by Adam Tooze
For Wilson as for Roosevelt the war was a test of America’s new self-confidence and strength. But whereas Roosevelt wanted to prove the manhood of the US, for Wilson the war raging in Europe challenged his nation’s moral equilibrium and self-restraint. By America’s refusal to become embroiled in the war, its democracy would confirm the nation’s new maturity and immunity to the inflammatory wartime rhetoric that had done such harm fifty years earlier. But this insistence on self-restraint should not be misunderstood for modesty. Whereas interventionists of Roosevelt’s ilk aspired merely to equality – to have America counted as a fully fledged great power – Wilson’s goal was absolute pre-eminence. Nor was this a vision that scorned ‘hard power’. Wilson had thrilled in 1898 to the excitement of the Spanish-American War. His naval expansion programme and his assertion of America’s grip on the Caribbean approaches was more aggressive than that of any predecessor. In order to secure the Panama canal, Wilson in 1915 and 1916 did not hesitate to order the occupation of the Dominican Republic and Haiti, and intervention in Mexico.34 But thanks to its God-given natural endowments, America had no need of extensive territorial conquests. Its economic needs had been formulated at the turn of the century by the ‘Open Door’ policy. The US had no need of territorial domination, but its goods and capital must be free to move around the world and across the boundaries of any empire. Meanwhile, from behind an impenetrable naval shield it would project an irresistible beam of moral and political influence.
For Wilson the war was a sign of ‘God’s providence’ that had brought the United States ‘an opportunity such as has seldom been vouchsafed any nation, the opportunity to counsel and obtain peace in the world . . .’ – on its own terms. A peace accord on American terms would permanently establish the ‘greatness’ of the United States as ‘the true champions of peace and of concord’.35 Twice, in 1915 and 1916, Colonel House was despatched to tour the capitals of Europe to offer mediation, but neither side was interested. On 27 May 1916, only weeks before the British began their Wall Street-financed offensive on the Somme, Wilson spelled out his vision of a new order in a speech to a gathering of the League to Enforce Peace, at the New Willard Hotel in Washington.36 Agreeing with the Republican internationalists who hosted the event, Wilson pronounced himself willing to see the United States join any ‘feasible association of nations’ that would underwrite a future peace. As twin foundations of that new order, he called for freedom of the seas and limitations of armaments. But what differentiated Wilson from most of his Republican rivals was that he coupled this vision of America’s role in a new world order with an explicit refusal to take sides in the current war. To do so would be to forfeit America’s claim to absolute pre-eminence. With the war’s ‘causes and its objects’, Wilson announced, America was not concerned.37 In public he was content to remark simply that the war’s origins were ‘deeper’ and more ‘obscure’.38 In private conversation with his ambassador in Britain, Walter Hines Page, Wilson was blunter. The Kaiser’s U-boats were an outrage. But British ‘navalism’ was no lesser evil and posed a far greater strategic challenge for the United States. The atrocious war was, Wilson believed, not a liberal crusade against German aggression, but a ‘quarrel to settle economic rivalries between Germany and England’. According to Page’s diary, in August 1916 Wilson ‘spoke of England’s having the earth and of Germany wanting it’.39
Even if 1916 had not been an election year and even if Morgan had not been one of the most prominent backers of the Republican Party, the enmeshing of a large part of the American economy on the side of the Entente at the behest of pro-British bankers would have posed a dramatic challenge to Wilson’s administration. As the electoral campaign entered its final stages, the tensions produced within the United States by the war boom came to a dangerous head. Since August 1914 the huge credit-fuelled boost in exports had driven up the cost of living. The much-vaunted purchasing power of American wages was melting away.40 It was the American worker who was paying for business war-profiteering. Over the summer Wilson approved moves by the populist wing in Congress to impose a tax on exports to Europe. In the last days of August 1916, in response to the threat of a general strike on the railway network, he intervened on the side of the unions, forcing Congress to concede the eight-hour day.41 In response, American big business rallied as never before around the Republican presidential campaign. The Democrats, for their part, pilloried the Republican Charles Hughes as the ‘war candidate’ in the service of Wall Street profiteers. After this poisonous campaign that produced the biggest electoral turnout in American political history, the manner of Wilson’s victory did little to calm the savagely partisan mood. Though Wilson won a solid popular majority, in the Electoral College he prevailed only thanks to California by a margin of just 3,755 votes. Wilson thus became the first Democrat to be re-elected as President for a second term since Andrew Jackson in the 1830s. As far as the Entente and their backers in America were concerned, it was a sobering outcome. A large part of the American public had declared its desire to stay outside the conflict.
III
Given Wilson’s re-election, to count on American acquiescence in the growing economic demands of the Entente war effort was clearly risky. But the conflict had a dynamic of its own. With the German onslaught on Verdun reaching its horrific climax, the Entente decision to bring forward the first major British offensive on the Somme was taken on 24 May 1916, three days before Wilson first announced his vision of a new world order at the New Willard Hotel.42 Though the British offensive failed to achieve a breakthrough, it threw the Germans onto the defensive. Meanwhile, on the Eastern Front the Entente’s grand strategy came close to decisive success. There, the might of the Imperial Russian Army, backed by the financial and industrial capacity of the Entente, could be brought to bear against the tottering Habsburg Empire. On 5 June 1916 the energetic cavalry commander General Brusilov hurled the cream of the Russian Army against the Austro-Hungarian lines in Galicia. In a remarkable few days of fighting, the Russians laid waste to Habsburg military power. But for an urgent injection of German troops and military leadership, the southern half of the Eastern Front would have collapsed. The shock to the Central Powers was so dramatic that it threatened to unleash a chain reaction.
On 27 August Romania finally abandoned its neutrality and declared war on the side of the Entente. Instead of the wagons of Romanian oil and grain, on which the Central Powers had come heavily to depend, a fresh enemy army of 800,000 drove westwards into Transylvania. Improbable though it may seem, in August 1916 it was not President Wilson but Prime Minister Bratianu in Bucharest who appeared to hold the fate of the world in his hands. As Field Marshal Hindenburg commented in retrospect: ‘Truly, never before was a state as small as Rumania, handed a role of such world historic significance at such an opportune moment. Never before have potent great powers like Germany and Austria been exposed in such a way to a state which had perhaps only one twentieth of their population.’43 At the Kaiser’s HQ the news of Romania’s entry into the war ‘fell like a bomb. William II completely lost his head, pronounced the war finally lost and believed we must now ask for peace.’44 The Habsburg ambassador in Bucharest, Count Ottokar Czernin, predicted ‘with mathematical certainty the complete defeat of the Central Powers and their allies if the war were continued any longer’.45
In the event, Romania defied the odds in its favour. A German-led counter-attack turned defeat into victory. By December 1916, with German and Bulgarian forces converging on Bucharest, the Romanian government and what was left of its army found themselves as refugees in Russian Moldavia. But it is this dramatic train of events that forms the essential backdrop to the confrontation between the Entente, Germany and Woodrow Wilson over the winter of 1916–17. Berlin’s path towards escalation was marked out at the end of August 1916 when the Kaiser replaced Erich von Falkenhayn, the discredited mastermind of Verdun, with Field Marshal Hindenburg and his chief of staff, Erich Ludendorff, as the Third S
upreme Army Command (3. OHL). Having over the previous two years been confined exclusively to the war against Russia, for Ludendorff and Hindenburg a close inspection of the Western Front came as a severe shock. The German effort at Verdun had been huge. But the extraordinary intensity of the British Somme offensive set a new benchmark. In response, Hindenburg and Ludendorff’s first move was to hunker down into a defensive posture. If they were to have any hope of matching the Entente’s globalized war effort, Germany would need a new mobilization of its own. Dubbed the ‘Hindenburg programme’, it was designed to double ammunition output within the year. Its targets were met, though at a huge cost to the home front. In the meantime, it was this same defensive rationale that led the 3. OHL to back the navy in calling for the U-boats to be unleashed. If Germany was to survive, the transatlantic supply lines had to be severed. Hindenburg and Ludendorff would not launch an attack immediately. They would give Bethmann Hollweg a chance at peace mediation. The German socialists needed to be reassured that they were supporting a purely defensive war.46 The risks of escalating the U-boat war were obvious. Americans would be antagonized. But to continue to hold back was simply to play into British hands. In economic terms, North America was fully committed to the Entente in any case.
Not surprisingly the Entente, who faced the daunting task of raising a further billion dollars’ worth of loans in the United States in the near future, were rather less sanguine about the inevitability of American support. Nevertheless for Britain and France, even more than for the Germans, a negotiated peace was unattractive. After two years of war, Germany’s armies occupied Poland, Belgium, much of northern France and now Romania. Serbia had been erased from the map. In London in the autumn of 1916 it was the argument over strategic priorities in the third year of the war that brought down the Asquith government.47 Ironically, those who were most open to Wilson’s idea of a negotiated peace were those who were most suspicious of the long-term rise of American power. This was particularly true of old-school liberals, such as the British Chancellor Reginald McKenna. As he warned the cabinet, if they continued on their current course ‘I venture to say with certainty that by next June [1917] or earlier the President of the American Republic will be in a position, if he so wishes, to dictate his own terms to us.’48 McKenna’s desire to avoid falling further into dependence on America was the obverse of Wilson’s distaste for European politics. As seen from both sides, the best way to minimize future entanglement was to halt the war as soon as possible. But by December 1916, McKenna and Asquith were out of office. In came Lloyd George at the head of a coalition dedicated to defeating Germany decisively. Ironically, though the posture of the coalition was fundamentally out of kilter with Wilson’s desire to end the war, it was the most Atlanticist in its basic commitments.49 As Lloyd George informed Robert Lansing, Wilson’s Secretary of State, he looked forward most enthusiastically to a permanent international order founded on the ‘active sympathy of the two great English-speaking nations’.50 As he put it to Colonel House earlier in 1916, ‘if the United States would stand by Great Britain the entire world could not shake the combined mastery we would hold over the seas’.51 Furthermore, the ‘economic force of the United States’ was ‘so great that no nation at war could withstand its power . . .’52 But, as Lloyd George had been arguing already since the summer of 1916, American loans established not simply Britain’s subordination to Wall Street, but a condition of mutual dependence. The more that Britain borrowed in America and the more it purchased, the harder it would be for Wilson to detach his country from the fate of the Entente.53
2
Peace without Victory
As 1916 drew to a close, both blocs of European combatants were preparing to take huge risks on the assumption that the financial entanglement between America and the Entente would sooner or later force Washington to align itself on the side of the Entente. Nor was this a secret of state. The assumption was widely shared. In his exile in Zurich the Russian radical, Vladimir Ilyich Lenin, was in June 1916 putting the final touches to what was to be one of his most famous pamphlets, ‘Imperialism, the Highest Stage of Capitalism’.1 This cast commonplace assumptions about the necessity of American involvement into an iron-clad theoretical dogma. According to Lenin, states in the age of imperialism were drawn into the fight as tools of national business interests. On this logic it was apparent that Washington must sooner or later declare war on Germany. What none of these speculations could account for, however, was the remarkable course of events between November 1916 and the spring of 1917. The American President, re-elected with a mandate to keep America out of the war, tried to do something far more ambitious. He attempted not just to preserve neutrality but to end the war on terms that would place Washington in a position of pre-eminent global leadership. Lenin may have declared imperialism to be the highest stage of capitalism, but Wilson had other ideas.2 So, it turned out, did the combatants. If a return to the pre-war world of imperialism was impossible, revolution was not the only alternative.
I
Throughout October 1916 the banking house J. P. Morgan was in urgent discussions with the British and the French over the future of Allied finance. For their next season of campaigning, the Entente proposed to raise at least 1.5 billion dollars. Realizing the enormity of these sums, J. P. Morgan sought reassurance both from the Federal Reserve Board and from Wilson himself. None was forthcoming.3 As Election Day on 7 November approached, Wilson began drafting a public statement to be delivered by the governor of the Federal Reserve Board warning the American public against committing any more of their savings to Entente loans.4 On 27 November 1916, four days before J. P. Morgan planned to launch the Anglo-French bond issue, the Federal Reserve Board issued instructions to all member banks. In the interest of the stability of the American financial system, the Fed announced that it no longer considered it desirable for American investors to increase their holdings of British and French securities. As Wall Street plunged and sterling was offloaded by speculators, J. P. Morgan and the UK Treasury were forced into emergency purchasing of sterling to prop up the British currency.5 At the same time the British government was forced to suspend support of French purchasing.6 The Entente’s entire financing effort was in jeopardy. In Russia in the autumn of 1916 there was mounting resentment at the demand by Britain and France that it should ship its gold reserves to London to secure Allied borrowing. Without American assistance it was not just the patience of the financial markets but the Entente itself that would be put at risk.7 As the year ended, the war committee of the British cabinet concluded grimly that the only possible interpretation was that Wilson meant to force their hand and put an end to the war in a matter of weeks. And this ominous interpretation was reinforced when London received confirmation from its ambassador in Washington that it was indeed the President himself who had insisted on the strong wording of the Fed’s note.
Given the huge demands made by the Entente on Wall Street in 1916, it is clear that opinion was already shifting against further massive loans to London and Paris ahead of the Fed’s announcement.8 But what the cabinet could not ignore was the open hostility of the American President. And Wilson was determined to raise the stakes. On 12 December the German Chancellor, Bethmann Hollweg, without stating Germany’s own aims, issued a pre-emptive demand for peace negotiations. Undaunted, on 18 December Wilson followed this with a ‘Peace Note’, calling on both sides to state what war aims could justify the continuation of the terrible slaughter. It was an open bid to delegitimize the war, all the more alarming for its coincidence with the initiative from Berlin. On Wall Street the reaction was immediate. Armaments shares plunged and the German ambassador, Johann Heinrich von Bernstorff, and Wilson’s son-in-law, Treasury Secretary William Gibbs McAdoo, found themselves accused of making millions by betting against Entente-connected armaments stocks.9 In London and Paris the impact was more serious. King George V is said to have wept.10 The mood in the British cabinet was furious. The London T
imes called for restraint but could not hide its dismay at Wilson’s refusal to distinguish between the two sides.11 It was the worst blow that France had received in 29 months of war, roared the patriotic press from Paris.12 German troops were deep in Entente territory in both East and West. They had to be driven out, before talks could be contemplated. Nor, since the sudden swing in the fortunes of the war in the late summer of 1916, did this seem impossible. Austria was clearly close to the brink.13 When the Entente met for their war conference in Petrograd at the end of January 1917, the talk was of a new sequence of concentric offensives.
Wilson’s intervention was deeply embarrassing, but to the Entente’s relief the Central Powers took the initiative in rejecting the President’s offer of mediation. This freed the Entente to issue their own, carefully worded statement of war aims on 10 January. These demanded the evacuation of Belgium and Serbia, and the return of Alsace Lorraine, but more ambitiously they insisted on self-determination for the oppressed peoples of both the Ottoman and Habsburg empires.14 It was a manifesto for continued war, not immediate negotiation, and it thus raised the inescapable question: how were these campaigns to be paid for? To cover purchases in the US running at $75 million per week, in January 1917 Britain could muster no more than $215 million in assets in New York. Beyond that, it would be forced to draw down on the Bank of England’s last remaining gold reserves, which would cover no more than six weeks of procurement.15 In January, London had no option but to ask J. P. Morgan to start preparing to relaunch the bond issue that had been aborted in November. Once more, however, they had reckoned without the President.
At 1 p.m. on 22 January 1917 Woodrow Wilson strode towards the rostrum of the US Senate.16 It was a dramatic occasion. News of the President’s intention to speak was only leaked to the senators over lunch. It was the first time that a President had directly addressed that august body since George Washington’s day. Nor was it an occasion only on the American political stage. It was clear that Wilson would have to speak about the war and in so doing he would not merely be delivering a commentary. Commonly, Wilson’s emergence as a leader of global stature is dated a year later to January 1918 and his enunciation of the so-called ‘14 Points’. But it was in fact in January 1917 that the American President first staked an explicit claim to world leadership. The text of his speech was distributed to the major capitals of Europe at the same time that it was delivered in the Senate. As in the 14 Points speech, on 22 January Wilson would call for a new international order based on a League of Nations, disarmament and the freedom of the seas. But whereas the 14 Points were a wartime manifesto that fit snugly into a mid-century narrative of American global leadership, the speech that Wilson delivered on 22 January is a great deal harder to assimilate.