SECRET OF THE WAR PROFITS
ALTHOUGH the announcement of President Wilsons war policy toward business was in practice construed as permitting the greatest profits in the history of the country, it was capable of being construed as permitting no profits at all. Had the generosity of the War Administration been, in fact, confined strictly to satisfying the four considerations mentioned,wages, upkeep, management, and necessary expansions for war purposesthen its war policy toward business might not be open to criticism. But a very large share of the money abstracted from the Treasury was not devoted to any of these specified purposes, but was diverted into an entirely different channel.
Not one dollar of the nine hundred million odd net, which the government guaranteed the railroad corporations, was devoted, or intended to be devoted, either to sustaining the efficiency of the railroad industry, providing a living for those who conducted the railroads, paying wages, or expanding the railroad properties. Salaries and wages were paid out of the operating income, and were covered by rate increases to the public. Maintenance and expansion were attended to with the half billion dollar revolving fund, and the funds of the War Finance Corporation, both appropriated by Congress. The $945,000,000 was an entirely different item, for an entirely different purpose. It was net profit. The part of this guaranteed net income over and above the sum that would have been available for dividends had America remained at peaceseveral hundred million dollarsmust be set down as riches coined by the shedding of Americas young blood upon European battlefields.
What is said of the railroad industry applies with equal force to steel, copper, coal, oil, shipping, and every other like enterprise. In each instance, the War Administration provided the money not only for four items, salaries, wages, maintenance, and expansion, but for a fifth item, profit.
The necessity of satisfying the first four items, as a condition for the successful conduct of the military operations, may be cheerfully concededprovided the fourth item, expansion, were satisfied by loans exclusively. But what is the secret of the fifth item ?
They are giving their lives; will you not give your money? This famous appeal was shouted at us by the super-patriots themselves. But it is obvious that no American who possessed more money at the end of the war than at the beginning can be said to have contributed one penny to it. The fact cannot be evaded that our leaders of industry and finance were richer at the end of the war than at the beginning, and that they became so through the operation of a policy unswervingly followed by the War Administrationthe policy of paying them prices that permitted them, after every war exigency was met, to add billions of dollars to their permanent fortunes.
Why was it the policy of President Wilson that Wall Street should make a lot of money out of the war ? Huge profits in war time have apparently been accepted by a great many persons as a normal, necessary, and innocent phenomenon. But it would seem that if American finance and industry had been mobilized and utilized with a view to its most effective use in war no dividends whatever would have been allowed, no piling up of great fortunes, no increase in anybodys wealth, least of all the wealth of those who already possessed the most.
It is true that the influence of our captains of industry was continually exerted in favor of higher pricesand of other special favors to themselvesand that the copper and coal producers particularly were accused of conspiring to limit production as a means to gouging more money out of the government.
But evidence of the power of these gentlemen to compel the Administration to meet their wishes is lacking. If the War Administration was physically powerful enough to conscript an army for the trenches, surely it was physically powerful enough to conscript industry and finance, including the personal services of managers and directors, and to pay to industry and financeas to the men in the trenchesthe money necessary to make them most efficient for war purposes, and no more.
The most plausible excuse for exorbitant profits paid to the large mining and industrial, corporations was that, in order to attain the maximum production possible, it was necessary to bring every available plant into operation, high-cost plants as well as low-cost plants, and that prices paid by the government had, therefore, to be based on costs in the highest-cost plants. Thus the owners of the low-cost plantswho were none other than our richest citizenscame into huge profits as if by accident.
But why was this pretty scheme adopted ? Would it not have been possible to put into effect, instead, a system placing all plants, whether of high or low cost, on a basis of all efficiency and no profit ?
If every man conscripted for the trenches had been paid twenty dollars per day net for his services, he would still not have been treated relatively so well as the possessors of Americas largest fortunes.
The secret of our magnificent generosity to Wall Street during the warand the secret of the war itselfis to be found, not in any special war conditions, but in a governmental policy pursued from the beginning. It had always been the policy of President Wilson to serve the special interests of Wall Street, regardless of the general welfare.
No American President ever more frankly confessed himself a servant of business than Wilson. No American President ever more completely met the wishes of big business than Wilson.
Although Wilson went to the White House in the role of a radical, solemnly pledged to a great programme of reform and attack upon special privilege, he did not carry out that programme in any important particular. A part of the programme intended to protect the public against the extortions of monopoly, he repudiated; another part he put through in such form that it turned out to be a service to monopoly, instead of a check upon it.
Although the Baltimore platform, upon which Woodrow Wilson became President of the United States, pronounced for the vigorous enforcement of the criminal as well as the civil law against trusts and trust officials, and the enactment of such additional legislation as may be necessary to make it impossible for a private monopoly to exist; and although Wilson endorsed this proposition both before and after election; neither his new anti-trust legislation nor his enforcement of the old, put an end to any monopoly. On the other hand, President Wilson, after prolonged efforts, procured the passage of laws, exempting corporations engaged in foreign commerce from all restrictions provided by the anti-trust laws.
Although the transportation monopoly was especially singled out for discipline by the Democratic party and its candidate, and although candidate Wilson pronounced in favor of lower rates, from one year after taking office President Wilson was almost constantly working for, and openly urging, higher rates. After having been responsible for one rate increase, the President twice urged upon Congress explicit approval, by the Congress, of the consideration of the Interstate Commerce Commission of an increase in freight rates. (Words of the message of Dec. 1916.) As early as November, 1914, the Wall Street Journal acknowledged : So far as he properly could, he [President Wilson] has assisted the railroads.
Although, in the programme of reform upon which Wilson rode into office, the high Republican tariff was denounced as the principal cause of the unequal distribution of wealth, and as a system of taxation which makes the rich richer and the poor poorer; and although an immediate revision downward, such as would reduce the cost of living, was promised; under Wilson the revision was accomplished in such a way as to reduce neither the cost of living nor the profits of protected industries. Moreover, guided by Wilson, the Democratic party enacted an antidumping law, which, in effect, built a barbed wire fence around the top of the tariff wall; and under cover of the war emergency, it enacted, to employ the words of Congressman Kitchin, the highest tariff ever written on the books.
Although the Baltimore platform carried a promise of currency reform guaranteeing absolute security to the public and complete protection from the misuse of the power that wealth gives to those who possess it, the Wilson Federal Reserve Act only made more secure the monopolistic control of the countrys credit that is so well described in the Pujo Committee report on the Money Trust. Currency inflation, made easy by the Federal Reserve scheme, greatly facilitated the war-time looting of the country, and became one of the causes of famine prices. The first claim for this law was that it would give us an elastic currency. The Federal Reserve currency proved elastic enough in the stretching, but when the day arrived for deflation, the unstretching was not so easy a process.
Although the Baltimore platform pledged candidate Wilson to conservation, promising such additional legislation as may be necessary to prevent the countrys natural resources from being wasted or absorbed by special or privileged interests, under Wilson no bona fide conservation laws were enacted. On the other hand, President Wilson conducted a long fight for the so-called Shields and Water Power bills, and the oil and mineral lands-leasing bills, designed to open up the last of such resources to a raid of the great exploiting concerns, on terms violating every accepted principle of conservation.
It is not the purpose here to go far into President Wilsons peace-time record, nor even to enumerate all the pledges of the Baltimore platform that became scraps of paper in his hands. Passed over is the pledge not to stand for a second term, the pledge not to encroach upon either of the other two branches of government, the Panama Canal tolls reversal, the pledge to suppress gambling in agricultural products, the pledge for an adequate system of rural credits. Only enough of this record is recalled to make it quite clear that the war-time favors to Wall Street embodied no new policy.
Wilsons own testimony on this point may be of interest. As early as January 20, 1914, President Wilson announced to his Congress : The antagonism between business and government is over. On signing the Federal Reserve Act, he said :
I myself have always felt, when the Democratic party was criticized, as not knowing how to serve the business interests of the country, that there was no use in replying to that in words. The only satisfactory reply was in action. We have written the first chapter of that reply.
June 25, 1914, in a speech before the Virginia Editorial Association, the President sketched his entire legislative programme as one of beneficence to business, carried out under the advice of business men. When the programme is finished, he promised, there will be a boom in business in this country such as we have never witnessed in the United States. ... Business can get and will get what it can get in no other way.
On the December 8 following, the President informed his Congress that the above promises had been fulfilled. The road at last lies clear before business, said he. It is the road to ungrudged, unclouded success.
Again, January 29, 1915, the President was voicing the following happy assurances: Nobody is going to be afraid of or suspicious of any business merely because it is big. Accordingly, in the St. Louis platform appeared a number of strange paragraphs, the like of which had never before been seen in a Democratic platform. One such paragraph reads :
We must now remove, so far as possible, every remaining element of unrest and uncertainty from the path of the business men of America, and secure for them a continued period of quiet, assured, and confident prosperity.
Promises of this character notwithstanding, Democratic spellbinders followed their time-worn practice of telling the people that Wall Street was lined up against their candidate. Evidence of this is lacking. Wall Street looked on with singular complacence. The reason was disclosed by the Wall Street Investment and Mining News, in its June issue :
The Presidential nominations are most satisfactory from a financial standpoint. No matter what a mans political preference may be, he should be satisfied with the choice as far as business is concerned. Wall Street responded nobly.
In the campaign, indeed, President Wilson repeatedly pointed to his record as an argument that the business vote should fall to him. In his speech of acceptance, for example :
The tariff has been revised, not on the principle of repelling foreign trade, but upon the principle of encouraging it. ... The laws against trusts have been clarified by definition, with a view to making it plain that they were not directed against big business, ... and a Trade Commission has been created with powers of guidance and accommodation, which have relieved business men of unfounded fears and set them upon the road of hopeful and confident enterprise. ... Effective measures have been taken for the recreation of an American merchant marine. ... So much have we done for business. What other party has understood the task so well or executed it so intelligently and energetically ?
JUST as it is necessary, in seeking the true causes of the European quarrel, to go back a space in the history of the contending countries, so, in order to determine the real motives for our own participation, we must devote some attention to the nature of American governmental policies even before the European war began.
Attention has been drawn to governmental service to domestic business. We now turn to foreign business. All foreign business of American citizens has come to be spoken of as foreign trade, especially by persons interested in promoting itperhaps because the term has an innocent sound.
What has Wall Street wanted most of America, on behalf of its foreign trade?
First, a great merchant marine; second, a greater navy and army; third, legislation especially framed to encourage and protect foreign business; fourth, an Executive committed to aggressive support of foreign business; fifth, a disciplined nation.
These are what may well be termed the permanent, as distinct from the immediate, advantages accruing from American belligerency. They are the instrumentalities of imperialistic exploitation.
Agitation for government subsidies, as a means to creating a large merchant marine under the American flag, had been carried on for several decades without results. The Japanese peril had been raised annually, in an effort to bring about substantial increases in the army and navy. In the year 1902, the Navy League was founded by a group of millionaires interested in contracts for armor plate, powder, munitions, and foreign financing. It carried on an unceasing propaganda for a huge navy and for a government polity of employing the navy to back up the undertakings of American financiers abroad. In the year of the European outbreak, the National Foreign Trades Council was organized by the heads of large banks and industrial corporations, many of whom were already prominent as founders of, directors of, or contributors to, the Navy League.
The publicity of such organizations found its way into the news and editorial columns of the newspapers, into the speeches of Senators and Congressmen, into university classrooms, into the pulpit, into the popular magazines, into the book world. Due to such influence, the Monroe Doctrine was given a more and more aggressive interpretation, inimical to the sovereignty of our Latin American neighbors.
The circumstances of the European war rendered these purposes a hundred times more desirableas well as apparently capable of realization in the fullest measure. By the end of 1915, Wall Street had seized a goodly share of the foreign trade of belligerents, particularly of Germany. How was that trade to be retained and extended ? New York was in a fair way to supplant London as the worlds financial centre. How was that position to be secured and made permanent ? The billions of war profits, dazzling in themselves, also opened up a dazzling future. To-day they were bursting American banks. What should be done with them to-morrow ?
The answer came from the Navy League, from the Foreign Trade Council, from the American Manufacturers Export Association, and the other organizations formed to take advantage of the situation. The answer was that there are no profits equal to the profits of imperialism; that to-morrow American dollars must be competing abroad with sovereigns and francs; that to-morrow America would be sharing places in the sun with the great imperial powersprovided political America would do its part.
In announcing the launching of the American International Corporation, Chairman Vanderlip urged upon his associates the necessity of arousing the interest and securing the cooperation of the entire country. It was necessary, explained Vanderlip, to make it [the business of international finance] a national undertaking, and to appeal to the confidence, the enterprise, and the patriotism of the American people. President Farrell of the U.S. Steel Corporation seconded the motion. The public must be taught, he said, that foreign trade is a vital element in domestic prosperity.
The European war, which brought inconceivable suffering to so many millions of human beings, presented itself to Wall Street as a financial opportunity, infinitely beyond its wildest dreams of former days. Said Mr. Vanderlip to a Chicago audience of bankers (Dec. 16, 1916)
Never since the beginning of time was there such an opportunity. Never did a people have before them a choice of two roads that led to such different destinations. Never did a nation have flung at it so many gifts of opportunityn flood tide of wealth, of opportunity, which, added to our resources, puts upon the people of this country a responsibility of trusteeship of the world. ... We have suddenly by a world tragedy been made heir to the greatest estate of opportunity that imagination ever pictured. The last twenty years have seen a fivefold development. I would hesitate to suggest what the next twenty years may see, if we rightly manage this heritage.
Our future for many years to come, said Vanderlip, in the same speech, will be governed by the soundness of the public mind and governmental actions in the next score of months.
This sort of propaganda raged throughout the year 1916, and reached its climax in the final weeks before America declared war. Following the Paris Economic Conference in June, 1916, the press was filled with horrible forebodings lest our rosy destiny might not be realized. The war after the war was presented as a peril hardly less sinister than the German invasion peril paraded before us a year later. Oh woe! What should be done ?
Wall Street told us what should be done, not too impetuously at first, but feeling its way. Even the National Security League did not at once tell us that the solution was to declare war on Germany. At the luncheon discussions of the war after the war, held by bankers, manufacturers, and merchants, daily throughout the country, exhortations to prepare for our great opportunities overseas, advocacy of compulsory military training, the beauties of a merchant marine under the American flag, demands for sterner measures in Mexico, rhetorical flights upon American destiny, and praise of the Monroe Doctrine, were inextricably mixedand equally applauded.
Finally, military alliance with the Entente came to be mentioned in the same breath with financial alliance. Evidence that our allies-to-be intended to wage commercial war on us, after the war, was used, more or less openly, as an argument to ally ourselves with them in order to get on the band-wagon. The last step was to bellow for the vindication of American honor, hoist the German peril, and call for war.
After war was safely declared, the purpose to obtain, through the circumstances of the war, the imperialistic advantages long sought by Wall Street, was frequently acknowledged. We find W.S. Kies, vice-president of the National City Bank, and one of Vanderlips right-hand propagandists, assuring friends (The Americas, Apr., 1917):
The entry of the United States into the war, and our definite alignment with the Allies will undoubtedly be of influence in obtaining for us preferential treatment [in the economic struggle after the war].
We find such men as James A. Farrell, president of the U.S. Steel Corporation, saying :
As we have willingly devoted our lives and our fortunes to the cause of the Allies ... it would be a natural corollary to this joint enterprise that there should evolve at the end of the war a definite plan of international coöperation in the financing of foreign enterprises. (Foreign Trades Council Convention, Apr., 1918.)
Also, same speech:
The gigantic task confronting the United States means not only that the Allies must be protected against defeat, ... but that ... our great resources should be fully utilized for the restoration of the decadent industry of shipbuilding.
Our war for the right of nations, great and small, to choose their own way of life and obedience, did not see the end of the plot to choose Mexicos way of life and obedience for her, but only brought that plot nearer to maturity.
Now glance at the governments share in this business. From the beginning President Wilson was a propagandist for foreign trade. In his first inaugural address, we find the words : Our domestic markets no longer suffice. We need foreign markets. And in his first message to Congress : We must build up trade, especially foreign trade. His public advocacy of government aid, in the building of a huge merchant marine, dates from the first months of his tenure. His first shipping bill having failed, we find him, the following year, urging a similar programme upon Congress. (Dec. 7, 1915.) Here is the plan and argument, in part :
The task of building up an adequate merchant marine for America, private capital must ultimately undertake ... and it seems to me a manifest dictate of wisdom that we should promptly remove every legal obstacle that may stand in the way. ... But ... something must be done at once ... and it is evident that only the government can undertake such beginnings and assume the initial risks. When the risk has passed ... the government may withdraw. But it cannot omit to begin. It should take the first steps, and take them at once. ... With a view to meeting these present necessities of our commerce, and availing ourselves at the earliest possible moment of the present unparalleled opportunity of linking the two Americas together in bonds of mutual interest and servicean opportunity which may never return if we miss it nowproposals will be made to the present Congress, for the purchase or construction of ships to be owned and directed by the government, similar to those made to the last Congress.
The Presidents bill, introduced forthwith, embodied the policy ultimately carried out, that the government should pay for the ships and afterwards turn them over to private enterprise, either through lease or sale.
The President succeeded finally in putting through his shipping legislation, but only as a part of the preparedness programme of 1916. The policy itself was realized only as a part of the war programme, when, in the words of Parrell, our great resources were, in fact, fully utilized for the restoration of the decadent industry of shipbuilding.
In a speech before the U.S. Chamber of Commerce, February 3, 1915, President Wilson said :
The anti-trust laws of the United States apparently make it illegal for merchants in the United States to form combinations for the purpose of strengthening themselves in taking advantage of the opportunities of foreign competition. That is a very serious matter. ... I want to know how these co-operative methods can be adopted for the benefit of everybody who wants to use them, and I say frankly, if I can be shown that, I am for them.
The Webb Billexempting combinations engaged in foreign trade from the operation of the anti-trust lawswas accordingly introduced, and in every subsequent session of Congress it was personally urged by the President in messages or public statements. It failed repeatedly, due to opposition to it as class legislation for the very rich. The President was finally able to put it through only under cover of the war. Meanwhile, so impatient was the Executive in this matter that he put the provisions of the bill into operation by fiat, more than a year before it passed Congress.
Many other bits of legislation designed to promote foreign trade were enacted at the instigation of President Wilson, as we approached war, and during the fighting itself. In urging the Water Power Bill, one of the Administrations arguments, signed by Secretaries Baker, Lane, and Houston (Mar. 3, 1918), ran thus : There is also need of legislation, in order that time may be given to prepare for the developments that must take place after the close of the war, if the United States is to maintain its proper place in world trade.
Under the guidance of Wilson, the Democratic party, in the 1916 platform, pledged itself to the essential principle of imperialism in the following words :
We favor ... a fixed policy for the continuous development of a navy worthy to support the great naval traditions of the United States, and fully equal to the international tasks which the United States hopes and expects to take part in performing. ... The circumstances of the last two years have revealed necessities for international action which no former generation can have foreseen. We hold it to be the duty of the United States to use its power, not only to make itself safe at home, but also to make secure its just interests throughout the world. ... The American government should protect American citizens in their rights not only at home, but abroad, and any country having a government should be held to strict accountability for any wrongs done them, either to person or property.
In spite of this, during the campaign, President Wilson charged his opponents with desiring to get in control of the government in order to put the army and navy of the United States back of their financial enterprises in Mexico and throughout the world. (Oct. 16, 1916.) During his preparedness-tour addresses, as has been seen, the President had made it a question of national honor to put the army and navy back of the business enterprises of American citizens abroad.
Said Wilson at Shadow Lawn, on the eve of the election (Nov. 4) :
The United States will never again be what it has been. The United States was once in the enjoyment of what we used to call `splendid isolation. ... Now ... we have become not the debtors but the creditors of the world, and in what other nations used to play in promoting industries which extended as wide as the world itself, we are playing the leading part. We can determine to a large extent who is to be financed and who is not to be financed. ... So it does not suffice to look back, as some gentlemen are looking, back over their shoulders ... for now we are in the great drift of humanity which is to determine the politics of every country in the world. With this outlook, is it worth while to stop to think of parry advantage ?
Such quotations help to explain why our international bankers were not in the least alarmed, in 1916, when our pacifists and Liberals united to reelect Wilson because he kept us out of war.
Further explanation is found in the course which the President was then actually pursuing, not merely in the diplomatic disputes with belligerent countries, and in the matter of preparation for war, but in his dealings with our neighbors, near and far. The anti-imperialist can find a complete vindication of his position, in the speeches and state papers of Wilson, but the imperialist finds equal comfort for his views in the same quarter. The record of action will determine the real nature of his foreign policy. Imperialism is not imperialism unless it has teeththe teeth of armed public forces behind the smile of diplomacy. Did Wilsons policy in action differ in any essential from the policy of Imperial England, Imperial Germany, and imperialistic France ?
It differed on but two occasions, and in each of the two instances the action was later reversed.
The second of these two instances, relating to Wall Street loans to belligerent governments, has already been mentioned. (Chapter VII.) The first had to do with a loan to China. Soon after coming to power, President Wilson refused diplomatic support to the Wall Street end of a proposed consortium loan to the Chinese government, in which financiers of England, France, Germany, Russia, Japan, and the United States had arranged to participate. As a result of Wilsons declaration that the scheme touches very nearly the sovereignty of China, the American bankers withdrew, and Wilsons name was hailed throughout the world as that of a genuine anti imperialist. But in 1919, under the ægis of Wilson, the American bankers went into a reorganized China consortium, paralleling in every principle and purpose the old one.
The President, indeed, had reversed himself as early as 1916 on this particular question. November 16 of that year, a State Department letter pledging diplomatic support to a loan by American bankers, and the enterprises behind it, was given to the press. It read :
I have read the contract between yourselves and the republic of China with reference to a loan of $5,000,000 for a period of three years, and I have to say in reply to your oral request for a statement of the policy of this department, respecting such loans, that the Department of State is always gratified to see the republic of China receive financial assistance from citizens of the United States, and that it is the policy of this department, now as in the past, to give all proper support and protection to the legitimate enterprises abroad of American citizens.
I am, gentlemen, your obedient servant,
That these words were not a mere polite bon voyage to the adventuring American dollars was soon made manifest. The particular loan, to which the published statement of the Secretary of State referred, was secured by a mortgage upon wine and tobacco taxes. Another loan, floated at about the same time, involved a contract for the construction of a railroad and the improvement of a canal by the Siems-Carey Railway & Canal Company, a subsidiary of the American International Corporation; in other words, it was tied to a government concession promising large profits.
In pursuance of its policy of establishing a modernized Monroe Doctrine for the benefit of Japanese capitalists in the Far East, the Japanese government promptly made representations to the Wilson Government, objecting to the first loan on the ground that it was political in its nature, and to the second on the ground that the enterprise came into conflict with concessions held by Japanese citizens.
The French, Russian, and British governments, at the instance of French, Russian, and British financiers, registered similar protests, but the sharpest issue was made by the Japanese. The diplomatic correspondence is still a secret, but the attitude of our government was sufficiently revealed to make it quite certain that Lansings term, all proper diplomatic support and protection, meant conventional support and protection, nothing less.
The crisis brought Viscount Ishii to America on his special mission. How near the two governments came to an open break over a profiteering contract gouged out of the weak and needy Chinese, the American public may never know. The signed statement of Lansing, published coincidently with the so-called Lansing-Ishii Agreement (Nov. 7, 1917), suggests that actual hostilities were nearer than any one not on the inside could have suspected. The agreement dissipated that particular crisis, and the representatives of both governments expressed themselves as delighted. What the real understanding was remained a matter of speculation; for the published version, to any one familiar with the processes of secret diplomacy, is obviously a blind.
The published version appears, on its face, however, to record a victory for Japan, as it registers a recognition by the United States of Japanese special interests in China. It is self-evidently hypocritical; for, while professing to guarantee the integrity and sovereignty of China, it violates it, and was protested against for this reason by the Chinese government.
The Lansing-Ishii Agreement is a conventionally imperialistic document, arrived at by conventionally imperialistic paths. The character of the new consortium is the same. These things begin to show how far America has gone afield to exploit weaker countries and to risk future war through competition in such business with the Old World predatory powers.
FOR the completed picture of our recent imperialism, it is necessary to look nearer home. In words we find President Wilson playing two rôles here, as elsewhere.
Before we injected ourselves into European affairs, President Wilson had promised equality to Latin America : All the governments of America stand, so far as we are concerned, upon a footing of genuine equality and unquestioned independence. (Message to Congress, Dec. 7, 1915.) Yet the following month (Jan. 27, 1916), he was telling us : What America has to fear, if she has anything to fear, are indirect, roundabout, flank movements upon her regnant position in the western hemisphereand suggested a willingness to fight to maintain such position. But how can a government claiming a regnant position among a group of nations also profess to stand for genuine equality?
In his Mobile speech (Oct. 27, 1913), President Wilson revealed a clear understanding of the conventional imperialistic devices through which weak countries nowadays are drawn under the dominion of the strong, and even promised the Latin American countries emancipation from such subjection :
There is one peculiarity about the history of the Latin American states which I am sure they are keenly aware of. You hear of `concessions to foreign capitalists in Latin America. You do not heat of concessions to foreign capitalists in the United States, ... and states that are obliged, because their territory does not lie within the main field of modern enterprise and action, to grant concessions, are in this condition, that foreign interests are apt to dominate their domestic affairs, a condition of affairs always dangerous and apt to become intolerable. What these states are going to see, therefore, is an emancipation from the subordination, which has been inevitable, to foreign enterprise. ... They have had harder bargains driven with them in the matter of loans than any other peoples in the world. Interest has been exacted of them that has not been exacted of anybody else, because the risk was said to be greater; and then securities were taken that destroyed that riskan admirable arrangement for those who were forcing the terms! I rejoice in nothing so much as the prospect that they will now be emancipated from these conditions.
Pledges of this character were repeated periodically through the next five years. Yet when, in July, 1916, Senator LaFollette offered an amendment to the Naval Appropriation Bill providing that none of the ships authorized therein should be used in any manner to coerce or compel the collection of any pecuniary claim of any kind, class or nature, or to enforce any claim of right to any grant or concession for or on behalf of any private citizen, copartnership, or corporation, of the United States, the amendment did not meet with Presidential approval, and it was lost. Moreover, in opposing it, Senator Lewis, the Democratic whip, told his colleagues that if they voted for it they voted to impeach the Administration of President Wilson.
Where did the Senator get that ?
From Wilsons record in Latin America, particularly in Santo Domingo, Haiti, Nicaragua, and Mexico.
Americans know, in a hazy way, that under anti-imperialist Wilson we undertook a military occupation of Santo Domingo and Haiti, maintained American forces permanently in Nicaragua, and perpetrated two notable invasions of Mexico. Have they duly reflected that each of these four countries won its independence by means similar to those by which the American republic won its independence; that they were recognized as sovereign and independent powers by the United States; that war was not declared against any of them; that an act of invasion constitutes an act of war; that, in sending armed public forces into these countries, the President not only violated the letter and spirit of international law, and the letter and spirit of the Constitution of the United States, but that he made a mockery of every pretense of adherence to the principle of the equality of nations ?
What was the nature and purpose of President Wilsons Mexican policy ? The President himself gave answers irreconcilable one with another.
On the same day that he was giving to Congress the most solemn pledge of scrupulous regard to the sovereignty and independence of Mexico, he was wiring our consuls to threaten the Mexicans with intervention. While assuring Mexico and the world that he was concerned solely for the interests of Mexico, he was telling Congress that the fortunes of Americans in that country would be well looked after. Although at one time he repudiated the big brother role for America, at other times he urged it as an excuse for his Mexican meddling. Time after time he told his audiences that Mexico had a right to take as long as she liked in settling her affairs; meanwhile he was telling Mexico she would better hurry or he would step in and do the settling. While pledging himself before the American people never to coerce Mexico, he was employing all forms of coercion, including verbal threats which contradicted his pledges. While promising the American people not to overwhelm Mexico with force, he was threatening to overwhelm the strongest and most popular Mexican party with force. When, while professing to oppose Huerta, he placed an embargo on arms, causing greater embarrassment to Huertas enemies than to Huerta, he defended the action as in accordance with the best practice of nations in the matter of neutrality, but, when he raised the same embargo, he characterized it as a departure from the accepted practices of neutrality. To the American people he pledged himself eventually to fight American concessionaires in Mexico; eventually he informed the Mexican government that he was willing to fight for American concessionaires, although over so insignificant a question as taxes. When he sent an army into Mexico after Villa, he promised that it would not be used in the interest of American owners of Mexican properties; long after the Villa chase was ended, he virtually admitted, through a member of his cabinet, that the troops were still held in Mexico in the interest of American owners of Mexican properties.
The varying points of view cannot be separated chronologically; the contradictions are not explainable on any theory of a change of policy. The conclusion is inevitable that President Wilson played the role of anti-imperialist in order to mask a course of imperialistic purpose.
True, our Chief Executive stopped short of a war of conquest upon Mexico. Did he refrain because of any question of principle ? What principle could hold him back from war upon Mexico, while permitting him to make war upon Haiti and Santo Domingo ?
It must have been a question of expediency. There were arresting circumstances in the case of Mexico that did not exist in the case of her weaker neighborscircumstances which any other President, equally with Wilson, would have had to consider. The theory that Mexico owed her safety, at any time, to the fact that one Woodrow Wilson happened to be President of the United States, is unsound.
An arresting circumstance of a most decisive nature was nothing more nor less than relative power. The Executive was in a position to make war on Haiti and Santo Domingo almost in secret, without even calling the matter to the attention of Congress, without asking for special appropriations for the purpose, without selling Liberty Bonds, without conscription, without a vast machine of education and terror to keep the American people under control. But Mexico he could not conquer personally and privately.
Does this mean that the efforts of our President to serve Wall Street in Mexico were a failure ?
Not at all. The aim of imperialism is not conquest primarily, but control. Conquest is resorted to only as a means to the measure of political control essential to the proper protection of property rights. If the desired political control can be procured without the expense and risk of war, so much the better.
Especially in countries having capacity for stubborn resistance, imperialism proceeds more or less cautiously, resorting to a series of well-tried tricks and maneuvers. Although Wilson did not see his way towards making an open effort at the conquest of Mexico, his efforts to control were unceasing, and the friction and agitation accompanying such efforts tended to prepare the way to conquer when the time is ripe. Intervention is intervention, even though it does not go beyond the field of diplomacyand it is successful intervention exactly to the extent to which it succeeds, through threats or otherwise, in imposing the will of the stronger government upon the weaker. The threat to use an army, veiled as it may be in diplomatic language, is hardly less grave an offense than the use of the army itself.
Almost from the day Woodrow Wilson took office, the threat of armed force was held over Mexico, with intent to mold Mexicos domestic affairs in accordance with the wishes of Wall Street. The Wilson threats cover every question remotely affecting the financial interests of foreigners. They touch every important item of the revolutionary programme, and have proven the greatest obstacle to Mexican reform since the time of Huerta.
Representations were almost invariably accompanied by some form of coercion. The refusal to recognize Huerta in the beginning was a form of coercion. Wilsons refusal to recognize Huerta was approved by anti-imperialists everywhere; it contributed greatly to his reputation as an enemy of imperialism; by this very fact it placed him in a position to serve imperialism more effectively than he would have been able to serve it otherwise.
But why did Wilson refuse to recognize Huerta ? He sought to lead the world to believe it was because, as a democrat, he could not approve of any government stained by blood or supported by anything but the consent of the governed. But what becomes of such pretensions when Wilson himself set up blood-stained governments in Haiti and Santo Domingo, and employed our armed forces to protect a blood-stained government set up by the previous administration in Nicaragua ?
Wilson was in the beginning not unalterably opposed to the recognition of Huerta. I take the following Washington dispatch from the New York World, April 11, 1913:
When asked about it this afternoon, President Wilson said the de facto government of Mexico would be recognized as the new provisional government when it had worked out the problem now before itthe establishment of peace.
In a speech, November, 1913, defending Englands recognition of Huerta, Prime Minister Asquith told Parliament :
We were informed by the government of the United States that, as regarded the recognition of Huerta, no definite answer could be given, except that they would wait some time longer before recognizing him.
It was evidently with ultimate recognition in view that Wilson retained, as ambassador to the court of Huerta, Henry Lane Wilson, who had assisted in setting up the Huerta régime and who, so long as he remained, was Huertas most conspicuous apologist and support.
It was evidently with ultimate recognition in view, also, that for 176 days after his inauguration, Wilson permitted agents of Huerta to purchase arms in the United States and ship them without interference; while at the same time the enemies of Huerta, when caught trying to export arms, were thrown into jail and their shipments confiscated.
Wilson did turn definitely against Huerta in August. Why ? The mission of John Lind is still shrouded in mystery, and it is impossible to state the full conditions demanded at that time by Wilson. Subsequent events make it quite certain that what Wilson sought was, literally, to maintain the dignity and authority of the United States, as he told Congress when he took Vera Cruzparticularly to impose the authority of the United States upon Mexico; to procure from Mexico, if possible, an admission of the right of the United States to dictate in Mexican affairs, which would mark the end of Mexican sovereignty.
Wilson pretended to Congress that he had to employ the armed forces of the United States to compel Huerta to salute the flag. It was a matter of principle. Huerta had offered to salute the flag if Wilson would at the same time salute the Mexican flag. That did not satisfy Wilson. It looked too much like equality. The regnant position of America must be maintained. At Tampico some sailors had landed at a dock at which they had been warned not to land, the city being under siege by the Constitutionalist forces. These sailors were arrested, taken part way uptown, brought back, and an apology offered. There had been no violence. For this offense Huerta was commanded to salute the flag. In April, 1919, Japanese soldiers arrested an American officer who was leaving a theatre in China, handled him roughly and threatened him with the bayonet. Nobody asked the Japanese government to salute the American flag. There happened to be no occasion, at that time, to require Japan to bow to the dignity and authority of the United States.
When Wilson occupied Vera Cruz, he sent a friendly note to Carranza, omitting to mention the dignity and authority of the United States, but hinting that the action was taken to serve the cause of Carranza. Had Carranza not protested against the invasion, he would have fallen into a trap evidently designed to catch him. Tacitly, at least, he would have recognized the dignity and authority of the United Statesits authority to invade Mexico at pleasure.
It was not Wilsons first effort to trap Carranza. In November, 1913, the President dispatched a personal agent, one William Bayard Hale, to Carranza to lay down the conditions under which Carranza would be recognized by Wilson. Secret diplomacy also shrouds the Hale proposals. Their nature may be guessed from a statement issued by Carranza on breaking off the Hale interviews : We will accept no transactions, nor the interference of any nation to regulate Mexicos interior conditions.
All that Carranza asked of the United States was equal rights with Huerta in the purchase and export of arms. This right was not accorded him until Wilson had been President of the United States for eleven months. Recognition was withheld for nearly two years after the Hale interviews.
Once American forces were ensconced in Vera Cruz, Wilson forgot to renew his demand that Huerta salute the flag. Nor did he capture Huertas shipload of armssupposed to have been the immediate occasion of the invasion.
Wilson is credited with having caused the downfall of Huerta, but when the Vera Cruz assault occurred, the Constitutionalist armies had already won the series of victories which decided the assassins end.
At least, the fall of Huerta is supposed to have been Wilsons purpose in occupying Vera Cruz, and incidentally killing some two hundred residents thereof. Why, then, did he forthwith renew the arms embargo against the Constitutionalists, who were also fighting to down Huerta ? Why, then, did he stay in Vera Cruz four months after Huerta had fled ?
Is it conceivable that Wilson did not go down to Vera Cruz either to get the flag saluted, to help the Constitutionalists, or even to hurry the fall of Huerta, but that the occupation was one maneuver in a scheme to dictate who should succeed Huertaand under what conditions ?
The facts that support this view seem to have been generally overlooked. Wilson accepted the mediation of the A-B-C governments on the condition that the internal affairs of Mexico and the selection of a new provisional president should come into the discussion. Wilson was as anxious to eliminate Carranza as Huerta. But Carranza declined mediation on such terms, and triumphed in spite of the opposition of Wilson. Our forces remained in Vera Cruz for four months after Huerta fled, and were withdrawn only after the announcement had been blazoned in Washington that the early triumph of Villa was assured.
After the failure of his effort to arrive at the political control of Mexico through the mediation conference, Wilson simply decided to assert the dignity and authority of the United States through the medium of Pancho Villa. A Wilson consular agent became Villas closest adviser. An American general carried to Villa Wilsons pledge that he would never, under any circumstances, recognize Carranza. The State Department was turned into a Villa press agency. American oil and mining interests looked with favor upon Villa. Villa gave to Wilson pledges of proper protection to Wall Street investments, and Wilson diplomacy assisted Villa and hindered Carranza in almost countless ways.
When Villa succeeded in capturing Mexico City, Wilson demanded that the city and the routes to it from Vera Cruz be neutralizedwhich, would have made it impossible ever to oust Villa.
When the hemp kings gained the ascendency temporarily over the Carranza garrison in Yucatan, Wilson prohibited Carranza from blockading the port of Progreso, as a means to recovering the state, and dispatched a warship to make sure that there should be no blockade.
Even after Villa had been decisively beaten, Wilson continued to maintain an arms embargo against Carranza, rendering operations of the latter more difficult, and opening the way for the Columbus raid. Even after the Columbus raid, Wilson maintained his arms embargo, rendering it impossible for Carranza effectively to police the borderat the same time justifying his punitive expedition by the conditions for which the embargo was responsible.
During his entire administration, down to Carranzas downfall, Wilson employed his authority to embargo arms as a powerful means of coercion to persuade the latter to come to the Wall Street-Wilson view as to the dignity and authority of the United States.
When the Mexican-American joint commission met to arrange for the withdrawal of American troops, the Mexican delegates came prepared to enter into any reciprocal arrangements suggested, and to concur in any plan intended to prevent future raids. They discovered to their surprise, that the American delegates did not come to talk about protecting the border against raids, but to talk about oil taxes, mining decrees, andin the words of Chairman Laneother rights that are vested.
Although Villa was not caught, the American forces had killed several hundred Mexicans, and in April, General Scott, representing the government of the United States, had signed a memorandum to the effect that the dispersion of the Villa bands had been completed and that, therefore, no reason remained why the troops should not be withdrawn.
Nevertheless, for nine long months after the Scott statement, the American army was held on Mexican soil while Woodrow Wilson, through Franklin K. Lane, and others, was attempting to browbeat Carranza into yielding to American capital in Mexico the guarantees desired by the Rockefellers, and Guggenheims, the Dodges and the Dohenys.
Wilson finally recognized Carranza only after being urged to do so by Argentine, Brazil, and Chili, and after repeated maneuvers to oust him in favor of reactionary elements had failed.
Wilson finally withdrew the American army from Mexico in February, 1917, only to prepare it for action against Germany.
The result of the Wilson policy is that the aims which Wilson set out to realize have been partially realized, and stand in a fair way to be realized in full.
While all the Wilson maneuvers and aggressions did not succeeddue to the astuteness and patience of Carranzain procuring from the latter an express recognition of the dignity and authority of the United Statesan acceptance of the principle of inequalitya concession of the authority of the government of the United States to dictate in the affairs of Mexicothey tended to defeat every purpose that Wilson ever professed to serveMexican reform, pacification of the country, security for American lives, except the one purpose of protecting vested interests.
It is obvious that sweeping reforms cannot be applied to the portion of any given industry controlled by natives, without at the same time applying them to the portion of the industry controlled by foreigners.
It is easily understood how a government, say, in the United States, which essayed to lay war taxes upon corporations owned entirely by Americans, while remitting the taxes upon similar corporations having foreign stockholders, could not last.
Americans can figure out for themselves how long an American President would last who negotiated, say, over Japanese rights in California, while a Japanese army was encamped on American soil.
Although, in the end, the Carranza régime was a failurealthough Carranza in the end succumbed to the forces against himthe greatest force against him was the big stick of anti-imperialist Wilson. Wilson made it impossible for Carranza to deliver the goods to the Mexican people. Wilson helped to make the Obregon revolution not only possible, but necessary. But towards Obregon Wilson pursued the same policy, in principle, as towards Carranza. As the condition for the recognition of Obregon, he accepted the terms of Albert B. Fall, which were also the terms of the great financial and industrial interests. When Obregon rejected these terms, Wilson turned the new Mexican president over to the tender mercies of his Republican successors.
The Wilson policy in action was a consistent policy of intervention, the aim being to control Mexico politically for the benefit of American capital; a policy looking toward war should it become impossible to impose the desired control by less expensive means; meanwhile, to prepare the way for easy conquest when the time is ripe. This is precisely the Wall Street Policy.
VIRGIN ISLANDS, HAITI, SANTO DOMINGO, AND NICARAGUA
There is not a foot of territory belonging to any nation which this nation covets or desires.
(Woodrow Wilson, Jan. 29, 1916.)
ALTHOUGH the American public apparently swallowed the misleading reports of the press as to our acquisition of the Virgin Islands, the Danish public was not so gullible, and the Danish government was forced to reveal a little of its true inwardness. The Danish foreign minister had to admit that he favored the sale only because retention of the islands might possibly involve Denmark in international complications. Edward Brandes, the finance minister, informed the Lower House (Aug. 10, 1916), that the Danish government had no alternative but to accede to the desire of the United States. Brandes revealed the fact that Denmark had rejected an offer to purchase in 1913, as it had no desire to lower the Danish flag without cogent reasons.
What can this mean except that little Denmark simply bowed to a threat of force by the great American democracy?
The one thing that we learned from our own government was that, in consideration of the yielding of Denmark, the United States would not object to the Danish government extending its political and economic interests to the whole of Greenland.
Who gave us the right to say what should become of Greenland ?
Finally, the Danish foreign minister disclosed the fact that he had suggested leaving the question of the transfer to a referendum of the population of the islands, in accordance with the principle of self-determination, but that the United States refused to sanction it.
More than one hundred years ago, after desperate fighting, now against France and now against England, the inhabitants of Haiti, like those of the American colonies, won their independence from European domination. Until the régime of Woodrow Wilson, the sovereign republic of the United States recognized the smaller republic of Haiti as equally sovereign.
Here are the salient facts of the Haitian conquest, as gleaned from the meagre news dispatches of that period :
1. That American forces invaded Haiti July 27, 1915, following a revolution in which President Guillame Sam was killed by a mob.
2. That, previously to the revolution, the American State Department had been pressing upon Sam a convention signing away the sovereignty of Haiti; that Sam was on the point of yielding; that the revolution grew out of patriotic opposition to the treaty; that, therefore, our own government caused the very revolution which occasioned the intervention.
3. That, July 30, it was announced from Washington that the armed forces of the United States would remain on Haitian soil pending negotiations of an arrangement whereby the United States would assume control over Haitis financial affairsa confession that intervention was not to restore order, but to cram the convention down the throat of Haiti, regardless of order or disorder.
4. That Admiral Caperton at once began to impose a military dictatorship over Haiti. August 4, he dispersed the government army, compelling its commander to resign. He dissolved the Committee of Public Safety named by the opposition leader, Bobo, and attacked Bobos forces, both in the capital and at Cape Haitien. August 6, he seized the government gunboat the Pacifique, and disarmed the forces in charge of it.
5. That, August 24, the Haitian National Assembly was called together in the National Palace, surrounded by American bayonets, presented with a draft of a convention prepared by the American State Department, and was ordered to ratify the convention without discussion and within 24 hours; that the National Assembly was overwhelmingly opposed to the convention, and permission to discuss it was given, and the time extended, only after the members had threatened to resign in a body.
6. That the Wilson Government did not await the ratification of the convention, either by the Haitian National Assembly or by the United States Senate, but began at once putting its provisions into effect. August 27, Caperton began seizing customhouses, collecting the customs and disarming all Haitians. September 4, because of general opposition to the American invasion, Caperton proclaimed martial law in the entire territory occupied by his forces. Before the end of September, 2,000 American marines were operating against Haitian nationalists, thereafter termed bandits.
7. That resistance to the American dictatorship, which began with the landing of American marines, did not cease with the enforced ratification of the convention; that the armed forces of the United States engaged in a prolonged war of conquest, in which thousands of patriotic Haitians and a few Americans lost their lives.
The Haitian National Assembly signed the convention under duress, September 16, 1915. Its text was secret. January m, 1916, the President sent it secretly to the Foreign Relations Committee of the Senate. The Committee ordered it printed in confidence for the use of the Senate only. Between January m and February 28, the Committee conducted secret hearings. Not a line of the hearings was ever printed, even for the confidential use of Senators. Finally, February 28, meeting in executive session, the Senate ratified the convention, after which the bare instrument was printed.
The brief convention itself reveals a few things.
Article 2 puts the financial affairs of the republic in the hands of the United States, through a general receiver and a financial adviser named by the President.
Article to puts the police power in the hands of the United States, through a constabulary, urban and rural, organized and officered by Americans named by the President.
Article 13 puts the development of the natural resources in the hands of the United States, through Americans named by the President.
Financepolice powerspublic works. What remained of the sovereign republic of Haiti ?
Even the foreign affairs were taken over by Americans, and in due course the republic of Haiti declared war upon Germany under the direction of the United States.
The independence of Santo Domingo was first impaired by an American receivership of customs, forced upon it by Theodore Roosevelt. Soon after Wilson became President, a Senatorial investigation revealed a scandalous situation in which American politicians, in league with American bankers and concessionaires, were preying upon Santo Domingo finances by virtue of political control exerted under the terms of the customs convention.
But the Sullivan scandal brought no change of policy. Instead, anti-imperialist Wilson was soon pressing for greater control than had been attempted either by imperialist Roosevelt or imperialist Taft. The war of conquest began in May, 1916, following an ultimatum from President Wilson to President Jimenez, giving the latter seventy-two hours in which to resign.
Jimenez claims to have yielded, only on the understanding that his resignation would prevent intervention. However that may be, six days afterwards, 500 marines took possession of the capital, and a fortnight later Puerta Plata was occupied, after two hours fighting.
We struck at the enemies of Jimenez as well as at Jimenez. In June, Admiral Caperton issued a proclamation stating that there was no intention of infringing on the sovereignty of Santo Domingo or subjugating its territory. At the same time he was seizing every vestige of the civil power wherever his forces went. There were many battles and some massacres. By November, 1800 marines were reported engaged in the pacification of Santo Domingo. On the twenty-ninth day of that month, Captain Knapp, on behalf of Wilson, issued a proclamation establishing martial law throughout the republic. All natives were prohibited from bearing or possessing arms, and a censorship of the press was instituted, prohibiting any criticism whatsoever of the government of the conquerors.
The proclamation of martial law assured the natives that there is no intention on the part of the United States to destroy the independence of the republic, and that the only purpose of the occupation was to assist the country to establish internal order and to enable it to comply with the provisions of its convention and to fulfill its obligations as a member of the family of nations.
Meanwhile, at Washington, had been drawn up a convention modeled after that applied to Haiti, placing Santo Domingo under a civil dictatorship under the President of the United States.
By January, 1917, an American captain of marines was discovered to be holding the post of Minister of Foreign Affairs of the sovereign republic of Santo Domingo, ordering native diplomatic and consular officials abroad to hand in their resignations. February 11, 1919, Washington dispatches informed us that Rear Admiral Snowden had been detailed for duty as military governor of Santa Domingo and the additional duty as representative of the United States in Haiti. In May, 1921, Snowden was superseded by Admiral Robinson, the military dictatorship continuing.
Nicaragua completes the picture, because it gives the why of all such extraordinary happenings in the sworn testimony of the persons who furnished the why.
Among all of President Wilsons voluble speeches, there appears not a single word of explanation of our adventures in Nicaragua-or, for that matter, in Haiti or Santo Domingo. The fact that a portion of our naval force was enacting the role of an alien army of occupation in a Central American republic was briefly mentioned at long intervals in the press. At such times a phrase or two, such as protecting American lives and property, or a legation guard, was all the explanation deemed necessary. During Wilsons eight years in the Presidential chair, no serious criticism of our occupation of Nicaragua was seen in any of our leading newspapers or magazines. Nor did the national law-making body make any demand upon the Executive for an accounting of his acts. Of the so-called Canal Convention Senator Borah remarked : If the American people had known all the circumstances of its making it would never have been made. That was about all. Evidently the press as a whole, and the leaders of both great political parties, approved of the Wilson policy in Nicaragua. When Wilsons successor continued it, no protest was heard. The policy had, in fact, been initiated by Wilsons predecessor in office.
For authentic details we may turn to the hearings on the Nicaraguan convention, conducted by the Senate Foreign Relations Committee early in 1916. These hearings were printed in confidence, for the use of the committee only, one copy going to each member under an injunction of secrecy. The writer has had access to one of these committee copies.
An examination of this secret government document shows the hearings to have been in the nature of a frame-up. That is to say, neither Nicaraguans nor Americans who opposed the convention were given an opportunity to testify. Only one witness was heard who was not either interested in putting the convention through, or in some way connected with the interested parties. In spite of the suppression of illuminating details inevitable from such an arrangement, the document discloses the following essential facts :
1. That the permanent occupation of Nicaragua was undertaken by the Taft Administration for the purpose of sustaining in power a president opposed by an overwhelming majority of the voters of the country.
2. That said president, Adolfo Diaz, was raised to power neither by the votes of Nicaraguans, nor the arms of Nicaraguans, but by the armed forces of the United States under the direction of the President of the United States.
3. That, as a means to raising Adolfo Diaz to the presidency and maintaining him there, we conducted a series of unlawful military campaigns, killed scores of Nicaraguans, overturned three successive governments, seized public and private property, and prosecuted an actual war of conquest until in complete possession of the country.
4. That Adolfo Diaz, on becoming president, found that he could do nothing of his own volition, but was required to take orders like a butler.
5. That American domination of Nicaragua did not bring a single American benefit to the Nicaraguan people; that what liberties Nicaraguan citizens had were permanently taken away; that a free press, free speech and free suffrage are unknown; that the government of Nicaragua under the American protectorate is a pure autocracy, administered by aliens, which is forced to hold the Nicaraguan people under a reign of terror in order to perpetuate itself in power.
6. That the sole purpose of the American war on that little republic was to compel Nicaragua to submit to a general looting of her rich resources by American financiers.
7. That Woodrow Wilson carried out in every essential the purpose of the conquest begun under Taft; that the looting of Nicaragua under American guns was given a color of legality only under the Wilson régime, by the ratification of the Nicaraguan convention on the recommendation of Wilson.
8. That the feature of this convention, relating to the purchase of a canal concession and the lease of naval bases, was an after-thought, conceived and put through primarily as a blind, to hide the purely financial features of the protectorate.
9. That the actual arbiter of Nicaraguan destinies under the protectorate is none other than the local representative of the syndicate of New York bankers for whose benefit the conquest was undertaken and the convention put through.
Our Nicaraguan adventure began in 1909. The first step was an effort to remove President Zelaya from power, through a revolution financed by Adolfo Diaz. Before the launching of this revolution, Diaz was a bookkeeper on a salary of about $1000 a year, in the employ of an American mining company owned in Pittsburgh. Diaz loaned the revolution $600,000 gold, the origin of which he was never able to explain. The hand of Washington began to be seen only when the anti-Zelaya movement, as a privately financed undertaking, was on the point of failure. December 1, 1909, Secretary of State Knox, in a singularly intemperate note, broke off relations with Zelaya and declared in favor of the revolution. His pretext was the execution of two American filibusters, Roy Cannon and Leonard Groce, who had been caught trying to dynamite a vessel loaded with Zelayas troops. As these men had enlisted in the forces opposed to Zelaya, they had, of course, forfeited whatever rights they may have had to the good offices of their home government.
The action of Knox caused the resignation and flight of Zelaya. As his successor, the Nicaraguan Congress elected Dr. Jose Madriz, by all accounts a person of high character. Whatever domestic reasons there existed for a revolution disappeared with the passing of Zelaya, and the revolution would have been quickly dissipated had it not been saved by American intervention. Madrizs forces took possession of the entire country with the exception of Bluefields, and bottled up the remnant of the insurgents in that seaport. But our marines were landed, and the Madriz commander was prohibited from entering the city. Filibusters were imported from the United States, the revolution was reorganized and revictualed, and in time was able to take the offensive. Protected by our navy, and due wholly to our assistance, the Diaz movement finally came into possession of the Nicaraguan capital.
Immediately, there came from New York one Thomas C. Dawson, who was named by the banking syndicate and appointed by the Secretary of State. Dawson had previously acted in the same capacity for our bankers in Santo Domingo, and later performed a similar service for them in Honduras. A meeting with the revolutionary chiefs was held on board an American warship, and a bargain entered into, known as the Dawson Pact. Diaz was named vicepresident, and Estrada, the military head of the revolution, was named president. In pursuance of the Dawson Pact, a farcical election was staged under the direction of American marines, the purpose being to frame a new constitution that would facilitate the bankers programme. But the scandal became so great that the packed Congress refused to carry out its full share of the scheme. Whereupon Estrada dissolved it and ruled as a dictator, taking his orders, however, from the American minister. Estrada was soon given the command to leaveand he left. So Adolfo Diaz, late bookkeeper for an American corporation, became president of the sovereign state of Nicaragua.
Naturally, the people of Nicaragua were hardly pleased by the turn of affairs, and it was to be expected that we who had placed Adolfo Diaz in power should be called upon to defend him. The Taft Administration poured some 2,350 marines and bluejackets into the country and a general war of pacification was prosecuted. The battle of Coyotepe and the battle of Leonboth in October, 1912ended the organized resistance on the part of Nicaraguan patriots.
All this was done without a shadow of legality. It was murder in the first degree, for which the then President of the United States ought to have been impeached and indicted. Had Woodrow Wilson, on becoming President, entertained any real regard for any of the democratic principles by which he professed to be guided in the European war, or even for his own oath of office, he would at once have recalled our forces from Nicaragua, and denounced and repudiated the purposes for which they were sent there. Instead, he kept our marines in that sister republic, and proceeded to carry out the purposes for which they were sent there by Taft.
The Canal Convention ratified by the Senate, February 18, 1916, cedes to the United States the following things :
1. Exclusive proprietary rights to construct, operate, and maintain, forever free from all taxation and public charges, an inter-oceanic canal across Nicaragua.
2. Lease of the Corn Islands on the Atlantic side, 99 years, with option of renewal, for the purpose of a naval base.
3. Lease of territory on the Gulf of Fonseca, Pacific side, 99 years with option of renewal, for the purpose of a naval base.
In consideration whereof, Nicaragua purports to receive $3,000,000. Actually, the money gets no nearer Nicaragua than a bank in New York. The convention provides that it cannot be drawn out without authority from the American Secretary of State. In the working out of the scheme, the money remains in the hands of a New York banking syndicate, which never renders any adequate return for it, either to the United States, which paid it out, or to Nicaragua, which is supposed to receive the benefit of it.
On its face the Canal Convention looks like a simple purchase and lease. In the unpublished features lies its secret. The canal purchase and the leases of territory were not urged by the Naval Board, but by our patriotic bankers. Their real motive may be judged by the things that Nicaragua lost besides her canal route and the territory set aside for naval bases.
When Knox deposed Zelaya, Nicaragua was solvent; the bona fide foreign debt was only about $2,500,000; the railroads were owned by the government; the customs were collected and disbursed by native officials; the government administered its own funds; the laws were framed and put through by citizens of that republic. But when the conquest was completed, Nicaragua was permanently in the hands of a receiver, with a debt in the neighborhood of $15,000,000; the railroads were in the possession of American bankers; the same bankers collected and disbursed the customs, owned the National Bank and administered the public finances; legislation for the government of Nicaraguan citizens was framed in Wall Street, enacted at the direction of agents of Wall Street, and administered by Americans under control of an American banking syndicate.
The Canal Convention, ratified at the instance of President Wilson, established Nicaragua as a private financial preserve of a group of American bankers, and that was its primary purpose.
It may be supposed that our financiers got possession of the Nicaraguan railroads, the banks, the customs, etc., by loaning to Nicaragua large sums of money, which the latter was unable to pay; that intervention was undertaken to enforce payment of such debts.
Nothing as innocent as that. Previously to the Diaz-Estrada plot, according to their own testimony, the bankers did not have a penny invested in Nicaragua. Their entire interest was based upon the speculative opportunity furnished by the defenseless condition of the little republic.
Wall Street went in for revolution, intervention, and political control in Nicaragua as a business proposition purely -prompted by the same motives which later caused it to go in for intervention in Europe. The scheme had been tried in Santo Domingoand it worked. It had been tried in Hondurasand it worked. Later it was to be tried in Haiti. The ambition is ultimately to put the same system in operation in Mexico.
Very well, as soon as Adolfo Diaz was well on his way to the palace, we find our bankers acquiring bogus claims upon Nicaragua, and, at the same time, drafting, in their offices, a convention legalizing such claims, to be presented at Washington for solemn approval and ratification.
The first big claim acquired was known as the Emery claim. For twenty years the George D. Emery Company had exploited a concession which had netted it $186,000 a year. Zelaya finally revoked the concession on the ground of gross violation of its terms. Emery then put in a claim based, not upon the investment, but upon the profits expected during a period of years to come. The claim was so preposterous that any honest court would have denied it forthwith. The bankers bought the Emery claim cheapfor less than $100,000, it was said. The bankers then tagged the claim with a valuation of $500,000, and at that price it was saddled upon Nicaragua, with the consent of both the Taft and the Wilson Administrations.
As originally written (in 1911), the Nicaraguan convention, known as the Knox-Castrillo Convention, purported to provide a loan of $15,000,000 to Nicaragua. But an examination of the document discloses the fact that Nicaragua was not to receive the money, that the bankers were to expend it. We discover, indeed, that the bankers were never to pay out any such sums as $15,000,000; that such sums as they paid out were to be paid chiefly to themselves; first, to liquidate the Emery and other claims, and, second, to develop the countryto establish a bank, which they themselves should own, and to improve the National Railway, which they themselves should control, operate, and later own. The bankers were also to receive a concession to build a new railroad, upon their own terms, at the expense of Nicaragua, the property to be controlled, operated, and owned by themselves.
Finally, the $15,000,000 was to be paid out, but-by Nicaragua. The bankers were to collect the customs, and disburse therefrom the sums needed to meet their claims and improvements, after which they were to pay out of this national revenue $15,000,000 and interest to themselvesto liquidate a loan that they had never made except on paper.
But, by the election of 1910, Congress went Democratic. The Knox-Castrillo Convention was defeated by the Democrats, and there was some denunciation of it as dollar diplomacy. Nevertheless, its worst features went into operation under a protectorate formally entered into by the Wilson Administration.
Mr. Tafts honorable Secretary of State, and the banking syndicate, did not, indeed, permit their scheme to be greatly hampered by the Senate. Following the example of Roosevelt in the case of Santo Domingo, they proceeded to put the terms of their convention into operation without indulging in the motions of legality. For the paper loan of $15,000,000, however, was substituted a temporary loan of $1,500,000, which, again, was not to be paid to Nicaragua, but expended by the bankers, who agreed to reorganize the National Bank, 51 per cent. of the stock to be owned by the bankers, 49 per cent. by the Nicaraguan government.
In consideration of this loan, the bankers were given a mortgage on the governments share of the bank, a mortgage on the governments railway, a lease for the operation of the governments railway, a lien upon the customs, authority to negotiate a settlement of the Ethelburga debt, a contract for the reform of the currency, and various other little things of solid financial value.
But first of all, the bankers were placed in possession of the customhouses, where they remained, protected in their private business by the public armed forces of the United Statescollecting the customs, paying out the customs receipts to run their Nicaraguan enterprises, paying out the customs money to liquidate principal and interest on the loans that Nicaragua never received.
The settlement of the Ethelburga debt is worth a word. The bona fide foreign debt of Nicaragua was only $2,500,000. Two and a quarter million of this sum had been taken up in a refunding scheme, negotiated in England just before the expulsion of Zelaya, known as the Ethelburga Syndicate Bonds. Had this scheme gone through it would have made the foreign debt amount to $6,472,689. But Nicaragua had never received any money on this deal. Moreover, there were irregularities which placed the Ethelburga bonds in the fraudulent class. At least this was the contention of the bankers, who offered to submit the matter to the British courts. The Ethelburga Syndicate did not wish to fight, and a settlement was arranged, not between the syndicate and the bankers acting for Nicaragua, but between the syndicate and the bankers acting for themselves.
In other words, the bankers acquired control of the Ethelburga businesscheap. The charge was made by Senator Smith of Michigan that they acquired the bonds for twenty-five cents on the dollar. These bonds were grafted upon the public debt of Nicaragua at par, $6,250,000, with the approval of both Taft and Wilson. The bankers proceeded to pay principal and interest to themselves out of the customs receipts of the republic.
Another item of interest is our reform of the Nicaraguan currency. The bankers drew upon their $1,500,000 loan to buy up for themselves, as private business men, the national paper at the existing market value, between 15 to one, and 20 to one. Then, as fiscal agents of the Nicaraguan government, they put into effect an arbitrary exchange rate of 12½ to one, unloaded at this figure, and so turned over a cool profit of from 25 to 75 per cent. on every reformed Nicaraguan peso.
While the reforming was going on, the bankers loaned Nicaragua an additional half million dollars for sixty days, to facilitate the job. On this half million they collected a profit of $60,000, above interest, based upon the difference in the value of the Nicaraguan peso at the time that they loaned themselves the money and the time they repaid it.
In due course the bankers exercised their option to purchase a majority of the stock of the National Railway. Although it had been a paying investment, and although Zelaya had refused $4,000,000 for it, the bankers acquired control of the Nicaraguan National Railway for $1,000,000. Again, Nicaragua did not receive a cent. The syndicate simply made a paper payment to one of its New York banks, announcing that the money would be held against the debts it was rolling up against Nicaragua.
The press informed us, from time to time, that the chief purpose of the intervention and the financial deals connected with it, including the canal purchase, was a part of a big brotherly scheme to assist Nicaragua to get on its feet financially. It is apparent, instead, that the deliberate purpose, from the start, was to bankrupt Nicaragua for the benefit of our international bankers.
Had President Wilson actually cared to put Nicaragua on its feetand wanted the Canal route besideshe would have recommended that Nicaragua be paid in cash what the Canal route was worth, with the stipulation that Wall Street get its blood money and be kicked out of the country. But business Presidents do not do that sort of thing.
Instead, in October, 1916, Wilson permitted the bankers to take over the internal revenues, completing their control of Nicaraguas income and finances.
Finally, the terms of the Canal purchase and naval base leases were found to conflict with rights which Nicaraguas immediate neighbors shared with her on the Gulf of Fonseca, and the convention was ratified over the protests of Costa Rica, Salvador, and Honduras. Immediately afterwards, Costa Rica and Salvador brought suit against Nicaragua in the Central American Court of Justice, which had been set up in 1907 at the instance of the United States government to obviate future wars among the Central American republics. The decision was against Nicaragua, and required the latter to repudiate the convention. This Wilson would not permit Nicaragua to do. Thus our own government was the first to flout the judgments of an international peace court which it had assisted to set up, and whose decisions, inferentially, at least, it had bound itself to respect.
In such circumstances lies the secret of the necessity of keeping an army of occupation permanently on the soil of a sister republic. On page 511 of the Secret Senate Committee hearings appears the following colloquy :
Senator Smith of Michigan : Could the present government down there be maintained at all without the aid or presence of American marines ?
Mr. Cole : I think the present government would last until the last coach of marines left Managua station, and I think President Diaz would be on that last coach.
This brief statement of Walter Bundy Cole, personal representative in Nicaragua of our bankers, explains the acceptance of the bankers regime by the people of Nicaragua. Also, it partially explains the bankers sure and perfect mastership over the native government. Should the dummy in the palace become restive, he is quickly brought to terms by a simple threat to withdraw the protecting fence of foreign bayonets and leave him to the vengeance of his countrymen.
Another form of discipline applied by the bankers is to withhold salaries until their commands are fully complied with. The president of the sovereign republic of Nicaragua was at times found humbly begging his wages of American financiers. When the sale of the National Railway was being put through, the members of the hand-picked National Assembly were afraid to approve the dealso violent was public opposition to it. It is recorded that one means of pressure brought to bear upon them by Bundy Cole was to withhold their salaries until the contracts were duly ratified.
In such incidents is revealed the importance of the bankers possession of the customhouses. Once there, their grip is forever fixed upon the throat of Nicaragua. They set their own terms upon all future transactions. They keep the books. Nicaragua can never become solvent. Nicaragua can never choose another master. Nicaragua is in the position of a Mexican peon in the days of Diaz. The purpose of the convention, acknowledged in the contracts, is to furnish security to the bankers. That security is extended in the shape of young men, in the uniform of marines, carrying rifles paid for in taxes by the American people. We protect not only the bankers, their customhouses, their banks, their railroads, but also their dummy president who sits in the palace. So we grind the faces of the Nicaraguan people. For this the American people pay, in cash alone, more than the bankers receivealthough cash is the least of what we pay.
The story of Nicaragua is Pan-Americanism as Pan-Americanism is. This is the Monroe Doctrine, not as it is written, but as it is applied. This is protecting American lives and property. This is encouraging American trade.
This is Wilson imperialism in action. It is American imperialism, as approved by the controlling element in both the Democratic and Republican parties. It is not different, in any respect, from the imperialism of England, France, Germany, Japan, or Italy, at their worst.
There is no reason to debate the question as to whether Wilson called America into the European war in the hope of putting an end to imperialism. It is enough to point out that Wilson himself was a conventional imperialist before the European war began.
1 The withdrawal from Santo Domingo promised by the Harding Administration in 1921 did not mean the removal of American control from Santo Domingo affairs, financial or political, but only n partial withdrawal of American forces similar to our withdrawal from Nicaragua after we had completed the pacification of that little country.