April 1997 | Volume 48, Issue 2
How a J. P. Morgan partner and the former Secretary of the Navy defused a revolution just by being good guys
As I sweep the leavings of the 1996 election campaign from my data bank, two antagonistic names emerge with renewed clarity: Jesse Helms and Fidel Castro. Helms is the newly re-elected senator from North Carolina and the chair of the Foreign Relations Committee. Castro, of course, is the man whom Helms passionately wishes to see ousted as Cuba’s Marxist dictator, toward which end the senator cosponsored the Helms-Burton Law of last year. It not only continues the long U.S. embargo against the island but opens the door to lawsuits against any foreign company doing business there if the business involves formerly American property nationalized—the senator would say “stolen”—by Cuba’s government since 1959.
After thirty-seven years Castro is still in power. It’s our government’s poorest performance in getting rid of Caribbean revolutionaries it doesn’t like. Though I doubt it will ease their frustration, I offer to the baffled supporters of our failed “get Fidel” policies a small lesson in comparative history.
Prior to 1959 the most durable authentically leftist upheaval south of the border was the Mexican Revolution, which began in 1910 and did not stabilize until the 1930s. U.S. policymakers recognized it tardily and with many reservations. On two occasions American armed forces were sent into Mexico, and on several others the two nations were on the brink of diplomatic rupture and economic warfare. But in each case Washington came to terms with the radically changed relationship and in the long run saw things change for the better. The embrace of this successful strategy was due in good part to the work of a pair of unlikely ambassadors. One, Dwight Morrow, was a Wall Street banker; the other, Josephus Daniels, a former civilian head of the United States Navy. Between them they represented the two most potent symbols of “Yankee imperialism.” But both played against stereotype.
The story’s starting point is the revolt in 1910 against twentyfour years of arbitrary rule by Porfirio Diaz, who had encouraged Mexico’s modernization by inviting foreign development capital. The result was that most of Mexico’s mines, oil wells, railroads, and factories were owned by European and American corporations.
In February 1913 the counterrevolutionary general Victoriano Huerta violently ousted the first revolutionary government, incurring the displeasure of President Wilson, who refused to recognize him on the grounds that he had autocratically hijacked the democratic revolution. Following an “incident” involving the brief detention of some American sailors in Veracruz, the U.S. Navy shelled and seized the port and occupied it for seven months. It was Navy Secretary Josephus Daniels who formally authorized the attack.
During 1917 a Mexican constitution was adopted, with a provision, Article 27, that all subsoil mineral wealth belonged to the nation and could not be “alienated.” This potentially wiped out the rights of American mining and oil companies, and the U.S. State Department protested loud and long against such a “confiscatory” violation of international law.
A compromise, reached in 1923, foundered with the advent of a new, more vigorously leftist Mexican president, Álvaro Obregón. Coolidge’s Secretary of State, Frank Kellogg, smelled Communist influence and warned Congress that “Bolshevist leaders” had “very definite” plans to make Mexico “a base for activity against the United States.” The fire seemed very near the gunpowder in the summer of 1927, when the President named Morrow, his friend and college classmate (Amherst ’96) and a partner in J. P. Morgan & Company, to fill the job of ambassador to Mexico.
At first glance it appeared to be part of a get-tough approach. “After Morrow come the Marines,” prophesied a Mexican newspaper. But Morrow proved something quite other than a collector for American creditors. “I know what I can do for the Mexicans,” he announced before heading south. “I can like them.” With an unaffected style that was natural to him, he cultivated Obregon’s successor, Plustarco Calles, and ordinary Mexicans like a candidate. He visited villages, bought souvenirs (and a permanent vacation home), smiled, tasted, admired, and charmed—a rumpled figure wholly unlike the cartoon gringo gunslinger. As a crowning touch he arranged for his future son-in-law, Charles A. Lindbergh, fresh from transatlantic triumph, to end 1927 with a nonstop flight from Washington to Mexico City.
Surface simplicity hid Morrow’s lawyerlike mastery of detail and dealmaking shrewdness. Forsaking the usual insistence on international law, he took a tack more congenial to Mexican pride with an increasingly friendly Calles. The oil-property seizures, he suggested, were technically illegal under the terms of the Mexican constitution itself, a point that company attorneys had advanced in local court challenges. Calles listened, and assured Morrow of his own belief that the Mexican Supreme Court would agree when it heard those cases—which was precisely what happened. In the face-saving outcome Mexico continued to claim sovereign ownership of its mineral wealth but generally confirmed pre-1917 holdings, while the owners recognized local laws but did not yield on the principle of their property rights.
Like any peacemaker, Morrow caught it from both sides—from leftists for slowing down Mexico’s march to reform and from the right for coddling “Red Mexico.” But his achievements held firm until 1934, when another Mexican president, Lázaro Cárdenas, repudiated Calles’s retreat toward conservatism, and another American ambassador had to deal with a resulting drift toward a collapse of Mexican-American relations.
This, of course, was Daniels. His appointment the preceding year had brought initial groans in Mexico City, where memories of Veracruz had not faded. But Daniels was no gunboat diplomat. As the owner-editor of the Raleigh (North Carolina) News and Observer , he was actually an anti-imperialist.
Like Morrow, Daniels practiced an easygoing, shirtsleeve diplomacy. He freely expressed himself to Mexican reporters and embraced them as colleagues. He also visited the countryside, tried on a traditional charro costume, and in other ways endeared himself to the locals, if not to the U.S. business world.
Then, in 1937, a long labor dispute in the American-owned Mexican oil fields came to a boil. After a bitter strike, Mexico’s labor arbitration board awarded a heavy retroactive payment to the unionized workers. The companies promptly declared that they could not pay without bankruptcy and, as was their long custom, looked to Washington—even New Deal Washington—for support. It was a time for diplomatic deftness, but in April of 1938 Cardenas nearly made Daniels’s mission impossible by abruptly declaring the full nationalization of the industry.
Secretary of State Cordell Hull drafted furious notes demanding immediate restoration of the seized properties or immediate payment of huge compensatory sums asked by the companies and threatening economic warfare.
While Hull and Assistant Secretary Sumner Welles raged, Daniels struggled valiantly to soften their tone, begged them to keep their demands unofficial and secret and thereby not back Cárdenas into a corner, and tried to get a hearing for Cárdenas’s counteroffers to make limited paybacks over a long term or allow the companies to operate the wells for his government and share in the revenues. Hull swore angrily that “Daniels is down there taking sides with the Mexican government and I have to deal with these Communists . . . and . . . carry out international law.” But though theoretically Daniels was Hull’s subordinate, the old man had a trump card in his private relationship with the President. In personal letters to FDR, Daniels pleaded for time. “We are strong,” he wrote. “Mexico is weak. It is always noble in the strong to be generous.” And he reminded the President, who needed no reminding, of Mexico’s other options. Germany, Italy, and Japan, preparing for war, would be happy to deal with the Mexicans if America should scuttle the Good Neighbor policy. So Roosevelt tactfully backed Daniels and smoothed his way by telling reporters that the oil companies, if compensated at all, should be reimbursed for actual investment expenditures, not inflated estimates of future profits.
Long-run victory went to the peacemakers. The State Department eventually accepted a proposal for arbitration, which dragged along for months until finally a “global” settlement was reached. Mexico would gradually pay a sum within its means for seized American lands and a total of $234 million for the oil-drilling properties. The figure, arrived at by independent experts named by both sides, was about half of the companies’ original claim. The United States would stabilize the peso, conclude trade agreements with Mexico, and lend help with Mexican highway development. These agreements, inaugurating a new, somewhat “postcolonial” attitude toward Mexico, were signed in November of 1941, a month after Daniels’s retirement and a month before Pearl Harbor.
During World War II and the Cold War, Mexico remained a United States ally. Its Revolutionary National party gradually became the establishment, and economic links were steadily forged between the two nations. What disagreements exist today never remotely approach the intensity of 1927 or 1938.
I like this story. Of course, all historical parallels are tricky. And, of course, the personal skills of ambassadors cannot by themselves bring peace without willing governments and favoring circumstances. Still, the tale of a J. P. Morgan partner and, eleven years later, the “villain” of Veracruz managing to cool jingoistic feelings and help their country to an accommodation with a revolutionary neighbor is one of those “stranger than fiction” episodes that are history’s occasional delight. It’s also worth remembering that the process began by dealing with “enemies” rather than by ostracizing them.