Читать книгу Sovereign Soldiers - Grant Madsen - Страница 13

Chapter 3

The Army in a Time of Depression

Lucius Clay left the United States for Panama in July 1929. When he returned in July 1931, it seemed like a different country. In the intervening years America’s industrial production had dropped by more than 30 percent. “My work carried me all over,” Clay recalled, “… and particularly along the Monongahela River—which was the region that supplied Pittsburgh with its coal. And it was a scene of shocking desolation.”¹

The Great Depression was the most important economic event of the twentieth century. It had enormous political and social consequences for nearly every nation. Although scholars debated its causes almost from the start, in the last two decades a “greater consensus” has emerged about the most likely sources of the economic collapse. Economists generally agree that the unstable arrangement coming out of Versailles finally caught up to the world and expressed itself in the form of the century’s greatest economic downturn.²

Of course, it has taken many decades to come to the current consensus, and the current consensus is neither the first nor the most strongly held agreement among economists. A framework offered by the British economist John Maynard Keynes (discussed below) generated widespread agreement within the United States for several decades as to the cause and cure for the Great Depression—although it has fallen out of favor over the last few decades. What matters for this study, though, is the way the current consensus fits particularly well within the insights that ultimately came out of military government. Of course, economists working during the depression were familiar with the events and data that make up the current consensus—as were non-economists such as MacArthur, Eisenhower, and Clay. Nothing about the current view was hidden from past generations. But the economists working during and just after the depression saw the same events as less decisive and the same data as less relevant than recent economists feel. By contrast, military government came to see the same events and data as particularly critical to the stability of the global economy and in a way that dovetails with the current consensus. The surprising agreement between the occupiers in the late 1940s and today’s economists therefore justifies a discussion of the current consensus.

While the current consensus has many subplots, one plot plays the central role: Germany could not recover from the war and pay reparations at the same time, and this fact destabilized global finance. To get around the challenge of paying reparations while trying to modernize industry and recover from the war, German officials more or less deliberately resorted to a kind of Ponzi scheme. Since the United States ended the war with surplus gold, it became Germany’s largest creditor. By 1927, Americans had sent more than $1.5 billion to Germany, covering the $500 million in reparations installments along with an extra billion to buy everything from new factories to new opera houses. A new market in the United States for German municipal bonds helped funnel American savings to German municipalities, which received the lion’s share of American investment. In simplified form, through the 1920s Germany borrowed heavily from the United States to pay its reparation debts to France and England (while keeping some to rebuild its infrastructure). France and England then used reparations to repay war debts to the United States (while keeping some to rebuild infrastructure). In other words, the U.S. lent the money ultimately used to repay itself, with overall global debt growing with each turn.³

As the scheme persisted, several German officials thought they saw an opportunity in their growing dependence on American finance. “One must simply have enough debts,” explained Gustav Stresemann, the foreign minister. Indeed, “One must have so many debts that, if the debtor collapses, the creditor sees his own existence jeopardized.” In his version of too-big-to-fail, Stresemann imagined that, “These economic matters build bridges of political understanding and of future political support.”⁴ He hoped that the bridge would reach from Berlin to New York and on to Washington so that eventually the American government would feel obligated to protect Germany’s economic health in order to protect itself as creditor.

While Germany ran up its debt, many other countries worked to get back onto the gold standard. For much of the nineteenth century, the standard had facilitated global trade and economic growth. In war most countries had suspended it to have a freer hand in financing production. While a great deal can be (and has been) said about the gold standard, two features are worth focusing on here. First, it embodied particularly well the “invisible hand” of market relationships and, in this sense, had a kind of legitimacy for standing outside of politics. Just about everyone could understand how it worked since it generally followed principles of personal finance. If a country bought more than it sold on international markets, it experienced about the same consequences as individuals who bought more than they earned. For individuals, the consequence was frugal living; for nations, frugality meant less total money in circulation (what economists label a “forced” deflation) because money (gold) now belonged to another nation. In practical terms, when a nation ran out of gold, it usually suffered a recession and rising unemployment. To be “on gold” meant governments had no monetary policy as such; they followed “the market,” discarding “independent national [economic] objectives of their own.”⁵

Second, the gold standard signaled an acceptance of international norms. After World War I, norms appealed to many policymakers around the globe.⁶ More specifically, gold signaled an effort to make good on Woodrow Wilson’s vision of a global marketplace. Gold acted as a check on “independent national objectives,” which in the early twentieth century often expressed themselves in right-wing nationalism and militarism. Gold, in this sense, stood for peace rather than nationalist conflict.⁷

Unfortunately, returning to gold after the First World War created as many problems as it solved—particularly for the British. The world economy had changed during the war, and the pound should have devalued coming out of it. Yet British officials insisted on maintaining the pound’s prewar value. In reality, it forced the British economy into deflation and chronic recession. Depreciation could have helped revive the economy, only to make British war debt relatively larger. In the end, British officials stuck to the higher value of the pound despite the economic hardship.⁸

The British economy would have benefited from American investment to make its products more competitive. Indeed, nearly all of Europe needed American investment for the same reason. German municipalities managed to get a larger share of American loans because they promised (unrealistically) greater returns. Ultimately, though, European recovery often followed American investment, and this flow continued at least piecemeal until 1928, when no level of return competed with what the New York Stock Exchange offered.

Figure 3. Dow Jones Industrial Average, 1925–1930. Source: Federal Reserve Bank of St Louis, FRED Economic Data, Dow Jones Industrial Stock Price Index for United States (M1109BUSM293NNBR).

The Dow Jones rose impressively between 1925 and 1928, going up 64 percent—a large increase, but not out of step with the growing productivity of the American economy. It then spiraled an additional 82 percent in just one year, and this increase had little to do with rising productivity. The promise of such great returns caused money to flow into Wall Street from around the globe, adding fuel to the speculative fire and draining investment from everyone else. Thus, as the American market took off, the British, German—even the Japanese economy—slipped into recession.⁹

Surveying Wall Street at the end of 1928, president-elect Herbert Hoover grew nervous. He and the governors of the Federal Reserve decided to burst “the bubble.” The central bank raised interest rates from 3.5 percent at the end of 1927 to a high of 6.0 percent by the summer of 1929. The rate hike had the intended effect, and industrial output began to decline. Yet the stock market ignored the data and continued to go up until, famously, in October, it lost spectacularly.

Figure 4. U.S. bank loans, 1925–1941 (billions of U.S. dollars). Source: Federal Reserve System, Banking and Monetary Statistics, 1914–1941 (Washington, DC, 1941).

European central bankers, and particularly the British and Germans, met the market crash with enthusiasm. In theory, once Wall Street stopped siphoning gold from around the world, investment would return to them. Yet their expectations were frustrated because at that moment the global financial system lay under tremendous pressure. Banks around the world had begun to fail and had stopped lending altogether. Worse, as credit collapsed, the economy in many countries slipped from recession to depression.¹⁰

By 1930, the moment of truth came for the German economy. In October the former German financial official Hjalmar Schacht made a trip to the United States. He pleaded with the American people to accept a revision of reparations and forgive war debts. “Never before,” asserted Schacht, had “a conquering force first taken from the vanquished all that they had in colonies … and then demanded the conquered people … to pay still more.”¹¹ If America took the lead in debt and reparations forgiveness, Woodrow Wilson’s ideal might get one last chance to succeed. But the American press wanted to talk instead about the upstart Nazi Party. They wanted a sense of who Adolf Hitler was and how he had become so popular so quickly. Frustrated, Schacht explained, “You must not think that if you treat a people for ten years as the German people have been treated they will continue to smile.… If the German people are going to starve, there are going to be many more Hitlers.”¹²

Without American loans, German authorities announced they could not make the next installment of reparations. Without reparations, the British and French could not repay their debts to America. Seeing that the global system lay on the brink of collapse, Herbert Hoover declared a oneyear moratorium on reparations and war debts, finally acknowledging what European authorities had argued since 1919. Hoover hoped that with time the Germans, British, and the rest of Europe might turn their economies around. None did.

Unfortunately, reparations represented only part of the problem. German municipalities also started defaulting on their loans, causing additional shocks to the global banking system. To slow the financial crisis, Berlin applied exchange controls to prevent gold from leaving its banks, as did nearly all Central European countries (Czechoslovakia, Bulgaria, Romania, and Yugoslavia).¹³ By the end of summer, 1931, the Bank of London was near panic as gold drained from it as well. Seeing no other alternative, on September 20, the British left the gold standard. “The struggle to bring the British pound back to par after the World War,” wrote the New York Times, “will rank among the epic contests of world finance. That struggle has failed.”¹⁴ The value of the pound finally dropped, losing 20 percent against the dollar. Almost immediately Sweden, Norway, and Egypt followed England off of gold. Many countries began to negotiate exchange rates bilaterally. In response, the United States suffered a new wave of bank failures corresponding to the financial crises in Europe, killing what had looked like a modest recovery in the first part of 1931.

The combination of Hoover’s moratorium and Britian’s move off of gold seemed to indicate the time had finally arrived to rethink the whole issue of reparations and war debt. In the summer of 1932, in Lausanne, Switzerland, leaders from the principal European countries gathered and, in a “gentlemen’s agreement,” decided that they would set aside German reparations once the British and French had “satisfied” their obligations to the United States. “We are still ready to cancel all debts due us,” explained Neville Chamberlain, then chancellor of the exchequer, “If the United States should decide to cancel all debts due her.”¹⁵

The gentlemen’s agreement launched an intense debate within the Hoover administration. On one side sat President Hoover, who considered his moratorium strictly a temporary “depression measure.” By contrast, his secretary of state, Henry Stimson, felt forgiveness “might really be the beginning of a recovery.” In a long conversation, he urged Hoover to accept it “without fear or rancor.” The two argued back and forth until Hoover exploded. “The European nations [are] all in an iniquitous combine against us!”

A frustrated Stimson did not know what more to say. “If [you really feel] that way, we [are] indeed on such different ground that I … ought not to be [your] adviser.”¹⁶ He tried to resign.

In the end, Hoover refused to accept the resignation. But he also refused Stimson’s advice. The moratorium remained temporary, and the disagreement strained the two men’s relationship thereafter.

Ultimately, Europe settled the issue on its own. Germany defaulted on reparations, and when the 1932 war debt came due only the British paid in full. The next year another payment came due, and this time no one paid. American loans to Europe, whether for war or peace, had been a cause of, and ultimately a casualty of the depression.

As he often did in his long career, the journalist Walter Lippmann captured succinctly the transition that had occurred between 1919 and 1933. “The theory was,” wrote Lippmann of the thinking in 1919, “under free trade, national frontiers would mark off cultural and local interests, but that economic opportunity would not be determined by political boundaries.” Ideally, once “there were no great barriers to trade at the frontiers, the problem of the frontiers would cease to be so troublesome.” By 1933, that charter had failed. Rather than cooperate economically, the victors had “insisted upon payments from the defeated powers and upon payments from one another,” with “a destructive and deflationary effect upon world commerce.” Now, in the face of depression, all nations seemed to agree that governments “must organize industry and agriculture and finance to a much greater degree than they have ever been organized before.” To do this “it follows inevitably that the system must be protected against external forces that cannot be controlled”—that is, the domestic economy had to be shielded from the vicissitudes of global competition. Thus, the world had entered into a new phase, a “Second Reconstruction” that combined political nationalism with economic nationalism. “Along these general lines the Second Reconstruction is now being carried out,” he concluded. “Will it bring that peace and that prosperity which the First failed to establish? Who can say?”¹⁷

* * *

At the end of 1932, Franklin Roosevelt beat Herbert Hoover handily in the presidential election. As it turned out, MacArthur, Eisenhower, Clay, and Stimson all had front-row seats to the unfolding drama of the Roosevelt administration. MacArthur and Eisenhower had been in Washington for several years before the election. “He had greatly changed and matured since our former days in Washington,” MacArthur said of Roosevelt in 1933.¹⁸ Clay had coincidentally received orders to report to Washington almost immediately after Roosevelt’s inaugural. He would supervise all river and harbor projects for the Army Corps of Engineers. For the first time (but not the last), all three future proconsuls found themselves together in the same place. Stimson ultimately joined the Roosevelt administration for a second stint as secretary of war in 1940.

In solving the Great Depression, Roosevelt tended to play to his strengths. He was first and foremost a politician, not an economist, and he tended to answer economic questions in political rather than technical terms. “If I read the temper of our people correctly,” he explained in his inaugural, “we now realize as we have never realized before our interdependence on each other; that we cannot merely take but we must give as well; that if we are to go forward, we must move as a trained and loyal army willing to sacrifice for the good of a common discipline.”¹⁹

Roosevelt’s choice of metaphor, suggesting that the country must become a “trained and loyal army,” became embodied in the National Industrial Recovery and Agricultural Adjustment Acts. Each aimed to create giant cartels in every segment of the economy as a means to rid it of “ruinous” competition. “The jig is up. The cat is out of the bag. There is no invisible hand. There never was,” wrote Rexford Tugwell, a member of Roosevelt’s “Brains Trust” and later an official in the agriculture department. “Time was when the anarchy of the competitive struggle was not too costly. Today it is tragically wasteful. It leads to disaster. We must now supply a real and visible guiding hand to do the task which that mythical, nonexistent, invisible agency was supposed to perform, but never did.”²⁰

For their part, Eisenhower and Clay both held high hopes that Roosevelt could end the depression. Clay had “followed the election very closely, and I can remember sitting up election night listening to the returns.… I was thrilled at the election results.”²¹ For Eisenhower, the early New Deal’s rhetoric proved intoxicating. “Congress met and gave the Pres. extraordinary powers over banking,” Eisenhower wrote in 1933. “Now if they’ll just do the same with respect to law enforcement, federal expenditures, trans. systems, there will be such a revival of confidence that things will begin to move.”²² Later that year he noted, “The purpose of the [National Recovery Administration] is to establish codes of business practice among our various trades associations, with the idea of … raising prices … and wages for labor. As in all other ideas of the President’s that have been translated into actual national effort—the announced objective is a most desirable one.”²³

In large measure, Eisenhower embraced the early New Deal because its intellectual genealogy included a common progenitor of his own—the War Industries Board headed by Bernard Baruch. Indeed, Baruch and other members of that board proved deeply influential in the design of the National Recovery Administration (NRA) and in the general thinking about the economy that permeated Washington in Roosevelt’s first years.²⁴ Eisenhower sensed the way these ideas had come of age. As he noted, “a course that three years ago would have been unquestioned, either by the govt. or by any private citizen” had fallen out of favor. Now “unity of action is essential to success in the current struggle.” Indeed, Eisenhower felt that “individual right must be subordinated to public good”—that “we must conform to the President’s program.… Otherwise dissension, confusion and partisan politics will ruin us.”²⁵

Yet for all the talk of American society functioning like an army, Roosevelt had little interest in helping the actual army. Looking to make good on promises to eliminate waste in the federal government, he sought to trim two-fifths of the army’s appropriation, requiring the dismissal of about twelve thousand men. He also sought to “furlough at half-pay any army officers the President may select.”²⁶

MacArthur felt compelled to speak up. In a meeting soon after the inauguration he confronted Roosevelt. “The world situation [has] become too dangerous to allow a weakening of our defense.” Japan, Germany, and Italy all showed signs of rearming. The American army had already been cut to the bone. “The country’s safety [is] at stake,” MacArthur said bluntly.

Roosevelt dug in. He ridiculed MacArthur’s concerns and mocked his tone. Roosevelt had no interest in sparing the army, and did not appreciate MacArthur’s second-guessing.

The two went back and forth for a few minutes until MacArthur finally lost his cool: “When we [have] lost the next war, and an American boy, lying in the mud with an enemy bayonet through his belly and an enemy foot on his dying throat, [has] spat out his last curse, I [want] the name not to be MacArthur, but Roosevelt.”

“You must not talk that way to the President!” Roosevelt boomed.

The room went silent. MacArthur knew he had overstepped.

“I’m sorry,” he said. “[You have] my resignation as Chief of Staff.” His career, he assumed, had come to an end.

As he turned to leave, he heard a conciliating voice: “Don’t be foolish, Douglas; you and the budget must get together on this.” Roosevelt blinked first. Both men took deep breaths and agreed to work together. Then MacArthur left the president’s office, went to the White House steps, and threw up.²⁷

The underlying message, though, quickly became clear. To protect itself, the army needed to become relevant to the New Deal. Perhaps because his father had served for years in Congress, Clay intuited the political reality more quickly than anyone else. He saw in the proliferating New Deal relief agencies—the Public Works Administration (PWA) and the Works Progress Administration (WPA)—an opportunity. None of these had a bureaucratic infrastructure or list of potential projects to employ relief workers. The “Corps of Engineers was going to have to expand and take on a great deal of this work,” he explained, “because we were the only ones … that had programs and projects on the drawing board.” Given time, the New Deal agencies could figure this out, and when they did, they might eventually replace the corps as the federal government’s construction agency. Clay decided to approach Harry Hopkins, head of WPA, about involving the corps in its projects. “We would like to lend to you, in each of your regions, a capable, competent Engineer officer who would bring with him a capable and competent chief clerk who knows how to disperse and set up public funds, just to get you going.”

Hopkins was suspicious: To whom would these people report? Did the corps aim to steal the role just given to the WPA?

“No,” Clay explained. “These people would be reporting directly to [you]. They would be [your] people.”²⁸

In the end, Hopkins warmed to the idea. In particular, he liked Clay. As the corps became involved in the WPA, the Public Works Administration began to look to the army for talent to take on its projects. Eventually, it found Eisenhower, who jumped at the idea of joining the relief agency, calling it a “marvelous” opportunity. But MacArthur killed it. He had come to depend upon Eisenhower, and, so long as MacArthur had a voice, Eisenhower would work for no one else. Yet MacArthur recognized Clay’s insight that the more the military helped the New Deal, the safer its appropriations. He allowed Eisenhower the task of overseeing Civilian Conservation Corps camps from time to time.²⁹

As the New Deal unfolded, Clay became increasingly enmeshed in its politics. Because of his father, he had both Democratic Party connections and a sense of how Congress functioned, and so he often testified on behalf of the Corps of Engineers before congressional committees. Eventually, he took charge of specific relief projects. Between lobbying and testifying he became the main liaison between the military, Congress, and the National Emergency Council, (a kind of clearinghouse for New Deal domestic policy). On the council he became close to many of the big names in Roosevelt’s administration: Chester Davis, General Hugh Johnson, Harold Ickes, Donald Richberg, and Frances Perkins.³⁰

In the meantime, Roosevelt and MacArthur also managed a working relationship. To MacArthur’s surprise, Roosevelt asked his thoughts on the many social programs emerging from the New Deal. Eventually, MacArthur asked, “Why is it, Mr. President, that you frequently inquire my opinion regarding the social reforms under consideration, matters about which I am certainly no authority, but pay little attention to my views on the military?”

“Douglas,” Roosevelt replied, “I don’t bring these questions up for your advice but for your reactions.”³¹

By the time the Supreme Court invalidated large parts of the New Deal in the spring of 1935, MacArthur and Eisenhower’s destiny lay elsewhere. The Philippine Independence Act (often called the Tydings-McDuffie Act of 1934) instructed Filipinos to draft their own constitution, “republican in form,” containing “a bill of rights” and “submitted to the people of the Philippine Islands for their ratification or rejection.”³² Once drafted, and after a ten-year “commonwealth period,” the new constitution would go into full effect and the Philippines would become fully independent. Many Filipinos went to work immediately and established their own constitution at the end of 1935.

Congress wanted to give the Philippines independence, but worried for the islands’ safety as Japan aggressively expanded its empire into China. “Can we suppose that Japan, suffering from a lack of raw materials and from excessive over-population will not be interested in the fate of these islands eventually?” asked an observer in 1935.³³ The “commonwealth period” aimed to provide cover while the Filipinos developed a capable selfdefense. When Manuel Quezon became the first president of the commonwealth government, he turned to Douglas MacArthur for advice. “General,” he asked, “in your professional opinion, can the Philippine Islands defend themselves in an independent status?”

“I know they can,” MacArthur replied.

“If the matter can be arranged with the President of the United States,” he continued, “will you accept the post as Military Adviser, taking charge of all defensive preparation in the Islands?”

MacArthur answered “in the enthusiastic affirmative.”³⁴

No sooner had MacArthur agreed to move to Manila than he made Eisenhower part of his team. “You and I have worked together a long time,” he explained. “I don’t want to bring in someone new.”³⁵

The Philippine assignment held several advantages for American soldiers. Most important, in a time of depression they could draw two salaries: one from the Philippine commonwealth, the other their regular American pay. In fact, MacArthur’s combined salary from the United States and the Philippines made him the highest-paid military leader in the world (at about $4,000 a year).³⁶ The assignment also allowed MacArthur to hold the rank of field marshal (a unique opportunity since the American military did not offer this option).

MacArthur landed in Manila, hoping to build an elaborate army of thirty divisions (the American army at that time consisted of three). Eisenhower’s job quickly became finding the means to build MacArthur’s army from the limited resources available to a poor nation in the midst of a global depression. It proved impossible. “The General is more and more indulging in a habit of damning everybody,” Eisenhower confided, “who disagrees with him over any detail, in extravagant, sometimes almost hysterical fashion.” He “now … seems to consider that the combined use of his rank, a stream of malapropos, and a refusal to permit the presentation of opposing opinion will, by silencing his subordinates, establish also the validity of his contentions.” However, as Eisenhower observed, the Philippines lacked everything from ammunition to training facilities. “He makes nasty cracks about ‘technicians’ and ‘small-minded people’ when we try and show that we are simply arguing from the standpoint of the amount of money available. I’m coming to believe,” he concluded, “that the 30 Div. Plan is adopted, not because he believes there is any honest possibility of attaining it, but to justify [his] early appointment [as] Field Marshal.”³⁷

Complicating matters, pleas for more resources fell on deaf ears in Washington. Even simple requests, such as obtaining obsolete rifles from the U.S. Army, stalled in a bureaucratic limbo. Eisenhower pressed MacArthur to return to the United States to lobby for weaponry and anything else that would help train the Filipino army. But MacArthur resisted.³⁸ Instead, through much of 1936 he instructed his staff to plan for a grand Philippine army whereupon Eisenhower would explain that the Philippines could not afford it. “I argue these points with more heat and persistency” observed Eisenhower, “consequently I come in for the more severe criticism,” usually in the form of “regular shouting tirades” from MacArthur.³⁹

With Quezon in tow, MacArthur finally traveled to the United States to plead the cause of Philippine preparedness in early 1937. The trip went badly. Roosevelt had grown cool toward MacArthur after he left Washington and avoided MacArthur’s requests to meet. He refused to see Quezon at all. Eventually, MacArthur convinced Roosevelt to hold a short interview with Quezon only to be horrified as Quezon harangued the president for five hours, demanding immediate independence. Roosevelt refused. Worse, MacArthur failed to get any promises on matériel for the Philippines.⁴⁰

Yet when he returned to Manila, MacArthur announced success. First, he explained that the Army Corps of Engineers had given him several engineers to assess the archipelago’s suitability for hydroelectric dams. As it turned out, Clay belonged to the group. It “looked like an ideal opportunity,” he explained.⁴¹ By this point a fixture in the Washington social scene, the Washington Post covered Clay’s plans to depart on its “social page.”⁴²

Second, MacArthur announced that, while no additional funds would come from Washington, he had obtained a different windfall. Quezon had just promised him “oil money” (revenue generated from a tax on coconut oil) that would allow a tripling of the equipment budget. It also provided for the constructing of new office space for the “use of engineers that are to come over in October [that is, Clay].” He then revealed that his “real purpose in having [the engineers] here under my thumb is that, though paid by funds of the [Philippine] Power Development Corporation, I can use them to help us out whenever they are not busy on other work.”⁴³ With this new information in mind, Eisenhower went to work on a revised budget for submission to the Philippine National Assembly with more army appropriations. He submitted it in August 1937.

Things went badly from there. Eisenhower began to hear, to his surprise, that Quezon had perhaps not promised MacArthur any “oil money” and therefore did not anticipate a revised budget calling for an expanded equipment appropriation. In fact, by October Quezon had called MacArthur on the carpet. He could not understand why the budget ultimately came to so much more than MacArthur had apparently initially promised.⁴⁴

MacArthur responded that he had “never approved” of the plan for thirty divisions “or even suggested it except as an expression of his hopes and ambitions.” Indeed, “all portions of the plan that exceed the” original estimate were “nothing but the products of [his staff] … without approval from him.” If the obvious dissembling were not enough, MacArthur then called together his staff (including Eisenhower) and reprimanded them for sending the budget without his approval, despite (in Eisenhower’s words) every “scrap of auxiliary evidence, letters, partial plans presented to the Gen., requisitions, and the direct testimony,” indicating the literal opposite of his claim.

Eisenhower could not take it. He “challenged” MacArthur “to show that I’d done anything not calculated to further his plans.” MacArthur moderated. He made clear “his ‘personal’ confidence in” his staff. He even “accepted much of the blame for the misunderstanding” even while he “‘shouted down’ any real explanation” of the situation—to which Eisenhower wrote in his journal, “But it was not a misunderstanding! It is a deliberate scuttling of one plan … while he adopts another one, which in its concrete expression, at least, I’ve never even heard of before.”

The episode finally broke the relationship between the two men. Eisenhower confided that he must “decide soon whether I can go much further with a person who, either consciously or unconsciously, deceives his boss [Quezon], his subordinates and himself (probably) so incessantly as he does.” In reality, Eisenhower had “remained on this job, not because of the Gen.—but in spite of him. I’ve got interested in this riddle of whether or not we can develop a [Philippine War Department] and an army capable of running itself.… But now I’m at a cross road.”⁴⁵

Just as Eisenhower debated whether to demand a transfer away from MacArthur, Clay arrived in Manila and took up residence in the same hotel as the Eisenhowers and MacArthurs. For the next year, the three future military governors lived in the same building. Quickly, Clay developed a working relationship with MacArthur (“General MacArthur never came to the office but about an hour a day,” he recalled, but every “once in a while, he’d call me up and we would go to a prize fight. He loved prize fights”).⁴⁶ More important, he connected with Eisenhower. “We were great friends,” Clay said.⁴⁷ “I had known Eisenhower socially in Washington, but it was not until the Philippines that I came in close contact with him. And I became very close to [him] and remained so until his death.”⁴⁸ Together, they organized maneuvers for U.S. and Filipino soldiers, developed an engineering school, and did their best to create a modern Philippine army. Ultimately, both men concluded the Philippines needed many things, new dams being the least important of them.

At the same time, Quezon appeared to have realized the truth about the budget. Through 1937 he reached out to Eisenhower and treated him as an informal presidential adviser, asking his thoughts on everything from “taxes [to] education, honesty in government, and other [policy] subjects.” He “seemed to enjoy” the discussions. “Certainly I did,” recalled Eisenhower.⁴⁹ While the difficulties with MacArthur remained, Eisenhower’s growing responsibilities and friendships made the work interesting enough that he decided to stay in the Philippines after all.

In many ways, though, his growing involvement in Philippine politics led to the final break with MacArthur. A “group of Filipino legislators,” recalled Clay, “felt that they could turn over [MacArthur’s] job of military advisor to Colonel Eisenhower and save the Philippine government a great deal of money.” Eisenhower earned much less and paid his own rent (unlike MacArthur who lived in the penthouse of the Manila Hotel at government expense). “I know that … Colonel Eisenhower had no part in this, and that he told these Filipino legislators that if they proceeded any further he would just have to ask to be sent home.” But their ideas did not remain secret. When it finally came to “General MacArthur’s attention … he just couldn’t believe that this could have happened … unless it had been instigated by Colonel Eisenhower.”⁵⁰

While Eisenhower left on a long-deserved vacation, MacArthur demoted him, prohibited him from contact with Quezon, and relegated him to work that kept him away from the National Assembly. Upon his return Eisenhower learned of these new restrictions, and attributed the matter to MacArthur’s jealousy and thin skin. “He’d like to occupy a throne room surrounded by experts in flattery,” he wrote in his journal.⁵¹ Recognizing that his career had come to a standstill, Eisenhower once again reached out to Fox Conner, and once again Conner provided. Within a few months, Eisenhower received orders taking him back to the States. Quezon begged him to stay. But at that point, he told Quezon, “No amount of money can make me change my mind.”⁵²

Clay also returned to the States about this time. Congress had approved construction of the Denison Dam along the Red River between Texas and Oklahoma. When completed, it would be the world’s largest rolled earth–filled dam, and something Clay had wanted to work on “for a long, long time.”⁵³ In the summer of 1938, when he learned of the opportunity to build the dam, he jumped at it.⁵⁴

In retrospect, the saga of Clay, Eisenhower, and MacArthur in Manila reads like so much court intrigue involving men who, in the near future, would hold the fates of millions in their hands. Certainly, the personality conflict revealed a lot about the character of Eisenhower and MacArthur as well as Clay, who managed to become a confidant of both men. But to focus on personality, tempting as it is, masks the important substantive dispute that first brought them into conflict.

For his part, MacArthur revealed an approach to military service driven by a sense of mission and a burning desire for success, and he could take great risks to accomplish that mission. This instinct led him to bravely challenge President Roosevelt’s planned cut of army personnel in 1933, but it led just as easily to his ham-fisted effort to sneak a bigger military budget past Manuel Quezon. At times, his willingness to treat every mission as a pivotal moment in world history reduced him almost to caricature; yet his instinct to succeed at all costs and seek almost apocalyptic tests of his character fit a kind of military ethos and as often as not ended with stunning victories.

By contrast, Eisenhower brought a sensibility to his work deeply attuned to the limits of his environment. He coupled this sensibility with a willingness to consider what military theorists subsequently called “grand strategy”—namely, the use of all the resources available to a nation (economic, moral, political) along with military might—and the way that all resources could be deployed directly or indirectly.⁵⁵ The eminent nineteenth-century German military theorist Carl von Clausewitz famously argued that “war is merely the continuation of politics by other means.”⁵⁶ The eminent nineteenth-century German statesman Otto von Bismarck famously noted that “politics is the art of the possible.” Eisenhower absorbed both insights in thinking of war as the art of the possible.

In the postwar years, these two Americans—MacArthur and Eisenhower—would embody contrasting visions of how America should fight the Cold War. Their personal inclinations would result in a political rivalry that would ultimately shape more than their increasingly strained friendship. But in the meantime, while Clay began work on his dam and Eisenhower traveled home, war erupted in Europe. Most Americans wanted to stay free of the conflict, but Roosevelt began to see American entry as inevitable. In foreign policy he tended to gather information informally through anecdote and conversation, assuming this gave him a better sense of a country than he could receive from his own State Department.⁵⁷ His feelings toward Japan proved a telling example. While Roosevelt attended Harvard in 1902, a Japanese student showed him a map outlining a twelve-step plan for annexing Korea, Manchuria, Australia, and New Zealand, and eventually all Asian people. Roosevelt related the story years later, as if to show that he learned more in one afternoon than what his own state department had discovered through the decade of the 1930s.⁵⁸

In June 1940, he surprised many by announcing a shakeup in both the Navy and War Departments. The Republican Frank Knox would become secretary of the navy. Roosevelt then turned to another Republican, Henry Stimson to become the secretary of war for the second time. Stimson had just turned seventy-two and with Roosevelt in office assumed he had finished his public career. Yet here he was, again, in the executive branch—working for a Democrat, no less. Roosevelt made the appointments “in behalf of national defense” and as a means to create “national solidarity in a time of world crisis.”⁵⁹ Americans generally liked the approach: over 70 percent approved Stimson’s appointment in a Gallup poll taken just after his nomination.⁶⁰