Epilogue Return of the Morgans
It is well not to cry for the Morgans.
Though permanently dethroned by the New Deal, they were able to make a comeback by the late
1930s.
The great thrust for economic nationalism had subsided and the Morgans were able to
begin to work again for stabilization of exchange rates.
In the fall of 1936, the United States entered into a tripartite agreement with Great Britain
and France, the three countries agreeing not exactly on fixed exchange rates, but on maneuvering
to support each other's exchanges at least within any given 24-hour period.
Soon, the agreement, which was to last until World War II, was expanded to include Belgium,
Holland and Switzerland.
As the nations moved toward World War II, the Morgans, who had long been closely connected
with Britain and France, rose in importance in American foreign policy, while the Rockefellers,
who had little connection with Britain and France and had patent agreements with IG Farben
in Germany, fell in relative strength.
Secretary of State Cordell Hall, a close, longtime friend of FDR's roving ambassador
and Morgan man Norman H. Davis took the lead in exerting pressure against Germany for its bilateral rather than multilateral trade agreements, and for its exchange controls, all put in place to defend a chronically overvalued mark.
As the United States prepared to enter World War II, it made its economic war aims brutally simple.
The Ending of the Economic and Monetary Nationalism of the 1930s and their replacement by a new
international economic order based upon the dollar instead of the pound.
In the trade area, this meant vigorous U.S. promotion of exports and the reduction of
tariffs and quotas against American products, the so-called, quote, open door for American
in Commerce and Investments, and in the monetary sphere, it meant the breakup of national currency
blocks and the restoration of multilateral exchanges with fixed parities based upon the
dollar.
Even as the United States prepared to enter the war to save Britain, its continuing conflict
with the British proclivity for exchange controls and an imperial preference block remained unsolved.
The resolution of the problem came after lengthy negotiations throughout World War II, culminating
in the Bretton Woods Agreement in July 1944.
Basically, the agreement was a compromise in which the United States won the main point,
a new, multilateral world of fixed exchange rates of currencies based on the dollar, while
the Americans accepted the British Keynesian insistence on jointly promoting permanent
Inflationary Policies to Ensure Full Employment The United States had achieved the objective
expressed by Secretary Morgenthau, to move the financial center of the world from London
to the United States Treasury.
It is no wonder that, in January 1945, Lamar Fleming Jr., President of Anderson, Clayton
and Company, the world's largest cotton export brokers, could write to his longtime colleague
and boss William L. Clayton that the, quote, British Empire and British international influence
is a myth already, end quote.
The United States would soon become the protector of Britain against the emerging Russian landmass,
prophesies Fleming, and this would mean, quote, the absorption into the American Empire
of the Parts of the British Empire, which we will be willing to accept."
The dominant role in the critical wartime negotiations leading up to Brenton Woods was played not
by the State Department, but secretly by the Council of Foreign Relations, or CFR, a highly
influential organization of businessmen and experts set up by the Morgans after World
War I to promote an internationalist foreign political and economic policy.
Private study groups set up by the CFR intermeshed and virtually dictated to parallel study groups
established by the sometimes reluctant Department of State.
President of the CFR from 1936 until 1944 and director of this effort was none other
than Norman Davis, long-time Morgan affiliate and disciple of Morgan partner Henry P. Davison.
The Morgans, indeed, were back.
During the war, many Morgan-oriented men who had strongly opposed the economic nationalism
of the early New Deal happily came back to help run the World War II and post-war version
of the New Era.
Lewis W. Douglas, Dean Acheson, who had left the New Deal because of its radical monetary
measures, was back as Assistant Secretary of State for Monetary Affairs.
Acheson's mentor, Henry L. Stimson, was Secretary of War, and Stimson's other disciple, John
J. McCloy, in effect ran the war effort as his Deputy Secretary.
And when the Aileen Cordell Hull retired in late 1944, he was replaced as Secretary of
State by Edward Stettinius, son of a Morgan partner and himself former President of Morgan-dominated
United States Steel.
After World War II, the Morgans were content to slide into a new role as junior partner
to the Rockefellers.
The new prominence of oil made the Rockefellers the dominant force in the political and financial
Eastern establishment.
The Rockefellers assumed control of the Council of Foreign Relations, the entire shift being
neatly symbolized by the new post-war role of John J. McCloy, who was to serve as chairman
of the Council of Foreign Relations, of the Rockefeller Foundation, and of the Rockefeller
flagship bank, the Chase National Bank.
The old verities and financial group conflicts of the pre-World War II era had disappeared
and had been transformed into a new world.