A Political and Economic History of China Addendum: Critics of the Atomic Bomb, Part 2 of 4

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Photo: Japanese women train with spears to fight invading American GI's in the “Glorious Death of One Hundred Million” mobilization campaign.

6 MIN READ - The Cautious Optimism Correspondent for Economic Affairs continues his mini-series on the atomic bomb, this time refuting the argument that fewer lives would have been lost by simply invading and occupying Japan without destroying Hiroshima and Nagasaki.

Originally the Correspondent thought it would take three columns to refute the most common arguments against using the atomic bomb in World War II, but the sheer amount of history he needs to document will require a fourth.

In this column we’ll address the second common criticism of the decision to use the bomb:

2) “Estimates of Allied casualties in a conventional invasion/occupation of the home islands were wildly overstated. A conventional military invasion of Japan would have been less deadly than using the atomic bomb.”

During the summer of 1945 Allied war planners forecasted unthinkable casualties if U.S. and supporting British/Australian/Canadian troops attempted to invade the Japanese home islands. Most postwar historians agree.

Although the numbers vary, most estimates for Allied casualties range from 250,000 to nearly one million (dead plus wounded). To put that in perspective the United States suffered one million casualties in all of World War II of which 291,000 were battle deaths.

In addition to Americans, estimates of Japanese casualties, military and civilian combined, numbered in the several millions.

Hence the bomb was dropped on Hiroshima and Nagasaki, killing upwards of 150,000 people. 

The civilian death count was still appalling although mitigated by two factors: First, U.S. bombing warning leaflets had been dropped over most Japanese cities urging citizens to evacuate including Hiroshima, reducing its population modestly before the attack...

(see "LeMay Leaflets")

https://ww2db.com/image.php?image_id=7350

And second, 40,000 of those living in Hiroshima were military, stationed at the Second Army General Headquarters which was responsible for the southern defense of Kyushu. The presence of the Army Command that would coordinate resistance against the Kyushu invasion was a major factor in the USA’s decision to select Hiroshima as a target.

But critics of the bombing still maintain Allied casualty estimates have been wildly overstated, both by the U.S. War Department and modern day historians, and that the Allies could have invaded and pacified Japan for far less than 150,000 deaths—Allied soldier, Japanese military, and Japanese civilian alike.

Using one customary example the late libertarian historian Ralph Raico, writing for the Ludwig von Mises Institute and making a case for trying Harry Truman as a war criminal, argued “the worst-case scenario for a full-scale invasion of the Japanese home islands was forty-six thousand American lives lost.”

Raico’s source was Stanford historian Barton Bernstein whose research, also criticizing the unnecessary use of the bomb, calculated the same fatality estimate: only 46,000 Americans dead.

Some readers may find such a low forecast and others like it beyond belief, and for good reason. Simply applying lessons learned from past Pacific battles reveals the outlandishness of artificially depressing the numbers that low.

The U.S. suffered nearly 20,000 dead fighting for two rocks in the Pacific—Iwo Jima and Okinawa—with another 56,000 wounded

The Japanese suffered 115,000 dead on the same two islands and another 40,000-150,000 civilians died in Okinawa.

In both battles the USA enjoyed a 5-to-1 advantage in manpower.

Total casualties on both sides? 175,000-285,000 dead and at least 60,000 wounded.

And taking Japan itself would be a monumentally larger operation for which the Allies planned a two-invasion campaign. First would come beach landings on the home island of Kyushu (Operation Olympic), then clearing out and occupying the southern third of the island, an area of about 4,000 square miles.

Kyushu's ports and airfields would then be used to stage the second, larger invasion of Tokyo and the Kanto Plain—about 6,200 square miles—in March of 1946, dubbed Operation Coronet.

Thus the Allies aimed to invade and occupy 10,200 square miles of Japanese territory, more than 13 times larger than Okinawa and Iwo Jima combined. And unlike the latter two, which were surrounded by ocean in all directions, the occupied regions of Kyushu and Honshu would remain adjacent to Japanese controlled territory and thus subject to constant infiltration and counterattack.

In January 1945 the U.S. began making plans to invade Kyushu with 766,000 men, ten times the number of Americans at Normandy which to this day remains the largest amphibious invasion in history. According to intelligence reports there was only a single IJA division defending the island.

However after losing Okinawa Japanese strategists correctly anticipated Kyushu would be the Allies’ next objective, and by July 1945 the IJA had deployed 900,000 men and several tank brigades to defend the limited number of suitable landing grounds. 10,000 attack planes were also apportioned to Kyushu, most of which would be used in kamikaze attacks against offshore U.S. Navy ships.

Instead of a 5-to-1 advantage the Allies were now faced with parity which U.S. war planners were reluctant to accept.

Furthermore the Japanese government had mobilized every able-bodied adult—men, women, and students—to resist the invasion for the “Glorious Death of One Hundred Million” campaign. Footage of young Japanese women being trained with bamboo spears still exists in the archives today.

Had the Allied invasion proceeded then today we would undoubtedly have archival footage of spear-wielding Japanese women being machine-gunned or flame-thrown by U.S. Marines. And today’s A-bomb critics would instead be castigating “the brutal killing of Japanese women when the war could have been ended quickly with the atomic bomb."

To think that after fighting Japan for 770 square miles, with a 5-to-1 advantage and losing 20,000 dead, the U.S. would somehow only suffer 46,000 dead fighting at parity against 900,000 Japanese soldiers in Kyushu alone, 10,000 attack planes, and two million armed civilians over 4,000 square miles is pure fantasy resembling wartime propaganda.

And that's just Act One.

Remember more casualties were anticipated for 1946’s even larger Operation Coronet where Allied soldiers would invade the much larger, more heavily populated island of Honshu and engage in door-to-door urban fighting for Japan’s largest city and capital, although admittedly a great deal of Tokyo’s structures had been destroyed during the U.S. firebombing in March.

Moreover the USA lost nearly 20,000 dead over two rocks that most Japanese never considered part of the homeland. The level of fanatical resistance would have only increased when invading Kyushu and Honshu, the capital city of Tokyo, and the imperial palace.

Also keep in mind that Iwo Jima was devoid of civilians (already evacuated) and Okinawan civilians were not combatants, yet 40,000-150,000 of them died anyway. In Japan tens of millions of civilians were mobilized as militia to battle against Allied troops on the home islands. 

The painful process of neutralizing militarized civilian resistance may also have extended beyond just southern Kyushu and the Kanto Plain—to the entire country—if the emperor never gave the order to surrender or perished before he could issue such an order.

Disruption of what little economy Japan had left during the fighting would have also led to more deaths by starvation as hunger was already gripping Japan by mid-1945.

The estimates of many millions of Japanese dead are absolutely realistic.

And foreshadowing the subject of our next column, American and Japanese death counts would have to be doubled for those who remember the millions more victims who critics of the bomb callously disregard: the peoples of Japanese-occupied countries who were already dying in large numbers and would continue to die throughout Asia while the invasion dragged on. 

Assuming very optimistically that the invasion wrapped up by summer of 1946 an estimated 4 to 5.6 million more civilians—mostly in China, Indonesia, and Vietnam—would have perished while waiting for the Japanese surrender to finally come. 

More details on that macabre calculus in Part 3, but due to the atomic bomb those 4 to 5.6 million Chinese, Vietnamese, and Indonesians lived instead.

“Worst case only 46,000 American lives lost” is wishful thinking for the ideologically predisposed: critics who start from a premise that the Allies possessed a long list of peaceful, bloodless options to end the war, but that Harry Truman callously chose to ignore them all. 

Simple historical facts, like casualty figures from the Pacific battles of early 1945, dispel such fantasies.

The very ugly nature of the choices the Allies faced has been better summarized by knowledgeable historians: a list of exclusively horrible options for the Allies, the Japanese, and the people of Japanese-occupied Asia, with the atomic bomb being the least worst solution by far. Those critics who argue a full invasion of Japan or a blockade (coming in the next column) “wouldn’t have been that bad” enjoy the luxury of living in an alternate reality that American war planners and Harry Truman did not.

A Political and Economic History of China Addendum: Critics of the Atomic Bomb, Part 1 of 4

Click here to read the original Cautious Optimism Facebook post with comments

6 MIN READ - By tackling this subject the Economics Correspondent is straying a bit from the current series’ core topic of Chinese history.

However there is a connection to our previous columns. The atomic bombings quickly ended the war in China along with the mass killing of millions of its civilians.

Our last article’s subject—General Douglas MacArthur’s decision to grant immunity to Unit 731 scientists, a notorious Japanese biological weapons program based in China that committed horrific experiments against live civilians—in exchange for their research is also tangentially related. 

Today many critics slam MacArthur and the United States as greedy biological weapons peddlers when in fact the immunity deal’s real motivation was a threat by Japanese scientists to hand over their data to the Soviet Union if they were prosecuted.

Likewise President Harry Truman is criticized as wicked for ordering the needless use of the atomic bomb.

As the topic still remains controversial today, as opinions vary even within CO Nation, and as Cautious Optimism doesn’t censor civil discourse, comments and opinions are welcome.

IMPERIAL JAPAN IN MID-1945

Whenever debate resurfaces over America’s decision to use the atomic bomb most Americans maintain the view it was a tragic but necessary evil to end World War II quickly.

The Japanese not only refused to surrender, they also employed the “Shosango” strategy of bleeding the U.S. with massive casualties to discourage invasion of the home islands in hopes of a more favorable negotiated peace. Furthermore the Japanese war cabinet’s later plan “Ketsugo” was inspired by the ancient bushido code, preferring to fight fanatically to the death over surrender while ordering millions of Japanese civilians to either die in battle or commit mass suicide.

But the Economics Correspondent has also heard plenty of condemnation of America’s use of the bomb, usually by far-left “America is evil” liberals, or from “always blame America” styled libertarians. To support these denunciations the critics have offered up a litany of reasons why dropping the bomb was not only unnecessary but also an immoral act since, according to them, there were better options available to the Allies that would have achieved peace with far less loss of life on both sides.

The Correspondent wishes to address these criticisms, none of which he believes hold merit with one possible exception on practical grounds which he’ll discuss in the last installment.

We’ll start this first column with the single most complicated criticism to rebuke:

1) “Dropping the bomb was unnecessary because Japan was just about to surrender. Harry Truman used the bomb anyway because he stubbornly insisted on nothing short of unconditional surrender.”

This argument is usually rebuked by people who remember that Japan still refused to surrender even after Hiroshima was destroyed by the “Little Boy” atomic bomb. If the Japanese government was one breath away from surrendering before Hiroshima, why did it refuse to surrender after?

Historians have also long known that after the second atomic attack on Nagasaki and Soviet declaration of war on Japan, the imperial cabinet was still divided fifty-fifty on the question of surrender. After a stalemate Emperor Hirohito finally stepped in and broke the deadlock, ordering Japan’s capitulation to avoid, as he stated in his surrender radio broadcast, “an ultimate collapse and obliteration of the Japanese nation.”

 This small fragment of history alone dispels the myth that Japan was just one breath away from surrendering before the Enola Gay destroyed Hiroshima.

But there’s more evidence, perhaps less commonly known, that disassembles what is effectively the “just about to surrender" fable.

Let’s start at the beginning.

By the summer of 1945 the Japanese war cabinet knew they were losing badly, but the so-called “Big Six” cabinet members—comprised of the Prime Minister, Foreign Minister, War Minister, Navy Minister, and Army and Navy Chiefs of Staff—wanted to achieve a face-saving resolution that offered favorable terms to Japan.

U.S. President Harry Truman demanded an unconditional Japanese surrender, but one high ranking Japanese official devised a compromise suggestion which he floated by the Big Six. Lord Privy Seal Koichi Kido, one of Hirohito’s more dovish advisors, proposed the following counteroffer of revised surrender terms to the Allies, dubbed the "four conditions”…

1. The Emperor shall retain his throne as head of state.
2. No war crimes trials will be conducted.
3. No Allied soldiers shall set foot on Japanese soil.
4. The Allies will not disarm the Japanese military. Rather, the Japanese military will disarm itself.

There was a fifth condition that wavered slightly and is not part of the bigger four:

5. Japan will keep all of its conquered territories.

However at times Kido considered concessions on this last condition including one that Japan might consider returning “former Western colonies,” implying the relinquishment of Hong Kong, Singapore, Malaysia, the Philippines (which Japan had already effectively lost), Burma (also effectively lost), and possibly Vietnam and Indonesia.

Anyone reading the “four conditions,” with or without the fifth, can tell it was not a surrender. 

It was a ceasefire proposal, and one with no change in the Japanese war government’s disposition, no accountability for any war crimes, no respite for the hundreds of millions of Asian civilians still suffering under Japan’s murderous occupation, and in practice no enforceable disarmament.

And despite such ridiculously favorable terms for Japan, the Big Six rejected Kido’s proposal for being too generous to the Allies.

So much a second time for the “just about to surrender” legend.

(the Economics Correspondent recommends CO readers consider a simple Google search on “Japan four conditions” to corroborate these little know surrender terms)

Nevertheless the Emperor asked Foreign Minister Shigenori Togo to contact Moscow and probe Soviet willingness to act as mediator for prospective peace talks with the Allies.

Unbeknownst to Japan, Joseph Stalin had already committed to break his neutrality pact and invade Manchuria, a pledge he made to late U.S. President Franklin Roosevelt going back to the Tehran and Yalta Conferences. Soviet foreign minister Vyacheslav Molotov stretched out peace discussions using delay tactics, giving Japan false hope with no intention of ever brokering a peace.

After the revelation of the atomic bomb and August 6th destruction of Hiroshima the Japanese war cabinet reconvened to discuss their deteriorating position. Kido floated his “four conditions” surrender idea again. They were completely unchanged from his first proposal.

Once again the Big Six rejected the terms. 

And once again, the “Japan was just on the cusp of surrendering before Hiroshima” fable is refuted. 

So much too for the “Japan only objected to unconditional surrender” argument, since they also objected to war crimes trials, military disarmament, any Allied presence on Japanese soil, and giving up their conquests in China, Korea, Taiwan, and conceivably other countries.

And all this after Hiroshima.

On August 9th the “Fat Man” atomic bomb destroyed Nagasaki while the Soviet Union simultaneously invaded Manchuria, overrunning Japan's dilapidated Kwantung Army.

The war cabinet convened yet again. Given the increasingly hopeless prospects for face-saving peace, the subject of unconditional surrender was finally discussed seriously.

Yet the Big Six were still divided, deadlocked three against three.

Despite the total destruction of two cities, the threat of more atomic bombs raining down on Japan, the Soviet invasion of Manchuria, prospects of the USSR invading Sakhalin Island, the Kuril Islands, and Hokkaido (the first two ultimately materialized, the third did not), War Minister Korechika Anami, navy chief Soemu Toyoda, and army chief Yoshijiro Umezu still argued for fighting on.

On the possibility of Japan being completely destroyed by atomic bombs War Minister Anami argued the complete annihilation of the Japanese race was preferable to the dishonor of surrender. 

Reflecting the fanaticism of the bushido code prevalent in WWII Japanese militarism, Anami likened the extinction of all Japanese people in nuclear fire to a delicate flower wilting in the flames of an inferno. “Would it not be wondrous for this whole nation to be destroyed like a beautiful flower?” he asked. 

The cabinet ultimately reached an impasse.

Side note: Five days later Anami signed the instrument of surrender aboard the USS Missouri and committed seppuku suicide the next morning.

From here the story becomes better-known again. The emperor stepped in to break the deadlock, ordering an unconditional surrender. 

Deferring to the infallibility of imperial edict the cabinet complied but managed to preserve a single condition that the emperor remained head of state. Luckily for both the war cabinet and citizens of Tokyo—which Truman considered as a target for the third atomic bombing—the Allies accepted the sole remaining condition.

In Part 2 we’ll discuss prospective casualty numbers from a conventional invasion of the Japanese home islands.

Trump's Tariffs are *not* Smoot-Hawley. Here's Why.

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Photo: Typical media headline warning 2025 tariffs will start another Great Depression

8 MIN READ - The Cautious Optimism Correspondent for Economic Affairs chimes in detail on Trump’s retaliatory tariff policies, strictly from a historical point of view. This might take a few minutes so have a seat.

Donald Trump’s strategy of using retaliatory tariffs to pressure America’s trading partners to lower longstanding protectionist barriers has launched a firestorm of controversy and debate, even here on the Cautious Optimism page.

While the Economics Correspondent’s position on Trump’s strategy tends to lean towards in favor, much more so in the case of China, the crosshairs of this article will be aimed squarely at critics who have compared Trump to Herbert Hoover signing the Smoot-Hawley Tariff.

Those who have resurrected the ghost of Smoot-Hawley include most of the usual suspects who will criticize Trump for anything: suddenly self-anointed tariff experts at CNN, Paul Krugman at the New York Times—who urged tariffs against China when Obama was president, but now scathes Trump for them—and the rest of the Trump Derangement crowd.

But the Correspondent has read many free market economists—people he reads, follows, and respects—liken Trump’s tariffs to Smoot-Hawley as well. 

For example, 150 free market economists recently signed the “Trade and Tariffs Declaration: A Statement on the Principles of American Prosperity" opposing Trump. Their names include Don Boudreaux (co-author), David Henderson, Ben Powell, and Deidre McCloskey, and the declaration warns Trump’s policies “repeat the catastrophic errors of the Smoot-Hawley Tariff of 1930.”

The Economics Correspondent maintains a large degree of respect for all these economists, some of whom he’s communicated with and learned from over the years. But he’ll argue here that comparing Trump’s tariffs to Smoot-Hawley is not only a faulty parallel. He’ll go even further by contending that the 1930 tariff and Herbert Hoover’s trade policy were near-mirror opposites of Donald Trump’s.

2025: SMOOT-HAWLEY IN REVERSE

Back in 2018 the Correspondent wrote a three-part detailed history of Smoot-Hawley as part of his larger Great Depression series. For those who wish to revisit those columns, links are available at the end of this article.

Before getting into why Trump’s tariff policy is nearly the opposite of Herbert Hoover’s, the Economics Correspondent wants to agree with the consensus on one major aspect of the Smoot–Hawley Tariff: although the tariff and the international response were major contributors that made the Great Depression worse, it did not “cause” the 1930’s downturn.

The Correspondent agrees the Federal Reserve’s failure to stop nearly 10,000 banks from failing, the resulting monetary contraction, Herbert Hoover and FDR’s attempts to artificially boost prices and wages with widespread government price controls, and the two presidents’ fiscal policies were all larger factors.

For example, Herbert Hoover doubled federal spending in real terms and raised the top income tax from 25% to 63% in the middle of a major depression. FDR then raised the top rate to 79% in 1936, and both presidents raised tax rates for income earners at all levels.

All of these were far larger factors than trade. The Correspondent’s rough estimates are that America’s decline in international trade accounted for at most 13%-14% of its fall in GDP. The other 86%-87% was attributable to other factors.

However the Correspondent repeats: Trump’s retaliatory tariffs are n͟o͟t͟ Smoot-Hawley, and in many ways they’re the exact opposite for a variety of reasons. 

Let’s go through them one-by-one.

1) In 1930 Herbert Hoover really did start a trade war—by initiating (the key distinction here being “initiating”) the Smoot-Hawley Tariff against other countries who were not doing the same to the United States.

In Donald Trump’s time trading partners in the European Union, Asia, and China in particular initiated the trade war by launching protectionism policies against the United States, sometimes literally for decades. These have included: tariffs, central bank foreign currency exchange rate intervention, import quotas, and intellectual property theft.

For the “Trade and Tariffs Declaration” to be historically accurate, it should accuse many of America’s trading partners of repeating the mistakes of Smoot-Hawley, not the USA and Donald Trump.

2) After launching Smoot-Hawley, America’s trading partners quickly retaliated with their own tariffs, leading to a slowdown in international trade. 

In response to those retaliations many of the economists who’ve signed the Trade and Tariffs Declaration correctly fault Herbert Hoover to this day while maintaining a “Well, of course they [America’s trading partners] were going to retaliate” position.

In 2025, by being the country that’s retaliating to longstanding foreign tariffs, the United States is playing the role of Canada and Europe in the 1930’s, the same countries most economists absolve in the Smoot-Hawley story. Yet the Correspondent has yet to hear a single economist say “Well of course the USA is going to retaliate against decades of overseas protectionism,” all while fallaciously comparing Trump to Herbert Hoover.

(For the record the Correspondent does not support retaliatory tariffs imposed, perhaps erroneously, on zero tariff countries that don’t restrict U.S. imports such as Singapore)

Again, the Smoot-Hawley analogy completely reverses roles, and blame, here. 

3) In 1930 the United States was a huge trade surplus country and the European nations ran huge trade deficits. This is all the more reason Smoot-Hawley was a terrible idea: putting up protectionist barriers to expand the USA’s already large trade surplus.

However in 2025 the United States is a huge trade deficit country. 

This doesn’t necessarily mean tariffs are an automatic no-brainer, but a large reason the USA runs such an oversized trade deficit is tariffs and other protectionist policies long-imposed by its trading partners. Meanwhile China, the largest trade surplus country in the world, has continued with its nearly half century of protectionist barriers, also a terrible idea.

Once again, the USA and Donald Trump in 2025 are playing the exact opposite role of Herbert Hoover in 1930.

4) In 1930 the United States was a huge creditor nation and most of its trading partners were indebted to it. The main reason was World War I. To foot the huge bill to fight history’s first-ever world war the European Allies borrowed heavily from what was by then the world’s largest economy: the USA.

In 2025 the United States is a huge debtor, not creditor, country.

For a fourth time, the United States in 2025 represents the anti-Smoot-Hawley position.

5) In 1930 most of America’s trading partners needed to run trade surpluses to repay war debts to the United States. Therefore choking off their exports with the Smoot-Hawley Tariff was a particularly bad idea.

Today the U.S. government owes a great deal of money to foreign governments and investors. While today’s debt is mostly the result of reckless domestic spending rooted in Washington DC itself, not a world war, a more balanced trade arrangement would increase domestic GDP—GDP being the sum of consumer, investment, and government purchase spending plus net exports—and make repaying that debt a little easier (provided Washington politicians don’t simply find new ways to spend the money).

Yet another diametric opposite Smoot-Hawley correlation.

Side note: If anyone is wondering why European countries running a trade surplus in 1930 to repay the USA was a good thing, keep in mind that Americans would hand over cash (converted to gold in the early 1930’s) for those European exports, and the Europeans would hand that cash (converted to gold) right back to the United States as a debt repayment. So when the smoke cleared America was effectively being repaid with free goods and services. Smoot-Hawley cut off that repayment mechanism.

6) Herbert Hoover launched the Smoot-Hawley Tariff even as the United States, in fact the entire world, was clearly entering a historic depression.

Today the United States and the world are neither in nor already entering a major depression. In fact, the Economics Correspondent would argue if Donald Trump looked around at the state of the economy today and it mirrored that of July 1930, he would put his trade policy on hold.

7) Finally, one of the only Smoot-Hawley analogies that holds up but which is never mentioned.

When Canada and European trading partners retaliated with their own tariffs in the 1930’s, America felt the painful impact on its exports immediately.

In fact the effects were so pronounced that one of incoming President Franklin Roosevelt’s first policy initiatives—after addressing the 1933 banking crisis—was to send Secretary of State Cordell Hull from country to country to negotiate bilateral removals of tariffs and trade barriers, successfully eliminating Smoot-Hawley and restoring America’s relationship with the world to the far freer trade environment of pre-1930.

In other words, retaliation by trading partners succeeded in getting the tariff initiator—the United States—to abandon its protectionist policies, i.e. it worked.

This is what Donald Trump has repeatedly said his motivation for introducing reciprocal tariffs has been all along, another example of Trump playing the role of 1930’s Canada and Europe. But the fact that the 1930’s retaliation worked is never mentioned in the Smoot-Hawley allegory which instead focuses on framing Trump as Herbert Hoover.

TWO MORE THINGS....

A couple of final words on the subject of retaliation.

First, there are those who believe Trump is really only adopting a free trade position as a cover to protect American workers. Some believe if one day he gets free trade but feels the smaller deficits are still too big—deficits defined as goods deficit + services surplus + investment flows surplus +  unilateral transfers + reserve currency benefits—then he will abandon free trade and adopt naked protectionism instead.

The Economics Correspondent won’t rule out this possibility, but right now who cares what Trump might do if and once he’s successful achieving global free trade?

Pressuring much of the world to return to a trade barrier-free arrangement is a laudable goal worth supporting. The Economics Correspondent believes Trump’s critics are wrong by fighting to preserve worldwide unilateral protectionism all because of what he “might try to do” after he’s achieved free trade. 

Now if Trump was actually successful in getting most or all trade barriers removed across the board—something the Correspondent is skeptical he can achieve in full in just three and a half years—and he tried to launch new, unilateral protectionist tariffs, the critics would then have a point, but only then.

And the Economics Correspondent would probably join them.

Second and lastly, some might argue “Well those Europeans and Canadians retaliating in the 1930’s gave us the Great Depression. It’s not worth another Great Depression just to get trade barriers reduced.”

But as the Economics Correspondent has already pointed out, the world’s economic conditions today are not those of the 1930’s. Retaliatory tariffs may temporarily hurt trade, but arguing they’d usher in another Great Depression is just irrational scaremongering.

In the 1930’s the U.S. banking system literally collapsed due to anti-branching unit bank laws that no longer exist.

The Federal Reserve, which had nationalized the lender of last resort function from the private sector, not only sat on its hands when the crisis came, it actually deliberately “punished” many banks straight into failure (its policy was named “Direct Pressure”).

Tax rates were raised from 25% to 79%. 

Real government spending doubled from 1929 to 1933 (Barack Obama increased real federal spending by 16% from 2009 to 2017). 

Prices fell by 30%.

(Which in itself isn’t Great Depression-inducing as evidenced by the 40% deflation in 1839-43 where GDP grew by % a year)

…but Herbert Hoover and Franklin Roosevelt imposed strict and inflexible price and wage floors that ballooned unsold products and unsold labor, i.e. mass unemployment.

The list of government screwups and other non-comparable factors during the Great Depression goes on, but the larger point is anyone who claims U.S. retaliatory tariffs designed to stimulate bilateral reductions in trade barriers will result in Great Depression 2.0 either doesn’t know Great Depression history or is simply exaggerating for scare effect.

A more detailed history of the Smoot-Hawley Tariff can be read on the Economics Correspondent’s archive at:

https://www.cautiouseconomics.com/2018/03/the-great-depression-09.html

https://www.cautiouseconomics.com/2018/05/the-great-depression-10.html

https://www.cautiouseconomics.com/2018/06/the-great-depression-11.html

A Political and Economic History of China, Part 35: Japanese Atrocities in World War II

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7 MIN READ - The Cautious Optimism Correspondent for Economic Affairs discusses Japanese atrocities in China during World War II, including a giant one the liberal left loves to blame on America.

(Photo: General Douglas MacArthur and Emperor Hirohito cut a postwar deal)

CO Nation has probably heard that the Japanese army (IJA) committed many atrocities during its occupation of Manchuria (1931-1945) and mainland China (1937-1945).

The most famous of these is the Rape of Nanking (Chinese: Nanjing da tusha, or “great Nanking massacre”), where Japanese soldiers went berserk on the civilian population as they occupied the Nationalist capital.

However the Nanking massacre is just a microcosm of the same sadism the IJA inflicted throughout most of China. For example, the “Three Alls” campaign of 1941-42 (“Kill all, burn all, loot all”) targeted civilian populations the same way in northern China and killed 2.7 million people, compared to “only” 300,000 in the capital.

Then there’s retribution for the 1942 Doolittle Raid. When fifteen U.S. carrier-launched B-25’s bombed Japanese cities in a more symbolic than strategic attack, the Japanese government lost face. Having previously boasted their home islands were invulnerable, the enraged Japanese combed the eastern China countryside searching for the Doolittle airmen who were forced to crash land when they ran out of fuel.

They only captured eight of the 75 flyers—executing three with a fourth dying in captivity—but they slaughtered about 250,000 Chinese civilians during the search. Villages “suspected” of aiding or even witnessing American pilots were massacred and burned down.

UNIT 731

Another notorious atrocity that we’ll focus on for the remainder of the article was biological experiments on civilians in the “Unit 731” program.

Emperor Hirohito was fascinated by biology and the potential for weaponizing it, and he personally approved Japan’s Unit 731 program. With access to such plentiful state resources it quickly became the most advanced biological weapons project in the world.

Based in the extreme northern Manchurian city of Harbin and euphemistically named “The Epidemic Prevention and Water Purification Department,” Unit 731 didn’t limit its research to animals. An estimated 14,000 Chinese and a smaller number of ethnic Russian civilians perished in gruesome experiments, usually conscious and without anesthesia.

Another 200,000 civilians are estimated to have died “in the field” to outdoors Unit 731 experiments. For example, one of the tests dropped planeloads of fleas infected with bubonic plague on Chinese population centers. Another was “inoculating” villagers with vaccines that actually contained anthrax to observe its effects on live humans.

Once again, if the Correspondent typed out all the gory details Facebook would probably censor this post. However readers can get a quick overview of the sadistic activities at this Wikipedia link:

https://en.wikipedia.org/wiki/Unit_731#Weapons_testing

The Correspondent suggests reading from the link through the end of the “Other Experiments” section.

DOUGLAS MACARTHUR: “WAR CRIMINAL”

But changing gears for a moment, the Correspondent wants to focus on an allegation surrounding Unit 731 that is often leveled against the United States, usually by left-wing liberals and some “always blame America” style libertarians: that the USA granted immunity to Unit 731 scientists from war crimes prosecution in exchange for their valuable biological weapons research data.

Any time you find an online article or YouTube video about Unit 731, or Japanese atrocities in general, there will usually be comments angrily condemning the evil United States because General Douglas Macarthur let Unit 731’s officers off the hook for their war crimes.

The story goes something like this: 

”Unit 731 performed horrific experiments on Chinese and ethnic Russian civilians, but Douglas Macarthur wanted Japanese research data in order to establish a sophisticated American biological weapons program at Camp Detrick. In return he granted all Unit 731 directors, officers, and scientists full immunity from war crimes prosecution and proceeded to cover up the program’s existence, a crime against humanity as evil as the sadistic experiments themselves.”

“Unit 731 Director Shiro Ishii and his men lived in comfort into old age and died of natural causes while the cries of betrayal ring from the graves of the Chinese victims, directed at the duplicity of the United States.”

Terms you will see describing the USA’s policy, usually in a self-righteous tone, include “shameful” and “history’s most morally bankrupt bargain hunting spree.”

By the way, Chinese state-run media runs similar commentary to paint the United States as a greedy war criminal nation that preaches human rights while hypocritically letting Japanese war criminals free. CCP propaganda is particularly effective since most Chinese are already aware of Unit 731’s reputation.

Well most of this tale, as it’s told, is actually true. On its face it’s hard to argue that “this is a lie.”

But as is usually the case when dealing with anti-U.S. historical revisionists, they leave out critical pieces of the story that would undermine their desired narrative. 

Here’s the more complete version:

Unit 731 was based in Harbin, China, a far northern Manchurian city about 300 miles from the Russian border.

In late 1944 and 1945 as the tide of the war turned against Japan, Unit 731 Director General Shiro Ishii was becoming concerned that he and his staff would be tried as war criminals if Tokyo surrendered to the Allies. So nearly a year before war’s end he already devised a plan to save himself from prosecution.

Ishii instructed his scientists to gather all data from their research. When the Soviet Union invaded Manchuria in August 1945 they quickly reached Harbin, so Unit 731 staff blew up their buildings, destroyed whatever evidence they could, burned corpses of the victims, and fled. 

Ishii went into hiding by faking his own death and many of his men fled to Japan with samples of their research data.

When Douglas Macarthur’s occupational army landed on the Japanese home islands they didn’t have to look hard to find Unit 731 war criminals. Instead the scientists eagerly sought him out.

A representative of Ishii approached American officers within a week of their arrival and presented a proposal: Grant immunity to all Unit 731 officers and scientists and in return we will give you our research data. But if we’re not granted immunity, the data “might” fall into the hands of the over one million Soviet troops in Manchuria right now.

Ishii’s men skillfully and deliberately played on American fears that the research could be handed to the USSR instead of the West.

MacArthur and his staff analyzed the sample data and were appalled at the sadism and indecency of the crude experiments, but they feared the prospect of Joseph Stalin procuring and weaponizing research from the most advanced biological program in the world.

Despite their disgust at the idea of granting amnesty to Ishii’s men, MacArthur and the War Department took the deal. Once his amnesty was secure Ishii came out of hiding.

Once the USA possessed the research data, they weren’t just going to destroy it. The information was integrated into the postwar Operation Paperclip program and used to set up Fort Detrick’s biological warfare center in Maryland. Weaponization was studied, as were defensive and vaccination/treatment options for the civilian population against likely offensive agents.

But the primary motivation for the amnesty deal wasn’t to start a leading bioweapons program as much as it was to deny Stalin one.

To protect the scientists, information was withheld from the Tokyo War Crimes Tribunals. Years later the judges were outraged upon hearing of the coverup.

The War Department wanted research data withheld from the tribunals because any public disclosure would alert the USSR not only to the existence of the Unit 731 program, but also clue in the Soviets that the USA likely had obtained valuable research data which in turn would give Moscow impetus to start their own program.

That’s the end of the more complete story.

The CCP and left-leaning western critics of the United States both omit the Soviet threat to boost their “American is evil” thesis. The coverup story is also used by critics to “prove” the alleged moral bankruptcy of the United States, again leaving out the USA’s concerns about alerting the Soviets.

THE SOVIETS IN MANCHURIA

As it turned out, in their hurry to retreat from the Red Army’s rapid advance, Ishii’s men missed destroying some of their data and the Red Army stumbled across sporadic research notes here and there.

With what little information they found the Soviets did exactly what MacArthur and the Pentagon predicted: started up their own competing biological weapons program albeit far behind the USA’s which enjoyed a head start. However during the Cold War the Soviets threw enormous resources and many of their own scientists into the program which eventually caught up with America’s.

Ultimately the world condemned biological weapons as too dangerous and inhumane. In 1972 the United States and USSR signed a treaty to ban further research and development and destroy their biological weapons stockpiles—the Biological Weapons Convention.

However today we know that the USSR secretly continued developing biological weapons, effectively “cheating,” and an accident occurred at one of the original postwar labs: the 1979 Sverdlovsk anthrax leak.

Due to a maintenance misstep with the ventilation system, weaponized anthrax spores were accidentally released into the air outside the lab and killed about 65 local townspeople. Since the Soviets were officially not supposed to be conducting weapons research in 1979, they concocted a cover story involving livestock, sanitized the area, and constructed a Potemkin Village staged area for visiting western scientists.

The scientists, headed by Harvard microbiologist Matthew Meselson, were fooled and reported the Soviet cattle story was completely “plausible and consistent with what is known from medical literature and recorded human experiences with anthrax.”

When the Cold War ended, the Soviet official responsible for the 1979 coverup publicly admitted that the USSR had lied and fabricated the elaborate deception for western observers.

His name was Boris Yeltsin.

But back to the original Unit 731 story, there’s no shortage of people in the West and the Chinese Communist government who tell only half the story in order to portray the American government as an immoral biological weapons peddler that sold out the victims of Japanese atrocities. The western comments in particular often pose as sophisticated observers of America’s villainous history, far more educated than those naïve Americans whose patriotism blinds them to realizing the USA is the most evil country in history.

But they always leave out the Soviet factor. MacArthur didn’t grant immunity out of some lust for weapons research data. He could have prosecuted the Unit 731 war criminals and we would all feel cleaner and morally superior for it, but then Joseph Stalin would have possessed by far the most advanced biological weapons program in the world while the USA would get nothing. It would be like handing Stalin a working atomic bomb while America was still struggling to refine uranium ore.

Read on for a few words on sources.

Over two decades ago the Economics Correspondent read about Douglas MacArthur’s concerns regarding Soviet procurement of Unit 731 research data, but all these years later can’t find the exact book.

But there's still no shortage of online sources, for those actually motivated to look for the fuller story, mentioning how fear of the Soviets factored into the USA’s decision to cut a deal with Unit 731 officials and scientists for exclusive access to their data. A few include:

1) As if it’s that difficult for the critics to glance at Wikipedia:

“After reviewing the data provided by those involved in Unit 731, [Colonel Murray] Sanders presented the findings to MacArthur, stating that he believed the data to contain valuable information that must not end up in Soviet hands. Knowing that the physicians had fled their headquarters in order to avoid prosecution by the Soviets for war crimes, Sanders suggested that MacArthur grant the physicians involved legal immunity against any war crimes charges in exchange for their data, stating, 'My recommendation is that we promise [Unit 731 Lt. Colonel Ryoichi] Naito that no one involved in [bioweapons] will be prosecuted as war criminals.'”

https://en.wikipedia.org/wiki/Murray_Sanders#Unit_731_cover-up

2) ”Keeping the information secret, the United States secured this data with a price tag, i.e., not prosecuting those responsible for the operations, such as Emperor Hirohito. The Soviet Union later joined in hiding information, since the secrets of successful biological warfare provided both superpowers massive new weapons of destruction.”

https://www.pacificatrocities.org/book-unit-731-coverup-the-operation-paperclip-of-the-east.html

3) “U.S. authorities were torn between the desire to deny the Russians access, even at the cost of an international incident, and their suspicion that allowing the Soviets to interrogate the Japanese with Americans present could reveal useful tips about the Soviets’ current knowledge of bacteriological warfare.”

https://pmc.ncbi.nlm.nih.gov/articles/PMC4487829/

4) “After Japan's surrender in World War II, the United States gave immunity from prosecution to many of Unit 731’s top scientists in exchange for their research, which they wanted to keep out of Soviet hands, according to U.S. government records.”

https://www.voanews.com/a/for-japanese-unit-731-survivor-speaking-truth-carries-a-cost-/7841643.html

5) “The Americans were not acting on behalf of the Allied nations, rather, unilaterally to protect their own self-interests. It was imperative that they obtained Ishii and his research data, as opposed to allowing it to fall into the hands of another nation, none more so than the Soviet Union.”

“MacArthur was clear to [Colonel Murray] Sanders: draw out the information at all costs to avoid it falling into the hands of the Soviet interrogators.”

“The seeds had been sown for an immunity deal and [Shiro] Ishii will have known that, at that time, this route was his best option to survive any impending prosecution. Ishii will also have known that it would be far more preferable to assist the Allies than to fall into the hands of the Soviets.”

https://clok.uclan.ac.uk/48605/1/Dyson%20-%20Final%20Thesis%20-%20Master%20Copy.pdf

A Political and Economic History of China, Part 34: Japan and World War II, Part 3

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6 MIN READ - The Cautious Optimism Correspondent for Economic Affairs wraps up his 20,000 foot view chronology of World War II in China, discussing the dispositions of the Nationalists and the Communists by war’s end.

Photo: Chinese zones of factional control at the end of World War II. Note communist controlled areas in vertical red/white striping. Stars indicate Nationalist provisional capital of Chungking (blue) and communist base of Yan’an (red).

Readers who missed Parts 1 and 2 of this very abridged summary of World War II in China can go to:

1) Japan's modernization and expansionist ambitions up to the 1931 invasion of Manchuria.

https://www.cautiouseconomics.com/2025/04/china-history32.html

2) The invasion of the Chinese mainland and several years of brutal warfare.

https://www.cautiouseconomics.com/2025/04/china-history33.html

After the Xi’an Incident of 1936 Chiang Kai-shek reluctantly agreed to the united front with the Communists to resist the Japanese. The combined armies, of which the Communists were by far the smaller at the time, were renamed the Nationalist Revolutionary Army. 

Communist soldiers wore the Nationalist blue sun insignia and on paper they took orders from Chiang Kai-shek. However given ideological differences and the geographical distance between Nationalist and communist bases of control, cooperation quickly broke down. In practice the Nationalists and Communists operated independently with little coordination/cooperation.

THE COMMUNISTS

While the Nationalist government remained holed up in the Sichuan basin city of Chunking, its stalemate with the IJA provided a golden opportunity for Chinese communist rebels.

When the Japanese entered rural areas they mercilessly killed the peasantry. It didn’t matter whether village dwellers resisted the IJA or cooperated, the Japanese looted, raped, and massacred. 

In the north, the Japanese “Three Alls” policy of 1941-42 (“kill all, burn all, loot all”) was aimed specifically at civilians of which 2.7 million were killed in that campaign alone.

Given no real choice, the peasants cooperated with the communist resistance since there was no incentive to remain neutral. Either way the Japanese would kill you.

The CCP’s base of Yan’an in northwest China also conveniently bordered Japanese occupied territory in northeast China. Given the sheer size of the country, Japanese occupation was limited mostly to urban areas with little presence in the countryside. Thus communist activity spread deep behind enemy lines and infiltrated the rural landscape of Japanese controlled provinces.

The Communists were also smart enough to treat the Chinese peasants well. Mao Zedong gave strict instructions to his soldiers not to steal and to always pay for whatever food they received from Chinese civilians. This, combined with seizing land and redistributing it to the peasants, won the Communists much support among the rural Chinese population in north and northeastern China. By contrast KMT troops, themselves poorly fed, equipped, and hungry, routinely looted their fellow Chinese.

Communist military leadership was also good. Famous commanders like Zhu De and Peng Dehuai successfully harassed Japanese troops with guerilla tactics similar to those they had used against the KMT during the Jiangxi Soviet days of the early 1930’s.

Although guerilla warfare was insufficient to change the outcome of the larger war, the perception that the Communists were going on the offensive—while the Nationalist government had retreated, sacrificed land for time, and was eventually holed up in Sichuan and playing defense—transformed the Communists into heroes who were “doing something.”

Thus millions of everyday Chinese—mostly young people and idealistic university students who were unhappy with the corruption and inefficacy of the Nationalist government—made pilgrimages to Yan’an from all over the country and joined the communist resistance. During the war the communist 18th Army Group’s numbers swelled from just 20,000 at the time of the 1936 Xi’an Incident to 1.2 million by war’s end. This doesn’t include another 2 million “People’s Militia” troops.

Most of the idealistic youth had no idea how communism worked and were unaware of the repeated famines in communist Russia, Stalin’s notorious NKVD police state, the Soviet Great Terror, or the Ukrainian Holodomor. Knowing nothing about the dangers of communism, they only saw the CCP fighting and harassing the Japanese invaders and poured into Yan’an as volunteers.

Fifteen years later these idealistic students would learn for themselves what life is really like under communism when the Great Famine of 1958-1961 came, but that's a subject for later.

By war’s end the Communists had infiltrated and controlled nearly all the countryside in northeast China and much of the Yangtze region, a major factor that would determine the outcome of the upcoming Chinese Civil War.

THE WAR TURNS

As Japan ravaged China Chiang Kai-shek’s wife Soong Mei-ling, American educated and fluent in English, routinely visited the United States in search of aid. While President Franklin Roosevelt and most of Congress were sympathetic to China, the American public remained generally isolationist so all the United States would offer was modest financial and humanitarian support.

The bombing of Pearl Harbor changed all that, drawing the United States directly into the war, and the Chinese were elated to have a new, powerful ally. FDR dispatched General Joseph Stilwell (aka. “Vinegar Joe”) to Chungking to assume the role of Commander all U.S. forces in China, Burma, and India (of which there were actually few Americans) and Chief of Staff to Chiang Kai-shek.

The U.S./Nationalist China relationship was strained from the start.

Although Stillwell mastered both written and spoken Chinese, his lack of diplomacy didn’t go over well with the Nationalist government. Appalled by widespread KMT corruption, Stillwell was soon referring to Chiang Kai-shek as “Peanut” and his internal memos and discussions were so laced with personal insults that word eventually got back to Chiang.

Chiang himself was not personally corrupt (a subject for another column) but his government certainly was, especially his wife and her family. During the 1940's, as U.S. aid poured into China, Soong Mei-ling’s brother T.V. Soong, a former banker and KMT finance minister and premier, was speculated by the western press to be the richest man in the world.

Meanwhile Chiang Kai-shek frustrated Stillwell by preserving his best remaining forces for an eventual showdown with the Communists while granting only his inferior troops and what few Americans were there to do most of the fighting against the Japanese. Stillwell also clashed with the British over operations in the China/Burma border region.

The disagreements and conflicts escalated to the point that Chiang asked FDR to replace Stilwell who was recalled to the United States and replaced by General Albert Wedemeyer.

Wedemeyer was more diplomatic and restrained in his disagreements with the KMT, but he saw the same problems that Stilwell did and conveyed similar reports of Nationalist corruption and poor leadership to his superior, George C. Marshall. 

Under FDR’s presidency massive amounts of U.S. aid flowed to the Nationalist government, much of it ultimately into the bank accounts of corrupt KMT officials. Meanwhile Nationalist troops suffered from shortages of food, weapons, and even boots. KMT officials and Soong Mei-ling’s own family made fortunes during the war while Nationalist soldiers, lacking basic necessities, routinely looted Chinese villages for food. 

Wedemeyer reported large numbers of KMT conscripts, snatched from their homes, died of disease or hunger before even reaching training camp. Many who did make it were immediately sent to “hospitals” which Wedemeyer’s report compared to German extermination camps at Buchenwald.

According to Wedemeyer, the “Chinese army was starving to death in the field.”

Nevertheless, the tide of the war turned against Japan in the Pacific. By late 1944 the U.S. Navy and its submarines controlled sea lanes to and from the home islands and the Nationalists won a few battles in mid-1945, mostly pushing the Japanese back in the southern and extreme southern provinces of Hunan and Guangxi. Even when the atomic bombs were dropped on Hiroshima and Nagasaki and the Soviet Union invaded Manchuria there were still 1.2 million Japanese soldiers stationed in China.

While the United States had carried out nearly all the offensive successes against Imperial Japan, there is something to be said for China’s role pinning down over a million Japanese soldiers on the mainland, something the CCP reminds Chinese citizens today. In some propaganda the CCP claims America’s role was secondary and that it was they, the Communists, who actually defeated Japan. This is of course an exaggeration, but there can still be no question that China, with all its suffering and losses tying up the IJA, still played a significant role in Japan’s defeat. It was a period of sometimes uneasy cooperation between the Americans and the Chinese, but it ultimately worked.

Either way the final death tally was enormous. Nearly 20 million Chinese had died, mostly civilians, a number rivaled only by Soviet losses on the European Eastern Front. The Chinese economy lay in ruins with inflation running rampant. When Chiang moved the Nationalist capital back to Nanjing and attempted to rebuild the economy while simultaneously preparing for another civil war, the Communists had likewise established themselves in northern China and Manchuria and their numbers had swollen into the millions.

Once again, an outside intervention had aided the CCP. The Japanese invasion had taken the Communists from a force of perhaps 20,000 men on the brink of annihilation by the KMT to effective control of northern China and an army of millions.

This was the state of China right before the outbreak of the second Nationalist-Communist civil war of 1945-1949.

A Political and Economic History of China, Part 33: Japan and World War II, Part 2

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7 MIN READ - The Cautious Optimism Correspondent for Economic Affairs continues his history of China series outlining the general chronology of the Second Sino-Japanese War, better known as World War II.

Photo: IJA Chinese territorial gains by 1940. Note that nearly every major Chinese city is occupied including Beijing, Tianjin, Shenyang, Shanghai, Nanjing, Hangzhou, Wuhan Guangzhou, Fuzhou, and Xiamen. Only Hong Kong—British territory that Japan would take in late 1941—and the remote Sichuan cities of Chengdu and Chongqing remain under Nationalist (KMT) control.

In the last column the Economics Correspondent planned to post one column summarizing the main events of World War II in China followed by one more on the aftermath effects for the rival Nationalist and Communist factions.

But upon writing it’s become clear that even a highly abridged version of the war with Japan will require more than a single column, so today’s article will be the first of two on the subject.

The Economics Correspondent doesn’t claim to know each and every battle between Chinese and Japanese forces during World War II. Like a lot of Americans he’s always been more interested in the battles between the U.S. and Japan, or between the Allies and Nazi Germany. The military campaigns in China were mostly land battles with infantry, limited armor—particularly on the Chinese side—and modest air support when compared to the European theater or great carrier battles of the Pacific.

In China, historians record 22 major battles from 1937 to 1945, defined as involving at least 100,000 soldiers. And China lost them all until mid-1945 at which point Japan was already nearly defeated by American naval blockades and strategic bombing.

FULL BLOWN INVASION

Just as it had during the invasion of Manchuria, Japan manufactured another pretext for invading the Chinese mainland in 1937: the so-called Marco Polo Bridge Incident.

On July 7, 1937 the IJA demanded to cross the Marco Polo Bridge border just outside Beiping to look for a missing solider (who had already returned to his unit the night before). When Chinese troops guarding their side of the bridge refused, the Japanese shelled their garrison and quickly moved 180,000 troops and armor into the area. Within two weeks the IJA had taken most of the Beiping and Tianjin areas.

The Marco Polo Bridge Incident marks the official start of Japan’s invasion of China proper.

Side note: Beijing was the capital of China during the Ming and Qing dynasties. The words “bei” and “jing” in mandarin mean “north” and “capital.” 

However in 1928 Chiang Kai-shek moved the Nationalist Chinese capital south to Nanjing (“south capital”) and consequently Beijing was renamed Beiping or “northern peace.” When the CCP won the Chinese civil war in 1949 they moved the capital back north and the city was once again named Beijing.

CHINA RETREATS

From 1931 to 1937 Chiang Kai-shek had pleaded with the public that China wasn’t ready for all-out war with Japan and his predictions proved correct. Nationalist forces were generally no match for Japan’s modernized army which rapidly moved south down the eastern coast and was already threatening to take Shanghai by the fall of 1937.

It didn’t help that Chiang is also considered by historians to be a poor military commander. Chiang often gave contradictory orders and he frequently countermanded his field commanders without telling them, leading to confusion on the front lines. 

While Chiang adopted a strategy of organized retreat when confronted with superior enemy firepower—a rational enough strategy—he sometimes impulsively threw divisions of his best troops at the Japanese to fight for strategically unimportant but symbolically prestigious objectives.

One of these times was the Battle of Shanghai. In fact, of the 22 major battles between China and Japan, the most consequential were at the war’s beginning as their outcomes laid the critical foundation for a large-scale Japanese occupation and eventual stalemate for the remainder of the war.

At Shanghai Chiang Kai-shek threw his best, crack German-trained KMT troops into the battle and put up a much tougher resistance than the Japanese had anticipated. Japanese generals predicted conquering the city within days, but the fighting lasted three months, eventually becoming door-to-door in what was the largest urban battle of World War II before Stalingrad. 

Chiang’s initial decision to commit his elite divisions was logical as it bought time for the Nationalist government to plan and execute a retreat from the nearby capital of Nanjing. The KMT also needed time to deconstruct and relocate a great deal of its industrial capacity. However once that objective was met Chiang ordered his crack units to keep fighting to the death and the KMT’s best soldiers were eventually annihilated.

Chiang could have ordered retreat and preserved much of his most capable forces. The government’s retreat was by then well underway, but he still insisted on fighting as long as possible. Reason? Shanghai was the fifth largest city in the world with a large presence of westerners and western investment. Chiang hoped that keeping the battle alive in the world press would gain sympathy from the western powers who would intervene on China’s behalf.

The west didn’t come to China’s aid and the Battle of Shanghai kneecapped Chiang’s fighting capacity for the remainder of the war.

As KMT troops fell back inland the Japanese pursued. Many sought revenge for the losses they had suffered at the hands of the stubborn Chinese. By the time the IJA reached the Nationalist capital of Nanjing (Nanking in Wade-Giles Romanization) their troops went berserk and carried out the six week-long “Rape of Nanking.”

The Correspondent doesn’t want to go into detail about the specific atrocities at Nanking. Facebook would probably censor or deboost this article based on the explicit nature of a detailed description anyway. But readers are encouraged to do a little research of their own including, for those who want to do more than just a little, reading the late Iris Chang’s book “The Rape of Nanking” (1997) which is credited for popularizing the previously little-known subject with western audiences.

A shorter summary of the Nanking atrocities, which surpassed the Nazis for brutality and sadism, is available on Wikipedia at:

https://en.wikipedia.org/wiki/Nanjing_Massacre#Rape

The Rape of Nanking is just one of countless atrocities carried out by the IJA upon Chinese civilians during the eight year war, but it’s the most famous in the west.

MORE RETREAT AND STALEMATE

Outgunned and having lost his best troops, Chiang Kai-shek borrowed a strategy from the Russians during Napoleon’s time: trading land for time.

Chiang knew China was so large there was no way Japan could control all of it. It would take the deployment of millions of Japanese soldiers and several years just to hold key areas and their supply lines would be thinly stretched. In the meantime Chiang hoped that foreign military help would come to the rescue.

The IJA in turn was smart enough not to attempt to occupy every square inch of China, limiting itself to key coastal regions and major commercial corridors such as major cities along the Yangtze River. This left the countryside mostly unoccupied which provided fertile ground for Chinese communist guerilla operations.

By late 1938 the Nationalist government had retreated all the way to Chungking (modern pinyin: Chongqing) in the western Sichuan basin, making the remote city the provisional capital where it remained until 1945. 

During its 1938 retreat the KMT destroyed Yellow River dykes in a defensive scorched earth campaign. The flooding and destruction stopped the advance of the Japanese in the north, but drowned up to 90,000 Chinese civilians and 500,000 more died in the ensuing famine. Later the Chinese communists, also operating out of northern China, used the disaster area as a successful recruiting ground against both the Japanese and the Nationalist government.

The Sichuan basin was surrounded by mountains and its isolation made the provisional capital of Chungking difficult to capture. Japanese ground forces were unable to concoct any serious threat at taking the city. All they could accomplish was aerial bombardment and holding the Nationalist government in check while they went about exploiting the Chinese mainland.

On another side note, Japan invented and carried out the first civilian firebombing in history and its target was—you guessed it—the provisional capital of Chungking. This version of strategic bombing would later be adopted by the U.S. Army Air Force on an immeasurably larger scale when U.S. B-29’s virtually incinerated most of the Japanese home islands' cities in 1945.

However, when reading through many historian condemnations of America's cruelty there’s rarely any mention that Japan pioneered the tactic years prior on Chinese civilians. There’s also little mention of the concept of karma.

Chiang’s retreat to Chungking certainly provided geographic protection from the IJA, but it also isolated the KMT. The primary coastal cities and commercial corridors like the Yangtze River were cut off as were the tax revenues they generated. The KMT government was increasingly forced to use the printing press for war finance and high inflation plagued Nationalist-controlled China through 1945 and into the Nationalist-Communist Civil War.

Chiang was also cut off from his urban political base and the Sichuan basin was marginally controlled by warlords, leading to political isolation as well.

Ultimately both sides settled into a stalemate with Japan controlling most of the important cities and coastal areas. The ever opportunistic Wang Jingwei, Chiang’s former KMT rival, was installed as president of a subordinate Chinese puppet government, and Japan resorted to frequent bombing of the provisional capital while waiting for the Nationalist government to collapse, but it didn’t. 

Wang Jingwei is roundly considered a traitor to Chinese of all persuasions, but in 1944 he left for medical treatment in Japan for an injury he had incurred from a failed assassination attempt in 1939.

Wang died in November 1944 which was probably a blessing for him. The Allies would almost certainly have extradited him to China where the Chiang Kai-shek government would have executed him along with many other convicted wartime traitors.

Stay tuned for the closing chapter of the war in the next installment.

A Political and Economic History of China, Part 32: Japan and World War II, Part 1

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6 MIN READ - The Cautious Optimism Correspondent for Economic Affairs apologizes for his extended under the weather absence but returns with a new article on Japan’s invasion of China during World War II, a conflict estimated to have killed 19 million Chinese.

The Second Sino-Japanese War is a massive story that, even when abridged, will require several articles. In this first installment the Economics Correspondent will lay out the background leading to Japan’s full blown invasion of mainland China in 1937, using some material already covered in previous articles. Next we’ll follow up with a high level overview of the war’s chronology, and lastly with the war’s aftermath for China’s rival Nationalist and Communist parties.

BACKGROUND 

The roots of Japan’s ambitions to colonize China begin in the 19th century.

Before 1839 both China and Japan were largely closed off to the western world. The Chinese Qing Dynasty traded reluctantly with the west and only through a single port—the southern city of Canton (today Guangzhou)—while the Japanese Tokugawa Shogunate traded exclusively with the Dutch and Chinese and also through only one port: Nagasaki.

Both the isolationist Qing and Tokugawa resisted foreign interaction, Japan even beheading shipwrecked sailors the moment they washed ashore, and the western powers countered with varying levels of force. 

The British forced more trading ports and concessions from China by winning the First Opium War of 1839-43. The United States sent Commodore Matthew Perry’s “black ships” into Tokyo Bay who announced his arrival by loudly firing his cannons into the water (1853).

China and Japan reacted very differently to the west’s more forceful demands.

China’s Qing Dynasty, ruled first by the incompetent and hedonistic Xianfeng emperor (r. 1850-1861) and after him the far more important but ultra-reactionary Empress Dowager Cixi (r. 1861-1908) continued to resist western trade and influence by every means necessary, culminating with the disastrous Boxer Rebellion in 1901. While the western world was undergoing the Second Industrial Revolution, China fell hopelessly behind.

In Japan the 265-year old Tokugawa Shogunate, having no answer to Perry’s cannons, lost face and succumbed to reform-minded officials. The emperor, for centuries merely a figurehead subservient to the shogun, regained power and the shogunate was banned forever.

Japan’s young and renown Meiji Emperor’s calendar years in power (1867-1912) nearly mirrored Cixi’s (1861-1908), but their policies couldn’t have been more different. While Cixi believed China’s cultural superiority could overcome western technology, the reform-minded Meiji recognized Japan had fallen behind and needed to learn all it could from the west. While Cixi resisted western trade, western technology, and western ideas as much as possible, Meiji opened Japan to the world.

Japan went on a crash course signing diplomatic and trade treaties with the western powers while enthusiastically importing western goods, technology, weapons, and advisors at a frenetic pace. Japan sent its officials throughout Europe and the United States to learn as much as possible and the end result was a spectacular ascent nearly unrivaled in history. In one generation an isolated, primitive, agricultural island nation modernized into a major world power.

Unfortunately Japan’s imperial ambitions grew as quickly as its economic and military power. By 1894 it was engaged in its first major regional war: the First Sino-Japanese War which is little known in the west compared to the Second Sino-Japanese War (aka. World War II).

Japan’s smaller navy routed the corrupt Qing Dynasty’s fleet at the battle of the Yalu River while its modern army humiliated Qing forces at several key Chinese ports. In the 1895 Treaty of Shimonoseki China was forced to cede Korea and Taiwan which Japan colonized for the next fifty years.

Japan then shocked the world by defeating Russia’s navy at the Battle of Tsushima Strait (1905).

Side note: Admiral Isoroku Yamamoto, the man who planned Pearl Harbor, was a gunnery ensign at Tsushima and lost two fingers in the battle.

By 1905 Japan had wrestled away territory from Russia: more Manchurian ports, control over the South Manchurian Railway, leases over Manchurian territory including the city of Dalian, and half of Sakhalin Island.

And Japan’s Chinese ambitions hardly ended in 1905.

During World War I Japan sided with the Allied Powers and made small contributions (mostly rhetorical) as a tactic to expand its sphere of influence. Japanese representatives at the Treaty of Versailles demanded and were granted formerly German Micronesian islands such as the Marianas, Carolines, and Marshalls. Japan was also handed China’s previously German-administered Shandong province, but the unexpected public outrage and demonstrations it ignited in China forced the Allies to pressure Japan into returning the territory in 1922.

MANCHURIA

Japanese ambitions for Chinese territory were hardly satisfied after World War I. By the late 1920’s the Japanese government was becoming militarist-fascist and it focused on gaining control of all Manchuria—a frigid, resource-rich territory in China’s northeast roughly the size of France, Germany, and Switzerland combined.

By now China had entered its chaotic “warlord era” and Japan cooperated with Manchurian warlord Zhang Zuolin, the Japanese providing Zhang military and economic support in exchange for permission to make large commercial and strategic investments in the industrial north.

By 1928 the Japanese believed Zhang's son and opium addict, Zhang Xueliang, would be easier to manipulate than his more powerful father, so they assassinated the elder Zhang by blowing up his railcar on a bridge. However the younger Zhang shook off his drug habit and resisted the Japanese who in turn responded with a full invasion of Manchuria in 1931.

The invasion of Manchuria, beginning September 18, 1931, is considered by many historians the true opening salvo of World War II as it preceded Hitler’s invasion of Poland by eight years.

As a pretext for invasion the Japanese army incited the Mukden Incident, a false flag operation whereby the IJA exploded dynamite near a Japanese-owned railroad and then accused Chinese dissidents of carrying out the attack. After five months of fighting Japan had assumed full control of the Manchurian northeast.

Japan had hoped to provoke then-Chinese leader Chiang Kai-shek into an all out war, but Chiang understood China’s military was hopelessly behind Japan’s and he used diplomacy and stalling tactics to avoid war. In the ensuing six years Chiang tried to simultaneously crush China’s Communist Party rebellion movement, modernize the Chinese economy and military, and hold off the Japanese.

As Chiang stalled for time, the Japanese worked on consolidating their gains. They set up the puppet state of Manchukuo headed by the former Qing boy-emperor Pu Yi. They also opened the notorious Unit 731—at that time the world’s most advanced biological warfare program—in the northern city of Harbin and tested experimental bacterial agents on eventually tens of thousands of live Chinese (and a few ethnic Russian) subjects throughout the country, a topic the Correspondent will discuss more in a future column.

Then, as a plan to sever more Chinese provinces from the mainland, the Japanese declared three autonomous Chinese regions bordering southern Manchuria. The justification was a claim that the people of these three territories no longer wished to live under Chinese rule and wanted to join Japan. Using this pretext Japan set up puppet administrative councils and demanded Chinese Nationalist (aka. Guomingdang or KMT) officials leave the area.

Chiang Kai-shek, once again not ready to enter into a major war with Japan, didn’t resist. Now the Japanese controlled not only Manchuria but also Chinese territory as far south as Beijing, stretching from Mongolia to the Bohai Sea.

All this time the Chinese public and Chinese communist rebels agitated for the Nationalist government to fight Japanese aggression, but Chiang Kai-shek knew China wasn’t ready and would lose a full scale war. It was only when Chinese dissent reached a head in 1936—when Chiang was kidnapped by Zhang Xueliang and forced to agree to unite with the Communists in a united front to resist Japan—that the policy of appeasement ended.

To read more details on Chiang’s kidnapping, the so-called “Xi’an Incident,” go to:

https://www.cautiouseconomics.com/2025/03/china-history31.html

Upon hearing that the Chinese KMT and Communists were no longer fighting one another and had agreed to unite, the Imperial Japanese Army (IJA) moved up their timetable for their invasion of the Chinese mainland where we’ll resume in the next article.