Mises Review

Wall Street, Banks, and American Foreign Policy, by Murray Rothbard

The Mises Review

The Merchants Of Death

Mises Review 2, No. 1 (Spring 1996)

Murray N. Rothbard
Rothbard-Rockwell Report, 1995, vii + 100 pp.

Defenders of the free market are often stigmatized as uncritical apologists for big business. Nothing could be further from the truth, as readers of this book will at once discover. Written by one of the two greatest twentieth century champions of free-market capitalism, Murray Rothbard, it is nevertheless a searing indictment of the influence of investment bankers on twentieth-century American foreign policy.

But “nevertheless” is the wrong word. Rothbards criticism of certain big business interests directly follows from his free-market position. Like Franz Oppenheimer and Albert Jay Nock, Rothbard distinguished two means by which people can attain their ends. One of these, voluntary exchange, constitutes the basis of the free society to which he devoted his life. The other, the “political means” is inimical to freedom. For Rothbard, in an even more unqualified way than for St. Augustine, the state is “a great robbery.” Its guiding principle is coercion, and its revenues are plunder extracted from producers.

Business interests who ally with the state, then, find no favor with our author. He maintains that investment bankers are especially liable to form alliances of this sort; hence their activities must be viewed with the greatest suspicion. “Investment bankers do much of their business underwriting government bonds, in the United States and abroad. Therefore, they have a vested interest in promoting deficits and in forcing taxpayers to redeem government debt. Both sets of bankers [i.e., commercial and investment], then, tend to be tied in with government policy, and try to influence and control government action in domestic and foreign affairs” (p. 1).

For Rothbard this view was no mere abstract speculation; it was the linchpin of much of his historical research. And his adoption of this theory makes his history all the more fascinating to read. Economic history too often is disguised sociology: forces such as Business, Labor, and Government confront one another in an “unearthly ballet of bloodless categories.”

There is none of this in Rothbard. For him history is a matter of who did what to whom. As Justin Raimondo points out in the books insightful “Afterword,” Rothbards search for the individual actor is a direct consequence of methodological individualism, a key tenet of the Austrian school.

In the present book, Rothbard applies his historical method with illuminating results. Though relatively short, it is, as my great teacher Walter Starkie used to say, “packed with matter”; and I have space here to indicate only a few of the many episodes Rothbard explores.

Near the start of the work, Rothbard advances a striking thesis: “The great turning point of American foreign policy came in the early 1890s, during the second Cleveland Administration. It was then that the U.S. turned sharply and permanently from a foreign policy of peace and non-intervention to an aggressive program of economic and political expansion abroad” (p. 4). The turn came at the behest of the House of Morgan, which in Rothbards view exerted a controlling influence on American foreign policy until the onset of the New Deal.

Under the new activist policy, the United States vigorously sought to wrest control of the Latin American market from Great Britain. In spite of the later close partnership between the Morgan interests and Britain, the United States was very far indeed from alliance with Britain during most of the 1890s.

Rothbard seems to me entirely on the mark here; few historians have grasped this simple but essential truth. In further support of Rothbards analysis, Britain strongly backed Spain during the Spanish-American War of 1898.

But a British-American partnership was not long in coming, and Rothbard finds in the close ties between the House of Morgan and British financial interests an underlying cause of American entry into World War I. Because of Morgan investments in allied war bonds and in the export of war munitions, “J.P. Morgan and his associates did everything they possibly could to push the supposedly neutral United States into the war on the side of England and France” (p. 16).

Rothbard is by no means finished with the House of Morgan. During the 1920s, Morgan interests controlled the Federal Reserve System. Here the key figure was Benjamin Strong, “who singlehandedly dominated Fed policy from its inception until his death in 1928” (p. 23). Strong “spent virtually his entire business and personal life in the circle of top associates of J. P. Morgan” (p. 23); and as Governor of the New York Federal Reserve Bank, then the most powerful position in the Federal Reserve system, he was ever alert to the interests of his Morgan allies.

I fear that I have so far given a misleading impression of the book. It is much more than a study of the Morgans. Indeed, in the 1930s the Morgans ceased to occupy the top position in the financial elite and were replaced by the Rockefellers. But, so filled with detail is the book that a review can really do no more than single out a few topics for mention.

The reader has much more in store for him. Rothbard again and again turns up a new angle on some person or event. Theodore Roosevelt, Walter Lippmann, John F. Kennedy, Henry Kissinger--all of these, and many others, come under Rothbards scrutiny, as he illustrates his thesis about the influence of investment bankers. The book defies summary: twentieth-century American diplomatic history will never be the same.


Gordon, David. “Merchants of Death.” Review of Wall Street, Banks, and American Foreign Policy by Murray Rothbard. The Mises Review 2, No. 1 (Spring 1996).

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