Bankrupting the Enemy: The U.S. Financial Siege of Japan Before Pearl Harbor

by Edward S. Miller

Award-winning author Edward S. Miller contends in this new work that the United States forced Japan into international bankruptcy to deter its aggression. While researching newly declassified records of the Treasury and Federal Reserve, Miller, a retired chief financial executive of a Fortune 500 resources corporation, uncovered just how much money mattered. Washington experts confidently predicted that the war in China would bankrupt Japan, not knowing that the Japanese government had a huge cache of dollars fraudulently hidden in New York. Once discovered, Japan scrambled to extract the money. But, Miller explains, in July 1941 President Roosevelt invoked a long-forgotten clause of the Trading with the Enemy Act of 1917 to freeze Japan s dollars and forbade it to sell its hoard of gold to the U.S. Treasury, the only open gold market after 1939. Roosevelt s temporary gambit to bring Japan to its senses, not its knees, was thwarted, however, by opportunistic bureaucrats. Dean Acheson, his handpicked administrator, slyly maneuvered to deny Japan the dollars needed to buy oil and other resources for war and for economic survival. Miller's lucid writing and thorough understanding of the complexities of international finance enable readers unfamiliar with financial concepts and terminology to grasp his explanation of the impact of U.S. economic policies on Japan. His review of thirty-seven studies of Japan's resource deficiencies begs the question of why no U.S. agency calculated the impact of the freeze on Japan's overall economy. His analysis of a massive OSS-State Department study of prewar Japan clearly demonstrates that the deprivations facing the Japanese people were the country to remain in financial limbo buttressed its choice of war at Pearl Harbor. Such a well-documented study is certain to be recognized for its significant contributions to the historiography of the origins of the Pacific War.

Genres: History, Japan, Nonfiction, Economics, World War II, World History, American History

368 pages, Hardcover

First published October 15, 2007

Reviews

[Juan · Rating 4 out of 5]

Addressing a subject that is poorly understood in the U.S., Miller documents how the U.S. leveraged vulnerable aspects of the Japanese economy in an attempt to influence the Japanese government's actions in response to their military actions in the Western Pacific prior to the U.S. entry into the war, and how Japanese leadership decided to responded to financial restrictions by expanding the scope of their military action. Not an apology for the initiation of military force, Miller presents a history of "financial force" that is instructive study in preparation for future conflicts as well as understanding the Pacific Theater of WWII.

[Greg · Rating 3 out of 5]

Learned some new things while reading this book and it was short and to the point, but the descriptions of the internecine US government bureacratic manuevering from 1939-1941 was not to my liking. The failures in US military/economic intelligence was interesting, but the most informative part was the underlying reliance that Japan had on the US as an import/export relationship for everything and how the US needed Japan for not much at all economically.

[Alan Carlson · Rating 3 out of 5]

Numbers, so many numbers. I did a fair amount of economics, mathematics, and accounting as an undergrad, and for two years worked on US policy toward UN sanctions, and I found Miller's text mind-numbing. Miller not only assumes the reader knows the background of Japanese aggression in China and SE Asia, but also fails to investigate or relate the impact of commodity embargoes and financial freezes (on gold and US dollars) on Japan's ability to initiate and sustain aggressive war in Asia and the Pacific. Miller does a better job of examining the potential effect of economic warfare before Pearl Harbor on Japanese civilians, but that was never the target. He does not answer important questions like: is the Japanese military intentionally stockpiling oil, enabled by purchases from America? If so, why? How much does war, and the implements of war, cost the Japanese government? Are the American embargoes and freezes substantial when measured against those costs?

Miller, I believe, wants to argue that the finanical freeze compelled the Japanese decision to go to war by the end of 1941, that absent the freeze on dollars and gold, a limited resumption of the oil trade from California would have restarted in the fall of 1941 and, accompanied by dollar and gold payments to the Dutch East Indies for oil from the fields there, would have delayed the Japanese decision for war in the Pacific until, essentially, after the defeat of the German army at Stalingrad in Frebruary 1943. And Miller clearly argues that Dean Acheson, who was appointed to and resigned from Treasury Undersecretary in 1933 and then appointed as an Assistant Secretaty of State in early 1941, is the primary if not sole driver of the decision to make a hard, irreversible freeze of the dollar and gold freeze in late July 1941, presenting FDR with a fait accompli upon the President's return from his summit with UK PM Churchill in August 1941. This has been argued before, even though as Miller admits, Acheson claims no such influence or power in his voluminous autobiography, Present at the Creation, published in 1969. And in the end, Miller only hints at his thesis, failing to find evidence to bear it out.

Time to re-read Herbert Feis The Road to Pearl Harbor (1950) and Present at the Creation. Yikes - Creation is NOT a short book! But at least both are Pulitizer Prize winners.

[Evan Þ. · Rating 4 out of 5]

This's the account of the embargos and financial freeze America put on Japan before World War II, which drove them to war. Or, more specifically, it drove them to extend their war with China to also fight America and Britain - contrary to the ideas of Roosevelt's bureaucrats and officials who'd conceived the embargos and freeze. One major theme I picked up here was how amateur the bureaucrats were, flying by the seat of their pants without caring to research what impact they'd actually have on the Japanese economy beyond a few stockpiles, or speculate how they'd respond, or even having a cohesive multi-month plan rather than throwing one idea after another.

As it turned out, Japan was able to evade the embargos for a while... but the financial freeze cut them off from international trade. But what no one guessed until it happened was that they'd respond with war. This reminds me of US policy in Vietnam, where we also couldn't fathom the enemy's supposedly-irrational reactions.

The picture of the prewar economy, divided into multiple currency blocks with trade barriers between - and then one block after another dropping out of the world economy due to war - was another gem of this book.

[Graham · Rating 4 out of 5]

Insightful little book on the U.S. economic and financial attitudes towards Japan before and/or leading to World War II. The state and emphasis of the pre-war Japanese economy was such that the postwar miracle appears even more miraculous, with heavy industry and high technology coming to occupy the role once played by raw silk and porcelain exports. Miller also does a good job highlighting some of the American bureaucratic processes and infighting surrounding the whole campaign, as well as Roosevelt's own willingness to override even a consensus he disagreed with.

In short, an unusual view into an underexplored corner of the U.S.-Japan relationship before World War II, and illustrative reading for anyone contemplating similarly effective - or provocative - economic restrictions on contemporary American peer competitors.

[Ryan Fishel · Rating 5 out of 5]

Absolutely great book. One of the best holistic approaches to the pre-Pearl Harbor events.

[Mark Edwards · Rating 4 out of 5]

Very detailed. Interesting and perhaps little-known aspect of the ramp up to war with Japan from the financial side of the US arsenal.