The Offstage Superpowers

As noted above, one of the greatest difficulties which faced British and French decision-makers as they wrestled with the diplomatic and strategical challenges of the 1930s was the uncertainty which surrounded the stance of those two giant and somewhat detached Powers, Russia and the United States. Was it worth making further efforts to persuade them into an alliance against the fascist states, even if this involved substantial concessions to Moscow’s and Washington’s requirements, and provoked criticism at home? Which of these should be wooed more ardently, and in what respects? Would an open move, say, toward Russia merely provoke rather than deter a German or Japanese reaction? From the viewpoint of Berlin and Tokyo (less so of Rome), the attitude of Russia and the United States was equally important. Would these Powers remain aloof while Hitler reordered the boundaries of central Europe? How would they react to further Japanese expansion in China or operations against the old European empires in Southeast Asia? Would the United States give at least economic aid to the western democracies, as occurred between 1914 and 1917? And would the USSR be bought off, by economic and territorial deals? Finally, did those two enigmatic, introspective politiesreally matter? How strong were they, in fact? How important in the changing international order?

It was harder to attempt an answer to such questions in the case of a “closed” society like the Soviet Union. Nonetheless the outlines of Soviet economic growth and military power in that era now seem evident. The first and most obvious point was that Russia had been dreadfully reduced in strength, more than any of the other Great Powers, by the 1914–1918 conflict and then by the revolution and civil war. Its population had plummeted from 171 million in 1914 to 132 million in 1921. The loss of Poland, Finland, and the Baltic states removed many of the country’s industrial plants, railways, and farms, and the prolonged fighting destroyed much that remained. The stupendous decline in manufacturing—down to 13 percent of its 1913 output by 1920—concealed the even greater collapse of certain key commodities: “thus only 1.6 percent of the prewar iron ore was being produced, 2.4 percent of the pig iron, 4.0 percent of the steel, and 5 percent of the cotton.”¹²⁶ Foreign trade had disappeared altogether, the gross yield of crops was less than half the prewar figure, and per capita national income declined by more than 60 percent to a truly horrendous level. However, since the extreme severity of these falls was chiefly caused by the social and political chaos of the years 1917–1921, it followed that the establishment of Soviet rule (or indeed any rule) was bound to effect a recovery of sorts. The prewar and wartime development of Russian industry had bequeathed to the Bolsheviks an array of factories, railway works, and steel mills. There was a basic infrastructure of railways, roads, and telegraph lines. There were industrial workers who could return to the factories once the civil war was over. And there was an established pattern of agricultural production, and the sale of foodstuffs to the towns and cities, which could be restored once Lenin had decided (under the New Economic Policy of 1921) to abandon the fruitless attempts to “communize” the peasantry and instead to permit individual farming. By 1926, therefore, agricultural output had returned to its prewar level, followed two years later by industrial output. The war and revolution had cost Russia thirteen years of economic growth, but it now stood ready to resume its upward surge.

But that “surge” was unlikely to be swift enough—certainly not to the increasingly autocratic Stalin—while Russia labored under its traditional economic weaknesses. With no foreign investment available, capital had somehow to be raised from domestic sources to finance the development of large-scale industry and the creation of substantial armed forces in a hostile world. Given the elimination of a middle class, which could either have been encouraged to create capital or plundered for its existing wealth; given, too, the fact that 78 percent of Russian population (1926) remained in a bottom-heavy agricultural sector, which was still overwhelmingly in private hands, there seemed to Stalin only one way for the state to raise money and simultaneously increase the switch from farming to industry: that is, by the collectivization of agriculture, forcing the peasants into communes, destroying the kulaks, controlling the output from the land, and fixing both the wages paid to farm workers and the (far higher) prices of food for resale. In a frighteningly draconian way, the state thus interposed itself between rural producers and urban consumers, and extracted money from each to a degree that the czarist regime had never dared to do. This was accentuated by the deliberate price inflation, a variety of taxes and dues, and the pressures to show one’s loyalty by buying state bonds. The overall result, represented in the crude macroeconomic statistics, was that the share of Russian GNP devoted to private consumption, which in other countries going through the “takeoff” to industrialization was around 80 percent, was driven down to the appalling level of 51 or 52 percent.¹²⁷

There were two contrary, yet predictable economic consequences from this extraordinary attempt at a socialist “command economy.” The first was the catastrophic decline in Soviet agricultural production, as kulaks (and others) resisted the forced collectivization and then were eliminated. The horrific preemptive slaughter of farm animals—“the number of horses fell from 33.5 million in 1928 to 16.6 million in 1935; and the number of cattle from 70.5 to 38.4 million”¹²⁸—in turn produced a staggering decline in meat and grain outputs and in an already miserable standard of living, not to be recovered until Khrushchev’s time. Esoteric calculations have been attempted as to the proportion of the national income which was later returned to agriculture in the form of tractors or electrification—as opposed to the amount siphoned off by collectivization and price controls¹²⁹—but this is an arcane exercise for our purposes, since (for example) tractor factories, once established, were designed to be converted to the production of light tanks; peasants, of course, were not so useful in checking the Wehrmacht. What was incontrovertible was that for the moment, Soviet agricultural output collapsed. The casualties, especially during the 1933 famine, could be reckoned in millions of lives. When output began to recover in the late 1930s, it was expedited by hundreds of thousands of tractors, hordes of agricultural scientists, and armies of tightly controlled collectives. But the cost, in human terms, was immeasurable.

The second consequence was altogether brighter, at least for the purposes of Soviet economic-military power. Having driven private consumption’s share of the GNP down to a level probably unmatched in modern history—and certainly far lower than, say, the Nazis could ever contemplate in Germany—the USSR was able to deploy the fantastic proportion of around 25 percent of GNP for industrial investment and still possess considerable sums for education, science, and the armed services. While the workplace of much of the Russian people was being transformed at a staggering rate, with the number employed in agriculture dropping from 71 percent to 51 percent in the twelve years 1928–1940, that population was also being educated at an unprecedented pace. This was vital at two levels, since Russia had always suffered—in comparison, say, with Germany or the United States—from having a poorly trained and illiterate industrial work force, and in possessing only a minuscule number of engineers, scientists, and managers necessary for the higher direction and steady improvement of the manufacturing sector. With millions of workers now being trained, either in factory schools or in technical colleges, and then (slightly later) with a vast expansion in university numbers, the country was at last acquiring the trained cadres necessary for sustained growth; the number of graduate engineers in the “national economy” rose, for example, from 47,000 in 1928 to 289,900 in 1941.¹³⁰ Many of the figures touted by Soviet propagandists in this period were doubtless inflated and concealed various weak points, but the deliberate allocation of resources to growth was unquestionable. So, too, was the creation of enormous new power plants, steelworks, and factories beyond the Urals, invulnerable to attack from either the West or Japan.

The resulting upturn in manufacturing output and national income—even if one accepts the more cautious estimates—was something unprecedented in the history of industrialization. Because the actual volume and value of output in earlier years (e.g., 1913, let alone 1920) was so low, the percentage changes are almost meaningless—even if Table 28 above serves the useful point of showing how the USSR’s manufacturing production was expanding during the Great Depression. However, if one examines only the period of the two Five-Year Plans (1928 to 1937), Russian national income rose from 24.4 to 96.3 billion rubles, coal output increased from 35.4 to 128 million tons and steel production from 4 to 17.7 million tons, electricity output rose sevenfold, machine-tool figures over twentyfold, and tractors nearly fortyfold.¹³¹ By the late 1930s, indeed, Russia’s industrial output had not only soared well past that of France, Japan, and Italy but had probably overtaken Britain’s as well.¹³²

Behind this impressive buildup, however, there still lurked many deficiencies. Although farm output slowly rose in the mid-1930s, Russian agriculture was now less capable than before of feeding the nation, let alone producing a surplus for export; and the yields per acre were still appallingly low. Despite fresh investment in railways, the communications system remained primitive and inadequate for the country’s growing needs. In many industries there was a heavy dependence upon foreign firms and foreign expertise, especially from the United States. The “gigantism” of the plants and of the entire manufacturing processes made difficult any swift adjustments of the product mix or the introduction of new designs. There were inevitable bottlenecks, too, because the planned expansion of certain industries did not match the existing stocks of raw materials or skilled manpower. After 1937, the reorientation of the Soviet economy toward a massive armament program was bound to affect industrial continuity and to distort the earlier planning. Above all, there were the great purges. Whatever the reasons for Stalin’s manic, paranoid assault upon so many of his own people, the economic results were serious: “civil servants, managers, technicians, statisticians, even foremen”¹³³ were swept away into the camps, making Russia’s shortage of trained personnel more acute than ever. While the terror no doubt drove many to demonstrate a Stakhanovite loyalty to the system, it also greatly inhibited innovation, experimentation, open discussion, and constructive criticism: “the simplest thing to do was to avoid responsibility, to seek approval from one’s superior for any act, to obey mechanically any order received, regardless of local conditions.”¹³⁴ It saved one’s skin; but it did not help the growth of a complex economy.

Having been born out of a war, and feeling acutely threatened by potential enemies—Poland, Japan, Britain—the USSR devoted a large share of the state budget (12–16 percent) to defense expenditures for much of the 1920s. That share fell away during the early years of the first Five-Year Plan, by which time the regular Soviet armed forces had settled down to about 600,000 men, backed by a large but inefficient militia twice that size. The Manchurian crisis and Hitler’s accession to power led to swift increases in the size of the army, to 940,000 in 1934 and 1.3 million in 1935. With the rise in industrial output and national income deriving from the Five-Year Plans, large numbers of tanks and aircraft were built. Innovative officers around Tukhachevsky were willing to study (if not fully accept) ideas from Douhet, Fuller, Liddell Hart, Guderian, and other western theorists of warfare, and by the early 1930s the USSR possessed not only a tank army but also a large paratroop force. While the Soviet navy remained small and ineffective, a large aircraft industry was created in the late 1920s, which for a while produced more planes each year than all the other powers combined (see Table 29).

Table 29. Aircraft Production of the Powers, 1932–1939¹³⁵

But these figures, too, concealed alarming weaknesses. The predictable corollary of Russian “gigantism” was an excessive emphasis upon quantity. Given the attributes of a command economy, this had resulted in the production of enormous numbers of aircraft and tanks by the early 1930s; by 1932, indeed, the USSR was producing over 3,000 tanks and over 2,500 aircraft—fantastically more than any other country in the world. Given the tremendous growth of the regular army after 1934, it must have been extraordinarily difficult to find sufficient highly trained officers and NCOs to supervise the tank battalions and air squadrons. It was even more difficult, in a country with a surplus of peasants and desperately short of skilled workers, to man a modern army and air force; despite the massive educational program, the country’s chief weakness in the 1930s probably still lay in the poor training of many of its workers and soldiers. Furthermore, Russia, like France, was a victim of heavy investment in aircraft and tank types of the early 1930s. When the Spanish Civil War showed the limits, in speed, maneuverability, range, and toughness, of these first-generation weapons, the race to build faster aircraft and more powerful tanks was accelerated. But the Soviet arms industry, like a large vessel at sea, could not change course swiftly; and it seemed folly to stop production on existing types while newer models were being built and tested. (In this connection, it is interesting to note that “of the 24,000 Russian tanks operational in June 1941, only 967 were of a new design equivalent or superior to the German tanks of that time.”)¹³⁶ On top of this, there came the purges. The decapitation of the Red Army—90 percent of all generals and 80 percent of all colonels suffered in Stalin’s manic drive—not only had the overall effect of destroying so many trained officers, but had specific results which badly hurt the armed forces. By wiping out Tukhachevsky and the “modern warfare” enthusiasts, by eliminating those who studied German methods and British theories, the purges left the army in the hands of such politically safe but intellectually retarded figures as Voroshilov and Kuluk. One early result was the disbanding of the seven mechanized corps, a decision influenced by the argument that the Spanish Civil War had shown that tank formations could play no independent offensive role on the battlefield and that the vehicles should be distributed to rifle battalions in order to support the infantry. In much the same way it was decided that the TB-3 strategic bombers were of little use to the USSR.

With much of its air force obsolescent and its armored units disbanded, with the services cowed into blind obedience by the purges, Russia was much weaker at the end of the 1930s than it had been five or ten years earlier—and in the meantime both Germany and Japan had greatly increased their arms output and were becoming more aggressive. The post-1937 Five-Year Plan clearly involved an enormous arms buildup, equal to and in many areas—e.g., aircraft production—larger than Germany’s own. But until that investment had translated itself into far larger and better-equipped armed forces, Stalin felt Russia to be passing through a “danger zone” at least as threatening as the years 1919–1922. These external circumstances help explain the various changes in Soviet diplomacy during the 1930s. Worried by the Japanese aggression in Manchuria and perhaps even more by Hitler’s Germany, Stalin faced the prospect of a potential two-front war in theaters thousands of miles apart (exactly the strategical dilemma which paralyzed British decision-makers). Yet his diplomatic tacking toward the West, which included Russia’s 1934 entry into the League of Nations and the 1935 treaties with France and Czechoslovakia, did not bring the desired increase in collective security. Without a Polish agreement, there was really little Russia could do to aid France or Czechoslovakia—and vice versa. And the British frowned at these efforts to create a diplomatic “popular front” against Germany, which in part explains Stalin’s caution during the Spanish Civil War; a triumphant socialist republic in Spain, Moscow feared, might drive Britain and France to the right, as well as embroil Russia in open conflict with Franco’s supporters, Italy and Germany.

By 1938–1939, the external situation must have appeared more threatening than ever in Stalin’s eyes (which makes his purges even more foolish and inexplicable). The Munich settlement not only seemed to confirm Hitler’s ambitions in east-central Europe but—more worryingly—revealed that the West was not prepared to oppose them and might indeed prefer to divert German energies farther eastward. Since these two years also saw substantial border clashes between Soviet and Japanese armies in the Far East (necessitating the heavy reinforcement of the Russian divisions in Siberia), it was not surprising that Stalin, too, decided to follow an “appeasement” policy toward Berlin even if that meant sitting down with his ideological foe. Given the USSR’s own political ambitions in eastern Europe, Moscow had far fewer reservations about a carving up of the independent states in that region, provided that its own share was substantial. The surprise Nazi-Soviet pact of August 1939 at least provided Russia with a buffer zone on its western border and more time for rearmament while the West fought Germany in consequence of Hitler’s attack upon Poland. Feeding morsels to the crocodile (to use Churchill’s phrase) seemed much better than being devoured by it.¹³⁷

All this makes it inordinately difficult to measure Soviet power by the end of the 1930s, especially since statistics on “relative war potentials”¹³⁸ reflect neither internal morale nor quality of armed forces nor geographical position. Clearly, the Red Army no longer resembled that “formidable modern force of great weight with advanced equipment and exceptionally tough fighting men” (except in the latter respect) which Mackintosh described the 1936 army as being;¹³⁹ but how far it had lost ground was not clear. The 1939–1940 “Winter War” against Finland appeared to confirm its precipitous decline, yet the less-well-known 1939 clashes with Japan at Nomonhan showed a cleverly led, modern force in action.¹⁴⁰ It is also evident that Stalin was aghast at the devastating Blitzkrieg-style victories of the German army in 1940, and more than ever anxious not to provoke Hitler into a war. His other great and obvious worry was where Tokyo would decide to strike in the East—not that Japan was so mortal a foe, but the defense of Siberia was logistically very exhausting and would further weaken Russia’s capacity against the German threat. The swift recall of Zhukov’s armor, to join in the invasion of eastern Poland in September 1939, once a border truce in the east had been arranged with Japan, was illustrative of this precarious strategical juggling act.¹⁴¹ On the other hand, by that time the damage inflicted upon the Red Army was being hastily repaired and its numbers increased (to 4,320,000 men by 1941), the entire Soviet economy was being deployed toward war production, massive new factories were being built in central Russia, and improved aircraft and tanks (including the formidable T-34) were being tested. The 16.5 percent of the budget allocated to defense spending in 1937 had jumped to 32.6 percent in 1940.¹⁴² Like most of the other Great Powers in this period, therefore, the USSR was racing against time. More even than in 1931, Stalin needed to urge his fellow countrymen to close the productive gap with the West. “To slacken the tempo would mean falling behind. And those who fall behind get beaten” The Russia of the czars had suffered “continual beatings” because it had fallen behind in industrial productivity and military strength.¹⁴³ Under its even more autocratic and ruthless leader, the Soviet regime was determined to catch up fast. Whether Hitler would let it do so was impossible to say.

The relative power of the United States in world affairs during the interwar years was, curiously, in inverse ratio to that of both the USSR and Germany. That is to say, it was inordinately strong in the 1920s, but then declined more than any other of the Great Powers during the depressed 1930s, recovering only (and partially) at the very end of this period. The reason for its preeminence in the first of these decades has been made clear above. The United States was the only major country, apart from Japan, to benefit from the Great War. It became the world’s greatest financial and creditor nation, in addition to its already being the largest producer of manufactures and foodstuffs. It had by far the largest stocks of gold. It had a domestic market so extensive that massive economies of scale could be practiced by giant firms and distributors, especially in the booming automobile industry. Its high standard of living and its ready availability of investment capital interacted in a mutually beneficial fashion to spur on further heavy investments in manufacturing industry, since consumer demand could absorb virtually all of the goods which increased productivity offered. In 1929, for example, the United States produced over 4.5 million motor vehicles, compared with France’s 211,000, Britain’s 182,000, and Germany’s 117,000.¹⁴⁴ It was hardly surprising that there were fantastic leaps in the import of rubber, tin, petroleum, and other raw materials to feed this manufacturing boom; but exports, especially of cars, agricultural machinery, office equipment, and similar wares, also expanded throughout the 1920s, the entire process being aided by the swift growth of American overseas investments.¹⁴⁵ Yet even if this is well known, it still remains staggering to note that the United States in those years was producing “a larger output than that of the other six Great Powers taken together” and that “her overwhelming productive strength was further underlined by the fact that the gross value of manufactures produced per head of population in the United States was nearly twice as high as in Great Britain or Germany, and more than ten to eleven times as high as in the USSR or Italy.”¹⁴⁶

While it is also true, as the author of the above lines immediately notes, “that the United States’ political influence in the world was in no respect commensurate with her extraordinary industrial strength,”¹⁴⁷ that may not have been so important in the 1920s. In the first place, the American people decidedly rejected a leading role in world politics, with all the diplomatic and military entanglements which such a posture would inevitably produce; provided American commercial interests were not deleteriously affected by the actions of other states, there was little cause to get involved in foreign events—especially those arising in eastern Europe or the Horn of Africa. Secondly, for all the absolute increases in American exports and imports, their place in its national economy was not large, simply because the country was so self-sufficient; in fact, “the proportion of manufactured goods exported in relation to their total production decreased from a little less than 10 percent in 1914 to a little under 8 percent in 1929,” and the book value of foreign direct investments as a share of GNP remained unaltered¹⁴⁸—which helps to explain why, despite a widespread acceptance of world-market ideas in principle, American economic policy was much more responsive to domestic needs. Except in respect to certain raw materials, the world outside was not that important to American prosperity. Finally, international affairs in the decade after 1919 did not suggest the existence of a major threat to American interests: the Europeans were still quarreling but much less so than in the early 1920s, Russia was isolated, Japan quiescent. Naval rivalry had been contained by the Washington treaties. In such circumstances, the United States could reduce its army to a very small size (about 140,000 regulars), although it did allow the creation of a reasonably large and modern air force, and the navy was permitted to develop its aircraft-carrier and heavy-cruiser programs.¹⁴⁹ While the generals and admirals predictably complained about receiving insufficient resources from Congress, and certain damaging measures were done to national security (like Stimson’s 1929 decision to wind up the code-breaking service on the grounds that “gentlemen do not read each others mail”),¹⁵⁰ the fact was that this was a decade in which the United States still could remain an economic giant but a military middleweight. It was perhaps symptomatic of this period of tranquillity that the United States still did not possess a superior civil-military body for considering strategic issues, like the Committee of Imperial Defence in Britain or its own later National Security Council. What need was there for one when the American people had decisively rejected the ideas of war?

The leading role of the United States in bringing about the financial collapse of 1929 has been described above.¹⁵¹ What is even more significant, for the purposes of measuring comparative national power, was that the subsequent depression and tariff wars hurt it much more than any other advanced economy. If this was partly due to the relatively uncontrolled and volatile nature of American capitalism, it was also affected by the fatal decision to opt for protectionism by the Smoot-Hawley tariffs of 1930. Despite the complaints by U.S. farmers and some industrial lobbies about unfair foreign competition, the country’s industrial and agricultural productivity was such—as the surplus of exports over imports clearly showed—that a breakup of the open world trading order would hurt its exporters more than any others. “The nation’s GNP had plummeted from $98.4 billion in 1929 to barely half that three years later. The value of manufactured goods in 1933 was less than one-quarter what it had been in 1929. Nearly fifteen million workers had lost their jobs and were without any means of support During this same period the value of American exports had decreased from $5.24 billion to $1.61 billion, a fall of 69 percent.”¹⁵² With other nations scuttling hastily into protective trading blocs, those American industries which did rely heavily upon exports were devastated. “Wheat exports, which had totaled $200 million ten years earlier, slumped to $5 million in 1932. Auto exports fell from $541 million in 1929 to $76 million in 1932.”¹⁵³ World trade collapsed generally, but the U.S. share of foreign commerce contracted even faster, from 13.8 percent in 1929 to less than 10 percent in 1932. What was more, while certain other major powers steadily recovered output by the middle to late 1930s, the United States suffered a further severe economic convulsion in 1937 which lost much of the ground gained over the preceding five years. But because of what has been termed the “disarticulated world economy”¹⁵⁴—that is, the drift toward trading blocs which were much more self-contained than in the 1920s—this second American slump did not hurt other countries so severely. The overall consequence was that in the year of the Munich crisis, the U.S. share of world manufacturing output was lower than at any time since around 1910 (see Table 30).

Because of the severity of this slump, and because of the declining share of foreign trade in the GNP, American policy under Hoover and especially under Roosevelt became even more introspective. In view of the strength of isolationist opinion and Roosevelt’s pressing set of problems at home, it could hardly be expected that he would give to international affairs the concentrated attention which both Cordell Hull and the State Department wished from him. Nevertheless, because of the crucial position which the United States continued to occupy in the world economy, there remains some substance in the criticism of “the occupation with domestic recovery” and the “desire for the appearance of immediate action and results [and] a national habit of policy formation that gave little sustained thought to the impact American programs might have on other nations.”¹⁵⁶ The 1934 ban upon loans to any foreign government which had defaulted on its war debts, the 1935 arms embargo in the event of war, and the slightly later prohibition of loans to any belligerent power simply made the British and French more cautious than ever about standing up to the fascist states. The 1935 denunciations of Italy were accompanied by enormous increases in American petroleum supplies to Mussolini’s regime, to the consternation of the British Admiralty. The various commercial restrictions upon Germany and Japan, in partial response to their aggression, “served to antagonize [both] without providing meaningful aid to the opponents of these nations. FDR’s economic diplomacy created enemies without winning friends or supporting prospective allies.”¹⁵⁷ Perhaps the most serious consequence—although the responsibility needs to be shared—was the mutual suspicions which arose between Whitehall and Washington precisely at a time when the dictator states were making their challenge.¹⁵⁸

Table 30. Shares of World Manufacturing Output, 1929-1938¹⁵⁵
(percent)

By 1937 and 1938, however, Roosevelt himself seems to have become more worried by the fascist threats, even if American public opinion and economic difficulties restrained him from taking the lead. His messages to Berlin and Tokyo became firmer, his encouragement of Britain and France somewhat warmer (even if that hardly helped those two democracies in the short term). By 1938, secret Anglo-American naval talks were taking place about how to deal with the twin challenges of Japan and Germany. The president’s “quarantine” speech was an early sign that he would move toward economic discrimination against the dictator states. Above all, Roosevelt now pressed for large-scale increases in defense expenditures. As the figures in Table 26 above show, even in 1938 the United States was spending less on armaments than Britain or Japan, and only a fraction of the sums spent by Germany and the Soviet Union. Nonetheless, aircraft production virtually doubled between 1937 and 1938, and in the latter year Congress passed a “Navy Second to None” Act, allowing for a massive expansion in the fleet. By that time, too, tests were taking place on the prototype B-17 bomber, the Marines Corps was refining its doctrine of amphibious warfare, and the army (while not yet possessing a decent tank) was grappling with the problems of armored warfare and planning to mobilize a vast force.¹⁵⁹ When war broke out in Europe, none of the services was at all ready; but they were in better shape, relative to the demands of modern warfare, than they had been in 1914.

Even these rearmament measures scarcely disturbed an economy the size of the United States. The key fact about the American economy in the late 1930s was that it was greatly underutilized. Unemployment was around ten million in 1939, yet industrial productivity per man-hour had been vastly improved by investments in conveyor belts, electric motors (in place of steam engines), and better managerial techniques, although little of this showed through in absolute output figures because of the considerable reduction in work hours by the labor force. Given the depressed demand, which the 1937–1938 recession did not help, the various New Deal schemes were insufficient to stimulate the economy and take advantage of this underutilized productive capacity. In 1938, for example, the United States produced 26.4 million tons of steel, well ahead of Germany’s 20.7 million, the USSR’s 16.5 million, and Japan’s 6.0 million; yet the steel industries of those latter three countries were working to full capacity, whereas two-thirds of American steel plants were idle. As it turned out, this un-derutilization was soon going to be changed by the enormous rearmament programs.¹⁶⁰ The 1940 authorization of a doubling (!) of the navy’s combat fleet, the Army Air Corps’ plan to create eighty-four groups with 7,800 combat aircraft, the establishment (through the Selective Service and Training Act) of an army of close to 1 million men—all had an effect upon an economy which was not, like those of Italy, France, and Britain, suffering from severe structural problems, but was merely underutilized because of the Depression. Precisely because the United States had an enormous spare capacity whereas other economies were overheating, perhaps the most significant statistics for understanding the outcome of the future struggle were not the 1938 figures of actual steel or industrial output, but those which attempt to measure national income (Table 31) and, however imprecise, “relative war potential” (Table 32). For in each case they remind us that if the United States had suffered disproportionately during the Great Depression, it nonetheless remained (in Admiral Yamamoto’s words) a sleeping giant.

Table 31. National Income of the Powers in 1937 and Percentage Spent on Defense¹⁶¹

Table 32. Relative War Potential of the Powers in 1937¹⁶²

The awakening of this giant after 1938, and especially after 1940, provides a final confirmation the crucial issue of timing in the arms races and strategical calculations of this era. Like Britain and the USSR a little earlier, the United States was now endeavoring to close the armaments gap which had been opened up by the prior and heavy defense spending of the fascist states. That it could outspend any other country, if the political will existed at home, was clear from the statistics: even as late as 1939, U.S. defense composed only 11.7 percent of total expenditures and a mere 1.6 percent of GNP¹⁶³—percentages far, far less than in any of the other Great Powers. An increase in the defense-spending share of the American GNP to bring it close to the proportions devoted to armaments by the fascist states would automatically make the United States the most powerful military state in the world. There are, moreover, many indications that Berlin and Tokyo realized how such a development would constrict their opportunities for future expansion. In Hitler’s case, the issue is complicated by his scorn for the United States as a degenerate, miscegenated power, but he also sensed that he dared not wait until the mid-1940s to resume his conquests, since the military balance would by then have decisively swung to the Anglo-French-American camp.¹⁶⁴ On the Japanese side, because the United States was taken more seriously, the calculations were more precise: thus, the Japanese navy estimated that whereas its warship strength would be a respectable 70 percent of the American navy in late 1941, “this would fall to 65 percent in 1942, to 50 percent in 1943, and to a disastrous 30 percent in 1944.”¹⁶⁵ Like Germany, Japan also had a powerful strategical incentive to move soon if it was going to escape from its fate as a middleweight nation in a world increasingly overshadowed by the superpowers.