John Mason Hart / Historians Against the War – 2006-03-09 08:49:13

[This paper was delivered at the Historians Against the War Conference held in Texas on February 17-19, 2006.]

“… We must guard against the acquisition of unwarranted influence … by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.”
— Dwight D. Eisenhower January 17, 1961

AUSTIN (March 6, 2006) — The people of the United States must critically examine the excessive violence exercised by their elites against Third World nations, or face the prospect of seeing these misdeeds endlessly repeated. The annihilation of the Native Americans, the invasions of Mexico, the bloody attacks on the Philippines and Vietnam, the use of atomic bombs against Japanese civilians, and the sanctimonious justifications for the now over 100,000, civilian casualties in Iraq underscore this need.

This essay sketches the development of the financial/industrial/military complex of the United States during the Civil War, treats its role in establishing U.S. hegemony over Mexico and Latin America, the beginnings of its global expansion, and our entry into World War I, in order to understand at least some elements of our power elite and the economic interests that spur them to act so violently toward people in the Third World. Today, this problem is more important than ever for America’s future, its image abroad, and safety at home.

When the Civil War began with the battle of Bull Run the Union forces totaled about 37,000. Less than two years later the Union army at Gettysburg totaled 75,000 front line troops with another 75,000 in reserve and an estimated 75,000 more in and around Washington, DC. The dramatic increase of strength was directly related to the appointment of Thomas A. Scott as Undersecretary of War.

Scott was president of the largest industrial firm in the world, the Pennsylvania Railroad, and he took charge of weapons procurement exercising his well-developed relationship with leading financiers and industrialists, including Moses Taylor, John Jacob Astor, William Dodge and Anson Phelps of the National City Bank; Junius Morgan and Anthony Drexel of Morgan and Drexel, and with the N.Y. financiers who enlisted George Baker and created the First National Bank.

These men along with Scott were already integrated with steel manufacturers such as John Griswold, a holder of the Bessemer Patent, and shipbuilding firms such as the Morgan Iron Works, owned by “kinsman” Charles Morgan of New York, and the Eads Company of Saint Louis.

These manufacturers began the construction of 54 iron and steel Monitor warships. Meanwhile Scott coordinated the production with the leaders of the arms companies including DuPont, Remington, Whitney, Union Metallic Cartridge, Massachusetts Arms, Peabody Rifle, and others. At the same time, in order to underwrite arms orders, the financiers sold union bonds in the northeast and Great Britain. By the second year of the war they were buying into the major arms producers while Remington and Union Metallic Cartridge consolidated smaller firms.

As the ties between the northern financiers and the arms manufacturers deepened, their British banking counterparts joined in as passive partners creating an alliance that would later reshape the World. In the short term they created the greatest war machine the world had ever known. By 1865, over 2 million men had served in the Union Army.

The financial and military/industrial elites even merged through marriage. Using National City Bank and the Remington Arms Company as an example we find a Dodge marrying a Hartley and bringing the future Remington president Marcellus Hartley Dodge into the world. Leading guests at the wedding included Taylor, the president of National City, and Charles Stillman, a leading investor in the bank.

During the war, Stillman earned the modern-day equivalent of approximately $16 billion by shipping confederate cotton out of northeastern Mexico to Liverpool and New York where his largest customer was the Union Army. It was a triumph of capitalism!

Following the Civil War, Generals Grenville Dodge, William Jackson Palmer, Herman Sturm, Lew Wallace, William Rosecrans, U.S. Grant, James Garfield, and Rutherford B. Hayes all took part in transcontinental and Mexican railroads, giving American expansion an especially militarist dimension. The victorious northern elites then led U.S. expansion into Cuba, Panama, Central America, and across the Pacific and Atlantic Oceans.

While General Philip Sheridan led his forces against the hopelessly outgunned western Indians, the railroad magnates followed his path and reached into Mexico. By the late nineteenth century Chairman James Stillman of National City personally owned nineteen banks in Texas alone, while Jay Gould dominated the Texas and Pacific Railroad, J. P. Morgan and Baker controlled the Northern Pacific, and the directors of National City took control of the Southern Pacific. They all had British partners. The directors of the National City, First National, and Morgan Banks shared control of the Union Pacific and the Mexican National Railway systems.

The financial engagement between the American economic elite and the Third World deepened profoundly between 1865 and 1867 as U.S. bankers extended loans and arms grants to Mexico during that nation’s war against French occupation. By the end of the struggle the Mexican government had incurred debts beyond reckoning with the American financiers and arms manufacturers.

As a result President Andrew Johnson sent General Rosecrans as Minister Plenipotentiary to Mexico and the New York Bondholders Committee of the Mexican National Debt hired him to represent them. In lieu of cash, Rosecrans asked for infrastructure concessions that included a national railroad and telegraph system with port facilities on both coasts. The bankers understood that control of infrastructure and natural resources meant hegemony.

Between 1872 and 1875, after years of negotiations with Mexican presidents Benito Juarez and Sebastian Lerdo de Tejada, various contracts were signed ceding railroad grants and creating the Mexican Telegraph Company. The new owners included the most powerful figures in American finance and industry-the leaders of the Pennsylvania Railroad, the founders of the fledgling New York Central System (Vanderbilt, Morgan, Stillman, Taylor, Baker, et.al.), and banking interests that included the Beekmans and Roosevelts.

Following Lerdo’s election to a second term as president in 1875, he cancelled all of the contracts with the admonition “Better a desert between strength and weakness.” At that point the concessionaires backed General Porfirio Diaz in a rebellion that overthrew the democratically elected President. Diaz was a prototype who set the standard for other American backed dictators like the Duvaliers, Batistas, Marcos’, Rhees, Pinochets, and Shahs, that followed.

The New York Bondholders, led by Taylor and Stillman, sent Diaz to Brownsville on the Mexican border. Attorney Charles Sterling of the law firm of Spearman and Sterling accompanied him “in order to represent” Stillman’s interests. Diaz received 2,000,000 recharging cartridges and other weaponry from Remington and the Whitney Arms Company shipped to him via Ed Morgan’s (the son of Charles Morgan) Louisiana Steamship Line. Diaz forces raided northeastern Mexico repeatedly in the first half of 1876 while he lived in Stillman’s home in Brownsville.

Secretary of State Hamilton Fish initially ordered the US Army to interdict this violation of the Neutrality Act, but then quickly backed off when he learned what was up. During the summer of 1876, Diaz moved troops down the Gulf Coast to Veracruz where they received a shipment of rifles from Remington and overthrew the Mexican government, which was denied credit for arms purchases in New York throughout the affair.

While Mexican democracy was being overthrown in 1876 the Ten Years War (1868-1878) was underway against Spanish rule in Cuba. Just as Stillman had housed Diaz in Brownsville, Taylor put up Guillermo Cespedes, the “President of the Republic of Cuba”, in one of his Manhattan mansions during the struggle.

Taylor, the largest importer of Cuban sugar in the US, also provided cash to the rebels while his affiliates at Remington Arms shipped consignments of weapons to the rebels via Cuban exiles in Tampa. A handful of American elites were becoming a virtual foreign policy oligarchy in the US, first gaining control of the infrastructures of Mexico and Cuba.

After 35 years of brutal dictatorship, the leading financiers and industrialists of the United States controlled 90 percent of Mexico’s coastlines and frontiers and 22 percent (100 million acres) of its surface through 162 individuals and companies and private properties that included enormous oil, timber and mineral interests.

Meanwhile, US businessmen owned seventy percent of all corporate enterprises and seventy percent of the active capital. Sir Weetman Pearson, a close friend of Stillman and Morgan, was the only non American to own oil production. After the Americans, European investors held positions that left the congenial Mexican elites with perhaps 7 percent of incorporated national assets.

Some of the American-owned estates operating in this socio-economic order imposed from the outside used forced labor, debt peonage, government controlled unions, segregated housing and work places, and even slavery in the cases of the Yucatan, the Valle Nacional, haciendas in San Luis Potosi and Tamaulipas, and the silver mines of the Copper Canyon.

In Mexico all of this was achieved by the American financial elite with minimal US government participation. In contrast, the Spanish American War provided the hegemonic objectives sought by Taylor, Baker, the Morgans, and James Stillman and William Rockefeller in Cuba, Puerto Rico, the Caribbean, Panama, Central America, the Philippines and much of the Pacific.

But there were even bigger fish to fry.

In the 1840s Taylor had envisioned the Pacific Ocean as an “American Lake”. During the 1880s J. P. Morgan, Baker, Stillman and Jacob Schiff of Kuhn Loeb adopted a secret name as they pursued an avowedly imperialist agenda. Calling themselves “The South America Group” they aligned as junior partners with the leading capitalists of the British Empire for investments throughout Latin America, while on an even larger scale the first three individuals adopted the secret name “TRIO” for global investments with their British imperial banking partners.

The groups would include Lord Balfour, Sir Ernest Cassell and Cecil Rhodes. Stillman, Baker and Morgan took five percent each on behalf of their syndicates for a total of fifteen percent of many British-led undertakings in Asia, the Middle East and Africa.

The TRIO included America’s wealthiest individuals as subscribers in the adventure, including Cyrus McCormack, William and John D. Rockefeller, Andrew Carnegie, James Ben Ali Haggin, Ford Frick, Elbert H. Gary, Henry Phipps, Cleveland Dodge, W. S. Valentine, John Stewart, and, last names that included, Converse, DuPont, Barney, Mills, Phelps, Hyde, Drexel, Hearst, Vanderbilt, Whitney, and Harriman. The British, in turn, received full opportunities to participate in US, Mexican, Caribbean and Central American resources and infrastructure.

In the first decade of the twentieth century the TRIO and its US investors continued to expand their interests. Led by Morgan, they bought the Panama Canal concession on April 28, 1904 from the Banque de France for $25 million. In 1909, National City Bank director Valentine personally took over the national debt of Honduras for $4,900,000.

Then, in 1910, Morgan took over the national debt of Liberia and the iron resources there for his United States Steel trust. His International Mercantile Marine handled the transport of ore with Baker and Stillman participating in the enterprises. On the other side of the world, National City dominated the Pacific Mail Steamship Company with the participation of Baker and Morgan.

The TRIO’s greatest achievement, however, reshaped the world.

When the guns of August roared in 1914 the British ruling class desperately turned to their American partners for financial support. At first it was to stabilize the pound on Broad Street. But then, as the setbacks of Flanders Fields and Picardy began to decimate a generation, the British leadership called on the TRIO for all of their resources in order to save the situation.

The TRIO responded with loans of $436 million, $344 million and $400 million to the Bank of England and the British government; $300 million to the French government, and later, even $25 million to the Tsar. After the first loan most of the cash went directly to Remington, DuPont and other arms manufacturers to pay for weapons and ammunition.

Remington greatly enlarged its operations, to a total of over 11,000 workers, through refinancing provided by the TRIO, and produced some fifty percent of the small arms ammunition expended by the British and Americans during the war; and, 69 percent of the rifles used by the US European Expeditionary Force.

The funds for the British initially came from the TRIO, but they then expanded until the commitments of capital resources were coming into their offices from banks across the United States. Finally, Morgan Jr., who had assumed leadership at the Morgan Bank for his deceased father in 1913, informed President Woodrow Wilson, “the private resources of the United States are exhausted; it is now up to you”.

Between 1914 and 1919 the British elites paid for the loans by surrendering vast resources at home and in the empire. These assets included their share in the Cerro de Pasco mines in Peru, the Republic of Panama 30 Year Bonds, property transfers across the United States including railroads and mining operations, the Central Argentine Railroad, the Braden Copper Company of Chile, the Chile Copper Company, Kissel-Kennecott of Chile, the Penyon Syndicate in Chile, the Cuban-American Sugar Company, the Cuban Cane Sugar Syndicate, the Cuban Sugar Export Credit Syndicate, the Cuban Railroad, “the $50 million Persian Government Credit,” the Burma Mines Company (Morgan assigned Herbert Hoover to run it), the 1909 Argentine bond issue, the Government of Chile 8% Gold Bonds, the Manitoba Sterling Debt, the Kingdom of Belgium Six Year Notes, The International Agricultural Corporation, and $7,500,000 in Uruguayan Bonds.

By 1919, a small group of American financiers held as much as 25 percent of the assets of the British Empire. Six acquisitions stood out in their importance: The Anglo-American Oil Company, all British interests in American banks, The Pacific Development Corporation of China, The Asia Banking Corporation, “The Outstanding Debt of the Persian Government” and The Anglo American Corporation of South Africa.

The consolidations continued. In 1933, the directors of DuPont bought out Remington.

Then, in 1939, as Hitler’s forces roared into Poland, the directors of the First National Bank merged with National City Bank creating a financial giant that proved crucial to DuPont-Remington and the Financial/Military/Industrial Complex during World War II. During that conflict the 82,500 workers at Remington produced 1,000,000 rifles and 16,000,000,000 cartridges.

Later, following the demise of the Soviet Union, the Morgan directors merged their resources with those of Chase Bank creating a second massive consolidation of finance capital long engaged with the arms industry and in the domination of infrastructure, productivity and markets throughout the Third World.

Taylor’s vision of global empire has been realized, but it is time the American people challenged the univocal nature of US foreign policy that has brought so much grief to so many.

If we do not do that, we forfeit our democracy to a foreign policy oligarchy and doom ourselves to watching the misdeeds of the past repeated in the future.