The Deluge: The Great War, America and the Remaking of the Global Order, 1916-1931

by Adam Tooze

The balance of world politics in 1919 resembled the unipolar moment of 1989 far more than the divided world of 1945.

But what no one disputed was that at the time of the Washington Naval Conference in November 1921, the British government owed the American taxpayer $4.5 billion, whilst France owed America $3.5 billion and Italy owed $1.8 billion. Japan’s balance of payments was seriously deteriorating and it was anxiously looking for support from J. P. Morgan. At the same time, 10 million citizens of the Soviet Union were being kept alive by American famine relief. No other power had ever wielded such global economic dominance.

Unlike the British Empire, the American Republic sought to incorporate its new territories in the West and the South fully into its federal constitution.

What was at stake in the peace policy of Woodrow Wilson’s White House can only be understood if we recognize that the twenty-eighth President of the United States headed the first cabinet of Southern Democrats to govern the country since the Secession. They saw their own ascent as vindication of the reconciliation of White America and the refounding of the American nation state.

What American strategy was emphatically directed towards suppressing was imperialism, understood not as productive colonial expansion nor the racial rule of white over coloured people, but as the ‘selfish’ and violent rivalry of France, Britain, Germany, Italy, Russia and Japan that threatened to divide one world into segmented spheres of interest.

In 1920 Russia appeared so weak that the Polish Republic, itself less than two years old, decided that this was the time to invade. The Red Army was strong enough to ward off that threat. But when the Soviets marched westwards they suffered a crushing defeat outside Warsaw.

By the end of 1916 Britain and France were luring the Japanese navy out of the Pacific to do escort duty against Austrian and German submarines in the eastern Mediterranean.

All the main European combatants began the war with what were by modern standards remarkably strong financial balance sheets, solid public finances and large portfolios of foreign investments. In 1914 fully a third of British wealth was held in private overseas investment.

To provide collateral, the UK Treasury organized a forced purchase scheme for private holdings of first-class North American and Latin American securities, which were exchanged for domestic UK government bonds. The foreign assets, once in the hands of the UK Treasury, were used to provide security for billions of dollars’ worth of Entente borrowing from Wall Street. The liabilities that the UK Treasury incurred in America were counterbalanced in Britain’s national balance sheet by vast new claims on the governments of Russia and France.

In the course of the gigantic Somme offensive over the summer of 1916, J. P. Morgan spent more than a billion dollars in America on behalf of the British government, no less than 45 per cent of British war spending in those crucial months.17 In 1916 the bank’s purchasing office was responsible for Entente procurement contracts valued in excess of the entire export trade of the United States in the years before the war.

Ensuring the supply of food and coal to the home front was not an incidental consideration in World War I, it was an essential factor in deciding the eventual outcome.22 Economic pressure took time to force the issue, but in the end its influence was decisive. When the Germans launched their last great offensive in the spring of 1918, a large part of the Kaiser’s army was too hungry to sustain the offensive for long. By contrast, the relentless offensive energy of the Entente in 1917 – the French offensive in Champagne in April, the Kerensky offensive in the East in July, the British assault in Flanders in July – and the final drive in the summer and autumn of 1918, would have been impossible both in military and political terms without North American backing.

The newly unified Italy and Germany did not look to America for constitutional inspiration. Both had their own home-grown tradition of constitutionalism. Italy’s liberals modelled themselves on Britain. In the 1880s the new Japanese constitution was modelled on a blend of European influences.

But, among the progressive reformers of the gilded age, America’s self-image was ambiguous. America was a byword for urban graft, mismanagement and greed-fuelled politics, as much as for growth, production and profit. In search of models of modern government, it was to the cities of Imperial Germany that American experts made pilgrimage, not the other way around.

Jewish Americans were hard pressed not to celebrate the advances of the Imperial German Army into Russian Poland in 1915, where they brought welcome relief from Tsarist anti-Semitism.

Since August 1914 the huge credit-fuelled boost in exports had driven up the cost of living. The much-vaunted purchasing power of American wages was melting away.40 It was the American worker who was paying for business war-profiteering.

In the last days of August 1916, in response to the threat of a general strike on the railway network, he intervened on the side of the unions, forcing Congress to concede the eight-hour day.41 In response, American big business rallied as never before around the Republican presidential campaign.

Improbable though it may seem, in August 1916 it was not President Wilson but Prime Minister Bratianu in Bucharest who appeared to hold the fate of the world in his hands.

The leading figures in Berlin never took seriously the idea that Wilson might actually manage to stop the war. Whatever the nuances of American politics, they insisted its economy was ever more committed on the Entente side. The effect was self-fulfilling. By acting on their deterministic beliefs about American politics, the Kaiser’s strategists tore the ground from beneath Wilson’s feet.

It retrospect it would come to seem a foreordained turn in world history. But at that very moment, it became obvious what extraordinary risks the Entente had been running in escalating the war in the face of American opposition.

Certainly Russia was not suffering from any shortage of materiel. Thanks to its own mobilization efforts and the now abundant Allied supply line, the Russian Army of the early summer of 1917 was better equipped than at any previous point in the war. The question was whether its soldiers would fight.

The elections duly went ahead in the last week of November (Table 2). Too frequently overlooked, they deserve to stand, not only as a monument to the political capacities of the Russian people, but as a milestone in the history of twentieth-century democracy. At least 44 million Russians cast a vote. To date it was the largest expression of popular will in history. Almost three times as many Russians voted in November 1917 as Americans had done in the 1916 presidential election. Not until the 1940s was any Western election to outdo this spectacular event. Turnout ran at just short of 60 per cent.

By 1916, Japan’s balance of payments was so strong and the Entente’s financial position so desperate that Tokyo was in the truly unprecedented position of lending money to the Entente

In truth, despite the appearance Wilson created of speaking to them directly, China, Russia and Germany were objects of his strategy. They were not his real interlocutors. Transformation in such alien places was no doubt welcome, but it was at best a long-term process and one from which America should keep its distance. Wilson’s public rhetoric, his diplomacy and strategy were not directed to them, but to containing the dangerous association he had been forced to enter into with the British Empire, the rampaging Japanese, and the vindictive and unpredictable French, an association all the more dangerous because the Machiavellian imperialists of the old world had so many powerful and self-interested friends in America itself, in Congress and on Wall Street. It was Wilson’s determination to preserve the upper hand over this network of forces closer to home, not the uncertain prospects for progress in faraway places in Asia or Europe, that dominated every other consideration.

By what right could the Bolsheviks, who were violently consolidating their coup in Petrograd, claim the territories conquered by the Tsar? By Lenin’s own estimates more than half the populations of eastern Europe were oppressed nationalities.5 As draconian as the final treaty was from a Russian point of view, only a very small portion of the territory removed from Russia was directly annexed by Germany. Instead, Brest gave birth to the precursors to the Baltic states in their modern form, an independent Ukraine and a Transcaucasian Republic.

Compared to either the Tsarist past or the post-Soviet future, the vision of a Brest-style peace in the East was not inherently illegitimate. What discredited it was the failure of Berlin to sustain a consistently liberal policy.

For the Bolsheviks this raised a terrifying prospect. In the pre-war years, Ukraine had accounted for one-fifth of total world exports of grain, a share twice that of the United States.

Ukraine was no less vital to Russia’s future as an industrial power. The region produced all of Russia’s coking coal, 73 per cent of its iron and 60 per cent of its steel. Ukraine’s manganese was exported to all the blast furnaces of Europe.3 If an independent government established itself in Kiev this would be a huge blow to the Soviet regime.

In truth, the Kaiser’s anti-Semitic flare-up on 13 February was no one-off. Over the winter of 1917–18 he had come increasingly under the influence of extremist nationalist propaganda and his daily notes to his subordinates were now commonly laced with diatribes against ‘Jewish subversives’.

Overriding the hesitancy of the parliamentary politicians, by November they had poured 72,000 troops into Siberia.46 What halted that escalation, what saved the Bolsheviks from an open capitulation to Ludendorff that would have robbed them of any historic legitimacy, was the suddenness of Germany’s defeat in the West.47 This not only prevented the realization of Operation Capstone, but it also took the wind out of the sails of Allied intervention almost as soon as it began.

The crises that shook both the French and Italian war efforts in 1917 were profound. The French mutiny and the Italian collapse at Caporetto were on a par with anything suffered by Tsarist Russia prior to the revolution.

In 1910 not quite two-thirds of the male population was entitled to vote, with disenfranchisement in poor urban districts rising to over 60 per cent.

In February 1918, with barely a ripple of public argument, Britain passed the largest franchise reform in its history.

Significantly, by 1922, the British relinquished all official control over local government in India and the urban franchise was rapidly expanded.49 At the provincial level, the equivalent of medium-sized European states, the make-up of the electorate varied, with special representation being granted to landowners and urban business interests. To prevent upper-caste domination, separate electoral colleges were provided for non-Brahmins.

As Montagu and Chelmsford acknowledged, these compromises were far from any liberal ideal. But they were not merely reactionary either, as is evidenced by the solution adopted for the female franchise. This was to be determined at a provincial level, with the result that in the elections to the Madras state legislature more women were entitled to vote than in all but a handful of the most liberal European nations.

When the great popular uprising against British rule began in 1919, it was not triggered by discontent at the inadequacy of the Montagu-Chelmsford proposals. It was sparked by outrage at the fact that the trust which the Indians had once more placed in that settlement had been violated by precisely the kind of draconian measures that liberals such as Montagu were desperate to avoid.

From the mid-nineteenth century British policy in the region had been torn between the desire to protect the Suez canal, by shielding the ailing Ottoman Empire against Tsarist expansion, and liberal indignation over ‘Turkish atrocities’ in the Balkans.

The Indian Army played a decisive role in all the campaigns against the Turks.71 In 1917 London weighed up the possibility of giving Germany’s East African colonies to India as its own mandate.

Since 1914 a handful of Zionist activists in Britain and America had been urging London to assume the mantle of their protector. This was flattering to men such as Balfour and Lloyd George, steeped as they were in Old Testament religion. But it was a far from obvious association. Britain’s own Jewish population was small and highly assimilated. In 1914 the central office of the international Zionist organization was headquartered in Germany and had declared itself ostentatiously neutral. In 1915 Zionists both in Europe and America had been unable to hide their enthusiasm when the Kaiser’s armies drove the Tsar’s army out of western Poland. Though it is hard to credit in retrospect, the promise of a new regime of toleration in the East was one of the aspirations associated by German-speaking Jews with the Brest-Litovsk moment. When Lloyd George took office in December 1916 it was precisely to redress this imbalance, to win ‘world Jewry’ back for the cause of the Entente, that British Zionists began pursuing a new alliance with the British Empire.

Even the richest combatants in World War I were not affluent by modern standards. Pre-war France and Germany had per capita incomes roughly comparable to those of Egypt or Algeria today, but had access to far less sophisticated technologies of transport, communications and public health. And yet despite such limitations, the major combatants were by 1918 committing 40 per cent or more of total output to the destructive purposes of the war.

That crisis had indeed arrived in the autumn of 1914, when financial markets seized up and the stocks of ammunition ran low. Both were overcome through decisive state intervention. Central banks took charge in the money markets of New York, London, Paris and Berlin.1 Imports and exports were tightly regulated. Scarce raw materials and food were rationed. Far from limiting the combat, industrial mobilization and technological innovation acted as a flywheel on the war.

When the climactic assault on the Hindenburg line began on 8 August 1918, 2,000 Allied aircraft provided smothering air superiority. The German squadrons, led amongst others by the youthful Hermann Goering, were outnumbered five to one. On the ground the imbalance was even more severe. By 1917 every major attack by French or British infantry could count on the support of hundreds of tanks. The Germans never fielded more than a handful. But the truly decisive difference was in firepower.

Held in bank accounts in London, India’s export earnings were invested in British war bonds. In effect, India was enrolled in an involuntary war-saving programme, a commitment made all the more painful because the government of India was simultaneously slashing spending on long-promised investments such as primary education to make room for war costs.40

Rather than uniting capitalist imperialism against the Communist regime, it was Germany’s surrender that saved the Soviet government. The Armistice not only spared Lenin the odium of an ever closer alliance with Ludendorff. It also took the impetus out of the intervention almost before it began. Furthermore, with the Germans on the retreat, it was now the White, anti-Bolshevik forces, not the Bolsheviks, who appeared to patriotic Russians as the lackeys of foreign power.

A case could be made for their outright destruction. But given the growing strength of the Red Army, that was no longer a minor undertaking. It would require an invasion by at least 400,000 men. Amidst the universal desire for demobilization, no one in the room was willing to commit the necessary resources.

The violent clashes were a disaster for the German far left. But they were not a prelude to a military dictatorship. A week after the suppression of the Spartakist uprising on 19 January 1919, 30 million men and women, over 83 per cent of Germany’s adult population, cast their votes for the Constituent Assembly. It was by far the most impressive democratic display anywhere in the Western world in the aftermath of World War I. Three million more Germans voted than in the US presidential election of 1920, though Germany’s population was 61 million versus the 107 million of the United States.

The upsurge in working-class militancy between 1910 and 1920 was a phenomenon that swept the entire world.38 Rather than seeing it as a mere epiphenomenon of the socialist revolution that did not happen, it deserves to be seen as a transformative event in its own right. In the United States, in the last 18 months of Wilson’s presidency, it was to unleash a veritable right-wing panic. In France, the delegates to the Versailles peace conference witnessed street battles on May Day 1919. By the summer of 1919 Rome appeared on the point of losing control of much of urban Italy.

Whilst the British Empire was still battering at the Hindenburg line, the Lloyd George government faced a police strike and a serious railway stoppage.39 So worrying was the situation that the government authorized local police forces to call on military assistance

In 1914 British public debt had stood at only £694.8 million. Five years later the figure had mounted to a dizzying £6.142 billion, of which £1 billion was owed to America, and not in sterling but in dollars (Table 7).45 Already in 1919 debt service amounted to 25 per cent of the budget and would in the foreseeable future rise to something closer to 40 per cent.

According to contemporary estimates public debt contracted during the war came to 60 per cent of pre-war national wealth in Italy as opposed to 50 per cent in Britain and only 13 per cent in the US.

In any case, the fact that a capital levy was not widely adopted did not mean that Europe’s elite escaped unscathed. Everywhere tax rates were pushed to unprecedented levels. Despite the failure of ambitions to outright revolution, whether through inflation or taxation, one of the consequences of World War I was to initiate an unprecedented levelling of wealth across Europe. This was not a shift limited to one country. None of the major European combatants would ever be the same again.