Are We Repeating the Mistakes of the Last War on Terror?

The last American war on terror failed to catch the perpetrators and its flailing ruthlessness instead eroded trust in government. The present war is heading in the same direction: as the World Economic Forum reported in its run-up to Davos, a year of fighting terror has produced a world in which most people - including Americans - mistrust their government and do not believe it represents them. This will worry enlightened minds hoping for democracy's success; it also stands, like the last war, to cost a great deal of money without improving security.

For 150 years, the United States has benefited from the trust of the world's peoples, who, facing a choice of where to send their capital and labor, more often than not send it to America. And the U.S. economy repays their trust: invested money yields good returns; settled migrants do likewise and often become American citizens to boot. The exception to this rule was the age of autarky that arose in the 1910s and 1920s in the name of fighting off terror.

For the U.S. it began when an anarchist murdered President William McKinley in September 1901. The world had seen four similar assassinations in the previous decade, along with a rash of random street bombings. The shadowy international network of terrorists shared explosives recipes and the conviction that, in the words of the bomber Emile Henry, "il n'y a pas d'innocents" in the modern world.

Theodore Roosevelt, McKinley's successor, declared war on anarchism, starting with an investigation into the control of immigration. Thus began an effort, popular among labor unions and other race-baiting constituencies, to turn the war on terror into an opportunistic war on foreigners. Congressional commissions and their expert witnesses derided the "quality" of immigrants, chided them for an insufficient desire to Americanize and lashed out at intellectuals who professed support for a cosmopolitan tolerance. A 1903 law prohibited the immigration of anarchists and the commissions began looking into more restrictions.

The cosmopolitans had the figures on their side: the globalisation of capital markets and decades of mass migration disproportionately favored the U.S. economy, whose extraordinary productivity attracted overseas investment. But, fearful of a world everywhere collapsing into violence, Congress continued to shut the golden door, passing laws beginning in 1917 that - with increasing obviousness - correlated the desirability of an immigrant with the lightness of his skin color.

The Department of Justice decided it could detain and deport immigrant radicals without the bother of indictment or trial. During the Democrat administration of Woodrow Wilson, A. Mitchell Palmer, the attorney general, made a name by rounding up "undesirable aliens" to ship overseas.

But the terror did not stop. Indeed, it ratcheted up in explicit reaction to the government's behavior. A 1919 letter-bomb campaign targeted official supporters of deportation; in July a man blew himself up trying to kill the attorney general. Palmer struck back, detaining and deporting more foreigners, herding more than 800 onto ships and bidding them good riddance.

And the terror did not stop. Late in 1920 a bomb went off in Wall Street. "There was no objective except general terrorism," a paper reported. Palmer identified the explosion as part of a plot to undermine American capitalism and vowed to expose it.

Yet two decades of eroding civil liberties, restricting immigration and increasing federal police power had not reduced terror but instead increased Americans' mistrust of their own institutions. This trend focused ultimately on the trial of Nicola Sacco and Bartolomeo Vanzetti, immigrant anarchists, for two murders during the robbery of a shoe factory. Sacco and Vanzetti were rough customers, possibly involved with the 1919 bombings. But persuasive evidence never surfaced for the murders they were charged with, though the government prosecuted and electrocuted them anyway. This indiscriminate zeal increased public conviction that, as attorney Clarence Darrow said, "prejudice and passion" were guiding the government's actions.

The shutting-down of immigration and global trade in the 1920s reduced the flexibility of the markets' natural responses to crises and a distrusted government could offer no leadership. The movement of global resources that benefited America stopped after 1929 and the nation sank into depression.

When globalization did return it aided the U.S. again. Immigration was liberalized in 1965. Capital inflows ultimately exceeded outflows, making the U.S. the world's biggest debtor in 1986. And trust in the security of U.S. investment kept money and migrants pouring in, fuelling the long boom.

Now that trust has faltered and, rather than repair the breach, the U.S. government is repeating past mistakes, setting aside the liberties that support faith in American institutions in favor of a show of strength directed at foreigners. Many have been detained. Apart from Richard Reid - who pleaded guilty - none has been convicted. Mistrust of government is rising. This terror-fighting strategy did not work before and it is not working now.

This article was first published in the Financial Times and is reprinted with permission.