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FOR a century or more any thought which this country has felt like giving to Latin America as a whole has been cast in a rather stereotyped mold. A considerable degree of homogeneity was assumed. It did not, in fact, exist. Diversities in economic and social conditions and in political and cultural ideologies divided the individual countries from each other and from the United States. But they were concealed under a superficial mantle of the republican form of government common to all, and remained largely unnoticed. And not merely was it always repeated that the New World, with the exception of Canada, was united in its abhorrence for the rule of monarchs. It was stressed that the principle of non-intervention by Europe, proclaimed in the Monroe Doctrine, was generally accepted.
This is not to say that underneath the ideological and political conception of solidarity there did not lie a substratum of economic reality. The Monroe Doctrine was born and nurtured in the economic conditions peculiar to the nineteenth century. We may remind ourselves that the century between the Napoleonic Wars and the First World War was uniquely favorable to the growth and survival of independent sovereign states in the New World no less than in the Old. The far-flung geographical distribution of the British Empire fixed British policy in terms of freedom of trade and freedom of the seas -- a policy necessary for the growth and development of England as the heart and center of modern industrialism. This was also the international basis for the growth and vigor of the ideas inherent in the Monroe Doctrine.
We must also remind ourselves that the nineteenth century, which enjoyed a seemingly boundless expansion into the frontier areas of the New World, fostered the growth of economic liberalism. By this we mean a scheme of economic coördination based not upon central planning, state interventionism or industrial control of economic life, but rather upon the loose coördination and coöperation of individual and atomistic units, each guided and directed through the functioning of the price system. The price system, to be sure, could function only on the basis of certain political institutional arrangements, including private property, private contract and freedom of private enterprise. Under the functioning of such a system, trade was not subordinated to political and military ends. Economics dominated the state -- not the other way round. So long as the coördination of economic activity was effected through the impersonal direction of a free price system, no antagonism developed between economic internationalism and political nationalism. Under the price system the existence of numerous national states had relatively little economic significance. The price system transcended political boundaries and made the world essentially international from the economic standpoint.
Thus the system of independent sovereign states in the Western Hemisphere, as conceived in terms of the Monroe Doctrine, fitted admirably into the framework of economic liberalism supported by the British policing of the seas which was the political basis of nineteenth-century economic internationalism. But the growth of protectionism, imperial preferential systems, economic blocs, and, finally, totalitarian states holding sway over entire continents, has spelled the doom of small nations. The latter are being drawn inevitably within the orbits of the great giants through the interplay of the forces of political penetration, trade relationships and military strategy.
The Monroe Doctrine was grounded in the institutions of free trade, freedom of the seas, economic liberalism and the political independence of nation-states. But, under the changed world conditions, if it is to have any meaning in terms of freedom from European intervention, it must be conceived not in terms of nineteenth-century political and economic liberalism, but in terms of a compact solidarity of the Western Hemisphere. The perfection of relations inside this hemisphere with a view to maintaining the interests of each and all vis-à-vis Europe -- this is the way the Monroe Doctrine must be made over if it is to retain vitality. Once this fact is firmly grasped, we begin to see what difficult problems face us in our relations with Latin America.
The countries of the Western Hemisphere are not homogeneous with respect to race, culture or political ideologies. Nor does Latin America conform to the cultural model of the United States. From the beginning it has found its inspiration in the intellectual life of the great European capitals -- at first Madrid and Paris, more latterly Rome and Berlin. This is increasingly true today. It must be admitted that the basic concepts of the now ascendant Fascist or corporative European states are congenial to many Latin Americans. Political democracy has run a turbulent course in Latin American history. Nineteenth-century democratic institutions, fathered by the American and French Revolutions, were never genuinely suited to the social and economic position of the masses in Latin America. With few exceptions they have not succeeded in establishing stable governments on the democratic model. Mutuality of interests between this country and the Latin American countries is consequently difficult to establish on an ideological and political basis.
Nor are the states of this hemisphere complementary in an economic sense. Under the economic liberalism of the last century, this lack of racial and ideological homogeneity and economic complementarity had no serious consequences, indeed it was scarcely noticed. But today, when new conditions call for solidarity and collective action, the differences become important.
Theoretically we can conceive of the Western Hemisphere achieving solidarity by one of two methods: (a) the operation of a ruthless imperialism which brings all the nations of the two continents under the military subjugation of the United States; and (b) voluntary collective action by the nations concerned.
The political and economic implications of the first of these alternatives are not worth exploring for the simple reason, if no other, that it clearly seems contrary to the spirit and psychology of the people of the United States. They do not dream of attempting any program of military subjugation and ruthless imperialistic domination in this hemisphere. There remains, therefore, only the second and more civilized alternative.
Obviously the first thing to consider is whether or not it would be to the interest of these countries to collaborate in the formation of a hemisphere bloc. Here we see at once that the situation of the different countries is by no means uniform. It is not enough to study the trade relations of the United States with the Western Hemisphere as a whole. That sort of study reveals the growing importance of this area in the trade of the United States. Thus, if we compare the prewar years of 1911-1915 with the year 1937, we discover that the total average trade (imports and exports) of the United States with the countries of the Western Hemisphere has increased from $1,242 million to $2,271 million. In comparison, our total trade with Europe declined slightly from $2,315 million in the prewar period to $2,203 million in 1937, just below the hemisphere total. Moreover, we find that while the exports of our leading agricultural commodities -- cotton, meat products, wheat and tobacco -- fell from $1,576 million in 1921-25 to $611 million in 1937, our exports of machinery, iron and steel products, automobiles and petroleum increased from $1,069 million in the early twenties to $1,502 million in 1937. With respect to leading finished manufactures, including machinery, iron and steel products, and automobiles, the Western Hemisphere took 44 percent in 1937, while Europe took only 28 percent. These general data tend to support the thesis that the trend is increasingly favorable to a close economic collaboration of the Western Hemisphere countries. But that conclusion would be superficial. The facts cited cover up other uncomfortable facts which become apparent when we examine the trade relations of the individual countries with the United States.
The problem becomes more manageable if we classify the Latin American countries into three groups, arranged according to the proportion of total imports coming into each from the United States in 1937. The picture is substantially the same for any other recent year. The following table makes such a classification, and also gives the proportion of the total exports sent by the countries in question to the United States:
|Percentage of total||Percentage of total|
|Countries||imports coming from the||exports shipped to the|
|United States, 1937||United States, 1937|
The foregoing table discloses the fallacy of generalizations about our trade relations with Latin America as a whole. However, with respect to each of the three groups certain generalizations are possible. Group A, it will be noted, is composed of the countries geographically nearest to the United States. It includes all of Central America and the two northernmost countries of South America. Group C, on the other hand, includes all of the countries farthest from the United States. Group B is in an intermediate position.
The trade of the Group A countries is highly integrated with the trade of the United States. Imports from us range from 40 to 69 percent, while exports to us, with one exception, range from 28 to 90 percent. The single exception is Venezuela, whose leading export, petroleum, goes to the Dutch West Indies and is largely reëxported to Europe. At the other extreme, the trade of the Group C countries is preponderantly with Europe; it is comparatively small with the United States. Thus in the case of Argentina, only about 15 percent of both her export and import trade is with us. And despite the large American market for Brazilian coffee, we take only one-third of Brazil's total exports and supply less than one-fourth of her imports.
The reason the United States has such a different importance in the trade of the Group A countries in comparison with those in Group C lies, of course, in the character of the export products of the two areas. Generally speaking (Chile aside, for her case is somewhat special), the great export surpluses of the Group C countries are agricultural. Except for Brazilian coffee, most of these compete directly with the export surpluses of the United States. They include, among others, corn, wheat, cotton and meat products. The United States, with its excess of agricultural production, obviously cannot absorb these great surpluses.
On the other hand, the export commodities of the countries in Groups A and B are not, in the main, competitive with the American economy. The leading exports of these countries are sugar, bananas, vegetable fibers, coffee, cacao, and mineral products including manganese, tin, copper, lead, zinc, silver, gold and petroleum. Either these products are complementary to our economy or they offer no such serious competitive menace as do the great agricultural surpluses of the Group C area.
We may conclude on the basis of this classification that an economic bloc consisting of the United States and the countries in areas A and B would have a solid foundation in the economic self-interest of all the countries involved. If it should be deemed desirable to include this entire area within a single customs union, no serious economic problems would arise. Moreover, such a bloc would be composed of countries contiguous to one another.
Now it is just this area which is vitally important for the United States from the standpoint of military strategy. We are told on competent military authority that the protection of this country against foreign aggression does not require that we develop military bases beyond a line extending roughly from the bulge of Brazil westward to the Pacific. Indeed, for the protection of the continental United States and the Canal Zone, bases considerably north of Natal (up to say 1500 miles from the Canal) would be adequate. A base on the hump of Brazil would go somewhat beyond the strictly primary or inner zone of defense, but would be important for carrying out a flexible defense program designed to meet various contingencies. It will be noted that the most productive and populous parts of Brazil are located south of the line indicated. It should also be noted that topographically the boundary of this area forms a natural barrier which would greatly facilitate its defense against outside aggression. We may conclude, then, that the area which is complementary to the United States from the economic standpoint is, in its geographic position, exactly the area which of necessity must be included in any defense program which pretends to be at all adequate.
Canada, it will be noted, is left aside in this survey. There are grave obstacles in the way of any effort to integrate the Canadian economy and ours. The huge wheat surplus of Western Canada alone offers a seemingly insoluble problem. Our politically important agricultural West would be vastly irritated by attempts to control its wheat production in harmony with Canada's.
But from the defense angle the Canadian problem ought not to be too difficult. Even though an economic union of Canada and the United States is probably not feasible under existing conditions, military collaboration for defense purposes is already a fact in the Canadian-American Permanent Joint Board on Defense. In general, the conflict of economic interests between the two countries is more than offset by the community of political and cultural ideologies, and we may hope that closer economic relations can gradually be attained through a progressive broadening of the Canadian-American trade agreement.
It is the Group C countries which present the most difficult problem. For them the populous industrial nations of Western Europe constitute a natural market. The industry of Europe is too large to be supplied from her own raw material resources. Her urban population is too large to be fed by her own agriculture. Such an area must be a powerful magnet for relatively undeveloped countries which produce a surplus of primary products. Germany in particular constitutes such a magnet. She needs the agricultural products of Argentina, Uruguay and Brazil; they need her industrial products. It is for just this reason that expansionistic nations like Germany, Italy and Japan favor the continued and rapid growth of their populations. For overpopulation (from the point of view of food and raw materials) furnishes them both with the justification for political expansion and with a magnetic power over countries rich in primary products.
In such a contest the United States cannot play a strong rôle. We have a surplus both of foodstuffs and industrial products. We are eager to export but reluctant to import. During the last twenty-five years we have had a net export surplus of goods and services totaling $25,000,000,000, for which no adequate quid pro quo has ever been received (or should one say accepted) in return. We lack relatively few raw materials; and even with respect to most of these we can supply our needs from synthetic production (as in the case of rubber) or else can find substitutes (as in the case of tin, except for a relatively small and irreducible minimum). The trouble with the United States is that it underutilizes its own productive resources, both agricultural and industrial. Its problem is one of internal expansion.
The export surplus of the whole Western Hemisphere -- that is to say, the annual products which, judging by statistics of its recent capacity to consume, cannot be absorbed at home -- totals roughly two billion dollars. Of this sum nearly half is produced in the Latin American countries; about 300 millions in Canada; and about 750 millions in the United States. In essence the economic problem facing the Western Hemisphere arises from the fact that it has heretofore been integrated in a world economy in which Western Europe has drawn upon the New World for food and raw materials, and that this situation is now undergoing drastic change.
Under postwar conditions the Western Hemisphere will probably have to move much farther in the direction of a closed economy than has previously been the case. This will be especially true if Germany dominates Europe completely. A Germandominated Europe is likely to develop along American mass-production lines and create precisely the great industries in which America has held the lead -- automobiles, electrical equipment, agricultural and industrial machinery, etc. Just as our agricultural exports dropped sharply in the last two decades under the influence of increasing self-sufficiency in Europe, so in the next decade we may see a sharp drop in the leading industrial exports to Europe, once it is unified and mass production begins on a large scale. Moreover, an economically unified Europe would include most of Africa and the Near East. This would give it the possibility of attaining a high degree of agricultural self-sufficiency.
If the Western Hemisphere is to move in the direction of a closed economy, a redirection of production will obviously become necessary. The transition period will be painful. But it can be made very much shorter and very much less painful if the Western Hemisphere -- especially the United States -- undertakes a vigorous program of economic expansion. A large part of the farm population could be drawn into urban industry. Moreover, the consumption of food and raw materials could be considerably increased. This in turn would be reflected in imports from Latin America and from Canada, thereby facilitating the transition in those countries also. Finally, Canadian and Latin American purchases of industrial products from this country, replacing products hitherto drawn from Europe, would facilitate the industrial expansion of the United States.
The Western Hemisphere contains within itself all the essential materials men need for enjoying a higher standard of living than any so far attained. The overwhelmingly important need is to secure the full and efficient application of labor power to these resources. A greater industrialization of the Latin American countries is a necessary part of the program. This could be greatly facilitated by the export of capital from the United States, and with it the export of heavy industry products.
If the British Empire should dissolve as a result of the war, the position of the Latin American countries vis-à-vis Europe might be greatly weakened. This would be particularly true of the countries of the C Group. With Scandinavia, Holland, the Balkans and much of Africa under permanent German and Italian domination, the German Government would be in a position to drive a hard bargain with South America. Nor would the establishment of a Western Hemisphere trading corporation to canalize trade with Germany help matters much. If Germany found herself confronted with such a monopolistic set-up she could be expected to develop her own sources of supply elsewhere. Whatever tempting trade terms Germany offers Latin America will be made in large part for political reasons.
So far as we are concerned, we can find all the natural resources we need without turning to the nations of the C Area; and, as already noted, their inclusion in the same bloc as ourselves is not essential from the standpoint of national defense. This is not to imply that the United States ought to assume an attitude of indifference toward the C Group countries. We should coöperate with them in facilitating their internal development and in easing the difficulties they will encounter during the transition period. We should expand our imports from those countries whenever possible. A large increase could be defended on economic grounds. For example, it is not good policy to subsidize the production of flaxseed, sugar and copper in the United States when they can be imported far more economically from Latin American countries. Nor is it good policy to prevent the importation of low-priced and nutritious canned meats from the Argentine, thereby depriving our low-income groups of a reasonably adequate meat diet. Imports of this sort compete only indirectly and only in relatively small degree with any important branch of American agriculture. In addition, we might give the Latin American countries a share in some of the purchases which we now make in other parts of the world. Our imports from Latin America of certain commodities such as coffee, sugar, cacao, fruits and nuts, copra, hides and skins, wool, canned beef, fibers, cabinet woods, nitrate, manganese, tin, copper, lead, zinc, chromite, could all be increased in varying degree. Tourist expenditures in Latin America can also be expected to grow, especially if aided by an efficient campaign of travel promotion. Dollar balances enabling Latin Americans to buy our exports could in some measure be made available through direct investment of private capital and loans by our government agencies such as the Export-Import Bank.
Meanwhile, every effort should be made to facilitate a closer cultural understanding by the interchange of students, by the development of radio communication, and by other means. A feeling of Hemisphere Solidarity can be grounded only in the conscious self-interest of all the countries concerned. It is not enough to work out a program by which in some manner and measure the United States will take care of surplus Latin American commodities. The Latin American countries would hardly feel that this offered a secure basis for thoroughgoing coöperation; our Western agricultural bloc might at any time force the abandonment of the policy, by bringing pressure on the Administration which had adopted the scheme. The most important single economic policy by which the United States can further the real and lasting solidarity of the Western Hemisphere is by releasing the magnetic power of a dynamic internal expansion in our own home market.
But when all is said and done we are compelled to face the uncomfortable fact that it is difficult both to plan and practice a system of solidarity which embraces the whole of the Western Hemisphere. Within the next few months we may witness serious internal upheavals in some of those Latin American countries which are least drawn to us by direct economic interest and which for various reasons are most susceptible to Nazi propaganda. The State Department rightly insists on the inclusion of all of Latin America in its program for collective action. We could and should pursue no other policy. But in the event that a program involving all the American republics does not succeed, we should remember that our southern neighbors can be considered in different categories, and that when one so considers them one finds significant things to report both on the economic and the military score. We approve the coöperative effort now being made to help and defend all of Latin America. But we should also keep in the back of our minds the solid fact that the area which constitutes our best and indeed essential line of defense is also precisely the area which has the sort of economic ties with us which signify that self-interest coincides with other less tangible reasons in dictating coöperation and solidarity.