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The Paradox of War for Profits

William T. Stone

Foreign Policy Association Bureau, Washington, DC

March 1935

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THERE is nothing new or surprising, or in the trade view illegitimate, in the disclosure that American armament firms, like American moving-picture concerns and motorcar companies, have their international connections. American aviation companies have their foreign subsidiaries and their license agreements with producing countries and distributing companies in Europe and South America.

The E. I. du Pont de Nemours Company with its vast dye industry, its chemical plants, its rayon factories, and its Duco products has a long list of foreign subsidiaries engaged in manufacturing innocuous commercial products as well as its commercial trade agreements with British, Canadian and German corporations. Likewise, it has its military sales agreement with Imperial Chemical Industries of England providing for joint sale of military explosives of both companies in Europe, Asia and South America.

Business considerations dictated the signing of the du Pont military sales agreement. But business arrangements sometimes turn out to conflict with national interests or national policies. Thus, when President Roosevelt proclaims an arms embargo on sale of arms and ammunition to Bolivia and Paraguay the du Pont Company may express its entire willingness to support loyally the policies of the United States government, but how does the intention pan out among its agents in the field?

Early in June 1934, a few days after the President's embargo proclamation, Nick Bates, the principal du Pont agent for South America, received an inquiry calling for quotations on 2000 tons of TNT, presumably for the government of Paraguay. Unable because of the embargo to answer the inquiry on behalf of du Pont, Bates promptly cabled Imperial Chemical Industries suggesting that the British firm quote its price to the agent in Buenos Aires. Under the sales agreement between the two companies du Pont receives a commission on all sales made by ICI in South America. Though this particular inquiry apparently did not result in a sale by the British company, du Pont agents are under obligation to promote the sales of a foreign corporation as well as their American employer.

BUSINESS considerations as well as diplomatic stupidity have played their part in the rearmament of Nazi Germany. While Downing Street and the Quai d'Orsay protest Hitler's open military preparations British, French and American commercial interests help to nullify Part V of the Versailles Treaty. British and American aviation companies have filled lucrative orders for airplanes and engines which may or may not be intended for Goering's air armada.

Three weeks after Hitler rode into power, in March 1933, the Pratt & Whitney Aircraft Company, manufacturers of airplane engines for the US Army and Navy signed an agreement with the Bavarian Motor Works of Munich, granting this firm the right to build Pratt & Whitney engines in Germany. The German company agreed to pay the American firm $200 for each engine built in Germany, and to make a quarterly report on the number produced. Perhaps the engines were for purely commercial use. But if they were, later developments were strangely suspicious. For before the first quarterly report the German firm demanded that the contract be modified to provide for a lump-sum payment which would not reveal the number of engines produced.

The activities of the arms merchant in pursuit of profits is the first chapter in the long story of munitions. The second chapter deals with governments preparing for war; governments lending aid and encouragement to the private munitions industry to play its part in the national defense scheme, and perfecting their elaborate mobilization plans for the next world conflagration.

Although armament firms are generally free to ply their trade without restriction, they are regarded by governments as integral parts of the military machine. That machine is the mass army backed by a regimented industry. War long since ceased to be an engagement between armed forces on the field of battle. In the somber words of our own War Department, it is:

a struggle in which each side tries to bring to bear against the enemy the coordinated power of every individual and every material resource at its command. The conflict extends from the soldier in the most front lines to the humblest citizen in the remotest hamlet in the rear.

In probing relations between governments and private munitions interests the Senate Committee has exposed, perhaps unwittingly, the central paradox of war for profits. For it has discovered, much to its own surprise, that the Army and Navy not only promote the traffic in arms, but serve in the role of "sales agents" to release their own military designs and processes and, in short, to arm the world—in order to encourage the development of a strong domestic industry in the interest of national defense.

There is, for example, the now famous Raleigh case in which the US War Department promised to release its latest designs of anti-aircraft material to assist the Driggs Automatic Ordnance Company, a private concern, to secure a large order from the Turkish government. Not to be outdone, the Navy Department offered the facilities of the cruiser Raleigh for an official inspection of the Driggs anti-aircraft guns, in the harbor at Constantinople, by a delegation of Turkish officials. The only disappointing incident of this transaction was the failure of the American company, despite this handsome cooperation, to secure the contract.

A few years ago the Polish government decided that it wanted an up-to-date powder factory. It approached agents of the du Pont Company with a proposal to build the plant and furnish the latest processes to enable it to produce the most efficient military propellants. When the proposition was put up to the War Department in Washington, the du Pont Company was advised that in the opinion of the Ordnance Bureau "it is vastly more important to encourage the du Pont Company to continue in the manufacture of propellants for military use than to protect secrets relating to manufacture."

Bewildered and perplexed by the long list of exhibits showing the sale of military equipment to foreign countries with the consent and approval of the War Department, one member of the Senate Committee was led to observe:

It seems to me that we now have the amazing proposition that when the United States perfects a new advantage in the art of self defense, we must sooner or later impart that knowledge to all the nations of the earth.... We must impart this advantageous information to our potential enemies, or our private munitions manufacturers in the United States will be unable to continue to arm us with this advantageous thing.

To which Senator Nye added:

It comes down to this—that we must arm the world under this practice so that we can have the capacity to defend ourselves in an emergency when and if the world decides to use our own devices against us.


Kay Davis, University of Virginia, © 2001-2003