The twenty years between the Spanish-American War and the end of World War One had seen the United States transform from a relative imperial outlier to a world hegemon. In what is in many ways a quite an extraordinary article, Louis C. Fraina attempts to reorient the thinking of U.S. Communists as he explores the parameters of what would later be called ‘The Short Twentieth Century.’

‘America As a World Power’ by Louis C. Fraina from The Communist (Section of the Communist International). Vol. 1 No. 2. August, 1921.

THE situation in the United States, at this moment, is complicated in its very simplicity. There is a serious economic crisis and decline in foreign trade, but still American Capitalism is unshaken. There are between four and five million unemployed, but this fact produces no revolutionary energy or action. There is now going on a tremendous struggle between capital and the labor unions, but in this capital is assuming the offensive while the unions have definitely accepted the defensive. There is a very severe national reaction and repression, but the masses don’t answer by means of more aggressive action. Monopoly is more dominant and oppressive, but the petite bourgeoisie accept this domination (having definitely accepted and merged in Imperialism). In spite (or because) of the industrial crisis, American Capitalism is preparing an economic and financial offensive throughout the world, but the offensive still lingers and does not project itself in action. There are indications of coming collapse, there is a concentration of revolutionary forces–but these are still largely potential factors in the process of proletarian revolution.

What explains the complicated character of this simplicity? It is a fact that the coming-to-a-crisis in the American situation depends almost completely upon developments in the world situation.

America is in a condition of “watchful waiting.” It waits upon the world developments in industry, in trade, in finance, in revolution. American Imperialism has usurped world-power, but this power is necessarily shaken by economic collapse and proletarian revolution. America, accordingly, is developing a two-fold policy: (1) crush the proletarian revolution–hence the severe repression of American Communists and the continued boycott of Soviet Russia; (2) restore the world economically and financially–hence the slow, but sure, preparation to re-enter Europe (in spite of rejection of the League of Nations).

I. AMERICAN ECONOMICS DURING AND AFTER THE WAR

1) The War and Production

American industry before the war was famed for its productive capacity. By extensive use of machinery, by an extensive standardization of output and a sub-division of labor, American industry produced abundantly and cheaply; and in spite of larger costs in wages, was able to compete successfully with Britain and Germany. The United States was the largest producer of iron and iron goods in the world, of manufactured articles in general; while it exported enormous masses of agricultural products and raw materials. But the United States by no means had a world hegemony in production and trade.

The War Definitely Established an American Economic Hegemony

During the first two years of the war before America’s entry) enormous demands were made by the Entente upon American industry and agriculture; and the response was a production of goods unparalleled in economic history. The Entente requirements for munitions enormously developed the American iron and steel industry; the requirements for manufactured goods multiplied manufactures, while the requirements for food produced a “golden age” in the history of American agriculture. With the magic touch of Midas America transmuted the agony and death of Europe into fabulous profits.

This enormous development of industry (and consequently of surplus capital for export) actually realized the formerly potential American capacity for world-power. The war being a war for world-power, the United States could not remain neutral; it had to go in.

While organizing an army of four million men, the contribution of the United States to war was still dominantly industrial. Through the government, the whole industry of the country was mobilized for war purposes. But in this process American industry was also mobilized for peace purposes after the war. The industrial mobilization was of such an order, so managed, that every new industry or new addition to industry made necessary for the war could very simply be transformed to a peace basis. For example, the Entente had difficulty with transports; the American Government builds an enormous number of ships; and today the United States has a larger ship-building capacity than Britain, and threatens British mercantile supremacy.

Before the war the United States was not a very large exporter of capital; in fact, it even imported capital–the United States was a debtor nation to the extent of approximately three billion dollars. The first two years of the war was enough to alter this; while today the United States is a creditor nation to the extent of probably twenty billion dollars.

While breaking down the industrial apparatus of Europe (excepting England, where, however, it was weakened) the war revivified, developed, integrated the industrial apparatus of the United States. While exhausting the capital reserve of Europe, the war multiplied the American reserves of capital. It was an unprecedented reversal of economic status. The conclusion of the armistice (November, 1918) found America the greatest producer of goods and possessor of capital in the world, with an infinite capacity for development–the dominant financial and industrial power.

The great military duel between Britain and Germany for world domination had been won–by the United States.

2) After the Armistice

America was a world-power, the power. President Wilson interpreted this fact in terms of the League of Nations. But the League met the unrelenting opposition of two sections of the American people, which together constituted an overwhelming majority. One section opposed the League of Nations because they conceived it as assuring the supremacy of Great Britain, they felt that America must not relinquish its power, must be independent of any force that might interfere in maintaining and extending American world-power, and particularly independent to struggle against any revival of British supremacy. The other section interpreted American world-power in purely business terms, of production and trade.

While President Wilson was battling for the League of Nations and being chained to the monstrous reaction of France by Clemenceau; while a small group of Republicans were developing a definite imperialistic world-policy–the complacent assumption of the majority of Americans was something of this sort: The war is won, and we have made enormous profits out of it; Europe owes us a lot of money which it must pay, how is Europe’s affair; we shall continue to manufacture and sell goods, while Europe prepares to pay its debts to us. This attitude developed more and more strength, becoming dominant after the American Senate’s rejection of the Wilson League of Nations. America isolated itself in monstrous self-satisfaction, cold to the tragedy of a world in ruins; while, with the generosity of hogs wallowing in their own super-abundance, the Americans threw a few bones of charity to starving Europe (but, with business calculation and malice, excluding Russia).

But the American capitalist had seriously miscalculated prevailing factors in the world situation. They had conceived a quick recovery of Europe, and a tremendous demand for 1919 was goods which only America could supply. The year was a prosperous one, American foreign trade showing a favorable balance of about four billions dollars: Europe starving and short of goods, mortgaged its future in order to purchase. In 1920, however, indications appeared of a collapse in trade. The favorable trade balance declined to about three billion dollars (an increase over 1919 of $300,000,000 in exports and $1,375,000,000 in imports); but the figures are deceptive, since there was an actual decrease in the movement of goods; the increase being due to abnormally high prices; upon the same price basis as 1919, American foreign trade in 1920 would have shown a decline of $700,000,000. Concerning exports to Europe, the situation was much more serious, exports having actually declined by $700,000,000 on the basis of 1920 prices, and a much larger decline in goods in terms of 1919 prices.

This trade, moreover, was maintained by the extension of large business credits to Europe, which since the armistice total about $4,000,000,000.

Already in 1919 there were indications of an economic crisis; American industry had a capacity for production greater than its foreign trade; and there was much curtailment of production. The tremendous financial expansion and inflation of credits, together with a 25 per cent. decline in wholesale prices produced financial stringency. Liquidation was the order of the day–a financial panic was in the making. But a financial panic was averted by means of the Federal Reserve System, which unites all the banks together (a bank system introduced by the Wilson Administration, which practically realizes the old dream of American monopoly for a “Central Bank”). This was the situation in 1920; an actual decline in foreign trade, panic-conditions in finances, closed mills, decreased railroad earnings (and demoralization), idle ships and unemployment.

In spite of these ominous facts, American business still maintained its insularity; the dominant sentiment still was: “To hell with Europe’s problems; let’s get down to business.”

But they could not “get down to business.” American industry had a tremendous capacity for production, but Europe could not buy the goods. American business was now cautious in extending more credits, since Europe could not pay; where Europe did pay, it paid in gold, weakening European credit, and increasing American stocks of gold to such an extent that American business wailed: “What shall we do with our gold?” The situation became almost disastrous. Industrial plants closed down; half the American merchant marine was idle; unemployment increased terrifically. During six months ending in May, 1921, American foreign trade declined 50 per cent, almost exclusively in trade with Europe.

II. THE CHARACTER AND OBJECTIVES OF AMERICAN IMPERIALISM

1) Apparent Variations in Foreign Policy

It was in these conditions that President Harding was elected and assumed office. It was imagined, during the election campaign, that the Republican Party, historically the party of American expansion and Imperialism, might initiate a “liberal” foreign policy. But precisely as the pressure of economic and political facts compelled Wilson to become an imperialist (in deeds, if not in words), so a similar pressure is compelling Harding to develop a world policy in accord with America’s world-power. Imperialism and the world-crisis, all the factors involved in the United States being a world-power, are forcing the Harding Administration to actually carry out (in all respects except the League of Nations) the foreign policies of President Wilson. There is only one difference: that while President Wilson employed the lofty language of universal history, President Harding employs the business slang of the American manufacturer.

There were large hopes placed upon Harding by persons who imagine that words and election slogans (of all places in America!) determine the politics of a nation; and the only results are large disappointments. It was imagined that Harding would pursue a policy of “isolation”; but on May 24th President Harding said to a meeting of manufacturers and bankers: “The United States never were, and never will be, able to maintain isolation. The war made us a great creditor-nation. It was imagined that Harding would immediately open trade relations with Soviet Russia; but Secretary of State Hughes’ note to the Soviets makes it clear that Harding is as opposed to relations with Russia as was Wilson. It was imagined that Harding would do something (it was never clear precisely what) to help Germany; but the opposite developed, since America’s loans to the Entente give it a huge stake in German payments. It was imagined that Harding would repudiate the Versailles Treaty; but this treaty is an instrument for capitalist domination in Europe and against proletarian revolution, and it will in one form or another (excluding the League of Nations) be ratified by the Harding Administration with such reservations and modifications only as are in accord with America’s own interests. was imagined that Harding would “boycott” Europe; but steadily the new American Government is intervening in Europe; if Europe cannot or will not go to America, and buy and pay, America must come into Europe, and make it buy and pay–a vulgar case of Mahomet and the mountain.

The indefinite forms and variations in America’s foreign policy are due to the fact that the war thrust economic and financial supremacy upon America so quickly that Americans had not the necessary time to develop a definite world policy they continued to think in purely business terms and insularity.

Up until the war American Imperialism was still largely national in scope; it had not projected itself in world policy beyond the Monroe Doctrine–“America for American capital.” American Imperialism developed definitely after the Civil War (1861-1865), with the building of the great transcontinental railways, which opened the west to capitalist exploitation. The west for twenty years played the role in American Imperialism of undeveloped colonial territory, immigrants being equivalent to colonial peoples. All the peculiar national forms of Imperialism prevailed in the United States–monopoly, the domination of finance-capital, State Capitalism, intensive exploitation of labor; but the international forms did not develop so quickly. Even the imperialistic war with Spain (1898), the annexation of the Philippines and the building of the Panama Canal did not develop a definite international policy for American Imperialism. Nor, strangely, did the war develop such a policy, except in a small group.

But political thinking cannot long lag behind economic facts. America has had world-power thrust upon it. Slowly but surely, America is developing a world policy compact of aggression and domination. American Imperialism may be pictured as a colossus with its feet planted firmly in Latin-America, while one hand reaches out to grasp China and Asia, and the other Europe.

2) America and the South Latin-America

Mexico, Central and South America may be considered as the colonial basis of American Imperialism. The United States has a political protectorate in Cuba, military protectorates in all the Caribbean Republics, and is preparing to conquer Mexico; while all South America is under the control of American capital.

Before the war, in spite of the Monroe Doctrine, Britain and Germany had larger interests in South America than the United States. But today all is different: Germany has been expropriated, Britain relegated to a minor position, while the United States is supreme. The commercial supremacy of the United States is undisputed. In 1910 the value of United States trade with Latin-America was $689,000,000; in 1912, $818,000,000; in 1915, $1,000,000,000; while in 1920 it was $3,373,185,567 (a gain over 1919 of $1,940,144,950). There was a decline during the first five months of 1921, but it is not serious.

It is not simply in terms of trade, as such, however, that we must measure the domination of the United States in Latin-America. More important is the export of capital and machinery for developing the vast undeveloped territories of Latin-America. The United States is a tremendous reservoir of investment capital, it produces vast amounts of machinery, all of which must be exported. Then there is the factor of oil. The United States has a practical monopoly of oil resources, with Mexico next. Supremacy in oil resources is today a vital factor in world supremacy. The United States must possess itself of Mexico’s oil resources (as well as of those in other Latin-American lands). Moreover, the United States now imports raw materials, and Latin-America possesses these in abundance.

The process which is now completing itself is to make Latin-America an integral unit of the industry and finance of the United States.

This American “urge to the South” now plays the role that the expansion westward played in American history up until the end of the nineteenth century. The Monroe Doctrine has been transformed into the political expression of this “urge to the South,” and it is being used to deny oil and other concessions to foreign nations (other than the United States!) in the Latin-American republics on the ground that such concessions menace the political independence of these republics.

President Harding is pursuing a systematic policy of consolidating and extending the economic domination of the United States in Latin-America. The developing program indicates that the industrial, financial and if necessary military control of Latin America is to become the solid basis of the Imperialism of the United States in its struggle to maintain and extend its world domination–precisely as the control and consolidation of Central Europe up to Turkey was to have been the basis for Germany’s domination of the world.

3) America, Japan, China

The traditional American policy in China has been the “open door” that is, equality of economic right and opportunity for all nations. This policy was partially abandoned by President Wilson in 1915, when, through the Lansing-Ishii Agreement, he recognized that Japan had “special rights” in China because of “territorial contiguity.” This was one of the acts which particularly aroused imperialistic ire against Wilson.

There are, at this moment, no particularly important American interests in China. The prevailing trade and investments are not very large, but rapidly increasing, and the potential importance of China is enormous. The economic awakening of China is imminent; it is a country which must necessarily absorb vast amounts of capital and iron goods. The United States, accordingly, is now developing an acute struggle to prevent Japanese hegemony in China (for this is the American policy, in spite of the Lansing-Ishii Agreement and Wilson’s approval of the award of Shantung to Japan). Relations between Japan and America are becoming strained; in both countries there exists a powerful party whose agitation directly makes for war.

The hegemony of China is indispensable to Japanese Imperialism; imperialistic Japan must expand or burst. But in a strictly industrial and financial struggle with America for control in China, Japan is doomed, since America is infinitely superior in industrial and financial resources. The United States is preparing an economic offensive in China; against this Japan is feverishly preparing by means of consolidating its political power in China and increase in armaments.

There is no possibility of a peaceful solution of this struggle for China, since, indispensable now to Japan, China must soon equally become indispensable to America’s capital and iron goods when other markets reach the point of saturation.

A struggle for China between America and Japan becomes inevitably a struggle for the domination of the Pacific. But should this struggle become war, it will involve more a struggle for world-power, into which Britain would be fatally drawn (because of the rivalry between America and Britain considered later on).

An American-Japanese War is not a factor that can affect the immediate policy of the Communist International. But should the proletarian revolution not sweep onwards, then this war (drawing in Britain and other nations) becomes inevitable and of supreme importance to the International.

4) America and Europe

America’s relations to Europe are determined; in the first place, by its financial stake in Europe. What is this stake? It amounts to, approximately $18,000,000,000, distributed as follows: loans by the American Government to Great Britain, France, Italy and Belgium (including unpaid interest), $11,000,000,000; other loans and business credits; $3,000,000,000; business credits extended since the Armistice, $4,000,000,000.

Upon receipt of payment for these loans and credits depends America’s financial integrity. Payment is possible only by means of trade, goods and investments. Payment with gold is impossible; Europe has not enough; moreover, America has almost half the world’s gold reserves, and is being choked by it–“it would be better,” said President Harding recently, “and more useful for this gold to remain in vaults abroad, guaranteeing the gold standard and the fair exchanges which are vital to international trade.” The problem is the restoration of the industry and trade of Europe, which are almost vanishing. America has a compact, efficient machine to produce goods and the ships to transport them; but both are now largely idle, since customers are unable to purchase; the problem is to finance the customers.

Europe must pay in goods. But American business is still under the influence of the old protectionist ideas of high tariffs, as well as the American Congress. This problem is creating tremendous discussion, and emphasizing the enormous contradictions of Imperialism.

On the other hand, American business is realizing that the restoration of normal trade depends upon America extending still larger credits to Europe. Corporations have been formed for the purpose of financing foreign trade. On May 7th the National Foreign Trade Council of America adopted a resolution, which said:

“A return to normal conditions depends largely upon the development of foreign trade. The United States must continue to increase its imports or exports necessary to stable employment of labor and permit liquidation of the obligations of nations indebted to the United States. The solution of the present situation depends upon our ability to create facilities for long-term credits, which are now so badly needed in Europe. Unless credits are granted their business and ours must remain stagnant.”

The Harding Administration has already practically pledged itself to the program of an extensive grant of business credits to Europe. But the plans are being slowly formulated, because it is the intention to use this extension of credits in a calculated policy for establishing American industrial and financial hegemony in Europe.

America’s financial control over Europe is already immense; with the extension of more credits this control will assume enormous proportions, accelerated by the fact that large amounts of American capital are being invested in European industry by means of purchase of European business enterprises. Moreover, America’s extension of credits must have security, and this will largely take the form of pledging European key industries and natural resources (as is already the case in Austria). And, should Europe recover industrially, and pay America its loans, these will partly represent an accumulation of surplus capital, much of which will be invested in European industry-consolidating American domination. Even before the new Harding policy this development was so important that a writer in “The Fortnightly Review” (London) said: “It is not inconceivable that through the purchase of European undertakings by Americans Europe may become a dependency, if not a colony, of the United States.”

Should this tendency develop to its conclusion (and for the moment we exclude from the problem the factors represented by Great Britain and Soviet Russia) Europe must become a hewer of wood and drawer of water for America, rendering its tribute to American Imperialism, deprived of initiative and independence. In a financial and industrial sense, Europe would be a colony, its manufactures the subject princes of American capital, while the workers would be subject to the double exploitation of European and American Capitalism.

That Europe is doomed in the struggle for world supremacy is clearly recognized by the French scholar, A. Demangeon, who, in ‘is book, “Le Declin de l’Europe,” says: “No one can question the fact that Europe, which ruled until the end of the 19th century, has relinquished her supremacy to other lands. We are beholding the shifting of the world’s centre of gravity. By an astonishing turn of affairs Europe, mother of so many colonies, is becoming a field for American colonization. No European country, from the most backward to the most advanced is escaping this powerful movement.”

Two years ago, it appeared as if Europe was doomed to become a colony of Britain. But now, according to the writer in “The Fortnightly Review,” Britain is itself in danger of becoming an American protectorate. America is now the world’s great provider of capital, New York becoming world-banker in place of London; America is also becoming the world’s great provider of goods; more and more American export trade becomes one in manufactured goods, on which British supremacy was based (in 1880-1890, the American export of manufactured goods was 15 per cent; during the years preceding the war it averaged 30 per cent; during the war and after it was 50 per cent); while the great American merchant marine built during the war threatens British maritime supremacy (assisted by the fact that, in trade with the Orient, the Panama Canal is wresting control from the Suez Canal). Most threatening of all to Britain, American capacity to produce steadily increases while British capacity declines (the output of the American worker is three times that of his British comrade). America is aggressively becoming what Great Britain formerly was–the world’s manufacturer, merchant, shipper and banker.

The struggle between Britain and America expresses itself in all parts of the world, but it is becoming particularly acute in Europe. Europe is rapidly becoming the arena of a great conflict shall Europe become a colony of Britain or America? While France imagines that it can secure the hegemony of Europe by means of military and political arrangement with newly-created states (Poland), these states, and France itself, are dependent upon England or America; after the military factor wears itself out and French policy accordingly collapses, France must itself, together with all capitalist Europe, become a colony of Britain or America. Lloyd-George instinctively appreciates the situation. His recent actions (as, for example, his speech on the Upper Silesian situation) are determined by his appreciation of Europe’s problem as one of finance and economics, while France and Poland see it in terms of politics and military actions. Lloyd-George wants this problem of political and military disturbances settled, so that by means of peace and production Britain may engage in its great struggle for the domination of Europe and the world.

It is a struggle of destiny for Britain. Defeat means retrogression, and that means collapse. But a powerful nation does not yield imperialistic supremacy without a resort to the arbitrament of the sword. A resort to the sword means another world war, with Britain, America and Japan as the principals.

In this situation Europe plays the role of the victim waiting for the sacrifice. There can be no initiative or independence in a capitalist Europe; it is doomed.

5) The Great Duel

But, in reality, fundamentally and historically, there are two great world powers: America, involving all the multiplying contradictions of Imperialism; and Soviet Russia, implying all the factors making for the proletarian revolution.

America, the imperialistic world power, bonds the world to its domination. It has in seven years increased its national wealth by fifty billion dollars; it controls enormous natural resources and is stretching out to control more; it has immense economic power; it dominates the world economically.

Soviet Russia, the revolutionary world power, strives to liberate the world by means of proletarian revolution. Soviet Russia, bruised, wrecked, starving, attacked by the whole capitalist world, has by means of its revolutionary policy resisted becoming a colony of either Britain or America. Revolutionary Russia may compromise, may make concessions, but through them all it calls the world to proletarian revolution. Soviet Russia has resisted colonization, it still maintains its revolutionary offensive–that is a fact of world historical importance.

The world revolution has resolved itself into a great duel between bourgeois America and Soviet Russia. America represents all the forces of Imperialism to “restore” Capitalism; Russia represents all the forces of revolutionary Communism to destroy Capitalism. America disposes of the forces of Capitalism everywhere, and in the process subjects them to its domination; Soviet Russia disposes of the revolutionary forces in all lands (particularly in Europe and Asia) and in the process liberates the world.

Emulating the Bolsheviks who changed the name of their party in 1918 to the Communist Party, there were up to a dozen papers in the US named ‘The Communist’ in the splintered landscape of the US Left as it responded to World War One and the Russian Revolution. This ‘The Communist’ began in July 1921 after the “Unity Convention” in Woodstock, New York which created the Communist Party of America, Section of the Communist International uniting the old CPA with the CLP-CPA party. With Ruthenberg mostly as editor the paper acted as the Party’s underground voice, reporting official party business and discussion. The Toiler served as the mass English-language paper. This ‘The Communist’ was laid to rest in December, 1922 with the creation of the above-ground Workers Party. An invaluable resource for students of the formation of the Communist Party in the US.

PDF of full issue: https://www.marxists.org/history/usa/pubs/thecommunist/thecommunist6/v1n02-aug-1921-com-CPA.pdf