Economics makes the world safe for democracy: Prosperity and freedom in the American view

This essay is based in part on chapters in D. Ellwood, The Shock of America. Europe and the Challenge of the Century, Oxford University Press, July 2012.



512TsvGZJ9LThe Americans have always been in the great majority a people of plenty, of material well-being, of opulence, of affluence, of a generalised prosperity. De Tocqueville said it, David Potter said it in a famous social history tract of 1954, latterly people like Benjamin M. Friedman have been saying it in books like The Moral Consequences of Economic Growth (2005). Their philosophers thought long and hard about where America’s riches came from, starting of course from the abundance of the land that God the Creator had endowed them with. They talked of their particular kind of Protestant religion which favoured the individual, work, merit, in a spirit of free community. They evolved their own brand of capitalism, which promoted risk, innovation, competition, bigness, and exalted the entrepreneur with his capacity for «creative destruction». Some, like Turner, even thought that the frontier experience had endowed the national mentality with special gifts of toughness, self-reliance, inventiveness, exuberance and so on… 1.

By the end of the 19th, as you’ve heard in these days, they were facing the almighty consequences and contradiction thrown up by the workings of these impulses in a land of weak government, with no organised banking system, with so few social or legal mechanisms for handling the tremendous forces of urbanisation, monopoly, mass production and exploitation which rose up in that time. Yet in the face of it all Americans remained overwhelmingly convinced that the future belonged to them. After the Spanish-American war of 1898, a Senator called Chauncey Depew would proclaim:

There is not a man here who does not feel 400 per cent bigger in 1900 than he did in 1896, bigger intellectually, bigger hopefully, bigger patriotically, bigger in the breast from the fact that he is a citizen of a country that has become a world power for peace, for civilization and for the expansion of its industries and the products of its labor 2.

What I want to show in these remarks is not simply how America became a great power via its civilization and its markets, but how, after the Great War and the beginning of the age of ideology and totalitarianism, the presumed lessons of America’s experience of progress and prosperity were transformed into a ceaseless effort to save the world – and Europe in particular – from itself: from its backwardness, ignorance, class conflicts, feudalisms, militarisms and all the other malignancies which had produced the war and then dragged America into it. As the dictatorships flourished, and a Second World War loomed, these diagnoses became ever more incisive and convinced, and were turned by a huge intellectual effort within and without Government, into specific designs for re-making the postwar world. This push found its highest expression in the Marshall Plan, the starting point for the great parabola in favour of world development which has outlasted the Cold War, and in spite of all its disappointments can still be found in the language of George W. Bush and Barack Obama. When we see calls coming every week for a new Marshall Plan here and there across the world, even in Europe itself once more, then we know this profound American view faith in the connection between prosperity and freedom – or capitalist growth and democratic stability – is still with us, alive and inspirational.

After Wilson

«Hunger does not breed reform», Woodrow Wilson told Congress in his address announcing the armistice of 1918, «it breeds madness and all the ugly distempers that make an ordered life impossible. […] Unhappy Russia has furnished abundant recent proof of that». So the moral was clear: «Nations that have learned the discipline of freedom» should now rule, «by the sheer power of example and of friendly helpfulness» 3. Wilson of course was no economist, and did not escape the disdain heaped by Keynes on the peacemakers of Versailles, who had neglected all the unappealing material realities which in his view were the key elements in re-starting the life of the war-torn continent. 4
But there was one man at the peace conferences who struck the Cambridge economist quite differently. This was Herbert Hoover, an American mining engineer with experience across the world whose specific contribution after 1918 was to invent another new means for projecting American power into Europe: large-scale humanitarian relief organizations. On the basis of prolonged experience in attempting to bring relief to Russians, Hoover had turned into a militant anti-Communist. He later explained:

[The Communists] found so receptive an audience in hungry people that Communist revolutions at one time seized a dozen large cities and one whole country – Hungary. We sought diligently to sustain the feeble plants of parliamentary government which had sprung up in all of those countries. A weak government possessed of the weapon of food and supplies for starving people can preserve and strengthen itself more effectively than by arms. 5

Hoover told Wilson that «a foundation of real social grievance» fed the revolutionary movement in Russia. The Bolsheviks were able to gain leverage from «the not unnatural violence» of masses who had «learned in grief of tyranny and violence over generations. Our people, who enjoy so great liberty and general comfort, cannot fail to sympathize to some degree with these blind groupings for better social conditions». 6

Franklin Roosevelt and his Secretary of State Cordell Hull explained the rise of the dictators between the wars in comparable economic and deterministic terms. They took seriously the arguments the Nazis and Fascists liked to make about the grievances which the «have-not» nations felt towards the «haves», and casting their perceptions of Japanese imperialism back on to Europe, they took for granted that a fair share of world trade and access to raw materials was what they all wanted underneath. But that still left to be explained how tiny extremist groups such as the Fascists and the Nazis (and the Bolsheviks for that matter) could become mass movements and take over great nations. Here again it was Hull who spelled out the rationale which would sink deepest into the American official mind. By the time ideological and psychological dimensions had been added to it, it would go on to become one of the key orthodoxies of the Cold War, and beyond. Hull told the British Ambassador in early 1936:

The most incomprehensible circumstance in the whole modern world is the dominating ability of individuals or one man to arouse the mental processes of the entire population of a country, as in Germany and Italy, to the point where overnight they insist upon being sent into the frontline trenches without delay. When people are employed and they and their families are reasonably comfortable and hence contented, they have no disposition to follow agitators and to enthrone dictators 7.

Hull had already berated the Italian Ambassador for the invasion of Ethiopia, asking him why Mussolini had not invested $100 million in the country instead of conquering it and spending far more. Now he told the British diplomat that if only Italy had been able to keep up her pre-crisis exports, there would probably have been no military campaign. As for the future, if only a $20 billion increase in international trade could be engineered, and investment to provide work for 12 to 14 million people, then this might make the whole difference between war and peace in Europe. 8 In his memoirs, published in the year in which the Marshall Plan started, Hull enlarged on the lessons that he saw in his long experience:

A people driven to desperation by unemployment, want, and misery, is a constant threat of disorder and chaos, both internal and external. It falls an easy prey to dictators and desperadoes. In so far as we make it easier for ourselves and everyone else to live, we diminish the pressure on any country to seek economic betterment through war. The basic approach to the problem of peace is the ordering of the world’s economic life so that the masses of the people can work and live in reasonable comfort. 9

But a more sophisticated approach to the link between economic progress and democracy was offered by the international journalist and commentator Vera Micheles Dean, in 1939. What Nazism and Communism shared was a

[…] Revolt of the dispossessed classes against industrial capitalism and such remnants of feudalism as the aristocracy, the officer class and a politically minded church. Both […] sought to provide the masses with material opportunities and a taste of power hitherto reserved for a social elite. […] Both, paradoxical as it may seem, represented an effort to realize the promises held out by the political democracy of the 19th century, which the possessing classes had too often failed to translate into terms of economic democracy in an age of mass production. 10

This was the key American perception and understanding of the roots of the world wars, of the great depression, of totalitarianism, which fed the determination of that nation’s government to place the peace of the world on a different, non-European footing, after the second world war in twenty-five years provoked by Europeans.

A very philosophical war

In his intellectual history, Why the American Century?, Olivier Zunz points out that by the time the shadow of the coming war fell over the United States from the late 1930s onwards, American business-men, researchers, university leaders, foundation trustees and government officials had quietly constructed «a vast institutional matrix of inquiry», a system whose purpose was to turn knowledge of the universe in all its forms into concrete economic, social and scientific projects which could, potentially, challenge existing arrangements  in any part of the world. 11
In his celebrated «American Century» article (February 1941), the publisher Henry Luce said that when the American people finally faced up to the challenges of their time, they would see that these were to make their nation «the dynamic leader of world trade», a land «which will send throughout the world its technical and artistic skills», one which would feed hungry people everywhere with its boundless produce. 12 By the beginning of 1942 every leading speaker in the great debate had been obliged to promise at least a new world organization to construct the peace, a transformed global trade system and a democracy based on rising purchasing power. The Four Freedoms declaration, the Lend Lease Act and the Atlantic Charter – all of 1941 – had made very clear just how serious were the American government’s intentions about these promises, all revolving around the three principles of a revised collective security system, multilateral trade liberalization, and raising living standards everywhere, what for long was called «development». The uncertain, unsettled United States of the 1930s, half in the international system, half out of it, had turned into a revolutionary, even evangelical nation.

Much of the effort of the great debate inside the U.S. was dedicated to exploring just how the perceived American experience of the connection between economic progress and democratic liberty might be translated into empirical, universally applicable recipes. Among the favorite models was always the Tennessee Valley Authority (TVA), the great New Deal system of dams, hydroelectric plants and irrigation projects which had transformed the prospects of a once-backward rural region. Former Under Secretary of State Sumner Welles pinpointed the Danube and the Balkans as the most suitable terrain in Europe for a similar scheme. 13

The talk in these discussions was all of interdependence, trade liberalization and the end of European colonial empires, raising living standards everywhere. The moral responsibility of the leading power, the US, was to teach these lessons to its allies and link them to their self-interest, to insist on the need to think in the long term, to demonstrate the supremacy of just that factor whose exclusion had ruined Versailles: economics, as planning, as business, as growth. Bretton Woods was where the language of growth made its debut on the world stage, and what it meant right away was that the language of deflation, austerity, protectionism and shrinkage so common in the 1930s would be totally swept away. Over the long run it implied that the State promised a quite new degree of power over economic processes, a kind of control which would deliver specific economic benefits to the mass of its citizens as quickly and as visibly as possible, thereby guaranteeing its own credibility, and renewing the legitimacy of democratic capitalism at a time when in Europe at least it had never been so low. The shift from the language of prosperity to that of growth is crucial I think, because of the role of the State, and the lessons of WW2 Keynesianism in Washington.

The meaning of the Marshall Plan

Swedish poster promoting the Marshall Plan: “Cooperation for peace, freedom and better standards of living.”

Swedish poster promoting the Marshall Plan: “Cooperation for peace, freedom and better standards of living.”

Among these lessons was the need for inter-dependence to be managed through special institutions, almost all of which were economic in nature: hence the re-born ILO and FAO, the new World Bank and the IMF, UNRRA and the unborn ITO, the many economic dimensions of the UN Charter. When these turned out to be totally inadequate for the real situation prevailing in Europe after the war, yet another was created ad hoc, the European Cooperation Agency, which in turn spawned the OEEC and the EPU. The Marshall Plan was the popular, umbrella term for all this, and nowhere more clearly than there can one see the force of American convictions concerning the link between economic growth and democratic stability, especially because the Marshall Planners made a point of teaching the Europeans through a vast array of information and propaganda efforts just how the link worked, and how it could be emulated by those willing to work for an American standard of living. «You Too Can Be Like Us»: that was the implied message of the Marshall Plan, but only IF you follow our two great policy prescriptions: productivity and integration. It’s a strange thing that in his People of Plenty Potter asserts that the export of democracy had failed by 1954 because the US had shown only its standards of living to the world – provoking envy – and not how to get there. He never mentions the Marshall Plan. 14

Yet people at the head of the Marshall Plan went out of their way to lecture Europeans on the difference between capital (the old European way) and capitalism the American way. Richard Bissell, a key technocrat of this period, wrote that:

[…] American machinery, American labor relations, and American management and engineering are everywhere respected. […] What is needed is a peaceful revolution which can incorporate into the European economic system certain established and attractive features of our own, ranging from high volumes to collective bargaining. […] [This] will require a profound shift in social attitudes, attuning them to the mid-twentieth century. 15

And Mike Dayton, head the MP Mission to Italy told a group of industrialists what would happen if they didn’t shape up:

Gentlemen, is there anyone here who believes that half-measures, half-cooperation and timid support of a plan to vitalise democracy, can win anything except the privilege of hanging from the arcade of a filling station, should we lose?

It was of course a reference to Mussolini’s fate in April 1945 and it got Dayton into much trouble. 16

But the teaching effort of this crucial epoch wasn’t just limited to the Marshall Plan. There’s the Truman Doctrine, with its insistence that:

The seeds of totalitarian régimes are nurtured by misery and want. They spread and grow in the evil soil of poverty and strife. They reach their full growth when the hope of a people for a better life has died. We must keep that hope alive. 17

The Doctrine of course was supposed to explain the need for special military and economic aid to Greece and Turkey. On Greece, the great Chicago historian W. H. McNeill, who first arrived there in a military mission in 1945, said:

If economic conditions could be so improved that every Greek was able to live as well as he had been brought up to expect, it seems probable that the excessive concern and fanaticism which the people now manifest for political parties and programs would diminish.

The mental, cognitive dimension of the aid challenge was therefore at least as significant as the material one, and the shift from relief to structural change and modernisation would take place in individual minds as well as in the farms, factories, shops, offices and government departments:

Circumstances might then be propitious (McNeill continued), for the gradual emergence of a community of ideas that would embrace almost the whole population, and permit genuine democratic government to be established. Economic prosperity could not guarantee stable and popular government, but it would certainly make its achievement more probable. 18

Then there’s Truman’s Point 4 Declaration, which talks about bringing the benefits of America’s technological progress to the backward masses of the world, and opens up the way to all the efforts to stage growth everywhere it was thought to be lacking by the standards now defined in Washington. 19 These vast projects have now been thoroughly deconstructed by American historians, such Michael Latham, Nils Gilman and others. But as historians pick through the wreckage of all the development theorems and strategies, one thing becomes clear: down to this day Americans continue to stick to their faith in the upholding, pacifying, stabilizing, moralizing effects on individuals and their societies of economic growth. As Benjamin Friedman puts it introducing his long study of this faith:

Economic growth – meaning a rising standard of living for the clear majority of citizens – more often than fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy. Ever since the Enlightenment, Western thinking has regarded each of these tendencies positively, and in explicitly moral terms. 20

In each of the testimonies left by the last two presidents, outwardly so dissimilar, is to be found once more the conviction that economic development is the key to democratic stability and peace in the world, taking it for granted that this always implies some form of western-style capitalism. 21 Bush’s universe was a defiant, hierarchical one, with the US unchallenged and unchallengeable on top. Might truly was right. Obama’s international disorder – I’m using his Nobel Peace Prize speech as the basis for these remarks – sees the US as still the leader of the pack, but also a power struggling in a crowded international scene, including the good, the bad and the ugly, to maintain a semblance of decency which in the end could only be delivered by better functioning international institutions. But both visions tackle explicitly the connection between economic progress and political – «democratic» – stability in ways which the world had become used to since the era of the New Deal, Bretton Woods, Truman’s Point Four and the Marshall Plan, and then the third world development programmes of the era of the Cold War. 22 Bush said: «Poverty does not make poor people into terrorists and murderers. Yet poverty, weak institutions, and corruption can make weak states vulnerable to terrorist networks and drug cartels within their borders». The remedy was to extend «free trade and free markets» so as to deliver «the rewards of liberty» to anyone seeking them. This was where «real freedom» could be found, «the freedom for a person – or a nation – to make a living». 23

Obama was ready to acknowledge the benefits of globalization – «Commerce has stitched much of the world together. Billions have been lifted from poverty» – and insisted that security and development were inter-linked. Using language that could have been adapted from the Truman Doctrine he referred to «the absence of hope» that «can rot a society from within», promising that America and its allies would always be interested in these realities. But there was no question of placing them at the heart of a presumed «war on terror» as Bush did. Terrorism for Obama was simply «a tactic» whose danger had been multiplied by «modern technology which allows a few small men with outsized rage to murder innocents on a horrific scale». Instead, the drive of America to secure «freedom from want» was a moral one: rights should include «decent education» and «a job that supports a family». Where America’s self-interest was concerned, the key question was no longer simply economic development as such, but climate change, since «if we do nothing, we will face more drought, famine and mass displacement that will fuel more conflict for decades» 24.
Now much of all this is very familiar to us today, and we are all submerged now in the great impulse for a return to dynamic economic growth as soon as possible, with warnings about political extremism and protectionism coming back if we don’t do it, much along the lines traced by Friedman.  But seen from the point of view of European political ideas and their evolution, all this American emphasis on the economic premises of democracy looks quite peculiar. My favourite reading in this area recently has been Jan Werner Müller’s Contesting Democracy. Political Ideas in Twentieth-Century Europe, which is not a philosophical tract as much as a study of the link between ideas and «the creation (and destruction) of political institutions», including the totalitarian varieties. 25
My point is very simple: in this long, brilliant book economics is no-where. The hegemony, legitimacy and credibility of political leaders, policies and institutions are everywhere, yet prosperity and growth are no-where. The values associated with democracy – positive and negative – are often cited; the economic bases of their functioning, and what happened when capitalist economies betrayed the liberal versions they propounded, well, they’re simply never mentioned.  There is of course Max Weber – there’s always Max Weber. He said in 1919 that there were three bases of legitimating rule: tradition, formal legal procedures, and personal charisma. Weber also held – says Muller – that the state should be preoccupied not so much with the well-being of people in the future (never mind the present), as with the «quality of future people’s character». 26 Contrast this with comments from Walter Lippmann, the era’s most prominent political commentator, in 1934 (after the Great Crash, of course):

The modern state cannot endure unless it insures to its people their standard of life. Only by making the people economically secure can a modern government have independence, wield influence in the world, preserve law, order, and liberty. That is now the central task of government, the very heart of statesmanship.

Lippmann was convinced that private capitalism was under trial, a «tolerated anomaly» left over from the Nineteenth century, and only accepted by the great majority as long as it could produce rising living standards for them. The price of this toleration, said Lippmann, was prosperity: «In 1896 it was the full dinner pail. By 1928 the price had risen. It had become the two-car garage». 27

Victoria de Grazia has shown us how the American concept of the «standard of living», a cultural concept defined in terms of the democracy of consumption, did spread in places throughout Europe between the wars. 28 It’s legitimate to imagine how, together with a force like Hollywood’s – which Potter pointed to specifically – these influences contributed to «the revolution of rising expectations», which a Marshall Planner identified as taking place throughout the world, from the time when political democracy first looked the industrial revolution in the face. 29 But as the Dean quote – and much other evidence makes clear – the lessons that American history was assumed to teach about the connections between economic progress under capitalism and democratic stability, were not so easily absorbed in Europe. Many Americans would say they never have been, and so they continue to preach to us about labour markets and productivity, about competitiveness and entrepreneurship, about innovation and risk and trust: look at Washington Post/Repubblica last Monday (2/7/12) 30. The Europeans have always sought a synthesis of some sort between their preferred traditions, and this sort of modernity, a French, British, Polish (or whatever), even a European way to be modern. 31 This effort is now in crisis. At least the Americans still have a faith to preach; the Europeans just try – each in their own way – to be as European as possible in the circumstances.


  1. D.M. Potter, People of Plenty. Abundance and the American Character, New York 1954, p. 154.
  2. W. Lord, The Good Years. From 1900 to the First World War, New York 1960, p. 1.
  3. W. Wilson, War and Peace. Presidential Messages, Addresses and Public Papers (1917–1924), ed. by R. Stannard Baker and W.E. Dodd, New York, 1927, Vol. 1, pp. 300–302; address of 11 November 1918.
  4. The Collected Writings of John Maynard Keynes. Vol. II The Economic Consequences of the Peace, London, 1971 (reprint of 1919 edition), pp. 134 and 211.
  5. H. Hoover, The Memoirs of Herbert Hoover. Years of Adventure 1874–1920, New York 1957, p. 301.
  6. Letter to Wilson of 28 March 1919 in ibid, p. 412.
  7. C. Hull, The Memoirs of Cordell Hull, Vol. 1, New York, 1948, p. 521.
  8. Ibid, pp. 439, 521.
  9. Ibid, cfr. David Ekbladh, The Great American Mission. Modernization and the Creation of an American World Order, Princeton 2010, pp. 63–76, Ch. 2 in general.
  10. V. M. Dean, Europe in Retreat, New York, 1939, pp. xv–xvi.
  11. O. Zunz, Why the American Century?, Chicago 1998, pp.88–90, pp. xi–xii.
  12. Luce editorial of 17 February 1941 reproduced in M.J. Hogan (ed.), The Ambiguous Legacy. U.S. Foreign Relations in the “American Century”, Cambridge 1999, pp. 11–29; discussion in ibid, introduction, and chapters 1 to 8.
  13. S. Welles, The Time for Decision, New York 1944, pp.152–3; the centrality of the TVA to liberal American visions of the postwar order is emphasised in Ekbladh, op.cit., pp. 37–8, and chapters 2, 3.
  14. Potter, op.cit., p. 139.
  15. R.M. Bissell Jr., «The Impact of Rearmament on the Free World Economy», Foreign Affairs, April 1951, pp. 385–405. (here pp. 404–405).
  16. Speech of 19 Oct. 1950, to American Chamber of Commerce for Italy, Genoa Branch, in National Archives, Record group 286, OSR 824, Central Secretariat Permanent Country Subject Files, «Italy 1951» sub-file.
  17. Full text of address visible at
  18. W.H. McNeill, The Greek Dilemma, London 1947, pp.223–4; McNeill kept reflecting on his Greek experience throughout his long and distinguished career; a 2005 commentary in «Afterword: World History and Globalization», in A.G. Hopkins (ed.), Global History. Interactions Between the Universal and the Local, London 2006, pp.287–8.
  19. Full text of Point 4 address at; cfr. D.C. Engerman, et al (eds.), Staging Growth. Modernization, Development and the Global Cold War, Amherst 2003.
  20. Cfr. N. Gilman, Mandarins of the Future. Modernization Theory in Cold War America, Baltimore 2003; B.M. Friedman, The Moral Consequences of Economic Growth, New York 2005, p. 4.
  21. Francis Fukuyama took this to indicate that his original bet that «history is over» was still functioning, especially as the crisis had thrown up no radically alternative models. But now he saw the conviction as a dangerous form of complacency; F. Fukuyama, History Is Still Over, in «Newsweek», Dec. 12, 2009.
  22. For a sceptical reading of this history, M.E. Latham, The Right Kind of Revolution. Modernization, Development and U.S. Foreign Policy from the Cold War to the Present, Ithaca 2011.
  23. Preface to The National Security Strategy of the United States, Sept. 2002, and Section VI, p. 18. This part of the document provides a detailed explanation and plan of action of the first Bush White House in the economic sphere. The EU received no mention, except as one of a number of sources of trade disputes.
  24. Full text of Nobel address at; on the limits and ambiguities of Obama’s commitments in the sphere of development, Mario Del Pero, Alla ricerca del primato (in parte) perduto: la politica estera di Barack Obama, in Quaderni di Relazioni internazionali, Nov. 2009, p. 23.
  25. J-W. Müller, Contesting Democracy. Political Ideas in Twentieth-Century Europe, New Haven 2011, p. 3.
  26. Ibid., pp. 8, 32.
  27. W. Lippmann, The Method Freedom, New York 1934, pp. 36,15.
  28. V. De Grazia, Irresistible Empire. America’s Advance through Twentieth-Century Europe, Cambridge, MA 2005, especially chapter 2.
  29. D. Ellwood, Shock of America, cit., chapters 7, 8.
  30. Edition of 2 July 2012.
  31. This is a central theme of Ellwood, The Shock of America, cit.