Section VI of SIS, the economic section, was formed in 1925–6 to collect material on the manufacturing strength and adaptability of European powers. Section VI was the brainchild of a senior SIS officer, Desmond Morton, who was struck by the number of reports emanating from France about ‘this new thing’ called industrial mobilization, for which the Germans had already coined a word, Wehrwirtschaft. In 1928 the Committee of Imperial Defence formed its sub-committee on industrial intelligence in foreign countries (FCI) charged with establishing the armaments manufacturing reserves and wartime expansion plans of antagonistic European powers. Developments within the FCI led to Section VI of SIS evolving in 1931 into the Industrial Intelligence Centre (IIC) headed by Morton. The IIC made a resounding debut with its first major report, compiled from secret sources and official publications, on Russia’s preparations for wartime industrial mobilization. This memorandum was beyond the capacity of naval or military intelligence. ‘The level of detail, imparted with a peremptory authority and with a lavish sprinkling of acronyms and Russian designations’ (to quote Morton’s biographer Gill Bennett), brought an unimpeachable new standard to British industrial intelligence-gathering and analysis.4
‘War has now become a matter for the whole nation,’ Charles de Gaulle of the Conseil Supérieur de la Défense Nationale wrote in a detailed survey of European plans to mobilize armaments production in wartime. ‘Politicians, soldiers, businessmen and economists increasingly proclaim the comprehensiveness of National Defence nowadays and the necessity accordingly for preparations to utilise all the resources of the country.’ Moscow knew these truths too, and never relented in its espionage directed against the machinery, blueprints, personnel and order books of the munitions factories of the European powers. Its best-known industrial spy in France was Jean Cremet, known as L’Hermine rouge or Le petit rouquin (the Red Ermine, or the Little Ginger). Cremet was a munitions worker whose war experiences had converted him to trade union militancy. By 1924 he was secretary general of the French communist party and running a spy network specializing in munitions design and manufacturing capacity. Against Kremlin rules, he was both a member of the local Politburo and head of the Fourth Department’s illegal rezidentura in France. When the Sûreté shut his group down in 1927, he fled to Moscow with his two lovers, the sisters Louise and Madeleine Clarac. After serving as the French representative on the Comintern, he was sent to Shanghai in 1929 to organize activities in China, Japan, Korea and Indo-China; but two years later, fearing for his survival under Stalin, he disappeared. He was thought to be dead, but returned to Europe by circuitous routes, took a new identity and survived in Brussels for forty years.5
In England Jack Hayes asked his brother Charles, a Midlands policeman, to collect information on the Birmingham Small Arms Company’s sales of weaponry to Balkan or Baltic states bordering Russia. BSA had been licensed by the Labour government in 1924 to supply 200 new Lewis guns to Russia (an order worth £20,000), but the incoming Conservative government embargoed arms exports to the Soviets and revoked the export licence in 1925. BSA had all but ceased armaments manufacture after 1918, because of the huge post-war European glut of weaponry; but it operated as the War Office’s agent to sell surplus rifles and machine guns. Charles Hayes was instructed to monitor these exports. In the mid-1920s another investigator tied to the Vigilance network, David Ramsay, used the cover of a travelling salesman of office accessories to visit armaments factories, including those of Vickers and Hadfield at Sheffield, to obtain confidential information and blueprints on war-material construction. He was equipped with a miniature photostat machine. Usually he took his material direct to the Soviet mission, Chesham House, from whence it went in the diplomatic bag to Moscow.6
The ARCOS raid of 1927 intensified the Bolshevik’s pre-existent siege mentality. At the May Day rally in Hyde Park a few months later, one CPGB activist, Charles Moody, a council dustman, made an inflammatory speech advocating propaganda among transport workers and merchant seamen to prevent troops and munitions from being sent abroad in the event of war. Moscow’s fear that British shipments of munitions to Estonia and other Baltic states presaged a London-concerted attack on the Soviet Union resulted in a recently converted young communist, Wilfred Macartney, approaching a shifty marine insurance underwriter named George Monkland for information on the value of such shipments. Macartney was the son of an electrical engineer who had made a fortune installing tramways in Malta. His boyhood was spent in the Levant, Panama and other exotic locations. In Odessa in 1905, aged six, he was traumatized when, as a result of officious blundering, his mother was seized before his eyes by tsarist policemen and carried off for interrogation as a suspected spy. He inherited about £70,000 in adolescence, but lost his fortune to swindlers, partly because he was always ‘one over the eight’ and in a state of reckless, drunken elation. He paid income tax of £8,000 in 1923 but was penniless by 1925, when two fervid CPGB recruiters got hold of him. ‘Communism became Macartney’s religion,’ wrote Compton Mackenzie, who had once employed him in secret service work in Greece; but he continued to consort with share-pushers, confidence tricksters and cat burglars, and in 1926 was jailed after an inept smash-and-grab raid on a Mayfair jeweller’s shop.7
After his release from Wormwood Scrubs prison, Macartney made his approach to Monkland, who took fright when inquiries about insurance cover for armaments shipments were succeeded by a detailed technical questionnaire about Royal Air Force aircraft. Monkland scurried to the former Director of Naval Intelligence ‘Blinker’ Hall, who passed him to SIS – not to MI5. ‘Throughout the summer of 1927 Macartney was buzzing about between London, Paris and Berlin, writing idiotic letters to Mr. Monkland, all of which the Intelligence Department had photographed by the Post Office in transit,’ as Mackenzie noted. SIS watched but remained inactive until November, when a young German named Georg Hansen came to London. Two or three days later, without any attempt to discover Hansen’s contacts or intentions, SIS had him and Macartney arrested at their first rendezvous at Hampstead tube station. As Mackenzie commented, ‘either Hansen was an unimportant supernumerary in a trivial affair or the British Intelligence authorities displayed an inexplicable neglect in their manner of dealing with him’. Their clumsy impatience was in contrast to MI5’s handling of the Vigilance detectives.8
Western capital-intensive manufacturing became more than ever a communist target after the inauguration in 1928 of the Five Year Plan, which made industrialization central to the self-induced modernization crisis of the Soviet Union. ‘The whole country is machine mad,’ reported Sir Esmond Ovey soon after reaching Moscow as British Ambassador following the restoration of Anglo-Soviet diplomatic relations by the incoming Labour government in 1929. A Birmingham audience would not, he thought, be as enthused as ‘primitive and simple-minded’ Muscovites were by a documentary film showing hundreds of whirring wheels: ‘in the machine the Communist enthusiast sees the future salvation of humanity’. Ovey was not hostile to the Soviets, whom he admired for pursuing ‘the greatest industrial experiment ever tried by mankind’. Defeatists were ‘reprimanded out of political existence’, he reported; for ‘Marxism is a religion to the Russian Communists,’ and no leniency could be afforded to doubters.9
Propaganda against armaments manufacturers
As early as 1926, speaking in a parliamentary debate on the Royal Navy, a Labour MP, Hugh Dalton, had declared: ‘directors of armament firms are the highest and completest embodiment of capitalist morality’. In the era of Five Year Plans, similar sentiments were used by communists and their allies to campaign against the munitions makers whose research and development expertise and reserve productive capacity were essential for rearmament. The Secret International (1932) and Patriotism Ltd (1933) by Dorothy Woodman of the Union of Democratic Control, The Bloody Traffic (1933) by Fenner Brockway of the War Resisters’ International and polemics by the communists J. T. Walton Newbold and Harry Pollitt were part of a heavy propaganda assault. The Labour Re
search Department’s Who’s Who in Arms (1935), published in a blood-red cover adorned with a black skull, argued that ‘dominant capitalist groups’ were the arch-manipulators behind the warmongering armaments firms. As the finance director of Vickers remarked in 1935, ‘the motive of the attack on the armaments firms is an attempt to get at the banks and financial houses’.10
The campaign against armourers entered popular culture. The villain of Graham Greene’s A Gun for Sale (1936) is a venomous munitions manufacturer called Sir Marcus, ‘a very old and very sick man with a little wisp of white beard on his chin like chicken fluff’, who is trying to engineer a European war. ‘He gave the impression that very many cities had rubbed him smooth. If there was a touch of Jerusalem, there was also a touch of St James’s, if of Vienna or some Central European ghetto, there were also marks of the most exclusive clubs in Cannes.’ Similarly, in Leslie Charteris’s thriller Prelude for War (1938), the machinations of Kane Luker, the aptly named financial kingpin of the Merchants of Death, are defeated by the all-action hero Simon Templar (‘the Saint’). Christina Stead, in perhaps the best-informed novel about hot money ever written, The House of All Nations (1938), depicts armaments manufacturers as ‘apaches of commercial life, profiteers of war, rapine, and fratricidal slaughter’.11
In Washington Senator Gerald Nye led a Special Senate Committee of Investigation into the Munitions Industry during 1934–6. ‘Mr. Nye is undoubtedly on the make,’ the British embassy in Washington reported in 1935. His committee’s wild innuendoes about warmongering by bankers, profiteering by manufacturers and European ruling-class duplicity had made front-page headlines. The senators, reported the British Ambassador, ‘overshot themselves in pursuit of the macabre, and a discreditable amount of loose talk was allowed, the names of prominent persons … being bandied about with incredible levity’. A few years later Isaiah Berlin, then posted to the British embassy in Washington, described Nye as ‘a notorious fire-eating Anglophobe isolationist’. The Nye Committee’s legal assistant, Alger Hiss, was a member of an underground communist cell in Washington. In 1934 the US Ambassador in Berlin, William Dodd (whose daughter Martha @ LIZA and son William @ BOY @ PRESIDENT were Soviet agents between 1934 and 1949) urged London to emulate Washington by setting up a Nye committee to expose the corrupt warmongering of arms manufacturers. Peter Rhodes, an American communist studying at the University of Oxford, urged fellow undergraduates to form study groups on the revelations of the Nye inquiry, ‘with the avowed aim of studying the root causes of war, so that the attack [on rearmament] may be directed sanely and efficiently’.12
The Baldwin government capitulated to this clamour by appointing the Royal Commission on the Private Manufacture of Armaments in 1935. The commissioners investigated allegations that capitalists fomented war, suborned civil servants, negated national sovereignty and defiled international politics. The preparation of testimony to the Commission and its prolonged deliberations during 1935–6 were a damaging distraction for both Whitehall and the private companies when the need for rearmament was becoming urgent. In May 1935 the pre-war alliance between France and tsarist Russia was revived by a Franco-Soviet treaty of mutual assistance if either nation was attacked by any European power. Although the pact contained no military protocols, Germany felt more ominously encircled than at any time since 1917. In March 1936 Hitler used the Franco-Soviet pact as a pretext for repudiating German obligations under the Locarno treaties and for reoccupying the Rhineland with troops. This was the moment when France might have arrested the Nazi advance by confronting the militarization of the Rhineland. Instead its Popular Front government shrank from military action, but nationalized its private armaments sector. All this at a time when Hitler was (in his own words) arousing in Germany ‘the spirit of proud self-assertion, manly defiance and passionate hate’, and igniting a ‘blazing sea of flame from which would … rise one cry: “WE WANT ARMS AGAIN!”’13
MI5 watch Wilfrid Vernon
In 1932 MI5’s deep informant within the CPGB, Graham Pollard, reported that a party of staff from the Royal Aircraft Establishment (RAE) at Farnborough – the Air Ministry’s research and experimental works – was to pay a summer visit to Russia. The RAE tourists included a draughtsman and technical officer, Wilfrid Vernon. The Security Service took little further interest in him until 1934, when he organized hospitality for the communist-led National Unemployed Workers Movement’s protesting Hunger Marchers as they proceeded towards Aldershot. An MI5 informant codenamed HOPS, who had infiltrated local left-wing study-groups, was set on him. Vernon liked talking, and soon became frank in his confidences to HOPS. Vernon was distributing Russia To-day, Moscow News and the Daily Worker within the RAE and among RAF personnel when he could. ‘I take four copies of the “Daily Worker” to the office every day,’ he told HOPS. ‘We spread the “Daily Worker” on the Mess Table, and discuss the King, munitions manufacturers and “Robber Barons” etc., and raise argument. A few disapprove, but we are gradually getting a number over to our way of thinking.’14
Vernon supported communist-front bodies such as the League against Imperialism and the Relief Committee for Victims of German Fascism. Background checks showed him to have been born in 1882 in the lower-middle-class London district of Stroud Green, Hornsey. His father’s work as an editorial clerk in a publishing office qualified him for a reasonable education at the Stationers Company School in Hornsey Vale. His early employers included the Siemens electrical combine and the Bristol Aeroplane Company. During the first war he joined the Royal Naval Air Force as an engineer officer, learnt to fly, worked on the development of flying-boats and served in RAF headquarters during 1919. He was demobilized with the rank of major, RAF, and continued to use his military title in civilian life until his death. He joined the Aircraft Inspection Department of the Air Ministry in 1924, and was transferred a year later to the RAE.
Major Vernon lived in a glade in the middle of a wood in Farnham, sleeping during warmer months in a tent by a pretty pond and retreating in winter to a bungalow-hut constructed of asbestos sheeting on a wooden frame. In socialist study circles and at self-help clubs for the unemployed he advocated workers’ power and revolutionary overthrow of the bourgeoisie. One of his RAE colleagues, who was in the group that visited Russia in 1932, was an Ulsterman called Edward Calvert. Their political views diverged and their friendship ruptured in the mid-1930s. ‘VERNON was a hale, red-faced, tweedy individual and looked rather like a country gentleman,’ an MI5 officer summarized Calvert as saying during an interview in 1952. ‘He used this impression to good effect when he was engaged in propaganda work.’ Vernon did not forgive Calvert for telling him, ‘the trouble with you is that you have not got the surface markings of a snake in the grass’.15
After the fascist violence against the Vienna socialists in February 1934, a refugee named Gessner came to live with Vernon. Immediately after the Nazi murder of the Austrian Chancellor Engelbert Dollfuss in July 1934, Gessner determined to make a hurried, clandestine return to Vienna with the Major’s help (apparently travelling in the side-car of the Major’s motorbike). As the latter recounted in a lantern-slide lecture to the Friends of the Soviet Union at Aldershot later that year, ‘We thought it would be easier if the Party contained two Englishmen to back our Austrian friend and bustle the frontier officials, so “George” and I fixed our Austrian friend up with a Trinity College tie, English cut grey suit, cap, and glare glasses, and called him “Toby”. “Toby” speaks excellent English and it was all very easy.’ ‘Tar’ Robertson of MI5 attended a similar lecture given by Vernon at Woking: he thought his target was hard-faced, untrustworthy, a poor public speaker, but mild rather than vindictive.16
In 1935 the Chief Superintendent at Farnborough addressed all the RAE departments with a remonstrance against political conversations in office hours. ‘He blamed the youngsters recently down from colleges with degrees, etc., imagining that they knew so much more than the older hands and trying to run the show,’ Vernon
told HOPS. ‘Of course, it is not the youngsters; they are too full of science and technical cramming to have any room for politics yet.’ Gaining confidence, the Major persuaded a young soldier named Thomas Ford to distribute seditious literature and collect names of communist sympathizers in the Royal Army Medical Corps. Ford was given the codename RIVER. When after several months Ford became conscience-stricken, Vernon (fearing that the youth might denounce him to the authorities) persuaded him to desert and gave him the money to take refuge in the Irish Free State. Ford seems then to have volunteered as a gunman for the Irish Republican Army.17
In 1936 the Major began supplying aircraft blueprints and other official secrets to Ernst Weiss @ David Lock and to an agent known to MI5 only as HARRY II. Vernon seems to have been secondary in the value of his purloined material to another RAE official, Frederick Meredith, who was introduced to Weiss by that scourge of munitions companies Dorothy Woodman. Ford meanwhile fell in with a group of Blackshirts – that is, adherents of Sir Oswald Mosley’s British Union of Fascists – whom he enraged with tales of Vernon’s sedition. In August 1937 Ford and three Blackshirts broke into the asbestos bungalow, ransacked it and stole books, political pamphlets, correspondence and documents in the hope of incriminating him as a subversive. They also took money, cutlery, a watch and a telescope. Their burglary was spotted by a neighbouring farmer, and their getaway car, with its fascist flag on the windscreen, was stopped by police at Staines. It was found to contain a wood-chopper, a knuckle-duster, a dummy revolver and a stash of Vernon’s belongings.
Enemies Within Page 21