Henry A. Wallace, Industrialization of the World

Selected Works of Henry A. Wallace

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Industrialization of the World

"Seed" Capital Must be Used Effectively

Henry A. Wallace

A speech delivered before The Institute of World Affairs, New York City, May 24, 1945.
From Vital Speeches of the Day (July 15, 1945), v. 11, n. 19, p. 603.

In appearing under the auspices of the Institute of World Affairs forty-two days after the death of our great President, I cannot refrain from paying momentary tribute to that man who more than any other piloted the democratic nations to safety during their time of greatest peril. Many times I heard President Roosevelt talk about the details of naval warfare in World War I. Because of this experience he never underestimated the magnitude of the effort required to defeat the enemy in World War II. Neither did he underestimate the skill required to lay the foundations for permanent peace. Roosevelt aimed at victory in both war and peace. But Roosevelt, like Moses, was not allowed to enter the promised land which his eyes had seen.
To us belongs that privilege and with it goes the responsibility for understanding new forces in the scientific, economic, social and psychological world.
It seems now as though the whole world is entering a new era which may prove to be even more significant than that which began with the peace of Westphalia in 1648. Three hundred years ago, 30 years of brutal and ruthless fighting had temporarily destroyed Germany as a dynamic center of expansion. Now, once again, Germany has became a poor and powerless thing incapable of influencing world politics.
The peace of Westphalia let loose many forces which had long been held back. Private initiative and scientific investigation, starting slowly, came to have an ever growing significance both in western Europe and in the New World.
The war from which we are now emerging might also be called a thirty years' war. It began in 1914 and has, in the main, continued in one form or another for more than 30 years. Only for a brief time in the Twenties was the world really at peace. When we dip deeply into the economic and scientific causes of these 30 years of terrible struggle we find the outstanding factor to be the unequal rate of industrialization and the consequent unequal growth of population and political power among the nations. England, the first to industrialize, dominated world commerce from 1830 to 1900. Germany, beginning in 1870, overtook and challenged England. Animated by a feudal warlike tradition and a false philosophy she decided she could out-compete England faster on the field of battle than in peaceful, commercial competition. Japan emulated the German example and, beginning in 1895, determined to use every effort of a docile, low wage, well educated, highly industrialized people to dominate first the Orient and finally the world. The differing speed in industrialization and population growth produced tensions which were used by ambitious, ruthless nations to create international earthquakes. As a result of these earthquakes the United States and Russia now emerge as the two most powerful nations in the world. The United States has nearly half the world's industry and Russia is on the way to developing a large share of the remainder. Since 1928 Russia has changed from an overwhelming agricultural nation to a powerful industrial nation. Moreover, her population is growing faster than that of any other great industrial nation.
Technology and war have destroyed western Europe as the center of world power. The two powers which now come to the top have no colonies and do not believe in colonies. They both claim to have great respect for the rights of small peoples but both have occasionally stepped over the line when the principle of national defense is involved. The two nations are so geographically placed that they have never had conflicting basic interests. The Russian and American people instinctively like each other. Neither the Russian nor the American people wishes to use modern technology as an instrument of war. We want to raise the standard of living of our peoples and we do not want to exploit other people.
Both the Russians and Americans in their different ways are groping for a way of life which will enable the common man everywhere in the world to get the most good out of modern technology.
This does not mean there is anything irreconcilable in our aims and purposes. Those who so proclaim are wittingly or unwittingly looking for war and that, in my opinion, is criminal. We in the United States are certain our methods will bring more liberty and a higher standard of living. The Russians are equally certain that if they are given the opportunity of peaceful development, their system will eventually deliver the most satisfaction to their people. Both of us believe in the maximum use of technology and both of us believe in peace. Both of us want to see the so-called backward nations industrialized so that the standard of living may be more uniform over the entire world.
Recent developments in electronics and chemistry tend more and more to free all nations from dependence on specific resources. Idealistic reformers who have long tried to raise the standard of living of the poor and the backward peoples now receive unexpected help from a technology which in the lifetime of some in this room will make it possible for nearly every industrious people in the world to enjoy a good standard of living. The irresistible trend of the modern industrial system is toward world-wide equalization of techniques.
This trend toward equalization reverses the order of world trade which grew up in the nineteenth century. Sixty years ago a few hundred million people in western Europe and eastern United States owned the world's workshop. Out of it they drew great profits and the egotism to proclaim cultural and political leadership. This over-lordship of the western nations has passed. We now know that no one world region can long claim exclusive economic leadership. In the years immediately ahead we see the United States, Russia, and the British Empire producing perhaps 85% of the world's industrial output. But we also see the stirrings of a rapidly expanding industrial consciousness in Latin America, China and the Near East. Shall we minister to that consciousness with the services of experts and the sale of goods? Or should we consciously, endeavor to prevent the industrialization of the so-called backward nations by withdrawing from the world market?
Personally, I have no question as to our decision. I shall not go into the economic arguments which are weighty. The political, security reasons are enough for me. We must trade in the most friendly way possible with Latin America because that is our back door. We must trade with England and western Europe because that is our side door. We must trade with Russia to prevent the world splitting into two hostile ideological camps. We must trade with China because the future peace of the world may depend on the friendly and sound industrial development of this great agricultural people.
We are only 140 million people in the United States even though we do have half the world's industrial power. Ninety percent of the world is in trouble because of the war. It is not only good business and the last word in selfishness but also the highest altruism to help the 90%.
Everywhere, for our own sake and the world's sake, we must do our utmost to help the devastated and so-called backward nations to produce, transport and distribute goods in an ever-increasing flow to their starving, sick and underprivileged people. We cannot do the work for these peoples but we can point the way and we can furnish the "seed" capital and the knowledge of how to use "seed" capital to produce a "high standard of living" crop.
The so-called backward areas of the world have a total population of more than one billion persons. It probably will be impossible for these areas rapidly to bring about widespread education, the building of dams, the construction of highways and airports, and the building of factories without help from the United States or England. In some cases, the smaller nations of western Europe may be able to help. As we look back over the history of the world, we see only three nations which were able suddenly without extensive foreign capital to change from a primitive to an industrialized economy. These three were Germany after 1870, Japan after 1890, and Russia after 1920. The most spectacular of the three was Russia's progress, especially after 1928. But we must remember that under the Czarist regime a better foundation had been laid, especially with regard to highway and riverway communications than most people realize. Also, we must remember that in Germany, Japan and Russia it was possible to direct the sentiments of the people in a more powerful way than in the nations which permit of free democratic expression. The education of all the people was focused on limited objectives and the desired results were achieved. There will be less future conflict in the world, in my opinion if England, and especially the United States help China to educate her people and to industrialize. We don't want China to use the methods used by Japan. There is a greater probability of a strong democratic China if we help her in the postwar period than if she follows the methods of either Japan or Soviet Russia and tries to do it chiefly by herself.
I am not saying that we should be a Santa Claus to China, or any other part of the world. We shall make fair business profits out of helping China get on the path to industrialization and we shall help, I hope, strengthen her friendship for us.
We shall build economic and cultural relations which will give us a powerful and helpful voice for peace in the Orient. But it should be made clear when we help China that we have no desire for political power in Asia. We are interested only in peace and trade, and not in the opening up of the backward areas so that we may eventually exercise sovereignty over dependent peoples. We have no use either for old-fashioned imperialism or economic imperialism. But, for our own sake, we want to help the backward peoples of the world to learn the secret of the abundant life so that eventually they may stand on their own feet and contribute in their own way to an expanded world trade. In this respect I think the United States has a better record than any other great power.
To improve our record and to avoid the mistakes we made after World War I, both our financiers and our industrialists must cooperate so any investments abroad may be carefully coordinated. Undoubtedly, the Department of Commerce and other Government agencies can be of help when it comes to discussing such problems as loans versus direct investments; whether loans should be made by Government or by private agencies; and whether the loans should be free or tied. From time to time the larger financial concerns and the leading Government agencies in the foreign field should counsel with Congressional leaders concerning the relationship between our foreign trade policy and investments abroad, tariff policy, tourist expenditures, etc. Our Commercial Attaches abroad, working in close cooperation with the Department of Commerce and those businessmen interested in foreign trade, can work out a program of foreign trade promotion which will not merely make money for the businessmen of the United States but will be of the very greatest service to those so-called backward nations which are trying to expand their economy along sound lines.
As I think about the fundamentals of our problem, I am convinced that an important contribution can be made by Government through continuous emphasis on fundamental scientific research. This will not be to the disadvantage of any private research institutions. Quite the contrary! I have had the opportunity for many years of watching the interplay between the fundamental scientific work in agriculture conducted by the Federal and State Governments and the research work conducted by private agricultural institutions. Private agriculture has been immensely helped, not harmed by Government. I hope to see the day when the scientific work in the Department of Commerce is enormously strengthened. It must be strengthened if in the postwar period American science is not to lose ground to Russian and English science. Every bit of fundamental scientific research sooner or later has its industrial implications, and finally its effect on exports and imports. Our economists in the Department of Commerce can, if they keep fully abreast with the latest fundamental scientific and technological developments, arrive at conclusions year by year as to the areas of the world which most need certain types of capital and certain types of commodity imports, while at the same time they can make estimates as to what the eventual exports from these areas will be if development has taken place.
I understand that the Institute of World Affairs, which is associated with the New School for Social Research, has been engaged in some such study. We in the Department of Commerce will be glad to cooperate with you in every way possible in this work, just as we shall be glad to cooperate in every way possible with those more actively engaged in the day-by-day transactions of foreign trade. We believe it is necessary to take into consideration both the short-run and the long-distance points of view. We are glad you have the time and disposition to go into the fundamental of what I like to call the seismology of "scienomics."
International peace and higher standards of living for the peoples of the world will depend on the intelligence with which we deal with our international economic problems. High levels of production and distribution, opportunities for new capital investment, and maintenance of full employment on a sustained basis in the United States as well as throughout the world, will depend in considerable measure on the extent to which the nations of the world are prepared to recognize their interdependence, and to cooperate in determining and achieving economic objectives that are mutually advantageous. The United States, in its own interest, as well as in the interest of the poorer nations, must be prepared to play an active role in promoting the industrialization of the backward areas of the globe. Actions, such as this, designed to increase the productivity, the purchasing power, and the standard of living of the poorer peoples of the world would not only promote worthy international social and economic objectives, but would also help assure prosperity and avoid postwar economic collapse at home. Moreover, and perhaps of greatest importance, achieving a sound international economic order is a fundamental prerequisite to the preservation of peace. The Bretton Woods proposals, the pending reciprocal trade and tariff legislation, and the San Francisco Conference are the types of measures that have the central purpose of establishing mechanisms and goals to permit orderly international cooperative action towards common objectives. Their objectives should have backing and active support of all persons and organizations interested in prosperity and world peace.
Looking toward the future, I wish to express it as my belief that the doctrine of "noblesse oblige" should apply not merely to individuals but also to nations. I have observed that this doctrine applied in private life usually pays the individual business man. This doctrine applied in international life will, in my opinion, pay the United States. It will pay the United States in short-time business returns, and it will also furnish the best guarantee for future peace. The one way in which the United States can effectively assist in guaranteeing the long-time peace of the world is by helping to promote economic conditions everywhere that will favor continuous growth of freedom and equality in all the lands.

Introduction | Essay | Documents | Resources

Selected Works of Henry A. Wallace

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