The Deluge: The Great War and the Remaking of Global Order, 1916–1931, by Adam Tooze, Allen Lane, 672 pp, £30, ISBN: 978-1846140341
A terrible diptych looms over the twentieth century: World War One and, separated by a hinge of a mere two decades, World War Two. The 1914-1918 conflict undermined the European Weltanschauung that had evolved in the wake of the Second Industrial Revolution: the interlocking tenets of globalisation, imperialism, and rentier capitalism were shaken to the core. But such upheavals seem mild compared to the barbarity unleashed just over twenty years later. With the distinction between civilians and combatants erased, the very concept of European civilisation seemed in doubt as total war became the cloak for genocide. If an artist with the talent of Otto Dix was required to depict the horrors of the first conflict, the only one appropriate to paint the second panel is Hieronymus Bosch.
Europe at the end of World War One was in a fragile condition, but it was in a considerably better state than it would be in 1945. The populations of Berlin and Vienna went hungry in 1918 but at least the fabric of their cities was intact. The Western Front had snaked from the English Channel to the Swiss border but with the exception of parts of Belgium and Northern France, Europe’s infrastructure was largely undamaged. Indeed, massive wartime investment and the induction of women into the workforce had the potential to boost long-term productivity. And even the defeated Central Powers maintained the vestiges of sovereignty.
Given that conditions were so much more propitious for recovery in 1918 than in 1945, why did Europe have to wait until that open-ended era some of us still think of as “postwar” to enjoy its golden age of mass affluence? What went wrong in the 1920s and 1930s? Why did we get Weimar and not Wirtschaftswunder? Mussolini rather than il miracolo economico?
The puzzling failure to achieve either stability or enduring prosperity is addressed by Adam Tooze’s new book. As the subtitle indicates, it is diligently international in scope but the cynosure of the study is the United States. In particular, Tooze is interested in the role America played or, more significantly, failed to play in shaping a new world forged by war. It was recognised even by contemporaries that the US decision to enter the war in 1917 marked the coming of age of a new sort of power. America’s status was of a different order from that enjoyed by the preponderant nation of the nineteenth century, the United Kingdom. Even at the height of its supremacy, Britain was only primus inter pares on the European stage. Tooze quotes a rather awed assessment of the emerging US superpower offered by an official of the British foreign office 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.
One wonders if the ‘at least our equal’ is an attempt to sugar the pill.
The public face of this new leviathan was the twenty-eighth president of the United States, Woodrow Wilson. A product of the Progressive movement that aimed to inject Protestant rectitude into the administration of the republic, Wilson brought the cadences of the Bible into the international realm. Nowhere was the evangelical streak more evident than in his remarkable “Peace without Victory” speech. Addressing the “Gentlemen of the Senate” on January 22nd, 1917, Wilson argued that the traditional way of settling terms belonged to a less enlightened age:
Victory would mean peace forced upon the loser, a victor’s terms imposed upon the vanquished. It would be accepted in humiliation, under duress, at an intolerable sacrifice, and would leave a sting, a resentment, a bitter memory upon which terms of peace would rest, not permanently, but only as upon quicksand. Only a peace between equals can last.
Given how the enemies of Weimar would harp on the terms of the “unjust” Versailles settlement, Wilson’s speech now reads as more prophetic than practicable. As he spoke, Germany was preparing to resume unrestricted submarine warfare in the Atlantic. That same month, in perhaps one the greatest ever acts of diplomatic bungling, the German state secretary for foreign affairs, Arthur Zimmermann, dispatched to the Mexican government a telegram that promised German assistance in Mexico’s reconquista of Texas and the US southwest if Mexico joined the Central Powers.
By April, the US was at war with the German Reich. The high-minded ideal of peace without victory would be severely tested if US doughboys were expected to die to secure that peace. But Wilson’s address had nevertheless sent out a signal to the Old World: it could not expect the US to be harnessed alongside Britain and France. America would dictate its own agenda.
But if military and diplomatic blunders by Germany had forced Wilson’s hand, there was a subtler but no less compelling factor dragging the US into the Entente’s corner ‑ money. In The Pity of War (1998), Niall Ferguson calculated with surprising exactitude that the Entente powers spent $36,485.48 to kill a serviceman fighting for the Central Powers. (With restricted access to financial markets, the Central Powers had to be more cost-efficient in their slaughter, spending a mere $11,344.77 to kill a serviceman fighting for the Entente.)
Even “the demiurge of the bourgeois cosmos”, as Marx had dubbed England, found itself put to the pin of its collar by this unprecedented expenditure. With purchases in the US running to $75 million per week by 1917, there was the very real prospect that the Bank of England would have to liquidate its remaining gold reserves to cover a scant few weeks of procurement. The scale of the Entente borrowing was such that Wilson had been concerned that Wall Street would drag the country into war to ensure its debtors were in a position to repay. Indeed, prior to April 1917 US authorities had demonstrated their disquiet when the Federal Reserve advised American investors not to increase their holdings of British and French securities.
The threat of a funding crunch was lifted with US entry into the war. Following their authorisation by Congress in 1917, “Liberty Loans” would by 1919 funnel $10 billion of loans to the Entente. Opening the spigots for their new allies did not however mean the Americans would wipe the slate clean with the armistice declaration. If the financial relationship between the US and Europe after World War Two can be symbolised by the Marshall Plan pumping billions of dollars across the Atlantic to a ruined Europe, the flow of cash in the decade after 1918 was far from being one-way. The web of debt repayments and war reparations would engender a volatile relationship between creditors, debtors, and defeated nations. France, the nation that had suffered the greatest physical and human toll among the victorious powers, continually pressed Germany to pay promised reparations. The money was needed not only to rebuild northern France but also to service the country’s enormous debts ‑ $3 billion to the US and $2 billion to Britain. The greatest interwar crisis prior to Munich, the French occupation of the Ruhr between 1923 and 1925, was sparked by the German decision to suspend payments to France. France made the occupation pay but at the price of helping to spark the hyperinflation that would fatally undermine the reputation of the Weimar Republic.
And the dwindling band in Britain who cling to the dream of the “special relationship” are likely to be unaware of the terms of the bilateral debt agreement concluded with the US in 1923. Tooze hammers home the weight of the burden: “Britain would repay $4.6 billion to the US over a 62-year period […] The annual payment of over $160 million was more than it has 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 […]”
America’s tough stance as a creditor can be partly understood if it is recognised that the US was itself not immune from the economic and social dislocations arising from the war. The expansion of credit and the demands made on manufacturing capacity had stoked severe inflation. By October 1919 the cost of living index had risen by 83.1 per cent since 1913. The erosion of workers’ purchasing power fuelled labour militancy, as seen in the rise of the radical trade union the International Workers of the World, nicknamed the “Wobblies”. Membership of the IWW reached its peak during these years.
Tooze argues that the little-known “Great Deflation”, which the Federal Reserve orchestrated in the early 1920s through a series of interest rate hikes, brought about a “world-wide Thermidor” that quelled the power of trade unions and obliged governments to embrace austerity. But if the global economy regained some degree of equilibrium as the 1920s progressed, signs of potential weakness were everywhere.
In the US, deflationary policies depressed agricultural commodity prices, pushing many farming communities into a Depression-style crisis a decade ahead of the rest of the country. In Britain, the blow to manufacturing suffered during the deflationary period arguably initiated the long decline of the north of England. In Germany, a brittle recovery was shored up by a policy that was both astute and reckless. Gustav Stresemann, the Weimar foreign minister for most of the 1920s, recognised that the size and reach of the US economy had ushered in a new era to which European nations would have to adapt if they were to survive. Stresemann sought to make a Germany the keystone of the emerging transatlantic bridge by attracting investment, loans, and trade from the US. But Germany’s rush to embrace American capital had the desperation of a floundering swimmer. As Stresemann once confessed: “One must simply have enough debts; one must have so many debts that, if the debtor collapses, the creditor sees his own existence jeopardized.”
The sputtering conveyor belt that distributed money through the global financial system finally broke down with President Franklin D Roosevelt’s decision to take the US dollar off the gold standard in 1933, sterling having left two years previously. The German government faced a dilemma: It could keep exports competitive by devaluing the Reichsmark, but that would significantly increase the burden of its dollar-denominated debts. If it kept the link to gold, its debt would shrink because of a falling dollar but the exports it needed to pay that debt would be uncompetitively priced. However, the abandonment of free-trade principles with the establishment of the sterling srea by the British empire and the introduction of the infamous Smoot-Hawley tariff in the US made the dash for exports a non-starter.
Pummelled by the triple whammy of a global depression, an overvalued currency and a decline in free-trade, the German economy went into free-fall. Stresemann had died in 1929 and the subsequent custodians of the Republic had lost even the detached loyalty of the Vernunftrepublikaner (“rational republican”) generation. Faced with six million unemployed and far-right paramilitaries clashing with Communist gangs in the major cities, the political kingmakers and barons of industry believed they could stage-manage a crackdown by installing a rabble-rousing Austrian corporal as chancellor.
Turning the US dollar into a fiat currency can be described a “non-hegemonic” act in that ameliorating conditions in the US was the overriding priority. The negative economic impact of a 44 per cent devaluation of the dollar on the United States’ nascent sphere of influence ‑ Western Europe, and Germany in particular ‑ was a consequence Washington could easily live with. And it is arguable that the action taken in the thirties defined the underlying reality that successive administrations would embrace when the chips were down. The dollar may have been the world’s reserve currency but decisions affecting its value would always be made for domestic reasons. As President Nixon’s treasury secretary, John Connally, candidly remarked to European finance ministers in the early 1970s: “It’s our currency, but it’s your problem.”
It is not just for monetary policy that the interwar period defined motifs that recur up to the present. A mini academic and journalistic industry has sprung up decrying the gridlock and decay of US institutions. (Francis Fukuyama, for example, recently wrote a lengthy lament in Foreign Affairs magazine with the mordant title “America in Decay. The Sources of Political Dysfunction”). But it is hard to think of an American president rendered as impotent by the legislative branch as Woodrow Wilson. The US failed to join the League of Nations ‑ the embodiment of the president’s vision of a comity of states ‑ because a handful of powerful senators were dubious about being beholden to international treaties. And the US Congress’s decision to veto the so-called “Hoover moratorium” ‑ President Hoover’s decision to give winded European economies breathing space by suspending debt repayments for a year ‑ prompted incredulous outrage in Europe. Tooze quotes the colourful reaction of the British ambassador to Washington’s decision: “[An] exhibition of irresponsibility, buffoonery, and ineptitude that could hardly be paralleled by the Haitian legislature.”
But to characterise the behaviour of the US towards its erstwhile allies as Gradgrindian debt collection is to betray a wilful naivety about international relations. The policy of self-interest may have lacked the “enlightened” adjective that characterised the post-1945 dispensation (although the Dawes and Young plans of the 1920s did involve generous loans and restructuring of German debts) but the conditions did not appear (at least not initially) to deserve more radical interventions. A “red scare” may have occurred in the 1920s but at that point the soldiers of the Red Army were fighting for their lives in the Soviet heartlands rather than washing their boots in the Elbe. Winning the hearts and minds of a febrile population was not the priority it would later become.
Moreover, despite the mauling they had suffered, all the major European powers in 1919 still saw themselves, with varying degrees of self-delusion, as independent players on the global stage, as likely to see the US as a rival as a benefactor. For example, Britain’s troubled interventions in the Middle East during the interwar period and beyond were largely motivated by desire to secure oil for the Royal Navy and so avoid dependence on Texan crude.
The situation was drastically different in 1945. Europe was so frightened by the trauma of 1939-45 that the continent largely abandoned politics as the pursuit of glory. Henceforth success would be measured by consumer goods purchased and GDP growth rather than anything as anachronistic as tanks produced or battleships launched. Left supine by war, Europe was by and large happy to take America’s money with the understanding that the tacit quid pro quo was not to become communist. The US giant was no less reluctant in 1941 than in 1917 to become enmeshed in Europe’s disorder but this time the collapse was on so much grander a scale that, as with a black hole, the gravitational forces were inescapable.
For reasons of space this review addresses only the portion of Tooze’s book that deals with the interaction of the US with Europe. It also reflects the author’s strengths in showing how economic realities influence and often determine the “superstructure” of high politics and inter-state relations. This skill was amply demonstrated in Tooze’s previous book, the outstanding Wages of Destruction, which demolished once and for all the myth of a hyper-efficient Third Reich. But the current volume also encompasses the turmoil that enveloped China, Japan, and the Russian Empire/Soviet Union. This scope is understandable when dealing with an era in which global diplomacy became a reality for the first time. (On a parochial level, it is also interesting to read about how the Irish grab for independence was well-timed, with the British Empire beset by a fiscal crunch and a wave of colonial flashpoints from the Middle East to India.)
Although the persevering reader is rewarded with a more sophisticated grasp of the forces at work during the period, some are likely to find the blizzard of names and events provided in sections such those covering the political factions in early twentieth-century Japan to be tough going. Overwhelmed by details, readers may occasionally hanker after something along the lines of Eric Hobsbawm’s The Age of Extremes or even Paul Kennedy’s The Rise and Fall of the Great Powers. Those works covered an even broader time span than Tooze’s but the sharpness of the prose and the judicious filtering of evidence made Hobsbawm’s and Kennedy’s theses easier to navigate.
On the issue of prose, one tic of Tooze’s will jar with anyone finicky about usage: the repeated use of the phrase “begging the question”. A random example taken from page 472: “But this begged the question: Who or what would provide for the security of Europe?” This “incorrect” usage is so widespread that to quibble is doubtlessly pedantic ‑ but why not forestall any carping by replacing “beg” with the perfectly adequate verb “raise”?
Shane Barry lives in Dublin and works as a technical writer for an international software company. He is a frequent contributor to several online publications and blogs.