The CFR and the “Grand Area” in American Economic Policy

The Council on Foreign Relations (CFR) is one of several policy discussion groups that have been sponsored by the members of the corporate community since the beginning of the 20th century. Along with the corporate and foundation-financed think tanks that developed soon thereafter, they are the main way in which corporate leaders attempt to reach policy consensus among themselves on the issues that impact all of them and then impress their views upon government. They are the hubs of the complex network that links the corporate community and government.

The CFR has its origins in the years after World War I when many American leaders returned from the Paris Peace Conference dissatisfied with both their preparation for the negotiations and the outcome of the conference. These leaders also believed that the growing economic power of the United States should lead to greater American involvement and leadership in world affairs than was previously the case. The CFR was formally founded in 1921 with the merger of a New York businessmen’s discussion group and a fledgling Institute of International Affairs that consisted in good part of statesmen and academic experts.

The council was restricted to 650 members, 400 from New York and 250 from the rest of the country, and had a membership roster that read like a Who’s Who of American leaders. Partners from Wall Street’s J. P. Morgan and Company interacted with professors, international lawyers, corporate leaders, syndicated columnists, clergymen, and State Department officials.

In 1939, a few days after World War II broke out in Europe, CFR leaders met with the U.S. State Department to offer their services on postwar planning. Members of the State Department and the CFR agreed that the the council would set up study groups to “engage in a continuous study of the course of the war, to ascertain how the hostilities affect the United States and to elaborate concrete proposals designed to safeguard American interests in the settlement which will be undertaken when hostilities cease”. In short, the postwar national interest was to be the main concern of the council’s work.

The official name for this work is “Studies of American Interests in the War and the Peace“. The policy discussions in the War-Peace Study Groups in 1940 and 1941 provides a general framework of the thinking within which American foreign policy has evolved since the Second World War.

The project produced some 680 planning documents but I would like to focus on just one: Memorandum E-B34, dated July 24 1941, titled: Methods of Economic Collaboration: The Role of the Grand Area in American Economic Policy

The memo reads:

The purpose of this memorandum is to summarize the concept of the Grand Area in terms of its meaning for American policy, its function in the present war, and its possible role in the postwar period. The memorandum is the introduction to a series concerned with the methods of integrating the Grand Area economically.

The economy of the United States is geared to the export of certain manufactured and agricultural products, and the import of numerous raw materials and foodstuffs. The success of German arms from the invasion of Poland onward brought most of Europe under Nazi domination and threatened the rest of the world. Faced with these facts, the Economic and Financial Group sought to determine the area (excluding continental Europe, which for the present was lost) that, from the economic point of view, was best suited to the defense of the United States. Such an area would have to: (1) contain the basic raw materials necessary to the full functioning of American industry, and (2) have the fewest possible stresses making for its own disintegration, such as unwieldy export surpluses or severe shortages of consumers’ goods.

With this end in view, a series of studies was made to ascertain the ‘degree of complementarism’ in trade of several blocs: the Western Hemisphere, the British Empire (except Canada), the Far East. (The memoranda are listed in the Appendix.) From the point of view of the United States, the Western Hemisphere is an inadequate area because it lacks important raw materials, which we get from southeastern Asia, and it is burdened with surpluses normally exported to Europe, especially the United Kingdom. An extension of the area in opposite directions to take in these two economically important regions thus becomes necessary. The extension brings new problems, but it was found that the United States can best defend itself–from an economic point of view–in an area comprising most of the non-German world. This has been called the ‘Grand Area.’ It includes the Western Hemisphere, the United Kingdom, the remainder of the British Commonwealth and Empire, the Dutch East Indies, China, and Japan. [p. 1]

After a discussion of the German-controlled bloc and the relative unimportance of the Soviet Union to the American economy, the memorandum stressed the role of the Grand Area in military preparedness and in avoiding adjustments in the American economy:

The Grand Area, then, is the amount of the world the United States can defend most economically, that is, with the least readjustment of the American economy. To maintain a maximum defense effort, the United States must avoid economic readjustment caused by constriction of the trading area if the military cost of defending the area is not too great. What such constriction might mean in weakening the defense economy can best be seen by imagining the strain on American supplies of labor, materials, and industrial capacity of the attempt to manufacture substitutes for or to do without rubber, tin, jute, and numerous vegetable oils, instead of importing these products from southeastern Asia. Similarly, to the extent that the United States and other countries can continue to export their surpluses, some dangerous stresses in the domestic economy are prevented from developing.

It is important for the United States to defend the Grand Area and to prevent the capture of any of its parts by the Germans. Similarly, the Grand Area must be defended from defection from within, (1) by making it economically possible for all member countries to live in the area, and (2) by preventing any country — particularly Japan — from destroying the area for its own political reasons. Some studies of the economic aspects of these problems have been made, others are projected. It is not the role of the Economic and Financial Group to determine how the area is to be defended nor to assess whether such a defense is feasible, though broad military considerations have of course played some part in determining the area, and it has been assumed that keeping the area intact is not patently impossible from a military viewpoint. Similarly, the methods of political collaboration needed to integrate the area, and the diplomacy required for keeping it intact, do not fall into the Group’s sphere, except insofar as economic weapons and enticements are part of that diplomacy and the institutional structure for solving economic problems is called political. Economic collaboration within the area, however, is an important field of study for the Group. Such collaboration to secure integration is necessary to transform the economic potential of the area into military power, and is at the same time a part of the defense of the area. By creating a working economic organization for the Grand Area, we make that area more viable and stronger both economically and, presumably, politically. [pp. 2-3]

Two pages later, the document turned to the importance of collaboration with Great Britain in integrating the Grand Area, emphasizing that this economic collaboration must begin during the war, not after:

Anglo-American collaboration is the key to the integration of the Grand Area, both as a wartime measure and in forging an enduring peace on the lines desired by the two countries. Many of the problems facing the peace-makers will be determined by wartime policies and the developments of war economics. It is likely to be easier to continue economic collaboration begun in wartime than to start anew at the peace settlement. It seems important, then, that the United States and British Empire countries work together within the framework of the Grand Area economy in wartime, and plan their policies — so far as is compatible with the immediate war effort — to provide the best possible basis for coping with problems of the peace. [pp. 4-5]

The document went on to say that there would be problems in integrating the Grand Area. There would be a need for a “conscious program” to insure that it did not come apart:

The statistical neatness of the Grand Area will not cause it to function automatically simply because Germany controls most of Europe although the blockade and its consequences stimulate this development. The condition of “buying first from one another,” on which it is based, would itself require a considerable degree of trade readjustment and raise certain problems of transportation. The Grand Area was defined on the basis of peacetime trade; the conditions of war change demand patterns and create hazards, such as the destruction of shipping and production capacity. Japan’s expansionist policy continues to threaten the integration of the Grand Area. These problems may not be ignored; some have already been the subjects of study (see Appendix). Above all, it appears certain that the integration of the Grand Area requires a conscious program of broadly conceived measures for (1) knitting the parts of the area closer together economically and (2) securing the full use of the economic resources of the whole area. [p. 5]

To summarize, the CFR and the State Department anticipate that the US would emerge from the war as the world’s dominant power and devised the concept of a “Grand Area”. This “Grand Area” was to be “organised” in such a way as to serve the needs of the American economy.

But this was only a temporary solution.

According to Memorandum E-A17 dated June 14, 1941 and quoted by Laurence Shoup, The concept of the “Grand Area” was only as an “interim measure”:

The Grand Area, as the United States-led non-German bloc was called during 1941, was only an interim measure to deal with the emergency situation of 1940 and early 1941. The preferred ideal was even more grandiose — one world economy dominated by the United States. The Economic and Financial Group said in June 1941, ‘the Grand Area is not regarded by the Group as more desirable than a world economy, nor as an entirely satisfactory substitute‘.

Memorandum E-B34 recommended that:

In the event of an American-British victory, much would have to be done toward reshaping the world, particularly Europe. In this the Grand Area organization should prove useful. During an interim period of readjustment and reconstruction, the Grand Area might be an important stabilizing factor in the world’s economy. Very likely the institutions developed for the integration of the Grand Area would yield useful experience in meeting European problems, and perhaps it would be possible simply to interweave the economies of European countries into that of the Grand Area.

For additional War and Peace Studies memos regarding “world control”, please read: CFR and State Department Discussions on “World Control” and The Atlantic Charter, Propaganda, and the True Aims of the Post-War Period

Thanks for reading,

Notes:

The Council on Foreign Relations and the Grand Area: Case Studies on the Origins of the IMF and the Vietnam War: http://digitalcommons.fiu.edu/cgi/viewcontent.cgi?article=1019&context=classracecorporatepower

Imperial Brain Trust – The Council on Foreign Relations & United States Foreign Policy: https://swprs.files.wordpress.com/2017/09/cfr_imperial_brain_trust.pdf

3 responses to “The CFR and the “Grand Area” in American Economic Policy”

  1. Hello, Thanks for this analysis of the Grand Area? Do you have any idea where one might find the original document online (E-B34) or elsewhere?

    Many thanks!

      1. Thanks so much–incredibly helpful!

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