Free People, Free Markets. George Melloan
In a speech in Detroit in December 1921, the Journal publisher asserted: “Germany could not pay her debts if she wanted to and she does not want to . . . She has issued paper money until the value of the mark, which was 23 cents before the war, 12 at the time of the Armistice, eight at the Peace Treaty of Versailles has now fallen to about one-third of a cent. How much lower will it fall? Well, it can’t go more than a third of a cent lower. Germany did not want to pay the reparations demanded and she brought about the present situation to prove that she could not. Now she has become alarmed and is asking Washington for help, but that help will not come until she is willing to help herself.
“We might as well admit however, that it is [beyond] the power of Germany to pay 33 billions [in U.S. dollars] of reparations when the whole property of the country is worth only 50 billion. France must take time to cool down and realize that fact. It would mean the slavery of the nation for three generations and the world cannot afford to hold in slavery 50,000,000 people. It took us a long time to find out that slave labor is the dearest in the world, and that free labor is the cheapest and most efficient.”
Barron asserted that President Woodrow Wilson’s 14-point peace plan “had greatly added to the problems of peace.” He quoted the cutting remark of French premier Georges Clemenceau about the 14 points: “the good Lord only had 10.”
Wrote Barron: “Close scrutiny of President Wilson’s 14 points will show that he is attempting a universal enforcement of only one of the Ten Commandments—‘Thou shalt not kill!’ The thunders of Sinai and the Finger of Jehovah on the stone tablets of Moses spoke this Commandment no more distinctly than that other Word: ‘Thou shall not steal.’
“Man slays his fellow man that he may steal his goods. Nations war upon nations that they may take their lands, their trade and their properties. Stealing, or defense against stealing, is the fundamental aim in individual and national killing.”
Barron, as with Clemenceau, clearly thought the American president was naïve in his urgings of disarmament, free trade and the restoration of the status quo ante in Europe in light of the pervasive Allied bitterness toward Germany during the Versailles proceedings. That bitterness and the arrogance of Clemenceau would be important factors in ensuring that another war would engulf Europe 25 years later.
After the war, Barron filed a report on his conversation with a rising young star in the field of economic policy advice who was participating in the Versailles Peace Conference as part of the British delegation. He was John Maynard Keynes, an economic adviser to British prime minister David Lloyd George. Barron discreetly let his readers in on the fact that Keynes was a homosexual by writing that he “didn’t seem like much of a family man.” But he agreed with Keynes that the harsh reparations demands inflicted on Germany by the French and British would cause problems in the future, as they in fact did.
Neither Barron nor Hamilton agreed with the opinion of some stock traders that wars were good for business, a view often picked up by pacifists and used to damn Wall Street, with cartoons of greedy men in top hats and striped pants as a nest of warmongers. Barron and Hamilton would have none of the “good-for-business” talk.
On October 4, 1912, a Journal editorial attacked the New York Herald for asserting that war in Europe would send Europeans clamoring for U.S. stocks: “Of course, this is only the New York Herald,” wrote Hamilton in a haughty English tone, “but there is considerable danger in second-rate thinking for second-rate minds, when the preponderance of second-rate minds is considered . . . If there is war in the Near East we may make up our minds that it will not mean one penny of investment to the American market that would not come here in any case, while it will involve the liquidation of American securities held abroad . . . War is a waste. One country cannot dissipate its savings in gunpowder smoke without hurting all the rest of us. In modern conditions of easy communications and international exchange, the misfortune of one is the misfortune of all.”
This argument, self-evident it would seem, that war involves massive economic waste would be reflected in many future Journal editorials. Along with the horrible costs in human lives, the loss of physical capital is damaging to national economies.
The argument that the replacement of damaged infrastructure has the good effect of creating jobs was demolished years before World War I in the “broken window fallacy” laid out by the great 19th-century French economist Frederic Bastiat. He held that destruction doesn’t advance economic growth. To be sure, a broken window makes work for the glazier, but it subtracts income from the house owner that might have gone to finance more useful endeavors.
But once the United States became involved in World War I, Barron urged that it pursue victory with vigor. That same approach would be taken by Journal editors after the Japanese attack on Pearl Harbor on December 7, 1941. And a version would be expressed by Robert L. Bartley, who set editorial policy for the 30 years ending in 2002, with reference to Vietnam: “Don’t get involved in any wars that you don’t plan to win.”
Some commentators argue, of course, that World War II was a boon to the United States in that it ended a decade-long Depression. But that argument needs a great deal of qualification. Certainly the war ended the unemployment problem, as it pressed nearly 12 million men and over 200,000 women into military service, not to mention the massive ramping up of employment in defense industries. But 407,316 of those soldiers lost their lives, and 671,278 were wounded. The U.S. economy produced massive numbers of tanks, planes, weapons munitions and ships, but most of that materiel was useless for anything other than destruction and had to be scrapped after the war.
The truly important factor in aid of U.S. recovery was that it emerged from the war a victor with its mainland infrastructure and its governing institutions and civil society intact, having had to endure no fighting, other than Pearl Harbor, on U.S. soil, something that no other participant, winner or loser, could claim. It came out with a new spirit of accomplishment and optimism.
World War II also put paid to further New Deal experimentation, which had caused uncertainties among businesses in the 1930s and thereby retarded investment. The nation came out of the war with a new respect for corporate capabilities and a retention only of those New Deal measures, like banking reform, that had proved to be mainly positive in their economic effects.
Moreover, when the United States came out of the war, the U.S. dollar was the dominant currency of the world, and U.S. financing, managerial skills and resources were applied to global reconstruction. World War II as such didn’t end the Depression, but the victory gave American businesses and consumers a new confidence and set U.S. governmental policies on a new, more positive course.
If you think war is good for an economy, don’t try to tell that to the survivors of World War II in devastated Europe and Asia. Journal editor Hamilton was making a good point when he attacked the “second-rate minds” at the New York Herald.
President Harry Truman was right in a sense when, in a 1948 campaign speech in Chicago, he said that The Wall Street Journal was the “Republican Bible”—but only in a sense. Truman, of course, was applying the old FDR formula of identifying Republicans with the hated tycoons of Wall Street, while at the same time taking a swipe at the Journal, which had given him mixed reviews.
Yet being called by the president the “Bible” of a party representing roughly half the electorate, even if it applied only to the editorial page, must have had some benefits in gaining the Journal national attention when it was still a relatively small newspaper. The Journal of 1948, which for over a half century had supported free-market capitalism, certainly had more admirers among Republicans than among Democrats. With the advent of the New Deal, the Democrats had become infatuated with a more radical version of Teddy Roosevelt’s “Progressive” politics. Its guiding theorists were experimenting with laws that attempted to control market transactions through federal regulatory interventions that were shaking the confidence of business owners and investors. The Journal deplored