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Dr. Raymond Vernon Oral History Interview

Oral History Interview with
Dr. Raymond Vernon

Assistant Director, Trading and Exchange Division, U.S. Dept. of State, 1942-46; Asst. Chief, International Resources Division, 1946-48; Member of Mission on Japanese Combines, 1946; Adviser on Commercial Policy, 1948; Member, U.S. Delegation, Gen. Agreement on Tariffs and Trade, Geneva, 1950, Torquay, England, 1951, Vice Chairman, U.S. Delegation, Geneva, 1952; Deputy Director, Office of Economic Defense and Trade Policy, 1951, and Acting Director, 1954.

Cambridge, Massachusetts
July 19, 1973
by Richard D. McKinzie

[Notices and Restrictions | Interview Transcript | List of Subjects Discussed]


This is a transcript of a tape-recorded interview conducted for the Harry S. Truman Library. A draft of this transcript was edited by the interviewee but only minor emendations were made; therefore, the reader should remember that this is essentially a transcript of the spoken, rather than the written word.

Numbers appearing in square brackets (ex. [45]) within the transcript indicate the pagination in the original, hardcopy version of the oral history interview.

This oral history transcript may be read, quoted from, cited, and reproduced for purposes of research. It may not be published in full except by permission of the Harry S. Truman Library.

Opened May, 1976
Harry S. Truman Library
Independence, Missouri


[Top of the Page | Notices and Restrictions | Interview Transcript | List of Subjects Discussed]


Oral History Interview with
Dr. Raymond Vernon


Cambridge, Massachusetts
July 19, 1973
by Richard D. McKinzie


MCKINZIE: Professor Vernon, maybe we could start by asking how you happened to get into Government service in the first place. You had prepared yourself more or less for an academic career and in the 1930s ended up in the Securities and Exchange Commission. Was this part of any game plan on your part?

VERNON: Heaven forbid I should have a game plan. I got out of City College in the acute depths of the depression, February 1933, and I managed by knocking on doors to get a couple of different jobs, one with the National Bureau of Economic Research, where I worked for Wesley Mitchell and Arthur Burns


on business cycles, and one in an advertising agency where I worked nights on whether Lever Brothers' advertising sold soap. The first one proved a little bit too reclusive for me at that age, and the second a little bit too crass, though I enjoyed both, I must say. So, when the SEC invited me to come to Washington, it seemed an easy compromise between the two: some action, some research. In any case I wanted to leave New York; so, that was the combination.

The SEC became an irrelevancy once the war had started, and since I had an eye disability and couldn't get more war-connected activity, I knocked about in Government trying to find war-related jobs. One of the jobs I did was the military affairs guides for the reoccupation of Western Europe and Japan, where I specialized on securities markets, capital markets, financial intermediaries, and so on.


MCKINZIE: Did you go down to the University of Virginia and work in that program down there?

VERNON: No, I worked entirely shuttling between Philadelphia and Washington, the SEC being then in Philadelphia. Then, by sheerest accident I was selected as a kind of third choice when the Mission on Japanese Combines was being set up under Corwin Edwards. They were looking for somebody who knew something about the securities markets, financial intermediaries, insurance companies, and all of that; and out of sheer desperation they chose me. Out of that experience I was invited by the State Department to head up a section on international restrictive business practices, patents, trademarks, and so on. This was part of -- whatever it was then called -- the Office of International Trade Policy, I guess. And I worked my way up through that not too complicated bureaucracy until I became John Leddy's deputy and then finally


Acting Director of the successor office, the Office of Economic Defense and Trade Policy.

MCKINZIE: Let's go back and sort of work at the end of the war, and we might even take it back to how had you got onto this mission on Japanese combines in 1946? What was the kind of background preparation, as you recall, and the thinking in the Government about what should happen?

VERNON: About the mission itself?


VERNON: Well, first, briefly, about myself. Having written these military affairs guides I had a smattering of ignorance already about Japan's securities markets and financial structure. Whoever was doing the putting together of this mission (I'll describe what the purpose of the mission was in a moment) had a fixed notion in his head that he wanted someone from the SEC. There were a


couple of logical candidates well ahead of me in the list. They both turned out (it was either one or two of them) -- one of them later went on to become the chairman of the Long Island Lighting Company, as I remember -- they couldn't go, or wouldn't go, and I could and did.

I had never met Corwin Edwards. I didn't know anything about the Government's policies toward Japan. I didn't know anything about the Joint Chief's post-surrender directive. In short, I didn't know anything. But it was known by one or two people in the Federal Reserve Board that I had done this work on Japan. Also I was busy knocking on doors again, which was my favorite preoccupation in the years -- just from sheer habit -- after having gone into the employment world during the depression. So, somehow or another it got around. I had myself interviewed by the Board of Economic Warfare, by the Foreign Economic Administration, by everyone under the sun. They all turned me down as being obviously


not very useful material for their purposes. A lot of my present friends were engaged in the turndown process, including Charlie [Charles P.] Kindleberger, Ed [Edward S.] Mason and others; but, anyhow, I survived that. It was then that I learned the importance of graduating from Harvard and not from CCNY.

I forget now the processes of interviewing which led to my being accepted on this mission, but from the very first, Corwin Edwards and I hit it off famously, and we are close friends to this very day. We entered the scene with a tradition which stemmed out of Thurman Arnold, Corwin Edwards, Joe Borkin, a string of people associated with anti-trust in the Department of Justice, hence, terribly ethnocentric. This was the U.S. perception of how markets should be as the leading, advanced perception. Every other culture's perception was regarded sort of pathological, or at least involved


in going through a cultural evolution which will one day reach the high plane of the American culture. That thread in U.S. policy had been given verbal recognition here and there in a variety of contexts. One of them was in the Joint Chiefs' post-surrender directive 1066, if memory serves me right.


VERNON: 1067, which said to the Supreme Commander, "You will abolish all excessive concentrations....", about a sentence and a half. MacArthur's role was a very interesting one. He took this directive quite literally, apparently. He hired a curious character off Wall Street, who is still around somewhere. I sometimes run into his name, but I never can remember it. He sort of single-handedly was going to go around breaking up the Japanese trusts; and then after four or five months of this decided he had better get back home to Wall Street.


Our group came in about January 1946, about as he left. I don't think there was any significant overlap. If there was it was an overlap of a few days, during which he announced that he had largely succeeded in dissolving the trusts and there were a few cleanup operations to engage in. It may have seemed so from his point of view. Everything seemed busted in Japan in January '46, and perhaps he thought the trust problem was liquidated too.

Well, eight of us were dispatched to Japan, most of us from Government agencies, with the exception of a professor of law of Ohio University, whose name escapes me, but it doesn't matter; and some people from the Federal Trade Commission, the Department of Justice, Edwards, and myself, eight in all. We spent three extraordinarily rewarding months in Japan, from January to March 1946, during which time we were given all sorts of cooperation by MacArthur. I never detected any sense of hostility or resentment; quite the contrary.


MacArthur had requested a mission to help him with this; and while some people thought that this was passing the buck, because he found the job distasteful, I never saw any evidence of that interpretation.

We had the facilities of SCAP made available to us -- Supreme Commander for the Allied Forces in the Pacific -- and each of us exploited them in his own way. I learned more, I think, in that three month period than any three months of my life. And of course, what one learned, if he could listen with even half an ear, was the incredible ethnocentricity of the American position, and the complexity of the phenomenon with which he was dealing.

My job was two-fold: it was to understand in detail one of the major Zaibatsu structures, the Yoshida structure; and then to understand the financial institutions and their role, whatever they might be. And I wrote various pieces of the report of the Mission on Japanese Combines, which


was published, and then wrote most of an unpublished document which was sort of the economic analysis of the reconstitution of the Zaibatsu in a period of reconstruction in Japan.

MCKINZIE: Could you talk about the reconstruction of Japan before we move? How soon should Japan be integrated into the economy of the Far East, how long should it be reduced, to use a word that's applied to Germany, to a "pastoral situation?"

VERNON: Well, there were actually three threads, three different views, then later four. One was the remnants of the Morgenthau doctrine. That was never of any importance in Japan. Though here and there an individual embodying that view might appear, it was never of any consequence. Outsiders sometimes thought that that was the dominant thing. They were dead wrong on this.

Then there was the passionate ideologue view which (a) believed that classical competition was


the most desi