Cascadia, the Warfare State

September 16, 2011
By

Progressivism

Human Ownership, the Military-Industrial Complex and Monetary Imperialism as Agents in the Development of the Pacific Northwest During the 20th Century

“Men, like cows, are expensive to raise, and a gift of either should be gladly received. And a man can be put to more valuable use than a cow!”

The New York Journal of Commerce, 1886, as quoted in the book Memory, Community, and Activism, edited by Jerry Garcia and Gilberto Garcia, Michigan State University, 2005.

The Pacific Northwest is one of the most resource-rich areas of the United States — arable land, great topsoil, abundant timber and fresh water, valuable mineral deposits, as well as the largest salmon run in the world. It is presently also home to some of the world’s most ardent supporters of nonviolence, antimilitarism, and anti-imperialism. It is quite ironic, then, that much of the region’s development in the late nineteenth and early twentieth century was provided by federal government expenditures on war mobilization. In fact, it seems that during this time, people in the Northwest were entirely dependent upon the military-industrial complex to provide capital, jobs, and infrastructure development.

In reading the history of the region, a pattern emerges which seems to demonstrate that the population of the Northwest has been unable to effectively monetize the natural resources here because of changes in monetary policy during this era that divorced the legal tender of exchange (the US dollar) from its connection to actual wealth. With money no longer a reliable store of value and disconnected from the real economy, prosperity was only possible during short-term, illusory periods of federal government-stimulated financial bubbles, usually connected to warfare. These war stimuli, and the disastrous changes in monetary policy, were made possible by the success of the Progressive agenda that was largely spearheaded by people in the Pacific Northwest. In a further layer of irony, this new “Progressive” monetary policy developed into an aggressive act of monetary imperialism against sovereign nations on every continent towards the end of World War II.

The Progressive Era is generally said to have lasted from 1900-1914, although Progressive ideas continued to drive federal policy well into the twentieth century. This was largely a reaction to the banking crisis known as the Panic of 1893, which caused the most protracted and deep depression the country had yet seen. This was due to bank failures and a severe contraction of the money supply. Because of this, the Progressive movement emerged seeking government redress for these issues.

There were many things that Progressives pushed for, including popular elections, women’s suffrage, labor regulations, the busting of monopolies, government ownership of industries, minimum wage legislation, as well as price controls for a variety of commodities, products, and services. In this, the Pacific Northwest was a leader. It was in Oregon that State senator Willi S. U’Ren successfully lobbied for a collection of legislative changes called “the Oregon System.” This included direct primary elections, a process for the electorate to recall elected officials, and the process of initiative and referendum. This system was soon adopted by Washington, Idaho, and Montana as well.

Progressives in the Northwest also really pushed for government involvement in the labor market. U’Ren wanted the state to provide employment “for every citizen who demanded work.” Oregon was the first state to pass a minimum wage law, in 1913. Washington was the first to enact a Workman’s Compensation Act, in 1911, holding employers financially responsible for injuries sustained by their workers while on the job. That state also passed a law requiring a limited workday for women laboring in particular professions. In Washington, several municipalities took ownership of transportation and utilities.

1913 saw the success of the Progressive agenda on a national scale with the passage of the Federal Reserve Act, the Sixteenth Amendment (allowing the US government to levy a federal income tax), and the Seventeenth Amendment (allowing the direct popular election of US Senators while depriving the state legislatures of national representation). The Eighteenth Amendment, prohibiting alcohol, was also the result of Progressive lobbying and was passed at that time.

The Federal Reserve was advertised as a response to Progressive demands for a government-controlled central bank to rein in the unbridled power of the private banks. In its charter, the Federal Reserve’s job is to stabilize the currency while promoting economic growth. Unfortunately, the Federal Reserve Board is just an advisory panel appointed by US Presidents. The government has no binding control over the activities of the twelve Federal Reserve banks throughout the country, which are private corporations with private stockholders.

By 1913, the federal government was now obligated to borrow every dollar produced by the Treasury from the Federal Reserve, at interest. But this greatly expanded the government’s ability to obtain credit. In exchange for this, of course, the federal government had to offer the central bank some collateral. This is what the income tax was about. The Sixteenth Amendment essentially pledged the future labor of every adult in the country forevermore in exchange for easy credit. It was perhaps the largest single human ownership transaction to have occurred in history at that time, turning American citizens into tax cattle. World War I broke out in 1914, and the US military’s involvement, starting in 1917, was certainly related to its expanded access to credit. It would have been impossible to conceive of war mobilization on this scale without it. Forced registration for military conscription began that same year.

In their book Nature’s Northwest, William G. Robbins and Katrine Barber talk about how the war brought the economy of the Pacific Northwest back to life again, boosting the prices of lumber, agriculturals, and minerals. On page 59 they write that the new economic war bubble was “truly impressive, with strong export markets, high prices, easy credit … A people who were neutral at the outset of the conflict clearly prospered through selling their goods in war-stimulated markets.” Pacific Northwesterners had learned to appreciate the taste of blood. Nonetheless, Robbins and Barber state (on page 62) that “the US decision to go to war in April 1917 caused more dissension in the West than in any other region of the nation.”

One of the Northwest’s important industries during this time was spruce wood, which the federal government “deemed an essential war material (Robbins and Barber, p. 63). Something called the US Spruce Production Corporation was created, which gave the federal government control of the entire process of production and the cost of the labor involved. 27,000 soldiers actually worked in this capacity at logging camps and mills in Washington and Oregon. Loggers and lumber workers enjoyed improved working conditions during the war, which ended with peace.

But the Devil is in the details, and the consequences of this Faustian pact with the war machine soon became evident, even if the cause remained obscure to most people. The expansion of the money supply by the Federal Reserve devalued the currency. The cheap credit and high prices during this time of course increased the cost of living for the average worker. This caused workers to collectivize and agitate for higher wages. In 1919, Seattle workers were striking due to what Robbins and Barber term “inflationary pressures.” The situation became a crisis when, as Robbins and Barber describe, the war bubble in the Pacific Northwest crashed “within a few months of the Armistice.”

To make a long story shorter, the Pacific Northwest stayed in an economic slump throughout the next decade, with what Robbins and Barber characterize as “alternating booms and busts” (p. 86) in various industries at various times. Of course everything became decidedly worse with the stock market crash of 1929. The following year, President Hoover received a letter from Oregon governor Julius Meir, asking for federal help to “avert suffering and possible uprisings” (p.104). When the next Presidential election came along, the people of the Pacific Northwest voted for Franklin Roosevelt overwhelmingly.

In the early 1930s, the US government essentially declared bankruptcy. They removed the peg between the US dollar and gold. American citizens had their gold confiscated and were given “Federal Reserve Notes” instead. The dollar could now have its domestic value changed arbitrarily by the central bank, which is exactly what happened the following year. Those who exchanged their gold for the Federal Reserve Notes lost 41 percent of their money’s value in one year alone (Jack Weatherford, The History of Money, p.182.)

The Roosevelt Administration followed the advice of economist John Maynard Keynes, and attempted to boost the economy of the United States through federal spending on both social programs and enormous public works projects. Much of this benefited the Pacific Northwest, including the Grand Coulee and Bonneville Dams, paid for by the new Federal Emergency Relief Administration. Not only did the dam-building bring jobs, but the dams generated hydro-electric power, allowing people in the Northwest to enjoy the least expensive electricity in the country. Among other things, this allowed for the cheap production of aluminum, another industry that was expanded at this time. This would be important when the United States entered the next global bloodbath, and needed to produce military hardware.

As with the rest of the country, World War II brought desperately-needed economic stimulus to the region. As Robbins and Barber describe it on page 116 of their book, the war brought an avalanche of money and people from the rest of the country. The major warfare industries included Seattle’s newly-created Boeing Company, which in 1944 employed 50,000 workers manufacturing military aircraft. Also, the Kaiser corporation, working with federal contracts, created three massive shipyards along the Columbia River in Portland and Vancouver that employed about 120,000 men and women.

The war did not only bring economic stimulus to the region. It also brought tremendous changes to the demographics of the area, and its workforce. With most of the eligible men overseas fighting, employers had to expand the pool of available human resources. So for the first time in the country’s history, women were encouraged to join the industrial workforce, making up 46 percent of Boeing employees and 30 percent of Kaiser’s shipyard workers, according to Robbins and Barber (p. 119). They also worked in plywood and paper mills in Seattle.

Also, 7000 blacks were brought in from the American Southeast to work in the shipyards, and lived in a federally-funded housing project that was created for them. (This artificial community, comprised of prefab fiberboard shanties, was later completely destroyed in the Columbia River Flood of 1948, pushing its sizable black population into Northeast Portland, which has been a historically “black neighborhood” ever since.) 15,000 black workers were brought into the “Tri-Cities” area of Kennewick, Pasco, and Richland in Washington to work in the DuPont Corporation’s Hanford Engineer Works in Richland. This was done in cooperation with the Manhattan Engineer District of the Army Corps of Engineers. These workers built the uranium and plutonium plants that would later enable the United States military to vaporize the city of Nagasaki in Japan. Unfortunately, the blacks at Hanford were forced to eat and recreate separately from their white co-workers. They were also subjected to segregation and discrimination by the businesses and city councils of the area.

Another demographic change brought to the area was the recruitment of thousands of Mexicans to work in the agricultural industry a la the US Congress’ Public Law 45, creating the “bracero policy” (a federally-funded program). Many of them labored in Washington’s Yakima Valley, working under brutal conditions for very little money. (See Memory, Community, and Activism, page 176-183.) They were thought by their employers to be racially suited to such work.

While thousands of new people from diverse ethnic groups were pouring into the Pacific Northwest during World War II, there was one racial group that was actually forcibly removed from their homes, dispossessed of their property, and herded into makeshift prisons made from animal stalls and barns. In February 1942, President Roosevelt signed an Executive Order “authorizing the removal of all persons of Japanese ancestry from the strategic military zone along the Pacific Coast.” (Robbins and Barber, p. 120-122). They were initially housed in stalls at Portland’s Livestock Exposition Center and the horse stables of Hastings Park in Vancouer. Two-thirds of them were natural-born American citizens.

Many of the Japanese had been farmers. When the federal government realized that now there was an agricultural labor shortage because they had imprisoned a large percentage of the farmers, the internees were then forcibly put to work as farming slave labor. (Memory, Community, and Activism, p. 119.) As one Japanese Kenton resident, Mae Okazi Ninomiya was quoted as saying, “The only country I ever knew evicted us from our homes and our businesses.” (“Survival on the Slough – Urbanization at Fairview Lake.”)

All told, the Portland area increased in population by 250,000 during World War II, and the Puget Sound increased by 160,000 (Robbins and Barber, p. 117). While much of the new population stayed after the war, the good economic times did not. Withdrawal from what one Seattle newspaper called “the narcotic effects of war contracts” was very cruel (Robbins and Barber, p. 117). By August 1945, Portland’s shipyards had already fired half of their workforce, many of them women, who were the first to receive the quit slips. Boeing fired almost three-quarters of its formerly forty-thousand-strong labor force. The unemployment rolls in Seattle and Portland swelled. As Robbins and Barber put in (p. 130), “fears about economic collapse were very real.”

The federal government’s debt had soared, facilitated by the Federal Reserve, the two world wars, an enormous expansion of federal domestic spending for social programs and public works. But luckily, they had already created a way to refinance. At the Bretton Woods conference in 1944, the United States committed what I term an aggressive act of “monetary imperialism” by “encouraging” 44 sovereign nations around the world to accept the US dollar as the “international reserve currency.” Essentially, all of these countries would from then on have to hold US dollars in their central banks as backing for their own domestic currencies. They also agreed to do all major international trade in US dollars.

Undoubtedly one of the factors that “encouraged” these countries to go along with this was the fact that the US had just built up, and demonstrated its proficiency in using, the largest and most technologically-advanced war machine the world had ever seen. Simply put, they had the biggest guns in the room. The Bretton Woods international monetary system ensured that there would be an eternal blank check for federal spending from then until the collapse of the system in 1971, because there was always a market for US bonds despite the government’s debt-to-income ratio.

It was a good thing that all of that free money was available, because while the bombs may have temporarily stopped falling after Hiroshima and Nagasaki were consigned to the ether, the Cold War had just begun. Of course, it was not free money to the tax slaves whose labor was auctioned off on the international bond market to cover the cost. But they hardly noticed, because people soon discovered that “rumors of war” could be just as powerful an economic stimulus as the war itself. As Robbins and Barber put it regarding the Pacific Slope of the Northwest, “the war economy never fully demobilized.”

Seattle’s chief industry continued to be aerospace, and the chief purchaser was still the US military (especially the newly-created US Air Force). By 1956, Washington was home to 89 percent of the country’s aerospace workers. Robbins and Barber describe the industry’s fortunes during this time as “inextricably linked to hot and cold war ventures” (p.130), which “contributed to cycles of boom and bust in Greater Seattle’s economy” (p. 135). This “ebb and flow” came in reaction to events like the blockade of West Berlin by the USSR, the Korean War, and tensions between the United States and Southeast Asia. In an effort to make his company less susceptible to control by the military-industrial complex, Boeing’s William Allen diversified the company’s output to include passenger aircraft in the 1960s.

Nonetheless, the dependence of the region’s economy, and Boeing in particular, on military spending continued into the early 1970s. As Robbins and Barber state (p. 135), the Seattle area was “almost exclusively dependent on the Boeing company until the mid-1970s.” Cold War contracts enticed thousands of manufacturing workers and engineers to the Puget Sound region. When Boeing laid off 67,000 of its 105,000 workers between 1969 and 1970, it was regionally referred to as the “Boeing depression.”

It would be impossible to overemphasize the importance that federal spending on militarism played in the economic and infrastructural development of the Pacific Northwest. It was also highly responsible for the immigration of its diverse population. The credit to pay for this was made available by “Progressive” changes in tax laws and monetary policy that turned US citizens from mere human beings into essentially what we may now call “collateralized human assets,” or “tax cattle.” Even the workers who do not have money taken from them through income taxes because of exemptions still pay with lower wages and higher costs due to tax charges. Also, everybody has their wealth stolen from them constantly through the inflation of the currency.

The military spending and easy credit of the first three-quarters of the twentieth century caused a significant loss of purchasing power in the US dollar during that time. However, the true pain of this was not felt until the 1970s. The Bretton Woods system collapsed in 1971 when President Nixon unilaterally decided to close the “gold window,” refusing to honor the international agreement to redeem US dollars held by other countries with gold bouillon upon request. Due to the falling value of the dollar other countries were making this demand far too much and had completely depleted the Treasury’s gold supply (largely confiscated from US citizens in 1933). Since his government was running out of gold, Nixon just decided to break the contract. The way in which this event contributed to the severe inflation of the 1970s, and the transition of the US, including the Pacific Northwest, into a low-wage, highly unemployed “service-based economy” is beyond the scope of this essay. However, the reader is encouraged to pick up the thread where I have left off.

Bibliography:

Garcia, Jerry and Garcia, Gilberto (ed.). Memory, Community, and Activism, Michigan State University, 2005

Robbins, William G., and Barber, Katrine. Nature’s Northwest, Arizona, 2011.

Weatherford, Jack. The History of Money, New York, 1997.

Bauman, Robert. “Jim Crow in the Tri-Cities, 1943-1950.”

“Survival on the Slough — Urbanization at Fairview Lake,” http://ccrh.org/comm/slough/afampdx1.php

Author’s note: I wrote this during the summer of 2011 for a college course in the history of the Pacific Northwest. All of the resource material, except for Jack Weatherford’s book A History of Money, was chosen for me by the professor and we were required to use it.

Also, thanks to Stephan Molyneux’s “The Story of Your Enslavement” for inspiration.

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