Is Economics Behind the New Bush Doctrine?

Fact & Fiction

Mr. Cardwell is a Ph.D. candidate, Rutgers University.

On a recent evening television talk show former CIA director James Woolsey equated President Bush's new national security directive, called the "Bush Doctrine" by the New York Times, with a national security directive of 1950 known as NSC 68, short for National Security Council document paper 68. Few people in America have probably heard of NSC 68. Fewer still have read it or know what it contains. Yet, it touched all of us directly, and not just here in the United States, but across the globe as well. For, NSC 68 was the U.S. blueprint for waging cold war against the Soviet Union, much as the Bush Doctrine is a blueprint for waging war on terrorism.

Like the Bush Doctrine NSC 68 painted the world in stark terms. Two world wars and a catastrophic international depression in between, had rendered the world torn between two superpowers--the United States and the Soviet Union. The great dilemma posed by this reconfiguration of power was that the Soviet Union sought, as its fundamental goal, "the complete subversion or forcible destruction of the machinery and structure of society in the countries of the non-Soviet world and their replacement by an apparatus and structure subservient to and controlled from the Kremlin." The situation was perilous, "involving the fulfillment or destruction not only of this Republic but of civilization itself." The situation was made so perilous because the Soviet Union had acquired atomic capabilities in September 1949, ending the U.S. atomic monopoly, which many felt was the greatest deterrent to Soviet expansionist aims. Equally disturbing, in early October, China fell to the communists. Communism, obviously, was on the move. Where would it strike next? Believing, or so it seems, that the very existence of the "free world" was at stake, the U.S. responded with NSC 68.

Weighing possibilities, including doing nothing, retreating into isolationism, and pre-emptive war, NSC 68 concluded that the only viable option was "the rapid build-up of political, economic, and military strength in the free world" leading toward the creation of "a successfully functioning political and economic system." Though Truman, mindful that the proposed program would be expensive, did not immediately approve NSC 68, the outbreak of the Korean War in June 1950 made the matter moot and thereafter NSC 68 became the national security policy of the United States.

Seen from the vantage point of fifty years hence, it is unquestionable that NSC 68 became a major guiding force in determining U.S. foreign policy in the Cold War. It called for a massive rearmament program, development of the hydrogen bomb, the stationing of increasing numbers of U.S. troops abroad, particularly (but not solely) in West Germany, the economic and military strengthening of U.S. allies, especially to counteract the dangerous trend toward neutralism, propaganda aimed at convincing the American people (and one imagines others as well) that the "cold war is in fact a real war in which the survival of the free world is at stake," and the containment and ultimate destruction of the Soviet Union and its way of life, all of which occurred over the course of the Cold War and, at least in the minds of most Americans, to U.S. victory in the Cold War and the vanquishing for good of a dreadful enemy. When Woolsey connected NSC 68 to the Bush Doctrine this is what he meant.

Yet, the story of NSC 68 does not end there. Though NSC 68 has come down to us as a successful blueprint for waging cold war against communism, a careful review of the evidence reveals that, as is so often the case when it comes to history, things are not always what they seem. As a case in point, as Truman's initial response to NSC 68 indicates, far from being bowled over by the Soviet bomb, communists in control of China, or even the Korean War, as the conventional view holds, his actual response was to ask for a reduction in military spending for the coming fiscal year, down to $13 billion from $14.5 billion of the previous fiscal year. This position was endorsed, albeit with the kind of grumbling one would expect from any bureaucrat facing budget cuts, by both the National Security Council and the Joint Chiefs of Staff.

Further, by the spring of 1950, with government spending nearly tapped out, Truman spoke openly of further reducing military spending to as low as $9 billion annually. When NSC 68 came across his desk in April 1950 he did not sign it but sent it back for review as to the costs involved. Even after the outbreak of the Korean War, though he did approve a supplemental increase to the defense budget of $4 billion, Truman still did not sign on to NSC 68. Not until the end of September, a year after the Soviet's got the bomb and China went Red, did Truman finally approve NSC 68. Whatever else may be said of Harry S. Truman, and the same could be said for other high-level officials in his administration, he was not a man unduly disturbed by these events, not, at least, into approving the kind of radical new applicable expansion of American power as outlined in NSC 68.

Why NSC 68, then?

Moving along side these events in late 1949 and early 1950 was a little watched, and subsequently less understood, postwar phenomenon, known as the "dollar gap," that saw the nations of the world incapable of earning, through their own production capabilities, the dollars they needed to trade with the U.S. If the dollar gap, itself a symptom of a deeper problem of worldwide production and consumption deficits, could not be overcome, those nations suffering dollar shortages would have no choice but to greatly reduce or halt altogether their trade with the U.S. Protected economic blocs would form. Global trade would diminish. And, As Paul Nitze, traditionally considered the primary author of NSC 68, put it in 1949: "The economic isolation of the U.S. would be a hard fact." This would leave the U.S. prostrate to affect its destiny and forced to reorder its economy at home. It would also leave the world more vulnerable to communist penetration, since communism fed on economic despair, though as Secretary of State Dean Acheson, another principle author of NSC 68, told the Senate Committee on Foreign Relations in January 1950, the problems posed by the dollar gap spelled disaster for the capitalist nations "even if there were no communism" in the world.

To prevent this, the U.S. funded the dollar gap between 1945 and 1949 to the tune of some $22.5 billion out of the taxpayers' pockets, the European Recovery Program or Marshall Plan being the most prominent example of this policy. But, for all the praise heaped on it, in early 1950 the ERP was not proving entirely successful. The dollar gap remained an unsolvable issue and the ERP, which in 1950 was the sole means by which Western Europe obtained the dollars they needed to trade with the U.S., was scheduled to end in 1952. What would happen then? And black clouds were forming in other regions of the world as well, not least Japan and Indochina.

The story has not yet been adequately told in its totality but the massive influx of dollars into the West European and Japanese economies for rearmament in the form of “off-shore procurement” (whereby the U.S. paid the Western Europeans and the Japanese to build military equipment for the U.S., providing them a source of dollars they otherwise would not obtain), the large increase in demand for raw materials required for rearmament (materials which largely were obtained in Third World nations dominated by Europeans, providing another source of dollar earnings), the depositing of U.S. troops across the globe (who spent their dollars in local economies and were supported largely from local resources that were paid for in dollars), the rebuilding of commercial industries abroad in the name of “mutual security” (such as the automobile industries in Italy, France, and Japan), the substitution of political and economic integration in Western Europe (an issue that in 1950 was proving nearly impossible to accomplish but which was deemed essential for Western Europe’s long-term recovery) for integration through NATO, whatever their qualities in containing the Soviet Union, did end the dollar gap crisis and create the setting for probably the most sustained period of economic growth in the history of the world (hence the “miracles” of Japanese and European recovery, not to mention of the United States’ “long boom”). Which is to say that NSC 68, for all its rhetoric about the “end of civilization,” was directed at and accomplished things that, though not unmindful of the communist threat, would have been necessary to overcome “even if there were no communism” in the world. However, only the passage of time, as archives have opened, has permitted such an alternative understanding of NSC 68 to come to light. At the time the unsuspecting public had only the word of their leaders to go on.

In the Bush Doctrine, we find the following phrase: “A return to strong economic growth in Europe and Japan is vital to U.S. national security interests.” We all know the road Japan has been going down the last few years, with nothing seemingly able to stop it. Brighter minds than my own will know about the European situation, but I had not realized that Europe, too, was on the rocks. Of course, there is always Russia as well. Woosley is on to something when he compares the Bush Doctrine to NSC 68. The searching question is what are the aims of the Bush Doctrine?

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More Comments:

Bush - 8/3/2003

I am bushy, and I have a lot of Bushy hair, and guess wat? I suck at being president! Muahahaha! So...wanna *groans*?

OK HI! - 8/3/2003


Paul N. H ehn - 10/12/2002

As I recall Germany has had 10% or 11 percent and even 12 %unemployment for some time
now--years--so it may or may not be trouble. Booms and h uge crashes have always
been part of capitalism. You should study it. Welcome to the real world.
We had them ever 20 years in the 19th cent. in America, the worst being
1929 and what's happening now. Could Nikolaj Ilyich and Uncle Karl have been
right that "capitalism means war!"

Paul N. H ehn - 10/12/2002

As I recall Germany has had 10% or 11 percent unemployment for some time
now--years--so it may or may not be trouble. Booms and h uge crashes have always
been part o capitalism. You should study it. Welcome to the real world.

Orson Olson - 10/10/2002

Cardwell is not wrong to raise the question of economic motives; he simply looks too deply into the past for a relevent answer. After all, we are living in a post-Cold War world, and forcing the former upon to latter is strained if not easily made relevant. 9/11 ought to have tought that!

The Bush' Hawks case is a revolutionary solution to a stagnant, politically, economically, and socially backward region of the world that engages in anti-western terrorism in reaction against the challenge of modernism. First Iraq, then revolution in Iran, and radical reform in Saudi, goes this dominos thesis. (See Bill Keller's profile of Undersecretary of Defense Paul Wolfowitz in New York Times [Sunday] Magazine in mid- or early-September)

But that's what makes the Party of Peace' and any figleaf of "progressivism" so reactionary and so painfully irrelevent! You'd think if they wanted to engage and defeat their oppoenets that they would study them--but no....

A TRUE Party of Peace would give the people a real, substantive alternative non-militarist alternative set of arguments that aims to tame terrorism and support fragile, nascent, pluralistic proto-democracies in the fringes of the Muslim world, i.e., Turkey, Indonesia, Pakistan, Afghanistan. But do they?


Jonathan Soffer - 10/9/2002

Mr. Cardwell's analysis is interesting and I would like to see he "careful review of the evidence" in more detail because it is contrary to my own understanding of the record. As my own research on this particular point is not yet finished, I remain open to being convinced.

Nitze's memoirs maintain that NSC-68 was driven by security concerns not economic concerns, and so much of the documentary record at the time as I have examined bears him out. Apart from a few general shibboleths, the document contains no real economic analysis. According to Nitze, this was on the advice of Dean Acheson. (See Paul H. Nitze, From Hiroshima to Glasnost: At the Centre of Decision (London, Weidenfeld and Nicolson, 1989), 96-97).

The Council of Economic Advisors, headed by the hawkish Keynesian Leon Keyserling, did not weigh in until May of 1950, though his certification that "without serious threat to our standards of living and without risking a transformation of the free character of our economy" does not exactly make it sound like the CEA considered NSC-68 a plan for closing the dollar gap and saving the American economy. It was only by December 1950 that Keyserling's tone shifted from an apology designed to quiet public fears about expenditures to suggesting that they should be speeded up in order to increase economic stimulation. (See Hamilton Q. Dearborn, Council of Economic Advisors to NSC, May 8, 1950, U.S. Department of State, Foreign Relations of the United States, (FR) 1950 1:309. [This memo was approved by Keyserling]; Leon Keyserling, memo "The Economic Implications of the Proposed Programs" December 8, 1950, 1950 1:430-31; Keyserling to Truman November 2, 1951, FR 1951, 1:245-54.

Judith Stein's brilliant book, Judith Stein, Running Steel, Running America: Race, Economic Policy, and the Decline of Liberalism (Chapel Hill: UNC Press, 1998)argues forcefully that the cold war sacrificed American industry on the altar of security concerns building up allies at tremendous cost to the US industrial sector. Stein's work indicates that in general security concerns and the domestic economy were treated autonomously (the major exception being Eisenhower's "Great Equation" which reduced military spending on the premise that a healthy civilian sector was America's best security program).

Jonathan Soffer
Assistant Professor of History
Polytechnic University
Brooklyn, NY

Patrick Murray - 10/9/2002

Five years ago Paul Nitze told me that the purpose of NSC-68 was not economic, it was rearmament in the face of a global threat to the American way of life.
Germany has nearly ten percent unemployment. Isn't that trouble?