeminent economic and political power in southern Manchuria.
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Revolutionary China began to challenge outside influence in Manchuria in the late 1920s. Chiang Kai-shek's control over China proper remained tenuous, at best, but he often used attacks on foreign interests to rally domestic support, and Manchuria seemed an especially inviting target. In 1929, Chiang launched a short and ultimately disastrous war against Soviet interests in north Manchuria. Unchastened by defeat, he followed with a less overtly provocative assault against Japan,

encouraging Chinese to emigrate to Manchuria, pushing boycotts of Japanese goods, and urging local warlords to construct a railroad line parallel to the Japanese-controlled South Manchurian Railway.
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Chiang's challenge caused grave concern in Japan. The depression had brought economic catastrophe to the island nation, heightening Manchuria's economic importance. Japan relied on Manchuria for food, many vital raw materials, and about 40 percent of its trade. Although it sought to resolve the mounting difficulties with China by negotiation, even the moderate government then in power viewed Manchuria as essential. The elite officer corps of the Kwantung Army in Manchuria had its own plans. Alarmed at the Chinese challenge and Tokyo's meek response, fearful of losing a major foothold on the Asian mainland, the army saw an opportunity to solidify Japan's position—and its own—in Manchuria, perhaps seize control of the government from the moderates, and implement far-reaching expansionist plans in Asia. The Kwantung Army viewed the international situation as favorable for boldness. The Western powers were preoccupied with the mounting economic crisis; the Soviet Union seemed unlikely to do anything. Thus at Mukden in south Manchuria in September 1931, the army blew up a section of its own railroad, blamed the explosion on the Chinese, and, in a carefully planned and well-executed move, used that incident as pretext to wipe out Chinese resistance in Manchuria.
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The West responded much as the Kwantung Army had anticipated. China's appeals to the League of Nations, the United States, and Great Britain went unheard. At a low point of the depression, the European powers were absorbed in domestic problems, their leaders politically insecure and on the defensive.
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Although Manchuria later took on enormous significance, at the time it seemed no more than marginally important. Indeed, conservative Europeans looked upon the Chinese as scheming and duplicitous and viewed Japan as a source of stability and a bulwark against Communism in northeast Asia. Those few Westerners who viewed with alarm what they saw as Japanese aggression refused to risk a tough stand.