The Empire Project: The Rise and Fall of the British World-System, 1830–1970 (55 page)

The logic of British policy was to limit the scale of their future commitments and place a swathe of French influence between the approaches to the Gulf and the rival they really feared – Russia. By the latter part of 1917, this grand scheme was in tatters. The Middle East war had gone disastrously wrong. The Dardanelles expedition to capture the Straits had been a humiliating failure: Turkey had not been knocked out. Turkish armies fought hard in Mesopotamia, surrounding and defeating the British Indian army at Kut in April 1916. It took another year before Baghdad was captured. The British army in Egypt struggled slowly into Palestine: but it took until December 1917 to capture Jerusalem. The Arab uprising promised by the Sherif of Mecca, with whom the British had made an alliance, proved of little military value. All this was bad enough: it did little for British prestige. The lack of progress on the Western Front made it much more serious. After January 1917, British leaders could not rule out the possibility of a peace on terms that left Germany unbeaten and poised to resume the struggle at a time of its choosing. That made it all the more important to secure the outer defences of Egypt (in Palestine) and Southern Mesopotamia. It was largely this thinking – ‘strategic Zionism’ – that converted the British War Cabinet to the Balfour Declaration in November 1917 promising a Jewish ‘national home’ in Palestine: a colony of Jewish settlers, fiercely anti-Turk in outlook, would help guard the approaches to Egypt.
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As Russia tottered towards collapse at the end of 1917, the urgency of safeguarding the Canal and the Gulf against a new Turko-German offensive seemed greater than ever. As the Russian armies fell back from the Caucasus, they opened the road to German and Turkish advance into Northern Persia and even Central Asia outflanking Britain's defence of the route to India.

Thus, even before the catastrophic events of March and April 1918 on the Western Front, the British had been forced to rethink their Middle East war aims in drastic fashion. They were desperate to block the route through the Caucasus along which German armies might march from the Ukraine. They wanted control of North Persia and a client government in Teheran. That meant advancing north from Baghdad towards Mosul and Kurdistan. With little prospect of defeating Germany and Austria-Hungary in Europe, it was all the more necessary to drive the Ottomans out of the Arab lands and hold them come what might in the West. Lloyd George and Milner had little faith in victory on the Western Front until American troops arrived en masse in 1919. At the beginning of February 1918, after a fierce argument with the other Entente leaders, they won agreement to their plan for a British offensive in Palestine, while standing their ground in Europe.
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In March, the ‘Eastern Committee’ of the War Cabinet was set up under Curzon's chairmanship to coordinate British policy between Greece and Afghanistan, to preside, in effect, over the forward movement in the Middle East. In the event, the hope of a swift offensive was aborted by the scale of the crisis in the West. Far from advancing deeper into Ottoman Syria, General Allenby was forced to repatriate British units in the Egyptian Expeditionary Force to meet Haig's desperate need for reinforcement, and wait instead for the arrival of more Indian troops, who were to make up nearly half his fighting strength.
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Not until September could the advance begin in earnest. When it did, the battle of Megiddo and the occupation of Damascus (1 October 1918) marked the virtual end of Ottoman resistance. On 2 October, the British and Indian army in Mesopotamia (which was two-thirds Indian) began its advance on Mosul. By 20 October, the Ottoman government had opened negotiations for an armistice, which was signed on the island of Mudros on 31 October.

As the scale of their victory began to unfold, the ministers of the Eastern Committee seized their chance to build a permanent barrier between their old European rivals and the approaches to what Milner's protégé, Leo Amery (a keen student of geopolitics), had called the ‘Southern British World’ in India, Africa and Oceania. The French were brutally told that their claims under the Sykes–Picot agreement were no longer valid. The ministers invoked instead the new ideals of self-determination, set out in Woodrow Wilson's Fourteen Points in January 1918, to propose a wide degree of self-government in the Arab provinces (with the significant exception of Palestine), on the understanding that Britain would enjoy a complete monopoly of external influence.
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‘We will have a Protectorate but not declare it’, remarked the Foreign Secretary, Arthur Balfour.
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Further east, they sanctioned Curzon's project of turning Persia – where ‘the British stake is a greater and not a less one in consequence of the war’ – into a virtual protectorate, with British command of the army, a financial adviser and a treaty.
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Only over Curzon's scheme for British occupation of the Caucasus and Trans-Caspia did his colleagues begin to cavil at the colossal scale of the commitments envisaged. But, by December 1918, a new British empire had been planned across much of the modern Middle East (the future of Armenia, the Straits and Constantinople was left undecided).

In the months that followed, this grandiose vision was gradually whittled down. The furious French refusal to give up their promised gains under Sykes–Picot forced a u-turn, and Syria, along with Lebanon, eventually became a League of Nations mandate under French trusteeship. The British foray into the Caucasus and Central Asia could not last. When demobilisation shrank the British army, the attempt to aid the successor states of the Tsarist empire against its Bolshevik successor was soon abandoned. Turkey revolted against the crushing terms of peace and the occupation of Asia Minor by the Greeks, willing allies in Britain's regional
imperium
. Even Persia resisted the quasi-protectorate that Curzon tried to force upon it in 1919. Across Egypt and the Arab lands in 1919–20, the British were caught up in a vast wave of political turbulence, much of it hostile to external control. Bitter arguments raged inside the British government over the cost of Iraq, the risks of confronting Turkey and the safety of the shoestring empire of ‘hot air, aeroplanes and Arabs’ (the characteristically acerbic phrase was Sir Henry Wilson's) that Churchill began to fashion in 1921. But, despite all this, the belief that defending the British world-system required a regional primacy across the whole Middle East, not fortified enclaves around the Gulf and the Canal, proved astonishingly durable. The strategic geography of imperial defence had been permanently recast. From now on until the end of empire, guarding this great salient in the middle of the world as the grand counterpoise to British weakness in Europe became the ultimate test of imperial power.

Of course, the imperial triumph in the Middle East was magnified by the victory over Germany and Austria-Hungary that had seemed so elusive for so long. As the Germans retreated, and then asked for an armistice, the British War Cabinet seized the chance to stop the war before the exhaustion of their manpower (and the shrinking size of their armies on the Western Front) began to tilt the balance of Allied power in favour of Wilson and Washington. They preferred the ambiguities of an armistice to the cost and delays that imposing unconditional surrender on Germany might entail. They hoped at the peace to limit the influence of American diplomacy and use it to restrain the demands of France. They had good reason to expect that, if the world had not been made safe for democracy, it had at least been made safe for the British Empire. The German navy – the great pre-war menace – was captured, and then scuttled by its own crews. The German colonies had been conquered. The Ottoman Empire had been demolished. The Russian empire had disintegrated in revolution. The peace conference would determine not the fact but the scale and permanence of British victory. The great unknown was American policy and the extent to which President Wilson would go to enforce the programme of the Fourteen Points.
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Would British sea-power regain the easy primacy it had lost after 1890? Or would American naval rivalry and bitter dislike of the British claim to control neutral shipping in time of war (Point Two of Wilson's Fourteen Points) trigger a new and unwinnable arms race – as Colonel House threatened Lloyd George in October 1918?
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Would the Americans insist upon the internationalising of wartime colonial conquests, and, if so, on what terms? Would the rise of Japanese power in East Asia, Chinese demands for an end to the unequal treaties, and the growing influence of the United States in the Western Pacific mean the attrition of British commercial and diplomatic influence in China? Above all, could victory on the Western Front be converted into a lasting reconstruction of the balance of power in Europe – and a guarantee that Britain would not again be faced with a continent united or dominated against her interests? On these, and on the economic aftermath of the war, the shape of the ‘new world’ would depend.

The price of victory

The war was bound to disrupt the global economy that had grown up after 1880 and depended upon the free movement of trade, capital and (with rather more restriction) people around the world. As the greatest beneficiary of this ‘globalisation’, Britain was bound to be affected, with uncertain consequences for the political and economic cohesion of the British world-system. But, at the outset of the war, once the turmoil of the financial markets had calmed down, it was widely assumed that the struggle would reveal Britain's latent strength as the pivot of the world economy. The British would use the huge credits built up over decades to draw in the produce needed from non-European countries. British industry would supply the weapons for the Entente's war effort. The Germans by contrast would find their foreign trade strangled by the British blockade, and the gross inflation set off by the expansion of paper money would undermine their will to fight.
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In a long war, the British were bound to win.

These were the views of John Maynard Keynes, the young Cambridge economist recruited to the British Treasury in August 1914. His technical knowledge and analytical brilliance quickly won him influence at the highest level. The essence of Keynes’ thinking was that Britain should fight the war in the same way as it had been fought against Napoleon, but with the added advantage conferred by huge claims on overseas production (by the capital and income from foreign investments) and Germany's dependence on foreign trade – the result of rapid industrialisation before 1914. After a year of war, it was clear that this optimistic calculation was badly flawed. The Germans had won a position from which they could only be driven by frontal assault. They controlled much of the coal, iron and steel production of the French and Belgian economies. The huge mobilisation of French and (later) Italian manpower drastically reduced their production of food. With the Dardanelles closed, Russian wheat could not reach the West, nor could Russia pay for the munitions she needed. As the war went on, Britain's allies needed more and more shipping, food and equipment and had less and less means to pay for them. To make matters worse, there was no question of keeping British manpower at home in factory and farm while the fighting was done by their continental allies. If Germany was to be driven out of France and Belgium, it would need a huge British army as well.

By August 1915, Keynes (who was now responsible for British purchases in the United States) was well aware of the dilemma. Britain could not raise Kitchener's armies, he argued, as well as supporting her allies economically.
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‘It is certain’, he wrote in September, ‘that the limitations of our resources are in sight.’
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The nub of the problem was foreign exchange. London had to find dollars to pay for the American goods the war effort demanded. In ordinary times, Britain earned dollars by exports, from foreign investment, and from exchanging goods with countries (like India) that had a surplus of dollars. But the war had disrupted international trade and payments. It sharply reduced Britain's dollar earnings from exports, since much of British industry was supplying munitions to the Allies, paid for by British loans not foreign payments. The longer the war lasted, the greater the need of the Allied countries for American products, for which only Britain could pay in dollars. The pressure became relentless. To pay for British and Allied purchases, the Treasury bought up British-owned dollar securities (with sterling) and sold or pledged them in New York. It exported some of the precious reserve of gold. And it borrowed from American bankers, using the great firm of J. P. Morgan to raise dollar loans on its behalf. At all costs, it had to prevent a collapse in the value of sterling against the dollar. For, if American sellers and lenders lost confidence, American goods would become impossibly expensive and bring the Allied war effort to a standstill.

For Keynes, therefore, the economic pivot of the war was Britain's credit in New York. If it failed, the Allies were finished. ‘We have one ally’, Keynes told the Admiralty board in March 1916, ‘the rest are mercenaries.’
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There was no certainty that American lenders would continue to buy British bonds when their own economy was booming. If American opinion was alienated by some transatlantic quarrel, the effect might be devastating. For the rest of 1916, however, disaster was postponed. The British dribbled their gold (and that of their Allies) into the New York market. They spent heavily to hold up the value of sterling. The American investor, despite Keynes’ pessimism, remained a willing buyer of Allied loans. But, by the end of 1916, the huge reserves of British financial power had reached the limits that Keynes predicted. In November 1916, the American authorities, disturbed by the rapid growth of so much debt, advised their banks to curtail foreign loans. At the same time, as the gold reserve in London reached a critical level, and dollar securities began to run out, British dependence on American lending became greater than ever. At the moment when the Asquith cabinet fell in early December, the Treasury privately calculated that it was scarcely a week away from exhausting its dollars. The immediate danger of a sterling collapse receded. But, in the spring of 1917, as Germany's unrestricted submarine warfare brought the United States closer and closer to intervention, there was barely a month's reserve in hand before a drastic reduction of British purchases would have been necessary.
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Even after American entry in April 1917, the strain and uncertainty were intense. A hold-up on American credits in June brought the British to the point of default.
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On 29 July 1917, Bonar Law, now Chancellor of the Exchequer, told his American counterpart, William Gibbs McAdoo, that, without urgent help, the ‘whole financial fabric’ of the Alliance would collapse within days.
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Keynes pondered how to safeguard Britain's ‘final reserve’ of gold – implying the curtailment of British purchases or going off gold. At the time of Passchendaele, the French army mutinies, the break-up of the Russian armies and the holocaust of their shipping in the submarine war, the British faced a financial ‘Dunkirk’. The implications were colossal. Financial breakdown would shatter the Alliance and force an early peace. A British default on their dollar loans, or a refusal to pay gold on demand to foreign holders of sterling balances kept in London, would ruin for the foreseeable future the City's reputation as a financial centre – together with sea-power, the principal source of Britain's world power.