The War within World War II: The United States and International Cartels

Published by EH.NET (May 2002)

Robert Franklin Maddox, The War within World War II: The United States and

International Cartels. Westport, CT: Praeger Publishers, 2001. xi + 232 pp.

$ (hardback), ISBN: 0-275-96274-1

Review for EH.NET by Daniel Barbezat, Department of Economics, Amherst College,

This book will serve as a good reference for economic and business historians.

It is written as a history of the strategic business practices of both Germany

and Japan, their relationships to US firms, and the process of decartelization

in the post war era. It is not an economic history of this process; rather, the

book is really about how wartime investigations led to the post-war reform

policies of the US conducted in both Germany and Japan. The first half is a

systematic recounting of the US investigation of how German and Japanese firms

aided axis war efforts and how US firms sometimes joined in restrictive,

collusive arrangements. The second half follows with a description of the

development and implementation of US decartelization.

The book opens with a brief overview of the traditional international cartel

literature. However, the book is not about international cartels, per se, and

so this material is rather perfunctory. The introduction spends most of its

time setting up the US anti-trust position through an examination of the

creation and findings of the Temporary National Economic Committee (TNEC).

There follows a good chapter on the relationship of US firms to German firms

and the business/industrial studies of Japanese production. Maddox does a nice

job of documenting US firms’ relationships with German firms. For example he

describes an agreement for Standard Oil to provide IG Farben its patents and

information on synthetic rubber in exchange for information from the German

firm on synthetic oils and other information concerning oil and gasoline. Once

discovered, the Justice Department forced Standard Oil to provide licenses on

patents concerning synthetic rubber royalty-free to domestic producers

interested in developing synthetic rubber plants and to provide the information

on how to use the patents. Other agreements described are Alcoa’s agreements

with IG Farben, Dupont and IG Farben, and Seimens and Bendix Aviation Co. After

these arrangements are described — as well as US policy responses — Maddox

turns to the information gathering on Japanese production and industrial

structure, viz. railroad bottlenecks, capacity estimates, etc.

The next two chapters are descriptions of German industry, one on IG Farben

itself and the next on German cartels. These are a good reference source for

the various firm liaisons within and exterior to the German market. There

follows a chapter on Japanese business practices. This is an interesting

chapter that goes beyond a mere description of the various kieratsu. Maddox

investigates the various strategies of industrial espionage of the Japanese,

designed both to find out US capabilities and to get technical information that

could be copied back in Japan. Historians of business structure and of wartime

strategy will find this information especially interesting. Maddox documents

how the Japanese government appropriated US patents while firms such as the

Universal Oil and Japan Gasoline Company secured information on high-test

aviation gasoline from Standard Oil that was not even made available to the

American oil industry.

The remainder of the book is an examination of how the US decided to conduct

reforms within German and Japanese industries. Maddox rightly begins with the

confusion in Roosevelt’s cabinet over the question of whether Germany would be

deindustrialized under the supervision of the British, Russian and American

governments. Maddox outlines the formation of the Morganthau Plan, which was

dedicated to the idea that (in Morganthau’s own words) “a weak economy for

Germany means that she will be weak politically, and she won’t be able to make

another war” (p.112). Maddox does a nice job of weaving the question of

international business interests and, specifically, the post-war treatment of

US involvement in international cartel arrangements. The only problem with this

chapter is there is no mention of Jean Monnet who had been in Washington and

was, of course, very interested in post-war German policy. In fact, Monnet’s

name does not appear in the index even though this chapter is followed by two

chapters on Germany’s decartelization. Monnet’s influence in the international

conduct of the German steel industry (culminating in the Schumann Plan) would

seem essential for understanding the dynamics of what the United States

undertook after the war.

The next two chapters outline the actual policy toward Germany, the first

covering until 1947 and the second from 1948 through to 1950. The story

emphasizes the many conflicts between British and US interests and, within the

US, between the military committees and the State Department. There is no

account, though, of the formation and implementation of the Marshall Plan,

which, of course, had a major impact in the turning of US policy. Overall,

Maddox’s account stresses the internal negotiations of the decartelization

policies rather than analyzing what actually occurred or the implications of

their outcomes on international business practices over the rest of the

twentieth century. These chapters can serve as a reference guide to the

formation of policy, especially in regard to international collusive

arrangements, rather than an analysis of it.

The final chapter, on the economic reform of Japan, begins with the story of

Truman’s decision to drop two atomic bombs on Japan in order to force Japanese

acceptance of the Potsdam Declaration before the Soviets could enter the

Pacific war. With the acceptance of the Potsdam Declaration and the

unconditional surrender of Japan, it was seen by the Truman administration that

the US would determine Japan’s future under the control of General MacArthur as

Supreme Allied Commander. Like the chapters that come before it, this one is

concerned mainly with describing the control and regulation of collusive

arrangements within the target country, this time Japan, and how US firms would

be able to interact with Japanese firms on arrangements of markets.

This book will serve as a reference to those interested in the inter-war and

post-war formation of US policy on international collusion. It documents how

internal conceptions of US anti-trust policy interacted with military,

strategic concerns to form the policies of the US towards both Japan and

Germany.

Daniel Barbezat is the author of articles on inter-war international cartels

and the European Union. He is currently researching federal policies toward

children in the 1920s and Cuba after 1960.