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Leo Panitch: Planning for the assimilation of postwar Europe into US-managed capitalism began in the late 1930s

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay.

The anniversary of D-Day is being talked a bout mostly as a confrontation between President Obama and President Putin, mostly to do with Putin supposedly saying the American D-Day and the American role in D-Day was not the decisive issue or story that American mythology lends it to be. And, of course, there’s a lot of truth to Putin’s argument.

But perhaps the more significant discussion to have about D-Day is how it set the conditions or prepared for American dominance of Europe and the world after World War II.

And now joining us to talk about all of this is Professor Leo Panitch.

Leo is the Canada Research Chair in Comparative Political Economy and a distinguished research professor of political science at York University in Toronto. He is the author of the Deutscher book prize winning The Making of Global Capitalism: The Political Economy of American Empire.

Thanks for joining us, Leo.


JAY: So, when the Americans joined D-Day and after Pearl Harbor finally joined the war in Europe, not only do they want to defeat Germany, but clearly they have plans for trying to control the outcome of the European war. When does that begin, and what does it look like?

PANITCH: Well, you know, the planning for this went on even before the Americans entered into the war, which didn’t happen until after Pearl Harbor. The planning for it goes back to the late 1930s, when the Council on Foreign Relations is bringing together roundtables of businessmen, together with foreign policy people and diplomats and officials inside the State Department. And they are trying to lay the basis for getting Congress to approve going into the war and getting business to approve going to the war.

And Dean Acheson, who later becomes the secretary of state and the leading person in the formation of the integration of Europe, the formation, even, of the Cold War, Acheson in 1939, partly through these meetings, but partly through a public speaking engagement that he’s involved with, he actually goes to the International Garment Workers Union, as well as to Yale University, and delivers two major speeches in which he says American capitalism will not be safe insofar as Europe is not safe for capitalism. And by that, he means both, obviously, communism, with the Soviet Revolution having yielded the communist regime in Russia, but he also means fascism. He means–by “capitalism” he means an open free trade capital-flowing capitalism, which, of course, the fascist powers in Italy and in Germany especially have been closed to. And it’s that that is driving, fundamentally, the concern that the Americans have in Europe and is driving Roosevelt to try to lay the basis for overcoming isolationist opinion and getting into the war behind Britain.

JAY: Leo, you actually told me off-camera the Americans actually wrote Hitler a letter at one point suggesting a free-trade agreement.

PANITCH: Well, Cordell Hull, who was the secretary of state through the 1930s and a fanatical free trader and believed that free trade and the export of capital was the only way to contain radicalism at home and was concerned, as many of the Western ruling class was, that the main enemy was not Germany, the main enemy was Soviet communism, he sent delegates to talk to Hitler in 1940 and tried to still arrange a peace agreement, on the condition that Hitler would sign on to free trade. And Hitler sent back the message to tell the Americans that not all the world’s problems can be solved by free trade.

JAY: Well, Hitler turned out to be right about something.

Now, Leo, the vision of American expansion or a Europe in America’s eyes after the war, you’ve written that it’s essentially their vision of the New Deal, a regulated kind of capitalism, and that this would compete and eventually defeat the Soviet model, and that they really believed, I think, many of them, at least, that they were bringing a kind of democracy to the world. Europe had gone to fascism as their way out of the crisis and America had not. What was their plan, and how did they see it?

PANITCH: Well, you know, I think it does go back to what we were talking about before, which is their deep understanding–and, I think, correct understanding–that for America to remain capitalist in the New Deal way–it had built state institutions to remain capitalist, to incorporate labor, incorporate dissent, etc.–that Europe had to be incorporated in the same way. And it was a remarkable development. And what it meant was really for the first time at the end of a war, a successful state largely forgave the debts of the countries that it had lent money to in prosecuting the war. And everybody was in hock to the United States, of course. It also meant that there was a requirement that these ruling classes and their states form their postwar societies and governmental structures in a way that would be compatible with the penetration of foreign direct investment and of American political influence over their state. So there was a degree of institutionalization of linkages between the United States and the recreated capitalist states of Europe, and they couldn’t have been recreated as capitalist states unless the United States came to the aid of their ruling classes. The recreated capitalist states of Europe were now integrated into an American empire. And that did away with the old pattern of intercapitalist rivalry and intercapitalist imperial.

JAY: They didn’t do this just out of the goodness of their heart, or even just out of the needs of developing global capitalism. I mean, the alternative to them doing it could very well have been revolutions in various countries. The Soviet Union ended the war, very popular in Europe. There was communists everywhere.

PANITCH: No, of course not. Of course they actually were actively recreating the capitalist states, because had they not done so, there was a very strong chance, given the degree of strength of the labor movements, let alone communist parties, that they wouldn’t be capitalist states in the sense that the United States understood them, that is, open to trade, open to free capital movements, open to American direct investment, floating their bonds in New York and Wall Street. So that’s what they meant by capitalist states, of course.

They weren’t really all that frightened by the Soviet threat. That was the, you know, language of the Cold War, that was the discourse of Soviet aggression. We hear some of it today around Putin. No.

What they were concerned about was the strength of the trade unions and the strength of the communist parties. And one should remember that in a number of continental European countries, Italy and France in particular, communists were members of coalition governments in the immediate post-war years. They didn’t know that the Labour Party wouldn’t–in Britain, which overwhelmingly formed a government in 1945, the first majority government in Britain, would not be a left social democratic government, rather than what it turned out to be, which was heavily involved in promoting the Cold War and reproducing the central role of the City of London of financiers in global capitalism. That was not clear in 1945, ’46, ’47.

JAY: The idea of exporting the New Deal almost had to be, in a sense, European social democracy, which actually took the New Deal further than it ever went in the United States.

PANITCH: Yes, yes and no. I think one has to be careful with this. It didn’t always go further than the United States, not least in terms of labor regulation. And they had partners not only with the social democrats, but also with the Christian democrats, those corporatist conservatives who’ve always looked for structures of class harmony.

Moreover, even in the immediate postwar period, the American goal–and, of course, there were battles about this in the United States–was to lay the basis, despite the capital controls that were allowed right after the war, was to lay the basis for those countries being open to free trade and foreign direct investment. And that’s the recipe for neoliberalism. And in that context, as they constructed the IMF and the World Bank and the planning for that was going on during the war, they were looking at it from the point of, yes, for a temporary period we will allow for the type of capital controls, exchange controls, etc., that will allow these countries to get back on their feet, and that could take quite a period. But our long-run goal is to open up those countries to free trade and free capital movement.

JAY: Now, with the development of the E.U. and the euro and all of this, the United States didn’t oppose this. At the time, there was a lot of talk about Europe could be a competing power bloc, a competing superpower, but that never happened.

PANITCH: Well, right up until the latest crisis, this was the commonest and most mistaken notion, the notion that Europe was forming in opposition to the United States. Not at all. The Americans, in fact, made a condition of the Marshall Plan that the first steps towards this be taken. And they supported it all along, insofar as Europe was to become a zone of free trade and free capital movements, which it has always been.

And in that sense, as we look today, for instance, at the push of NATO to Russia’s borders, the incorporation of Eastern Europe, of the former communist states, into the European Union has been of a piece with the military strategy. In fact, Madeleine Albright, Clinton’s former secretary of state, in the context of the Ukraine disaster said that had the Europeans been more active and open in incorporating the Ukraine economically long ago, they wouldn’t be facing this problem and Ukraine would already be part of NATO. So these have been things that have moved together. They haven’t been separate at all.

JAY: Now, D-Day, which started the conversation, was a very big step towards the defeat of Hitler, but I think clearly not the decisive state–issue. As we said earlier, the Soviet war against Hitler and Nazism was the more decisive breaking of its back. But still it was important.

But as things progressed and we look at the last few years, Germany has become more and more dominant in Europe. You’ve heard people say that Germany has accomplished without firing a shot what it wanted to in World War II. I don’t think quite that, but Germany certainly has emerged as the dominant economic and political force in Europe.

PANITCH: The secretary of the Treasury at the end of the war, Henry Morgenthau, was actually proposing that Germany not only be demilitarized, but entirely deindustrialized, that its manufacturing capacity, its factories should be wiped off the face of the earth by Allied bombing.

And it’s very, I think, important to recognize that that was not taken all that seriously in American ruling class circles, precisely because there was an understanding that the United States would only continue to prosper, that American capitalism would only continue to prosper, if the other advanced capitalist societies were developed so they could prosper, so you could get accumulation via trade and investment in those countries.

Those people who think capitalism is about one capitalist country weakening another capitalist country rather than playing the role of encouraging its capitalist development so that the pie grows in a capitalist sense, so there’s more and more space for accumulation and commodification, etc., including, of course, by American multinational corporations then, that’s the key to how the United States built its empire. And it was those people who understood that in the American state, who saw through the incredible incorporation of Europe into American empire. And they facilitated and developed Germany’s central role in this. So people who say that the–say in 1950 the United States accounted for some half of world production, world GDP and 25 years later only accounted for 25 percent of it and that shows American decline aren’t seeing the forest for the trees.

JAY: But it’s kind of ironic that it turns out, then, with this creation of Europe, that Germany seems to have no problem with beggar-thy-neighbor policies, and in terms of what’s happening to all the periphery countries, they don’t seem to mind the crisis that’s taking place.

PANITCH: Well, that’s, I think, a very, very good point, Paul. And I think it is the type of empire which is not built on colonies. And therefore there has to be a continual negotiation of the American state’s central role in governing the global economy with what are, of course, sovereign states.

So the United States can’t simply tell Germany what to do. It isn’t that kind of empire. It can’t even tell my state, the Canadian state, what to do. So there needs to be negotiation, pressure. And there’s a degree of autonomy in each of these states.

The American Treasury and Federal Reserve have not been happy with the German Bundesbank, which is the most powerful influence on the European Central Bank, for the kind of austerity, the hardball that has been played on the periphery of Europe. This goes back all the way to the 1970s, when the Germans showed how obsessed they were with what they call moral panic. And that is essentially about not bailing out capitalists and bankers who make mistakes. And the Americans have recognized all along that when the financial system’s about to tank, it’s the state’s role to save it, and they have had to pull the Germans kicking and screaming into playing that role repeatedly now for 40 years. And that’s an indication of the type of empire we’ve got. In the end, they do do it. And, heaven knows, the Americans themselves, when it’s suited them, have put terrible austerity and structural adjustment on countries who have had to be bailed out.

JAY: And I was about to say–.

PANITCH: In this instance, the Americans have not wanted the Germans to play hardball like this. They’re worried that Greece or Spain or Portugal might introduce capital controls if they’re kicked out of the euro, and this could cascade into the unmaking of global capitalism.

JAY: And this idea of growing the pie and understanding that countries have to–you know, their elites, at least, have to prosper for America to prosper. That didn’t apply to all countries, though. I mean, there was great swathes of the world that American capitalism didn’t mind if they stayed immersed in terrible poverty and chronic underdevelopment and so on.

PANITCH: Well, yes and no. I mean, I think that the Americans have been extremely active, as have the Germans, for that matter, in making the condition for foreign aid or for bailouts by the IMF when they are in financial trouble, that they open up their economies to foreign direct investment and that they orient themselves to export-oriented development. So, you know, the development of Brazil or China, or India, for that matter, is not something that the American empire has been afraid of. It’s something that’s encouraged insofar as it’s been about capital accumulation, insofar as foreign capital inside those countries will be treated equally with national capital, insofar as national–American multinational corporations and other multinational corporations can come in, and insofar as the ruling classes of those countries are free to put their money into Wall Street.

JAY: But for many countries these policies have led to the exact opposite. Rather than economic growth, maybe some of the elites have gotten rich, but many of the countries that opened up, allowed this direct foreign investment, and followed the whole regime, it ended up as a disaster for them.

PANITCH: Yes, for a period, but not–and for some regions of the world, of course, it is a disaster and it’s going to be a disaster, ’cause they don’t have the class structures, the state structures, etc., to do that. I entirely agree. But one shouldn’t think that that is an inevitable outcome.

What is an inevitable outcome is the growth in inequality, the growth in alienation, the transformation of class structures and state structures so they facilitate markets and undermine protections for their citizens. That is inevitable. But that’s the case in Ohio, as well as in the countries of the Third World.

JAY: Thanks very much, Leo.

PANITCH: Happy to be here, Paul.

JAY: And thank you for joining us on The Real News Network.


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