The Merchants Of Death
WALL STREET, BANKS, AND AMERICAN FOREIGN POLICY
Murray N. Rothbard
Rothbard-Rockwell Report, 1995, vii + 100 pp.
Defenders of the free market are often stigmatized as
uncritical apologists for big business. Nothing could be further
from the truth, as readers of this book will at once discover.
Written by one of the two greatest twentieth century champions of
free-market capitalism, Murray Rothbard, it is nevertheless a
searing indictment of the influence of investment bankers on
twentieth-century American foreign policy.
But "nevertheless" is the wrong word. Rothbards
criticism of certain big business interests directly follows from
his free-market position. Like Franz Oppenheimer and Albert Jay
Nock, Rothbard distinguished two means by which people can attain
their ends. One of these, voluntary exchange, constitutes the
basis of the free society to which he devoted his life. The
other, the "political means" is inimical to freedom.
For Rothbard, in an even more unqualified way than for St.
Augustine, the state is "a great robbery." Its guiding
principle is coercion, and its revenues are plunder extracted
Business interests who ally with the state, then, find no
favor with our author. He maintains that investment bankers are
especially liable to form alliances of this sort; hence their
activities must be viewed with the greatest suspicion. "Investment
bankers do much of their business underwriting government bonds,
in the United States and abroad. Therefore, they have a vested
interest in promoting deficits and in forcing taxpayers to redeem
government debt. Both sets of bankers [i.e., commercial and
investment], then, tend to be tied in with government policy, and
try to influence and control government action in domestic and
foreign affairs" (p. 1).
For Rothbard this view was no mere abstract speculation; it
was the linchpin of much of his historical research. And his
adoption of this theory makes his history all the more
fascinating to read. Economic history too often is disguised
sociology: forces such as Business, Labor, and Government
confront one another in an "unearthly ballet of bloodless
There is none of this in Rothbard. For him history is a matter
of who did what to whom. As Justin Raimondo points out in the
books insightful "Afterword," Rothbards search for the
individual actor is a direct consequence of methodological
individualism, a key tenet of the Austrian school.
In the present book, Rothbard applies his historical method
with illuminating results. Though relatively short, it is, as my
great teacher Walter Starkie used to say, "packed with
matter"; and I have space here to indicate only a few of the
many episodes Rothbard explores.
Near the start of the work, Rothbard advances a striking
thesis: "The great turning point of American foreign policy
came in the early 1890s, during the second Cleveland
Administration. It was then that the U.S. turned sharply and
permanently from a foreign policy of peace and non-intervention
to an aggressive program of economic and political expansion
abroad" (p. 4). The turn came at the behest of the House of
Morgan, which in Rothbards view exerted a controlling influence
on American foreign policy until the onset of the New Deal.
Under the new activist policy, the United States vigorously
sought to wrest control of the Latin American market from Great
Britain. In spite of the later close partnership between the
Morgan interests and Britain, the United States was very far
indeed from alliance with Britain during most of the 1890s.
Rothbard seems to me entirely on the mark here; few historians
have grasped this simple but essential truth. In further support
of Rothbards analysis, Britain strongly backed Spain during the
Spanish-American War of 1898.
But a British-American partnership was not long in coming, and
Rothbard finds in the close ties between the House of Morgan and
British financial interests an underlying cause of American entry
into World War I. Because of Morgan investments in allied war
bonds and in the export of war munitions, "J.P. Morgan and
his associates did everything they possibly could to push the
supposedly neutral United States into the war on the side of
England and France" (p. 16).
Rothbard is by no means finished with the House of Morgan.
During the 1920s, Morgan interests controlled the Federal Reserve
System. Here the key figure was Benjamin Strong, "who
singlehandedly dominated Fed policy from its inception until his
death in 1928" (p. 23). Strong "spent virtually his
entire business and personal life in the circle of top associates
of J. P. Morgan" (p. 23); and as Governor of the New York
Federal Reserve Bank, then the most powerful position in the
Federal Reserve system, he was ever alert to the interests of his
I fear that I have so far given a misleading impression of the
book. It is much more than a study of the Morgans. Indeed, in the
1930s the Morgans ceased to occupy the top position in the
financial elite and were replaced by the Rockefellers. But, so
filled with detail is the book that a review can really do no
more than single out a few topics for mention.
The reader has much more in store for him. Rothbard again and
again turns up a new angle on some person or event. Theodore
Roosevelt, Walter Lippmann, John F. Kennedy, Henry Kissinger--all
of these, and many others, come under Rothbards scrutiny, as he
illustrates his thesis about the influence of investment bankers.
The book defies summary: twentieth-century American diplomatic
history will never be the same.