Chapter Ten
Kohlberg and the Pauley Mission

On August 6, 1945, the first nuclear bomb was dropped on Hiroshima, and questions about the effectiveness of psychological warfare against Japan became moot. The Japanese rushed to surrender; on September 2 General MacArthur presided over the official ceremony on the deck of the Missouri . One cosmic watershed had been crossed.

Less newsworthy but nonetheless highly salient to the political wars shaping up in the United States was the failure of a grand jury on August 10 to indict three of the six persons arrested in the Amerasia case. The jury did indict Andrew Roth, Emmanuel Larson, and Philip Jaffe; but John Stewart Service was unanimously cleared, and Mark Gayn and Kate Mitchell were let off on a divided vote. The failure to indict these three stuck in the craw of the China lobby for the next thirty years.^[1] To use the vernacular, Chiang's supporters believed that the fix was in.

The case of Service was particularly galling. Service had written some of the most trenchant criticism of the Chinese Nationalist government and some of the best-documented praise of Mao and the Yenan Communists. How could he have been exonerated by a grand jury unless the government attorneys deliberately fudged the evidence against him?

From an objective viewpoint, the unanimous exoneration of Service is easy to understand. What had he done? He had simply loaned documents he wrote and he classified to a journalist. The practice of leaking such documents to journalists (frequently on background) was as well established then as it has been ever since. Service explained to the grand jury that what he had done with his documents was common throughout the government, and the jury believed him. Harvey Klehr and Ronald Radosh, using transcripts of FBI taps on the telephone of Tommy Corcoran,

a lawyer assisting Service, show that Corcoran influenced government attorneys not to grill Service before the grand jury; this agreement, they claim, constituted a fix.^[2] This is a peculiar conclusion since Radosh and Klehr acknowledge that "Service probably wouldn't have been indicted anyway." So what was fixed? The most that can be said is that "Corcoran's intervention spared him tough questioning in front of a grand jury."

Other developments in the Amerasia case intensified China lobby paranoia. Emmanuel Larson learned from his building superintendent that federal agents had been let into his apartment without a warrant. On September 28 he filed a motion to quash the indictment because the evidence had been obtained illegally. The Department of Justice was alarmed; Jaffe, the main culprit, could also file such a motion, which was certain to succeed. If he did so, the whole case would evaporate.^[3]

The Department of Justice decided to act the same day that Larson filed his motion. They contacted Jaffe's lawyer, who had already suggested a plea bargain for his client. The government offered to let Jaffe off easy if he would plead guilty simply to unauthorized possession of government documents. The lawyer accepted. It was Friday. James McInerney, assistant attorney general in charge of the Criminal Division, found a judge who would work Saturday morning. On September 29, 1945, in an unusual weekend session, Jaffe came to court, pied guilty, and was fined $2,500, and the Department of Justice was spared the embarrassment of having a notorious case thrown out of court because of illegally obtained evidence.^[4]

To hardline anti-Communists, this outcome was a perversion. Amerasia festered in the cold war years until they believed, as George Sokolsky put it in a broadcast of July 17, 1949, that "the Amerasia case was bigger, more important, and historically more significant than the Alger Hiss case."^[5]

With the war over in 1945, Lattimore assumed that his government service was finished, and he settled down at Johns Hopkins to plan postwar programs for the Walter Hines Page School, of which he was still the head. Only minor provocations intruded on his academic activities; among these provocations was the Kohlberg article in October's China Monthly .

Alfred Kohlberg's "Owen Lattimore: Expert's Expert" is not as virulent as most of the Kohlberg corpus. Kohlberg acknowledges that Lattimore backed Chiang Kai-shek during the war and that he praised Chiang

as a "world statesman, a real genius"; Kohlberg even gives Lattimore credit for giving Chiang's industrial cooperatives a pat on the back. But dominating the article are Kohlberg's usual slanders: Lattimore was a "great admirer of the Communist system" who wanted to "lock China into the Communist world system," and Solution in Asia does not "clearly reveal" what Lattimore recommended for Asian economies.^[6]

Lattimore protested the article, and unlike Reader's Digest, China Monthly agreed to carry his response. "Reply to Mr. Kohlberg," in the December 1945 issue, argued that Kohlberg was so inaccurate as to be completely unreliable and set forth "what my attitude really is toward Russia, and toward Russian influences and interests in China." Lattimore wrote: "I do not believe that a spread of Communism anywhere in Asia (or indeed in Europe or America) is either inevitable or desirable. I believe that throughout Asia the desire of ordinary men and women for a democratic order which includes private enterprise and private profit is more important than the desire of minorities in each country for a Communist or Socialist order of life. More than that, I believe that the country which most people in Asia would like to imitate and emulate is America rather than Russia." ^[7]

After noting numerous inaccuracies in Kohlberg's account, Lattimore suggested that Kohlberg's quotations from Solution might "lead some readers to consult that book as a whole and form their own opinions" of his views. China Monthly , however, was not about to give Lattimore the last word. Lattimore's article ended on page seventeen of the December issue; several pages later Carmac Shanahan began a new and more virulent attack on Lattimore in an article entitled "False Solution in Asia." Shanahan had been a Roman Catholic missionary in China, and he had heard about atrocities committed by the Communists. The Chinese couldn't be gravitating toward communism, as Lattimore thought would happen if Chiang failed to liberalize his rule.^[8] In Shanahan's three pages no single sentence acknowledges Lattimore's solution: private property, the profit motive, encouragement of small business, evolutionary development rather than revolution, and in China the continued leadership of the Generalissimo. Lattimore did not reply to Shanahan.

In October Lattimore got another call from Washington. The predator nations were defeated, and now justice had to be done for their victims. All of Asia had been savaged by the Japanese, and the victims were clamoring for reparations. Truman gave the task of deciding who was to get what from the Axis to Edwin W. Pauley, a prominent Democratic oil magnate.

Pauley's first task was to set reparations goals for Europe; this task he completed by September 14, 1945. Truman then instructed Pauley to lead a reparations mission to Asia.

Pauley had probably never heard of Lattimore, but on October 5 J. R. Parten of the United States Commission on Reparations wrote Pauley a memorandum: Lattimore was an outstanding Far East authority and should be invited to serve on the mission, selecting whatever assistants he wanted.^[9] Pauley thereupon contacted Lattimore to see if he were available. Lattimore's response was lukewarm. Certainly he was interested in the project; foremost among his personal beliefs was the conviction that Japan had treated the Chinese brutally and should make whatever amends were reasonable. But another lengthy trip away from home, family, and job was not inviting. Pauley sweetened the offer by arranging for Eleanor to come along as part of the support staff; she had considerable experience administering IPR projects and worked closely with her husband on his professional tasks.^[10] Mrs. Lattimore was placed on the Pauley mission rosters and received her travel authorization, but it was canceled because of the housing shortage in Tokyo.

The Pauley mission personnel (twenty-two including support staff) went on active duty in Washington on October 15.^[11] There were briefings and a general staff meeting, and Lattimore took every opportunity to interview experts on Japan during this period. Before the mission left for Tokyo Pauley was confronted with unfavorable publicity about Lattimore that upset him. Walter Trohan's article in the Washington Times Herald of October 26 was headlined "State Department Sends MacArthur Soviet Sympathizers as Aides." Trohan did not seem to understand that Lattimore was working under Pauley on reparations matters, not as an aide to MacArthur, but Kohlberg and Eastman had done their work. Trohan wrote "Another Red sympathizer, if not a Communist, Owen Lattimore has been named a special economic adviser to Tokyo." Other members of Pauley's staff assured him that Lattimore was not a Communist, and the mission went forward; but seeds of suspicion had been planted.

The first contingent of the mission left for Japan November 1, 1945. Lattimore had been preparing a "Forecast" memorandum on the problems they would face. The memo was ready for presentation to H. D. Maxwell, chief of staff, when they landed in Tokyo.^[12] The occupation, as Lattimore saw it on the basis of what he learned in Washington and from news reports, was going well; MacArthur had managed it with "great skill." The Japanese power structure was not monolithic, and MacArthur had

kept competing groups off balance, exploiting conflicts between them in order to find those groups that he could use to support American policy.

All power holders in Japan, however, wanted to preserve their own privileges. Demilitarizing Japan and breaking up the Zaibatsu cartels would not be easy. In his memorandum to Maxwell, Lattimore fleshed out the ways of promoting entrepreneurship that he had first mentioned in Solution:

Each negative step taken in demilitarizing Japan should be accompanied by a positive step which permits the formation of an anti-militarist interest group. It is no use trying to indoctrinate Japan with a democratic ideology based on words and arguments, unless the people who hear the words and study the arguments can see that they fit their own interests. Examples: Break-up of the Zaibatsu will be only temporary unless other ways of doing business are deliberately encouraged and given the edge, in such a manner that the Zaibatsu, when they try to recombine, will find that their principal obstacle is not an American decree, but the resistance of newly formed Japanese small-scale and middle-sized enterprises with interests of their own to defend. Possibly a start could be made by setting up tax scales with incentives for smaller enterprises and deterrents for cartels and associations. ^[13]

It is not likely that this memorandum had much influence. What Lattimore recommended was in line with established American policy for the occupation, but the Pauley mission was specifically charged with considering reparations.^[14] Lattimore's role was primarily to relate possible reparations to the needs of Japan's victims, not to show how small businesses could be encouraged.

Two areas of Japanese industry were assigned to Lattimore for analysis: machine tools and aluminum. Both areas had been expanded for war production far beyond any possible domestic needs. By the time he finished his investigations, Lattimore had found the Japanese to possess approximately 850,000 machine tools, compared to the 1930 prewar stock of 150,000. The interim report of the Pauley mission (January 12, 1946) slated half the machine-tool hoard for reparations. In aluminum, the war-induced production was even greater. No aluminum whatever had been produced until 1934, when Japan was already deep into Manchuria. By 1944 nine major plants produced annually 152,200 metric tons of aluminum, all of it for the war effort. Japan had no bauxite, the civilian economy used little aluminum, and there was excess capacity in the copper industry that could be devoted to aluminum should civilian demand in-

crease. Lattimore—and Pauley—finally recommended that only a plant or two be retained to process the estimated two and one-half years' supply of scrap.^[15]

Aside from his assigned industries, much of Lattimore's attention was devoted to China. Here he locked horns with another commission member, Arthur G. Coons. Toward the end of November Coons gave Pauley a memorandum on reparations policy as it affected China. Lattimore disagreed with much of Coons's memo. On November 26 Lattimore presented Pauley with a document "in modification or amplification of Coons' interpretations." One of Coons's assumptions was that the United States should accept as a given that "Russia is pledged to support of Chungking." Coons apparently based this assumption on the terms of the recently signed Sino-Soviet Treaty.

Lattimore exploded: "Russia is NOT pledged to support of Chungking. Article V of the Russo-Chinese Treaty pledges non-interference in internal affairs. This has always been a thorny point with any country that negotiated a treaty with Russia." Russia had agreed to moral support and assistance to the Nationalist government, true, but in the context of the war with Japan. That war was now over. International lawyers could argue interminably about whether the Soviets were obliged to support Chungking against domestic enemies.^[16]

If it were not enough to have caught Coons trusting the Russians, Lattimore found fault with another Coons conclusion: "We dare not leave Jap troops (or, for that matter, Jap civilians) in North China, if we wish to consider the victory over Japan complete." To this Lattimore responded, "I disagree. With the fall of Japan, the Japanese in North China are like a tank with no gas. The Japanese were powerful in North China because they were hooked up with Japan as a power base." The only way they could now have power would be to hook up with the Americans. Lattimore thought we should get our military out of China; then the Chinese would expel the Japanese quickly. ^[17]

Coons claimed, when interviewed by the FBI in 1950, to remember a controversy among members of the Pauley mission over reports that Soviet troops were stripping Manchuria of its industrial facilities. Coons believed these reports to be true; Lattimore allegedly refused to accept them because he was pro-Soviet.^[18]

Lattimore did not recall a controversy over the accuracy of reports that Russia was stripping Manchuria. He did recall discussing probable Russian strategy with Martin Bennett, an engineer with the mission whom Lattimore much respected. Bennett was assigned to visit Manchuria for

purposes of estimating Manchuria's suitability as a recipient of Japanese reparations. Bennett, as Lattimore remembered in 1979, reported that the Russians had indeed removed many industrial plants from Manchuria. But they had been amazingly inconsistent in their actions: "He said that some of the machinery had been crudely stripped, so much so that it was probably more damaged than useful by the time they got it up m Siberia. Others, he said, had been done with surgical precision and delicacy."

Bennett told Lattimore about a visit to one large, Japanese-built hydroelectric-irrigation dam. The Russians had left the dam intact but had carefully removed the turbines, which were engineered for that dam only and could not be used elsewhere. Bennett's conclusion as Lattimore recalled it: "Looking at where those turbines had been lifted out, the job was so beautifully done, those turbines are probably sitting nearby in Siberia, waiting for the Chinese Communists to win, and they will be put back." This incident reinforced Lattimore's skepticism about the Soviet commitment to sole support for Chiang.

Lattimore wrote another memo to Pauley on November 28, this one about "American public opinion on China and Manchuria." Many observers of the Asian scene were talking about a United Nations trusteeship for Manchuria as the only way to counter Soviet influence there. Lattimore felt that while Americans would object to Manchuria becoming a Soviet puppet state, they would also object to assuming responsibility for a trusteeship.^[19]

Yet a third memorandum, written in anticipation of Pauley's trip to China, is headed simply "Situation in China," and it puts succinctly Lattimore's advice on that tangled matter. Lattimore begins, "You know already that I think our policy in China [intervening on the side of the Nationalists without requiring Chiang to reform] has been heading for calamity, so you can apply your own discount to the following." He then gives Pauley a preview of various proposals for aid to Chungking that Pauley would confront in China, all of them aimed at military defeat of the Communists. Lattimore knocks all of them down as unrealistic.

Japan held North China for eight years occupying all strong points and the communication lines between them. This was not enough. Extensive field operations were undertaken. Still not enough. The Communists continued to increase, in numbers and still more in influence, right up to the end of the war.

Into this area we are now helping to move Government troops. These troops, except for a few units, are inferior to the Japanese in arms, training, and morale. They were never able to advance against the Jap-

anese in large scale operations. . . . And yet, just because they have the prestige of American policy behind them, they are expected to defeat the Communists whom the Japanese were never able to crush. This is utter nonsense.

The intervention policy in North China could only succeed if we committed really large numbers of American forces to active field operations against the Communists. Politically, I do not see how we could get away with this. The reaction at home would be too strong. . . .

The whole history of civil war against the Communists in China proves clearly that every attempt to cure Communism by killing Communists only results in breeding more Communists than can be killed. Why? Because more and more middle-of-the-road people are pushed into the Communist ranks. Most of the people in the Communist ranks today are there not because they read a book or heard a speech, but because they were brutally treated, callously overtaxed, and denied elementary rights. . . .
In the Far East, we have got to hold up our end against Russia. We can't do it unless we stop pushing into Communism people whom the Russians themselves couldn't lead into Communism.^[20]

And in that claim, Lattimore was assuredly right.

Pauley had now come to regard Lattimore as knowledgeable and perceptive; he put Lattimore in charge of preparing the official mission statements on treatment of the crucial Japanese machine-tool and light-metals industries. Likewise, the other members of the mission remembered Lattimore as competent and knowledgeable when the FBI interviewed them in 1950.^[21]

The final Pauley commission report was based on the conviction that the Japanese had built up an industrial plant far in excess of civilian needs in order to arm their military for conquest of Asia. And despite the devastation of parts of Japan, Pauley found that "Japan still retains, in workable condition, more plant and equipment than its rulers ever allowed to be used for civilian supply and consumption even in peaceful years. That surplus must be taken out. To complete the demilitarization of Japan by taking it out will not mean the complete deindustrialization of Japan. I want to be very emphatic on that point." Pauley also found that the Japanese were not starving and in fact had a standard of living, even with war devastation, higher than that of other countries in Asia. ^[22] These were all positions that Lattimore wholeheartedly supported.

Pauley agreed with Lattimore that the Zaibatsu cartels had to be destroyed if Japan were to be set on a peaceful course.^[23] Nor was the emperor to be exonerated; he was to be "deprived of the ownership or con-

trol of any assets located outside Japan proper." This was not a Carthaginian peace. As to the specific areas handled by Lattimore, the final commission report called for removing half the capacity for the manufacture of machine tools and for shipping any transferable facilities for producing aluminum and magnesium (which were then primarily used in aircraft) to countries Japan had invaded.

Lattimore was chosen to present two of the eight sections of the report to the Far Eastern Commission on January 12,1946. The only other member to present more than one section was his friend Bennett.

However high Lattimore ranked with his colleagues, he ranked even higher with MacArthur's counterintelligence chief, Brigadier General Elliott R. Thorpe. Thorpe's job was to investigate all foreigners entering Japan. In Lattimore's case, the visitor made an impression on Thorpe sufficient to generate a personal friendship. Five years later Thorpe was vigorous in his support of Lattimore's patriotism. ^[24]

Six days after its presentation to the Far Eastern Commission, the Pauley group left for Washington, a final general staff meeting, and demobilization. There was some grumbling among Japanophiles, but the report as a whole was widely praised. Pauley commended Lattimore for his good work.

But there were journalists in Tokyo who were not so convinced. One of them, Dennis McEvoy of Reader's Digest , noted that Lattimore kept suspicious company: Jack Service and Edgar Snow. This bit of intelligence was passed on to Major General Charles A. Willoughby, who succeeded Thorpe as counterintelligence chief. Willoughby was a fanatic who dug out records on every New Dealer sent to Tokyo during the early years of the occupation. Three years after the Pauley mission, Willoughby's people gathered reports on Lattimore's contacts.^[25] In addition to the McEvoy item, Lattimore was rumored to have seen Thomas A. Bisson, to have met with former Japanese IPR activists, and even to have interviewed some Japanese Communists. But Willoughby could not connect Lattimore with any known subversives.^[26]

Elizabeth Boody Schumpeter could. She was still feeding the FBI her analysis of how Lattimore was helping the Russians. On January 5, 1946, the Boston FBI office reported to Hoover that Schumpeter had been to see them again, agitated by Lattimore's membership on the Pauley mission. She reminded the FBI that Lattimore was friendly with Andrew Roth of Amerasia fame, that he was a pal of poet Archibald MacLeish, that he was acquainted with Charles Siepman (whose sin was that he was a friend of the left-wing Clifford Durr of the Federal Communications Commission),

that Solution in Asia was a pro-Soviet book, and that the Lattimores had joined the East and West Association sponsored by the subversive Pearl Buck.^[27] FBI headquarters did not react to this latest from Boston.

Closer to home, but also unknown to Lattimore, reactionary trustees of Johns Hopkins, inspired by Kohlberg, began a campaign to get Lattimore fired. The opening salvo came from trustee James R. Young of Pawling, New York, in a letter to Provost Stewart Macaulay on December 1, 1945. Young noted that contributions to the IPR were drying up after Kohlberg's "remarkable job of research," and Johns Hopkins should expect the same as long as Lattimore was there. Young and many of his friends were intensely interested in Far Eastern affairs and "would like to see the Johns Hopkins take the lead but this cannot be expected if you have Lattimore on your hands. . . . I would most certainly recommend that from 1946 you clear yourselves of any connection with Lattimore. He is away now from your staff which might be a splendid opportunity to make the absence permanent."^[28]

Provost Macaulay responded extensively, debunking Kohlberg and defending Lattimore. No beleaguered academic could have asked for a better defense. The most telling sentence: "It is my firm belief that Lattimore's presence at the University will bring us a great deal more money than will be lost, but even if that were not the case I would have no hesitancy in saying that a university, if it is to be worthy of the name, must continue to support scholars whose work is honest and original even though those scholars may have views which are not shared by—for example—the people who hold the purse strings."^[29] It was the beginning of a fifteen-year controversy.

Also while Lattimore was in Japan with Pauley, Washington was startled by the fiery resignation of Ambassador to China Patrick Hurley.^[30] Hurley believed that his attempt to bring the Chinese Nationalists and Communists together had been sabotaged by Service, John Paton Davies, and the rest of the foreign service China hands. It was Hurley's resignation blast that caused Truman to send General George C. Marshall to China to mediate the incipient civil war, thus bringing Marshall within the sights of the demagogue from Wisconsin in 1950.