While previously we
mentioned that Japanese textbooks generally referred to a U.S. financial siege
of Japan "before" Pearl Harbor, US documents released in context of
the Holocaust Era Records Act between 8 and 10 years ago show among others that
from 1937 to 1940 a dozen experts in U.S. financial agencies analyzed Japan's
balance of payments, gold production and reserves, scrap gold collection,
liquidation of foreign investments, and other financial data. They also
predicted when Japan would be bankrupt and have to stop the war in China,
always six to eighteen months in the future. It was a comforting thought to
policy makers, but the analyses were wrong. From 1938 to the summer of
1940 the Bank of Japan secretly accumulated $160 million in the New York agency
of the Yokohama Specie Bank. It began with funds removed from London. It was a
sum equal to three years' oil purchases from the U.S. The YSB did not report
the deposits, as required by law. Bank examiners discovered the fraud in August
1940. Japan raced to withdraw the money during the first half 1941. The fraud
accelerated thinking in Washington toward a dollar freeze, instead of commodity
embargos, as the most deadly sanction. The freeze order was drafted in March
1941. As is well known, It was imposed on 26 July 1941 when Japan occupied
southern Indochina. After the freeze, Japanese diplomats and agents proposed
many ideas to unfreeze dollars in order to reopen trade. Dean Acheson, the
effective manager of the freeze policy, rejected them all. In August 1941 the
Japanese government, through Mitsui, made an extraordinary offer to barter $60
million of silk for $60 million of US commodities, mainly oil. Barter would not
require unfreezing dollars, they thought. Strangely, they chose as spokesman a Roosevelt-hating lawyer named Raoul Desvernine.
Acheson and Vice President Wallace rejected the scheme on 15 September, about
the time the Japanese government was reaching a decision for war. Furthermore
features of the prewar situation from records that were not classified but that
are omitted from other history books, thus there are a large number of
vulnerability studies, of Japan's foreign trade written in April 1941 by committees
of trade experts of U.S. agencies under direction of the Export Control
Administration. Reviewing the oil and tanker situation in both Japan and the
U.S. for example one will here find that FDR blamed an imaginary shortage of
gasoline in America as a reason for the freeze of Japan. There was no shortage
despite the loan of 20% of US tankers to Britain. Two-thirds of Japan's dollar
earnings were due to exports of raw silk to America. (When war began in Europe
all other currencies became blocked and inconvertible.) The Great Depression
and rayon substitution destroyed the silk dress industry. After 1930 nearly all
Japan's silk went for American women's stockings, which was a strong market
despite the Depression. On 15 May 1939, however, DuPont introduced nylon
stockings at the New York Worlds Fair. They were a
great success. By 1941 nylons gained 30% of the market, and were on track to
100% in 1943 if no war. The market loss of $100 million per year would have
been a disaster for Japan if it had not gone to war. Yet what the following
case study furthermore shows is that Roosevelt's idea of a financial siege of
Japan in fact backfired by exacerbating rather than defusing Japan's
aggression. And for sure the attack on Pearl Harbor was not the result of a deliberate
Roosevelt strategy (as right-wing conspiracy theorists claim), but a Roosevelt
miscalculation.
U.S.Exports to Japan 1939 (in Millions of Dollars)
U.S.Exports to Japan 1940 (in Millions of Dollars)
U.S.Exports to Japan 1941 (in Millions of Dollars)
The American
perception of Japan's economic and financial vulnerability dated back to a time
thirty-five years before Pearl Harbor. President Theodore Roosevelt grew
concerned after the victory over Russia in 1905 that Japan would seek to
dominate China in contravention of the U.S. Open Door policy, which championed
independence and free trade for China. Japan would perceive that policy, and
U.S. bases in the Philippines and Hawaii, as barriers to building an empire.
Roosevelt asked the U.S. Navy for a plan to fight Japan, if and when necessary.
The result, War Plan Orange, was fundamentally an economic strategy in both
origins and outcome. (Japan was code-named Orange, the United States Blue.) The
godfathers of the plan, Admirals George Dewey and Alfred Thayer Mahan, had
served as young officers enforcing the Union's Anaconda Plan against the
Confederacy, an "island" vulnerable to economic blockade. They and
later disciples in the War Plans Division of the Navy demonstrated a fierce
mindset favoring vigorous action, a mindset echoed by civilian bureaucrats who
advocated a nonviolent economic and financial "war" against Japan in
the crisis years before Pearl Harbor.
While U.S. military
planners assumed Japan's war aims would be limited --a surprise attack, victory
in naval battle, and a negotiated peace ceding dominance of East Asia--their
aim was a crushing defeat of the enemy, an aim demanded by an aroused public.
They understood that Japan, an island nation poor in natural resources,
depended on overseas trade for the sinews of war and its very economic life.
The Japanese Empire produced food enough, but industrialization and conquests
led to voracious needs of metals and fuels. The planners designed a strategy of
siege. After initial losses, Blue forces would fight back island by island,
sink the enemy fleet, seize bases near Japan, starve it of vital imports, and
ultimately force it to capitulate. Japan's financial destitution would be
ensured by "coercive pressure" on world lenders to deny funds such as
Wall Street provided during the Russo-Japanese War. Plans rang with confidence
that the United States could enforce "final and complete commercial
isolation" (1906), leading to "eventual impoverishment and
exhaustion" (1911) and "in the end ... economic ruin" (1920). As
air power came of age, bombing of industry and transportation intensified the
siege plan. In 1941 Plan Orange morphed into global Plan Rainbow Five, and in
1942-45 it was executed in most major respects. The Pacific war culminated in
unconditional surrender after devastation of Japan's economy, including, at the
end, the deployment of atomic bombs.
In the 1930s
peaceable internationalist governments in Tokyo gave way to military-dominated
regimes. The anticipated violations of the Open Door unfolded in the invasion
of China and designs against colonies of the Western powers. The helplessness
of Japan, if isolated economically and financially, evolved into an axiom at a
time when the U.S. government was averse to fighting a war. When national
policy to deter Japanese aggression took root, the United States gradually
deployed its vast economic and financial powers to strangle Japan by means
other than ships and bombs. It was a Plan Orange strategy in peacetime. The
story now turns to the U.S. strategy of achieving the nation's foreign policy
aims, without combat, by bankrupting Japan.
When Japan invaded
China on 7 July 1937, U.S. government financial experts reckoned the aggressor
could not wage a long war because it lacked hard currency to purchase essential
commodities abroad. As Herbert Feis, the economic
adviser of the State Department, wrote, "Warfare requires many vital raw
materials which Japan does not possess at all or in sufficient quantities, and
which must by purchased with foreign exchange."
Therefore, the "ability of Japan to carry on a protracted war depends
ultimately upon her actual and potential foreign exchange resources."
(Herbert Feis, Economic Adviser, "Japan's
Ultimate Foreign Exchange Resources," 20 September 1937, Box 21, File
Japan Foreign Exchange Position, OASIA.)
And as early as 1935,
it sought to regulate its position as the world's most important supplier of
materials for war, it was in the summer of 1941 the United States decided to
deploy its most powerful economic sanction against Japan, dollar freezing. The
first steps, taken at a time when Japan was not yet an aggressor in China, were
aimed at keeping the United States from being drawn into another foreign war.
Later steps were taken by so-called voluntary means and by executive orders to
ensure that the nation's exports did not support Japanese aggression in China.
In fact sanctioning to impose a nation's will on others in peacetime was also,
not a novel concept, as it was based on international law governing trade
relations among sovereign states laid down by the European jurists Hugo Grotius
and Emeric de Vattel in the
seventeenth and eighteenth centuries.
Thus in the autumn of
1937 Franklin Delano Roosevelt brooded about deterring foreign military
dictatorships from attacking peaceful nations. On 5 October, thirteen weeks
after Japan invaded China, the president delivered his famous "quarantine"
speech. Likening the spreading aggressions to an epidemic disease, he suggested
that law-abiding countries ought to quarantine the aggressors. When pressed by
reporters, he denied that he meant economic sanctions, calling sanctions
"a terrible word to use." "There are," he said, "a lot
of methods in the world that have never been tried yet."! Roosevelt was
not sure what he meant until December, after Japanese bombers sank a U.S.
gunboat in China. He turned to his energetic secretary of the treasury, Henry
Morgenthau Jr., for a "modern" weapon to wield against Japan.
Treasury experts unearthed the perfect device: a relic of the First World War
known as Section 5(b) of the Trading with the Enemy Act (TWEA), a single
paragraph that empowered the president to paralyze dollars owned by foreign
countries, whether enemy or not. Denial of U.S. dollars, a key reserve currency
of the world and indispensable to Japan for waging war, could dissuade Japan
from belligerence. That surviving section of the act had arisen from an obscure
spat in 1917 between government agencies that foreshadowed the bureaucratic
grasping for power in Washington during 1937-41 as the United States groped
toward invoking its great financial powers to render Japan effectively bankrupt
in the world.
And finally the first
months of 1941 then, marked a turning point in the will of the United States to
advance from a patchwork of export restrictions to full-blooded financial
warfare against Japan. A spurt of work from January through March established
the nature of the financial punishment it would mete out when the time came.
Above all, that the levers of control would be manipulated not by learned
economists and banking technicians, nor by moderate diplomats seeking
bargaining leverage, but by truculent lawyers determined to show Japan no
mercy.
In common English
usage, "bankruptcy" is a synonym for "impoverishment."
Japan was cast into international bankruptcy, a condition of absolute
illiquidity, by the U.S. financial weapon. The choke hold of the relentless
freeze rendered its dollars and gold worthless for national survival. It was a
strange sort of bankruptcy. Japan's reserve of gold and dollars exceeded $200
million in late 1941, enough to buy, for example, four years of U.S. oil at pre-freeze
shipment rates, yet it was rendered useless. Thereafter Japan piled $60 million
of new gold and $15 million of silver into the useless reserve every year until
it suspended mining of precious metals in 1944. Japan had invested in gold
mines, collected gold ornaments, and nurtured dollar-earning exports.1 It had
husbanded its reserve for future purchases of resources for its war economy,
inflicting "the curse of gold" on its people by a "wholesale
attack on the standard of living." At the end of the war, although the
economy was in a shambles, the government of Japan was awash in gold amounting
to twice its hoard in 1941. After the surrender the gold and silver in the Bank
of Japan and other government vaults was sequestered by MacArthur's occupation forces.
As to Japan's frozen dollars, they were never returned.2
A contemporary
journalist summed it up. He could not have known that for four years, U.S.
Treasury and Federal Reserve analysts had predicted Japan would soon exhaust
its assets and necessarily abandon its aggressive policies. However, he wrote,
"Japanese leaders exerted every possible effort to avoid this outcome.
They succeeded .... Gold production was stimulated A vast foreign exchange
reserve was maintained." Although U.S. forecasts of empty vaults proved
false, Japan was plunged into the international bankruptcy they predicted
because of a stroke of a pen in Washington.3 Two views, one American and one
Japanese, illustrate the attitudes about Japan's bankruptcy on the eve of war.
When Dean Acheson
arrived at the State Department in January 1941 he rediscovered the prodigious
powers of Section 5(b) of the 1917 Trading with the Enemy Act. He and
colleagues of like mind promoted its deployment against Japan, then twisted a
cautious squeeze designed "to bring Japan to its senses, not its
knees" into strangulation. Acheson, an officer of the department charged
with peaceful solutions through diplomacy, boasted to Cordell Hull on 22
November 1941 that financial crippling had proven far more devastating to Japan
than embargoes. The freeze administrators thwarted Japan from removing its
dollars from U.S. control as it had been doing for a year. Their actions
slashed U.S. exports to zero despite Japan's valid export licenses for oil, and
other licenses it would have been entitled to for cotton, lumber, and
foodstuffs. Nor could Japan pay the mineral-rich nations of North and South
America or the Dutch Indies, which demanded dollars, while the sterling bloc
joined in the freeze. U.S. markets abruptly closed to Japan. Washington refused
to allow Japanese trading companies to receive dollars, even if paid into their
blocked accounts, hastening the ascendancy of nylon, which devastated silk
farmers and demolished Japan's largest renewable flow of dollars.4
U.S.Forecasts of Japan’s International “Bankrupty,”
1937-1941
In Japanese eyes the
bankruptcy was a lethal threat, an assault on the nation’s very existence.
After the war, Koichi Kido, lord keeper of the privy seal and adviser to
Emperor Hirohito, delivered an eloquent statement through his American defense
counsel, William Logan Jr., before the International Military Tribunal for the
Far East. (Kido was found guilty of war crimes and sentenced to life
imprisonment but was released in 1955.) Kido styled his defense “Japan Was
Provoked into a War of Self-Defense.” Allied charges of war crimes defined
aggression as “a first or unprovoked attack or act of hostility.” Kido argued
that strangling an island nation dependent on foreign resources was a method of
warfare more drastic than physical force because it aimed at undermining
national morale and the well-being of the entire population through starvation.
A nation, he concluded, had the right to decide when economic and financial
blockade was an act of war that placed its survival in jeopardy. Kido thereby
harked back to the dawn of international law three centuries earlier when
jurists held that refusal to sell to another nation might well be a valid casus
belli under extraordinary circumstances such as starvation.The
defense added, “We know of no parallel case in history where an eco nomic blockade … was enforced on such a vast scale with
such deliberate, premeditated, and coordinated precision …. Responsible leaders
at that time sincerely and honestly believe[d] that Japan’s national existence
was at stake.” Because sanctions “threatened Japan’s very existence and if
continued would have destroyed her,” the “first blow was not struck at Pearl
Harbor.” Indeed, Lojan continued, the “Pacific War
was not a war of aggression by Japan. It was a war of self
defense and self preservation.”5
The OSS Document.
Unfortunately for
Japan, its leaders chose a war that brought upon it far more economic
devastation than any sanctions, along with great loss of life and untold
misery. Although struggling along under bankruptcy without going to war was a
dreary prospect, a third course was open to Japan: renouncing imperial
aggression in return for thawing of the freeze. One may wonder, what if Japan
had endured the freeze long enough to ascertain that Germany could not win and
had then abandoned the Axis, perhaps even joined the Allied side as it had in
1914? It would have prospered mightily by selling ships, machinery, and other
goods to the Allies. It would have emerged after the war as the strongest
regional power, with a world-class navy, an overflowing treasury, and a zeal
for industrial modernization, just as colonial empires in Asia were crumbling. It
might have shored up China against communism. A cooperative Japanese commercial
"empire" in East Asia, economically buoyant and trading
internationally on a grand scale a generation sooner, could have changed the
course of history in the twentieth century and beyond.
Arthur B. Hersey
titled his study for the Office of Strategic Services and the Department of
State "The Place of Foreign Trade in the Japanese Economy; an analysis of
the external trade of Japan proper between 1930 and 1943 focusing on possible
or probable postwar development." He comprehensively analyzed Japan's
external trade with both the yen bloc and the rest of the world in three
representative prewar years: 1930, 1936, and, to a lesser extent, 1938.6 His
goal was to outline a possible range of conditions of Japan's economy about
five years after the end of World War II to assist U.S. planners contemplating
post-surrender and occupation policies. The methodology was complex. To link
actual past to hypothetical future years Hersey converted physical units
(pounds, bales, square yards, calories, etc.) to a common denominator of
"constant yen," a proxy for physical units that also allowed him to
adjust erratic prices of internationally traded goods into more comparable
units.7
During the war many
economists expected a return of the global Depression after a brief postwar
boom. Hersey believed Japan's future in international trade to be especially
bleak. Its appetite for imports of minerals, industrial crops, machinery, and
even foodstuffs was almost unbounded. But its capacity to import would be
limited to the hard currency it could earn from exporting goods and services
and from gold mining. (He considered foreign loans unlikely.) In the 1930s
Japanese exports had expanded rapidly, but the benefits to the people had been
circumscribed for several reasons. A rising share of exports went to the yen
bloc, which could neither pay in hard currency nor deliver the most needed
commodities. While foreign countries erected barriers against Japanese goods,
the terms of trade (relative world prices) worsened after 1930. No foreign
loans were available due to disorganized financial markets in America and
Europe and active discouragement of lenders by those governments because of
Japan's aggressions.
"The core of the
analysis," Hersey wrote, was a classification of Japan's imports
(typically 90 percent raw and semiprocessed materials
and foods and 10 percent manufactures) into two categories: commodities
required by factories that manufactured products for export and commodities for
final consumption within Japan. The latter, labeled "retained
imports," comprising 59 to 68 percent of all imports in the 1930s,
contributed directly to the standard of living. Another 25 percent of imports
were materials for processing and resale abroad, primarily raw cotton for
textiles, wood pulp and salt for rayon, and metals, chemicals, and fuels for
other manufactures. A final 8 percent of imports were offsets to exports of a
similar nature, swapped, in effect, because Japan both bought and sold in
various grades and processed forms, wheat, sugar, fish, coal, and fertilizer.8
Japan's greatest dilemma in the 1930s, Hersey believed, had been deterioration
of the "barter terms of trade," that is, weak export prices and high
import prices. Japan had to run harder to stay in the same place
internationally. For consistency he recast the data into indexes of
"constant yen" at 1930 terms of trade. (He also calculated 1936 and
1938 terms of trade although they were of less relevance to his conclusions.)
Hersey selected 1930 as a "best case" year, similar to the relatively
prosperous 1920s, and the last equilibrium year of Japan's international trade
before the turmoil of world depression, yen devaluation, the Manchurian adventure,
and foreign trade discrimination. In 1930 Japan's upscale products enjoyed high
prices abroad, notably raw silk and silk fabrics, premium seafoods, fine
pottery, and other consumer luxuries, while prices of raw cotton and most other
imported agricultural and forestry products were low. (Japan did not yet import
oil, metals, or minerals on a large scale in 1930, and not much machinery).9
A terms-of-trade
index is not the same as the familiar domestic price index. It is a ratio of
relative prices, that is, an export price index divided by an import price
index. Hersey calculated data for twenty internationally traded product classes
that he aggregated into eight groups: food; fertilizer and fodder; coal and
petroleum; metals and minerals; cotton, wool, and pulp for rayon; lumber and
paper pulp; and manufactured goods. He assigned to the terms of trade in 1930
an arbitrary index number of 100. The index for any other year, actual or
predicted, was that year's export price index divided by its import price
index. A resulting index above 100 meant a favorable trend for Japan, and vice
versa for numbers below 100. Although any prediction was "pure
guesswork," Hersey admitted, a postwar Japan enjoying 1930 terms of trade
could fare adequately in the world, though not richly. "It is
doubtful," he opined, "whether Japan's terms of trade will under any
circumstances be more favorable than they were in the 1920s and 1930."
Hersey examined the
improvements of the Japanese standard of living before the war. Economists had
been awed by a surge of retained imports-79 percent higher in 1936 and 86
percent higher in 1938 compared with 1930but the benefit to ordinary Japanese
families was somewhat illusory. Yen devaluation, worsening terms of trade, and
a massive switch to importing and stockpiling of industrial and strategic goods
left the rise of retained imports for the benefit of the public at only 14
percent, barely more than population growth of 9 and 12 percent respectively
since 1930. Yet the Japanese standard of living had undeniably improved, by
about 10 percent per capita. Food consumption per capita was thought to be
unchanged; the rising population was fed from rising domestic farm output
through intensive fertilization. Gains in nonfood goods and services ranged
from 20 percent to more than 30 percent per capita. As with food, the gains
were mostly achieved by surges in production from domestic resources, notably
chemicals, electrical energy, and paper, and by the effect of rayon pulp (10
percent of textiles cost) substituting for raw cotton (50 percent of textile
cost). The experience implied that if postwar Japan could import consumer needs
for its populace at the 1930 rate in real terms per capita, reduction of the
standard of living would be tolerable, although disappointing for a population
used to improving conditions.10
For his "highly
tentative" postwar models of trade and living standards Hersey adopted the
hypothetical year" 1950" to represent a date a few years after the
war when physical reconstruction would be largely completed, production of most
domestic-sourced goods recovered, and crop yields normal. Population growth was
a crucial assumption. Japan's population had risen steadily at about 1 million
per year, from 64.4 million in 1930 to 72 million in 1938. Expecting
continuation of that rate, Hersey expected a population increase to 81 or 82
million in "1950," after adjusting for war casualties and
repatriation of Japanese émigrés from Asia.11 For a country that historically
found difficulty in feeding itself, millions of extra mouths would intensify
the dilemma of maintaining living standards in the face of weakened exports.
Three adjustments have been made here to adapt Hersey's data from
"1950" to represent Japan in, say, 1942, under a freeze but not at war
with the Allies. First, the population differences between the periods of seven
to eight million people are neutralized by converting trade to per capita
values. Second, yen are converted to dollars at appropriate exchange rates.
Third, his eight commodity groups are simplified into two: consumer commodities
and other.
Japan's postwar
future was clouded by an anticipated vicious cycle of trade: uncertain markets,
adverse prices, and technological changes (notably the substitution of nylon,
reducing raw silk exports by an assumed 50 percent)12 resulting in a shortage
of hard currency to buy raw materials for factories that produced for export.
The uncertainties were profound. Rather than guess at world appetite for
Japan's specialized goods, Hersey found it easier and surer to calculate
imports essential for survival of an impoverished populace. He therefore set
imports as the independent variable and assumed two levels of
"retained" and other imports. He then "reverse engineered"
his models to determine the exports necessary to fund the purchasing abroad.
Japan's exporting capability became the dependent variable. Hersey developed
two scenarios of the Japanese standard of living in "1950" by
arbitrarily assuming two levels of nutrition, expressed as daily calories per
person, which set an upper limit on non-food imports. Case A assumed the 2,250
calories prevailing in 1930, which had not increased much if any in the
following ten years. Assuming, however, that Japan's capacity to harvest crops
and fish had topped out by 1941, a larger share of its limited postwar earnings
would necessarily have to pay for imported food, fertilizer, and fishing boat
fuel. Imports of materials for clothing, shelter, and infrastructure would have
to be severely constrained by government priority rules, leaving little or
nothing for other consumer goods such as foodstuff varieties. The procedure
resulted in reduced postwar living standards of 25 to 33 percent depending on
the details assumed.13
Case B envisioned a
horrendous outcome for the Japanese people because of an exporting capacity so
enfeebled that not even basic nourishment and health could be maintained.
Hersey arbitrarily assumed a 20 percent reduction in nutrition below Case A, to
1,800 calories per person per day. Food and fertilizer needs would overwhelm
other import priorities. Only minor imports could be financed for other
consumer needs and urgent infrastructure. Retained imports per capita would
slump 67 percent below 1930.14 Hersey also calculated terms of trade for 1936,
the last peacetime year and a "worst case" year for Japan. Raw silk
prices had fallen disastrously. Textiles and other wares were restricted by
U.S. tariffs and quotas and by British imperial preference. Although exports of
chemicals and mechanical products-bicycles, sewing machines, industrial
machinery-held up better, Japan mostly sold them to the empire for yen.
Meanwhile, prices of imported
commodities were propped up by dominant suppliers such as U.S. government
supports of cotton. (Strategic metals and fuels remained relatively cheap but
were minor items of import before the war in China.) Relative to a 1930 index
of 100, export prices in 1936 dropped to 95 whereas import prices soared to
129. Japan then had to sell 33 percent more goods to buy the same basket of
imports. Because Hersey assumed the value of other imports as equal to Japan's
residual buying power after meeting food and fertilizer needs, the large
difference between 1930 and 1936 terms of trade dictated a necessity of much
larger exports, but did not alter his Case A and B models of "1950."
For example, Case A, calibrated to the 1936 terms of trade, required 55 percent
more exports versus the 1930 terms of trade model, $1.62 billion versus $1.05
billion, to achieve the same standard of living established by Hersey's
assumptions. (Hersey did not itemize exports in detail as he did for imports
because of extreme uncertainty over the products Japan could sell, and to which
countries, after the war.) Despite Japanese censorship of data from 1936
onward, Hersey calculated a somewhat improved 1938 terms of trade index but did
not rely on it because distortions caused by the war in China, commodity
stockpiling, and a renewed U.S. depression that lowered the cost of Japanese
imports rendered it irrelevant to his vision of "1950."15
As indicated above,
Japan's de facto bankruptcy proved a crucial factor in the failure of negotiations
for a peaceful settlement with the United States. The diplomatic maneuverings
of 1940-41 have been exhaustively described in documents, memoirs, diaries,
interviews, postwar investigations, and war crimes trials.16 Thus we briefly
summarize the events, focusing on the significance of the dollar freeze. U.S.
resentment against Japanese aggressions began with the seizure of Manchuria in
1931 and accelerated when Japan assaulted China in 1937. The' country initially
reacted with diplomatic scolding’s, aid to China, and embargoing exports of a
few arms-related products. In 1940 tensions grew acute when Japan signed the
Tripartite Pact with Germany and Italy whereby the three powers pledged to
assist each other in wars, under certain circumstances. The United States,
inching toward war in the Atlantic through pro-British policies, grew concerned
that it might have to fight Japan as well. Negotiations for a settlement of
tensions began in earnest in April 1941. All discussions were conducted in
Washington between Ambassador Kichisaburo Nomura
(assisted after 15 November by special envoy Saburo
Kurusu) and Secretary of State Cordell Hull. The Japanese diplomats also met
directly with President Roosevelt, and occasionally with civilian and naval
officials Nomura new personally.
Other U.S. officials
played relatively minor roles.17 Hull advanced four "principles" for
Asia: respect for the territory and sovereignty of all nations, noninterference
in their internal affairs, equal commercial opportunity, and maintenance of the
status quo in the Pacific-the principles established by the Nine Power Treaty
of 1922. For Japan the main stumbling block was surrendering its decade of
conquests by withdrawing from Indochina and China, perhaps even from Manchuria.
In Japanese eyes a retreat would mean giving up any possibility of gain from a
war that had cost two hundred thousand dead soldiers, required huge outlays of
national treasure, and caused economic hardships for its people. The United
States further demanded assurances that Japan would renounce the Tripartite
Pact, or at least refrain from fighting it as an ally of Hitler. To prod Japan,
Washington embarked on three programs: arms and financial aid to China, a
buildup of forces at Pearl Harbor and in the Philippines, and barring exports
of commodities needed for its own defense.
The Japanese position
was, simply, resistance to Hull's proposals: no U.S. interference in
China-Japan affairs, no military withdrawals from occupied territories,
maintaining ties with Germany, and continuing trade with the United States. In
1941 events in Europe emboldened Japanese leaders. Hitler's attack on Russia on
22 June quelled the army's fears of a Soviet attack on the empire, and it
joined the navy in favoring a war to seize the resources of western colonies in
Asia. On 24 July, Japan, having coerced Vichy France, occupied southern
Indochina, triggering the U.S. freezing orders two days later and those of the
Allies soon after. After 26 July 1941 Japan's priority shifted to demanding an end
of the dollar freeze, or at least an easing so that deliveries of oil and
perhaps other strategic commodities might resume. At first Tokyo phrased the
aim in generalities while its representatives in the United States searched for
loopholes. In August banking and consular officials petitioned for financial
licenses to pay for two shiploads of oil and probed the possibilities of paying
with dollars or gold held outside the frozen accounts. They were rebuffed at
every turn by the Foreign Funds Control Committee dominated by Dean Acheson.
Early in August Prime
Minister Prince Fumimaro Konoe
launched an initiative to meet with President Roosevelt personally, perhaps in
Hawaii or Alaska, in what later generations would call a summit meeting. To
placate the generals and admirals, Foreign Minister Teijiro
Toyoda drafted demands that the United States halt reinforcement of the
Southwest Pacific, mediate a peace settlement in China (a euphemism for
abandoning aid to Chiang KaiShek), and restore normal
commercial relations (a euphemism for ending the freeze). In return Japan
offered not to advance beyond Indochina and to withdraw troops from China when
the war ended at some vague future date. FDR was intrigued but the State
Department deemed the tradeoffs unacceptable, especially because Japan refused
to start evacuating promptly. The United States declined the summit offer.
Japanese military and
naval leaders moved forward with plans to launch a war before the year was out.
On 6 September 1941 an imperial conference agreed to make a decision during the
first ten days of October about war against the United States, Britain, and the
Dutch Indies (a deadline gradually moved back to 29 November) unless Japan's
demands were met.3 On 18 September Acheson disclosed that the United States had
rejected Japan's last ditch barter scheme of oil for silk. Mobilizing for an
attack began in earnest in Tokyo in the second half of the month. Nevertheless,
Toyoda wished to test other avenues of negotiation. The deadlock between the war
hawks on one hand and Konoe and Toyoda, who favored
some troop withdrawals, on the other hand, led to the fall of Konoe and his replacement as prime minister by General
Hideki Tojo on 17 October. Last-chance diplomacy
passed to a new foreign minister, Shigenori Togo.
Japanese agents had
continued to poke about desultorily for token financial licenses for oil or
minor freeze-evading transactions, without success. On 24 October, however,
Acheson told Counselor Tsutomo Nishiyama that the
looming insolvency of the Yokohama Specie Bank in New York, where Japan had
mobilized its dollars-a bank failure engineered by the U.S. government's
barring the bank from collecting money for silk delivered to the United States
before the freeze-would permanently lock up Japan's main holding of blocked
dollars. It was clear that oil cargoes would never sail. This casting away of
hope immediately preceded Tokyo's decision to demand financial relief, explicit
in time and very substantial in amount, countered by American musings of barter
concessions much below Japanese needs.
As resource
stockpiles dwindled, and with the military's reluctant consent, Togo proposed
"Plan A," an offer reciting kinder words about free trade in China
but standing firm on the Axis pact and rejecting troop withdrawals for
twenty-five years. As expected, Hull rebuffed it. Togo followed with "Plan
an interim truce. Japan would evacuate Indochina if the United States kept its
nose out of China, resumed trade promptly at pre-freeze levels, supplied oil in
abundance, and prodded the Dutch to supply more.19 The army insisted on
amending Plan B so that "the United States will promise to supply Japan
with the petroleum it needs." On 14 November the generals defined their
terms:
The United States
must sell a tonnage of oil equivalent to 42 million barrels per year (converted
here at 7 barrels per metric ton), including 10.5 million barrels of avgas, and
ensure another 14 million barrels from the East Indies. If the Dutch did not
agree, Japan would occupy the Indies. If the United States did not comply one
week after signing an agreement, war would begin. Togo and Tojo
scaled down the extravagant demands to 28 million barrels of U.S. oil, still a
wildly improbable figure 34 percent greater than the annual rate of U.S. sales
in January-July 1941. The amount was 259 percent greater than the 7.8 million
barrel annual quota based on 1935-36 that Washington had contemplated in August
for possible trade resumption. Avgas had been effectively embargoed since
December 1939. Nomura did not present the exorbitant demand because Hull's
response to Togo's first plan intervened.20
In November special
ambassador Saburo Kurusu arrived to assist Nomura,
whose English was not the best. As presented to Hull on 20 November, Plan B proposed
evacuation of Indochina, American noninterference in China matters, restoring
pre-freeze trade, including an undefined volume of oil, and helping obtain
Indies resources. Considering the plan "preposterous," Hull pondered
a response, urged by the military services to buy time for defense preparations
and by China and England not to go soft.6 On 18 October Hull had mused to Lord
Halifax, the British ambassador, about a minor swap of silk for cotton-not
oil-in exchange for a promise of a status quo in the Pacific. Anxious to avoid
a rupture, the Japanese envoys suggested another humble accommodation: small
quantities of U.S. rice and oil for Japan, far less than its full requirements,
with guarantees that none would go to its armed forces. Hull was willing to
think about it. Roosevelt informed Winston Churchill that the United States
might thaw the freeze slightly on quasi-barter terms, strictly for civilian
goods, for a three-month trial. The United States would license exports of food
products, ships' bunker fuel, pharmaceuticals, raw cotton worth up to six
hundred thousand dollars per month, and some petroleum for civilian needs while
encouraging the Dutch to supply more. Yet the United States would not unfreeze
Japan's dollars. Instead, it would buy Japanese products, two-thirds of which
was to be raw silk-about 5 percent of the pre-freeze rate of silk
purchases-just sufficient to finance the U.S. exports and to service Japanese
bonds owned by Americans.7 But the gesture, overtaken by the onrushing crisis,
was never offered to Japan. For six crucial days in November Hull played with
notions of a modus vivendi ("manner of living"), a standstill of
three months during which Japan would abandon southern Indochina, limit forces
in the north, and commence peace discussions with China. In return the United
States would unfreeze some Japanese dollars and resume some exports, although
export controls in effect "for reasons of national defense" would
remain. It would encourage the British and Dutch to act similarly. Between 20
and 26 November, Hull reviewed a slew of proposals and modifications from
administration officials that watered down his proposal. Acheson's boastful
report of the excellent results of the financial freeze arrived on his desk. By
24 November Hull's draft conceded a barter-type exchange of raw silk for oil
and other goods, amounts not specified, but no release of blocked dollars.
The eviscerated modus
vivendi was never offered to the Japanese. Allied scouting planes spotted a
troop convoy heading for Thailand and Malaya. Landings there were sure to
provoke war. On 26 November Hull's definitive response, approved by FDR,
retreated all the way back to stiff-necked demands for the four principles and
unlinking from Germany. Tojo deemed it an ultimatum.23
When six Japanese aircraft carriers sorties from the Kurile Islands, Washington
sent a war warning to Pearl Harbor and other bases. An imperial conference of 1
December gave up on negotiations and decided irretrievably that the empire
would attack. On 4 December the southern invasion force sailed for Malaya from
Hainan Island. On the sixth Roosevelt made a futile personal appeal for peace
to Emperor Hirohito. On 7 December Japan attacked Pearl Harbor. The two nations
were at war.
Japan Sources of Dollars, Actual, 1939-1940, and
Projected, 1941-1943
Japan: Retained Imports per Capita, 1930s and “1950”
Projections
Sources Including for Further Research.
The focus of this
case study is the United States' financial and economic sanctions against Japan
before Pearl Harbor, reconstructed primarily from official U.S. sources. Many
histories have been written about the run-up to the Pacific war, largely by
diplomatic historians, understandably in view of the centrality of the
Department of State in U.S.-Japanese negotiations and that department's
voluminous, well-organized files, which were declassified long ago, some as
early as 1943, supplemented by forty volumes of congressional hearings of 1946
about Pearl Harbor and precursor events.35
Not until 1996 did
the National Archives, at the prompting of a U.S. interagency group on Nazi
assets, declassify and make more readily available the worldwide papers of the
Treasury Department's Office of the Assistant Secretary of International
Affairs, established on 25 March 1938 and directed by Harry Dexter White.36
These records contain a trove of U.S. assessments of Japan's financial
problems, and U.S. proposals to exploit them, that have not appeared in other
histories. A similar wealth of information is in the records, first opened to
the public in 1996-97, of the Division of International Finance of the Board of
Governors of the Federal Reserve system, primarily from 1935 to 1955. The
Federal Reserve Bank of New York voluntarily sent to the National Archives
those of its records "that relate to the activity in accounts for foreign
governments" in the same era.37 The files of the U.S. Alien Property
Custodian, which include the 1880-1942 records of Japanese bank branches in the
United States seized in 1941, were closed until fifty years after seizure to
researchers lacking special permission and were inconveniently located until
transferred to the National Archives II in 1995-96 and "bulk
declassified." The records of the Tariff Commission (now the U.S.
International Trade Commission), with a wealth of studies on specific Japanese
products, were open but not properly described and arranged until 1992.4 The
planning records of the Administrator of Export Control, the office that led
the drive for sanctions against Japan during the crucial months of September
1940 to May 1941, were difficult for researchers to use until recently, when
they were rearranged and a finding aid was prepared at the National Archives.
That office was subsumed in September 1941 into the vast wartime bureaucracy of
the Foreign Economic Administration, which in turn was reorganized three or
four times during the war. Its boxed records extend 3,817 cubic feet and weigh
seventy-five tons. A comprehensive catalogue of all international records of
the era, which are mostly located at National Archives II in College Park,
Maryland, was completed in 1999 under the direction of Greg Bradsher
and is available online at http://www.archives.gov/research/
holocaust/finding-aid.
The main Japanese
sources are the excellent historical data published in bilingual tables by the
Japan Statistical Association, and Japanese commercial and diplomatic studies
published in English. Most of Japan's official records of 1931 to 1945 were
burned in the two-week interval between the surrender and the occupation in
1945 in anticipation of war crimes trials. However, economic information for
the last prewar decade was reconstructed in detail and published by the U.S.
Strategic Bombing Survey and by investigators of the Supreme Commander of the
Allied Powers during the postwar occupation. Japanese financial and trade
statistics are usually presented for fiscal years beginning I April, so that,
for example, "1940" means the twelve months beginning 1 April 1940
and ending 31 March 1941. U.S. statistics are usually given for calendar years,
making some comparisons awkward. Physical trade units are stated here in U.S.
measures such as ounces, tons, or yards, or occasionally in metric measures.
Some Japanese figures have been converted from metric units or the ancient
weights and measures then used in trade.
Money figures are
stated in U.S. dollars, the dominant world currency then and now. The 1935-41
dollar was worth about $10 in 2007 dollars if measured by an average of U.S.
prices of goods, or about $25 if measured by average U.S. wages. In exchange
markets the yen was worth 49 to 50 cents from 1899 until devalued on 14
December 1931. It dipped as low as 20 cents in 1932-33, then stabilized at 28.3
cents until 24 October 1939, when it was devalued to 23.4 cents. There was no
organized exchange market after 25 July 1941; fragmentary trading in China
suggests that in late 1941 the yen's gray market value was much lower, perhaps
II or 12 cents.5 After a devastating wartime and postwar inflation, the yen was
stabilized at 0.28 cents (360 per dollar). It subsequently has risen to almost
I cent (l00 per dollar). The U.S. economy is roughly 150 times larger than in
1935-40 in unadjusted dollars and about 10 times larger adjusted for price
inflation. The Japanese economy is about 500 times larger in unadjusted U.S.
dollars and about 50 times larger adjusted for U.S. inflation. The prewar
Japanese economy was about 8 percent the size of the American. In 2006 it was
about 40 percent as large. Japanese foreign trade is now about seven hundred
times greater in nominal value, $1.1 trillion versus $1.5 billion before the
war, of which half was within the "yen bloc." (Both figures are
unadjusted for inflation.) To grasp the relative significance in twenty-first
century terms of $100 million in 1941, a very large fraction of Japan's
international liquidity at the time, the reader may wish to multiply by a
factor of one thousand.
As seen above, the
United States forced Japan into international bankruptcy to deter its
aggression after Washington experts confidently predicted that the war in China
would bankrupt Japan. However, the United States did not know the Japanese
government had a huge cache of dollars fraudulently hidden in New York. Once
discovered, Japan scrambled to extract the money. But, in July 1941 President
Roosevelt invoked a long-forgotten clause of the Trading with the Enemy Act of
1917 to freeze Japan s dollars and forbade it to sell its hoard of gold to the
U.S. Treasury, the only open gold market after 1939. Roosevelt s temporary
gambit to bring Japan to its senses, not its knees, was thwarted, however, by
opportunistic bureaucrats. Dean Acheson, his handpicked administrator, slyly
maneuvered to deny Japan the dollars needed to buy oil and other resources for
war and for economic survival. So it is to the oil issue we now turn, continue...
1. In March 1941 the
Bank of Japan reported $117 million of gold in its vaults. Mine production
through July was about $20 million. Another $23 million is attributed so scrap
gold purchases, residual holdings in the Gold Fund Special Account and gold
held by other government agencies assumed from postwar data, minus industrial
use. In February 1941 the FRBNY had estimated that Japan held about $205
million of gold, an exaggeration probably due to an older statement of the Bank
of Japan and overestimating gold production. Liquid dollar assets of the
Yokohama Specie Bank and other Japanese banks in the United States were about
$40 million as reported by the Office of Alien Property Custodian, more or less
depending on settlements of domestic liabilities ultimately allowed by the APC.
Just before the freeze virtually all strategic products except oil had been
embargoed, but Japan probably could not have purchased more than the recent $50
million of U.S. oil (annual rate) due to tanker shortages. Purchases of
nonstrategic civilian products from America, some subject to licensing but
likely to be allowed due to abundance such as cotton, lumber, pulp, phosphate,
foodstuffs, pharmaceuticals, and some chemicals, had been about $25 million per
year. Against this potential $75 million of U.S. supplies, Japan was exporting
$150 million to the United States (although the $100 million of raw silk was
sure to decline due to nylon's inroads). Purchases from other dollar countries
were curtailed by American and British preemptive buying of raw materials. As
Kurt Bloch, a reporter for the Far Eastern Survey, noted, "Japan's
financial difficulty abroad is no longer finding means of paying for foreign
goods, but rather finding foreign goods for which available means of payment
can be used . . . . At present, Japan's gold problem may not differ greatly
from that of the United States," an ironic statement because the United
States had no need of gold for international transactions as all nations would
gladly have accepted unlimited amounts of dollars. BB, Memorandum to the
President, 5 August 1939. Kurt Bloch, "Japan on Her Own," Far Eastern
Survey, 3 November 1941,244-49.
2. In 1945 an
accounting submitted to the occupation forces reported that the Bank of Japan,
the mint, and other government agencies held approximately $461 million in gold
bullion and coin, $134 million of which was said to be held on earmark for the
account of Thailand and French Indochina for goods purchased from them during
the war. Government agencies also held $49 million in silver bullion and coins
and $4 million in currencies, primarily U.S. and British. The Yokohama Specie
Bank reported its overseas branches owned $10 million in U.S. dollars and $4
million in sterling, which of course had been frozen, $20 million of Swiss,
Swedish, and Portuguese currency accounts, and minor holdings of South American
currency accounts. The government also held $28 million (prewar value) of
German marks, yen, military yen, and local currencies of the colonies and of
occupied China and conquered areas, nominally worth hundreds of millions of
dollars but all of dubious value. Jenkins to I. S. Friedman and Coe, Gold
Bullion and Other Foreign Exchange Assets in Japan, 16 October 1945; Division
of Monetary Research, Tokyo Reports on gold, silver, platinum, currency, etc.,
owned by Japanese Government or Bank of Japan, I November 1945, File Japan
Foreign Exchange Position; Survey of the Gold Fund Special Account, c. August
1945; Tenenbaum to Friedman, Japanese Gold Production and Operation, 2 January
1946; J. Tenenbaum to Jenkins, Foreign Exchange Assets of the Yokohama Specie
Bank, I March 1946, Box 20, File Japan Banks and Banking, vol. I, OASIA.
3. Kurt Bloch,
"Japan on Her Own."Far Eastern Survey, 3
November 1941, 244-49. ---. "Japan's Problem Reversed." Far Eastern
Survey, 30 June 1941, 135-36.
4. Acheson to
Secretary of State, Present Effect of the Freezing Control in the Economic
Control as Exercised Upon Japan, 22 November 1941, FRUS, 1941,4:903-4.
5. R. John Pritchard,
commentator International Military Tribunal for the Far East, The Tokyo Major
War Crimes Trial: The Records of the International Military Tribunal for the
Far East (New York: Edward Mellen Press, 1998),
90:43159-62.
6. OCL, Place of
Foreign Trade, includes vol. I, pt. I, xvii, 1-158, issued 29 August 1946; vol.
I, pt. 2, 159-362, issued September 1946; and vol. 2 (statistical summary and
charts) xii, 1-128, issued January 1946. The ass was the ancestor of the
Central Intelligence Agency, established in 1947. William W. Lockwood, an
economics professor and author on Japan's economy, called it "a valuable
study" as late as 1954. Lockwood, Economic Development of Japan, 314.
Jerome Cohen, a professor of economics at the City College of New York,
criticized the study because it did not address the motivations for prewar
Japanese trade-control measures and thus "hinders an attempt to understand
the problem as the Japanese then saw it." Cohen, Japan's Economy, 12n27.
Lockwood and Cohen had access to 1937-41 data after the war that was
unavailable to Hersey until nearly the end of the study. Cohen's point is
irrelevant for applying the study to this chapter, which is intended as a
speculation on how U.S. authorities might have evaluated the impact of the
dollar freeze on Japan if continued for a few years.
7. OCL, Place of
Foreign Trade, vol. 1, pt. 1, iii.
8. Ibid., iv; vol. 1,
pt. 2, tables II-32 to II-34.
9. Ibid., vol. 1, pt.
1, iii; 11-21.
10. Ibid., 2-21.
11. Ibid., 110-11.
12. Ibid., 121.
13. Ibid., 43-66, 91-97,
109-145; vol. 1, pt. 2 177-81,205-12,231-33,254-63,272, 294-98, 308-10, 344-45,
352-59.
14. Ibid., vol. 1,
pt. 1,61-66, 114-15, 134-37, 143, app. 145-48, 152-53, tables 1-20, 1-21, 1-22;
vol. 1, pt. 2,177-81,208-12,231-33,254-64,272-74,294-98, 305-6, 309-10, 319,
322, 327-28, 336-37, 339, 341, 344-45, 348-49, 352-59.
15. Ibid., vol. 1,
pt. 1,67-87.
16. The U.S. Library
of Congress lists 115 books in English under "Pearl Harbor Attack,"
several dealing with the diplomatic and military preludes rather than the
attack itself (and a few espousing conspiracy theories). The principal
published documentary sources are FRUS, 1941, vol. 5; FRUS Japan; Congress,
Joint Committee on the Investigation of the Investigation of the Pearl Harbor
Attack, Hearings; and Defense Department, The "Magic" Background of
Pearl Harbor (Washington, D.C.: GPO, 1978). General works include Cordell Hull,
The Memoirs of Cordell Hull (New York: Macmillan, 1948); Feis,
Road to Pearl Harbor; Langer and Gleason, Undeclared War; Roberta Wohlstetter, Pearl Harbor: Warning and Decision (Stanford,
Calif.: Stanford Uni'(ersity Press, 1962); Dorothy
Borg and Shumpei Okamato,
eds., Pearl Harbor as History: Japanese American Relations 1931-1941, Studies
of the East Asia Institute (New York: Columbia University Press, 1973); Gordon
W Prange with Donald M. Goldstein and Katherine V
Dillon, At Dawn We Slept: The Untold Story of Pearl Harbor (New York: Viking,
1991); and Akira lriye, Pearl Harbor and the Coming
of the Pacific War (Boston: Bedford/St. Martin's, 1999). Works that focus on
the freeze and embargo in the negotiations include Utley, Going to War with
Japan; Barnhart, Japan Prepares; and Worth, No Choice but War. On the Japanese
side, see Morley, Final Confrontation; and Goldstein and Dillon, Pacific War
Papers, 136-234.
17. State Department
officers contributed advice, but Ambassador Grew in Tokyo was relegated to
incidental adviser and message carrier. Neither the secretaries of war and the
navy nor their uniformed chiefs, who tended to favor a softer line to gain time
for building up defenses, participated in direct negotiations, nor did other
cabinet-level officials, although some operated as advisers and go-betweens.
Consultations within the government were eclectic, ranging from sideline
discussions to full cabinet meetings. Intelligence agencies provided Roosevelt,
Hull, and a very few others with deciphered messages between Tokyo and its
ambassadors. Historians have differed on whether code breaking helped U.S.
negotiators or hindered them due to misunderstandings and poor translations. In
Japan, Prime Minister Prince Fumimaro Konoe was an expansionist. Shortly before the freeze the
foreign ministry passed from the quirky, pro-Axis Yosuke Matsuoka to the
relatively moderate Admiral Teijiro Toyoda who was
more wiling to negotiate. However, the Army and Navy
held the balance of power because a general and an admiral served as mandatory
members of the cabinet so either could bring down a government by resigning.
Pol icy was set in liaison conferences, often lasting hours, conducted among
the Army and Navy officers, in cabinet conferences including at least the prime
minister and foreign minister and service chiefs, and ultimately imperial
conferences before Emperor Hirohito and his household advisers.
18. Morley, Final
Confrontation, 175ff, 243.
19. Ibid., 261-65,
Appendix 9.
20. Ibid., 262 316;
Barnhart, japan Prepares, 254-59.
21. Barnhart, japan Prepares, 235, 260; FRUS, 1941,4:642-44; Hull,
Memoirs 2:1070.
22. Joseph P. Lash,
Roosevelt and Churchill, 1939-1941 (New York: Norton, 1976),457, 466-69.
23. Barnhart, japan Prepares, 235; Morley, Final Confrontation, 305,
317-20.
24. That day, when
FDR summoned the cabinet for the decision to freeze Japanese assets, he took
the extraordinary step of telling the American public that there was an odious
link between the predicted East Coast gasoline shortage and oil sales to Japan.
While addressing a volunteer group for civil defense headed by Mayor Fiorello
LaGuardia of New York-the city bearing the 1argest volume of risk for rationing
of gasoline-FDR told the press, You have been reading that the Secretary of the
Interior, as Oil Administrator, is faced with the problem of not having enough
gasoline to go around in the east coast, and how he is asking everybody to
curtail their consumption of gasoline. All right. Now, I am-I might be called
an American citizen living in Hyde Park, N.Y. And I say, "That's a funny
thing. Why am I asked to curtail my consumption of gasoline when I read in the papers
that thousands of tons of gasoline are going out from Los Angeles-west coast-to
Japan; and we are helping Japan in what looks like an act of aggression."
Roosevelt's linking of Atlantic and Pacific supplies was a brazen political
canard to guide public opinion and perhaps soothe Japanese anger. There was no
conceivable possibility of satisfying East Coast needs with West Coast oil.
Nevertheless, in the weeks following 26 July, as a relentless oil embargo by
means of the dollar freeze descended on Japan, Ickes continued to insist,
against the advice of government and private experts, against all remedies
offered by the industry, against the findings of a senatorial investigating
committee, and even against evidence that Britain did not need u.s. tankers, that an East Coast gasoline crisis was
inevitable. The specious rationale of a shortage continued almost to the eve of
Pearl Harbor: the United States could not spare California oil for Japan
because it was scarce in New York.
25. Ralph H. Davies,
Acting Petroleum Coordinator for National Defense, testimony, pt. I, 28 August,
I-52; letter from Davies, 4 September, 165-67; and Davies statement, 9 and 10
September 1941, 272-347, 356-80, all in Special Committee, Hearings.
26. Special
Committee, Hearings, pt. I, 29 August, 73-79; 8 September 1941, 215-39.
27. Ralph Budd, a
transportation advisor to the Council of National Defense, calculated 29,000
idle cars. Statement, Special Committee Hearings, pt
I, 4 September 1941.
28. John J. Pelley,
President of the Association of American Railroads, Statement and Testimony, 3
September, Special Committee, Hearings, pt. I, 81-II2; letter from Pelley, 5
September 194 I, 191-214; Statement and Testimony, 2 October, Special
Committee, Hearings, pt. 2, 605-38.
29. Special
Committee, Report No. 576, Gasoline and Fuel-Oil Shortages: Preliminary Report,
II September 194 I.
30. Harold L. Ickes,
Petroleum Coordinator for National Defense, Statement and Testimony of I
October 1941, Special Committee, Hearings, pt. 2, 383-593; Ickes, Secret Diary,
622-23.
31. Ickes, Secret
Diary, 630-32; Statement of Admiral Emory S. Land, Chairman, Maritime
Commission, 29 August 1941, Special Committee, Hearings, pt. 1,53-73; Senator
Francis Maloney, comment, I October 1941, Special Committee, Hearings, pt. 2,
574-75; Economist, 26 July 1941, cited in Special Committee, Hearings, pt. 1,28
August 1941, 354-55.
32. Oil and Gas
Journal, 30 October, 9,12,181941; 6 November 1941, 59; 20 November 1941,18; and
4 December 1941,16; Ickes, Secret Diary, 631-32. Pelley's claims were
ultimately justified. In April 1942, when German U-boats were sinking many
tankers off the Atlantic and Gulf coasts, the railroads moved six hundred
thousand barrels per day to the East Coast, a volume almost 50 percent of the
prewar rate of total supply for the region.
33. Payton-Smith,
Oil, 129, 162-63, 178-81, 195-211,375-79, Appendixes IV, VI; at! and Gas
Journal, 9 October, 1941, 24.
34. Oil and Gas
Journal, 4 August 1941, 28, 80; 21 August 1941, 26; II September 1941, 14-15; 2
October 1941,16; 6 November 1941, 59, 66; 4 December 1941, 20.
35. The U.S. Library
of Congress catalog lists 115 books in English under "Pearl Harbor
Attack." Many address the diplomatic prelude rather than the attack
itself. A few espouse conspiracy theories.
36. National Archives
and Records Administration (NARA), Holocaust-Era Assets: A Finding Aid to
Records at the National Archives at College Park, Maryland (Washington, D.C.:
NARA, 1999). The files are in Office of Assistant Secretary for International Mfairs, RG 56, NA (hereafter cited as OASIA), and Records
of the Federal Reserve System, RG 82, NA. Secretary of the Board of Governors
of the Federal Reserve System to National Archives, Agreement to Transfer
Records and accompanying letter, 23 January 1997; and Greg Bradsher
to author, e-mail, 26 January 2007, both in author's files.
37. Record 3, no. 4
(May 1997); William W. Stiles, Secretary of the Board of Governors to Assistant
Archivist for Records Services, National Archives, de classifications agreement
and letter, 23 January 1997.
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