Money and Power: America and Europe in the 20th Century

By Burk, Kathleen | History Today, March 1993 | Go to article overview

Money and Power: America and Europe in the 20th Century


Burk, Kathleen, History Today


Money makes the world go around: Kathleen Burk looks at how the Yankee dollar transferred influence from the Old World to the New.

The international power of the United States in the twentieth century has been grounded in its economic strength. In 1900, even before the US had much of an army, it was perceived as a power and a future great power. By 1920 it was the supreme financial power in the world, having displaed Great Britain during the First World War. By 1945 it was virtually the only financial power, most other having been devastated by the Second World War. By 1985 it had lost ts position as supreme financial power, with Japan succeeding to the crown. It had been a short but action-packaged reign.

The economic power of the US, as of any country, can be difficult to pin down. Power to do what? After all, econoic power is not necessarily transferable to other realms. Power exercised by whom? Does the term |financial power' refer to private money controlled by bankers and private investors, or public money controlled by governents? Indeed, does |financial power' exist if abundant private money cannot be directed according to government policy? Certainly these are important questions when considering American relations with Europe, because economic relations, economic aid and economic rivalry have been dominant themes.

Yet fro the beginning of the century until the advent of Lend-Lease in 1940, the years 1917-199 excepted, the only American money available was private money: power arising from a government's ability to disperse cash was not at issue. It is in the post-war period, with foreign aid and contributions to multi-lateral institutions such as the International Monetary Fund and the World Bank, that this direct governmental pressure becoes possible. But of course, what money can also do is finance an aggessive foreign policy. But here a country needs a will to power and a willingness to accept continuing responsibilities. Only in the post-war period did the US clearly, and more or less steadily, conduct such a foreign and military policy. The fact that she could afford to do so constituted the great difference between the US and the UK, her erstwhile rival and now increasingly-dependent ally.

Clear distinctions have to be drawn, therefore, between private and public money, between wartime and peace-tie, and between Europe and, for example, Latin America, where Amerian economic power underlay its own informal empire. Within Europe itself, there are distinctions. American relations with the UK are of a different order from those with any other nation. The financial communities, for example, remained close throughout the twentieth century. On the other hand, the trading communities have frequently been great rivals. At the officials level, the US saw Britain as a great rival during the whole period from 1900 to at least 1947; thereafter she gradually took on the colouration of a dependent, a position highlighted if one looks at episodes such as the 1949 devaluation, the Suez crisis, the fight to maintain the pound during the 1960s, or the 1976 IMF crisis.

American relations with, for example, France and Germany, have been very different. For a good part of the period, Germany was either an enemy, as during both of the world wars, or a basket case, such as during the Dawes negotiations in 1924 or during the immediate post-Second World War years. Germany's economic miracle ad subsequent economic power have meant that Germany could share in the burden of supporting NATO, for example, but she has become increasingly difficult to push around, and lately the American Governent has sometimes found this hard to cope with.

Nevertheless, Germany since 1945 has never denied the US the leadership role it has craved. The same cannot be caid for France, which has never acknowledged tha the US had any right to tell it what to do. France in her weakness suffered from American decisions during the inter-war period, such as over the Ruhr, and there is reason to suspect that postwar French politicians - in particular de Gaulle - determined never to be in this position again. …

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