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

by Adam Tooze

The age of imperialist Weltpolitik had proved ruinously dangerous. Nor despite the loose talk of ‘old world’ or ‘traditional’ imperialism was head-on rivalry between the major powers in every arena of the world an ingrained habit. It dated to the 1880s.

The loss to France was spectacular. In an area of devastation that amounted to only 4 per cent of the country, the Germans managed to do damage totalling between 2 and 3 billion dollars.

When it was incorporated into the Habsburg Monarchy in 1526, the kingdom of Bohemia had included a large swath of German-speaking people in its western region, later to become notorious as the Sudetenland. This territory was economically important and now constituted a natural defensive barrier for any Czech state. Its prosperous population had by 1913 grown to 3 million and had remained ethnically and linguistically German. But never in its history had any of this land belonged to any of the states that were forged into the German Reich in 1871.

Once more, the contrast with the period after 1945 is sobering. Between 1918 and 1926 roughly half the German population of what was now Polish territory chose to emigrate.34 After the Potsdam Conference of 1945 the proceedings were far more brutal. Within three years the entire German population of much of eastern Europe had been violently expelled at the point of a gun. In Silesia that amounted to 3 million people. Almost 100,000 people were confirmed dead, with another 630,000 recorded as missing, or ‘fate unknown’.35 The same treatment was meted out to the inhabitants of the Sudetenland.

The Polish Republic had to be assembled out of the territories of three defunct empires – German, Austrian and Russian – with radically different political traditions and wildly mixed populations. By 1919 the Polish lands were poor, overpopulated and ravaged by years of fighting.

The preconditions were not promising. The Polish political parties were legendary for their infighting. A deep fissure ran between the ethnic nationalism of the National Democrats predominant in Russian Poland, whose chauvinism and anti-Semitism were notorious, and the more progressive nationalism of Austrian and German Poland, whose leading figurehead was the renegade socialist Jozef Pilsudski.43 Their bitter disagreements spilled over into an adventurist foreign policy that led Poland to wage no fewer than six wars between 1918 and 1920, including attacks on the Baltic states, the Ukraine and a near-fatal assault on the Soviet Union.44 At the same time, to integrate the new nation, Poland launched a dramatic programme of welfare spending without the financial means to support it. The result was ruinous inflation.

The mere thought of being ruled by Poles was enough to send a shiver through the soul of any authentic German nationalist. The year 1919 saw not just a rearrangement of boundaries in Europe. It was truly a post-colonial moment. Established hierarchies of politics, culture and ethnicity were overturned. This sense of revolutionary change in turn helps to explain the attitude of suspicion and fear shared by those who had to decide the Polish question at Paris.

Though British marines struggled to prevent this violation of the Armistice, killing nine German seamen in the process, the Germans managed to sink the vast bulk of the Kaiser’s navy – 15 battleships, 5 cruisers and 32 destroyers – the largest loss of ships on any single day in the annals of naval history.

the Chinese were the only delegation to stay away. Since the first week of May the Versailles conference had reduced the largest country in the world to uproar. The transfer by the conference of Germany’s Shandong concession to Japan was to go down in the epic of modern Chinese nationalism as a founding moment.

Balfour’s response was striking. The claim that all men were created equal, Balfour objected, ‘was an eighteenth-century proposition which he did not believe was true’. The Darwinian revolution of the nineteenth century had taught other lessons. It might be asserted that ‘in a certain sense . . . all men of a particular nation were created equal’. But to assert that ‘a man in Central Africa was created equal to a European’ was, to Balfour, patent nonsense.

But on 8 March 1920 Wilson reaffirmed his refusal to grant any concessions to the Republican majority, and on 19 March the Senate failed to find the requisite two-thirds majority for either the original or the amended treaty. The failure to pass the treaty even in an amended version was undeniably in large part Wilson’s doing. But it was far from obvious, even if the President had been willing to compromise, whether the reservations demanded by Lodge would have been acceptable to the Entente.

On Wilson’s return from Paris, in July 1919 only a few blocks away from the White House, entire African American neighbourhoods were aflame. Fifteen people were bludgeoned, shot and burned to death. In Chicago the death toll reached 38.16 One thousand African American families were left homeless. In all, 25 American cities were convulsed in the summer of 1919 by the most widespread outburst of racial violence since the Civil War. The White gangs targeted symbols of wartime social change – African American servicemen and recent migrants to Northern cities.

America’s industrialists and their Republican friends, however, sensed weakness. Would the Democrats be willing to stand by organized labour, if employers raised the stakes and confronted the Federal government with the risk of serious civil strife? The business counter-attack began with the end of the war. Already by December 1918, companies such as General Electric were rolling back the concessions granted in the previous 18 months.

In 1919 one out of every five industrial workers was involved in a stoppage.

Industrial Pennsylvania was flooded with an army of 25,000 private security guards backing up the heavy-handed police. The US Steel town of Gary, Indiana, was placed under martial law.

Across the South and much of the West, the agrarian crisis fuelled the second coming of the Ku Klux Klan. Feeding off popular discontent across the American heartland and supercharged by a highly incentivized recruitment system, membership in the Klan surged from a few thousand in 1919 to as many as 4 million by 1924 – one in six, the Klan claimed, of the eligible white male population.

In 1923 Texas, Alabama and Indiana all returned Klan candidates to the Senate. Southern Illinois was convulsed by white on white ‘Klan wars’. Oregon’s state politics were entirely under the spell of the local Grand Goblin. In Oklahoma the Klan’s influence on the state legislature, court system and police force was such that the state governor was forced to resort to martial law.

At the 1924 election convention of the Democratic Party, the notorious ‘Klanbake’, the Klan caucus came close to derailing the party altogether, as they fought to prevent the nomination as a presidential candidate of the Catholic Al Smith, who stood on an anti-lynching platform.

Meanwhile, over the winter of 1919–20 the fiasco of Wilsonian political economy was having an immediate impact on America’s European debtors. The abrupt 50 per cent increase in the Federal Reserve’s key interest rates delivered a deflationary shock to the entire world economy. After exporting $292 million of gold in 1919 and billions of dollars in credit, in 1920 new foreign credits dried up. Almost $800 million in gold surged back into the US. To compound this deflationary pressure, between 1918 and 1924 the United States ran a surplus of over $12.6 billion on trade account.

Tens of thousands of leftist suspects were arrested. From the cosmopolitan Argentinian capital the politics of counter-revolution spread south to the very end of the inhabited world.

The deflationary wave driven forward by America from the spring of 1920 was the true key to the ‘world-wide Thermidor’ of the 1920s, the main driver of the restoration of order, both domestically and internationally.3 It is to this day probably the most underrated event in twentieth-century world history.

The inflation that followed the war in Germany is of course legendary. Poland and Austria were to suffer a similar fate. But until 1920 inflation was a generic experience of all the combatant and non-combatant states across the world. In Europe and Asia demand surged. Prices rose everywhere, with all but the United States having abandoned the gold standard.

As the inflationary boom gathered pace the anxiety caused by a surging cost of living was palpable. Rising prices threatened real wages and drove workers into the ranks of the trade unions. In 1919 and 1920 the French government was confronted with huge May Day strikes and threats of a general strike. In Italy the summer of 1919 ushered in a Biennio Rosso. On 30 August 1919 the Japanese Trade Union Congress was born under the sign of international progressivism.

With export orders plunging, on 15 March 1920 the Tokyo stock market crashed.14 Rice and silk prices plunged. Almost 170 Japanese banks faced panic-stricken runs on their accounts. By June 1920, the Tokyo stock exchange had fallen by 60 per cent against its post-war peak. By comparison with Japan, in the UK the deflationary adjustment was more clearly policy-induced.

The consequences of this deflation for the politics of post-war recovery in Britain were drastic. The ambitious plans for social expenditure, public housing and education reform promised in 1919 were consigned to the wastepaper basket. The disillusionment of the progressives with Lloyd George was complete.

On 15 April 1921 Downing Street called out army and navy units to face down the last and most dramatic threat of a Triple Alliance strike.18 Eleven battalions of infantry and three cavalry regiments, backed up by tanks, were readied for use in London.19 But with the solidarity between the three most powerful unions disintegrating, the strike wave was broken. In 1922, with unemployment still close to 20 per cent, barely more than half a million workers were involved in industrial action, 80 per cent less than in 1919.

The net effect of the deflation that unfolded after 1920 was to tame the drama of post-war politics. Above all it broke the onrush of the labour movement. As unemployment surged and prices fell the momentum ebbed away from the trade unions. But its implications both domestic and international were more comprehensive than merely the crushing of the left. The deflation worked to contain the right as well. Whilst revolutionaries and paramilitaries traded blows on street corners, picket lines and in meeting halls, deflation acted as a force for strategic demobilization not only across the world but on both sides of the political divide.

There was no straight line leading from reparations to the Ruhr crisis and hyperinflation of 1923. In the spring of 1920 following the defeat of the Kapp putsch, the Goldmark had strengthened against the dollar. Between March and July prices fell by 20 per cent and then stabilized. For a brief moment it seemed as though the Weimar Republic might be on the point of following the rest of the world in a deflationary financial consolidation.

In any case, the reparations crisis of the spring of 1921 undid this temporary stabilization. After months of price stabilization, inflation resumed in June of that year and surged to double-digit figures in August.

But this was not enough to bring peace. Sinn Fein’s final burst of apocalyptic radicalism vented itself not on the British, but on their former comrades who had accepted the compromise. The resulting civil war within the Republic claimed more lives than the fight against the British. Taking the two wars together, the Irish death toll rose to levels comparable, in proportional terms, to that other great disaster of Britain’s retreat from empire, India’s partition in 1947.

The dislocation of the Egyptian economy caused by its incorporation into the imperial war effort was one of the driving forces of this unrest. Inflation was rampant. Prices had increased threefold and malnutrition was at alarming levels.

The humiliation of the Arab political class reached its finale in March 1924 when the elected members of Iraq’s constituent assembly were dragged into parliament by armed British guards to ratify the Anglo-Iraq Treaty that established Iraq’s independence, but gave Britain control of its army and its finances.28 A new order had been created in the Middle East, anchored on nominally independent Egypt and Iraq, but in fact based on a wilful disregard for political legitimacy, a lack that in turn rebounded on the moral foundation of the British Empire as a whole.

If the outrage in the Hindu community was not enough, the British in early 1919 faced another threat. Safeguarding the Muslim minority population had long provided the British with a rationale for their presence in India. In 1916 this had been thrown into question by the Lucknow Agreement between the Indian National Congress and the Muslim League. By the spring of 1919, as the full severity of the peace terms with the Ottoman Empire became clear, Britain came instead to be seen, in Viceroy Chelmsford’s own words, as the ‘arch enemy of Islam’.

In the event, in 1923 Kenya introduced new exclusions on Indian settlement, but in so doing, along with Australia, New Zealand, South Africa and Canada, and for that matter Britain itself, it put itself at odds with the very principle of equal treatment that was now acknowledged as a requirement of any consistent liberal vision of global empire.

the Communist movement developed a new long-range strategy of insurgency, not metropolitan but peripheral in its base, not based on the proletariat but appealing to the majority of the world’s population, the peasantry. It was an ideological shift that marked a profound break with the nineteenth century, a wrenching reorientation within Marxist political thought at least as fundamental as anything that happened, for instance, to the tenets of bourgeois liberalism.2 Whereas London and Washington were worrying about what self-determination might mean for the constitution of India or the Philippines, in Moscow the Comintern was recognizing the colonial and semi-colonial peasantry as one of the pre-eminent historical forces of the future.

The arrival of Petlura and Pilsudski heralded the fifteenth change of regime in Kiev since January 1917. Hundreds of thousands of people had died at the hands of Germans, Austrians, White and Red Russian occupiers, amongst them 90,000 Jews who had been slaughtered in the worst series of pogroms since the Cossack uprising of the seventeenth century.

On 21 March the sensation of the Communist Party conference was Lenin’s proclamation of the so-called New Economic Policy. In towns and cities the strategy of total collectivization was reversed. Private property was permitted for businesses employing fewer than 20 workers. The coercive requisitioning of food was replaced by a regular tax that from 1924 was levied in cash. To restore confidence, a new gold-backed currency would be introduced.

On 13 July, Lenin licensed the non-conformist writer Maxim Gorky to issue an international appeal for charity, not on behalf of worldwide revolution, but in the language of humanism, on behalf of ‘the country of Tolstoy, Dostoyevsky, Mendeleyev . . . Mussorgsky’ and ‘Glinka’.

Might the Russian famine committee perhaps constitute the basis for a new provisional government?1 In the autumn of 1921 the possibility seemed to come into view of a truly comprehensive European peace based on a taming of the Soviet regime and a reintegration of Russia.

Italy’s war debt burden relative to its income was the heaviest of all the Entente powers.

As a share of national income, by 1938 Nazi Germany was spending five times what Imperial Germany had spent during its arms race with Edwardian Britain, and the GDP at Hitler’s command by 1939 was almost 60 per cent greater than that available to the Kaiser.