The Korean War:
United States Reassesses the Third World

excerpted from the book

Confronting the Third World

United States Foreign Policy 1945-1980

by Gabriel Kolko

Pantheon Books,1988

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The global context from late 1949 until the outbreak of the Korean War the following June, especially Russia's explosion of an atomic bomb in August 1949 and the final Communist triumph in China, had deeply disturbed the Truman Administration, and it authorized the National Security Council to prepare a fundamental review of its policies in order to close the growing disparity between its international objectives and the military and political resources it had to attain them. That search for remedies culminated in the top secret NSC-68 report in April 1950, though the quest ultimately was never to end because the basic contradiction the United States faced, and refused to acknowledge, was that its goals inherently outstripped its capabilities.

... NSC-68, which had recommended more than doubling military spending and "rolling back" communism in Eastern Europe, was the beginning of the vertiginous growth in outlays that the Korean War made possible. Indirectly, the economic consequences of this trend to U.S. relations with the Third World proved far-reaching within only a few years. Its immediate profound impact on the American economy required the Eisenhower Administration to make critical strategy and policy changes. The effort to correlate policy and costs always defines possible courses of action, and the Korean War revealed that there was a serious fiscal constraint on U.S. behavior. In Vietnam this was later to prove decisive.

NSC-68 and Korea caused U.S. military spending to increase almost four times between fiscal 1950 and 1953, while inflation in 1951 was over three times the 1950 rate and the federal deficit in fiscal 1953 shot up to $6.5 billion-an enormous sum for the postwar era until then. The Republican Party castigated these deficits during the presidential campaign and upon coming to power immediately embarked on the "New Look" policy, cutting military spending by $5 billion each of the next two years and reducing the armed forces by a million people.

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There was a perfect continuity between the Truman and Eisenhower administrations in their definition of U.S. objectives and interpretations of the nature of changes taking place in the world and their relationship to Soviet actions and power. Both privately and publicly, each attributed to the Russians a transcendent ability to shape events in the most remote countries, and even where they did not initiate them they almost invariably knew how to exploit them, so that where Communists were not important, other groups could serve Soviet interests whether or not they intended to do so. Russia "seeks world rule through the domination of all governments by the International Communist Party," as John Foster Dulles typically put it in 1957.4 Such conspiracies included "extreme nationalism as one of its tools," he reminded conservative Latin Americans. And he found their alleged ability "to get control of mass movements" uncanny. He was convinced, even when as in Guatemala there was "never . . . proof . . . of any contact," Moscow nonetheless exercised a clandestine presence there. The occasional effort of his brother Allen, the head of the CIA, to discourage attributing cosmic powers to the Soviets lest it also demoralize America's confidence in its ability to relate to the world, had no impact.

The risk of such a paranoid vision was that it made almost any significant change unfavorable to U.S. interests a cause for concern in a period where basic change itself, for an enormous diversity of reasons, was the only thing that was certain in the Third World. And since finite funds and other priorities still had to be considered, new and more effective, but above all cheaper, means had to be devised to cope with a turbulent human condition from which an almost endless number of challenges might arise to confront the United States. The Eisenhower Administration sought to face this dilemma in ingenious new ways.

It was integral to the New Look doctrine that although the United States was to use its firepower and technology in future conflicts, it would depend also on its local allies to supply most of the manpower. And to the extent that it was to bank on local surrogates it was now compelled, to an unprecedented extent, also to link its own interests and future to the stability, integrity, and destiny of numerous Third World regimes, thereby risking loss of control over its priorities. America's reliance on local armies required it to increase their size, and it was to strengthen the objective position of the military in numerous states, thereby deeply affecting their social dynamics and political structures-and potentially compounding its own future problems. American power, to some crucial extent, was in the process of becoming no stronger than the critical foreign surrogates on which it was counting. No one in high places in Washington considered these risks, and, indeed, it was Kennan's , encouragement of repression in 1950-"harsh government repression may be the only answer"-that soon became typical of official sentiment.

Annual military aid, nearly all outright grants, during the Eisenhower years grew four times compared to the 1949-52 period in Latin America; increased almost as much in East Asia; and began for the first time, albeit a relatively small sum, in Africa. Such a strengthening of officers in local politics was privately always acknowledged as much a fact of life, and an increasingly desirable one, under Eisenhower as it had been under Truman. "We were putting up some money here for hardware," Dulles observed in regard to Egypt the very first week he was in office, ". . . in the hopes it would keep a particular fellow [Nasser] in power and if in power [we] would get something else out of it." Vital contacts were made, as well, by training foreign officers in the United States and by sending missions to maintain foreign military forces, even in many nations whose political leadership was hostile toward the United States-a point that caused some tension with Congress, for example, in Guatemala early in 1954 when the "CIA feels," as Dulles told a potential critic, "we have gotten advantages out of it." If this increasing reliance on the potentially most repressive and least democratic element throughout the Third World flew in the face of America's public professions, no one in Washington's highest levels had any illusions or qualms about it. "One cannot explain everything to our own people," Dulles informed Richard Nixon in April 1954 about the facts of politics, "as it also explains things to our enemies."

With such growing military ties came an impulse to create bases and formal regional alliances to cement and institutionalize the global military network on which the United States was increasingly depending. And a conscious assumption of this system, as Dulles was to acknowledge explicitly, was that were there to be a relaxation of Cold War tensions, "a feeling of need in the face of danger" would end and "The Free World's efforts would rapidly decline.... There would be what seems to be a great danger-a tendency to fall apart." Fear had a crucial role in binding together the alliances.

As important as the United States' dependence on officers and armies became, it would be an error to minimize the role of other, relatively less violent solutions, or the Eisenhower Administration's creativity in its efforts "to develop techniques" to neutralize Communists in the Third World." The difficulty in using armies is that most of the problems Third World states had to confront required a much lower level of violence, and a number of major Latin American nations began asking for training in police methods no later than 1953. That the police might serve as well, or even better, than the army in dealing with internal opposition of every sort was obvious. A small CIA course for foreign police was started in 1952, but beginning in 1955, using the

Agency for International Development as a cover, it sent "public safety missions" to thirty-eight nations over the next seven years. The explicit premise of this growing, permanent program was that the police "first detect discontent among people" and "should serve as one of the major means by which the government assures itself of acceptance by the majority.... effective policing is like 'preventive medicine.' The police can deal with threats to internal order in their formative states. Should they not be prepared to do this, then 'major surgery' may be required in the sense that considerable force would be needed to redress those threats. This action is painful and expensive and often disruptive in itself."

It was precisely because of this desire to encourage lower levels of violence to forestall a need to use the local regular military, much less American troops, that the ClA's potential as a major arm was quickly brought to fruition: under the Eisenhower Administration. Capable of exploiting a huge variety of techniques, it was to become the most flexible instrument of U.S. interventions in the Third World, all the more useful because it was extremely cheap and because its reliance on secrecy had the political asset of "plausible deniability," to American citizens as well as foreign governments, should any of its actions be uncovered. If the premises underlying the ClA's activity and support for local police simplified greatly the nature of social movements in the world, the institutional sources of their conduct, and what is pemmanently decisive in dealing with them, it nonetheless possessed an incalculable short-run potential for eliminating enemies and helping erstwhile friends for as long as they could perform a useful function. No important American leaders reflected on how the very ease of relying on these new forms of intervention would increase immeasurably the extent to which they might occur, both undermining the possibilities for a less traumatic social evolution in many nations and demanding increased American efforts to save politicians and parties in power by virtue of U.S. aid and incapable of remaining there without more of it. Just as this approach averted the need for massive violence immediately, CIA efforts or more aggressive police also protracted the lives of rotten regimes and thereby intensified social diseases and political instability that might eventually require the very medicine of massive U.S. interventions they were intended to avoid using. What would the United States do once the ClA's actions failed or proved insufficient? Only events over the coming decades would reveal the answer.

The CIA was created in 1947 as part of the fundamental revamping of the military services that replaced the War and Navy departments with the Defense Department. Its mandate was completely open-ended and included "such other functions" as the NSC assigned it. A covert action wing, the "clandestine service," was soon added and from 1949 to 1952 was assigned the Truman Administration's ambitious commitment to the "rollback" of Communism and had its size expanded twenty times, to nearly six thousand persons. Action-oriented and often operating in Communist nations, under the Truman Administration it still avoided high-risk political destabilization, assassinations, and the like, restricting itself to tasks like espionage, psychological warfare activities, rigging elections, or building anti-Communist unions. Given Eisenhower's passionate desire to avoid a suicidal nuclear confrontation as well his deep skepticism toward the efficacy of expensive limited wars, it was inevitable that the New Look's most original innovation would be to exploit the CIA much more aggressively.

Headed by Allen Dulles, who was very close to his brother John, the CIA flourished under the tight control of the president. Over the next eight years the ClA's "clandestine service" added two thousand members and absorbed the larger share of the agency's budget. It was also to become one of the most important instruments in the U.S. relationship to the Third World throughout I the Eisenhower period.

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The emergence of raw materials as a source of deepening U.S. anxiety after 1950 was the culmination of its growing dependency on imports that began when it became a net importer of raw materials in the 1920s, which even then deeply colored its policies toward the Third World. Excluding gold and iron the United States imported only 5 percent of its total consumption of metals in the 1920s but 38 percent in 1940-49 and 48 percent the following decade This deficiency was partly due to the depletion of U.S. sources, but more important was the fact that the rise of modern technology is intimately linked to metals that the United States possesses only in small quantities or, increasingly, not at all. While the bulk or even the dollar value of such metals is not great compared to iron, their qualitative importance is so large that no nation can build many advanced industries without access to them. Even by 1930 the United States was importing 64 percent of its bauxite and copper, and during World War Two, twenty-seven of the sixty minerals it imported came entirely from foreign suppliers. A modem iron and steel industry must have manganese, nickel, and tin, not to mention many other metals, which by 1956-60 were almost entirely imported. Indeed, by that period even a quarter of the U.S. consumption of iron ore was imported. With time, the sheer significance of such materials to electronics, military equipment of every sort, and the sinews of industrialism was to grow-and with it the need for stable sources of supply. Even dollar comparisons are misleading, for in 1945-49 the U.S. outlay for raw materials imports, adjusted for inflation, was only slightly greater than in 1925-29. It was the value of the output of entire industries that were dependent on them that rose enormously. Yet in 1948 the United States, as a share of the world's total consumption, utilized 49 percent of its copper, 47 percent of its lead, 43 percent of its zinc, and 52 percent of its steel.

Access to imported raw materials was increasingly essential to the survival of the U.S. economy as it had developed after 1920 and to its dominant role in the world from 1945 onward. And this meant that the Third World's qualitative significance was also increasing, for most of the critical U.S. imports came from there. Excluding Canada, the Western Hemisphere was the greatest supplier of vital metals (gold excepted) to the United States, and while Africa dominated in a far smaller number of metals, all were critical, and no alternative sources could be found easily, if at all, for most of them. While Southeast and South Asia were relatively the least significant for the United States, Japan literally could not survive as an American ally without their exports. This crucial triangular linkage, as well as the direct dependence of all of its allies on sufficient supplies, also strongly influenced American raw materials policies, if only because it affected the capacity of Europe to reconstruct with less U.S. aid by earning dollars from their colonial domination over many of these sources.

Washington's goal of global economic integration, therefore, was not merely a question of opening channels for the export of investment funds abroad, although it hoped to do so both for the sake of profit and to link the economic and political development of the poor nations to that of the United States and richer countries. Most vital was the task of assuring that sufficient supplies of essential imports were available to American users, which frequently were the same companies that invested in the Third World-for profit, of course, but also to guarantee adequate output so they could sell finished products to American and foreign consumers.

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With the outbreak of the Korean War, what was a serious but relatively subdued U.S. concern became a major national obsession as world prices for all metals by 1952 had risen 39 percent over 1950, while the terms of trade swung sharply in favor of the underdeveloped areas in 1951, and not until 1957 were they again biased in favor of the industrial nations. In a skyrocketing world market, the United States generally outflanked its European allies in obtaining scarce supplies now essential both to their economic recovery and rearmament, creating such serious tensions with Britain and shortages for much of Western Europe that in June 1951 a mechanism for controlling the allocation and price of twelve of the most vital materials was created

The need for more supplies from Third World sources also gave renewed impetus to Point Four, and in January 1951 the President's Materials Policy Commission, headed by CBS chairman William S. Paley, assisted by a mining industry and pro-business board, began an exhaustive review of the United States' raw materials needs. Its massive report focused on the nation's structural deficit and its import dependency and predicted that scarcity would worsen over future decades. It stressed the importance of creating conditions for greatly expanded U.S. private investment abroad, including active government aid, tax shields, insurance, and the like. The commission heightened government and business awareness of the Third World's vital importance in satisfying American needs. And by pointing out that Europe's demand for raw materials was increasing more rapidly than U.S. demand, it also implicitly raised the issue of how the colonial world's resources would be divided. "I do not believe this country can survive," W. Averell Harriman one of the postwar era's most influential men, warned a Senate committee early in 1952, "if the sources of the raw materials are in the hands of unfriendly people who are determined to destroy us." In a private memo to Truman he surveyed U.S. interests in the Third World, and in no region did he think it could afford to be aloof-with raw materials providing the only common justification for involvement in all of them. In 1954 a Senate committee reviewing these questions concluded that "To a very dangerous extent, the vital security of this Nation is in serious jeopardy."

This raw materials fever continued as long as there were shortages and prices were high, and not until 1957 did it subside. But a greater awareness of its importance than earlier remained. Such a mood created a general backdrop when the United States confronted its specific regional problems during this decade, and if it by no means explains all the dimensions of its diverse policies it nonetheless is integral to any serious explanation of the sources of its conduct throughout the Third World.

The Middle East: From Collaboration to Control

... by l950 the Near East's oil reserves were already equivalent to all the rest in the world combined and double those in the United States-and this vast wealth was largely in British concessions. "Control of this source of energy," the State Department's experts advised in September, "important in peace and war, is a desirable goal in itself ... The U.S. government should seek maximum development in U.S. owned concessions."

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All that Britain had left of major significance in the Middle East after the Egyptian coup was its claim to the control of the Iranian oil fields, and by 1951 even this had become tenuous. Indeed, from Britain's viewpoint it was soon to become apparent that the United States was intent on pushing it aside there as well, though in fact U.S. policy and actions were exceedingly convoluted because in that extremely complex local environment the Truman Administration sought to apply its increasingly schizophrenic policy of both fostering Britain's military presence and supplanting its influence in the region.

Iran after 1945 was a thoroughly anti-Russian state, and the young Shah was committed to encouraging a greatly increased U.S. role in the area both to offset British and Soviet strength and to modernize the army, on which his power depended. More important, Iran was going through a deep political and economic crisis that pitted the Shah against rising urban middle-class elements who also wished rather vaguely to modernize Iran along conventional Western bourgeois lines. Whatever their differences, both tendencies agreed that money was essential to bail Iran out of its nearly bankrupt condition and that the Anglo-lranian Oil Company (AIOC), which had the concession on its oil and was owned by the British Admiralty, should provide much more of it. This national consensus transcended the immediate political rivalries in the long run, but after 1949 politics obscured this reality as factions sought to exploit the nationalist euphoria the oil issue provoked. From the U.S. viewpoint, however, both sides were anti-Communist, and the only real issue initially was the future of British power-which, in any event, it increasingly saw as in eclipse.

When the U.S. oil firms during 1950 agreed to give Saudi Arabia a fifty-fifty split on its oil, American officials had predicted that the Iranians, who had been negotiating terms with the AIOC since mid-1949, would increase their demands also. A coalition of nationalist groups in the Majlis (parliament), led by Dr. Mohammed Mossadegh, throughout 1950 made oil the all-consuming issue in Iranian politics-one the wily, opportunistic Mossadegh was prepared to exploit. He was a European-educated, aristocratic landlord who was both an anti-Communist and devoid of any social reform program. The fact that he wished to aid mainly the urban middle classes also meant that Mossadegh had no mass base unless he could appeal to a nationalism whose main obsession was English domination. It was for good reason that Americans on the scene thought he was capable of playing a useful role. By November 1950, when Mossadegh's committee in the Majlis called for nationalization of the AIOC, the State Department was furious with the British for ignoring its appeals to make concessions and defuse the issue. When the British in early 1951 finally agreed to fifty-fifty to forestall nationalization, it was too late, and after the assassination of the moderate prime minister on March 7 the Majlis proceeded to nationalize the AIOC, the next month electing Mossadegh prime minister.

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For the new Republican Administration the question of Iran posed two challenges. The most obvious one, to which most attention has been paid, was the nature of the Mossadegh regime, which was in early 1953 both politically and economically in a grave internal crisis. By that time he had managed to alienate many of his earlier middle-class followers and, isolated, he did indeed turn to the Tudeh for support in the streets-where a great deal of activity was now occurring. Mossadegh was unwilling to compromise with the British but unable to bring them to heel, so the Eisenhower Administration, which favored an activist CIA policy of preventive measures against deviant regimes, had no hesitation tentatively to authorize a joint project with the British to overthrow Mossadegh.

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While plotting for a possible CIA coup went forward, the United States and Britain continued to disagree on the same Iranian problems that had separated them under the Democrats, and for exactly the same reasons. The renewal of aid, sending U.S. technicians and equipment to maintain Iran's refineries to supply their new Japanese and Italian customers-all these possibilities kept the Anglo-Americans divided until June 22, when Washington gave the coup scheme its final approval. The decision to act was based on the fact that Mossadegh in his bid to take total power was losing followers, had alienated deeply the military, and in order to create leverage for his new goals had set loose street mobs whom he could not, ultimately, control.

The coup itself succeeded not because of the ClA's cunning but because Mossadegh had managed to alienate most of those with power while remaining incapable of organizing those, principally the masses, who had none. For while the relatively small Tudeh could bring numbers out on the streets, it was unable to defend a demagogic aristocrat who had no social program. The coup scenario began on August 12 when the Shah, who was already on his way out of the country, issued a decree firing Mossadegh, which merely led to the arrest of a few of the Shah's supporters. While Mossadegh's forces hesitated, the army spontaneously took over the Tehran streets in a pro-Shah coup of its own even as the CIA was ordering its plan aborted as a failure. The Mossadegh regime had been a house of cards, likely soon to fall in any case, and when the CIA reactivated its operation the demise of Mossadegh was a matter of a few days-he ending in jail while the Tudeh's leaders were rounded up for execution or prison.

... the Iranians ... fragile interlude with parliamentary politics had come to an end, with an absolute monarchy emerging in its place. The Americans, for their part, now had political hegemony in Iran and a large interest in its oil. A major shift in the overall balance of power in the region had occurred.

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At the end of 1956 both Dulles and Eisenhower perceived the magnitude of the new power equation in the Middle East, and)without consulting the experts in the State Department, the Pentagon, or the CIA, who later deemed it an incomprehensible error, decided to proclaim the so-called Eisenhower Doctrine. During January 1957 the president discussed it with members of Congress and then asked them to pass a joint resolution. In it the president was authorized to assist nations of the region economically as well as to use U.S. armed forces "to secure and protect the territorial integrity" of any nation requesting help "against overt armed aggression from any nation controlled by international communism." "The United States appears as the self-appointed policeman and patron of the Middle East," as a staunch defender of its mission explained it. The problem, which greatly embarrassed those in Washington dealing with the region, was that the resolution was aimed at Nasser, who was not by any criterion a Communist.

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The problem which the Administration soon acknowledged in private was that the complexity of Arab politics, whether within each nation or among them, transcended any outside state's capacity to master, and that the United States might be just as much a victim of the region's social and political dynamics as the British had been. It was obvious, too, that while Nasser's influence had risen, largely because British and American actions made him the region's only hero, he too was incapable of dominating the area's political currents. This was graphically revealed when Egypt's relations with Iraq began to deteriorate dramatically, so that on March 12, 1959, Nasser denounced General Abdul Karim Kassim's regime as "a Communist reign of terror." Kassim, as the CIA itself admitted publicly in April 1959, was surely not a Communist; he refused to allow Communists in the government, and Russia itself seemed to have no control over them and was urging Kassim, who was now demanding economic and military aid Moscow could scarcely afford, to pursue a much more cautious line on oil nationalization than the local Communists were advocating. Iraq emerged as one of many national political mutations in the Arab world, each with its specific character and originality and quite beyond the control of either the United States or the Soviet Union, much less Nasser, who was merely the first and most charismatic leader of the army-backed new middle classes coming to power in the Arab world. All the two superpowers could be certain of doing was to pay handsomely for their pretensions to meddle into the affairs of the most mercurial, and dangerous, of all the Third World's regions as the Arab states began with mounting success to play one against the other while pursuing their own independent foreign policies.

The confusion and folly of its position soon compelled the Eisenhower Administration to return discreetly to its earlier strategy of treating Nasser as a useful, potentially cooperative force in the region. In March 1958 he intensified his repression against his own Communists, and on July I the first U.S. aid agreement since Suez was signed, for a mere eight million dollars. By the time the Eisenhower Administration left office, however, Nasser could boast of having received three hundred million dollars in American aid from it. Nothing more revealed the sheer pragmatism and opportunism that guided American policy throughout the 1 950s, for Nasser was in fact a barrier to a Communist movement that loomed immeasurably larger in American imaginations than in reality. He had served Washington's purposes well against Britain. If he was a frustration to its mastery of the politics of the

region, he was nonetheless only one of many in a part of the world in which instability and politics were synonymous. The Administration sensed full well that it could go no farther in the Middle East after 1958, despite the elimination of British interests, and that the better part of wisdom was to exploit the handsome advantages it had gained for its oil companies-and hope for the best.

Latin America and the Challenge to U.S. Hegemony

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American policymakers understood fully the economic and political implications of the web of economic ties that bound the United States to its southern neighbors, and the Truman and Eisenhower administrations were of one mind on them. To attempt to substitute other sources of raw materials for Latin supplies, a State Department study concluded in October 1953, would double their cost to the United States, and loss of the hemisphere's output would be "a major security blow to the U.S." Every NSC policy statement during the decade accepted this premise and argued that "adequate production . . . and access by the United States to . . . raw materials [was] essential to U.S. security." In vital ways all of its policies in the region, despite some variations, were to revolve around this central theme.

As a result, we see Washington's litany in both its repetitive public statements and closed deliberations on private investment's crucial, essential role in developing Latin America's economies. And these ceaseless homilies not only proclaimed the absolute need to keep the door open to U.S. investors but also for local businessmen to be allowed full rein within the framework of systems that were capitalist in the classic sense of minimum government intervention; for Washington also saw the region as a giant arena for the application of its economic theories, the one place in the Third World where they could be implemented in a pure form without expedient concessions it was compelled to tolerate elsewhere because of the putative menace of the Left or the Soviet Union. And this vision, while ideological, was also eminently practical. For it was designed to guarantee the United States, both as a nation and as part of a hemispheric economy that integrated local private entrepreneurs, a vehicle for its interests in the form of a system that gave the United States access to an immensely rich continent, both greatly strengthening its prosperity at home and its ability to apply its power abroad.

Political difficulties that arose in the region were to a critical extent a by-product of the fact, as Assistant Secretary of State John M. Cabot phrased it in December 1953, that "our problems in our inter-American relations are largely economic, and they largely boil down to the question of how we are going to cooperate in the economic sphere to our mutual benefit." The United States did not deny the legal right of a nation to expropriate U.S. firms if it paid "prompt, adequate, and just compensation," Cabot put it starkly, but such nationalization was equivalent to the "undeniable sovereign right to declare war on any other nation.... the question of the treatment of foreign capital is not essentially one of right.... it is a question of what is fair, what is wise, what is practical, what is in the national interest, what will preserve the international comity." Six months later this brutal definition found its first expression in the United States-organized overthrow of the Guatemala government.

For it was also the logic of the United States' hegemonic vision that, as an NSC report put it, "the self-interest of the Latin American countries is generally best served by cooperating with us." And in the context of the entire decade, by far the largest obstacle to U.S. attainment of this relationship came not from the Left but from those nationalist political coalitions on the Right and in the Center that actually controlled state power and that had begun to disturb Washington after World War Two. For the U.S. vision was not based simply on preserving private property as the central institution of the area's nations, since that was also the goal of the diverse nationalist parties, but to create an integrated hemispheric economy to which the United States had essentially uninhibited access. Given the fact that the Left held little power throughout the decade, the primary issue was one of rival capitalisms- locally based as opposed to Yankee-dominated. In practical terms it was the difference between economic development oriented to the export of raw materials or toward diversified domestic economic growth and consumption,

Nationalism in Latin America assumed numerous forms, but the two most important expressions of it, in Argentina and Brazil, had a clearly elitist, largely urban leadership that in turn mobilized with populist slogans an essentially powerless mass base to resist challenges to it from the traditional oligarchies, who produced for the export market and whom they were displacing. Free trade had been the oligarchy's ideology, and the import-substitution strategies the Vargas regime in Brazil and Peron in Argentina promulgated required far less emphasis on exports in order to industrialize their nations and, at least for the middle class, expand the domestic market. Any latent radicalism from the masses, who appreciated the employment that came from these developments, was submerged in government-dominated unions, which became crucial vehicles for manipulating the people. Such nationalist strategies sponsored state-controlled sectors, but they also stimulated the growth of a national bourgeoisie that was symbiotic on the new economic structures-and eager to perpetuate them. In the many variations of such economies that emerged, sections of the military could often be found on the nationalist side. Anti-Yankee sentiment was both a by-product and a cause of the diverse nationalist movements, and it was on this issue alone that the populist Right and the relatively much smaller Left shared a consensus.

This growing nationalism agitated greatly those in Washington charged with hemispheric responsibilities, and their concern rose with the nationalist tide. The Truman Administration began to link "the siren song of extreme nationalism" to Communist agitation after 1952, a theme its successor continued, but everyone also knew that while the Communists endorsed it, they were scarcely its cause. "To arrest the development of irresponsibility and extreme nationalism and their belief in their immunity from the exercise of United States power," in the words of an NSC report, increasingly became Washington's main policy objective as it concluded that "There is a trend in Latin America toward nationalistic regimes maintained in large part by appeals to the masses...."

But since these troublesome governments were also extremely anti-Communist, they supported the United States quite loyally in the United Nations on nonhemispheric questions, in return for which they frequently demanded economic concessions in the forms of aid, loans, and much else, greatly annoying Washington in the process-which gave them very little and insisted they place their confidence in U.S. investors.

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Even as it advocated an open door outside the hemisphere, the United States renewed its postwar campaign to suppress not just Communism and nationalism but to prevent a restoration of European influence as well, an undertaking that was the culmination of its historic pretensions since the Monroe Doctrine in 1823 to dominate the hemisphere. Europe's lessened trade role was hardly sufficient for the United States, and it persisted throughout the 1950s with its earlier policy of attempting to control weapons supplies for Latin American armies and the training of its officer corps.

This effort was hampered after the outbreak of the Korean War because of the enormous demand for arms elsewhere in the world. Until then the Latins had received mainly surplus U.S. arms, and after June 1950 their low-priority assignment for future supplies once again raised the threat of European sales and training missions. The only way to fulfill the goal of standardizing Latin armies to U.S. weapons and to close off the hemisphere, the NSC knew, was to divert more to them. Yet this was not done, and Latin officers were both irritated and alienated. Despite the initiation of a modest military aid program in mid-1952, the Latin armies wanted yet more arms, and purchases of far cheaper European supplies seemed only a matter of time. By 1956, much to the Pentagon's consternation, they had begun to buy weapons primarily from the British but also from the French, Canadians, Swedes, and Italians. For reasons of goodwill as well as keeping European missions away from the politically crucial officer class, the NSC in September 1956 decided to intensify its struggle to control the hemisphere's arms flow, employing cheap credits and flexible pricing to win back the monopoly, for profits were not its concern; they largely failed in this effort. In this domain, too, events in the region had begun to escape Washington's mastery.

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In the ... case of Guatemala ... its poverty was the result of the concentration of over half the cultivable land in 0.3 percent of the farms, with United Fruit the largest of these. Export agriculture concentrated in coffee and bananas also meant less production of food for local consumption. In 1944 a revolution led by young army officers under Juan Jose Arevalo, who the next year won the first democratic election in the nation's history, proposed to ameliorate the country's miseries. This typical group of middle-class officers was, like many others in the hemisphere, anti-United States and for mild but long overdue reforms. Arevalo was anti-Marxist but also a committed reformer and idealist. But labor codes, the right of workers to organize, and minimum-wage laws greatly disturbed the U.S. firms that controlled the export sectors, transport, and utilities, and partial land reforms in 1948 deepened their hostility.

In March 1951 Jacobo Arbenz Guzman, an officer who had been defense minister, succeeded Arevalo and embarked on a comprehensive land reform program that directly struck at United Fruit interests. Farms under 100 hectares were exempt from reform, those between 100 and 300 hectares were excluded if they were at least two-thirds cultivated, and those over that were not affected only if fully cultivated. The measure was directed against those companies, like United Fruit, that left vast tracts of prime land fallow for future exploitation. Worse yet, compensation to those expropriated was to be calculated on the basis of their land's declared taxable value, which United Fruit and others had reported at far lower than its real worth in order to avoid taxes. The land was given to some 100,000 peasant families, who eventually obtained about 1.5 million acres, 234,000 of which had belonged to United Fruit. Compared to Mexico, Taiwan, and Japan, the reform was a modest one. But the problem was that it affected U.S. companies, whose wrath knew no limits and who began actively to lobby in Washington for the overthrow of the government.

In mid-1952 the CIA and United Fruit, with cooperation from the Somoza regime in Nicaragua, Trujillo in the Dominican Republic, and Perez Jimenez in Venezuela-the three most reactionary states in the hemisphere-almost implemented a plan to overthrow the Arbenz government. But the plan was amateurishly organized, and the State Department convinced Truman to abort the well-advanced scheme, leaving the problem to the Eisenhower Administration.

Every writer with access to the essential documents has shown that there was an intricate web of personal and political relations between United Fruit and many of the Republican and Democratic officials dealing with the Guatemala issue, the most direct being the former president of United Fruit's brother John M. Cabot, who was Eisenhower's assistant secretary of state for Latin America. That United Fruit mobilized a highly effective lobby of former New Dealers, liberals, and the establishment press is an excellent illustration of how pressure groups have an impact, but given the context of official U.S concerns and priorities, which identified corporate interests with its own, the most one can say is that while United's efforts probably advanced the timing of the U.S. overthrow of Guatemala's democratic, reformist government, it certainly would have occurred in due course in any case. For Guatemala was systematically violating all the economic criteria for the hemisphere that the Democratic and Republican consensus had articulated since 1945, and it was a dangerous precedent. Most decisive, however, was the fact that it was extremely easy to overthrow because the army, while loyal to Arbenz himself, also had many senior officers personally linked to the oligarchy and hostile to land reform. The military still retained the balance of power, and Arbenz had been neither able nor willing to alter its traditional composition or views. The United States, fully aware of this, kept a training mission with it throughout this period to maintain vital contacts.

The principle of overthrowing the Arbenz government received the Eisenhower Administration's blessing immediately upon coming to office, and from this time onward it mounted a vast, sustained public-relations campaign to convince the U.S. public and the world that Guatemala had been taken over by Communists. As before, United Fruit was involved in every phase of the Administration's efforts, yet they remained a useful convenience rather than a principal cause. But neither Dulles nor Eisenhower wanted a mere coup, which could have been accomplished as readily in early 1953 as in June 1954; rather, they sought to exploit the occasion to inhibit nationalists in the other nations of the hemisphere, many of whom had supporters and programs comparable to those in Guatemala, and to deepen U.S. political control of the Organization of American States in order better to be able to utilize it in the future. Given the actual political situation within Guatemala and the army's monopoly of weapons, the United States could be patient.

The NSC decided in March 1953 that it would operate through the OAS to avoid the appearance of taking unilateral measures or abandoning the Good Neighbor policy, which would only have fanned anti-Yankee feelings in the hemisphere. Had the OAS not given the United States the two-thirds required vote approving its action, however, it intended to act alone as a last resort. This opportunistic attitude toward the OAS's role continued for the next eight years. But it was not until the OAS conference in Caracas, Venezuela, in March 1954 that the Administration obtained the legal facade it thought essential, and after "two weeks of very intensive work," involving both threats and promises of aid, Dulles was able to get the OAS to pass a resolution, one that, he confessed, "was certainly not adopted with genuine enthusiasm." It was also less than he had initially demanded. Most of the Latin nations regarded the Caracas declaration that "international communism" constituted intervention in the hemisphere, one requiring strong countermeasures, as "a pretext," as even Dulles admitted, "to permit American [U.S.] intervention in the internal affairs of other republics in the Hemisphere." Their real anxiety was linked to "the commercial and financial policies that the Administration was following in Latin America." Dulles's own broad interpretation of the Caracas resolution, which did not specifically mention Guatemala, was that it "was an extension of the Monroe Doctrine to include the concept of outlawing foreign ideologies in the American Republics."" Events over the next months were to confirm the fears of many Latin nations that it was precisely U.S. opposition to independent economic development that was behind its attack on Guatemala. In a sense the United States at Caracas had laid an all-encompassing foundation for confronting directly all those increasingly important reform and nationalist ideas in the region that challenged its hegemonic aspirations. Guatemala was but a major chapter in its larger struggle for hemispheric mastery.

Caracas gave the United States the legal facade it thought desirable, and it quickly proceeded to overthrow the Arbenz government. The label of "communism" it imposed on it was wholly contrived, though in the broader sense Arbenz's reformism was tantamount to the same thing insofar as U.S. interests were concerned. Arbenz himself, in the words of the later CIA-sponsored account of the entire episode, was "an enigma." Had he been a Communist, the army, which the United States never claimed was under any Communist influence whatsoever, would have overthrown him much earlier. Arbenz never made a Communist a cabinet minister, but he allowed them to work very hard for him at lower-level posts, particularly in education and in the land reform ministry, where they comprised under a tenth of its personnel. The Communists themselves, who never numbered more than four thousand, were deeply divided on how to deal with him, and the Party's most important leader and head of its labor union had several times argued for an end to the Party's support for an unconventional nationalist reformer like Arbenz. The Party had only four of fifty-one seats in the 1953-54 Congress's ruling coalition. Arbenz did not fear it because in the hope of influencing him they had largely abandoned their own ideology and organization. It was precisely for this reason, again to quote the CIA-sponsored postmortem, that "The events of the last week of the Arbenz regime showed that Communism in Guatemala had not developed into a successful popular movement.... the Communists had not found sufficient time to build a broad base or to sink their roots deeply." Notwithstanding its public statements, Washington never produced proof that Arbenz's government was Communist, and when dealing with Latin nations it never tried to. Privately, the United States admitted that it had never found evidence of any Soviet contacts with the Guatemala party.

The army, in fact, still retained the ultimate power over the nation's future, and Arbenz was an ex-officer who was rapidly exhausting the patience of its more conservative wing. His purchase of arms from Czechoslovakia in early 1954, which the United States used to corroborate the deliberate falsehoods it and United Fruit publicists had been producing, in reality showed Arbenz to be a wholly naive man. He had failed for years to obtain arms from the United States and Western Europe, and to purchase arms from a Soviet bloc nation created the worst of all possible worlds: it provided the United States with the propaganda it needed, and it gave weapons to the only force in the country able to remove him easily.

It was for this reason only that the chaotic ClA-controlled invasion to overthrow him, which began on June 14 as an opera bouffe by three hundred poorly equipped and poorly trained men, with three old bombers to exaggerate their strength, was to succeed within two weeks. Had he or the Communists been serious or important, the assault could easily have been liquidated, but Washington's strategy was to force Arbenz's army to cease being passive and to take over. After some hesitation, the army acceded to U.S. demands that they transfer all power to Castillo Armas, the leader of the invasion whom United Fruit had personally selected, and a new regime was installed. Neither Arbenz nor the Communists chose to fight.

The terror that followed was merciless: unions were banned, parties suspended, a majority of voters disenfranchised, and at least nine thousand persons arrested and an unknown number killed. The new regime abolished the post-1945 reform legislation, and United Fruit had its huge estates re turned. As the pre-1944 order was fully restored and the government sank into corruption, Guatemala became the leading example of the kind of hemisphere the United States sought to create.

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... the Eisenhower Administration privately reaffirmed its readiness to use covert or overt means against any nation warranting it, the mere fact that such efforts were also potentially embarrassing and exceedingly time-consuming compelled the Administration to rely also on other means - namely, greater support for congenial dictatorships.

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Dictators, an NSC estimate observed in mid-1954, "present themselves as guarantors of stability and order and of cooperation with the United States," while reformers believe the United States has a moral obligation to support them-taking U.S. ideological rhetoric at face value.'

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Arbenz's overthrow noted in his diary in February 1955, Dulles's "instructions are flat: do nothing to offend the dictators; they are the only people we can depend on." "Dulles had laid down the policy with vigor," a State Department official assured him.

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An international free trade system remained Washington's unwavering goal, despite its own growing deviations from it. "I think the principal divisive issue between the United States and Latin America today," a State

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The trend toward economically policing the Third World through so-called multilateral banks was well advanced by 1954, when U.S. officials understood that a nation wishing a loan had also to take "'house-in-order' actions to attract it." Export-lmport Bank and World Bank loans were consistently earmarked for countries "which have taken measures which would reasonably encourage private enterprise." As Eugene Black, the World Bank's president, explained it, "The desire for autarky will not be tempered until there is an awareness how, by underemphasizing exports, the leaders of these nations are prolonging the poverty of their people.... aid must be a means of promoting 'the right kinds of decisions' in terms of development. . . ." It was in this light that Milton Eisenhower and other U.S. officials defined the purpose of the IADB, which had the virtue that "if loan conditions were deemed to be intervention, at least it would be in a collective form and not intervention by the United States." The lADB's additional asset was that U.S. control of 41 percent of its votes allowed it to block any loan, which required a two-thirds vote for it, if it did not meet its standards. The bank's initial capital of one billion dollars of mainly non-U.S. funds was not significant in any case, given the magnitude of the challenges Latin America faced. The IADB was far too little, far too late, and it was more of the same policy in multilateral guise.

When President Eisenhower traveled to Latin America in early 1960, in response to the Cuban revolution's popularity and the growing hostility toward the United States, there was no possibility that his statements would waver from the strictures and goals that had characterized U.S. policy toward the region since 1945. Brazil's president had urged him to embark on a struggle against Castroism by stressing genuine economic development, yet Eisenhower lectured him and others on their obligation to oppose Castro under U.S. Ieadership, and he issued homilies on the need to create conditions that would attract U.S. private capital. The net effect was to deepen the regional leadership's orientation toward those autonomous economic strategies the United States so deplored.

That Washington's hegemonic objectives would generate a political response as well as an economic one, bringing it into conflict with much of Latin America after 1950, seemed, in retrospect, inevitable-and for Latin Americans necessary if they were ever to develop their nations. The extent to which the United States managed to alienate social classes who were also opposed to the Left was itself not surprising because its hemispheric objectives were so pervasively and aggressively economic. That its position produced such broad opposition was disagreeable to the United States but, ultimately, also incidental. If its economic goals and raw materials requirements were perfectly comprehensible, given the U.S. economy's specific needs, what its leaders could not anticipate was the extent to which their monomania would eventually force it to confront virtually all of the hemisphere's political forces committed to lifting the area out of the political and economic miasma that had so distorted its social development. Yet here, too, the United States was impervious to the immense human costs to the people of the hemisphere; far more crucial, it so welcomed and aided dictators in such an overt fashion as to intensify profoundly a general hatred toward it. To be anti-Yankee in thought and deed became a precondition of the region's emergence from its suffering and sloth.

Given all these circumstances, it was certain by 1960 that the United States could no longer continue to remain so oblivious to Latin America, and that the rising storm there would compel it soon to cope with the monumental political consequences of its past policies and greed.

Institutional Bases of the United States' Role in the Third World

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The capitalist credo that U.S. leaders applied consistently in dealing with the Third World was a reflection of the fact that America was preeminently an economic civilization, and all those who succeeded in it were products of its culture, absorbing its instinctive values and premises without reservations. Their identification of freedom of choice in economic affairs with freedom in "intellectual or spiritual life," as Dulles argued typically in May 1954, cannot be dismissed as merely conscious propaganda, for it was deeply and genuinely embedded in the minds of those who led America both politically and economically.' And that it was also a premise that aggrandized U.S. economic power abroad does not alter the fact that this beneficial reality was both a cause and an effect of its profound commitment to the deeply rooted traditional idea, as Eisenhower put it in January 1955, that "the United States holds forth the ideals of personal freedom, private property, individual enterprise, and open markets." What is unquestionable is that this overarching belief invariably led to ~ predictable policy conclusions that then had to be implemented, and that just , as invariably aided U.S. interests in the Third World at the same time. While there were many varieties of capitalism consistent with the anti-Communist politics the United States also sought to advance, what was axiomatic in the American credo was that the form of capitalism it advocated for the world was to be integrated in such a way that its businessmen played an essential part in it. Time and again it was ready to sacrifice the most effective way of opposing Communism in order to advance its own national interests. In this vital sense its world role was not simply one of resisting the Left but primarily of imposing its own domination.

Influencing the transformation of the Third World "to render its outcome at least compatible with Western values and vital interests," as a group of influential consultants put it, was the consistent keystone of U.S. efforts in the Third World after 1945.3 The extent to which the economic component of this mission predominated over all strategic and political considerations depended on the region, but only in parts of Asia did noneconomic factors eventually become equal to, or more significant than, material causes in American policy. Only by separating the importance of such determining elements by continents can we gain an accurate perspective of the diverse and changing sources of America's policies in the Third World as well as its objectives.

U.S. economic goals required that Third World nations avoid various forms of autarky and import substitution, and above all both welcome outside investors and forgo creating an important state economic sector. "A major task for U.S. foreign economic policy," a senior State Department policy group argued in May 1954, "is to get across to other countries an understanding of our conception of the role of government in economic affairs." Specifically, the "normal function of government . . . is to provide an environment in which private enterprise can flourish free from artificial restraints." It was this message, with its axiomatic corollary of free access for U.S. investors, that America carried to the world throughout this decade. In the UN as well as in the countless demarches of its officials, it never ceased to argue that "where private capital, both domestic and foreign, is encouraged, the nation's economic and political health and stability are strengthened."

This meant, as an International Cooperation Administration directive put it in September 1957 shortly after Congress had voted a new development loan fund, that it would "employ U.S. assistance to aid-receiving countries in such a way as will encourage the development of the private sectors of their economies." In effect, it was the constant U.S. assumption that the internal economic policies of many nations, but especially the major ones and above all in Latin America, were legitimate concerns for its foreign policy. And since local politics determines the choice of economic programs, the obligation for America to shape it, too, soon became an unavoidable concomitant. For however much it hoped that the economic parameters for development it defined would also shape the political character of Third World regimes, by the end of the 1950s a relatively small group of important American officials realized that this was not happening in the way they had hoped for. They had expected that a middle class, one with congenial politics, would emerge throughout the Third World, but it did not in Africa, the Middle East, and much of Asia, and even where it occurred, as in Latin America or the Philippines, that class's penchant for economic nationalist strategies proved to be a great challenge to U.S. hegemony. Whether the local economies conformed to the American formula or not, some officials and key businessmen began to reason, was less crucial than U.S. interests gaining access to extractive industries geared to export. From the viewpoint of most potential and actual U.S. investors, all the rest was quite incidental, and a relatively small but growing number became more tolerant toward an important economic role for the state in Africa and the Middle East. Indeed, even providing such countries with U.S. aid was acceptable and perhaps desirable if it was politically essential or if it aided the extractive sector.

Moreover, despite the intense and unwavering ideological consistency of most senior officials in Washington or U.S. business leaders, some became defensive as they considered the extent to which the United States violated the canons it expounded to others. After 1956, particularly, this became impossible to ignore in Latin America, as Milton Eisenhower reported how irate Latin businessmen were over the United States' subsidized dumping of its surpluses abroad and import quotas. "The agricultural export sales policies and the import quotas on minerals," Lamar Fleming, head of the giant Clayton, Anderson cotton firm reminded the president in 1958, "put the United States in the role of perhaps the world's greatest violator of the principles that it advocates in international competition and tries to sell to others through GATT."

This obvious irony was to increase throughout the 1950s because of the Administration's balance-of-payments problems and the political leverage of the farm bloc and interest groups. From 1954 through 1958 from a third to a half of all U.S. agricultural exports, which competed most with the Third World, were government-subsidized. Three-quarters of all U.S. rice and 57 percent of its cotton production in 1957 was exported. Over half of its foreign aid was being shipped in much more expensive U.S. boats, while over twothirds of all its aid was tied to U.S. goods-which were far dearer than its competition. And by 1957, U.S. Ioan policy shifted even more emphatically to harder terms requiring repayment in dollars.

The extent to which its aid policies made a mockery of the trade principles it advocated for others was not completely lost on American planners, whose aid strategy was inconsistent and often counterproductive. In part because of the $1.2 billion the USSR gave to poor nations in 1953-57, American aid was distributed primarily for political reasons, so that the many official review committees found that aid often lacked purely economic coherence. Washington had preached export-oriented development to the Third World but then closed its doors to many of their products, saturated many of their best markets with its own governmentally subsidized goods, and then gave the kinds of aid that most satisfied U.S. rather than local interests. With neither trade nor aid as its real strategy, it gyrated between both.

During the last years of the Eisenhower Administration its economic policies toward the Third World were in disarray, save insofar as they responded unvaryingly to its own domestic needs, and all that remained constant was the ideological principles that it demanded others implement. Yet given the fact that from the inception the United States had expected its private investors to play the critical role in extending American power overseas, underneath this superficial disorder there still remained a foundation of consistency around the deeply held conviction that the continuing expansion and prosperity of U.S. corporate interests would greatly help the Third World I also.

Confronting the Third World

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US and Third World

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