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PAYING FOR A WORLD WAR The United States Financing of World War II Jarvis M. Morse ^OOM 5030 TREASURy DEPARTMENT i PAYING FOR A WORLD V/AR, THE UNITED STATES FINANCING OF WORLD WAR II 4(- -X- ^ li,,.;.-,:.Y; Rf: A(JLriAi975 TREASURY DEPAHTMENT Jarvis M. Morse Dr. Jarvis Morse brings impressive credentials to the writing of PAYING FOR A WORLD WAR--scholar, teacher, historian, researcher and author. But most important, he was a recording eyewitness to, and a participant in, the planning and execution of the U. S. Savings Bonds Program from its very inception to its conversion to a peace-time activity. The text of this book was drafted immediately after the conclusion of World War II, while the events were fresh in the minds of the many who were interviewed. Dr. Morse also had access to many Treasury documents which might not have escaped government paper housecleaning in later years. The Savings Bonds Division is indebted to Dr. Morse and thanks him for making available his manuscript of PAYING FOR A WORLD WAR. Elmer L. Rustad National Director U. S. Savings Bonds Division December 10, 1971 CONTENTS ter CHAPTER I BEFORE PEARL HARBOR On May 1, I9UI, the first U. S. Savings Bond of Series E was sold by the Secretary of the Treasury, Henry Morgenthau, Jr., to the President of the United States, Franklin Delano Roosevelt. On January 3, I9U6, the last dollar of Savings Bonds sold during the Victory Loan was deposited to the account of the Treasurer of the United States. Between those two dates the War Finance Committees of the Treasury, and their predecessor organizations, were responsible for selling a total of $185.7 billions of securities to finance the war. The story of these sales - the greatest mass selling achievement '.in history - will be here told as far as it can be set down in words. The real story of VJar Finance defies relation. An approximation of its full breadth and depth would run to thousands of pages, for it is the story of hundreds of thousands of people throughout the continental United States, Alaska, Hawaii and Puerto Rico. It is the story of a small band of leaders in headquarters who advised and guided a few paid workers throughout the nation, the two groups together heading up in the incalculable labors of patriotic volunteers in every community of the land. It is a story embracing every color, creed and condition of men, women and children throughout the American scene. The Treasury's war finance operations were the product of experience reaching back to the American Revolution, during which the earliest attempts were made to sell government securities to the public. Not until the Liberty Loan and War Savings campaigns of World War I, however, was any program developed likely to achieve the goal which the Secretary of the Treasury had in mind at the outset of World War II. The Defense Savings Staff, first of the VJar Finance organi- zations, was created in March, I9UI, to meet both the Treasury's need for funds and to help unite many diverse and conflicting groups in the country into a strong program of national defense. Disunity of the Am.erican People The outbreak of war in Europe in September, 1939? found the American people wholly unprepared for the role they were destined . to play. They suffered not only from lack of military and naval povrer, but also from sharply divisive opinions as to whether they had or should take any part in the growing world struggle, and as to how foreign and domestic affairs should be conducted to the best advantage of the national welfare. The core of this psychological unpreparedness was our history-long conflict between professed faith in political isolation and our actual practice of participating in world affairs. Always professing opposition to intervention in the concerns of other nations, we had nevertheless been drawn by inner compulsion as well as the logic of events to take part in the game of power politics. One reason for this seeming incon- sistency is that the millions of Europeans who found permanent homes in America kept alive an interest in the affairs of the "Old Country." Our government has not hesitated to take notice of and to express itself on internal affairs in other countries in response to pressure from groups of these nationalities with- in our own. borders. Another important cause of confused sentiment in 1939 ^'^^^ the disillusionment of the American people over events following World War I. The bright promise of a new world of peace and freedom, summed up in President Wilson's slogan - "Make the World Safe for Democracy" - and embodied in the ill-fated League of Nations, the World Court, had seemed to come to nothing but tears and sorrow. Large sections of our people became convinced that wars were brought about solely by the machinations of munitions makers, or Big Business, or "Wall Street." Distrust of other nations and peoples was the order of the day with many Americans The distrust, however, was accompanied by a real feeling of humanitarianism for the people who had been suffering under Nazi and Fascist aggression in the 1930' s, and anger and alarm lest such injustices and violence should grow unchecked and threaten to engulf our oi'm country. Trade Union leaders, having seen their comrades crushed in Italy and Germany, became more than ever alert to the menace of totalitarian dictatorship. American Jews saw their German friends and relations subjected to every indignity, and death. In the Far East a development parallel to that in Europe took shape with the Japanese "New Order" for Asia. American missionaries were seized and roughly handled. American property rights were violated. The new world order of which we had heard so much in 1917-19 was going to pieces before our eyes. But we had "troubles of our own" - economic depression, imemploy- ment, a bitter partisan warfare at home - which seemed to counsel that we turn to our knitting and let the rest of the world go by. This could not stop the march of events abroad, nor render 2 - us iimnune to its effects. There was no gainsaying the harsh and tragic facts. It was one thing, however, to feel compassionate, angry, or afraid, and quite another to unite on a national plan of action to deal with the causes of these compelling emotions. Every effort of the adinini strati on from 1935 to 19^1 to put this nation in a better state of defense was violently opposed "by strong elements of public opinion. There was a secret admiration for Hitler and his hordes felt by many well-placed people. They believed that Hitler was their best insurance against Communism. Fear of social revolution at home transcended their fear of Nazi conquest from abroad. American opinion toward the Japanese followed a similar course - resentment of Japanese aggression in China, loathing of brutalities committed in the name of military necessity, condemnation of violations of the "Open Door" policy and neutral rights, but to the last we kept faith in "measures short of war" to preserve peace. For some time after the outbreak of war in Europe, public opinion polls showed that a great majority believed the war would last a year or less, and would end in a victory for England and France. A small majority favored selling supplies to the "democracies" for "cash on the barrel head." Only a minority expressed itself, in the seemingly unlikely event of an English- French defeat, in favor of American war on Germany. 1/Jhen President Roosevelt proposed to repeal the arms embargo to facilitate sending supplies to the democracies. Congress was flooded with letters of protest. The American Federation of Labor declared opposition to American involvement in war, or steps being advocated which would force us into war. A National Committee to Keep America Out of Foreign VJars was founded. The National Association of Manufacturers declared that American businessmen had set the weight of their influence against another war. In radio addresses, Charles Lindbergh became a champion of isolationism, saying that the war in Europe was not a threat to the institutions or security of this country. In his train gathered a collection of sincere American isolation- ists, along with German -American Bundists, anti-Semites, English-hating Irish, various American Fascist groups, Republican bitter-enders, and other enemies of the Roosevelt administration. During the early days of the war the isolationists dominated the scene. Proponents of a more vigorous foreign policy and of closer collaboration with the beleaguered democracies were in the minority. Forthright demands for American intervention were few and far between. Some came from prominent educators. Among the stalwart supporters of President Roosevelt's policy was Senator George Norris of Nebraska. His support of the interven- tionist position was the more notable since he had been one of - 3 - the small group of "^^illful men" v/ho opposed American participa- tion in World War I. Norris declared that it T'^as self-evident that England and France were fighting the battle of hui-fianity and civilization, and that decency and self-interest demanded, that \Te place ourselves on their side. However much distinguished leaders might debate the issues of war in Europe, to most Americans the conflict seemed remote and the discussions swirling around it monotonous, until the so- called "phony war" came to an end in April, 19^0. German armies then moved into Denmark and Norway, and the next month into Holland, Belguim, and Luxenburg. In June came the heroic evacua- tion of the British from Dunkerque.

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