Schooling is not education. This is.

meet the warburgs

Paul M. Warburg

• Vice Governor [Vice Chair], Board of Governors, 1916–1918
• Member, Board of Governors, 1914–1916

• Born: August 10, 1868
• Died: January 24, 1932

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Paul M. Warburg was sworn in as a member of the first Federal Reserve Board on August 10, 1914. He was appointed vice chairman (called “vice governor” before 1935) on August 10, 1916. He resigned from the Board on August 9, 1918.

Warburg was born in Hamburg, Germany, in 1868. He graduated from high school in Hamburg in 1886 and began working for an exporting firm there. He then moved on to positions at shipping and banking companies in London and Paris. He returned to Hamburg in 1895 and became a partner in the banking firm M.M. Warburg and Company, founded by his great-grandfather. 

Warburg was a partner in the family firm until 1907. However, in 1902, he moved to New York City and joined his father-in-law’s company as a partner overseeing international loans to several governments. In 1911, he became a naturalized US citizen.

Warburg was considered one of the top authorities on central banking both in Europe and the United States and was active in the monetary reform movement taking place in the United States in the early 1900s. He gave speeches, published several articles advocating the establishment of a US central bank, and was an unofficial advisor to the National Monetary Commission, which was established following the Panic of 1907 to study banking system reform. In 1910, Warburg was one of six men, including Sen. Nelson Aldrich, to participate in a secret meeting on Jekyll Island, Georgia, that resulted in a plan for a National Reserve Association. Although the “Aldrich plan” was rejected by Congress, it laid the foundation for the 1913 Federal Reserve Act, which created the Federal Reserve System. President Woodrow Wilson appointed Warburg to the new entity’s first Board in 1914.  

Although Warburg left the Federal Reserve Board in 1918, he continued to serve the Federal Reserve as a member of the Federal Advisory Council (1921–26). He resumed his activities in business and philanthropic circles as well. For example, he founded and was the first chairman of the Executive Committee of the American Acceptance Council in 1919. In 1921, he organized the International Acceptance Bank to promote US government financing of reconstruction in Europe following the war.

Warburg was also a director of the Council on Foreign Relations (1921–32), a trustee of the Institute of Economics (1922–27), and a trustee of the Brookings Institution after it merged with the Institute of Economics in 1927. He also helped establish the Carl Schurz Memorial Foundation in 1930. He served at various times as a director of the Baltimore and Ohio Railroad, Union Pacific Railroad, and Western Union Telegraph Company. Warburg was also a director of the Julliard School of Music and a trustee of Tuskegee College.

Warburg continued to take an active interest in the nation’s monetary affairs and banking system. In March 1929, he warned that the wild stock speculation resulting from stock price increases and improper bank lending practices would have disastrous results if left unchecked. On October 29 of that year, the stock market crashed.

Throughout his career, Warburg was a prolific writer. Most notable among his published works was a two-volume set on the Federal Reserve System published in 1930. The Yale University Library (Manuscripts and Archives) is the repository for Warburg’s papers dating from 1904 to 1932. The collection includes 169 volumes on banking and finance.

Warburg died at his home in New York in 1932. At the time of his death, he was chairman of the Manhattan Company and a director of the Bank of Manhattan Trust Company, Farmers Loan and Trust Company of New York, and First National Bank of Boston.

Written by the Board of Governors of the Federal Reserve System. 

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THE MOST WARBURG THING TO DO

The Meeting at Jekyll Island

by Gary Richardson and Jessie Romero, Federal Reserve Bank of Richmond

November 20, 1910–November 30, 1910

A secret gathering at a secluded island off the coast of Georgia in 1910 laid the foundations for the Federal Reserve System.

The old clubhouse, Jekyll Island, Georgia. (Courtesy of Tyler E. Bagwell)

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In November 1910, six men – Nelson Aldrich, A. Piatt Andrew, Henry Davison, Arthur Shelton, Frank Vanderlip and Paul Warburg – met at the Jekyll Island Club, off the coast of Georgia, to write a plan to reform the nation’s banking system. The meeting and its purpose were closely guarded secrets, and participants did not admit that the meeting occurred until the 1930s. But the plan written on Jekyll Island laid a foundation for what would eventually be the Federal Reserve System.

The Need for Reform

At the time, the men who met on Jekyll Island believed the banking system suffered from serious problems. The Jekyll Island participants’ views on this issue are well known, since before and after their conclave several spoke publicly and others published extensively on the topic. Collectively, they encapsulated their concerns in the plan they wrote on Jekyll Island and in the reports of the National Monetary Commission.

Like many Americans, these men were concerned with financial panics, which had disrupted economic activity in the United States periodically during the nineteenth century. Nationwide panics occurred on average every fifteen years. These panics forced financial institutions to suspend operations, triggering long and deep recessions. American banks held large required reserves of cash, but these reserves were scattered throughout the nation, held in the vaults of thousands of banks or as deposits in financial institutions in designated reserve and central reserve cities. During crises, they became frozen in place, preventing them from being used to alleviate the situation. During booms, banks’ excess reserves tended to flow toward big cities, especially New York, where bankers invested them in call loans, which were loans repayable on demand to brokers. The brokers in turn loaned the funds to investors speculating in equity markets, whose stock purchases served as collateral for the transactions. This American system made bank reserves immobile and equity markets volatile, a recipe for financial instability.

In Europe, in contrast, bankers invested much of their portfolio in short-term loans to merchants and manufacturers. This commercial paper directly financed commerce and industry while providing banks with assets that they could quickly convert to cash during a crisis. These loans remained liquid for several reasons. First, borrowers paid financial institutions – typically banks with which they had long-standing relationships – to guarantee repayment in case the borrowers could not meet their financial obligations. Second, the loans funded merchandise in the process of production and sale and that merchandise served as collateral should borrowers default. The Jekyll Island participants also worried about the inelastic supply of currency in the United States. The value of the dollar was linked to gold, and the quantity of currency available was linked to the supply of a special series of federal government bonds. The supply of currency neither expanded nor contracted with seasonal changes in demands for cash, such as the fall harvest or the holiday shopping season, causing interest rates to vary substantially from one month to the next. The inelastic supply of currency and limited supplies of gold also contributed to long and painful deflations.

Furthermore, Jekyll Island participants believed that an array of antiquated arrangements impeded America’s financial and economic progress. For example, American banks could not operate overseas. Thus, American merchants had to finance imports and exports through financial houses in Europe, principally London. American banks also struggled to collectively clear checks outside the boundaries of a single city. This increased costs of inter-city and interstate commerce and required risky and expensive remittances of cash over long distances.

In an article published in the New York Times in 1907, Paul Warburg, a successful, German-born financier who was a partner at the investment bank Kuhn, Loeb, and Co. and widely regarded as an expert on the banking systems in the United States and Europe, wrote that the United States’ financial system was “at about the same point that had been reached by Europe at the time of the Medicis, and by Asia, in all likelihood, at the time of Hammurabi” (Warburg 1907). 

Just months after Warburg wrote those words, the country was struck by the Panic of 1907. The panic galvanized the US Congress, particularly Republican senator Nelson Aldrich, the chair of the Senate Finance Committee. In 1908, Aldrich sponsored a bill with Republican representative Edward Vreeland that, among other things, created the National Monetary Commission to study reforms to the financial system. Aldrich quickly hired several advisers to the commission, including Henry Davison, a partner at J.P. Morgan, and A. Piatt Andrew, an economics professor at Harvard University. Over the next two years, they studied banking and financial systems extensively and visited Europe to meet with bankers and central bankers.

The Duck Hunt

By the fall of 1910, Aldrich was persuaded of the necessity of a central bank for the United States. With Congress ready to begin meeting in just a few weeks, Aldrich — most likely at Davison’s suggestion — decided to convene a small group to help him synthesize all he had learned and write down a proposal to establish a central bank.

The group included Aldrich; his private secretary Arthur Shelton; Davison; Andrew (who by 1910 had been appointed assistant Treasury secretary); Frank Vanderlip, president of National City Bank and a former Treasury official; and Warburg.

A member of the exclusive Jekyll Island Club, most likely J.P. Morgan, arranged for the group to use the club’s facilities. Founded in 1886, the club’s membership boasted elites such as Morgan, Marshall Field, and William Kissam Vanderbilt I, whose mansion-sized “cottages” dotted the island. Munsey’s Magazine described it in 1904 as “the richest, the most exclusive, the most inaccessible” club in the world.

Aldrich and Davison chose the attendees for their expertise, but Aldrich knew their ties to Wall Street could arouse suspicion about their motives and threaten the bill’s political passage. So he went to great lengths to keep the meeting secret, adopting the ruse of a duck hunting trip and instructing the men to come one at a time to a train terminal in New Jersey, where they could board his private train car. Once aboard, the men used only first names – Nelson, Harry, Frank, Paul, Piatt, and Arthur – to prevent the staff from learning their identities. For decades after, the group referred to themselves as the “First Name Club.”

An additional member of the First Name Club was Benjamin Strong, vice president of the Bankers Trust Company and the future founding chief executive officer (then called governor, now called president) of the Federal Reserve Bank of New York. But it is unlikely Strong attended the meeting on Jekyll Island. In his autobiography, Vanderlip recalls him attending, but no other account indicates Strong’s presence. Most scholars and journalists who have written about the issue, including Bertie Charles (B.C.) Forbes — the founder of Forbes magazine and the journalist who first revealed the meetings in an article in 1916 — have concluded Strong did not attend (Forbes 1916). Strong had worked closely with the Jekyll Island attendees in other venues, however, and his ideas were certainly present at the meeting even if he was not there in person. After the meeting, as the First Name Club revised the plan and prepared it for publication, Strong was frequently consulted and according to Forbes, “joined the ‘First-Name Club’ as ‘Ben’” (Forbes 1922).

The Plan Takes Shape

Aldrich and his colleagues quickly realized that while they agreed on some broad principles — establishing an elastic currency supplied by a bank that held the reserves of all banks — they disagreed on details. Figuring out those details was a “desperately trying undertaking,” in Warburg’s words. Completely secluded, the men woke up early and worked late into the night for more than a week. “We had disappeared from the world onto a deserted island,” Vanderlip recalled in his autobiography. “We put in the most intense period of work that I have ever had.”

By the end of their time on Jekyll Island, Aldrich and his colleagues had developed a plan for a Reserve Association of America, a single central bank with fifteen branches across the country. Each branch would be governed by boards of directors elected by the member banks in each district, with larger banks getting more votes. The branches would be responsible for holding the reserves of their member banks; issuing currency; discounting commercial paper; transferring balances between branches; and check clearing and collection. The national body would set discount rates for the system as a whole and buy and sell securities.

Shortly after returning home, Aldrich became ill and was unable to write the group’s final report. So Vanderlip and Strong traveled to Washington to get the plan ready for Congress. Aldrich presented it to the National Monetary Commission in January 1911 without telling the commission members how the plan had been developed. A final report, along with legislative text, went to Congress a year later with a few minor changes, including naming the new institution the National Reserve Association.

In a letter accompanying the report, the Commission said it had created an institution “scientific in its method, and democratic in its control.” But many people, especially Democrats, objected to the version of democracy it presented, which could have allowed the largest banks to exert outsized influence on the central bank’s leadership. With a presidential election coming up, the Democrats made repudiating the Aldrich plan a part of their platform. When Woodrow Wilson won the presidency and the Democrats took control of both houses, Aldrich’s National Reserve Association appeared to be shelved.

Leaders of the Democratic Party, however, also were interested in reform, including President Wilson and the chairs of the House and Senate Committees on Banking and Currency, Carter Glass and Robert Owen, respectively. Glass and Owen both introduced proposals to form a central banking system based on draft legislation supported by Wilson. Glass, Owen, and their staffs directly consulted with Warburg, whose technical expertise was respected by Democratic and Republican politicians alike. Wilson’s chief political adviser, Col. E. M. House, met and corresponded with Warburg to discuss banking reform in general and the Glass and Owen plans in particular. So did William McAdoo and Henry Morgenthau, senior political and policy advisers to Wilson who served in his administration. Morgenthau assured Warburg “that he sent his copy of the [January 10, 1913] memorandum to President Wilson” (Warburg 1930, p. 90). Together, these ideas formed the basis of the final Federal Reserve Act, which Congress passed and the president signed in December 1913. The technical details of the final bill closely resembled those of the Aldrich Plan. The major differences were the political and decision-making structures, which was a compromise acceptable to both the progressive and populist wings of the Democratic Party.

Postscript

B.C. Forbes somehow learned about the Jekyll Island trip and wrote about it in 1916 in an article published in Leslie’s Weekly (October 19, 1916 p. 423), which was recapitulated a few months later in an article in the magazine Current Opinion. In 1917, Forbes again described the meeting in Men Who Are Making America, a collection of short biographies of prominent entrepreneurs, including Davison, Vanderlip, and Warburg. Not many people noticed the revelation, and those who did dismissed it as “a mere yarn,” according to Aldrich’s biographer.

The participants themselves denied the meeting had occurred for twenty years, until the publication of Aldrich’s biography in 1930. The impetus for coming clean was probably the publication in 1927 of Carter Glass’s memoir, An Adventure in Constructive Finance. In it, Glass, by now a senator, claimed credit for the key ideas in the Federal Reserve Act, which prompted the Jekyll Island participants to reveal their roles in creating the Federal Reserve.

Warburg was especially critical of Glass’s description of events. In 1930, he published a two-volume book describing the origins of the Fed, including a line-by-line comparison of the Aldrich bill and the Glass-Owen bill to prove their similarity. In the introduction, he wrote, “I had gone to California for a three months’ rest when the appearance of a series of articles written by Senator Glass…impelled me to lay down in black and white my recollections of certain events in the history of banking reform.” Warburg’s book does not mention Jekyll Island specifically, although he states that

“In November, 1910, I was invited to join a small group of men who, at Senator Aldrich’s request, were to take part in a several days’ conference with him, to discuss the form that the new banking bill should take. … when the conference closed … the rough draft of what later became the Aldrich Bill had been agreed upon … The results of the conference were entirely confidential. Even the fact that there had been a meeting was not permitted to become public. … Though eighteen years have gone by, I do not feel free to give a description of this most interesting conference concerning which Senator Aldrich pledged all participants to secrecy. I understand, however, a history of Senator Aldrich’s life … will contain an authorized account to of this episode” (Warburg 1930, pp. 58-60).

Disagreements over authorship of the Federal Reserve Act received widespread publicity in the late 1920s. Glass defended his claim for the lion’s share of the credit in speeches, in his book, and in submissions to prominent publications including the New York Evening Post and the New York Times. Critics responded in similar venues and academic journals. For example, Samuel Untermyer, former counsel to the House Committee on Banking and Currency, published a pamphlet titled “Who is Entitled to the Credit for the Federal Reserve Act? An Answer to Senator Carter Glass,” in which he asserted that Glass’s claims of primary authorship were “fiction,” “fable,” and a “work of imagination” (Untermyer 1927). In 1914, Edwin Seligman, a prominent professor at Columbia University, wrote that “in its fundamental features the Federal Reserve Act is the work of Mr. Warburg more than of any other man.” In 1927, Seligman and Glass debated this point in a series of letters published in the New York Times.

The Jekyll Island Club never bounced back from the Great Depression, when many of its members resigned, and it closed in 1942. Today, its former clubhouse and cottages are National Historic Landmarks. But the debates at and about the conference on Jekyll Island remain relevant today.

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Bibliography

Forbes, B.C. Men Who Are Making America. New York: B.C. Forbes Publishing Co., Inc., 1917.

Forbes, B.C. “How the Federal Reserve Bank Was Evolved by Five Men on Jekyl Island.” Current Opinion vol. 61, no. 6 (December 1916): pp. 382-383.

Glass, Carter. An Adventure in Constructive Finance. New York: Doubleday, 1927.

Glass, Carter, “Mr. Warburg and the Bank: A Reply to Prof. Seligman on the Paternity of the Federal Reserve,” New York Times, February 15, 1927, p. 24.

Lamont, Thomas. Henry P. Davison: The Record of a Useful Life. New York and London: Harper and Brothers Publishers, 1933.

Lowenstein, Roger. America’s Bank: The Epic Struggle to Create the Federal Reserve. New York: Penguin Press, 2015.

New York Times. “Untermyer Assails Glass on Bank Act: Calls His History of Federal Reserve Fiction and Its Author Credulous. Claims Glory for Owen. Wilson, McAdoo and Bryan also Entitled to Credit … ” June 20, 1927, p. 4.

Seligman, Edwin R. “Introduction: Essays on Banking Reform in the United States, by Paul M. Warburg.” Proceedings of the Academy of Political Science vol. 4, no. 4 (July 1914): pp. 3-6.

Seligman, Edwin R., “The Federal Reserve Act. Professor Seligman Takes Issue with a Statement by Senator Glass,” New York Times, February 1, 1927, p. 26.

Stephenson, Nathaniel Wright. Nelson W. Aldrich: A Leader in American Politics. New York: Charles Scribner’s Sons, 1930. Reissued in 1971 by Kennikat Press.

Untermyer, Samuel. “Who Is Entitled to Credit for the Federal Reserve Act? An Answer to Senator Carter Glass.” Manuscript, June 19, 1927. Available at http://www.okhistory.org/historycenter/federalreserve/untermeyer.pdf

United States National Monetary Commission. Letter from Secretary of the National Monetary Commission, Transmitting, Pursuant to Law, the Report of the Commission. Washington: Government Printing Office, January 8, 1912. https://fraser.stlouisfed.org/title/641, accessed on August 11, 2015.

Vanderlip, Frank, and Boyden Sparks. From Farm Boy to Financier. New York and London: D. Appleton-Century Company, 1935.

Warburg, Paul M., “The Defects and Needs of Our Banking System,” New York Times: Annual Financial Review, January 6, 1907, p. 14-15, 38-39.

Warburg, Paul M. The Federal Reserve System: Its Origins and Growth. New York: The Macmillan Company, 1930.

Wicker, Elmus. The Great Debate on Banking Reform. Columbus, Ohio: Ohio State University Press, 2005.

Written as of December 4, 2015. 

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MEET FELIX THE COOLEST CAT

Recognition for the service and philanthropy of Felix M. Warburg, chairman of the American Jewish Joint Distribution Committee, was expressed by one of the new Jewish settlements in the Ukraine, at solemn exercises held yesterday.

Djankoy, a settlement adjacent to the colonies Novy Put and Novaya Zarya, near Krivoy Rog, was renamed Felix Warburg.

Mr. Warburg laid the cornerstone for the first intermediate school in the Jewish colonies, established at Novy Put.

A report of the events during Mr. Felix M. Warburg’s visit to the Jewish colonies in the Ukraine, was made public yesterday by the National Headquarters of the United Jewish Campaign on the basis of a cable received yesterday from Moscow by David A. Brown, national chairman.

Mr. Warburg and James H. Becker, accompanied by Dr. Bernard A. Kahn and Dr. Joseph A. Rosen, on their arrival in the colonies of the Cherson district, where the new Jewish “autonomous region” was recently established, were given a tremendous ovation by the Jewish settlers whose entrance upon a new permanent livelihood as productive workers on the soil was made possible by the aid of the American Jewish Joint Distribution Committee, of which Mr. Warburg is the chairman.

The travellers came from Moscow first to the Cherson settlements, and thence to the colonies of the Krivoy-Rog district, where they were received with equal enthusiasm. The inhabitants of Novy Put and Novaya Zaria, both recently established settlements in this section, expressed the desire to have their colonies renamed in honor of Mr. Warburg. In Novy Put the visitors officiated at the laying of a cornerstone for a high school, one of the significant first landmarks in the effort for the establishment of a modern educational system for the children of the twentieth century Jewish pioneers on the Russian steppes.

The establishment of schools and other facilities for an adequate community life goes hand in hand with the agricultural and economic aid provided by the Joint Distribution Committee, which operates in Russia under the name of Agro-Joint, with the official sanction and cooperation of the Russian government. The agricultural colonization program was begun a little over two and a half years ago when the great spontaneous “back to the soll” movement took start among the Jews of Russia, as an escape from the dwindling trading occupations of the city and the crushing political proscriptions leveled against this class under the new economic organization of the country. Its purpose was to give organized direction and support for expansion to what has been hailed by authoritative social students as an epochal new development offering revolutionizing potentialities for the future economic structure of Jewish life in Eastern Europe. More than 10,000 families have already taken up farmsteads in the Ukraine, White Russia and Crimea, on vast virgin tracts comprising over 700,000 acres whose prewar value is estimated at over $12,000,000. In addition to the free gift of the land, the government furnishes free transportation and free lumber for building, and tax and military service exemption for the first three years.

The aid provided by American subsidies through the Agro-Joint includes loans to settlers to enable them to make the transition from the cities to the interior and to build them homes, purchase of farm implements, seed and live-stock, well drilling and road building, organization of farm cooperatives, and the maintenance of agricultural experiment stations and a staff of field experts to supervise instruction of the colonists in their new vocation. The work of the Agro-Joint is under the direction of Dr. Joseph A. Rosen, a noted American agricultural scientist, who carried out the agricultural relief program of the American Relief Administration during the great famine in the Volga region in 1921-22. Dr. Rosen is accompanying Mr. Warburg and his party on their tour of the colonies.

With 100 new settlements already established, thousands of more families, according to Dr. Rosen have registered their desire to take up land and are anxiously waiting to be enabled to go-Further development of the work depends, however, on the amount of money which the Agro-Joint will have at its disposal. The J. D. C.’s appropriation for Russia calls for $2,000,000 for this year, of which $1,500,000 is for agricultural purposes.

Whether this sum will actually be forthcoming depends on the payment of pledges made to the $25,000,000 United Jewish Campaign, all other resources of the J. D. C. being now exhausted. With the spring season now at its height, when the ground must be prepared for sowing, it is particularly vital that the funds for carrying on the work should be assured, and the campaign leaders have been compelled to issue an emergency call urging local leaders throughout the country to borrow on funds pledged to the state and city drives, to make the minimum amounts urgently needed not only for Russia but for all of Eastern Europe available for the transmission to Europe at the earliest possible moment. – JTA, 1927

Felix M. Warburg, chairman of the American Jewish Joint Distribution Committee, on the conclusion of his visit to the new Jewish colonies in Russia, sent a cable to David A. Brown, national chairman of the United Jewish Campaign, and James N. Rosenberg, vice-chairman of the Joint Distribution Committee, describing his impressions of his inspection.

Mr. Warburg expressed himself as profoundly impressed with the permanent foundations of a new Jewish agricultural class being laid through the work of the Agro-Joint.

“Later I hope to persuade American Jewry to invest further in this practical and humanitarian work,” Mr. Warburg said in his message. His visit covered more than forty colonies in the three districts of the Ukraine, White Russia, and the Crimea, in which the Agro Joint is working. There are 135 colonies in all, in which more than 10,000 families of former impoverished traders and city dwellers have established themselves. All these colonies have been founded within the last three years.

A second cable was received at the same time from James H. Becker of Chicago, who is traveling with Mr. Warburg.

Mr. Warburg’s cable, as made public by Mr. Brown, reads:

“After delightful inspection our main three districts, am both satisfied proud of permanent foundation bringing these colonists only happiness only self-re-spected healthy life possible here, probably within near future. With unemployment more seriods, number anxious to become self-supporting independent farmers steadily increasing. First three years have gone according to schedule entirely satisfactory, and seeing them in their homes secure, contented, with hopes revived, working farms, starting repayments, is joy as well as vindication of Rosen’s plan. government encouraging, aiding our successful effort. Later I hope to persuade Jewry to invest further in this practical and humanitarian work. Meantime you and few who have given, worked, and seen for themselves realize that least American Jews can do is pay pledges without delay, for our obligations here must be met according to schedule. Nature’s seasons and desirable land wont wait.”

Mr. Becker’s cable read:

“Although have followed closely all oral, written reports, from our representatives who have seen colonization undertaking, I had no adequate picture of its magnitude of spirit. Have inspected work in all three districts. Visited and passed through more than forty out of hundred thirty-five our colonies. By October will have hundred eighty. Saw settlements in all stages of development, some formed this spring, to those completing third year. Have fine efficient business and technical organization, which receives inexperienced city dwellers, teaches them farming, helps them build houses, plant vineyards, prepared fields, sow crops, establish creameries, cooperative farm banks, etc., and remains in contact with them until they are independent farmers. This is great historic opportunity to acquire more land and continue turning declassed occupationless discouraged people into independent farmers. Although this sounds strong statement, nevertheless absolutely accurate. At present number persons we can help depends only upon money available. Can’t stress too much absolute necessity assuring funds enabling us carry out program and obligations already assumed. – JTA, 1927

PURCHASE, N. Y., Aug. 30, 1975 —The marriage of Mrs. Barbara Warburg of New York and Vineyard Haven, Mass., widow of Paul Felix Warburg, the financier and philanthropist, to Leonardo Mercall of East Hampton, L. 1,, and Athens, took place here today at the home of John L. Loeb, the investment banker, and Mrs. Loeb. State Supreme Court Justice John C. Marbach performed the ceremony in the presence of members of the couple’s immediate families.

The bride, the former Barbara Tapper of Chicago, was the widow of Baron D’Almeida when she was married to Mr. Warburg in London in 1949.

The bridegroom, who graduated in 1923 from Oxford University, prefers in this country not to use the title of Count, to which he is entitled. He was previously married to the former Lily Stathatos of Athens.

The couple will divide their time between New York and Europe. – New York Times

WARBURG – THE NEXT GENERATION

James Warburg before the Subcommittee on Revision of the United Nations Charter

Revision of the United Nations Charter: Hearings Before a Subcommittee of the Committee on Foreign Relations  (1950) 
United States Senate

SOURCE

REVISION OF THE UNITED NATIONS CHARTER
Hearings before a Subcommittee of the Committee on Foreign Relations
United States Senate
81st Congress, 2d Session
on Resolutions relative to the United Nations charter, Atlantic Union, World Federation, etc.
Feb. 2, 3, 6, 8, 9, 13, 15, 17, and 20, 1950
Printed for the use of the Committee on Foreign Relations
U.S. GOVERNMENT PRINTING OFFICE, WASHINGTON, 1950: 64429
PP. 494-508

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Subcommittee on Revision of the United Nations Charter
Elbert D. Thomas, Utah, Chairman
Theodor Francis Green, Rhode Island
Alexander Wiley, Wisconsin
H. Alexander Smith, New Jersey
February 17, 1950Washington, D. C.

STATEMENT OF JAMES P. WARBURG OF GREENWICH, CONN.

I am James P. Warburg, of Greenwich, Conn., and am appearing as an individual.

I am aware, Mr. Chairman, of the exigencies of your crowded schedule and of the need to be brief, so as not to transgress upon your courtesy in granting me a hearing.

The past 15 years of my life have been devoted almost exclusively to studying the problem of world peace and, especially, the relation of the United States to these problems. These studies led me, 10 years ago, to the conclusion that the great question of our time is not whether or not one world can be achieved, but whether or not one world can be achieved by peaceful means.

We shall have world government, whether or not we like it. The question is only whether world government will be achieved by consent or by conquest.

(our emphasis added)

Today we are faced with a divided world—its two halves glowering at each other across the iron curtain. The world’s two superpowers—Russia and the United States—are entangled in the vicious circle of an arms race, which more and more preempts energies and resources sorely needed to lay the foundations of enduring peace. We are now on the road to eventual war—a war in which the conqueror will emerge well nigh indistinguishable from the vanquished.

The United States does not want this war, and most authorities agree that Russia does not want it. Indeed, why should Russia prefer the unpredictable hazards of war to a continuation of here present profitable fishing in the troubled waters of an uneasy armistice? Yet both the United States and Russia are drifting—and, with them, the entire world—toward the abyss of atomic conflict.

SUPPORT OF SENATE CONCURRENT RESOLUTION 56

Mr. Chairman, I am here to testify in favor of Senate Resolution 56, which, if concurrently enacted with the House, would make the peaceful transformation of the United Nations into a world federation the avowed aim of United States policy. The passage of this resolution seems to me the first prerequisite toward the development of an affirmative American policy which would lead us out of the valley of death and despair.

I am fully aware that the mere passage of this resolution will not solve the complex problems with which we are confronted. Our recognition of the inadequacy of the present United Nations structure, and our declared determination to strengthen that structure by Charter amendment, will not alone overcome the Russian obstacle. But it will, at long last, chart our own goal and enable us to steer a straight course toward a clearly seen objective. Moreover, it will unite us in purpose with the vast majority of the peoples of the non-Soviet world.

Until we have established this goal, we shall continue to befog and befuddle our own vision by clinging to the illusion that the present structure of the United Nations would work, if only the Russians would let it work. That has been our position to date.

Until we establish this goal, we shall continue to ask other peoples to unite with us only in the negative purpose of stopping Russia. Fear-inspired negative action makes poor cement for unity.

Once we shall have declared a positive purpose—once we shall have cemented the united will of the free peoples in a common aspiration— we shall be in a far stronger position to deal with the obstacles presented to the realization of that purpose.

Mr. Chairman, I prefer Senate Resolution 56 to other resolutions now before you for two major reasons:

UNIVERSAL FEDERATION REQUIRED

First: Senate Resolution 56 goes to the root of the evil in the present state of international anarchy. It recognizes that there is no cure for this evil short of making the United Nations into a universal organization capable of enacting, interpreting, and enforcing world law to the degree necessary to outlaw force, or the threat of force, as an instrument of foreign policy. It states the objective in unequivocal terms.

Second: Senate Resolution 56 does not commit the United States to any specific next steps to be taken toward the attainment of that objective. In the present-state of world affairs, it would seem to me unwise to commit ourselves to any fixed plan of action, without first exploring all the possibilities. In contrast to Senate Resolution 56, other proposals before you seem to me either to set a goal short of what is needed to ensure peace, or to foreclose the ultimate attainment of a universal organization by an over-eager acceptance of half measures, on the theory that half a loaf is better than none.

Limitations of time prevent my going into detail, but I should like to state specifically the conviction that any exclusive partial federation, such as the Atlantic Union, would not only serve to harden the existing cleavages in a divided world, but would create new and dangerous cleavages within our half of the divided world.

I should like to make it clear, Mr. Chairman, that I do not minimize the many and complicated problems which will remain to be solved, once Senate Resolution 56 is enacted. Mr. Hickerson of the Department of State listed them most carefully. In due course we shall have to define more closely what we mean by world government and by what steps we propose to get there. I have given considerable study to these problems. I believe them to be soluble—but not by the adoption of any hastily conceived formulas, and, above all, not without exploring patiently and carefully what is in the minds of other peoples, who, while friendly to us, do not share our historical background nor our particular political or economic prejudices and predilections.

If we seek peace under law by common consent, we cannot expect to impose our imprint upon the world. We must be prepared to accept some sort of a composite pattern, in which we may preserve for ourselves the things we cherish, but in which others may be equally free to do the same. We may or may not be able to find a common pattern with the present rulers of Russia. We most certainly can, and must, find a common pattern not only with the peoples of western Europe but with the peoples of Asia, Africa, the Middle East, and Latin America. Perhaps a shorthand device for stating the point would be to say that we must find a common pattern with Nehru, before we can even think of trying to find a common pattern with Stalin.

AFFIRMATIVE POLICY REQUIRED

The virtue of Senate Concurrent Resolution 56 is precisely that it does not commit us to the narrow pattern which the State Department dreads. It is a broad declaration of purpose and nothing more.

Secretary Acheson said the other day that the only agreements which can usefully be made with the Kremlin are those which rest upon established fact. I think this is true, and not only with respect to Russia. But, as to Russia, the trouble has been that we have been letting the Kremlin create the existing facts.

One of your colleagues made a speech the other day, which seemed to me to leap straight for the jugular vein in our present foreign policy. Senator McMahon proposed that we create some facts of our own.

One of these facts, which your colleague specifically proposed to create, would, in my judgment, be far more powerful than our recent decisions to develop and manufacture hydrogen bombs. Senator McMahon proposed that we present the Kremlin with the fact of our determination to dedicate our strength to a world-wide, cooperative crusade, waged through the United Nations, against hunger, poverty, disease, and ignorance. This is the sort of bold affirmative action in the economic field which could, if pursued, create the climate for the attainment of our political objective—namely, the establishment of a world community living at peace under law.

Without detracting from the imaginative courage of Senator McMahon’s proposal, I regret that, in his first presentation, he has attached it to a self-negating proviso. His plan, so right in itself, would become operative only if a disarmament agreement were first reached with the Kremlin under which the United States could save $10,000,000,000 a year out of its military budget. This is extremely unlikely.

Moreover, even if the Russians were to accept a modified Baruch plan, this would not suffice, because, at best, such a plan would outlaw only one type of weapon and one method of waging war. It would, in effect, establish world government in the limited field of atomic energy, but it would leave the use of all other types of weapons to the discretion of nation-states dwelling in a state of international anarchy.

At a conference in New York last week, I ventured to put forward an alternative, in which Senator McMahon’s world-wide Marshall plan would not be conditioned upon anything the Kremlin might or might not be willing to do. Under this alternative, we should not wait for Russia. The benefits of the McMahon plan would become immediately available to those countries which made known their will to accept supranational authority—not only in the field of atomic energy, but in the whole field of international relations—to the extent necessary in order to establish peace under law.

Obviously, the proposed alternative condition—agreement to outlaw all weapons and war itself—is one which we cannot impose until we ourselves have accepted it. But, once we have accepted it, by adopting the concurrent resolution now before you, we shall be in a position to proceed with Senator McMahon’s cooperative plan, hand in hand with the majority of the world’s peoples.

Thus we should present the Kremlin with two vital new facts not of its own making:

First. The united determination of the majority of the world’s peoples to establish a rule of law and thus eventually to free themselves from the burden of armaments and from the overhanging fear of annihilation; and

Second. The steady progress of the massed forces of humanity embattled in a common crusade against hunger, poverty, disease, and ignorance.

The first of these new facts would, for a time, be static. The avowed aim could not be realized without Russian cooperation. The second of these new facts would be dynamic. It would demonstrate how peoples devoting their energies and resources to cooperative effort outstrip those peoples whose governments subsist on force and pursue only the goal of widening the orbit of their own arbitrary power.

Taken together, these two facts would exert a mounting pressure toward cooperation upon the Kremlin. It is true that a regime, which maintains itself by force at home, cannot readily renounce force as an instrument of foreign policy. Yet even such a regime can, in the long run, be brought to accept new facts which alter the conception of its own self-interest and self-preservation.

The creation of one such new fact has been boldly proposed by a member of your committee. The creation of the other lies in your hands today.

In order not to trespass upon your time, Mr. Chairman, I have left a number of gaps in the presentation of the suggested modification of the McMahon proposal. To fill in these gaps, I ask leave to have included in the record of my testimony, the paper already referred to, which was delivered last week at a conference of the Postwar World Council in New York.

Senator THOMAS. Without objection, it will be included.

(The paper referred to is as follows:)

SENATOR MCMAHON’S PEACE BOMB-WORKABLE PLAN OR DESPERATE HOPE?

[The Current Affairs Press, New York 17, N. Y.](By James P. Warburg)

I. IS IT A PLAN OR JUST A HOPE?

The speech delivered in the United States Senate on February 2, 1950, by the Honorable Brien McMahon, may well go down in history as the turning point in postwar United States policy. On the other hand, it is also quite possible that its echoes will die away within a few weeks or months, if the flame of hope which it kindled is allowed to flicker and die out.

For the first time since the cold war began, one of the major architects of United States foreign policy stood up and denounced the sterility of the present negative approach to peace—denounced as hopelessly outworn the ancient motto: “He who wants peace had better prepare for war.” This was the beginning of hope.

But Senator McMahon did more than merely repudiate the idea that security can be attained through maintaining the greatest arsenal of destructive weapons. He put forward a constructive proposal for an affirmative approach to peace. Was this proposal a workable plan for peace? Or was it merely the expression of a desperate anxiety that a workable plan for peace should be developed?

Briefly stated, Senator McMahon proposed that, if the Soviet Union would accept effective international control of atomic energy, the United States should declare itself willing to cut its military expenditures from 15 to 5 billion dollars a year, and to contribute the $100,000,000,000 so saved to a world-wide economic recovery program, channeled through the United Nations. The Senator envisaged a cooperative program, to which other nations would likewise contribute—a program lasting perhaps 5 years and calling for a total contribution of $50,000,000,000 from the United States. The present European recovery program, the point 4 program, atomic energy development and, presumably, all other programs of economic rehabilitation and development would be combined in this single over-all plan. Under it, all nations, including the Soviet Union, would be eligible for assistance.

This proposal falls into two parts: the proposal itself, and the conditions upon which it was put forward. Let us consider each separately.

II. THE CONCRETE PROPOSAL

The plan itself recognizes and squarely meets several major defects in our present foreign-aid policies.

By implication, it recognizes the futility of all military aid as opposed to economic assistance. Explicitly, as to economic assistance itself, Senator McMahon’s proposal corrects three major errors in our present procedures:

1. We have so far been attempting to deal with isolated parts of the world economy without an over-all concept or plan. For example, we are trying desperately to “integrate” western Europe by one major effort, while making another wholly separate effort to raise the living standards of the so-called underdeveloped areas of Asia, Africa, and the Middle East. We have so far -overlooked the fact that parts of western Europe are actually much more closely “integrated” with parts of Asia, Africa, and the Middle East than they are with each other.

Senator McMahons’ plan recognizes the need for a single, coordinated, worldwide effort, applied at whatever may be the points of maximum leverage on the world’s economy.

2. We embarked, in 1947, upon a wholly negative concept of extending economic and military aid wherever needed to contain Soviet-communism. We then tried to switch to a positive approach, when Secretary Marshall, in launching his well-known project, declared: “Our policy is not directed against any country or doctrine, but against hunger, poverty, desperation, and chaos.” Our attempt to make this switch was frustrated by Molotov’s famous walk-out, which doomed the Marshall plan to become primarily an instrument in the negative cold war. (It is beside the point of this discussion to speculate upon which would have happened, if Russia had accepted Secretary Marshall’s invitation.) In January, 1949, President Truman made a second start toward an affirmative policy, when he enunciated the point 4 principle. This declaration of principle remains as yet unimplemented and the legislation now before Congress would, if enacted, constitute only a very small first step in its execution.

Senator McMahon’s proposal carries the affirmative emphasis over into the whole of our foreign economic assistance effort. It restores the original Marshall plan concept.

3. We have been operating, in our foreign-aid programs, almost wholly outside the United Nations. The basic tenet of our policy has been to strengthen the United Nations; nevertheless, we have acted unilaterally in western Europe, in Greece and Turkey, and in China. President Truman’s point 4 program will apparently attempt to channel at least some of the proposed technical aid through the United Nations, but most, if not all, of the needed capital investments are expected to flow unilaterally from the United States to the participating countries, in accordance with bilateral bargains made outside of the United Nations. Senator McMahon’s proposal recognizes the need for channeling the whole program through the United Nations.

These are three major contributions to the making of an American policy that might lead to enduring peace. There is a fourth contribution implicit in the Senator’s proposal.

Because we have committed so large a part of our resources to military preparations and to European aid, we have arrived at the crisis in Asia feeling impoverished. Our budget is heavily out of balance. Taxes are already burdensome. Therefore, whatever we do in Asia must, we think, be done without spending any substantial funds from our Treasury. This led President Truman to speak of “our vast imponderable resources” and to think in terms of technical advice rather than financial assistance. Since then, however, it has become clear that technical advice without substantial help in carrying it into effect would be of no great usefulness, and so we have built a point 4 program on the hypothesis that private investors can be induced to provide the necessary capital. To a very great extent, I believe this hypothesis to be an illusion, especially in the initial stages of the program.

Senator McMahon’s proposal would make aid to the underdeveloped areas an integral part of an over-all program financed largely by Government contributions channeled through the United Nations. This would in no way preclude private investment. It would, on the contrary, create the only conditions in which private capital might be willing and able to make an important contribution.

We see, then, that the McMahon proposal might, if reduced to a practicable plan, cure precisely those defects from which our past efforts have suffered and from which the point 4 program will suffer, if we pursue our present course.

III. THE SELF-NEGATING PROVISO

Let us now consider the conditions upon which this extremely interesting proposal has been put forward.

The whole plan rests upon the assumption that the United States can save $10,000,000,000 a year (two-thirds of its present military budget). This assumption, in turn, rests upon Russian acceptance of a modified Baruch plan for the international control of atomic energy.

Various commentators have pointed out that this point of departure negates the whole proposal and makes it merely a clever propaganda maneuver. They have pointed out that, if Russia would not accept the Baruch plan when we had an atomic monopoly, she would certainly not accept it now; in other words, that the Baruch plan is out of date.

This criticism seems to me wide of the mark. It is true that the Baruch plan is out of date. But I can find no conclusive evidence in the Senator’s speech to suggest that he would object to modifying it, so long as it remained an enforceable plan fortified by the right of inspection. The real difficulty lies elsewhere.

The Acheson-Lilienthal report, from which the Baruch plan derived, was a revolutionary document. It said, in so many words, that there was no way to prevent the construction and probable use of atomic weapons, short of establishing a world authority capable of enacting, administering, and enforcing law. The Baruch plan was, in effect, a plan for the establishment of world government in the field of atomic energy.

Now the amazing thing was this: We, the United States, were willing to put forward this far-seeing proposal and to abide by it, but without recognizing the revolutionary nature of our own proposition. It never occurred to us that the principle, which we recognized as valid with respect to atomic weapons, was equally valid with regard to all weapons. We talked about government under law with respect to A-bombs, but went on talking about international anarchy with respect to TNT-bombs. This is something like a community which decides to outlaw murder by the use of firearms, enacts a law to that effect, and hires a policeman to enforce it, but leaves murder by knives, hatchets, and poison to the discretion of individuals. For what, pray, is any attempt to control so-called conventional armaments by treaty between sovereign nation states, other than leaving the use of such armaments to the discretion of the individual governments?

The trouble with the Baruch plan-even if brought up to date-is that it deals only with one type of weapon. It outlaws one method of waging war. What we need to do is to outlaw all weapons of aggression. What we need to do is to outlaw war itself.

The puzzling thing about Senator McMahon’s proposal is that he did not make this the condition-if there was to be a condition-for the adoption by the United States of an affirmative policy toward peace. It would be less puzzling if Senator McMahon had not himself sponsored a resolution, now before both Houses of Congress, which would make the development of the United Nations into a world federation the avowed aim of American policy. In signing his name to this resolution, Senator McMahon recognized that there can be no peace without a world organization capable of enacting, administering, and enforcing world law, in such a way as to prevent aggression by any nation against another with any weapons of force-from hatchets to H-bombs.

Why not, then, combine two bravely taken positions of wise statesmanship into one? It seems to me that, were he to do this, Senator McMahon would have a theoretically impeccable plan.

It is true that the proposals thus modified would still not be a practicable plan, because the Russians would hardly accept world government with regard to all weapons any more readily than they would accept the enforcement of law with regard to one type of weapon. This brings me to the final observation I should like to make concerning the Senator’s proposal.

IV. THE PLAN MADE REALISTIC

If the policy suggested by Senator McMahon is a wise policy for the United States to pursue, why must it be made conditional upon any Russian action? The obvious answer is that we cannot afford to cut our military expenditures by $10,000,000,000 a year unless there is an effective agreement to disarm; and that, unless we can save the $10,000,000,000 out of our military budget, we cannot afford to spend them on economic reconstruction.

The first half of this answer must be accepted as correct. Disarmament by example will get us nowhere.

The second half of the answer seems to me open to question. Suppose we take for granted that no effective disarmament agreement is possible at the present time, and that we cannot, therefore, count on any substantial saving in our military budget. Is it so certain that we cannot afford to go ahead nevertheless with the constructive program put forward by Senator McMahon?

To begin with, we should not be talking about a ‘net increase of $10,000,000,000, a year in our expenditure. The money we are now spending in western Europe and in other parts of the world for purely economic aid—excluding military assistance—comes to at least $4,000,000,000 a year. If these existing programs were integrated, as proposed, in the new over-all plan, we should be adding only six billions to our annual expenditure. Thus, the 5-year program would cost us 30—not 50 billions. Furthermore, it seems reasonably certain that, with or without the over-all McMahon plan, we shall have to spend considerable sums in Asia and the Middle East during the next 5 years if we intend to hold our own in a continuing cold war. It is, therefore, fair to say that the adoption of the McMahon plan without any conditions whatever would probably not add more than four or five billion dollars a year to our expenditures.

Can we afford such an increase?

I should like to put the question to you In reverse: Can we afford not to undertake such a plan? The last war cost us over $1,000,000,000,000. It cost us very early as much per week as this program would cost us per year. No one knows what the next war would cost.

Clearly we can afford it, if the program can reasonably be expected to get us off the greased slide that leads to atomic war and on to the long and arduous road that leads to peace.

I, for one, believe that Senator McMahon has outlined a plan that can reasonably be expected to lessen the existing tensions, to strengthen the United Nations, to put the United States into an unassailable moral position and to improve the lot of mankind. I believe that the United States should embark upon such a plan without making its decision subject to whatever the Kremlin may or may not be willing to do at the present time.

Secretary of State Acheson has said that the only agreements that can be made with the Kremlin are agreements which rest upon existing facts. Let us, then, present, the Kremlin with a fact far more powerful than our decision to develop and manufacture ever more horrible weapons of destruction. Let us present the Kremlin With the fact that the United States is determined, in spite of its military burdens, to commit an act of faith-to dedicate its great strength to constructive cooperation with all the world’s peoples in a world-wide crusade against hunger, poverty disease, and ignorance. Let us present the Kremlin with the fact of a challenge not only to its military power but to its purposes, which are the ultimate roots of its power.

V. SHOULD WE LET RUSSIA PARTICIPATE IN THE NEW OVER-ALL PLAN?

The condition I would attach to Senator McMahon’s proposal is one that we shall not be able to impose until we, ourselves, have accepted it. That condition is that only those nations shall be eligible to participate in the plan whose peoples have made known their will to accept the rule of law—not merely in the field of atomic weapons but in the whole field of international relations—to the degree necessary in order to outlaw force, or the threat of force, as a method of settling disputes.

Once we declare our own willingness to transform the United Nations into an organization capable of enforcing peace under law, we shall find ourselves in company with the entire non-Soviet world. We shall then be in a position to proceed with our over-all cooperative plan hand in hand with the majority of the world’s peoples.

When the rulers of the Russian people decide that they, too, wish to participate on these terms, then, at long last, the arms race can come to an end, and all the world’s peoples can be released from the burden which lies so heavily upon them, and from the overhanging threat of annihilation which beclouds their lives with fear.

It would, I think, be foolish to think that this can happen in the immediate future as the result of any sort of negotiations. A regime which maintains itself at home by the use of force cannot readily renounce force as an instrument of foreign policy. In the long run, however, even such a regime can be brought to realize—by “demonstration of fact”—that those peoples, who devote their energies to peaceful cooperation, will outstrip the peoples whose governments pursue only the sterile aim of widening the orbit of their own arbitrary power. The alternatives with which we are faced today are not whether we should or should not “talk to the Russians.” The alternatives we face are whether or not to do—in spite of the Russians—what needs to be done and what. in our hearts, we know we should do.

Freed from its self-defeating proviso, Senator McMahon’s proposal can become a mighty weapon for peace.

Freed from its own myopic, penny-pinching fears, our Government can use this proposal to end the long nightmare in which we have been living.

QUESTIONS

Senator THOMAS. Senator Smith?

Senator SMITH of New Jersey. Mr. Warburg, I am interested in your program here. I gather from your statement that you are not prepared to go as far as the so-called Hutchins plan, which is a proposed set-up for a world federation—you are not prepared to go that far?

Mr. WARBURG. No, sir.

Senator SMITH of New Jersey. I also gather that you are not in accord with the proposals of the Atlantic Union group which contemplates a preponderance of power at this time in order to give us a strong bargaining position with Russia?

Mr. WARBURG. No, sir; I am not in favor of that, as I stated in my testimony.

Senator SMITH of New Jersey. And you think the proposals we have had to move step by step are not adequate?

Mr. WARBURG. That is right.

WORLD “FEDERATION” OR “ORDER”?

Senator SMITH of New Jersey. Now there is one difficulty that has been raised in these hearings, in regard to a particular resolution, and that is to the use of the word “federation,” and that is on the theory that it prejudges the kind of world set-up to exist. In other words, it is sort of copying after our own state or Swiss state. Some think that it goes too far and some think that unless we can see the thing through and blueprint it as to what it means, we should not use it. I have been asked as to those things, and as to the substitution of the word “order” for the word “federation” so that you won’t have the implication of some kind of federated. states, if that might not be better in this resolution, if adopted.

Mr. WARBURG. I would hesitate to express an unconsidered opinion as to this, Senator. It seems to me that “federation” is as broad as “order,” and a little more specific in the sense that it is more limited if you like, because it means that you delegate power to a federal government, whereas “order” might be unitary government, and if I were afraid of having this too broad, I would prefer the word “federation” because it does imply a limited delegation of power.

Senator SMITH of New Jersey. You feel it presupposes that we might commit ourselves to something like the Swiss Federation, or our own federation, or any other existing federation at the approach. I am wondering whether you are prepared to go that far, where you say in your statement that you are not trying to outline the details, you mean you are not prepared to say yet what kind of over-all federal legislature should be set up to enact the kind of laws you contemplate?

Mr. WARBURG. No; because I don’t think we alone are capable of thinking that out. I think that is a cooperative matter that calls for cooperative effort.

Senator SMITH of New Jersey. I just wondered whether you wanted the United States to commit itself to that approach, and to the implication of the word “federation” at this time.

Mr. WARBURG. I think the essential thing we should undertake is that we declare our willingness to participate in some sort of world organization capable of enacting, administering, interpreting, and, enforcing world law, whether you call it a federation, a government, or world order, I don’t think that matters. I don’t share in Mr. Hickerson’s anxiety that this limits us to a narrow approach. I think this is a broad approach, and I like it for that reason; whereas some of the other proposals are not, and I think they would be a misstep at the present time.

Senator SMITH of New Jersey. Would you be willing, irrespective of whether this is passed or not, to support the Thomas-Douglas proposal, or the so-called Ferguson Resolution, if you know what they are?

Mr. WARBURG. I don’t know the Ferguson Resolution.

Senator SMITH of New Jersey. The Ferguson Resolution is simply an approach through the United Nations, recognizing the United Nations, and presupposes that it has in it a possibility of expansion and proposes that that area of expansion should be explored under the United Nations as it is today, a trial-and-error approach, rather than contemplating a blueprint for the future.

Mr. WARBURG. I couldn’t support that because it doesn’t seem to go to the root of the matter, which is simply that the United Nations in its present form is a league of sovereign states, and the root of the evil is that it is not a league of sovereign people. Unless you cure that, I don’t think you can attack the root of the evil. I don’t think our present resolutions go far enough, I may be incorrect, but in my understanding, the resolution won’t go far enough to change the United Nations from a league of nations to a league of people.

Senator THOMAS of Utah. It would not change the structure of the United Nations at all.

Senator SMITH of New Jersey. That is all I had in mind, Mr. Chairman. I wanted to bring out, if I could, Mr. Warburg’s position on these things, and the relation to other proposals. We are dealing with lots of proposals and we will have to meet in executive session when the hearings are over, and think through the positions taken by the different witnesses.

I feel grateful to you for your splendid presentation, Mr. Warburg. Your point of view is very valuable.

Mr. WARBURG. If I might sum it up, I think Senate Resolution 56 does the minimum required to undertake the job we have to undertake without going any further than is necessary, to accomplish that minimum, at the present time.

Senator SMITH of New Jersey. You don’t claim Senate Resolution 56 would meet any of the immediate present crises before us?

Mr. WARBRG. No, but I think it would get us on a course with a charted goal toward which we could steer, which would enable us to meet the crises, and without such a goal, I don’t see how we can, because we will go on zigzagging.

DISARMAMENT PROPOSAL

Senator SMITH of New Jersey. Would you care to comment on Senator Tydings’ suggestion that the President call a disarmament conference to deal with that as the immediate problem before us, before we get to Senator McMahon’s proposal?

Mr. WARBURG. With all due respect to Senator Tydings, I have never seen any hope in disarmament or limitation of armaments by agreement between sovereign nations or states, because all of the treaties between the sovereign nations or states are such that anyone can break them at their convenience, and the result is that you give a head start to the aggressor.

Senator SMITH of New Jersey. I ought to say, in behalf of Senator Tydings’ proposal that he wouldn’t think of going into it unless there were some practical plan for international inspection.

Mr. WARBURG. I would find it difficult to imagine any practical plan which did not involve some form of world government.

Senator SMITH of New Jersey. That is one of the difficulties we have. Thank you, Mr. Chairman.

IMPLEMENTATION OF SENATE CONCURRENT RESOLUTION 56

Senator WILEY. Mr. Chairman, Senate Resolution 56 merely expresses the sense of the Congress. Do you think, Mr. Warburg, that it should be a fundamental objective of the foreign policy of the United States to support and strengthen the United Nations and seek its development into a world federation open to all nations with defined and limited power?

Where do you go from there?

Mr. WARBURG. I don’t think one needs to answer that question at the present time, sir. I can tell you where I think, or where I would try to go. As far as I can see today, the next thing I would do would be to explore with the other nations, and as I said in my statement, particularly with a nation like India, what the common ground is on which we could reasonably hope to build a pattern on which they could live and we could live, each keeping the things we cherish. If we could do that, find the common pattern or the common meeting ground for the non-Soviet world, and I believe it can be done, then one begins this trial-and-error business, finding out how the details would work out in terms of a constitution, and so forth.

Senator WILEY. I want to thank you for that explanation, because I agree fully with you that all the resolution does is to express the sense of the Congress the hope and wish that through man’s ingenuity and vision he can evolve something that may do this job.

Mr. WARBURG. I should say, if I might, sir, it is more than a wish. I think it is a determination. I think if the Congress enacts this concurrent resolution, it is requesting the President to declare this as an avowed aim of the American policy, and aims of American policy have a habit of being more than wishes.

Senator WILEY. I won’t quibble with you about the meaning of words. What I have in mind is that it is not a mandate because under the Constitution this is a question of foreign policy. It virtually says to the President, “Now, get busy and see if you can do something about this terrible situation that we are in.” The State Department says that they have been busy. They have been trying in every way, through the United Nations, through their ambassadors, to try to reach some workable arrangement with Joe Stalin. The only reason I am interjecting this angle is because, as you have heard today, two Congressmen have intimated that the passage of one of these resolutions would be unconstitutional. When those very suggestions get to the public, and they connect them with the daily news, a bad psychological condition is created. I think it is well to have it clear that all we are doing here is exploring these suggestions. If any resolution is passed, all it does is to suggest to the President who, under the Constitution, has responsibility for our foreign relations, that we want him to keep on exploring to see if we can do something to antidote the Russian influence.

EFFECT OF RESOLUTION ON PEOPLE OF THE WORLD

Now, I want to ask another question: Assume now that pursuant to this resolution the President is requested to head in a certain direction in foreign relations to take steps to support and strengthen the United Nations in such a way that there will be developed a world federation open to other nations.

Assume that we are successful in getting this resolution through. Suppose we get India and Pakistan and their 500,000,000 people to enter our organization. We could make a lot of other assumptions.

All right, how are we going to, by having this mechanism, change the ideological approach of these people? I am interested, vitally interested, because I think that is the crux of the thing-how are we going to win the battles of the mind?

Mr. WARBURG. What I attempted to suggest, and let me restate it because I think it is the nub of the problem. I don’t think that by our avowed intention to transform the United Nations into a world federation, that we change an existing crisis with Russia, and the whole Communist orbit.

Senator WILEY. That should be set out—

Mr. WARBURG. It may, hitch together, because that is only half of what I want to say.

I don’t think we can meet that crisis in any other way except by embarking on this road, and then doing some other things as well. I don’t think then, even if you attained world government, you would necessarily have a guaranty of peace-I don’t think you can have peace without world government, I think we need to proceed on two parallel lines, one political, and one economic. I think the political line is that we must declare our intention to do the one thing that can preserve the peace in the world, and oddly enough, the United States and the Soviet Union are the only two great powers that are on record as opposing the transformation of the United Nations, That is the only thing we agree with Uncle Joe on. Most of the other nations in the world are about ready to do something about it. That is the political approach.

But, parallel, to that, that is why I brought in Senator McMahon’s proposal, I think we can do a great deal to create the limits within which the world community can grow and become possible, and I think the Senator hit the nail on the head with his proposal, except as I say he hitched it to another proviso.

I think we should go ahead and do precisely what he says, and not wait for Russia. We should get together with the other nations, which are willing to share our purpose to create the rule of law in the world.

Senator WILEY. Have you ever heard of the statement that a treaty is but a scrap of paper?

Mr. WARBURG. Yes.

Senator WILEY. Have you seen any indication in the last 30 years that the nations have changed their approach on that?

Mr. WARBURG. If your question means, do I believe that we can make a treaty with the Russians, I will say precisely the opposite. I am saying we should proceed, irrespective of a treaty with the Russians.

Senator WILEY. I am talking about whether or not the question of the validity of a treaty is just as strong as the intent of the parties to maintain it and keep it.

Mr. WARBURG. That is correct.

Senator WILEY. And, when you talk about creating a world government, you mean, I presume, that not simply the mechanism, but that the parties to that will live and die with the instrument; that they are ready to live and ready to sacrifice and ready to carry it through. But we have seen how in the economic front, the doctrine of the British, that a contract is a valid thing between two parties, has fared, and you have seen in the nations of the earth, the old British doctrine go out the window and the idea is now, “Get as much as you can, and forget the contract.”

Mr. WARBURG. Senator, I think you have put your finger on the primary reason why this resolution is necessary. As long as you have a world organization which is in effect nothing more than a multilateral agreement between sovereign states, you have precisely the situation you describe. The minute you have government and law, and law enforcement, there is no longer a question of whether you are willing to stick to a contract, you have to, or the policeman will come and take you in to jail.

Senator WILEY. You are assuming law and law enforcement. That means that Uncle Sam would become the world policeman.

Mr. WARBURG. No, no. I am not assuming that we will run the world government. I am not assuming that this world federation is a device for extending our own power.

Senator WILEY. You are not assuming that all the other folks on the earth are going to run us, are you?

Mr. WARBURG. I am assuming that a government will be run as our own Government is run, by the development of a fair process of representation which has to take in all the factors that apply to that, not only population, but productivity and education and all those things.

Senator WILEY. That is a consummation devoutly to be wished for, but are you not really assuming that we have won the battle of ideas in the minds of men, so that-we all see alike? Until you do that, you will have your internal conflict.

Mr. WARBURG. I don’t think we have won the battle for the minds of men, I think we are in the process of losing it, sir.

Senator WILEY. I think we have lost it. I want to win it back, if there is a way to do it. If yours is the way to do it, you will have to demonstrate it, and you will have to demonstrate that if we join up with all the groups of the earth, that we won’t be taken for a ride. We have been so naive in our world dealings, as you know, with the Soviet Union particularly and with others, and my whole thought in questioning you is to see or make sure that the thing we want, in other words, people sitting down, nations sitting down together, keeping faith with one another, things that we want to be–that our wishes do not lead us up other blind alleys that we would regret.

Mr. WARBURG. I subscribe to that, but I do very strongly feel that what we are doing today is following a policy which is made largely in Moscow, a fear-dictated negative policy designed to stop the Russians from whatever they want to do. I think the only way we will ever stop the Russians is to. develop a positive policy of our own, and I think the two parts of a pattern go together. You can’t have law without government, and you can’t have peace without law, that is part A; and, part B, the fact that you have to conduct a really serious world-wide war on hunger, disease, ignorance, and poverty if you want to have the people of the world on our side. I don’t mean to be Santa Claus. I mean, there should be a cooperative endeavor, such as Senator McMahon was talking about, in which everybody chips in.

Senator WILEY. We have to have that recognition. If we have it, can we get all the other folks to have that recognition, and then keep faith?

Mr. WARBURG. I think the first problem we should meet is in ourselves. One of the things I think we have been doing too much, is that we have stopped ourselves from getting started in the right direction because we then say, conveniently, “Oh, well, the other fellow won’t do it anyway, so what’s the use.”

If we said, “This is something we have to do,” and did it, we would find an awful lot of other people coming along who, once something was started, might be persuaded to join us.

Senator WILEY. You understand, of course, that we have a great deal of disagreement here between great minds in relation to the appropriateness of the mechanism. You are in favor of this, others are in favor of the North Atlantic Union, so, great minds differ on the mechanism, but they all seem to think that their mechanism will do the job.

Now, the thing I am trying to bring out in my questions is, that no mechanism will do the job unless there is a willingness and intent on the part of the peoples to carry it through.

Mr. WARBURG. Including our own.

Senator WILEY. Yes, that is the thing, and there is always the danger that because men of high standing, like yourself, get up here and talk about a mechanism, that some people believe it is going to give us the thing right off the bat, ipso facto, so to speak—it is going to be self-operating. That is a very dangerous condition for us to get into. We must make sure that whatever we do, it does not go out to the public that at long last we have found the magic something that is going to bring peace on earth. Peace is a question of conflict within the minds of men, and between nations. Conflict in the minds of men has been generated through centuries of hate and competition between people for material wealth and political domination. That basic conflict is not eliminated by merely passing a resolution or creating a mechanism. It has to be something finer, a rebirth within the minds of men. Do you agree with that?

Mr. WARBURG. Yes, but nothing I ever said, or that I have ever written indicated that I think that by passing a resolution we will have the millennium, nor are we talking about a mechanism. I think we are talking about an aim to find a mechanism; something different. We are not saying this is the mechanism by which you do it, we are saying you have to find it. We have to find the mechanism which will enable us to substitute the rule of law for the rule of anarchy in the world.

Senator WILEY. You have no mechanism, you are searching for one. Others say they have the mechanism.

Mr. WARBURG. I think that is all this resolution commits us to, to search for a mechanism to create the rule of law.

Senator WILEY. Thank you.

Senator THOMAS. Thank you, Mr. Warburg.

Mr. WARBURG. Thank you, sir.

James Warburg Biographical/Historical Note

SOURCE: JFK Library

1896 Born August 18, Hamburg, Germany

1917 A.B., Harvard

1917-1918 Navy Flying Corps

1919 National Metropolitan Bank of Washington

1919-1921 First National Bank of Boston

1921-1929 Vice President, International Acceptance Bank

1929-1931 President, International Manhattan Company

1931-1932 President, International Acceptance Bank

1932-1935 Vice Chairman of the Board, Bank of Manhattan Company

1932-1934 Financial Advisor to President Roosevelt and London Economic Conference

1933 Financial Advisor, World Economic Conference, London

1934-1936 Work in opposition to certain New Deal Policies

1939-1941 Work against isolationism in American foreign policy

1941-1942 Special Assistant to the Coordinator of Information

1942-1944 Deputy Director, Overseas Branch, Office of War Information

1944 Advisor and speech writer, Political Action Committee of the Congress of Industrial Organizations (CIO-PAC)

1945-1969 Touring, speaking, and writing efforts on behalf of “a more creative foreign policy”

1969 Died June 3, Greenwich, Connecticut

And this is just history as written by its winners.
We will keep digging deeper to find out what they forgot to tell us and what they made up.

To be continued?
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