# The Deluge  ## Metadata - Author: [[Adam Tooze]] - Full Title: The Deluge - Category: #books ## Highlights - To this day, the decision for peace in November 1918 is not given its due as a remarkable victory for democratic politics. This was hardest for Germany. But the armistice was controversial also in London, Paris and Washington. Their leaders too had to choose peace. Were they right to settle for an armistice rather than fighting on to an outright German surrender? By October Germany’s defences were collapsing. If the war had been continued even for a few weeks, the Entente might have ended the year by imposing an unconditional surrender. Instead Germany managed not only to rescue itself from the jaws of absolute defeat but, to a surprising degree, to define the politics of the peace. For sure, Germany was no longer in a position to claim the ‘peace of equality’ promised by Wilson in January 1917. Nevertheless, in the course of negotiating the armistice, Berlin quite deliberately wrote Wilson and his promise of a peace without defeat back into the heart of the script. ([Location 4383](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4383)) - Tags: [[blue]] - In a desperate effort to secure its survival, Germany was exploiting Wilson’s evident desire to establish America as the arbiter of world affairs. The possibility that Berlin might actually take up Wilson’s offer of ‘peace without victory’ had been the nightmare of Entente strategy ever since the Peace Notes of December 1916. Until the autumn of 1918, political divisions within Germany had made it impossible for Berlin to avail itself of this option. The Reichstag’s peace appeal of July 1917 had been overshadowed by Germany’s military triumph over Russia. The effort to make a progressive peace at Brest-Litovsk had been derailed by the disastrous interaction between the German militarists and the Bolsheviks. In the autumn of 1918 the German bid for a liberal peace would once again come close to fiasco. In November the politics of the armistice negotiations would unleash first a mutiny and then a revolution, but not before Berlin had given Wilson the chance to force the hand of London and Paris. In defeat, Germany conferred on Wilson the position that the Entente had worked so hard to deny him. It was the armistice that once more transformed the President from a combatant into the arbiter of European affairs. On the brink of collapse Germany allowed Wilson to fashion the script that has defined the story of the peace ever since. ([Location 4452](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4452)) - Tags: [[blue]] - It becomes far easier to understand the course of events after October 1918 if we acknowledge at the outset that Wilson was always highly sceptical about the democratization process in Germany. The American President was the very opposite of the universalist for which he is too often mistaken. For Wilson, genuine political development was a gradual process deeply determined by profound ethno-cultural and ‘racial’ influences. Regarding Germany he held simplistic views. Ever since the summer of 1917 he had been convinced that the ‘military masters’ of Germany were pursuing a two-pronged strategy: ‘... stand pat if they win, yield a parliamentary government if they lose’. ([Location 4473](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4473)) - Tags: [[blue]] - At the Paris Peace Conference he made every effort to avoid meeting the German delegation. ‘He would not have minded,’ Wilson remarked, ‘meeting the old blood and iron people of the old regime, but he hates the thought of seeing these nondescript creatures of the new ([Location 4480](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4480)) - Tags: [[blue]] - For Wilson, the negotiations with Germany were above all a lever through which to gain purchase on the victors. Now that Germany was on the brink of defeat, it was French and British imperialism that Wilson believed posed the main threat to his vision of a new world order. It was for this reason that, though American troops in their hundreds of thousands were fighting side by side with the Entente, he chose to respond to Berlin unilaterally without consulting either London or Paris. ([Location 4483](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4483)) - Tags: [[blue]] - Anxious about the anger stirred by his unilateral diplomacy, but determined to seize the opportunity that Germany was offering him, Wilson raised the stakes. On 14 October in his response to Max von Baden’s second armistice notice, the President demanded proof that Germany was really on the road to democracy. The implication was clear: the Kaiser must go. Once again Wilson’s concern was as much for public opinion at home as for any real change in Germany. He needed to appear both forceful and liberal at the same time. But as far as London and Paris were concerned, this too was a serious misstep: In Germany, making democratization a condition of peace was bound to have a counter-productive effect; the advocates of reform would look like puppets of the enemy. The European Allies were right. ([Location 4500](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4500)) - Tags: [[blue]] - The British, French and Italians at first threatened to take a hard line, refusing to associate themselves with any peace that incorporated the 14 Points since those too had been a unilateral presidential announcement. The French and Italians did not object to the idea of a League of Nations, but did not want it written into the peace. The British objected to a general commitment to uphold the freedom of the seas. Rather than accept such a disabling limitation, they would prefer to fight the war to a finish on their own. The German peace notes had reopened fundamental differences between Wilson and the Entente. ([Location 4530](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4530)) - Tags: [[blue]] - Despite their bellicose rhetoric, neither Clemenceau nor Lloyd George wanted war for its own sake. Even though they were unaware of Germany’s near complete collapse, it was clear that they had gained a historic victory. If they fought on into 1919 they might hope to impose an unconditional surrender on Germany, but it would be American forces that would claim a far greater share of the credit. If France and Britain made peace now, they could look forward to being hailed as heroes. The only thing that could possibly jeopardize their triumph would be a botched attempt to sabotage an armistice, from which they would emerge looking like reactionary opponents of Wilson’s vision of peace and democracy. ([Location 4546](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4546)) - Tags: [[blue]] - Under such circumstances, for the Entente to have accepted the 14 Points as the basis of the future peace was an astonishing triumph for the diplomacy initiated by the Reichstag majority in early October. If the French and British had realized how close to the precipice of disintegration Germany stood, they could easily have derailed Wilson’s coup. Within days the revolutionary avalanche would have left Germany completely unable to resist a further military advance. Instead, the German government had allowed Wilson to define the politics of peace. ([Location 4576](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4576)) - Tags: [[blue]] - The accusation later made by the likes of John Maynard Keynes, that Germany had been tricked, that the Entente had obtained an armistice on false pretences from a valiant and still combative foe, inverts reality. Up to the end the Entente continued to treat the German state as a sovereign counterpart, whilst the Reich was, in fact, collapsing into chaos. Between 9 and 11 November 1918, it was the Germans who negotiated at Compiègne as though they represented a government and an army capable of continuing the struggle, when in fact both were in a state of dissolution. The Germans would protest their betrayal, but in light of what happened across Germany in the first two weeks of November, as far as the British and French were concerned, this was merely further evidence of their bad faith. ([Location 4590](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4590)) - Tags: [[blue]] - Wilson was engaged in a high-stakes wager. He was choosing to forego imposing a peace of his design by force of American arms. He was gambling that an armistice made on the basis of his 14 Points would hold the Entente in check. For this to succeed, Wilson needed to rally public opinion and he needed above all to control Washington, the new hub of global power. But it was precisely there, in the week prior to the Armistice, that Wilson lost his grip. ([Location 4596](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4596)) - Tags: [[blue]] - He invited Ashurst to a personal conference at which he revealed his true strategic purpose. Whereas an unconditional German surrender would unleash British and French power, Wilson insisted that he was ‘thinking now only of putting the United States into a position of strength and justice. I am now playing for 100 years hence.’ ([Location 4604](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4604)) - Tags: [[blue]] - Wilson’s unilateral diplomacy was an extraordinary power play. It was motivated not by his concern for German democracy but by a desire to subordinate Britain and France to his particular vision of American power. Wilson’s Republican critics envisioned a very different peace. As Roosevelt confirmed to British Foreign Secretary Lord Balfour, America should stand ‘for the unconditional surrender of Germany and for absolute loyalty to France and England in the peace negotiations . . . America should act, not as an umpire between our allies and our enemies, but as one of the allies bound to come to an agreement with them.’ ‘While we gladly welcome any feasible scheme for a League of Nations, we prefer that it should begin with our present allies, and be accepted only as an addition to and in no sense a substitute for the preparedness of our own strength and for our own defenses.’33 To a journalist friend Roosevelt spoke of a working agreement between the British Empire and the United States that he was now content to call ‘an alliance’.34 Wilson’s main Republican opponents were no more isolationists than Clemenceau and Lloyd George were reactionaries. What they had in common was their rejection of Wilson’s peculiar vision of American global leadership. Their concept of a post-war order would be based on a privileged strategic alliance between the United States and the other states they recognized as partners in an exclusive democratic club, above all Britain and France. This was a vision that was both menacing to Germany and profoundly distasteful to Wilson. In this respect his alignment with Berlin was no mere figment of the partisan imagination. ([Location 4628](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4628)) - Tags: [[blue]] - Between October and December 1918 the old world of Europe collapsed. Revolution swept away not only the Habsburgs and the Hohenzollern, but along with them the royal houses of Bavaria, Saxony and Württemberg, eleven Duchies and Grand Duchies, and seven smaller German principalities. They were not much lamented. ([Location 4643](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4643)) - Tags: [[blue]] - as Woodrow Wilson embarked for Europe on the first ever such tour by an American President, he imagined himself as the centre of a global storm. ‘The conservatives do not realize what forces are loose in the world at the present time,’ Wilson lectured his staff in December 1918 onboard the SS George Washington. ‘Liberalism is the only thing that can save civilization from chaos – from a flood of ultra-radicalism that will swamp the world . . . Liberalism must be more liberal than ever before, it must even be radical, if civilization is to escape the typhoon.’ ([Location 4653](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4653)) - Tags: [[blue]] - Wilson’s ‘revolution’ ended in a notorious fiasco. Lenin and Wilson died within weeks of each other in early 1924 as deeply disappointed men. True believing Wilsonians and fellow travellers of Leninism have ever since derived dramatic conclusions from this failure. The aborted or failed revolution of 1918–19, it is said, shaped the rest of the twentieth century. It was the conservatism, the rancorous nationalism, the inveterate imperialism of the ‘old world’ that frustrated both Lenin and Wilson and made impossible any true break with the past.6 Instead, the violence of the Great War was stitched together with the even greater violence that was to come. ([Location 4672](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4672)) - Tags: [[blue]] - Since seizing power Lenin had imagined himself balancing Imperial Germany against the overwhelming power of the Entente. Now the German counterweight was gone. As Lenin commented, ‘when Germany is being torn apart by the revolutionary movement at home, the British and French imperialists consider themselves masters of the world’. ([Location 4685](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4685)) - Tags: [[blue]] - Note: Precursor to Stalin making peace with Hitler initially and deciding to split the East between them - When on 27 December he was hosted at Buckingham Palace he appeared in pointedly plain attire and struck a resolutely Cromwellian pose. His message was blunt: ‘You must not speak of us who come over here as cousins, still less as brothers; we are neither. Neither must you think of us as Anglo-Saxons, for that term can no longer be rightly applied to the people of the US. Nor must too much importance in this connection be attached to the fact that English is our common language . . . no, there are only two things which can establish and maintain closer relations between your country and mine: they are community of ideals and of interests.’25 Wilson made no secret of the fact that, as far as he was concerned, the community of values was embodied far more in the opposition Labour Party than Lloyd George’s coalition. ([Location 4816](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4816)) - Tags: [[blue]] - Lloyd George and his Tory partners had, it seemed, found a way to turn democracy into a vehicle for reaction. Lloyd George, the staunch opponent of the Boer War, stood accused of pandering to the basest instincts of nationalism. ([Location 4907](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4907)) - Tags: [[blue]] - 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. The surge of militancy in Britain may not have been so radical in its rhetoric, but it was nevertheless formidable. 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 ([Location 4928](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4928)) - Tags: [[blue]] - As John Maynard Keynes, later one of the arch-critics of reparations, admitted in the spring of 1919, the ‘intense popular feeling . . . on the question of indemnities . . .’ was not based on ‘any reasonable calculation of what Germany can, in fact, pay’. It was based on a very ‘well-founded appreciation of the intolerable situation’ that would arise for the European victors if Germany did not carry a substantial fraction of the burden.48 When Lloyd George, the father of Britain’s system of social insurance, spoke of searching the Germans’ pockets for reparations, what he was promising anxious middle-class taxpayers was that these immense new burdens would not be borne by them alone. ([Location 4987](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=4987)) - Tags: [[blue]] - 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. More than that, it was an interlinked process. Through reparations and the vast international debts accumulated during the war, the governments and societies of Europe were interlocked as never before. On 27 May 1919, France’s unfortunate Finance Minister Louis-Lucien Klotz found himself calling upon the Chamber of Deputies to approve painful tax increases, so as to demonstrate to ‘our allies that France still knows how to make the sacrifices the situation demands, and thus deserves . . . the maintenance of the agreements in the military, economic, and financial sphere, which have produced the victory of right over might’. ([Location 5004](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5004)) - Tags: [[blue]] - on the British leg of his grand tour, President Wilson had already made clear his refusal to fall in with this sense of priority. America, he had told his English audience, was ‘not now interested in European politics’ or ‘merely in the peace of Europe’. America was interested in ‘the peace of the world’. ([Location 5031](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5031)) - Tags: [[blue]] - As one of his biographers remarked, ‘February 14 1919, would seem to be the climactic day towards which Wilson’s life had supremely moved’.2 Wilson deliberately placed himself at the centre of the drama, chairing all but one of the Commission meetings. It was his triumph. It would also be his defeat. ([Location 5042](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5042)) - Tags: [[blue]] - 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. What Britain, France and Japan aspired to construct, no less than the American delegation, was a new order of security. The drafting of the League Covenant was for them the moment at which Wilson would answer the fundamental question of the post-war world: what could they expect from the United States? The answer they received was incoherent. For its most perceptive critics the fundamental defining feature of the League was not its internationalism, nor the logic of imperial power that it cloaked, but its failure to respond to the challenges of the twentieth century by explicitly laying out a new model of territorial or political organization.4 Wilson himself insisted that the League Covenant must not be confining, it must ‘not be a straitjacket’. It was a ‘vehicle of power, but a vehicle of power which may be varied at the discretion of those who exercise it and in accordance with the changing circumstances of the time’.5 The question that haunted the rest of the world was who would have the power to exercise that discretion, to wield that power. ([Location 5051](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5051)) - Tags: [[blue]] - By comparison with the French, the British preferred a minimal organizational architecture for the League precisely because they wanted to use it as a flexible vehicle for their alliance with Washington. But, as was true for the French, what the British were proposing was radically new. Not since Spain and Portugal had divided up the New World in 1494 with the Treaty of Tordesillas had there been a strategic vision of comparable scope. As far as both French and German observers were concerned, the prospect of such an Anglo-American condominium was regarded as ushering in the end of Europe as an independent locus of global political power. ([Location 5088](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5088)) - Tags: [[blue]] - For Japan’s most influential liberal thinker, Yoshino Sakuzo, it was clear that the victory of November 1918 had delivered the Hegelian verdict of history. The war had brought the triumph of liberalism, progressivism and democracy over authoritarianism, conservatism and militarism. Once a prominent liberal imperialist, Yoshino now embraced the principle of ‘no annexations’ and the League of Nations as representing ‘the prevailing world trend for greater international justice by consolidating democracy internally and establishing equality externally’.16 But Japan’s era of popular political mobilization was not confined to the left. Popular nationalism too experienced a dramatic revival. They too demanded to know: would the peace offer their country a legitimate and equal place in the new world order? ([Location 5109](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5109)) - Tags: [[blue]] - Ferdinand Larnaude, the second French delegate, to ram home what was really at stake for France. Given Cecil’s train of thought, Larnaude ‘thought that the use of the general terms “great” and “small” power was inadvisable’. The League was ‘the outcome of this war’. Of course, the Big Five were not the only ones to have made a contribution. ‘But the matter is not one to be discussed in the abstract or on the basis of sentiment; but a thing of cold fact; and the fact is that the war was won by Great Britain, France, Japan, Italy and the United States. It is essential that the League be formed around these effective powers . . .’23 ‘During the course of the war,’ continued the second French delegate, Bourgeois, ‘the five nations had made a league of nations after a sort; they have fought, actuated by a single idea. Now it is important that it be made known to the world that they are creating this League under the influence of a single idea.’ ([Location 5150](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5150)) - Tags: [[blue]] - the frustration that Larnaude and Bourgeois experienced in the Commission confirmed Clemenceau in his suspicion that the League was a lost cause as far as France was concerned. Making the best of a bad situation, Clemenceau joined the British and Americans in distancing himself from Bourgeois’ impractical demands, all the better, he hoped, to consolidate the trilateral transatlantic pact with Britain and America that was his true goal.39 Provided that a democratic alliance was in place, France could live with an empty League. The real risk from the point of view of Paris was that the League might have become an exclusive Anglo-American duopoly. ([Location 5278](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5278)) - Tags: [[blue]] - Wilson’s stance on naval affairs was, if anything, even more worrying. In advance of his visit to London in December, he gave a carefully scripted interview to The Times in which he spoke of the need for ‘the most generous understanding between the two great English-speaking Democracies’.42 But what did this mean for the future organization of naval power? In his independent armistice exchanges with the Germans in October 1918, Wilson had reiterated the call for the freedom of the seas that was anathema to the British. To further increase the pressure, in late October he asked Congress to appropriate funds for a second three-year naval spending programme. And in unguarded moments on the passage to Europe in early December he made clear what this meant. If Britain would not come to terms, America would ‘build the biggest Navy in the world, matching theirs and exceeding it . . . and if they would not limit it, there would come another and more terrible and bloody war and England would be wiped off the face of the map’. ([Location 5290](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5290)) - Tags: [[blue]] - Whether it was cruel or kind, what struck Bainville most about the Versailles settlement was that it extended the principle of national sovereignty across all of Europe, including to Germany. Despite the disaster unleashed by Bismarck’s creation of 1871, an integral and sovereign German nation state was taken for granted as a basic element in the new order. For Bainville this assumption was the hallmark of sentimental nineteenth-century liberalism.5 The bizarre mixture of cruelty and kindness that characterized the peace was the direct result of Clemenceau’s effort to reconcile the security needs of France with his romantic attachment to the principle of nationality. Whatever we may think of Bainville’s politics, the force of his point can hardly be denied. Across the sweep of modern history since the emergence of the modern nation state system in Europe in the seventeenth century, the assumption of German national sovereignty marks the treaty of 1919 as unique. Most, if not all, of the problems peculiar to the Versailles Treaty system arose from it. ([Location 5347](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5347)) - Tags: [[blue]] - As recently as 1866, during the crisis that would lead to the Austro-Prussian War, the French statesman Adolphe Thiers could declare that the ‘greatest principle of European politics’ was that Germany must consist of independent states, bound together by no more than a federation.7 It was against this backdrop that Clemenceau made what at first may seem an incongruous claim: ‘... the Treaty of Versailles can make this boast . . . that it did conceive, and even in part bring about, certain relations founded on equity between nations that had been ground against one another by successive outbreaks of historical violence’.8 A consolidated German nation state would stand after Versailles at the heart of Europe. Furthermore, as one could hardly fail to notice even from the most casual inspection of the post-war map, due to the simultaneous collapse of the three eastern empires, Germany not only survived the war. In defeat in 1918 it bulked far larger than it had done in victory in 1 ([Location 5382](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5382)) - Tags: [[blue]] - a no less indispensable element in the equation was the massive coercive force of the Red Army. After 1945 it was the very real threat of a Soviet takeover that drove West Germany willy-nilly into the arms of the West and kept it there. And this too marks 1919 as a singular moment in European history. Since the eighteenth century, Russia had overshadowed German history.9 Germany’s military defeat of Russia in 1917 removed this basic parameter of European power politics. ([Location 5421](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5421)) - Tags: [[blue]] - Ever since, Clemenceau’s failure to respond more cooperatively to the offer of a security pact has served critics of the peace as the best illustration of his bad faith. But this once more fails to take seriously what the French were saying. The fundamental French objective was to protect their country not just against the general menace of German power, or even against the prospect of defeat, but against the threat of invasion and occupation.15 Of course the French would never forget their experiences in 1870 and 1914. But here too they were making a more general point of considerable novelty. Before the war, the conventions of international law had been developing in such a way as to insulate civilian life as far as possible from war fighting. It was this development that allowed liberal theorists such as the oft-derided Norman Angell to argue that, provided the conventions of international law were respected, from the point of view of the civilian population it ought to make little difference which civilized government they lived and worked under.16 But it was precisely those laws of war that the Kaiser’s armies had systematically violated in their occupation of Belgium and northern France. Allied propaganda was prone to exaggeration, but the Germans did not even attempt to deny that they had executed several thousand Belgian and northern French civilians, whom they chose to regard as illegal combatants.17 Nor did they deny that during their retreat to the Hindenburg line they had laid waste to a large part of northern France. Captured German documents from 1917 and 1918 convinced the French that this had been done not only for tactical advantage but to cripple their economy permanently.18 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.19 To the profound frustration of the French and Belgians, when he arrived in Europe Wilson refused to tour the devastated areas, apparently because he feared that it would upset his emotional equilibrium.20 The French could not afford the luxury of such detachment. For them, Germany’s turn against the developing norms of international civility was a clear warning. This made clear that it was no longer enough for the French government to guard against defeat. It had an imperative obligation to protect its citizens against another German occupation. This was a novel territorial problem that required a territorial solution. It must be at the aggressor’s expense. ([Location 5470](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5470)) - Tags: [[blue]] - The greatest danger, Lloyd George announced, was to create in the East a new Alsace-Lorraine. ‘I cannot conceive of any greater cause of future war,’ he was happy to state, ‘than that the German people, who have certainly proved themselves one of the most vigorous and powerful races in the world, should be surrounded by a number of small states, many of them consisting of people who have never previously set up a stable government for themselves, but each of them containing large masses of Germans clamouring for reunion with their native land. The proposal of the Polish Commission that we should place 2,100,000 Germans under the control of a people which is of a different religion and which has never proved its capacity for stable self-government throughout its history must, in my judgement, lead sooner or later to a new war . . .’47 In more unbuttoned moments Lloyd George referred to the Poles as ‘hopeless’. Lord Cecil regarded them as ‘orientalised Irish’. Jan Smuts resorted to his South African idiom. As far as he was concerned the Poles were simply ‘kaffir’. ([Location 5614](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5614)) - Tags: [[blue]] - To be just another member of a general assembly of nations was not what Weltpolitik had promised at the turn of the century. Precisely so as to insure against that fate, Clemenceau looked beyond the League to a trilateral transatlantic alliance with Britain and the United States. But that only raised further questions for Germany. Faced with such an overwhelmingly powerful and futuristic coalition in the West, what did Germany’s bare European sovereignty amount to? ([Location 5650](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5650)) - Tags: [[blue]] - France for its part counted on the joint responsibility of the Allies for enforcing payment. The eventual withdrawal of the occupying forces in the Rhineland and the return of the Saar were both conditional on Germany meeting its reparations obligations. France and the Allies would leave German soil 15 years after it began making regular payments. If Germany did not pay, France would not leave, so at least Clemenceau reassured the French Chamber of Deputies. ([Location 5665](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5665)) - Tags: [[blue]] - from the German point of view there was a quality to the reparations demands – the remorseless, inescapable weight of debt – that made them in some ways even more odious than the territorial provisions of the treaty. Unlike the loss of territory, which directly affected only the border regions, reparations touched every man, woman and child in Germany. They burdened the entire nation literally every day. Their weight would not be lifted for generations to come. Nationalist propagandists spoke of reparations as bondage and slavery. ([Location 5672](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5672)) - Tags: [[blue]] - they imposed on the situation after World War I a vision that was out of date. It wasn’t simply the inherent implausibility of viewing Germany as a French imperial possession, a story that had been played to its violent conclusion already in the Napoleonic era. The truly misleading aspect was to view Germany’s situation under the Versailles Treaty in isolation from the global force-field in which all the European combatants now found themselves. Ironically, since it was the Entente that had constructed the new geometry of international finance, France’s future position of subordination was already more definitely marked out by the spring of 1919 than was that of Germany. ([Location 5684](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5684)) - Tags: [[blue]] - For the Entente there was nothing that was clearer in the wake of the war than that its economic and financial position had changed forever. For the French the shock was no doubt severest of all.5 Before the war Paris had been second only to London as a source of international credit. Now France was a needy borrower. One prong of the French response was to rebalance the European economy at the expense of Germany. French heavy industry would be strengthened above all by deliveries of German coal and the ore from Alsace-Lorraine.6 But this effort at European industrial rebalancing was combined with a wider vision that foresaw the extension of inter-Allied and transatlantic cooperation beyond the end of the war. In strategic terms this was in line with Clemenceau’s insistence on the absolute priority of the three-way transatlantic democratic alliance. ([Location 5691](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5691)) - Tags: [[blue]] - In 1950 Monnet was to become renowned as the architect of the European Coal and Steel Community.11 Fifty years later in his Memoirs, Monnet looked back with regret on what he saw as the missed opportunity of 1919. At this moment Europe might have taken a bold step toward industrial cooperation. ‘It was to take many years and much suffering before Europeans began to realize that they must choose either unity or decline.’ ([Location 5711](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5711)) - Tags: [[blue]] - it was the American position at least as much as the European that was to change between 1919 and 1945. Both future President Harry S. Truman and his fabled Secretary of State, George Marshall, saw combat in France in 1918. Returning to Europe in 1945, they hustled Paris into leading the rest of the continent toward cooperation and integration. Jean Monnet was amongst their most active collaborators. Back in 1919 the Wilson administration took a very different line. Washington set itself firmly against Clémentel and his integrationist schemes. ([Location 5716](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5716)) - Tags: [[blue]] - As far as the Wilson administration was concerned, the inter-Allied structures promoted by the French were really ‘arrangements, which the English’ would ‘set up in London for provisioning the world with our foodstuffs and on our credit’.15 The only guarantee that ‘justice’ would be done ‘all around’, Hoover insisted, was for America to act alone. ([Location 5725](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5725)) - Tags: [[blue]] - the consequences of this push to depoliticize the world economy were perverse. Far from taking politics out of economic life, the result was to drive Europe ever more deeply into the greatest financial and political entanglement of all – reparations. On 5 February 1919 Clémentel confronted the Economic Drafting Committee of the Council of Ten with the clear choice. France was willing to approve a moderate peace. But this depended on instituting ‘by means of measures based on common agreement, an economic organization designed to assure the world a secure recovery . . .’. If not, the ‘guarantee’ of ‘security’ would have to be provided by a ‘peace of reprisals and punishments’. ([Location 5731](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5731)) - Tags: [[blue]] - The British situation was entirely different. Britain had not suffered significant damage to its territory. But London had incurred huge losses to its shipping, it had run down its capital stock and borrowed on a gigantic scale to fund the entire Entente. For Britain the essential point was distributional. It needed to ensure that the wealth which had made London the hub of the Entente war effort did not leave it carrying a disproportionate burden for decades to come. The risk was that the spectacular damage to France and Belgium would be made good whilst the less visible attrition Britain had suffered would go unacknowledged. ([Location 5753](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5753)) - Tags: [[blue]] - Writing in December 1921, John Maynard Keynes, the British economist, former Treasury advisor and vocal critic of the Versailles Treaty, acknowledged the political logic behind this compromise. The reparations settlement was not wise, nor in every respect practical. In some respects it was clearly dangerous, but, with more than two years distance from the events, Keynes was able to admit that ‘public passions and public ignorance play a part in the world of which he who aspires to lead a democracy must take account; . . . the Peace of Versailles was the best momentary settlement which the demands of the mob and the characters of the chief actors conjoined to permit’. ([Location 5803](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5803)) - Tags: [[blue]] - Keynes was not so much a Wilsonian as the mirror image of a Wilsonian. He opposed Lloyd George and those dedicated to delivering the knock-out blow precisely because they were leading Britain headlong into ever greater dependence on America. Whereas Wilson sought to insulate America from the aggressive impulses of the ‘old world’, Europe, for Keynes, stood for a fragile blend of capitalism with true personal and cultural freedom.30 He saw none of this in America, even in its progressive version. What Wilson and Keynes had in common was a desire to preserve distance. The reality that faced them in 1919, however, was entanglement. If we compare the narrative of the peace provided by The Economic Consequences with what Keynes himself contributed as an expert to the peace conference, we get some sense of the contortions that were necessary to maintain at least the hope of disentanglement. ([Location 5830](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5830)) - Tags: [[blue]] - Keynes argued that the only way that the crisis might have been defused was for Britain and America to have arrived at a general economic settlement in a preliminary discussion. Once again, his stress is on the British. But here, at least, Keynes goes beyond the personal critique of Wilson. The problem was that the American delegation had arrived at Paris without a properly worked-out economic plan.32 What such a joint Anglo-American proposal might have involved does not emerge until the very end of Keynes’s ferocious polemic. The first remedy he proposed was a reduction of the demands on Germany. But this, Keynes acknowledged, could only be justified in connection with a far wider financial rearrangement. Again he placed the onus on Britain to lead the way in abandoning all financial claims on Germany. But this, in turn, would have to be followed by a general cancellation of all inter-Allied debts and a new $1 billion loan, which would enable reparations to be paid and world trade to be restarted. As harsh as was his criticism of French demands, Keynes acknowledged at the end of his book that to consider a reparations reduction in isolation without allowing for a reduction of inter-Allied debts would be profoundly unjust. ([Location 5846](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5846)) - Tags: [[blue]] - It was Keynes’s task at the Treasury to prepare the British response, which was presented to the Americans at the end of March. As Keynes acknowledged, a complete cancellation of inter-Allied claims would impose a loss of £1.668 billion on the US. But Britain as a large net creditor to the Entente would also bear a substantial loss, running to £651 million. The chief beneficiaries would be Italy, which would be relieved of £700 million in debt, and France, which would be granted £510 million in debt relief. Among the great powers there was absolutely no precedent for such enormous transfers of monies, but in light of the relative strength of the Allied economies and the damage they had suffered in the war, this did not seem unreasonable. All the arguments that Keynes would later deploy with such dramatic effect against reparations were first put to use in March 1919 in an effort to persuade Washington of the disastrous consequences of upholding the entangling network of inter-Allied war debts. Keynes was quite frank about the desperate situation in which France found itself. If Britain and America were to insist on full repayment, ‘victorious France must pay her friends and allies more than four times the indemnity which in the defeat of 1870 she paid Germany. The hand of Bismarck was light compared with that of an ally or of an associate.’38 How were the populations of Europe to be brought to accept an infuriatingly inadequate reparations settlement, if not by means of generous concessions from those who could afford to make them? ([Location 5879](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5879)) - Tags: [[blue]] - Though Mussolini was to succeed where Hitler failed in taking advantage of the post-war crisis, in their methods and their basic historical vision they were in profound agreement. Modern Italy and modern Germany had been made barely three generations earlier, during the convulsive mid-nineteenth-century disintegration of Europe’s post-Napoleonic order. What was to unite Hitler and Mussolini was their common reaction to the world crisis unleashed by World War I. The reality of world power as represented by the Big Three at Versailles was what they had to contend with. As Lloyd George commented to one of Wilson’s inner circle in May 1919, ‘as long as America, England and France stand together, we can keep the world from going to pieces’.2 ([Location 5977](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=5977)) - Tags: [[blue]] - What terrified London and Paris was that if Rome had stuck to this line, they would have been faced with a stark choice between one regime of international legitimacy and another – the sanctity of treaties on the one hand and the emerging norms of a new liberal order on the other. ([Location 6019](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6019)) - Tags: [[blue]] - This was followed by a further unprecedented step. Over the head of the official delegation of a friendly government President Wilson issued a manifesto to the Italian people. America was ‘Italy’s friend’, the American President declared. The two countries were ‘linked in blood as well as in affection’. But America had been privileged ‘by the generous commission of her associates . . . to initiate the peace . . .’ and ‘to initiate it upon terms she had herself formulated’. The United States was now under a ‘compulsion’ to ‘square every decision she takes a part in with those principles’. Wilson chose not to mention the fact that in October 1918 Italy had protested the armistice negotiations and argued against the inclusion of the 14 Points. Now he asked Italians to accept that America was bound. ‘She can do nothing else. She trusts Italy, and in her trust believes that Italy will ask nothing of her that cannot be made unmistakably consistent with those sacred obligations.’13 This direct appeal to the Italian population was the most dramatic expression of Wilson’s distance from Europe’s political institutions. If the British were regarded as imperialist recidivists and the French as ‘selfish’, the Wilsonian attitude toward the Italian political class was little short of contemptuous. ([Location 6044](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6044)) - Tags: [[blue]] - The point was not lost on Orlando. Wilson, he spluttered, had ‘addressed himself directly to the people of Italy along the lines which he had used to eliminate the Hohenzollerns as the ruling class of Germany’.19 As was clear to all present at the conference, the American President had challenged the Italian Prime Minister’s right to speak for his people. ([Location 6069](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6069)) - Tags: [[blue]] - its party conference in Bologna in October 1919 the Italian Socialist Party (PSI), fatefully, had voted three to one in favour of joining Lenin’s radical Comintern.28 Fired by their surging electoral success and a huge wave of strikes and land seizures, the most intransigent wing of the PSI expected an imminent revolution. That in turn opened the door to Mussolini’s second coming, no longer as a journalist or parliamentary politician, but as the leader of a new breed of right-wing enforcers, dedicated to destroying the Italian socialist movement physically. ([Location 6110](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6110)) - Tags: [[blue]] - The position of the Foreign Office and the majority of the Weimar coalition was reflected in the memorandum drafted by the German peace delegation on 17 June.47 They too advised rejection. The peace was insupportable because its terms were deliberately calculated to violate German self-respect. It was impractical. It was at odds with the terms of the Armistice. It was in bad faith because it asked Germany to admit against the truth its sole responsibility for the war and to recognize as a just peace what was in fact an act of violence. Honesty, the delegation insisted, was the only lasting foundation for a peace. ([Location 6180](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6180)) - Tags: [[blue]] - For the representatives of Tokyo the first days at the Versailles peace conference had come as a painful shock. The Japanese had acknowledged Wilson’s 14 Points, but they had not anticipated that the entire conference would be framed in liberal terms. They had certainly not expected to be made to plead their case in front of the Chinese. What were the West’s intentions? Were they seriously interested in a more equitable international order, or were they, as the Japanese right wing suspected, intending ‘to freeze the status quo and hold in check the development of second-rate and lower-ranked nations’?9 It was this uncertainty that gave crucial salience to the Japanese demand for race equality to be written into the League Covenant. ([Location 6351](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6351)) - Tags: [[blue]] - 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. ([Location 6370](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6370)) - Tags: [[blue]] - For these future leaders of right-wing Japanese militarism, Ludendorff’s concept of a new era of Total War waged between huge global power blocs was one of the most inspiring concepts produced by World War I. For young Japanese military officers in Germany in the aftermath of the war, including Tojo Hideki, later the much-reviled leader of Japan in World War II, this was a future they envisioned for Japan in a struggle against the Western Powers.37 They would fight at a vast material disadvantage, as Imperial Germany had done. They would compensate on the one hand by establishing an autarchic zone in China and on the other by rallying the army around an extreme samurai ethic, which depicted ‘the way of the warrior (bushido) as the search for death’. ([Location 6476](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6476)) - Tags: [[blue]] - In presenting the text of the Versailles Treaty to the Senate on 10 July 1919, Woodrow Wilson chose words of extraordinary drama. ‘The stage is set, the destiny disclosed. It has come about by no plan of our conceiving, but by the hand of God who led us into this way. We cannot turn back. We can only go forward, with lifted eyes and freshened spirit, to follow the vision. It was of this that we drew at our birth. America shall in truth show the way. The light streams upon the path ahead, and nowhere else.’ ‘Shall we or any other free people hesitate to accept this great duty?’ ‘Dare we reject it and break the heart of the world?’1 The language was exalted but Wilson was not exaggerating. Both the victors and the vanquished looked to the United States as the pivot of the new order. ([Location 6529](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6529)) - Tags: [[blue]] - The divided powers of the American constitution had preoccupied him since his earliest days as a political thinker. What had driven him into politics was a sense that the American nation state had reached a turning point that required creative presidential leadership. Since 1913 Wilson had used the presidency in new ways to drive congressional action and mobilize public opinion. He had established a new apparatus of national economic government, led first and foremost by the Federal Reserve. The war had led to state interference across American life. ([Location 6542](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6542)) - Tags: [[blue]] - On 19 November at the first crucial Senate vote the Republicans defeated the treaty, whereupon on Wilson’s instructions the Democratic minority blocked a motion to accept the treaty with reservations. For five further months the Senate agonized. 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. ([Location 6579](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6579)) - Tags: [[blue]] - In the event he not only underestimated the uncertainty and insecurity he was injecting into the international arena. At home he overtaxed his personal charisma. He tragically overestimated his own physical strength. But, more fundamentally, in counting on the electorate to see him through, he failed to grasp the explosive social and economic legacy left by the war. By the autumn of 1919 it was not only Wilson’s foreign policy but his vision of America’s own future that was coming apart. ([Location 6635](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6635)) - Tags: [[blue]] - What did not dissipate so easily was the very real threat to the savings of millions of American families posed not by anarchists or foreign radicals but by the anonymous, all-pervasive force of inflation. By October 1919, even in America, the society best cushioned against the impact of the war, the cost of living index had risen by 83.1 per cent since 1913.34 Up to the end of 1917, wages had lagged seriously behind. They caught up in 1918 under the pressure of the war effort.35 But as inflation accelerated in 1919, real wages were once again eaten away. One could fight strikes with armies of private security thugs. Court injunctions would humble trade union leaders. One could offer concessions, even including an eight-hour day. Attorney General Palmer promised a crackdown on hoarders and speculators.36 But none of this really addressed the grievances of tens of millions of people whose standard of living was threatened by the huge surge in prices. ([Location 6729](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6729)) - Tags: [[blue]] - The cause of this social and economic dislocation, in the United States as across the rest of the world, was not subversion or moral decrepitude, but the financial disequilibrium left by the war. The last Liberty Bond, the Victory Loan, was issued in the spring of 1919 in the hope of soaking up excess purchasing power and consolidating the government’s finances. It brought in $4.5 billion. As during the war, however, these funds came in large part not out of savings but from bank credits, which only served to stoke inflationary pressure. In the course of 1919 the volume of notes in circulation surged by 20 per cent. Faced with such inflation, it was only to be expected that workers would organize to protect their standard of living. ([Location 6745](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6745)) - Tags: [[blue]] - To attract long-term investors and to cool the markets the New York branch of the Federal Reserve was noisily demanding an increase in interest rates.40 But throughout 1919 as inflation surged and gold drained out of the Fed’s reserves, the Treasury resisted action. Its dilemma was that any large increase in interest rates would devalue the outstanding stock of Liberty Bonds, which carried an interest rate of only 4.25 per cent. To offer higher rates for new loans would drive down the resale value of Liberty Bonds, penalizing those who had committed their savings to the war effort. As Russell Leffingwell, the Assistant Secretary to the Treasury, made clear to the Fed Board on 4 September 1919, if the price of Liberty Bonds fell below 90 cents in the dollar, the administration could find itself facing unmanageable repercussions in Congress and a panic in the bond market. This was the hostage that had been given to fortune by the unprecedentedly wide dispersal of the bonds and the unsustainably low rate ([Location 6755](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6755)) - Tags: [[blue]] - with inflation making it attractive to turn dollars into gold, by the end of 1919 the ratio of gold reserves to notes in circulation at the New York branch of the Federal Reserve had fallen to 40.2 per cent, within a whisker of the minimum required by law. Faced with an impending crisis, the governors of the New York Federal Reserve voted to suspend reserve requirements for a grace period of ten days. But the full Board of the Federal Reserve refused to permit this drastic step. Governor Strong, the dominant figure at the New York Fed, was outraged. It was the Treasury’s refusal to allow a timely increase in interest rates that had put the New York banks in danger. He would ‘loyally’ carry out the instructions of the Treasury and Fed Board, ‘but after this he would resign rather than continue such a policy’.42 ([Location 6768](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6768)) - Tags: [[blue]] - Until 15 January 1920 the Treasury needed to borrow $500 million every fortnight. Until then there could be no thought of an increase in interest rates.43 So uncertain was the Treasury of Strong’s loyalty that they had Attorney General Palmer confirm that in the event of unauthorized, unilateral action by the New York bank, they had the power to relieve him of his position. ([Location 6778](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6778)) - Tags: [[blue]] - Three weeks later, Leffingwell completely reversed his previous position. The Treasury was now convinced that ‘nothing but a drastic increase on commercial paper to 6% would curtail the situation’. America was ‘dangerously near leaving the gold standard . . .’. Now it was the turn of the New York Fed to object. A sudden increase in interest rates of almost 50 per cent was ‘unjust’. It would convey the impression either that ‘the Federal Reserve board had lost its head or that conditions must be very critical’. It might incite a panic rather than calming the market. But Leffingwell was in a vindictive mood. ‘If a panic in New York should break out, he would be glad of it.’ ([Location 6784](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6784)) - Tags: [[blue]] - The deflationary impact was drastic. The abrupt tightening of credit tipped the American economy over a cliff. After continuing to accelerate to an annual inflation rate of 25 per cent in the first half of 1920, in the second half of the year the price level plunged by an annualized rate of 15 per cent. In the entire macroeconomic record of the US, this switchback is completely unique. In the Great Depression deflation was even sharper, but it did not follow a period of rapid inflation. In 1920 as prices fell, industrial output plummeted and unemployment shot up. By January 1921 the National Industrial Conference Board estimated that industrial unemployment topped 20 per cent. ([Location 6792](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6792)) - Tags: [[blue]] - Wilson would linger on in Washington until his death in February 1924. But with his departure from the White House, so goes the familiar story, America’s first wave of internationalism had broken. It was followed by an age of isolationism. But this terminology perpetuates contemporary polemics as historical misunderstanding. If, instead, we recognize Wilson for what he was – an exponent of turn-of-the-century high nationalism, bent on asserting America’s exceptional claim to pre-eminence on a global scale – then what is more striking is the continuity between his administration and the Republicans who followed. Speaking in Boston in May 1920, just as the recession set in, Senator Warren G. Harding had coined the phrase that was to define not only his campaign but his presidency: ‘America’s present need is not heroics but healing; not nostrums but normalcy.’ But he went on to add another telling line. What was called for was ‘not submergence in internationality but sustainment of triumphant nationality’.49 Triumphant nationalism is as apt a description of the policies of the Republican administrations in the 1920s as it was of Wilson’s own administration. Triumphant nationalism was not inward-turning or isolationist. It was by definition addressed to an outside world, but it spoke in terms that were unilateral and exceptionalist. ([Location 6826](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6826)) - Tags: [[blue]] - Within weeks of his inauguration Harding approved a law that cut immigration from 805,228 in 1920 to 309,556 in 1921–2. Immigration from southern and eastern Europe and Asia was reduced to a trickle. In 1924 the cap was further lowered to 150,000 entrants per year. For centuries the New World had stood open to adventurous settlers. The damming up of transatlantic immigration marked the most decisive break between the liberal modernity of the nineteenth century and the increasing centrality of nation-state regulation in the twentieth century. ([Location 6839](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6839)) - Tags: [[blue]] - How was America’s assertive nationalism to be reconciled with its pivotal role in the international economy? If inter-Allied debts were to be serviced, if Germany was to pay even a modest amount of reparations, what the world needed was not protectionism but for the US to serve as an engine for global trade. If America wished to avoid this deepening entanglement, the obvious alternative, as Keynes had insisted, was for the net creditors, Britain and America, to forgive the debt, to deleverage. But that ran up against another radically novel feature of the situation. In 1912 the Federal government’s debt stood at just over $1 billion. Seven years later, in 1919, the total debt burden of the Federal government had swollen to $30 billion. This was modest in relation to the size of the US economy. But of that sum, as much as one-third was actually foreign-owed war debt. Inter-governmental debt was not marginal to the US domestic discussion, it was a highly visible feature of the new world created by the war. In August 1919 Wilson’s administration had unilaterally announced to the Entente a two-year moratorium on repayment. Lloyd George’s government repeatedly appealed to Wilson to join Britain in a more expansive policy of debt write-down. But to no avail. ([Location 6851](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6851)) - Tags: [[blue]] - It is an extraordinary tale. With variations it can be repeated across much of the world in the aftermath of World War I – a sense of a world coming apart, fantasies of conspiratorial communist influence, a pressing state of economic crisis, a wave of strikes and industrial conflict, fuelling drastic rhetorics of class conflict and violence on both sides. The nineteenth century had been haunted by revolution. Now was the moment, it seemed, that revolution had arrived. But outside Russia the far left was everywhere defeated.2 Across the world, as in Argentina and the United States, the resources of the state and the property-owning classes were mobilized to defend established order aggressively. ([Location 6889](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6889)) - Tags: [[blue]] - 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. ([Location 6905](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6905)) - Tags: [[blue]] - 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. ([Location 6927](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6927)) - Tags: [[blue]] - Ahead of America, it was Japan that led the world into deflation in the spring of 1920. In February the long rise in silver prices reversed. Within a matter of months on Asian markets the price of gold in terms of silver doubled. By inverting the movement of 1919 this impelled a drastic appreciation of the yen relative to China’s silver-backed currency. 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. ([Location 6951](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6951)) - Tags: [[blue]] - The problem was that the US did not stay ‘within reach’. As gold drained out of the US in early 1920, London had feared that the Fed might respond with an excessive deflationary squeeze. Their fears were more than realized. As American prices plummeted, the challenge of restoring sterling to its pre-war parity became ever more daunting. Britain not only had to close the gap between British and American wartime inflation. It now had to match the American deflation as well. In April 1920 the Bank of England followed the Federal Reserve in hiking interest rates and the budget brought in large tax increases on higher incomes and a spending cut of 30 per cent, leaving a 12 per cent surplus for debt repayment.16 Prices plunged, interest rates increased, but nominal wages remained stubbornly high. Producers faced a ruinous surge in real costs, whilst debtors were plunged into negative equity. Bankruptcies followed en masse. By the autumn of 1920 the British economy was in free fall. ([Location 6967](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6967)) - Tags: [[blue]] - 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. Between July 1920 and July 1921 unemployment amongst trade union members shot from 1 per cent to 23.1 per cent (Fig. 4). The balance of power in industrial relations had reversed. ([Location 6980](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=6980)) - Tags: [[blue]] - In the event, the refusal of these large economies to follow the UK and the US into wholesale deflation acted as a stabilizing force in the world economy.27 One of the things that helped to make the worldwide crisis of 1920–21 less prolonged and severe than the 1929–33 recession was precisely that it was not uniform in its impact. But the fact that it was not experienced in the same way across the world economy was in itself significant. It made manifest the way in which the reconstruction of the world economy after World War I organized a new hierarchy. At the bottom were the basket cases en route to hyperinflation, the likes of Poland, Austria and Germany. They became wards of the ‘money doctors’ and international stabilization regimes, examples of a new form of diminished sovereignty.28 At the top were the US and the UK, willing and able to carry through a headlong monetary contraction, reversing the monetary effects of the war. In the twilight between these extremes the majority of the world’s states – France, Italy and Japan amongst them – were forced to settle for half-hearted stabilization. They avoided the worst of either hyperinflationary excess or bludgeoning deflation, but did so at the price of accepting a humbling second-tier position in the reconstituted economic order. ([Location 7027](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7027)) - Tags: [[blue]] - 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. ([Location 7039](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7039)) - Tags: [[blue]] - At Versailles, Japan had been recognized as a major power. But, so far, its claim to significance had rested on its military force. This was a fleeting advantage. The enduring foundation of power was economic. With their determination to restore the gold standard, America and Britain were reaffirming their leadership in the world economy. For Japan to adopt a deflationary policy would cut short the boom, but if wages and prices were not forced down, Japan’s exporters would soon find themselves struggling to compete. As the balance of payments deteriorated, Japan would once more slide into dependence on foreign credits. The only way to make Japan a permanent member of the great-power club was to establish a platform for long-lasting economic prosperity on the basis of a truly harmonious relationship with China. ([Location 7061](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7061)) - Tags: [[blue]] - These, however, were tactical adjustments. It was with regard to the navy that truly strategic decisions had to be taken. In the spring of 1919 as Britain and America clashed at Versailles, the Royal Navy had estimated its financial requirements for the coming year at £171 million. This was denied both on grounds of austerity and to avoid antagonizing the Americans. On 15 August the cabinet instructed the service departments to make their plans on the assumption that ‘the British Empire would not be engaged in any great war during the next ten years’. For the navy this meant that spending was to be slashed to £60 million by 1920–21. The consequences were drastic. As the Admiralty pointed out: ‘It must be clearly understood that Great Britain will no longer be supreme at sea . . . we shall be supreme in European waters, but as regards the seas as a whole the supremacy will be shared with the United States.’39 Shared supremacy as the basis for a lasting global pacification had been the basic aspiration of the Lloyd George government since 1916. The Wilson administration had refused any such agreement, but given the financial legacy of the war, it was now being built into British strategy willy-nilly.40 ([Location 7089](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7089)) - Tags: [[blue]] - France did not have the financial cushion that allowed Britain to weigh up its options. The domestic costs of rebuilding northern France could, if necessary, be raised domestically through taxes, borrowing, or if this proved most expedient, by inflation, a tax on savers. The huge burden of France’s foreign debt – $3 billion to America, $2 billion to Britain – had to be repaid in gold or dollars. Barring a miraculous surge in exports, which the US and the UK with their policies of aggressive deflation were doing nothing to promote, or a ruinous cut to essential imports, this foreign currency could only come from reparations. ([Location 7138](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7138)) - Tags: [[blue]] - 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. Given what was to come next, this cannot but appear attractive.49 But with unemployment soaring in Britain, in the early 1920s an end to the post-war boom was regarded in Germany as a distinctly mixed blessing. There was great fear that Germany’s precariously balanced political system would not withstand the kind of mass unemployment the British and American governments were inflicting on their populations. 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. ([Location 7233](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7233)) - Tags: [[blue]] - Those who were most sincerely committed to the Republican project argued that Germany should put Britain and France in the wrong by pursuing responsible financial policies, thereby demonstrating the practical impossibility of fulfilment. As Allied experts, including Keynes, repeatedly pointed out, even if Germany could not restore pre-war conditions, then like Japan, France or Italy, it could certainly halt any further slide. Its price level would remain high, but at a suitably depreciated exchange rate it would be internationally competitive. This would provide a solid platform from which to renegotiate. If, on the other hand, Germany did not comply, what was there to hope for, but a descent into chaos, foreign occupation and civil war? ([Location 7246](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7246)) - Tags: [[blue]] - It was this political impasse that drove the slide into disaster. Inflation was the path of least resistance. The Wirth government clung to the rhetoric of reparations fulfilment. But it did so by printing cash and dumping it on the foreign exchanges. The result was a feverish domestic boom and a plunging exchange rate. By contrast with Britain and the US, up to the winter of 1922 unemployment in Weimar Germany was negligible. The bill was paid by the huge tax levied by inflation on Germany’s savers. When that became unsustainable, the trigger was set for renewed confrontation. ([Location 7259](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7259)) - Tags: [[blue]] - Rather than authorizing the Treasury to broker strategic debt deals, it gave control over debt policy to a five-member Senate Commission and explicitly banned the use of any foreign bonds as means of repayment. In the aftermath, Governor Norman of the Bank of England complained resignedly to his friend Benjamin Strong at the New York Fed that Congress had created a ‘ridiculous’ roadblock. ‘Having, let us suppose, steadied the exchanges by some reparations adjustment, we are immediately to see them unsteadied by inter-allied debt payments.’58 ([Location 7294](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7294)) - Tags: [[blue]] - In Europe, Britain was the strongest power financially and the most stable politically. Further afield the war appeared to have ended as a triumph for the British Empire. Its rivals old and new were humbled, the Royal Navy ruled the waves, the armies of the empire were victorious in Europe and the Middle East (Table 10). But within a year of the Armistice the map of the British Empire came to resemble not so much a vista of power as a landscape of rebellion on which the sun never set.1 The crisis of empire spanned the globe from the West Indies to Ireland, Egypt, Palestine, South Africa, India and Hong Kong. ([Location 7303](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7303)) - Tags: [[blue]] - the switchback of inflation and deflation swept through the colonial economy. As the cost of living surged, there was boiling labour unrest from Winnipeg to Bombay. ([Location 7310](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7310)) - Tags: [[blue]] - 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.18 The cost of food hit the urban poor worst, but peasants too, who grew cotton for export, found themselves close to starvation. ([Location 7407](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7407)) - Tags: [[blue]] - As Milner reassured the British cabinet, though ‘Egypt is truly the nodal point of our whole imperial system’, it was not necessary for Britain to ‘own it’. All that Britain needed was a ‘firm foothold’, which was provided by the recognition of Britain’s right to station troops in the Suez canal zone whilst it consolidated its position on the upper reaches of the Nile in Sudan. ([Location 7426](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7426)) - Tags: [[blue]] - Even after the Amritsar massacre the Congress meeting of December 1919 had still been willing to give grudging approval to Montagu’s reforms. Gandhi himself had not yet rejected cooperation. It was the brutal terms of the Sèvres Treaty with Turkey, combined with the utterly inadequate official reaction to Dyer’s massacre, that finally convinced Gandhi of London’s lack of good faith. ([Location 7546](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7546)) - Tags: [[blue]] - The ‘reality’ of India’s political situation in 1920 was defined by Gandhi’s movement of popular resistance. For the British and Indian elite alike, it was a bewildering new world.44 Gandhi’s vision of Swaraj was in many ways deliberately utopian. It appealed to a future freed not only from the oppression of British rule, but from any modern state or economic order. It refused any vision of colonial development. It was at odds with the aspirations of the established nationalist elite and it was pilloried as absurdly anachronistic by India’s emerging Communist movement. After 1945, despite his being acclaimed as spiritual leader of the Indian nation, Gandhi’s communalist vision would be ruthlessly sidelined. Yet Gandhi’s undeniable strength lay not only in his charisma, but also in his truly subtle understanding of political tactics. Day by day he gathered the forces of the uprising around himself, trying to gauge the possibility for increasing the pressure without provoking the British to the point where they had no option but to respond with lethal and massive force.45 Non-cooperation was a deliberate effort to craft a revolution that avoided Lenin’s headlong plunge toward a general conflagration or Sinn Fein’s Irish version of the same. It was a strategy perfectly designed to probe the legitimacy of a liberal empire, to the tenets of which Gandhi himself had so recently subscribed. ([Location 7569](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7569)) - Tags: [[blue]] - Having lost the majority to Gandhi, the question was whether the British could sustain the cooperation even of the moderate minority. A failure to silence the radical nationalists would leave the moderates exposed. But a recurrence of Amritsar would create a situation as polarized as in Ireland. ([Location 7590](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7590)) - Tags: [[blue]] - in early 1922 the officials sensed that ‘moderate opinion’ was ‘showing distinct signs of veering round in favour of the government’. After Gandhi’s high-handed rejection of the Round Table, influential Indians would support his arrest, so long as the British chose the right moment. That moment would come when Gandhi openly declared his intention of overthrowing British rule. He had ended 1920 by promising Swaraj within a year. One year on, he had failed to deliver. ‘...(S)ooner or later’, Britain’s imperial tacticians noted, he would be ‘forced into proclaiming mass civil disobedience . . . and then and then only, government will be in a position to enter on the final struggle with him . . . without the risk of alienating such support as we have in the country, and precipitating a crisis which would break the constitution’.49 ([Location 7612](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7612)) - Tags: [[blue]] - Liberal visions were necessary to sustain empire in the sense that they offered fundamental justifications. But they were always likely to be reduced to painful hypocrisy by the real practices of imperial power and by the resistance of those subjected to empire.54 In the 1850s the liberal vision of empire articulated in the 1830s had been swept away by the Indian mutiny. A full revolution of the cycle from liberalism to repression was avoided in India in 1917–22. But the oscillation between liberalism and reaction was now accelerating into a dizzying and unrelenting switchback that sapped the will of empire.55 ([Location 7662](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7662)) - Tags: [[blue]] - If the tensions between autonomy and coherence, racial hierarchy and liberalism, were ever more apparent, the British Empire nevertheless enjoyed a collective sense of triumph after 1918. The solidarity of the war was not forgotten. In 1919, in the wake of Amritsar, an ill-timed jihad by the Afghans across the North-Western frontier helped the British to restore their standing as the defenders of India with Sikhs and Hindus in the Northern provinces. Faced with a more significant foreign threat, the Commonwealth would surely rally together again. But given the stark financial and strategic realities of the 1920s, even this begged the question. World War I had certainly demonstrated the empire’s might. But it had also demonstrated that Britain’s far-flung empire was vulnerable to regional challenges by well-organized nation states. If the question was not merely one of maintaining British rule against popular resistance from within, but of securing the empire’s future as a global strategic unit, then even at the height of its power in November 1918 the idea of the empire standing alone was an illusion. In the absence of a truly powerful League of Nations, the empire’s viability depended on coming to terms with the potential challengers of the future – Japan and Germany, the United States and a consolidated Soviet regime. But would a privileged relationship with one of these powers imply a dangerous antagonism toward the others, and were any of them in fact interested in an alliance with the British Empire? ([Location 7698](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7698)) - Tags: [[blue]] - On 8 July, to the dismay of Whitehall, Washington abruptly issued invitations not just to Britain but to the entire Entente to attend a conference to consider disarmament and the future of the Pacific.6 The presumption of the Americans in inviting Britain on the same terms as Italy and France caused consternation in London.7 Lloyd George and Churchill thought that Britain should refuse to attend. But given the empire’s strategic dilemma, its profound interest in cooperation with Washington, the fact that Congress was about to debate the crucial question of inter-Allied debts, and that it was those same senators who were also demanding an end to the naval arms race, London really had no option. ([Location 7746](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7746)) - Tags: [[blue]] - unlike Wilson who had made himself the aggressive spokesman of American naval power, the Harding administration had summoned the powers to Washington to discuss limitations on naval power. In the era before the bomber and the intercontinental ballistic missile, it was the battleship that was widely considered the great strategic weapon of modern war. With the German menace lifted from the Atlantic, naval disarmament would be coupled with an agreement on security in the Pacific, which in turn would be underpinned by an agreement between the United States, Britain and Japan to neutralize China, the decisive zone of pre-war imperialist competition. ([Location 7762](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7762)) - Tags: [[blue]] - Hughes achieved total surprise. The opening session, gushed one journalist, ‘which was expected to consist only of formal addresses’, was driven by a ‘dynamic intensity such as had never been previously experienced at an international diplomatic gathering’. The contrast with Wilson’s airy generalities was exhilarating.9 ‘The unprecedented clarity, definiteness and comprehensiveness of the concrete plan for naval disarmament . . . marked a new chapter in diplomatic history . . .’ ([Location 7780](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7780)) - Tags: [[blue]] - this image of harmony was marred by the European question. The Pacific arbitration agreement was signed by a fourth power, France, which found itself in a far less satisfactory strategic position than the three main parties. From the French point of view it seemed, not without reason, that following the failure to create a stable North Atlantic system at Versailles, the British Empire was using the Washington Conference to escape its commitment to France in favour of sharing global hegemony with the United States. Wilson had withdrawn the security guarantee promised at Versailles. With the question of security on the Rhine and reparations unresolved, was France now to be expected to match the naval pact by accepting comprehensive restrictions on land armaments? The French were not assuaged by the American view that they should be satisfied with a third-tier navy, because that was all they would be able to afford for the foreseeable future.17 It was Washington, after all, that was demanding a first claim against France’s financial reserves. ([Location 7829](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7829)) - Tags: [[blue]] - despite the failure to deliver a truly comprehensive disarmament deal, there was no doubting the significance of the Washington Conference. America had resumed a role of leadership in global affairs. Japan’s political class had responded constructively to the American line. Britain had accepted a profound realignment of its strategic position. Balfour described it as an event unparalleled in world history. This was no exaggeration. Never before had an empire of Britain’s stature so explicitly and consciously conceded superiority in such a crucial dimension of global power. It deserves to stand as an early twentieth-century precursor to Mikhail Gorbachev’s retreat from the escalation of the Cold War in the 1980s. ([Location 7846](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7846)) - Tags: [[blue]] - The Washington Conference was both a dramatic demonstration of the global power hierarchy and a deliberate decision to deflate the currency of military power. The aim was to clear the way for economic forces to take the lead in reconstruction. ([Location 7962](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7962)) - Tags: [[blue]] - This failure of the promise of revolution is an essential element in the story of post-war stabilization, and it is significant not only in a negative sense. Out of that failure 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. ([Location 7974](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=7974)) - Tags: [[blue]] - There were those, Winston Churchill most prominent amongst them, who wanted to go further than this, to roll back the Bolshevik revolution itself. And by the spring of 1919, even though London and Paris had decided against full-scale intervention, the White forces of General Alexander Kolchak in Siberia and Anton Denikin in southern Russia had received enough materiel to pose a major threat to the survival of the Bolshevik regime. ([Location 8012](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8012)) - Tags: [[blue]] - The vision of revolution had gone through four phases since November 1918. As the war ended, Lenin had been on the defensive anxiously looking for ways to continue the balancing of Brest-Litovsk. In the spring of 1919 that had given way to the prospect of revolutions exploding like wildfires across Eurasia. When that was disappointed, the Comintern in 1920 took upon itself the task of orchestrating a global revolutionary campaign. Finally, after the renewed defeat of revolutionary hopes in Germany and Italy in 1921, Moscow came to see itself as pursuing a strategy of revolutionary defence. Rather than socialism being the animating force of a global uprising, or the strategic centre of a global campaign, it became the ideology of one state amongst others in a heterogeneous world system.35 ([Location 8178](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8178)) - Tags: [[blue]] - On politics there could be no compromise. But on economic policy Lenin was willing to be flexible. The strategy of forced contributions had led to a disaster. Inflation was rampant. In the factories there was a veritable epidemic of absenteeism. 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. ([Location 8266](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8266)) - Tags: [[blue]] - In return for aid and at least tacit recognition, the Soviet state must recognize its basic international obligations.2 Above all it must come to terms over the billions of dollars owing to France and Britain on which it had defaulted at the time of Brest-Litovsk. A quarter of total French foreign investment was at stake. More than $4 billion was owed to upward of 1.6 million investors, many of them private stakeholders in Russian industry and railways. Britain’s somewhat smaller share totalled $3.5 billion, which were overwhelmingly claims on the Russian government.3 In October 1921 an international conference convened in Brussels to discuss a comprehensive Western response to the Soviet famine. With British leadership, the conference adopted a resolution under which aid to the Soviet Union was made conditional on acknowledgement of outstanding debts and the creation of ‘conditions’ within the Soviet territory that would allow trade to revive. International credit, the Brussels Conference insisted, ‘must rest on confidence’.4 ([Location 8295](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8295)) - Tags: [[blue]] - On 18 August 1921, only two days after Lloyd George had issued his appeal for a common front, the Soviets accepted Hoover’s offer of aid.7 For the next 12 months, 10 million Russians were fed by America. ([Location 8315](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8315)) - Tags: [[blue]] - Lloyd George was moved to an even grander design. If the sticking point between Britain and France was the insecurity of France’s allies in the East and the problem with Germany was reparations, Lloyd George proposed a scheme to stabilize and restore the economies of eastern Europe, including Russia. The insistent and claustrophobic French demand for a comprehensive bilateral security guarantee would be opened into a pacification of the entire continent.18 In a single grand diplomatic bargain the Soviets would be persuaded to accept the conditions for economic assistance worked out at Brussels. On that basis, hundreds of millions of pounds would flood into the ruined Soviet Union, simultaneously bringing Russia back within the capitalist fold and funding a revival in German exports. Germany would earn the hard currency it needed to reliably service reparations, which in turn would restore France’s credit in America. A regular payment by Germany to France of £50 million ($200–250 million) from the Russia trade should enable Paris to raise a loan of £700–800 million (c. $3.5 billion), which would go a long way toward resolving France’s financial difficulties.19 The unproductive struggle between Germany and France would be transformed into an expansive engine of continental economic growth. In a characteristic blend of opportunism and progressive ambition, Lloyd George also calculated that a diplomatic triumph would allow him to call a snap election, win a handsome victory for his wing of the Liberal Party, and escape the dependence on the Conservatives that had constrained him since the Khaki election. With Europe at peace, Lloyd George would outflank the rising Labour Party and re-establish himself as the master of the progressive centre ground. ([Location 8372](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8372)) - Tags: [[blue]] - With the British Empire holding the ring, the European economy would be restored, the spectre of Communism lifted, the conflict between Germany and France assuaged, and the political balance shifted back toward the centre-left. Lloyd George’s breadth of strategic vision is all the more startling when we place it in its global context. His European initiative coincided over the winter of 1921–2 with the global naval agreement at the Washington Conference and the simultaneous resolution of multiple crises within the empire. As Lloyd George well understood, taming Gandhi, containing the Irish, and neutralizing Egyptian nationalism would remain tactical and short-lived successes if the wider strategic challenges of the Atlantic, Pacific and Eurasia were not addressed. What he was attempting was nothing less than a global fix for the post-war crisis of liberalism. One might, however, also turn this point on its head. The scope of Lloyd George’s design indicates the dizzying scale that any truly comprehensive re-establishment of a liberal order would in practice have required. Nothing like this had ever been attempted. Given Britain’s limited resources, the task was daunting. ([Location 8386](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8386)) - Tags: [[blue]] - Moscow’s fundamental objective was to forestall Lloyd George’s fantasy of a British-French-German consortium to hegemonize Russia. They found a partner in the Germans, whose confidence in Lloyd George’s grand bargain had been profoundly shaken by the reparations crisis of March and who were themselves haunted by the fear that the real purpose of the conference was not to broker a general peace, but to rebuild the encircling anti-German alliance. This idea had been nourished by conservative elements in the German Foreign Office who favoured a Russo-German agreement.39 At Genoa these fears were heightened by alarming reports that France and Britain might help Russia to repay the Tsarist debts by backing Moscow’s reparations claims against Germany. When news reached Rathenau of exclusive conversations between the Russians and the Western Powers, this was enough to panic the German delegation. At all costs they must forestall a new anti-German coalition. ([Location 8491](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8491)) - Tags: [[blue]] - By 6.30 that evening, having signed the so-called Rapallo Treaty, the German and Soviet delegations had derailed the entire conference. Lloyd George’s bold initiative, rather than producing a Europe-wide security order, had opened the door to a treaty of mutual recognition and cooperation between the two pariahs, Germany and the Soviet Union. As Lloyd George himself acknowledged, ‘With an aggregate population of over two hundred millions the combination of Germany’s technical skill with Russia’s resources in raw materials and man-power’ posed a ‘terrible danger to [the] peace of Europe’. ([Location 8501](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8501)) - Tags: [[blue]] - Though the Washington Conference was regarded as a qualified success and Genoa was viewed as an unmitigated disaster, what both grand designs had in common was their tendency to underestimate the forces committed to disrupting the post-war status quo. London, Paris and Washington imagined that the nationalist urge could be tamed by financial hegemony. Consortia were constructed to oversee and supervise the finances and transport infrastructure of China and Russia.43 Great business opportunities no doubt beckoned. But without state guarantees of the old kind, secured by spheres of interest and promises of extra-territoriality, it turned out that private bankers were reluctant to extend substantial loans. ([Location 8509](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8509)) - Tags: [[blue]] - loudly applauded by Ataturk in Turkey.46 Of course, Germany’s financial situation was grave, but to associate itself with the Soviet Union, Republican China or the insurgent Turks in the league of pariahs, was a self-indulgent nationalist fantasy. Versailles was built on the assumption of German sovereignty. In August 1921 Washington had formally ended the state of war by concluding a separate and extremely favourable peace with the Weimar Republic. Britain clearly wished for the reintegration of Germany into both the international economic and political system. France’s anxiety could easily have been exploited to Germany’s advantage. All Lloyd George needed was Germany’s continued commitment to the Versailles process. The side deal at Rapallo delivered the opposite. If it harkened back to the Realpolitik of the Bismarck era, this was Realpolitik without the substance. If Rapallo was something else, not a carefully calculated power play, but a rallying cry, a gesture of national resistance, it begged the question. How far were the Germans willing to go?47 ([Location 8524](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8524)) - Tags: [[blue]] - The reply from the Dominions was, if anything, even more crushing. South Africa failed to respond to London. As far as Canada was concerned, the Washington Conference had taken care of the fundamental strategic concerns of the empire. Australia was furious that London called on it for help only in the midst of a crisis and expressed no enthusiasm for a re-enactment of Gallipoli.51 The disintegration of Lloyd George’s grand strategy left Britain isolated not just in Europe but within its own empire. ([Location 8555](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8555)) - Tags: [[blue]] - In January 1923 the new Tory government abandoned the search for a comprehensive financial settlement. Leaving reparations to the French, London negotiated a bilateral settlement of its war debts with Washington. Britain would repay $4.6 billion to the US over a 62-year period at an average yearly interest of 3.3 per cent.57 The annual payment of over $160 million was more than it had cost to service the entire British national debt before the war. It was equivalent to the national education budget, or two-thirds of the cost of the navy, enough over 62 years to rehouse the entire city slum population of the UK.58 Prime Minister Andrew Bonar Law, who had lost two sons in the war, was so incensed at these terms that he withdrew from the cabinet discussion and threatened to resign. ([Location 8588](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8588)) - Tags: [[blue]] - On 29 December, following what he would later claim was ‘the voice of God’, Secretary of State Hughes addressed the meeting of the American Historical Association at New Haven, Connecticut.8 He offered the most that Washington dared. There would be no renewed political or financial engagement by America with its wartime associates. But America would send commissioners to attend a European meeting of financial experts to determine Germany’s capacity to pay.9 This was no longer enough for the French. By the end of November, Poincaré’s cabinet had resolved that on the occasion of the next German default the French Army would enforce the Treaty of Versailles. ([Location 8629](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8629)) - Tags: [[blue]] - The Germans responded with passive resistance. Miners refused to dig and the railways would not run. Of 170,000 Reichsbahn staff in the Ruhr, only 357 agreed to work for France. In retaliation, railway workers and public employees along with their families were summarily expelled from the zone of occupation, often with no more than a few hours’ notice – altogether 147,000 men, women and children.12 Four hundred railwaymen were sentenced to lengthy prison sentences for acts of sabotage. Eight died in scuffles with the occupying forces. To deter attacks, handpicked German hostages were assigned to every train carrying coal to France.13 In total, at least 120 Germans lost their lives. ([Location 8652](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8652)) - Tags: [[blue]] - Meanwhile, Britain had withdrawn from a position at the very centre of European affairs to a position of deliberate abstention. To the new, all-Tory government it seemed that the greater the distance they kept from their turbulent neighbours on the continent the better. In June 1923 Parliament was persuaded to vote additional funds to more than double the establishment of the newly formed Royal Air Force, the principal mission of which was to deter a French attack on Britain. ([Location 8688](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8688)) - Tags: [[blue]] - Unlike the Ruhr crisis, which was a matter pertaining directly to the Versailles Treaty, the violence in the Ionian Islands was precisely the kind of incident that the League of Nations was designed to de-escalate. Corfu was viewed as a test by all sides. Mussolini did not hide his scorn for a ‘League which placed Haiti and Ireland on equality with great powers, which showed impotence in questions of Greco-Turkish conflict, Ruhr or Saar, and reserved its activities for encouraging socialist attacks on Fascisti Italy’. ([Location 8704](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8704)) - Tags: [[blue]] - Stresemann’s accession to power in 1923 was the defining moment in his remarkable trajectory from wartime imperialist ideologue to the architect of a new German foreign policy. The key to Stresemann’s understanding of the world was his belief in the central role of American economic power.25 During the war this had led him to demand that Germany must create for itself an American-sized greater economic sphere in central Europe. In defeat, like his Japanese counterparts, Stresemann came around to the view that America’s rise to power was initiating an entirely new era in which Germany’s only realistic policy was to accommodate itself to American hegemony and to seek a place for itself as a valued market and investment vehicle for American capital. ([Location 8720](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8720)) - Tags: [[blue]] - The French had won. As Poincaré had promised, the Ruhr occupation had paid dividends. The costs of the operation up to the end of September had come to 700 million francs, against revenues from the Ruhr of 1 billion francs.27 But France had done far more than vindicate its military power and gain economic advantage. The entire structure of the post-war order was in play. On the French side the possibilities that had been shut down by Clemenceau at Versailles were reopened. Perhaps, after all, France did not have to accept the sovereignty of an integral German nation.28 Having shrunk from the task in 1919, in early October 1923 France was presented with a second chance to construct a radically new map of Europe, a second Westphalian peace, which would return to 1648 in founding European security on the disintegration of Germany. ([Location 8737](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8737)) - Tags: [[blue]] - Despite his personal sympathy for the agenda of the nationalist right, Stresemann was convinced that no authoritarian government could possibly broker the international settlement on which Germany’s future depended. By fomenting internal disorder, the conspirators placed in jeopardy the value he held most deeply, the integrity of the Reich itself. ([Location 8778](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8778)) - Tags: [[blue]] - Over the next 15 months of incarceration Hitler was to arrive at the conclusion that was also dawning on the Comintern in Moscow: a violent seizure of power was out of the question in modern Germany. If he was to destroy ‘the system’, Hitler would have to do so from within. ([Location 8791](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8791)) - Tags: [[blue]] - Stinnes was now convinced that the entire post-war order was the result of an Anglo-American diktat and threatened that when ‘international capitalism attempted to suck Germany out . . . the youth of Germany would take up arms’. ([Location 8814](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8814)) - Tags: [[blue]] - The plan that came to bear Dawes’s name was worked out in the early months of 1924. It was based on the idea that since Germany had evaporated away its internal debt, if it imposed taxes equal to those of its neighbours then it should be able to generate a cash surplus with which to finance its reparations obligations.49 The fact that for every debtor relieved by the German inflation there was also an offsetting financial loss was not part of the calculation. Nor did the obvious damage that German productive capacity had suffered during the Ruhr occupation and the hyperinflation enter into the narrowly financial discussions. The Dawes Plan did, however, recognize what was a key problem, the destabilizing effect on the currency markets of exchanging huge quantities of Reichsmarks for dollars. In future, a resident reparations agent would see to it that Berlin’s transfers did not unduly destabilize the markets. Funds that could not be safely exchanged would be held on account in Germany, in the name of the creditors. The Dawes committees were not authorized to modify the final reparations total set by the London ultimatum in May 1921. But they did specify a new payments schedule, which by stretching the payments until the 1980s considerably lightened the burden on Germany. After weeks of haggling, Young managed to persuade the French to accept an annuity rising to 2.5 billion Reichsmarks after a grace period of five years. ([Location 8853](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8853)) - Tags: [[blue]] - In August 1924 with anxiety again mounting about the franc, Paris appealed to J. P. Morgan to renew the $100 million loan granted in March. Morgan’s made clear that it was willing to do so, but only if France pursued a determined fiscal consolidation combined with a ‘peaceful foreign policy’. Again the bankers got their way. Under an American-brokered compromise, France agreed to withdraw from the Ruhr within a year. ([Location 8958](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=8958)) - Tags: [[blue]] - But if Morgan’s were bewildered by the role they had been forced to play, this speaks to the eerie quality of the reconfiguration of international politics in 1924. The Labour government that hosted the final negotiations in London was the first socialist government elected to preside over the most important capitalist centre of the old world, supposedly committed by its party manifesto of 1919 to a radical platform of nationalization and social transformation. And yet in the name of ‘peace’ and ‘prosperity’ it was working hand in glove with an avowedly conservative administration in Washington and the Bank of England to satisfy the demands of American investors, in the process imposing a damaging financial settlement on a radical reforming government in France, to the benefit of a German Republic, which was at the time ruled by a coalition dominated by the once notorious annexationist, but now reformed Gustav Stresemann. ‘Depoliticization’ is a euphemistic way of describing this tableau of mutual evisceration.75 Certainly, it had been no plan of Wilson’s New Freedom to raise Morgan’s to such heights. In fact, even Morgan’s did not want to own the terms of the Dawes settlement. Whereas Wilson had invoked public opinion as the final authority, this was now represented by the ‘investing’ public, for whom the bankers, as financial advisors, were merely the spokesmen. But if a collective humbling of the European political class had been what lay behind Wilson’s call for a ‘peace without victory’ eight years earlier, one can’t help thinking that the Dawes Plan and the London Conference of 1924 must have had him chuckling in his freshly dug grave. It was a peace. There were certainly no European victors. ([Location 9003](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9003)) - Tags: [[blue]] - But if there was one common denominator in all these frustrations it was the overshadowing of the European power states – a model originating in seventeenth-century Europe and imported to Asia by Japan – by the challenges of a new era and the rise in the form of the United States of a different focus of economic, political and military authority. As a memo compiled by the British Foreign Office put it in November 1928: ‘Great Britain is faced in the United States of America with a phenomenon for which there is no parallel in our modern history – a state twenty-five times as large, five times as wealthy, three times as populous, twice as ambitious, almost invulnerable, and at least our equal in prosperity, vital energy, technical equipment, and industrial science. This state has risen to its present state of development at a time when Great Britain is still staggering from the effects of the superhuman effort made during the war, is loaded with a great burden of debt, and is crippled by the evil of unemployment.’ However frustrating it might be to search for cooperation with the United States, the conclusion could not be avoided: ‘in almost every field, the advantages to be derived from mutual co-operation are greater for us than for them’.4 If this was true for Britain and its empire, it was all the more so for all the other, once great powers. The question it posed for all of them was the same. If confrontation was not an option, what would be the terms of ‘mutual cooperation’ under this new dispensation? ([Location 9048](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9048)) - Tags: [[blue]] - As Stresemann remarked in an unbuttoned moment in 1925: ‘One must simply have enough debts; one must have so many debts that, if the debtor collapses, the creditor sees his own existence jeopardized.’8 ([Location 9075](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9075)) - Tags: [[blue]] - The Washington treaties in 1921 had halted the arms race in capital ships. In 1924 the Dawes Plan, whilst setting the stage for the economic restoration of the post-war system, defanged the Versailles Treaty. In effect, it precluded any further use of the French Army to ensure compliance. But this begged the question. Who or what would provide for the security of Europe? ([Location 9169](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9169)) - Tags: [[blue]] - The only solution agreeable to Hughes was for Washington to be given a veto over the implementation of any League sanctions. But as Chamberlain pointed out, that would be to place Washington on a par with the collective authority of the League and would thus confer on the United States the status of a ‘super-State . . . a court of appeal from all proceedings of the League’. When Britain’s ambassador in America, Sir Esme Howard, replied that ‘we all have to face facts sometime’, Chamberlain shot back that ‘there is a difference between recognition of a fact and public proclamation of its consequences’.27 ([Location 9183](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9183)) - Tags: [[blue]] - on 20 March 1925, London announced that it was taking up a proposal made by Germany for a Rhineland security pact. This would guarantee the western borders of Europe and normalize relations with Germany by bringing it into the League. It would also have the effect of ensuring that Germany remained firmly bound to the ‘system of the West’.30 The terrifying Rapallo scenario of a Russo-German alliance would be banished. ([Location 9196](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9196)) - Tags: [[blue]] - On the afternoon of 27 August 1928, with Kellogg himself in attendance, 15 powers gathered in Paris to endorse a treaty that required its signatories to ‘condemn recourse to war for the solution of international controversies, and renounce it as an instrument of national policy in their relations with one another’. It was the first time since 1870 that a German Foreign Minister had been officially received at the Quai d’Orsay.33 The Germans had hoped to include the Soviets in the signing ceremony, but that was too much for Washington. Nevertheless the Soviet Union became the first to ratify what became known as the Kellogg-Briand Pact.34 In the course of 1928, no fewer than 33 powers signed on. By 1939, its signatories had reached 60 in number. It was the crowning glory of the new ideology of peace that dominated the late 1920s, a vision of the ‘world existing in peace’ as ‘normal and normative’, a world in which war was redefined as nothing less than a criminal ‘aberration’.35 Easily ridiculed, overwhelmed during the following generation by terrifying violence, the Kellogg-Briand Pact was not without historical vindication. In 1945, when the Allies were formulating the indictment of the Nazi leadership before the International Military Tribunal at Nuremberg, the main charge against the defendants was neither the familiar canon of war crimes codified in the nineteenth century, nor the relatively novel concept of crimes against humanity, let alone genocide, which as yet barely featured in the minds of international lawyers. The central point of the indictment drawn up by the American prosecutors was Nazi Germany’s violation of Kellogg-Briand, its crimes against peace. ([Location 9210](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9210)) - Tags: [[blue]] - Britain too was torn between conflicting impulses. There was intense frustration in Baldwin’s Conservative government over continuing American challenges to the legality of naval blockade. The UK Treasury fumed over every instalment of the war debts. By 1928 there were the rumblings of a strategic realignment. Perhaps London’s gamble on a strategic relationship with America had been a mistake. Perhaps Britain would do better to rally the empire as a counterweight to the United States. Or perhaps Britain ought to join France in pushing for a consolidated European bloc, including Germany and the Benelux countries. But London hesitated. Any move away from Washington was fraught with risks. If Britain were to pit the empire against the United States, the likely result would be the defection of Canada, which as part of the new and fuller conception of Dominion status had been granted permission to open its own embassy in Washington. If, on the other hand, Britain chose to pursue the European option, this would give enormous leverage to Germany. As the Foreign Office recognized, the United States was ‘a phenomenon for which there is no parallel’ in Britain’s ‘modern history’. The advantages to Britain of cooperating with the US were vast, whereas confrontation was unthinkable.38 Like the French, the British government resolved not to back away, but instead to attempt to consolidate the transatlantic relationship.39 ([Location 9241](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9241)) - Tags: [[blue]] - The Great Depression was the event that would shatter this surprisingly resilient system of international order. But this disintegrative effect was not immediately obvious. The initial impact of the downturn, like that of the recession of 1920–21, was not to blow the world apart but to tighten the constraints of the existing order. Indeed, it was a sign of how far the new norms had become entrenched that in 1929, unlike in 1920, deflation was pursued in every major country of the world. ([Location 9457](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9457)) - Tags: [[blue]] - The question that critics have asked ever since is why the world was so eager to commit to this collective austerity. If Keynesians and monetarist economists can agree on one thing, it is the disastrous consequences of this deflationary consensus. Were ignorant central bankers to blame, or an atavistic attachment to the memory of the gilded age?1 Or did the experience of inflation in the wake of World War I create an anti-inflationary bias even among the better-placed countries, the United States and France, which ought to have acted as counterweights to the downward pressure on Britain, Germany and Japan?2 More political interpretations suggest that deflation provided fiscal hawks with a welcome opportunity to roll back the concessions made to labour in the tumultuous aftermath of the war.3 What all these explanations underestimate is the wider political investment in the restored international order of the 1920s. This went beyond fear of inflation, or a conservative desire to cut welfare. The gold standard was tied to visions of international cooperation that went beyond technical discussions amongst central bankers. At the real pressure points in the international system the gold standard was ‘knave proof’ not just with regard to big-spending, inflation-minded socialists. The ‘golden fetters’ also constrained the militarists. Indeed, given Washington’s veto over any tougher collective security system, an embedded market-based liberalism was the only significant guard against the resurgence of imperialism. A cyclical recession, even one that brought mass unemployment and bankruptcy, was a small price to pay to uphold an international order that was the best hope of peace as well as economic progress. It was one of the tragic ironies of the Great Depression that constructive policies of international cooperation became so tightly entangled with economic policies of austerity. The perverse consequence was that advocates of ‘positive’ economic policy found themselves gravitating toward the insurgent nationalist camp. ([Location 9462](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9462)) - Tags: [[blue]] - As reparations were reduced, the claims on them by the United States loomed ever larger. In 1919 the ratio of reparations claims to war debts owed to the US had stood at a comfortable 3:1. The effect of America’s dogged debt diplomacy and Germany’s revisionism regarding the Versailles Treaty was to reduce that cushion. Britain and France increasingly functioned as conduits for a cycle of payments that ran from the United States to Germany and back again. After the Young Plan, France retained only 40 per cent of its reparations payments, Britain barely 22 per cent. The rest was passed on to the United States for war debts. As Trotsky put it in typically drastic terms: ‘From the financial shackles on Germany’s feet, there extend solid chains which encumber the hands of France, the feet of Italy and the neck of Britain. MacDonald, who nowadays fulfills the duties of keeper to the British lion, points with pride to this dog collar, calling it the best instrument of peace.’6 It was more than mere coincidence that the sum of $2 billion paid to the United States in war debts by 1931 was almost exactly the total of credits advanced to Germany from the US by the early 1920s.7 Funds were being recycled. But it was precisely that cycle that was put under immense strain by the Young Plan. The result of the Plan was to normalize Germany’s debts, but by the same taken to make the burden more transparent and to pin responsibility more directly on Berlin. ([Location 9490](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9490)) - Tags: [[blue]] - they had reason to fear that their security interests were being ignored. With a navy barely one-third the size of that of Britain or America, the French would be forced to choose between defending their Atlantic coastline and guarding the Mediterranean against Mussolini, who was openly scornful of the entire disarmament process. Not that France was asking to compete with Britain or the United States. On the contrary, its priority was to link disarmament to more specific security commitments than those offered by either the League of Nations or the Kellogg-Briand Pact. If London and Washington desired naval disarmament, France wanted what remained of the Royal Navy to be firmly committed to its defence. ([Location 9544](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9544)) - Tags: [[blue]] - But the face of the Labour government was set squarely against any cooperation with France, and it was this that let Germany off the hook. Despite the enthusiastic approval given to Briand’s proposal by 20 of its 26 recipients, including all the smaller countries of Europe except for Hungary and Ireland, both London and Berlin let the proposal drop. On 8 July 1930 Brüning’s cabinet concluded smugly that the most appropriate response to the historic French initiative should be to offer it a ‘first-class funeral’. ([Location 9588](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9588)) - Tags: [[blue]] - Under these circumstances it was not surprising that gold and foreign currency began to drain out of the German financial system. Since 1924 German policy had been waiting for this moment. Would the country be able to use its debtor relationship with America to unhinge its reparations obligations? There was no doubt that Wall Street was seriously exposed. All told, American investors had $2 billion tied up in Germany. Since January 1931 Stimson had been warning of the serious risk to America if there was a German collapse.29 But to imagine that the President was at the behest of the bankers was to repeat the mistake made by Berlin in their fateful U-boat decision of January 1917. Hoover was no friend of the Wall Street barons, and the voters of the Midwest were even less so. It was not until 19 June, with desperate telegrams arriving from London, that Hoover finally agreed to act. The next day he announced a plan to freeze all political debts, both reparations and inter-Allied war debts. Announced on a Saturday, on the following Monday 22 June the Berlin stock market was in a frenzy of bullish trading, only for the bubble to be abruptly pricked when France refused to fall into line. This French veto caused outrage in London and Washington, and the sounds of protest have echoed down to the present through historical writing. According to the most influential interpreter of the Great Depression, France’s unwillingness to cooperate with Hoover’s rescue effort in June 1931 revealed the true weakness of the interwar system. What was at fault ‘was not lack of US leadership. It was the failure of cooperation, specifically French unwillingness to go along.’ ([Location 9632](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9632)) - Tags: [[blue]] - Even as the economic crisis escalated in 1931, a handful of right-wing extremists were not yet capable of shaking loose the international system. Germany could be quarantined. It would take a further shock to the heart of the global financial system to open the door to disaster. As deflation ate its way across the world, precisely such a crisis was brewing. ([Location 9751](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9751)) - Tags: [[blue]] - When the cabinet failed to achieve complete unanimity, MacDonald resigned and formed a cross-party National Government, which, shorn of the dangerous socialists, announced large tax increases and spending cuts. It was not enough. On Friday 18 September, despite assistance both from the New York Federal Reserve and the Banque de France, London gave up the fight. The Bank of England was far from being in the position that had confronted Berlin over the summer. But it had no desire to end up there either. Even with the help of an emergency loan from New York and Paris, by midday on Monday 21 September the Bank of England would have been forced to contemplate truly drastic action. Instead, MacDonald agreed to make the humiliating admission that sterling was departing the gold standard. Unlike the Mukden incident, this was a truly global event, causing banks to fail in America and panic in Berlin. For a day, it displaced the Manchurian scandal from the headlines even in Tokyo. The gold standard was the frame of discipline and coordination that Washington and London had made into the anchor of post-war stabilization. As sterling plunged, Britain was followed by the empire and all of its smaller trading partners. The initial reaction to the suspension of the gold standard was one of shock. But, within a year as the pound stabilized at a new and far more competitive level, Britain’s National Government, still headed by MacDonald, would discover that for a country with some degree of international credibility, a free-floating exchange rate offered not disaster but the possibility of a creative reinvention of economic liberalism.38 With its banking system intact, low interest rates delivered an effective stimulus to the British recovery. When compared to either the US or continental Europe, the British experience of the 1930s was far from dismal. ([Location 9763](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9763)) - Tags: [[blue]] - On top of the wave of assassinations and the desperate aggression of the Kwantung army, it was this spectacular and sudden collapse of the framework of the international economy that undid the efforts by Japanese liberals to hold the line. As 1931 came to a close, in the Diet the Foreign Office official, Manchuria-hand and fascist sympathizer Matsuoka Yosuke demanded to know: ‘It is a good thing to talk about economic foreign policy but we must have more than a slogan. Where are the fruits? We must be shown the benefits of this approach.’40 If even the British Empire was turning inwards, Japan must take urgent steps to create its own trade bloc. ([Location 9785](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9785)) - Tags: [[blue]] - It was in Germany that the situation now became truly unbearable. It could not devalue because it was pinned down by its huge burden of foreign debt denominated in dollars, the weight of which would increase if the value of the Reichsmark fell. Unlike the Bank of England, the Reichsbank had no reserves with which to ward off the speculative attacks that were bound to follow a departure from gold. Furthermore, Washington made clear that it preferred to see Germany hunker down behind the exchange controls and debt moratoria put in place over the summer. That way it could at least continue to service its debts to Wall Street. Meanwhile, the consequences for German trade of upholding its gold parity whilst Britain devalued were nothing short of catastrophic. Up to September 1931 Brüning’s cabinet could at least claim that its harsh deflationary policy had produced a gain in export competitiveness. Now, clinging to the wreckage of a disintegrating gold standard, Germany’s exports suffered one blow after another. By the end of 1931, as unemployment surged from 4 to 6 million and a wave of bankruptcies shook German industry, the deflation consensus splintered. If there was no international system left to which to conform, what was the rationale for another wave of government-decreed wage and price cuts? Across Germany, cliques of experts, business interests and politicians began to rally around the call for a concerted policy of national economic salvation. One wing of this debate congregated around the trade union movement, but another wing entertained increasingly prominent guests from the anti-Young Plan campaign and from Hitler’s National Socialist Party. In the summer of 1932 with a work-creation programme emblazoned on its banners, the Nazis swept to a dramatic election victory. Hitler’s party scored 37 per cent of the national vote, just short of the Socialist Party’s triumph in the National Assembly election of January 1919. The right wing was well short of a majority. The DNVP for its part was ailing. And in the second general election, in November 1932, the Nazi vote began to ebb. But it was this breakthrough over the desperate winter of 1931–2 that made Hitler into a candidate for the Chancellorship. When the effort to consolidate a conservative regime under Franz von Papen or a military directorate under General von Schleicher failed, in January 1933 it was Hitler who was next in line to head a nationalist coalition.42 ([Location 9805](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9805)) - Tags: [[blue]] - In early February 1933 as America awaited a new President, a menacing bank run started in Louisiana. By 3 March it had reached the heart of the world financial order in New York. In desperation, New York State appealed to Washington for federal action. But Hoover’s presidential powers expired that day and Franklin Roosevelt, his successor, refused to cooperate. Before daybreak on 4 March 1933, with no guidance from the national government, the Governor of New York took the decision to shut the centre of the global financial system. In the face of the worst global economic crisis in modern history the American state had absented itself. ([Location 9846](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9846)) - Tags: [[blue]] - The first priority of FDR’s new administration was to remedy that impression. Democracy must be seen to govern.46 The New Deal introduced a radically new conception of the role of the Federal government. After the revolution, and the Civil War of the 1860s, the United States was about to undergo its third moment of founding.47 Hoover himself had already taken dramatic steps to increase the scope of Federal government support for the economy with the creation of the Reconstruction Finance Corporation, which by the summer of 1932 had been authorized to borrow up to $3 billion. Further dramatic steps were to follow. But this turn to ‘constructive’ policy in the United States was, as elsewhere, associated with a throwing off of international obligations. It was not in the aftermath of World War I but in reaction to the disillusionment of the 1920s and the Great Depression that full-throated isolationism came truly to the fore in American politics.48 The nationalist turn of American policy in the first phase of FDR’s administration completed the process of disintegration set in motion by the shock delivered by Britain in 1931. ([Location 9851](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9851)) - Tags: [[blue]] - The business of the World Economic Conference was dominated by the question of whether America, France and Britain could come to an agreement on how to manage the violent fluctuations of the dollar and sterling against the franc, now the lead currency on gold. Throughout June the negotiators moved close to a stabilization agreement. But on 3 July Roosevelt issued his ‘bombshell telegram’, denouncing any effort to stabilize the American currency as irrelevant to the business of achieving recovery. The dollar would float to whatever level suited the US economy, regardless of its impact on the rest of the world. Berlin took the hint. In October, Hitler withdrew the German delegation from the League of Nations disarmament talks and announced a near total default on all its outstanding international obligations. ([Location 9877](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9877)) - Tags: [[blue]] - Too often and too easily we write ‘interwar history’ as though there was a seamless continuity between the phase on which we have concentrated here, 1916–1931, and what came after in the 1930s. There were continuities of course. But the most important is that of a dialectical reaction and supersession. Not only Stalin, but the Japanese, German and Italian insurgents of the 1930s were impelled in their radical energy by a sense that at their first attempt they had failed. The Western Powers might squabble and prevaricate. Knowing the costs of full-scale war, both political and economic, they shrank from it. But they did not shrink from fear of failure. In a direct confrontation Britain, France and the United States were to be feared. In 1930 at the London Naval Conference, as they traded battleships, cruisers, destroyers and submarines, neither the Russians nor the Germans had a navy to barter with. The positions of Japan and Italy were second and third tier. As Stalin reiterated to factory managers in February 1931, at the height of the first, agonizing Five Year Plan: ‘To slacken the pace would mean to lag behind, and those who lag behind are beaten. We do not want to be beaten . . . We have lagged behind the advanced countries by fifty to a hundred years. We must cover that distance in ten years. Either we’ll do it or we will go under.’2 What Stalin articulated was not merely the common sense of an age of global competition. After World War I his was the characteristic perspective of those who had been made to feel what backwardness meant in the global power game, who had lived through the disappointment of the revolutionary elan, and witnessed the overwhelming force of Western capitalism mobilized against Imperial Germany, the main challenger of the nineteenth century. The men whom Lenin had hailed as the champions of organized modernity, Rathenau, Ludendorff and company, had put up a brave fight, but they had gone down to defeat. What was needed was something even more radical. Over the next generation Stalin’s refrain was to be reiterated by planners and politicians in Japan, Italy and Germany and – as decolonization began – in India, China, and dozens of other post-colonial states. ([Location 9919](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9919)) - Tags: [[blue]] - Once again we are, in some ways, too familiar with the story of the 1930s to appreciate the drama of what was occurring. We speak of an armaments race, as though what Japan, Germany and the Soviet Union were engaged in was akin to the dreadnought naval arms race of an earlier era. In fact, the rearmament drives of 1930s Japan and Nazi Germany were, like the efforts of Stalin’s Soviet Union, comparable to nothing ever seen in the three-hundred-year history of modern militarism. 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. In constant prices the resources lavished on the Wehrmacht in the late 1930s were at least seven times greater than those received by Germany’s military in 1913. This was the compliment collectively paid by all of the insurgents of the 1930s to the force of the status quo. They knew the power arrayed against them. They knew that during the era of World War I the more conventionally minded efforts of Japan and Germany to escape the limits of their national power had run aground (Table 15). It would take something unprecedented. ([Location 9936](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9936)) - Tags: [[blue]] - The lesson of the first decades of the twentieth century was not simply, as is so often asserted, that democracies were weak. Though they no doubt had their weaknesses, they were vastly more resilient than the monarchies or aristocratic regimes that they replaced. The more strategic point was that the advent of mass democracy appeared to make certain kinds of power politics increasingly problematic. The comfortable half-way and quarter-way houses of the late nineteenth century, the Bismarckian constitutions, the limited franchises of Britain, Italy and Japan, had all collapsed in on themselves in the course of World War I. Before they did so, the Reichstag and the Japanese Diet had acted as real checks on the ambitions of German and Japanese imperialists. The default that emerged everywhere as the norm, from Japan to the United States, was a comprehensive or near-comprehensive manhood suffrage and, in the case of new states, national republicanism. These constitutions were often still thin and weakly established. But the popular demands that they reflected were real and made it hard to sustain truly large-scale imperial expansion under anything approximating to liberal conditions. The choice as it increasingly appeared to nationalist insurgents was between supine, democratic conformism and national self-assertion driven by a new form of domestic authoritarianism. There could be, it seemed, no compromise. This was in no way a traditional formula. Insofar as the insurgents themselves had a historical model, it was Bonaparte and he was hardly a traditionalist. The authoritarian movements of the interwar period and the regimes they spawned were a novel answer produced in response to the dramatic changes in international and domestic politics. But this challenge developed gradually. Throughout the 1920s dictatorships like that of Mussolini were still very much the exception and confined to the periphery. Neither the Polish nor the Spanish dictatorship of the 1920s was conceived of as permanent. It was only in the 1930s, in their all-out drives to challenge the status quo, that Stalinism, Nazism and Japanese imperialism would shed any inhibition. The new imperialism was unprecedented and uninhibited in its aggression both toward the domestic population and that of other countries. Hypocrisy was one crime that Nazism would not be accused of. ([Location 9954](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9954)) - Tags: [[blue]] - The entire story told in this book – from ‘peace without victory’ down to the Hoover moratorium of 1931 – is inflected by this basic impulse on behalf of successive United States administrations: to use America’s position of privileged detachment, and the dependence on it of the other major world powers, to frame a transformation in world affairs. The ‘revolution’ in Europe and Asia that was as yet far from complete must be allowed to run its full course. This was in many respects a liberal and progressive project according to the terms defined by the US. Peace between the great powers, disarmament, commerce, progress, technology, communication were its watchwords. But fundamentally, in its view of America itself, in its conception of what might be asked of America, the project was profoundly conservative. ([Location 9986](https://readwise.io/to_kindle?action=open&asin=B00INIXN6Y&location=9986)) - Tags: [[blue]]