A Patriot's History of the Modern World (38 page)

Americans had faced a similar predicament with the Indians. After being treated as friendly foreigners living in autonomous nations inside American borders, followed by autonomous tribes to be protected, subservient
pawns to be moved at will, and semiautonomous tribes without American citizenship rights, the Indians finally became semiautonomous tribes (actually “wards of the State”) with full American citizenship. When worldviews of property rights conflict (white/Indian, or free soil/slavery), one or the other must triumph in order to maintain a unified state. Ultimately, the American Indians ceased to be a “problem” (as defined by achieving a somewhat tolerable unemployment rate, lowering the alcoholism rate, and seeing the tribes become prosperous without government transfers) only when the Indians finally, and by then, enthusiastically, fully entered the market economy of casinos. To an extent, they still relied on government favors, wherein casinos were not allowed on state lands, but at the very least by the twenty-first century the once unimaginable sight of “Help Wanted” signs on Indian reservations indicated the market had finally penetrated Indian lands.

The American Indian policy could never have served as a model for European colonies in Africa or Asia. By the late 1800s, Indians in America constituted a few red dots in a sea of white. Europeans in Africa and Asia, however, were outnumbered by natives by several orders of magnitude. In addition, in America the Indians were eventually granted full citizenship rights, but full citizenship for native peoples under their European colonial masters was never considered a part of the European concept of “equality.” Americans' adherence to the Declaration's “all men are created equal” principle eventually resulted in American realities living up to her ideals. In fact, outside of some extraction industries and trading ports, the Europeans did not think much about their territories at all. This was evident in the ratio of Europeans to natives within the colonial populations. Britain had 1,315 officials in Nigeria for 20 million subjects; the Belgians, 2,384 in the Congo for 9.4 million; and France, just over 4,400 to govern 18.2 million in Equatorial and West Africa.
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Government in the colonial possessions was administered through the elevation of locals, often creating tribal chiefs where none existed previously. Germany, for example, invented the position of chief in Tanganyika, eventually producing a revolt against the newly appointed elders. Usually, however, the Europeans found an appropriate leader—occasionally a despot—handing over to him duties such as tax collection or labor recruitment, producing no small amount of graft on the part of the intermediary and festering envy on the part of the inhabitants. Europeans also struggled merely to define their possessions legally. Were they “colonies”? “Protectorates”? “Mandates”? “Trustees”? None of the colonial
powers agreed on the proper designations, and there was no consistency of approach in managing them.

For the British and French, cultural representations of their possessions included brightly colored maps and postage stamps, exotic exhibitions, stuffed wild game vividly displayed in the mother country, and, of course, outrageous uniforms for native armies and for European forces stationed abroad. For more recent would-be colonialists, including tyrants in Africa, the Middle East, and North Korea, displays of power were often accompanied by lavish parties, wicked punishments for the smallest violations, and regular demonstrations of military might. Most crucially, the aspiring nations looked to Britain and America as their role models—that is, the success of the Anglo-American democracies was the expected outcome of an orderly transition to self-rule. Some, mostly those colonies that had been governed by France, expected more of a French model, but the outcome in any case was expected to be the same: a stable nation with functioning democratic institutions. Unfortunately, virtually no attention was paid by either the imperial powers or the colonies to the centuries of incubation that republican concepts had undergone in the West. Worse,
no
one
at any time examined the strictly exceptional American characteristics, the four pillars of American exceptionalism, particularly the sanctity of private property and common law, that had permitted a multiethnic population to congeal around civic republicanism.

A few native leaders, without entirely appreciating the causes of the disconnect, started to realize the grim reality that the colonial powers had no intention of granting either full citizenship rights within the empires or independence from them. At the same time, the Europeans increasingly recognized that maintaining vast expanses of foreign lands and controlling masses of native people took a financial and spiritual toll on the mother countries. Britain, for example, understood that the empire had left it more exposed than ever, with more land to protect and more sea lanes to police. No institution felt this exposure more than the Royal Navy. Having already declined by the early 1900s to near-parity with the U.S. Navy, the British Admiralty could no longer consider a “two-war” scenario, which would require fighting in separate oceans. In the Pacific alone, Britain could not equal either the Japanese or Americans. Then to simultaneously protect the Middle East, Singapore and Hong Kong, and the African possessions,
and
maintain a cordon sanitaire (“safe zone”) around the British Isles? Impossible. Moreover, offensive ground action of any sort would require heavy
naval escorts, further drawing down British sea power. In 1922, Andrew Bonar Law of the Conservative Party warned, “We cannot alone act as the policeman of the world.”
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Four years later, the Foreign Office echoed the former prime minister, saying, “whatever else may be the outcome of a disturbance of the peace, we shall be the losers.”
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The Chiefs of Staff warned that British naval weakness in the Pacific would be extreme in case of war, possibly exposing Australia and New Zealand to invasion.
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Not just in Britain, but throughout the West, budgets and security were unavoidably and dangerously intertwined. Domestic tranquillity depended on low taxes and the newly emerging social welfare supports. Allocating large sums for armies and navies in a time of peace and prosperity proved nearly impossible for democracies. In a time of economic distress, it was out of the question. Coming full circle then, the Versailles security agreements ultimately depended not only on keeping Britain and France—as victors—prosperous, but also on simultaneously keeping Germany prostrate and economically feeble. However, Britain especially found that it was advantageous to get the Germans back on their feet sooner rather than later to relieve the burden of feeding them (and to accelerate reparations payments). Europe's colonial tensions, then—supervising the colonies, policing them, and benefiting from them financially—were intertwined with and shaped by the post-Versailles realities on the European mainland.

The Reparations Triangle: Germany, the Allies, and America

Virtually every aspect of the Versailles Treaty produced unintended consequences. By forcing the Germans to build 100,000 railroad cars and locomotives to replace those French units destroyed by war, France's own railroad factories took a severe hit. Britain's demand that Germany replace shipping sunk by U-boats had the same effect on the British shipbuilding industry. America's recession led it to attempt to get Allied loans paid back, which further burdened the German economy because Britain and France would only pay the United States out of German reparations. Everything that appeared free came at a spectacular cost to the victors, and at times, to Germany as well. Reparations payments were originally to be made in gold. After Germany's gold reserves dwindled, payments were made in paper money, becoming a source of finagling and trickery when the German government inflated the mark. Many of the reparations were made through bonds, which reduced Germany's real liability to less than half the stated
amount. Some historians, such as Sally Marks, question whether in fact the connection between the inflation and the level of reparations payments existed.
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At the very least, American investment in the German industrial economy helped offset some of the dislocations. “In the end,” Marks argues, there was a net cash flow into Germany and “the victors paid the bills.”
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Of course, the French didn't spend marks, but converted them, shipping the paper money back to Germany where it sparked inflation that rose at meteoric rates. Already the price levels in Germany were five times what they were before the Armistice, but under the flagging economy and demands for reparations, the wholesale price index reached 14.3 percent by 1921, and leaped to almost 37 percent a year later. Confidence in money completely vanished with the assassination of foreign minister and former industrialist Walther Rathenau, an event which produced so much uncertainty that people rushed to convert cash into commodities. Families that had no musicians purchased pianos, and desperate people bought staples, hats, sweaters, soap, and shoes in bulk to guard against price increases.

The impact of the German hyperinflation, which began to bleed into the currencies of other countries, affected all of Europe by wiping out the savings of the growing middle class. As a result, the resentment of average people turned not against authoritarian governments but against constitutions and parliaments put in place after the war. Only the United States avoided this inflation and the systematic deflationary pressure of the Fed in the 1920s and the soaring productivity caused, in part, by the Harding-Coolidge tax cuts and the reduction of the national debt from 1921 to 1926. But with Germany reeling, it was time for the political teeter-totter to swing. The French, concerned about getting their payments, sent an army into the Ruhr, further humiliating Germany and destroying public confidence in the Weimar Republic. A few industrial conglomerates, including Krupp, Thyssen, and Farben, welcomed the inflation because it made German goods cheaper for export, but everyday transactions took on a surreal character. In one astounding example, a student at Freiburg University who purchased a cup of coffee for a menu price of 5,000 marks ordered a second, but by the time the bill came, it had gone up to 7,000 per cup.
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Prices, even by previous standards of ridiculously high inflation, skyrocketed: by July 1923, 300 paper mills were working nonstop and 150 printing companies had 2,000 presses running constantly just to print money. Debtors who had once celebrated inflation found themselves as broke as ever. On a single day,
October 25, 1923, the Reichsbank printed 120,000 trillion marks, but the day's demand for money was one million trillion. Housewives burned cash in stoves for heat and wallpapered apartments with it. By 1923 a million marks would not purchase a postage stamp.

Other countries have since experienced worse hyperinflation (Hungary in 1945–46 and Yugoslavia in 1992–94), but the impact in Germany with its fledgling Weimar Republic perched uncertainly on an electorate unfamiliar with self-rule portended drastic political change. In the short term, a new government introduced the Rentenmark in 1923, which was carefully limited in its circulation and maintained its value until a new Reichsmark pegged to gold was introduced in August 1924. The Dawes Committee, headed by Chicagoan Charles G. Dawes, convened in 1924 to save Germany from collapse and ensure continued reparation payments. One of the key participants, General Electric's Owen Young, helped negotiate the final arrangement that allowed the Germans to reduce their overall debt while at the same time borrowing from the United States to make some of the payments.
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For the second time in history America saved Europe, but by no means would this be the last.

The upshot of these disruptions was a new geopolitical/financial strategy that sought to align Weimar Germany with the United States as a counterbalance to France and Britain. Carefully exploiting the U.S. reparations agent, Wall Street banker Parker Gilbert, German chancellor Gustav Stresemann and the president of the Reichsbank (Germany's national bank), Hjalmar Schacht, embarked on a policy of soliciting heavy loans from the United States to repay the British and French—who had to then repay their war debts back to the Americans. This “Atlanticist” strategy seemed viable, but it ran completely counter to the other current gaining momentum in Germany, the National Socialist (Nazi) Party, which interpreted the rising power of the United States as a threat to Germany's very survival. Adolf Hitler viewed America as under control of the Jews, and just another nation in the international Jewish/capitalist/Bolshevik conspiracy. We shall return to Hitler's seemingly contradictory conflation of capitalism and communism under the same Jewish rubric later, but for now it is important to realize that not only did Hitler believe it, but he also sold the notion to millions of Germans. Only a German-dominated Europe could “stand up to North America,” he warned in his “Second Book” (written in 1928, but not published). “It is the task of the national socialist movement to strengthen and prepare its fatherland for this mission.”
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Versailles, he
ranted, was concocted by the “crook” Wilson and his “staff of 117 Jewish bankers and financiers.”
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What stands out is that as early as the
1920s
, Hitler focused on the United States as the ultimate enemy while Britain, France, and Russia were all minor players to be swept aside. To the bitter end, Hitler clung to his perverted fantasy that a Judaic America defeated him. In 1945, he told his private secretary Martin Bormann, “An unfortunate historical accident fated it that my seizure of power should coincide with the moment at which the chosen one of world Jewry, Roosevelt, should have taken the helm in the White House…. Everything is ruined by the Jew, who has settled upon the United States as his most powerful bastion.”
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