The warning issued by American Consul General George Messersmith on June 26, 1933, that continued U.S. policies toward Germany’s economic controls could render Germany a “danger to world peace,” truly brings into sharp focus the complex and often contentious interplay between economic policy, national interest, and the escalating international tensions of the interwar period. This was a pivotal moment, as the world grappled with the fallout of the Great Depression and the rise of aggressive, nationalistic regimes.
To grasp the full weight of Messersmith’s caution, it’s essential to understand the dire economic context within Germany and the contrasting “open door” vision the United States championed. Germany had endured a horrifying experience with runaway inflation and currency depreciation in the early 1920s, culminating in the complete monetary collapse of 1923. This deep-seated trauma meant that, even as other European nations abandoned the gold standard and devalued their currencies, no German government could politically afford the dreaded act of another devaluation. Consequently, Germany was forced to implement strict exchange controls.
Within this climate, figures like Dr. Hjalmar Schacht, who would become a critical link between the Nazis and German big business, found success in forging bilateral trade agreements, essentially “barter arrangements,” that deliberately bypassed traditional gold-based and international banking systems. These arrangements, while economically necessary for Germany given its constraints, deeply angered the United States and other Western countries, who perceived them as a direct challenge to the established global financial order. Indeed, during his May 1933 talks in Washington with President Roosevelt and Secretary of State Cordell Hull, Schacht not only denied the widespread harassment of Jews but also warned that Germany was rapidly running out of foreign exchange needed to service its substantial $2 billion debt held by American investors.
The United States, particularly under the guidance of Secretary of State Cordell Hull, aggressively pushed back against Germany’s economic nationalism. Hull was a steadfast proponent of multilateral trade and sought to replace the 1930s system of economic and monetary nationalism with a new international economic order anchored by the U.S. dollar. This vision entailed promoting American exports, reducing tariffs and quotas, and breaking up national currency blocs in favor of stable, dollar-based exchange rates – a true “open door for American commerce and investments”. The U.S. viewed Germany’s bilateral trade deals and exchange controls, which were seen as propping up a chronically overvalued mark, as inherently hostile. By 1935, American officials were openly labeling Germany, and similarly Japan, as “aggressors” due to their successful bilateral trade competition.
This U.S. stance was not merely theoretical; it manifested in direct interventions. President Roosevelt, for instance, overruled his Agricultural Adjustment Administration chief George Peek, who favored accepting bilateral deals with Germany and was known as an ardent “isolationist” in the late 1930s. The U.S. also actively countered German economic inroads in Latin America, which Hull concluded by 1935 was “straining every tendon to undermine United States trading relations” in the region. The American Chamber of Commerce in Brazil, for example, pressured the State Department to scrap the Germany-Brazil barter deal, which it deemed the “greatest single obstacle to free trade in South America.” Brazil was ultimately persuaded to cancel the agreement in exchange for a $60 million loan from the U.S.. U.S. exporters further agitated for stronger government action, and Roosevelt even commissioned a study of South American currencies to “minimize German and Italian influence” in the hemisphere. German diplomats candidly reported that the U.S. was exerting “very strong pressure against Germany commercially” to drive them out of South American markets, demanding an “unconditional economic surrender” to America’s trade philosophy.
Messersmith’s warning on June 26, 1933, came amidst this backdrop of escalating economic confrontation. Just weeks after his direct observation, the World Economic Conference in London, which had been years in the making by the British-dominated League of Nations, descended into disarray. This conference was a desperate attempt to restore a fixed exchange rate system, but Roosevelt, prioritizing domestic inflation, essentially “torpedoed” it with his “bombshell” message in July 1933. This action, enthusiastically supported by American economists like Irving Fisher and George F. Warren who advocated for unchecked manipulation of the dollar’s value, signaled a clear shift towards monetary nationalism and international financial warfare. It deeply angered the French and English and led to the resignation of key American financial advisors like James P. Warburg who had advocated for stabilization.
Messersmith’s fear was that the persistent American pressure to dismantle Germany’s self-developed economic controls, especially when the German government felt unable to pursue traditional devaluation, would inevitably lead to instability that could threaten global peace. The underlying question, as explored by some historians, is whether Western resentment of Germany’s successful competition through bilateral agreements, and a desire to “liquidate such competition,” contributed significantly to the Western drive towards war with Germany. Secretary Hull’s later observation that “war did not break out between the United States and any country with which we had been able to negotiate a trade agreement,” and that “the political lineup follows the economic lineup,” suggests his belief that economic alignment could avert conflict.
However, the U.S. approach also harbored a moral dimension, particularly in its growing antagonism toward the emerging fascist dictatorships. While Hull genuinely believed that “economic rehabilitation” through open trade would foster “contentment” and deter militarism, his economic rationale may have inadvertently obscured the true, aggressive motivations of these regimes. The reality was that by 1935, Hitler’s rearmament program was blatant, openly violating the Treaty of Versailles, and his storm troopers paraded with rhetoric of global conquest. Fears of another war and foreign fascist gains were well-established, with even figures like Fiorello La Guardia warning as early as 1931 that American financial policies were contributing to Hitler’s rise to power, and that American troops might “return to Europe”.
Ultimately, Messersmith’s warning underscored a critical tension: the pursuit of specific economic objectives, even those ostensibly aimed at promoting a more open and prosperous world, could inadvertently exacerbate geopolitical instability if they were perceived as directly undermining a nation’s ability to survive or if they fueled resentment among populations already facing immense hardship. The Great Depression had already contributed to the rise of militarism in Japan, as seen in the 1931 seizure of Manchuria, by sealing the fate of its liberal internationalists through the collapse of world trade. This historical context illustrates how economic despair, coupled with perceived external pressure, could tragically be channeled into aggressive, expansionist policies that would indeed make a nation “a danger to world peace”.