“Nobody could hate war more than I do.”—J. P. Morgan, Senate Munitions Committee
“We see men living with their skulls blown open; we see soldiers run with their two feet cut off, they stagger on their splintered stumps into the next shell-hole; a lance-corporal crawls a mile and a half on his hands dragging his smashed knee after him; another goes to the dressing station and over his clasped hands bulge his intestines; we see men without mouths, without jaws, without faces; we find one man who has held the artery of his arm in his teeth for two hours in order not to bleed to death. The sun goes down, night comes, the shells whine, life is at an end.”—All Quiet on the Western Front
It is estimated that the disaster of World War I claimed some 15-22 million lives. This does not even take into account the injuries, property destruction, and other post-war consequences. The above quote from the well-known novel, All Quiet on the Western Front, captures a horrific snapshot of World War I. While people often flippantly talk about war—especially from within the borders of a wealthy international hegemon like the United States—people ought to read such descriptions and soberly weigh the costs and benefits of going to war.
Given the description of the destruction above, plus the fact that Woodrow Wilson ran on the slogan, “He kept us out of war,” Americans probably would have resented the fact that the late entry of the United States in World War I served, at least in large part, to bail out American bankers. Such a statement as, “We are fighting this war on behalf of the bankers,” was, at one time, enough to land an American populist presidential candidate—Eugene V. Debs—in prison under the Espionage Act and Sedition Acts in 1918. However, following the war, Woodrow Wilson admitted,
Why, my fellow-citizens, is there any man here, or any woman—let me say, is there any child here, who does not know that the seed of war in the modern world is industrial and commercial rivalry? . . . This war, in its inception, was a commercial and industrial war. It was not a political war.
Yet, in the above quote, Wilson only admitted that this was the case for the commercial powers of Germany and its rivals, but he did not acknowledge the rescue that the US performed for American bankers in the war, who had been funding the Allied cause and providing loans to the Allied powers. The newly-printed money for these loans, supplied to Allied European powers, was quickly funneled back to certain industries in the United States who provided war materials. In the middle were the Fed-connected bankers.
No less an historian than the Oxford don, Niall Ferguson—who we might expect to act as a “court” historian who crafts evidence only to make a positive case for the actions of the state—in his Pity of War (p. 329), said, “By the beginning of 1917, J. P. Morgan was so committed to Britain...it was Morgan as much as Britain which was bailed out in 1917.” He was right.
World War I provided a new opportunity to utilize the newly-created powers of central banking through the Federal Reserve system. The Federal Reserve—doubling the money supply since its inception in 1914—would finance US entry into World War I. This probably could not or would not have been supported by the American people through direct taxation. World War I simultaneously strengthened the power and centralization of the Fed, the federal government, and the closely-connected banker-industrial class.
Wall Street banks and Morgan were greatly benefited by the war as financier and mart for war materials for the Allies. How did this process work?
The war heavily indebted England and France. When the merchant banks and even the central banks of those countries hit limits, the political elites of England and France turned to the US and the House of Morgan. Most of the money loaned out by the US was quickly funneled back to the US to purchase war materials from select US companies. Acting both as banker and purchase agent, J. P. Morgan would loan the money to the Allies, quickly receive it back in order to direct it to US companies, receiving a commission from each transaction in both directions. Many of the companies receiving these production contracts were often owned by Morgan holding companies or were at least within “his orbit of bank control.”
When it seemed that the Axis powers might succeed in the war as is ground toward a stalemate, these financial interests agitated for American entry into the war to extricate them from a major financial loss and open new vistas of profit. Woodrow Wilson also saw US financial control over the other Allies as essential to influencing France and England into Wilson’s view of post-war peace and world order.
The fortunes of the House of Morgan had actually been declining since about 1900, but the outbreak of the war provided opportunity for Morgan, the Fed, the Fed-connected banks, and the select companies which would receive war contracts. Rothbard said, “At the moment of great financial danger for the Morgans, the advent of World War I came as a godsend.” Walter Hines Page—trustee of the Rockefeller General Education Board, editor of several Wall Street publications, and so pro-British that he often appeared to others to be a British agent—is described in Lundberg’s America’s 60 Families (1937), “He did everything he could to have the United States rake England’s chestnuts out of the fire.” Therefore, “There was every reason, of course, for Wall Street to regard the war as beneficent.”
While there is absolutely nothing wrong with voluntary trade and profit on a free market, as these are essential features of a thriving civilization, we should remind ourselves that there are two ways to reap economic growth—engaging in the production-and-exchange process or force and fraud to expropriate the production of others. Reaping wealth by the political means—war, force, coercion, cronyism—should not be considered as within the same category of market profits. While there were many well-earned entrepreneurial fortunes during this era, many fortunes were made through the war—wealth transferred from the American people to these institutions via the Fed and government.
Lundberg, again, records that, in 1892, the number of fortunes amounting to a million dollars or more was only 4,047. In 1914, the millionaire or higher fortunes amounted to 7,509, but by the next year—largely because of the war profits—there were 10,450. The Internal Revenue Bureau recorded that the number grew to 11,800 in 1917. The newly-inflated money that the US government “sent” to Europe quickly returned to the US bankers and companies with war contracts. Lundberg writes,
Europe got none of the money lent by the Treasury; it received only materials of war. The owners of American industries got the money. They employed most of it to expand the industrial equipment of the nation and to increase the size of their fortunes and the extent of their power. In short, the war debt created by the American government amounted simply to money transferred from the people of the country to the richest families, who owned the banks and industries. Wartime profits…were enormous.
The money that the US government—aided and abetted by the Fed and banking system—gave to the Allies was basically “[transferred] into the hands of the wealthiest families.” General Smedley Butler—retired major general, two-time Medal of Honor recipient, and author of War is a Racket—wrote in 1935,
In the World War a mere handful garnered the profits of the conflict. At least 21,000 new millionaires and billionaires were made in the United States during the World War. That many admitted their huge blood gains in their income tax returns. How many other war millionaires falsified their income tax returns no one knows. (emphasis added)
The US got involved in the war, quickly ensuring an Allied victory. Rather than a stalemate of exhausted powers, American entry into the war prevented a negotiated peace, drove the Allies toward an unconditional surrender policy toward Germany, German dismemberment, war guilt and reparations requirements laid totally on Germany, etc. The disruption of WWI not only cost lives and property, but enabled the rise of fascism, Nazism, and Communism.
Ignoring the other disastrous consequences of WWI, at least the men who fought and died, the civilians who died, their families, the injured, those who had their property and livelihoods destroyed, those who would suffer under the later brutal 20th-century regimes, and those who held their arteries together with their teeth, could rest assured that US entry and an Allied victory at least saved US bankers and funneled war profits to politically-connected US businesses.
