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home | Tea Party Economist | Rhett Butler: War Profiteer
 

Rhett Butler: War Profiteer

Gary North
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Dec. 12, 2012

"Frankly, Mr. Davis, I don't give a damn."

These are the words that would have made Gone With the Wind far more meaningful to me.

Instead of Rhett in a yankee jail, losing at poker to make himself too valuable for the commanding officer to execute, he would have been in a Confederate jail. After all, he was using precious cargo space to bring back trinkets to sell to civilians at high prices rather than selling guns at high prices to the War Department. I can almost hear Jeff Davis now: "You're hurting the war effort, Butler, you scoundrel!"

I always liked Rhett. I think most Southerners liked him in 1939. But in 1863 in Atlanta, he would have been a scoundrel -- a near traitor . . . unless he had something for sale that some Southern patriot, or his wife, wanted to buy. Then it would have been "let's make a deal [you scoundrel]."

I wrote an article on General Grant's expulsion of the Jews from his military district in 1862. In response, a subscriber posted this on a forum.

I was unaware of this event until reading this article even though I consider myself as having an above average appreciation of the military campaigns through the reading of the late Shelby Foote's fine volumes "The Civil War; A Narrative". What bothers me most is the unsettled question: "Are war profiteering and free markets ever moral?"

Is war profiteering moral? Not for a pacifist, certainly. But the subscriber is not talking about pacifists. He is talking about civilians who support the war.

To begin to answer this question, let us look at the question from the economic point of view. Are war losses a good idea?

To answer this, I will speak of what is euphemistically called "the Great War": World War II.

PROFIT AND LOSS

You cannot have profits if you cannot have losses. Entrepreneurial profits come from the accurate forecasting of the future, and then taking steps to implement a plan of action consistent with this forecast. Losses come from the opposite scenario. Somebody guesses wrong, and he implements a bad plan. In both cases, customers impose their will on the respective producers.

Let us say that, during World War II, someone in Ireland, which was neutral, invented a weapon which would have utterly destroyed the capabilities of all aircraft flying over a country. The man in Ireland would have a chance to make a bundle of money. He could sell his invention to the Germans or to the Americans. He would probably have decided on the basis of which country would pay him the greatest amount of money. He had no commitment to the Allies, and he had no commitment to the Germans.

I also could use the example with a man in Latin America or Spain. The point is, the man has an invention which could give victory to one or the other country within weeks.

Let us say that you are a loyal American in 1942. Would you want to see the invention sold to the Germans? No? Well, then, would you want to see the federal government make that man incomparably wealthy by buying his invention? If you are an American, you would think it would be an excellent idea. So, the public in the United States would be taxed, and every dime would go to the foreign inventor.

Let's say the product came with a money-back guarantee. The Americans then deploy the weapon, the Germans can no longer bomb their enemies, and within weeks, the war is over.

Would that have been a good investment? Would it have been a good idea to make that foreigner incomparably wealthy, thereby saving the lives of 300,000 Americans, plus lots of lives from the other allied nations? If you think that this would be a good idea, then you believe in war profiteering for foreigners.

But, you may say, none of this is true if the inventor is an American. In that case, it would be treason for him to sell his invention to the Germans. That is true; it would be. So, the man simply tells the United States government to pony up whatever he thinks he can extract out of the government. He would soon be a war profiteer on a scale never seen before. He is going to get incomparably wealthy at the expense of American taxpayers. In doing so, he is going to save the same amount of lives. Should the government fork over the money? What if he asks for the money tax-free? Should the government pay him the money on a tax-free basis?

One answer might be "no." The government should not pay him a dime. The government should force him to hand over his invention. But the man does not have to turn over anything. It is his property. If he thinks that he is not getting compensated for his invention, he can tell the federal government to get lost. What then? Lots of dead American troops. Lots of dead Allies. The war goes on for another three years, or whatever.

Or, maybe the guy decides to give up his American citizenship, moves to Brazil, or any other neutral nation, and then makes his offer to the highest bidder. He is no longer American citizen. Any American is allowed to give up his citizenship. Any American who gives up his citizenship is no longer under the jurisdiction of the United States government. At that point, he can cash in on his invention. He is non-ideological. He doesn't care whether the Germans win or the Americans win. All he cares about is getting paid for his invention. What's wrong with that?

If the goal is to win the war, then there should be no consideration whatsoever regarding the profitability of any invention or strategy which will win the war. The government should pay the person at least as much as the war will cost, not counting the dead and wounded troops. Whatever money the government estimates it will expect to pay in order to win the war should immediately be handed over to that individual, on a money-back guarantee, for the weapon. That would save all those lives. It would cost only the money that the government would have spent anyway.

Anything wrong with this line of economic reasoning so far?

If the answer is "The man is a scoundrel," so what? He can win the war.

How many parents would say this? "I'd rather have my enlisted son at risk of dying than see that profiteer get rich." Not many.

TRADING WITH THE ENEMY

What if the issue of war profiteering involves helping the enemy? What if it is helping the nation to win a lot more than his costing the enemy to win?

This is what Rhett Butler was doing. He was helping ladies to buy nice things. Maybe he was running other goods. It was a matter of "high bid wins" as to what he was shipping out or bringing back. He did not care who won the war. He cared that he would come out ahead, which he did. He owned no slaves, but he sold trinkets at high prices to those who did.

What he did is basic to every war in American history. Someone finds a way to do well for himself by way of scoundrel-like actions. The little guys get caught. The big boys quietly get rich.

Most Americans are unaware that the largest companies of the United States traded with the enemy for over three years, 1942-45. In 1983, Charles Higham's book on this appeared: Trading with the Enemy (Delacorte). We read in the Introduction:

The government smothered everything, during and even (inexcusably) after the war. What would have happened if millions of American and British people, struggling with coupons and lines at the gas stations, had learned that in 1942 Standard Oil of New Jersey managers shipped the enemy's fuel through neutral Switzerland and that the enemy was shipping Allied fuel? Suppose the public had discovered that the Chase Bank in Nazi-occupied Paris after Pearl Harbor was doing millions of dollars' worth of business with the enemy with the full knowledge of the head office in Manhattan? Or that Ford trucks were being built for the German occupation troops in France with authorization from Dearborn, Michigan? Or that Colonel Sosthenes Behn, the head of the international American telephone conglomerate ITT, flew from New York to Madrid to Berne during the war to help improve Hitler's communications systems and improve the robot bombs that devastated London? Or that ITT built the Focke-Wulfs that dropped bombs on British and American troops? Or that crucial ball bearings were shipped to Nazi-associated customers in Latin America with the collusion of the vice-chairman of the U. S. War Production Board in partnership with Goring's cousin in Philadelphia when American forces were desperately short of them? Or that such arrangements were known about in Washington and either sanctioned or deliberately ignored?

For the government did sanction such dubious transactions-both before and after Pearl Harbor. A presidential edict, issued six days after December 7, 1941, actually set up the legislation whereby licensing arrangements for trading with the enemy could officially be granted. Often during the years after Pearl Harbor the government permitted such trading. For example, ITT was allowed to continue its relations with the Axis and Japan until 1945, even though that conglomerate was regarded as an official instrument of United States Intelligence. No attempt was made to prevent Ford from retaining its interests for the Germans in Occupied France, nor were the Chase Bank or the Morgan Bank expressly forbidden to keep open their branches in Occupied Paris. It is indicated that the Reichsbank and Nazi Ministry of Economics made promises to certain U.S. corporate leaders that their properties would not be injured after the Fuhrer was victorious. Thus, the bosses of the multinationals as we know them today had a six-spot on every side of the dice cube. Whichever side won the war, the powers that really ran nations would not be adversely affected.

Higham popularized what Antony Sutton researched in detail. Sutton could not get a mainstream publisher for his book, Wall Street and Hitler.

Most Americans are also unaware of the fact that representatives of America, Great Britain, Germany, Japan, and all the other countries involved in World War II met with each other on a regular basis in Switzerland at the Bank for International Settlements. They cleared their accounts with each other . . . in gold. (None of your fiat money, please. It's gold on the line.)

Citizens in the respective nations were not told about this, because it would have indicated that the governments at the very highest level were trading with the enemy, which they were. There was never a time in which the Allies were not doing deals with the Axis powers. But, of course, this does not get into the textbooks. The public was kept in the dark in World War II, and, for the most part, the public is still in the dark.

It is all a matter of degree. At the highest level of government, wartime deals are done all the time. During wartime, there is always trade of some sort across enemy lines. Sometimes the enemy lines are on the battlefield, and other times the enemy lines are in Switzerland.

During wartime, a national government lies to the public on a systematic basis in order to keep morale up. Are these lies legitimate? If the lies are legitimate for the sake of morale, and morale was required in order to win the war, and the war is legitimate, then the question of profiteering is one of morale, not one of economics. It is not a matter of who gets rich. It is a matter of who gets rich in such a way that the public's morale remains high, in order to keep fighting the war. This assumes that the war ought to be fought.

At some point, one side or the other must decide that the war is not worth fighting. It surrenders. Then acts that were legitimate before the war become legitimate once again. People can make profits on peace. But, the fact of the matter is, people were making profits on war, but the profits were concealed. Black marketers went to prison. The big boys got rich.

CONCLUSION

Does all this surprise you? Is this new information to you? If so, I suggest that you continue to research America's 12 major wars, from the Seven Years War (1754-1763) to Afghanistan (2001-?). Focus on these issues: (1) how they started, and who benefited; (2) how they were paid for, and who benefited; and (3) how the national government changed after the war, and who benefited. This research strategy is called "follow the money."

There is an extraordinary naïveté about how wars are fought, why they are fought, and what the outcomes are. It is important for politicians who start wars that there be mass naïveté, because only through mass naïveté can the government keep up public morale. That is the price of warfare.

The solution to all this is not going to war.

Until then, consider this possibility: Rhett Butler had it right.


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