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Before the 1914 war, the great economic potential of the U.S. was suppressed by its ineffective political system, dysfunctional financial system, and uniquely violent racial and labor conflicts.
It's simple English primarily consists of America was a byword for urban graft, mismanagement and greed-fueled politics, as much as for growth, production, and profit.
Dark blue shading represents countries where oil is the biggest export and shows the importance of oil not just in the Middle East, but across Asia and Africa and South America.
Other commodities, including precious metals and minerals, also play a significant role in the global economy. Across much of Asia and Africa, large numbers of countries shaded in red and orange indicate the importance of exports such as gold, iron ore, and coal to these nations. Interestingly, and perhaps unexpectedly, India’s biggest export is precious stones.
Conversely, European exports are focused on machinery and transportation.
Electronics dominate in both China and the USA, while food and drink and textiles top the bill in a number of countries.
Today we celebrate, or, actually, mourn the anniversary of President Richard Nixon's taking America, and the world, off the gold standard, making many promises that were promptly broken.
For instance, President Nixon promised that the dollar would retain its full value.
Fiat money is regulated by the government through the Federal Reserve. Fiat money has nothing to back it but debt. Our money used to be backed by gold and silver. That changed with Nixon aka the Nixon Shock, back in 1971.
The Nixon shock was a series of economic measures undertaken by United States President Richard Nixon in 1971, the most significant of which was the unilateral cancellation of the direct international convertibility of the United States dollar to gold.
Every other World War I belligerent had quit the gold standard at the beginning of the war.
As part of their war finance, they accepted that their currency would depreciate against gold.
The currencies of the losers depreciated much more than the winners; among the winners, the currency of Italy depreciated more than that of France, and France more than that of Britain. Yet even the mighty pound lost almost one-fourth of its value against gold. At the end of the conflict, every national government had to decide whether to return to the gold standard and, if so, at what rate.
The American depression of 1920 made that decision all the more difficult.
The war had vaulted the United States to a new status as the world’s leading creditor, the world’s largest owner of gold, and, by extension, the effective custodian of the international gold standard. When the U.S. opted for massive deflation, it thrust upon every country that wished to return to the gold standard (and what respectable country would not?) an agonizing dilemma. Return to gold at 1913 values, and you would have to match U.S. deflation with an even steeper deflation of your own, accepting increased unemployment along the way. Alternatively, you could re-peg your currency to gold at a diminished rate. But that amounted to an admission that your money had permanently lost value—and that your own people, who had trusted their government with loans in local money, would receive a weaker return on their bonds than American creditors who had lent in dollars.
Britain chose the former course; pretty much everybody else chose the latter.
The consequences of these choices fill much of the second half of The Deluge. For Europeans, they were uniformly grim, and worse. But one important effect ultimately rebounded on Americans. America’s determination to restore a dollar “as good as gold” not only imposed terrible hardship on war-ravaged Europe, it also threatened to flood American markets with low-cost European imports. The flip side of the Lost Generation enjoying cheap European travel with their strong dollars was German steelmakers and shipyards under pricing their American competitors with weak marks.
Such a situation also prevailed after World War II, when the U.S. acquiesced in the undervaluation of the Deutsche mark and yen to aid German and Japanese recovery. But American leaders of the 1920s weren’t willing to accept this outcome. In 1921 and 1923, they raised tariffs, terminating a brief experiment with freer trade undertaken after the election of 1912. The world owed the United States billions of dollars, but the world was going to have to find another way of earning that money than selling goods to the United States.
That way was found: more debt, especially more German debt. The 1923 hyper-inflation that wiped out Germany’s savers also tidied up the country’s balance sheet. Post-inflation Germany looked like a very creditworthy borrower. Between 1924 and 1930, world financial flows could be simplified into a daisy chain of debt. Germans borrowed from Americans, and used the proceeds to pay reparations to the Belgians and French. The French and Belgians, in turn, repaid war debts to the British and Americans. The British then used their French and Italian debt payments to repay the United States, who set the whole crazy contraption in motion again. Everybody could see the system was crazy. Only the United States could fix it. It never did.
Peter Heather, the great British historian of Late Antiquity, explains human catastrophes with a saying of his father’s, a mining engineer: “If man accumulates enough combustible material, God will provide the spark.” So it happened in 1929. The Deluge that had inundated the rest of the developed world roared back upon the United States.
The Great Depression overturned parliamentary governments throughout Europe and the Americas. Yet the dictatorships that replaced them were not, as Tooze emphasizes in The Wages of Destruction, reactionary absolutisms of the kind re-established in Europe after Napoleon. These dictators aspired to be modernizers, and none more so than Adolf Hitler.
“The United States has the Earth, and Germany wants it.” Thus might Hitler’s war aims have been summed up by a latter-day Woodrow Wilson. From the start, the United States was Hitler’s ultimate target. “In seeking to explain the urgency of Hitler’s aggression, historians have underestimated his acute awareness of the threat posed to Germany, along with the rest of the European powers, by the emergence of the United States as the dominant global superpower,” Tooze writes. “The originality of National Socialism was that, rather than meekly accepting a place for Germany within a global economic order dominated by the affluent English-speaking countries, Hitler sought to mobilize the pent-up frustrations of his population to mount an epic challenge to this order.” Of course, Hitler was not engaged in rational calculation. He could not accept subordination to the United States because, according to his lurid paranoia, “this would result in enslavement to the world Jewish conspiracy, and ultimately race death.” He dreamed of conquering Poland, Ukraine, and Russia as a means of gaining the resources to match those of the United States. The vast landscape in between Berlin and Moscow would become Germany’s equivalent of the American west, filled with German homesteaders living comfortably on land and labor appropriated from conquered peoples—a nightmare parody of the American experience with which to challenge American power.
Could this vision have ever been realized? Tooze argues in The Wages of Destruction that Germany had already missed its chance. “In 1870, at the time of German national unification, the population of the United States and Germany was roughly equal and the total output of America, despite its enormous abundance of land and resources, was only one-third larger than that of Germany,” he writes. “Just before the outbreak of World War I the American economy had expanded to roughly twice the size of that of Imperial Germany. By 1943, before the aerial bombardment had hit top gear, total American output was almost four times that of the Third Reich.”
Germany was a weaker and poorer country in 1939 than it had been in 1914. Compared with Britain, let alone the United States, it lacked the basic elements of modernity: There were just 486,000 automobiles in Germany in 1932, and one-quarter of all Germans still worked as farmers as of 1925. Yet this backward land, with an income per capita comparable to contemporary “South Africa, Iran and Tunisia,” wagered on a second world war even more audacious than the first.
The reckless desperation of Hitler’s war provides context for the horrific crimes of his regime. Hitler’s empire could not feed itself, so his invasion plan for the Soviet Union contemplated the death by starvation of 20 to 30 million Soviet urban dwellers after the invaders stole all foodstuffs for their own use. Germany lacked workers, so it plundered the labor of its conquered peoples. By 1944, foreigners constituted 20 percent of the German workforce and 33 percent of armaments workers (less than 9 percent of the population of today’s liberal and multicultural Germany is foreign-born). On paper, the Nazi empire of 1942 represented a substantial economic bloc. But pillage and slavery are not workable bases for an industrial economy. Under German rule, the output of conquered Europe collapsed. The Hitlerian vision of a united German-led Eurasia equaling the Anglo-American bloc proved a crazed and genocidal fantasy.
Tooze’s story ends where our modern era starts: with the advent of a new European order—liberal, democratic, and under American protection. Yet nothing lasts forever. The foundation of this order was America’s rise to unique economic predominance a century ago. That predominance is now coming to an end as China does what the Soviet Union and Imperial Germany never could: rise toward economic parity with the United States. That parity has not, in fact, yet arrived, and the most realistic measures suggest that the moment of parity won’t arrive until the later 2020's. Perhaps some unforeseen disruption in the Chinese economy—or some unexpected acceleration of American prosperity—will postpone the moment even further. But it is coming, and when it does, the fundamental basis of world-power politics over the past 100 years will have been removed. Just how big and dangerous a change that will be is the deepest theme of Adam Tooze's profound and brilliant grand narrative.
