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

by Adam Tooze

After the Versailles Treaty it was to become a commonplace that simple liberal nostrums such as ‘self-determination’ were ill-adjusted to complex historical realities. But whatever the complications of Silesia or the Sudetenland, they paled by comparison with the problem facing Secretary of State Montagu in his attempt to devise a system of ‘responsible’ self-government for India. The task involved devising a constitution for an entire subcontinent, an extraordinarily diverse slice of humanity, divided along lines of religion, ethnicity, caste and class.

Responsible government must be the goal of British rule in India, the report insisted, because it was the ‘best form of government’ that the British themselves ‘knew’.50 Upholding a racial double standard in India was not tenable in the long run. Despite the differences that segmented Indian society, its unity was growing. Illiterate peasants were maturing into responsible citizens. Britain must gamble that the best way to hasten the growth of the capacity for self-government was to transfer responsibility to the Indians themselves, the exercise of which would ‘call forth the capacity for it’.

Despite profound reservations, the Indian political class, once more, fell in with this appeal.52 Down to the end of the war Gandhi could be found travelling across India, recruiting volunteers for the war effort of the liberal empire. Home Rule, he insisted, meant not independence, but that Indians ‘should become . . . partners in the Empire’, like Canada and Australia.53 The radical Hindu nationalist Tilak called on his fellow Indians to view British war bonds as the ‘title deeds of Home Rule’.54 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.

Facing bitter competition from Sinn Fein it was John Dillon, the deputy leader of the hitherto moderate Nationalist Party, who demanded to know from London: ‘How can you face Europe? How can you face America tomorrow, and pose as the champions of oppressed nationalities? What answer will you have when you are told, as you will be told at the peace conference, “go home and put your own house in order”.’58

In his speech to Congress on 2 April 1917 Wilson placed the United States on the side of democracy against untrustworthy autocracies. But he left open where the Entente were to be situated. In correspondence with London, it was the Irish impasse that he highlighted as the only obstacle to ‘an absolutely cordial cooperation’ between the US and Britain. Following the overthrow of Tsarism, all that was needed to demonstrate that ‘the real programme of government by the consent of the governed had been adopted everywhere in the anti-Prussian world’ was Home Rule.59

Something had to be done. But what? If the British Liberals had seen a way to deliver Home Rule without unleashing a civil war in Ireland, they would have seized on it long since. Speaking in the House of Commons in March 1917, Lloyd George reiterated that as far as London was concerned the question had already been decided by Parliament in ...

Throughout the bitterly contested deliberations of the Constitutional Convention, the British supplied the White House with the same confidential reports that were received by George V in Buckingham Palace.63 The message was clear. The hopes of American intervention were fuelling intransigence on the Nationalist side. Unless the full force of both London and Washington was put behind a compromise, Ireland faced permanent partition between a ‘majority and a minority each relying upon the doctrine of self-determination . .

Sinn Fein refused any war service on behalf of the British state. But the British Labour movement made clear that it would not accept a last levy of men from London and Manchester, if Dublin and Cork remained exempt. The only way to give even a shred of legitimacy to conscription in Ireland was to move immediately to Home Rule. This, however, would require the South to accept the exemption of Ulster and Ulster to accept that this exemption could only be temporary.

One noted imperialist fumed that Balfour’s enquiry was ‘a document’ the likes of which he ‘never thought to see an English statesman put his name to’. By washing their dirty linen in front of the Americans, the British cabinet had stooped to asking Wilson and House ‘to make up their minds for them’. But injurious though it may have been to national pride, neutralizing the possibility of a disavowal from the White House was essential. When Lloyd George announced Irish conscription to the House of Commons on 16 April 1918, he was able to present it not only as the quid pro quo for Home Rule.

When Curzon had addressed the House of Lords in May 1917, he had held out the prospect that the harmonious resolution of the Irish question would ‘pave the way for that world cooperation of the three greatest liberty-loving nations on earth – namely, France, the United States of America, and ourselves . . .’. ‘The settlement of the Irish question’ would thus emerge ‘as a great world factor of capital importance . . .’.67 Washington’s grudging response to the Home Rule compromise of April 1918 fell far short of that grandiose vision, and with good reason. Ireland’s political future was in no way resolved. Sinn Fein was preparing to resist conscription with force. The path to partition and a bloody civil war was clearly marked. But London’s painstaking elaboration of the Home Rule formula had done enough to prevent any serious breach with Washington.

Wilson denied Sinn Fein its demand that Ireland should be debated at the Versailles peace conference. It remained a matter internal to the British Empire.68 At least in this minimal sense America was cooperative.

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. Turkey’s decision to join the Central Powers in October 1914 turned London’s policy in a decidedly turkophobic direction. In December, London declared a protectorate over Egypt, triggering the Russians into expansive claims on Ottoman territory, which Britain and France sought to contain in the spring of 1916 with the so-called Sykes-Picot agreement.70 This allocated a slice of northern Mesopotamia, Syria and Lebanon to France. Palestine proper was to be internationalized as a buffer zone. Britain would secure the extended eastern flank of Egypt with naval bases in Gaza and Haifa.

In the eyes of Curzon and Viscount Alfred Milner the outcome of the war should be the total suppression of imperialist competition by the assertion of British control over the eastern Mediterranean and East Africa, establishing a British Monroe Doctrine in the Indian Ocean and its approaches. It was to be an all-empire project. 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.72 The Admiralty was abuzz with schemes to base squadrons of an imperial navy in the Indian Ocean and the Pacific.

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.

By the spring of 1917 influential voices in London were calling for the Zionist cause to be added to the Armenians and Arabs as British clients. Finally, in August, as General Allenby’s troops readied themselves for a drive to Jerusalem, the small coterie of Zionists in Britain led by Chaim Weizmann were asked by the Foreign Office to draft a declaration in favour of a Jewish home in Palestine.

But Montagu spoke not only in his capacity as Secretary of State. He was also a prominent member of assimilated Anglo-Jewry. As such, Montagu deeply resented the Zionist claim to represent the entire ‘Jewish people’ and he was acutely sensitive to the anti-Semitic reflexes amongst his Gentile colleagues that Weizmann was turning so eagerly to his advantage.

It was not until October that Wilson’s equivocation was overcome by persistent lobbying from within his inner circle.78 In light of these overriding ‘political considerations’ Curzon withdrew his objections. Montagu was outvoted and the cabinet approved Balfour’s short declaration announcing Britain’s sponsorship of Jewish aspirations to a National Home in Palestine. It was despatched to Lord Rothschild as the presumptive leader of Anglo-Jewry, on 2 November 1917.

Britain had learned its lesson. Whilst the war in Europe might be in disarray, Britain was rebuilding its empire in the image of a liberal future. The programme of change in India and the new policy in the Middle East were tokens of Lloyd George’s determination to remake the empire as a ‘great commonwealth of nations’. Nine days later the British and American parties joined sixteen other delegations at the Inter-Allied Conference in Paris.

The message that Smuts conveyed to the Austrians was indicative of the British self-conception at the time. If Austria would abandon Germany, Smuts assured the Austrian envoy, London would ‘assist Austria’ in giving ‘the greatest freedom and autonomy to her subject nationalities . . .’. ‘If Austria could become a really liberal empire . . . she would become for central Europe very much what the British Empire had become for the rest of the world . . .’, a benevolent liberal guardian.80 It was a fantasy no doubt, but one that had taken on real force.

The Entente, Lloyd George proclaimed, was an alliance of democracies fighting for a democratic peace. ‘The days of the Treaty of Vienna,’ the Prime Minister announced, are ‘long past’.81 It would be a peace, he openly declared, of self-determination, ensuring that governments ruled by the consent of the governed. It would restore the sanctity of treaties and would be underwritten by an international organization to see to it that peace was preserved and the burden of armaments was lifted.

But it should not be allowed to obscure the point that if the leaders of the British Empire emerged in a confident mood in November 1918, it was because they felt they had secured the foundations of the empire as a key pillar of the emerging, liberal world order.

Back in 1914 conventional liberal wisdom had insisted that the globalization of the world economy would make prolonged war impossible. The collapse of trade and finance would bring the fighting to a halt within months. 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.

By 1918 the productive capacities of the Entente and the Americans, the cooperation they managed to sustain and their willingness to take considerable risks, all combined to give the Allies a crushing superiority.6 In every dimension it was the Allied armies that pushed the battlefield into a new technological era. 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.

But the truly decisive difference was in firepower. Artillery war reached its apotheosis in 1918. On 28 September 1918, in preparation for the final push through the German defensive line, British artillery unleashed 1 million shells in a single, continuous day-long barrage – 11 shells per second for 24 hours.

In November 1918 Germany’s planned economy surrendered in the face of a second even more powerful economic vision – a triumphant model of ‘democratic capitalism’. At the heart of the democratic war effort stood the much-heralded economic potential of the United States. World War I marked the point at which America’s wealth stamped itself dramatically on European history.

American ‘productivism’ soon established itself as one of the guiding ideologies of the early twentieth century. Greater productivity per hour promised an escape from hard political choices, opening the door to a new era of domestic and international harmony.

But as a self-declared ideology we should treat ‘productivism’ and the associated fable of American abundance with the caution it deserves. The celebration of American productive power was exaggerated. It tempts historians to project the dominant position that American mass-manufacturing had established by the 1940s anachronistically into an earlier era. As an ideology it obscures the interests that it served and, with its emphasis on tangible, material goods it deflects attention from the true locus of American power, which in 1918 was founded above all on money not on things.

In the economic sphere even more distinctly than in politics we see the sudden overshadowing of European history by the prospective dominance of the United States. If we look more closely at the way in which America’s resources were actually funnelled into Europe, what we see is both the purposefulness with which that shadow was cast and the as yet fragile facade from which it was projected.

Nor, in early 1918, was America in any position to supply its new army with advanced armaments from its own factories. Though the US had made huge deliveries of war supplies, the Entente’s orders had been concentrated on raw materials, semi-finished products, explosives, gunpowder and ammunition.12 The actual weapons of war continued to be designed and finished by the Europeans.

The year 1918 should not be confused with 1944. In 1918 it was the American Army that fought with French weapons, not the other way around. Three-quarters of the aircraft flown by the US Air Service were of French origin.

When the German offensive tore into the Allied lines on 21 March, even more drastic measures were required. Turning the tables on Wilson, it was now Lloyd George who, over the head of the laggardly President, appealed directly to the American public. Wilson was so incensed that he even considered having the British ambassador recalled. ‘I fear,’ he expostulated on one occasion, ‘I will come out of the war hating [the] English.’19 But the American military authorities responded. In the month of May, 250,000 men were moved, 1.788 million men in all between February and November 1918, at least half of them on British ships.

The bottleneck of shipping reduced the transatlantic war economy to the most primitive economic trade-off: men against things. To maximize capacity American soldiers were shipped virtually without equipment. Britain and France supplied the fresh American divisions with all their rifles, machine guns, artillery, aircraft and tanks.

Due to their lack of combat experience, most of America’s army could not be thrown directly into the front line. But they were a promise of ultimate victory and a strategic cushion against the possibility of a German breakthrough. On the Italian front a single American regiment was deployed, in a purely propagandistic role. Its three battalions of 1,000 strapping young men from Ohio were moved rapidly from town to town, parading in changing uniforms so as to create the impression of tens of thousands of reinforcements.21

In November 1917, following the Caporetto disaster, the Supreme War Council was established. By April 1918 British and French soldiers were fighting under one supreme command. In May, Marshal Foch’s coordinating powers were extended across the entire length of the Western Front from the North Sea to the eastern Mediterranean. Meanwhile, British and French rations were weighed against each other in common purchasing and shipping plans.

Through the involvement of a generation of businessmen, engineers and technocrats, such as the Briton Arthur Salter and his close colleague and friend, the Frenchman Jean Monnet, this cooperation was to provide the inspiration for the project of the European Union led by the functional integration of the European Coal and Steel Community (ECSC) after World War II.

This third economic model spawned by the war, the model of inter-Allied cooperation, was eclipsed in historical memory by its two chief competitors – Germany’s planned economy and America’s capitalist abundance.24 Nor was this any coincidence. The victor states were liberal political economies that chafed at state regulation.

In practice, however, every American intervention in Europe – Hoover’s relief programme for Belgium no less than Pershing’s independent American Army – was dependent on the cooperative logistical apparatus established by the Entente. In 1918, if Belgium continued to be fed, it was not only on account of Hoover’s organizational genius, or America’s largesse, but because the inter-Allied shipping agency placed the priority of American relief shipments even above the needs of the home fronts of France, Britain and Italy.29

Other, cooler heads pointed out that fantasies of independence were vain in any case. Whether victory was won in 1918 or 1919, whether or not a large American army was involved, the Entente were dependent on the United States. Behind Detroit’s aero-engines and Pittsburgh’s steel was something less tangible but ultimately decisive, dollar credits. Since 1915 Wall Street had bankrolled the Entente. Even without the abrupt intervention of the Federal Reserve Board in November 1916 and despite the sympathetic cooperation of J. P. Morgan, the limit of the Entente’s credit would undoubtedly have been reached in the course of 1917.

It was this direct financing out of US public credit that helped to give the Entente its crucial margin of advantage over Germany. On 24 April 1917 Congress laid the foundation for long-term funding in the form of the Liberty Loan authorization. The initial authorization of funds for the American war effort was for $5 billion, of which as much as $3 billion were allocated for loans to the Entente.

Up to April 1917 the Entente had borrowed in the United States to fund purchases from the US and overseas. A condition attached to all US congressional appropriations was that the dollars lent must be spent exclusively in America. After April 1917 the US Federal government was operating a gigantic, publicly funded export scheme. The American fiscal apparatus and the productive capacity of American business were harnessed together as never before. No previous ‘financial hegemony’ exercised by Spain, Holland or Britain between the seventeenth and nineteenth centuries had ever exercised anything approximating this scale or degree of coordination.

As critics like John Maynard Keynes, the brilliant young economist advising the UK Treasury, had predicted, delivering the knock-out blow to Germany put Britain at the mercy of the United States. Lloyd George had willingly courted this risk, expecting America to understand its own interests in an Atlantic alliance. But as Keynes was to experience first hand in Washington in the summer of 1917, the reality of transatlantic partnership was less reassuring than the rhetoric of a democratic alliance might suggest.

To Keynes it seemed that the Wilson administration positively relished the opportunity to reduce Britain to a state of ‘complete financial helplessness and dependence’.33 That dependence expressed itself at its most basic level in the monetary system. Before the war, the international gold standard had been anchored to the gold parity of the pound sterling. After 1914, though it could no longer be freely converted at home, sterling remained nominally attached to gold and in New York the exchanges continued to function. For the Entente Powers it was vital to maintain the value of their currencies against the dollar.

the spring of 1917 Wilson’s Treasury Secretary (and son-in-law) William McAdoo made quite clear that he aimed to replace sterling with the dollar as the key reserve currency.35 As a first move, McAdoo proposed that no funds from congressionally approved Liberty Loans should be used to support either sterling or the franc. Nor should London be permitted to use such funds to repay overdrafts that it had contracted with J. P. Morgan during Wilson’s credit freeze over the winter of 1916–17.

The near panic this caused in London and on Wall Street was enough to convince the Wilson administration that even if the dollar was to replace sterling in the long run, in the short term defending sterling was the cheapest way to prop up the Entente war effort. But this guarantee was limited to the duration of the war. When hostilities ended, the Entente would be left to its fate. The US dollar would emerge as the only global currency still securely based on gold.

The empire had two lopsided monetary pillars, the first being sterling based on gold supplied in large part from South Africa. The second was the Indian rupee based on an uneasy silver-currency standard. The war put this structure under extreme pressure. Britain’s imports from the Dominions and India surged, whilst its exports to the empire were throttled to a bare minimum. The empire accumulated large surplus claims on Britain, but given its desperate need for dollars and gold, London could not permit the empire to indulge in an import boom from third markets, such as the US.

Despite protests from the mining corporations who were in effect being forced to provide a subsidy to the British war effort, the price was held until the end of the war. The result was to concentrate one of the world’s main supplies of gold in London, but also to provoke bitter nationalist protests. In the Transvaal mining region vociferous Boer activists demanded that South Africa must take full control of its own gold, establishing refineries and its own mint.

From the autumn of 1915 the balance of trade shifted decisively in India’s favour. Under normal circumstances this would have triggered either expanded Indian imports or an inflow of precious metals. But instead, to prevent India’s purchasing power from spilling over into a huge surge in ‘unnecessary’ imports, wartime controls were extended to the subcontinent.39 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

In early 1916 the Indian currency was officially uncoupled from silver. Henceforth, the backing for the rupee would be the British government bonds held in London in India’s name.

With the risk of inflation becoming more and more obvious, the remaining silver stocks disappeared from the market. This in turn made it harder to sustain the fiction that the flood of paper rupees would eventually be redeemable in specie. As a countermeasure, in April 1916 the government of India began feeding silver purchased in the United States into circulation.

By early 1918 the Indian currency system was close to collapse. In Bombay political discussion of the Montagu-Chelmsford reforms was overshadowed by tumultuous scenes on the exchanges as merchants scrambled to cash their rupee notes for the dwindling stock of silver.