Sectoral Conflict and Foreign Economic Policy,1914-1940 STOR Jeff Frieden International Organization,Vol.42,No.1,The State and American Foreign Economic Policy. (Winter,1988),pp.59-90. Stable URL: http://links.istor.org/sici?sici=0020-8183%28198824%2942%3A1%3C59%3ASCAFEP%3E2.0.CO%3B2-R International Organization is currently published by The MIT Press. Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use,available at http://www.istor org/about/terms.html.JSTOR's Terms and Conditions of Use provides,in part,that unless you have obtained prior permission,you may not download an entire issue of a journal or multiple copies of articles,and you may use content in the JSTOR archive only for your personal,non-commercial use. Please contact the publisher regarding any further use of this work.Publisher contact information may be obtained at http://www.istor org/journals/mitpress.html. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. The JSTOR Archive is a trusted digital repository providing for long-term preservation and access to leading academic journals and scholarly literature from around the world.The Archive is supported by libraries,scholarly societies,publishers, and foundations.It is an initiative of JSTOR,a not-for-profit organization with a mission to help the scholarly community take advantage of advances in technology.For more information regarding JSTOR,please contact support@jstor.org. http://www.jstor.org Fri Feb820:10:442008
Sectoral Conflict and Foreign Economic Policy, 1914-1940 Jeff Frieden International Organization, Vol. 42, No. 1, The State and American Foreign Economic Policy. (Winter, 1988), pp. 59-90. Stable URL: http://links.jstor.org/sici?sici=0020-8183%28198824%2942%3A1%3C59%3ASCAFEP%3E2.0.CO%3B2-R International Organization is currently published by The MIT Press. Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/about/terms.html. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/journals/mitpress.html. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. The JSTOR Archive is a trusted digital repository providing for long-term preservation and access to leading academic journals and scholarly literature from around the world. The Archive is supported by libraries, scholarly societies, publishers, and foundations. It is an initiative of JSTOR, a not-for-profit organization with a mission to help the scholarly community take advantage of advances in technology. For more information regarding JSTOR, please contact support@jstor.org. http://www.jstor.org Fri Feb 8 20:10:44 2008
Sectoral conflict and foreign economic policy, 1914-1940 Jeff Frieden The period from 1914 to 1940 is one of the most crucial and enigmatic in modern world history,and in the history of modern U.S.foreign policy. World War I catapulted the United States into international economic and political leadership,yet in the aftermath of the war,despite grandiose Wilso- nian plans,the United States quickly lapsed into relative disregard for events abroad:it did not join the League of Nations,disavowed responsibil- ity for European reconstruction,would not participate openly in many inter- national economic conferences,and restored high levels of tariff protection for the domestic market.Only in the late 1930s and 1940s,after twenty years of bitter battles over foreign policy,did the United States move to center stage of world politics and economics:it built the United Nations and a string of regional alliances,underwrote the rebuilding of Western Europe, almost single-handedly constructed a global monetary and financial system, and led the world in commercial liberalization. This article examines the peculiar evolution of U.S.foreign economic policy in the interwar years,and focuses on the role of domestic socioeco- nomic and political groups in determining foreign policy.The American interwar experience powerfully demonstrates that the country's interna- tional position and economic evolution do not sufficiently explain its foreign policy.Indeed,although the contours of the international system and the place of the United States in it changed dramatically during and after World War I,these changes had a very different impact on different sectors of The author would like to acknowledge the comments and suggestions of Beverly Crawford, Robert Dallek,Amy Davis,Barbara Geddes,Judith Goldstein,Joanne Gowa,Stephan Hag- gard,John Ikenberry,Robert Jervis,Miles Kahler,Paul Kennedy,Robert Keohane,Charles Kindleberger,Steve Krasner,David Lake,Mike Mastanduno,William McNeil,John Ruggie, Stephen Schuker,Jack Snyder,Arthur Stein,and Richard Sylla. International Organization 42,1,Winter 1988 1988 by the Massachusetts Institute of Technology and the World Peace Foundation
Sectoral conflict and foreign economic policy, 1914-1940 Jeff Frieden The period from 1914 to 1940 is one of the most crucial and enigmatic in modern world history, and in the history of modern U.S. foreign policy. World War I catapulted the United States into international economic and political leadership, yet in the aftermath of the war, despite grandiose Wilsonian plans, the United States quickly lapsed into relative disregard for events abroad: it did not join the League of Nations, disavowed responsibility for European reconstruction, would not participate openly in many international economic conferences, and restored high levels of tariff protection for the domestic market. Only in the late 1930s and 1940s, after twenty years of bitter battles over foreign policy, did the United States move to center stage of world politics and economics: it built the United Nations and a string of regional alliances, underwrote the rebuilding of Western Europe, almost single-handedly constructed a global monetary and financial system, and led the world in commercial liberalization. This article examines the peculiar evolution of U.S. foreign economic policy in the interwar years, and focuses on the role of domestic socioeconomic and political groups in determining foreign policy. The American interwar experience powerfully demonstrates that the country's international position and economic evolution do not sufficiently explain its foreign policy. Indeed, although the contours of the international system and the place of the United States in it changed dramatically during and after World War I, these changes had a very different impact on different sectors of The author would like to acknowledge the comments and suggestions of Beverly Crawford, Robert Dallek, Amy Davis, Barbara Geddes, Judith Goldstein, Joanne Gowa, Stephan Haggard, John Ikenberry, Robert Jervis, Miles Kahler, Paul Kennedy, Robert Keohane, Charles Kindleberger, Steve Krasner, David Lake, Mike Mastanduno, William McNeil, John Ruggie, Stephen Schuker, Jack Snyder, Arthur Stein, and Richard Sylla. International Organization 42, 1, Winter 1988 O 1988 by the Massachusetts Institute of Technology and the World Peace Foundation
60 International Organization American society.World War I dramatically strengthened the overseas eco- nomic interests of many major U.S.banks and corporations,who fought hard for more political involvement by the United States in world affairs. Yet domestically oriented economic groups remained extremely powerful within the United States and sought to maintain a relatively isolated America.Through the 1920s and early 1930s,the two broad coalitions battled to dominate foreign economic policy.The result was an uneasy stand-off in which the two camps entrenched themselves in different por- tions of the state apparatus,so that policy often ran on two tracks and was sometimes internally contradictory.Only the crisis of the 1930s and the eventual destruction of most of America's overseas competitors led to an "internationalist''victory that allowed for the construction of the American- led post-World War II international political economy. The problem To virtually all observers then and since,at the end of World War I the United States seemed to dominate the international political economy.It had financed the victorious war effort and provided most of the war materiel that went into it;its industry was by far the world's largest and most produc- tive.Despite its traditional economic insulation,the sheer size of the U.S. economy made the country the world's largest trading power.The center of world finance had shifted from London to New York.The United States clearly had the military,industrial,and financial capacity to impose its will on Europe.Yet after World War I the United States,in the current arcane iconography of the field,did not play the part of international eco- nomic hegemon,arbiter,and bankroller of the world economic order.The United States was capable of hegemonic action,and President Woodrow Wilson had hegemonic plans,but they were defeated.The problem was not in Europe,for although the British and French were stronger in 1919 than they would be in 1946,they could hardly have stood in the way of American hegemony.Indeed,European complaints about the United States after World War I were in much the opposite direction:the Europeans bitterly protested America's refusal to accept the responsibilities of leadership.The Euro- peans charged that the United States was stingy with its government finance, hostile in its trade policy,scandalous in its refusal to join the League of Nations, unwilling to get involved in overseeing and smoothing Europe's squabbles. The British and French tried for years to entice and cajole a reluctant America into leadership.America would not be budged,at least until 1940. The world's most powerful nation pursued a contradictory and shifting set of foreign economic policies.The country both asserted and rejected world leadership,simultaneously initiated and blocked efforts at European stabili- zation,and began such major cooperative ventures as the League of Nations
60 International Organization American society. World War I dramatically strengthened the overseas economic interests of many major U.S. banks and corporations, who fought hard for more political involvement by the United States in world affairs. Yet domestically oriented economic groups remained extremely powerful within the United States and sought to maintain a relatively isolated America. Through the 1920s and early 1930s, the two broad coalitions battled to dominate foreign economic policy. The result was an uneasy stand-off in which the two camps entrenched themselves in different portions of the state apparatus, so that policy often ran on two tracks and was sometimes internally contradictory. Only the crisis of the 1930s and the eventual destruction of most of America's overseas competitors led to an "internationalist" victory that allowed for the construction of the Americanled post-World War I1 international political economy. The problem To virtually all observers then and since, at the end of World War I the United States seemed to dominate the international political economy. It had financed the victorious war effort and provided most of the war materiel that went into it; its industry was by far the world's largest and most productive. Despite its traditional economic insulation, the sheer size of the U.S. economy made the country the world's largest trading power. The center of world finance had shifted from London to New York. The United States clearly had the military, industrial, and financial capacity to impose its will on Europe. Yet after World War I the United States, in the current arcane iconography of the field, did not play the part of international economic hegemon, arbiter, and bankroller of the world economic order. The United States was capable of hegemonic action, and President Woodrow Wilson had hegemonic plans, but they were defeated. The problem was not in Europe, for although the British and French were stronger in 1919 than they would be in 1946, they could hardly have stood in the way of American hegemony. Indeed, European complaints about the United States after World War I were in much the opposite direction: the Europeans bitterly protested America's refusal to accept the responsibilities of leadership. The Europeans charged that the United States was stingy with its government finance, hostile in its trade policy, scandalous in its refusal to join the League of Nations, unwilling to get involved in overseeing and smoothing Europe's squabbles. The British and French tried for years to entice and cajole a reluctant America into leadership. America would not be budged, at least until 1940. The world's most powerful nation pursued a contradictory and shifting set of foreign economic policies. The country both asserted and reject~d world leadership, simultaneously initiated and blocked efforts at European stabilization, and began such major cooperative ventures as the League of Nations
Sectoral conflict 61 and the Dawes Plan only to limit its participation in these American initia- tives in ultimately fatal ways.The analytical problem bedevils both eco- nomic ,determinists and political Realists.For those who believe in the primacy of international power politics,it is difficult to explain why a United States able to reconstruct the world political system was unwilling to do so. For those who look at economic affairs first and foremost,America's unchal- lenged position as the world's leading capital exporter should have ac- celerated the trend towards trade liberalization and international monetary leadership begun before World War I;instead,the pendulum swung back towards protectionism and little public U.S.government involvement in international monetary issues. The relevant international relations literature,faced with such analytical anomalies,generally falls back on vague reference to domestic constraints in explaining U.S.foreign economic policy in the interwar period.Charles Kindleberger,whose comparison of the era with the Pax Britannica and Pax Americana is the foundation stone for most international relations thinking on the interwar years,cites E.H.Carr approvingly,to the effect that"in 1918,world leadership was offered,by almost universal consent,to the United States...[and]was declined,"'and concludes that"the one country capable of leadership [i.e.the United States]was bemused by domestic concerns and stood aside."1 Seen from the perspective of American domestic politics,however,the problem is quite reversed.In the context of traditional American apathy or even hostility towards world affairs,the interwar years saw an amazing flurry of global activity by the country's political,economic,and cultural leaders.Against the backdrop of the longstanding indifference of most of the American political system to events abroad,the level of overseas involve- ment in the 1920s and 1930s appears both startling and unprecedented.2 The contradictory role of the United States in the interwar period can be traced to the extremely uneven distribution of international economic inter- ests within American society.America's international economic position did change during and after World War I,yet overseas assets were accumulated by a very concentrated set of economic actors.This left most of the U.S. economy indifferent to foreign economic affairs,while some of the country's leading economic sectors were both deeply involved and deeply concerned with the international economy.American foreign policy was thus torn be- tween insularity and internationalism;the segments of the foreign-policy 1.Charles Kindleberger,The World in Depression 1929-1939 (Berkeley:University of California Press,1973),pp.297-99.The Carr citation is from his The Twenty Years Crisis,1919- 1930 (London:Macmillan,1939),p.234.A popular British satirical history of the 1930s,under the heading"A Bad Thing,"summarized the results of the Great War somewhat more suc- cinctly:"America was thus clearly top nation,and History came to a."Walter Sellar and Robert Yeatman,1066 And All That (New York:Dutton,1931),p.115. 2.Robert Dallek,The American Style of Foreign Policy (New York:Knopf,1983)is a good survey of traditional American insularity
Sectoral conflict 61 and the Dawes Plan only to limit its participation in these American initiatives in ultimately fatal ways. The analytical problem bedevils both economic !determinists and political Realists. For those who believe in the primacy of international power politics, it is difficult to explain why a United States able to reconstruct the world political system was unwilling to do so. For those who look at economic affairs first and foremost, America's unchallenged position as the world's leading capital exporter should have accelerated the trend towards trade liberalization and international monetary leadership begun before World War I; instead, the pendulum swung back towards protectionism and little public U.S. government involvement in international monetary issues. The relevant international relations literature, faced with such analytical anomalies, generally falls back on vague reference to domestic constraints in explaining U.S. foreign economic policy in the interwar period. Charles Kindleberger, whose comparison of the era with the Pax Britannica and Pax Americana is the foundation stone for most international relations thinking on the interwar years, cites E. H. Carr approvingly, to the effect that "in 1918, world leadership was offered, by almost universal consent, to the United States . . . [and] was declined," and concludes that "the one country capable of leadership [i.e. the United States] was bemused by domestic concerns and stood aside. "' Seen from the perspective of American domestic politics, however, the problem is quite reversed. In the context of traditional American apathy or even hostility towards world affairs, the interwar years saw an amazing flurry of global activity by the country's political, economic, and cultural leaders. Against the backdrop of the longstanding indifference of most of the American political system to events abroad, the level of overseas involvement in the 1920s and 1930s appears both startling and ~n~recedented.~ The contradictory role of the United States in the interwar period can be traced to the extremely uneven distribution of international economic interests within American society. America's international economic position did change during and after World War I, yet overseas assets were accumulated by a very concentrated set of economic actors. This left most of the U.S. economy indifferent to foreign economic affairs, while some of the country's leading economic sectors were both deeply involved and deeply concerned with the international economy. American foreign policy was thus torn between insularity and internationalism; the segments of the foreign-policy 1. Charles Kindleberger, The World in Depression 1929-1939 (Berkeley: University of California Press, 1973), pp. 297-99. The Carr citation is from his The Twenty Years Crisis, 1919- 1930 (London: Macmillan, 1939), p. 234. A popular British satirical history of the 1930s, under the heading "A Bad Thing," summarized the results of the Great War somewhat more succinctly: "America was thus clearly top nation, and History came to a ." Walter Sellar and Robert Yeatman, 1066 And All That (New York: Dutton, 1931), p. 115. 2. Robert Dallek, The American Style of Foreign Policy (New York: Knopf, 1983) is a good survey of traditional American insularity
62 International Organization bureaucracy that reflected internationally oriented interests tried to use American power to reorganize the world's political economy,while portions of the government tied to domestically oriented sectors insisted on limiting America's international role.The crisis of the 1930s dissolved many of the entrenched interests that had kept policy stalemated and allowed a new group of political leaders to reconstitute a more coherent set of policies. This article builds on the work of historians investigating the interwar period3 and on the contributions of other social scientists concerned with the relationship between the international and domestic political economies. The work of Charles Kindleberger and Peter Gourevitch,among many others,has shown the importance of sectoral economic interests in ex- plaining domestic politics and foreign policymaking in advanced industrial societies.Both Gourevitch and Thomas Ferguson have used a sectoral ap- proach to elucidate domestic and international events in the 1930s.The present article is thus an attempt to build on existing sectoral interpretations of modern political economies,and an extension of the approach to prob- lems in international relations. The argument summarized Between 1900 and 1920,the United States went from a position of relative international economic insignificance to one of predominance.A major inter- 3.The historical literature on the period is so enormous that it is feasible only to cite the most recent important additions.Two review essays and a forum are a good start:Kathleen Burk, Economic Diplomacy Between the Wars,Historical Jour(December 191),pp.1003 15;Jon Jacobson,"'Is There a New International History of the 1920s?"'American Historical Review 88(June 1983),pp.617-45;and Charles Maier,Stephen Schuker,and Charles Kin- dleberger,"The Two Postwar Eras and the Conditions for Stability in Twentieth-Century Western Europe,"American Historical Review 86(April 1981).Other important works include Denise Artaud,La question des dettes interalliees et la reconstruction de I'Europe (Paris: Champion,1979);Frank Costigliola,Awkward Dominion:American Political,Economic,and Cultural Relations with Europe 1919-1933 (Ithaca,N.Y.:Cornell University Press,1984); Michael J.Hogan,Informal Entente:The Private Structure of Cooperation in Anglo-American Economic Diplomacy,1918-1928 (Columbia:University of Missouri Press,1977);Melvyn Leffler,The Elusive Quest:America's Pursuit of European Stability and French Security,1919- 1933 (Chapel Hill:University of North Carolina Press,1979);William McNeil,American Money and the Weimar Republic (New York:Columbia University Press,1986);Stephen Schuker,The End of French Predominance in Europe (Chapel Hill:University of North Carolina Press,1976);and Dan Silverman,Reconstructing Europe after the Great War (Cam- bridge:Harvard University Press,1982).Many of the leading scholars in the field summarize their views in Gustav Schmidt,ed.,Konstellationen Internationaler Politik 1924-1932 (Bochum,W.Ger.:Studienverlag Dr.N.Brockmeyer,1983). 4.Charles Kindleberger,"Group Behavior and International Trade,"Journal of Political Economy 59 (February 1951),pp.30-46;Peter Gourevitch,"International Trade,Domestic Coalitions,and Liberty:Comparative Responses to the Crisis of 1873-1896,'Journal of Inter- disciplinary History 8(Autumn 1977),pp.281-313;Peter Gourevitch,"Breaking with Or- thodoxy:the Politics of Economic Policy Responses to the Depression of the 1930s," International Organization 38 (Winter 1984),pp.95-129;Thomas Ferguson,"From Normalcy to New Deal:Industrial Structure,Party Competition,and American Public Policy in the Great Depression,"'International Organization 38 (Winter 1984),pp.41-94
62 International Organization bureaucracy that reflected internationally oriented interests tried to use American power to reorganize the world's political economy, while portions of the government tied to domestically oriented sectors insisted on limiting America's international role. The crisis of the 1930s dissolved many of the entrenched interests that had kept policy stalemated and allowed a new group of political leaders to reconstitute a more coherent set of policies. This article bbilds on the work of historians investigating the interwar period3 and on the contributions of other social scientists concerned with the relationship between the international and domestic political economies. The work of Charles Kindleberger and Peter Gourevitch, among many others, has shown the importance of sectoral economic interests in explaining domestic politics and foreign policymaking in advanced industrial societies. Both Gourevitch and Thomas Ferguson have used a sectoral approach to elucidate domestic and international events in the 1930s. The present article is thus an attempt to build on existing sectoral interpretations of modern political economies, and an extension of the approach to problems in international relation^.^ The argument summarized Between 1900 and 1920, the United States went from a position of relative international economic insignificance to one of predominance. A major inter- 3. The historical literature on the period is so enormous that it is feasible only to cite the most recent important additions. Two review essays and a forum are a good start: Kathleen Burk, "Economic Diplomacy Between the Wars," Historical Journal 24 (December 1981), pp. 1003- 15; Jon Jacobson, "Is There a New International History of the 1920s?" American Historical Review 88 (June 1983), pp. 617-45; and Charles Maier, Stephen Schuker, and Charles Kindleberger, "The Two Postwar Eras and the Conditions for Stability in Twentieth-Century Western Europe," American Historical Review 86 (April 1981). Other important works include Denise Artaud, La question des dettes interallie'es et la reconstruction de ['Europe (Paris: Champion, 1979); Frank Costigliola, Awkward Dominion: American Political, Economic, and Cultural Relations with Europe 1919-1933 (Ithaca, N.Y.: Cornell University Press, 1984); Michael J. Hogan, Informal Entente: The Private Structure of Cooperation in Anglo-American Economic Diplomacy, 1918-1928 (Columbia: University of Missouri Press, 1977); Melvyn Leffler, The Elusive Quest: America's Pursuit of European Stability and French Security, 1919- 1933 (Chapel Hill: University of North Carolina Press, 1979); William McNeil, American Money and the Weimar Republic (New York: Columbia University Press, 1986); Stephen Schuker, The End of French Predominance in Europe (Chapel Hill: University of North Carolina Press, 1976); and Dan Silverman, Reconstructing Europe after the Great War (Cambridge: Harvard University Press, 1982). Many of the leading scholars in the field summarize their views in Gustav Schmidt, ed., Konstellationen Internationaler Politik 1924-1932 (Bochum, W. Ger.: Studienverlag Dr. N. Brockmeyer, 1983). 4. Charles Kindleberger, "Group Behavior and International Trade," Journal of Political Economy 59 (February 1951), pp. 30-46; Peter Gourevitch, "International Trade, Domestic Coalitions, and Liberty: Comparative Responses to the Crisis of 1873-1896," Journal of lnterdisciplinary History 8 (Autumn 1977), pp. 281-313; Peter Gourevitch, "Breakin with Orthodoxy: the Politics of Economic Policy Responses to the Depression of ti 1930s," International Organization 38 (Winter 1984), pp. 95-129; Thomas Ferguson, "From Normalcy to New Deal: Industrial Structure, Party Competition, and American Public Policy in the Great Depression," International Organization 38 (Winter 1984), pp. 41-94