Cox on Madsen, 'Sovereign Soldiers: How the U.S. Military Transformed the Global Economy After World War II'

Grant Madsen
Ronald W. Cox

Grant Madsen. Sovereign Soldiers: How the U.S. Military Transformed the Global Economy After World War II. Philadelphia, PA: University of Pennsylvania Press, 2018. PP. ISBN 978-0-8122-5036-7.

Reviewed by Ronald W. Cox (Florida International University) Published on H-Diplo (November, 2018) Commissioned by Seth Offenbach (Bronx Community College, The City University of New York)

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Professor Grant Madsen’s new book, Sovereign Soldiers, examines the role of US military governments in structuring the economy policies of the US occupation of Japan and Germany after World War II. The author locates the US military occupation within a larger theoretical context of understanding US foreign policies. He borrows conceptually from a foreign policy literature that questions the unitary capacity of a nation-state to make policy in a unidirectional fashion. He argues that the best explanation of US occupation policies comes from an understanding of the role that US military governments have played as an “external state,” or “those institutions functioning outside the formal boundaries of the United States, but still tied to it” (p. 7). Madsen takes the concept of the external state from the political theorist Robert Latham, and also expresses his debt to the body of scholarship that he references as the “transnational” approach or the “new internationalism” (p. 9).[1] This approach also advances a critique of the notion that foreign policymaking can be analyzed productively by assuming that there is a unitary state. Drawing from these scholarly perspectives, Madsen argues that the actions of the  US state in foreign occupation policymaking have often been more responsive to the immediate political skill, ambition, judgments, and expertise of military officials entrusted with developing occupation policies than to any overarching set of unitary state interests.

With this approach, Madsen locates his own historical framework within the scholarly traditions that reject grand narratives of US strategy. Madsen is skeptical of explanations of US occupation policy that characterize it as “empire-building” or that view policy as a product of the vested interests of a dominant political and business elite. He argues that such framing fails to capture the extent to which top military commanders and their bureaucratic support system were able to shape the direction of US policies in Germany and Japan. Madsen traces the roots of the US military command structure as an “external state” to a historically conditioned set of experiences that military officers were able to draw from in making policies in Germany and Japan. For Madsen, the US imperial project as it developed at the turn of the nineteenth century (which he spends some time on) never developed the formal colonial administrative apparatus utilized by European powers in managing their colonial territories. As the United States dramatically expanded its foreign military presence during and after the Spanish-American War, US presidents began to entrust the military with a set of governance functions in occupations that were never completely subordinated to the overarching goals of the state. As a consequence, military commanders from Douglas MacArthur to Lucius Clay to Dwight Eisenhower, the central figures in Madsen’s narrative, were forced to struggle with the political and economic context that informed the mix of policies developed by the occupying authorities. From the occupation of the Philippines during the Spanish-American War to the occupation of Germany and Japan following World War II, MacArthur, Clay, and Eisenhower were sharpening their ideas about what policies offered the best mix of political and economic stability for countries that had been defeated on the battlefield.

Madsen argues that each of these officers was influenced by his previous battlefield experience, as well as his own personality, ambitions, and philosophies, in developing the political and economic policies that would govern the occupations of Germany and Japan. Of the three central characters of the book, Eisenhower emerges as the most complex thinker during his role as military governor of Germany. Eisenhower presided over the US occupation by enlisting the services of other military and civilian officials, notably Clay, who served as the deputy governor for Eisenhower from 1945-47 before replacing Eisenhower as military governor, and Joseph Dodge, a US banker whose influence over the occupation policies would prove to be critical in both Germany and Japan. Madsen describes how, in their new roles, Eisenhower and Clay faced a German economy devastated by World War II. The German currency, the Reichsmark, was rendered worthless as a result of hyperinflation. German employers had little incentive to invest and workers little incentive to secure employment. Instead of market exchange, barter was more commonly used to transfer goods from one individual or business to another. Eisenhower and Clay began thinking about the proper incentive structure that would restore market exchange, create a stable currency, and provide motivation for production and employment.

The approach that Eisenhower and Clay adopted, influenced by the hiring of banker Joseph Dodge to lead the Finance Division, was greatly informed, according to Madsen, by a recognition that the only viable long-term solution for German economic stability was to implement monetarist-oriented balanced budget and low inflation policies. Madsen argues that the US military command structure mostly wanted a stable policy environment to encourage market exchange and that their solutions were practical, rather than ideological. As Madsen puts it, the framework of “big government” versus “small government” was not very useful in understanding the preference of US occupation planners. Neither Eisenhower, Clay, nor Dodge were opposed to “big government” per se. They were open to a strong social welfare state, high levels of taxation, and a monetary policy that operated to check inflation. Madsen contrasts their policy preferences with those bureaucrats from the State Department who advocated a breakup of German industry (a plan that Dodge argued would work against economic stability) or those from the Treasury Department who advocated a “punitive peace,” which would not allow for the deployment of political and economic tools to foster a true recovery.

In Japan, the US military command structure under General MacArthur faced a similar set of problems as their German counterparts. The bureaucracy that served under MacArthur was interested in using Keynesian economic policies to spur economic growth in a nation beset with a weak to nonfunctioning currency (extreme inflation rates were the norm), lack of productive investment, and high rates of unemployment. MacArthur focused his efforts on “putting political reform ahead of economic reform,” especially in the supervision of a US-drafted constitution which the Japanese “had to accept as written” (p. 132). By 1947, according to Madsen, this mix of policies were floundering and the political and economic conditions of occupied Japan were getting worse. At this time, the Truman administration, concerned about the geostrategic implications of a Japan implosion, sent Dodge with the authority to fix the mess. Dodge came to Japan fresh from his service in Germany in 1946. In Japan, he went around the Keynesian bureaucrats (and also MacArthur when necessary), which resulted in a reversal of many of the previous policies that encouraged unchecked spending, unaccountable ministerial decision-making, and accounting practices and runaway inflation that inhibited the functioning of an effective market economy.

The arguments of Madsen’s book are built around a very narrow contextual interpretation of US political economic policies in occupied Germany and Japan. His theoretical framework allows him to elevate the decisions of key individuals as decisive in creating the basis for policy formation, implementation, and success. His bias against Keynesian policies results in a privileging of monetarist policies as inordinately successful and Keynesian policies as dramatic failures. What emerges is an argument that the US military command structure had a better grasp of what worked in foreign economic policy than the government did, particularly under Truman. Eisenhower is extolled for providing the leadership that contributed to saving the German economy, in tandem with German political leaders such as Ludwig Erhard. And a considerable portion of the latter part of the book attempts to demonstrate how Eisenhower’s foreign policy experience as military commander contributed to his successful use of the same budgetary philosophy and policies during his presidency. Indeed, Madsen draws the conclusion that the crisis of the modern global economy is rooted in a disregard for the importance of balanced budgets, which were a hallmark of the thinking of military commanders like Eisenhower and finance directors like Dodge, whom Eisenhower would enlist as his budget director during his presidency.

The exclusion of the political and economic power of business elites from this narrative of the US military command structures reflects a serious weakness of the book. The Council on Foreign Relations served as a conduit between business elites and the US government during World War II and published The War and Peace Studies, to provide guidance to the US State Department regarding postwar planning. The War and Peace Studies included an analysis of what the US capitalist economy would require from foreign markets to function effectively after the conclusion of World War II. In this work, corporate executives emphasized the centrality of foreign trade and investment for the health of US capitalism, including a revived European and Asian capitalism that would be a necessary complement to US economic recovery. These planning documents represented an ongoing cooperation between business and political elites that extended into the post-WWII period, resulting in the creation of international organizations such as the International Monetary Fund and the Bank for International Reconstruction and Development, as well as the thinking behind the Marshall Plan. Madsen provides a very brief overview of the Marshall Plan, but his discussion ignores the business influence behind the plan’s structure.[2]

Madsen portrays the US military occupation policies as having been the best and most viable solution for the economic crisis facing Germany and Japan. The military commanders are often portrayed in the book as heroic individuals whose policies are designed to overcome the more parochial concerns of those government and private sector actors engaged in narrow profiteering. However, economic policies always serve particular interests, whether they be the interests of creditors or the interests of debtors. In the case of the US-backed policies in Germany and Japan, the policies served the interests of local dominant economic and political elites who were able to use their leverage in policymaking circles to ensure that there would be no radical overhaul of the capitalist economic structure in either country.[3] In Japan, Dodge’s policies led directly, as Madsen acknowledges, to efforts to subjugate and discipline labor within capitalist production, and to privilege the large-scale Japanese Zaibatsu as the capitalist engine of future Japanese growth. This meant taking sides in what had emerged as a domestic class struggle in Japan, with Japanese workers attempting to use their unions and organizational power to exert more influence over decision-making in Japanese corporations. The military occupying forces had none of it and clearly took sides during the occupation. This meant that the US military occupiers, led by Dodge, helped facilitate a Japanese labor system that thoroughly subordinated “company unions” to the directives of Japanese managers and executives.[4]

In Germany, the US sided with the rehabilitation of powerful German industries and helped to further a set of policies that were led by capitalist interests. These included the US political and military elites working with prominent German firms to resist efforts by large-scale workers unions, most notably I. G. Metall, to strike for greater control over decision-making within the corporate structure. The US military command structure and its bureaucracies worked closely with employers to resist worker demands for collective decision-making pertaining to “the type, methods and layout of production, investment, sales, price-setting and mergers.”[5] US military and political elites encouraged West German businesses to hold firm against greater decision-making for workers in production. The overall strength of the German working class allowed German workers to secure co-determination in employment, defined as the creation of works councils that had a seat on the board of directors of German companies, but whose power was confined to issues of wage and employment compensation and retention, not extending to co-determination in production decisions.[6] 

Madsen also greatly underestimates the extent to which previous histories of US military occupation were structured in ways very similar to the colonial occupations undertaken by European countries. Alfred McCoy’s detailed dissection of US colonial policy in the Philippines, Policing America’s Empire: The United States, the Philippines and the Rise of the Surveillance State (2009), provides a very different analysis of the scope of earlier US military occupation policy than Madsen does in framing his argument. McCoy argues, contrary to Madsen, that the US military developed a structure of imperial occupation that built an elaborate police-intelligence-surveillance state that borrowed heavily from other colonial powers, including Spain and Britain. The imperial repression endemic to the history of US military occupation is downplayed by Madsen. As McCoy argues, there was nothing “exceptional” about the levels of brutality that characterized the lengthy US history of military occupation and imperial policy.

US military occupiers were never part of an “external state,” as Madsen describes. They have long been part of an imperial state that has involved extensive coordination and cooperation between corporate and political elites. Madsen’s narrow historical framework privileges a political economic perspective that elevates balanced budgets as a relatively neutral policy tool deployed effectively by US military occupiers. However, a wider perspective would locate this policy tool within a broader framework of corporate power and the relationship between corporate elites, the US state, and foreign business elites and political parties. Such an angle is absent from this book, which unfortunately relegates its best examples to a biographical overview of the central protagonists, who are too often disconnected from other power structures and left in isolation from the broader trends of US-led global capitalism after World War II.


[1]. Robert Latham, The Liberal Moment: Modernity, Security and the Making of Postwar International Order (New York: Columbia University Press, 1997).

[2]. Ronald W. Cox and Daniel Skidmore-Hess, US Politics and the Global Economy: Corporate Power, Conservative Shift (Boulder, CO: Lynne Rienner, 1999), 51-56.

[3]. Gary Harrigel, “American Occupation, Market Order and Democracy: Reconfiguring the Steel Industry in Japan and Germany after the Second World War,” in Americanization and Its Limits: Reworking U.S. Technology and Management in Post-War Europe and Japan, ed. Jonathan Zeitlin and Gary Herrigel (New York: Oxford University Press, 2004), 340-400.

[4]. Keith Cowling and Philip R.Tomlinson, “The Japanese Model in Retrospective: Industrial Strategies, Corporate Japan and the ‘Hollowing Out’ of Japanese Industry,” Policy Studies 32, no. 6 (2011): 572.

[5]. Philip Armstrong, Andrew Glyn, and John Harrison, Capitalism since 1945 (Hoboken, NJ: Blackwell, 1991), 136-49.

[6]. Robert Brenner, The Economics of Global Turbulence: The Advanced Capitalist Economies from the Long Boom to the Long Downturn, 1945-2005 (New York: Verso, 2006), 46.

Citation: Ronald W. Cox. Review of Madsen, Grant, Sovereign Soldiers: How the U.S. Military Transformed the Global Economy After World War II. H-Diplo, H-Net Reviews. November, 2018. URL:

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