by Adam Tooze
The first economic model spawned by the war was that of the self-sufficient, state-planned national economy. In May 1918 Lenin justified his turn toward Germany by citing that country as the non plus ultra of economic and industrial modernity.3 It was in Germany, he insisted, that a form of state capitalism had been born which would provide the stepping stone to the socialist future. Walther Rathenau, the CEO of the international electrical engineering group AEG, became renowned as the exponent of a new mode of organized capitalism, in which corporate organization would be merged seamlessly with the power of the state.4 This identification of Germany as the epitome of an organized planned economy was ironic, since by 1916 the organizational and productive inferiority of the German war effort was already starkly apparent. In the autumn of 1916 the Hindenburg armaments programme was conceived as a vain effort to outdo Lloyd George’s triumphs as Munitions Minister in Britain.5 By 1918 the productive capacities of the Entente and the Americans, the cooperation they managed to sustain and their willingness to take considerable risks, all combined to give the Allies a crushing superiority.6 In every dimension it was the Allied armies that pushed the battlefield into a new technological era. When the climactic assault on the Hindenburg line began on 8 August 1918, 2,000 Allied aircraft provided smothering air superiority. The German squadrons, led amongst others by the youthful Hermann Goering, were outnumbered five to one. On the ground the imbalance was even more severe. By 1917 every major attack by French or British infantry could count on the support of hundreds of tanks. The Germans never fielded more than a handful. But the truly decisive difference was in firepower. Artillery war reached its apotheosis in 1918. On 28 September 1918, in preparation for the final push through the German defensive line, British artillery unleashed 1 million shells in a single, continuous day-long barrage – 11 shells per second for 24 hours.7
In November 1918 Germany’s planned economy surrendered in the face of a second even more powerful economic vision – a triumphant model of ‘democratic capitalism’. At the heart of the democratic war effort stood the much-heralded economic potential of the United States. World War I marked the point at which America’s wealth stamped itself dramatically on European history. The globetrotting engineer and philanthropist Herbert Hoover was the first great ambassador of American abundance. His food-relief organization operated first in occupied Belgium and then across all of war-torn Europe. Meanwhile, Henry Ford’s rise to global prominence as the prophet of a new era of mass-produced prosperity coincided almost exactly with the war. Ford introduced his legendary $5 per-day wage on his Model T production lines in January 1914.8 Following Wilson’s declaration of war, Ford outdid himself in his extraordinary promises: 1,000 two-man tanks per day, 1,000 midget submarines, 3,000 aero engines per day, 150,000 complete aircraft. None of these ever materialized. Europeans, notably the British, the Germans, the French and the Italians, were the great mass- producers of aircraft in the early twentieth century. But Ford’s legend was as robust as his car. By the winter of 1917 it was not incongruous for Britain’s General Allenby to credit his celebrated march on Jerusalem to ‘Egyptian labour, camels and the Model T’.9
American ‘productivism’ soon established itself as one of the guiding ideologies of the early twentieth century. Greater productivity per hour promised an escape from hard political choices, opening the door to a new era of domestic and international harmony. It was a vision that suited socialists as well as liberals and found recruits even amongst the new breed of ‘reactionary modernists’.10 But as a self-declared ideology we should treat ‘productivism’ and the associated fable of American abundance with the caution it deserves. The celebration of American productive power was exaggerated. It tempts historians to project the dominant position that American mass-manufacturing had established by the 1940s anachronistically into an earlier era. As an ideology it obscures the interests that it served and, with its emphasis on tangible, material goods it deflects attention from the true locus of American power, which in 1918 was founded above all on money not on things. In the economic sphere even more distinctly than in politics we see the sudden overshadowing of European history by the prospective dominance of the United States. If we look more closely at the way in which America’s resources were actually funnelled into Europe, what we see is both the purposefulness with which that shadow was cast and the as yet fragile facade from which it was projected.
I
From the summer of 1917 Entente military planning was based on the assumption that 1 million American soldiers would arrive in Europe by the end of 1918.11 But at the beginning of the year only 175,000 had crossed the Atlantic, out of which General Pershing had managed to form only two oversized infantry divisions. In the United States droves of would-be Doughboys had signed up. But they were training with wooden rifles and obsolete machine guns. They had none of the heavy weaponry that ruled the European battlefield. Nor, in early 1918, was America in any position to supply its new army with advanced armaments from its own factories. Though the US had made huge deliveries of war supplies, the Entente’s orders had been concentrated on raw materials, semi-finished products, explosives, gunpowder and ammunition.12 The actual weapons of war continued to be designed and finished by the Europeans. Once American armaments production did begin to be ramped up, it was based on European types. Ford’s main contribution, rather than the thousands of tanks he promised, was to devise a low-cost process for mass-producing the cylinders required by the Liberty aero-engine that American engineers had scrambled together from French, British, Italian and German designs. Despite the already legendary prowess of Detroit, there was too little time for America’s distinctive new system of mass-manufacturing to have a truly decisive impact.13 The year 1918 should not be confused with 1944. In 1918 it was the American Army that fought with French weapons, not the other way around. Three-quarters of the aircraft flown by the US Air Service were of French origin.14
The fact that the Americans would begin their apprenticeship on the Western Front as pupils of the British and French was no surprise and this transatlantic division of labour was efficient. But there was one rate-limiting factor that constrained any American contribution – shipping. When the commitment of 1 million American soldiers was made, it was understood that they would be shipped to Europe predominantly in American vessels. But due to infighting in Washington, little was done in 1917 to actually build cargo ships. By the end of the year the American general staff disposed of only 338,000 tons of shipping. To tip the manpower balance decisively by the summer they would need to concentrate at least ten times that figure.15 The ensuing struggle casts a stark light on relations between the Wilson administration and its European associates during the final crisis of the war.
The effective monopoly over the world’s shipping fleet established by Britain and its allies after 1914 was a direct challenge to Wilson’s vision of an American-led world order. The Shipping Act passed in September 1916 was intended to sponsor the construction of an American merchant navy to rival that of Britain.16 These, however, were peacetime measures and the rival American interests were slow to agree on the details. Once the U-boat war forced America’s hand in April 1917, it was the Federal government that took emergency powers to build and operate a publicly owned merchant fleet. But by then the British had pre-emptively cornered every free slipway and dry dock in the United States. In response, Wilson placed a moratorium on any further foreign orders. Outstanding British and French orders were bought out by the US government. Finally, in October 1917 all steel-hulled cargo ships in the United States were placed under Federal control. On this basis, the Emergency Fleet Corporation launched an epic ship-construction programme. With their familiar combination of showmanship, entrepreneurial energy and technical vision, America’s industrial barons competed in meeting ever more excessive targets. Some $2.6 billion later, the results were impressive. In the last six months of 1918 American shipyards delivered as much as the entire world had launche
d in 1913 – 100 ships on 4 July 1918 alone (Independence Day).17 But by the third quarter of 1918 the military crisis had already passed.
During the truly critical period, between March and July 1918, when the American Army was desperately needed in France, American shipyards produced virtually no additional cargo capacity. Not only that, even at the height of the crisis, the Wilson administration did not give clear priority to the needs of the European war. Of the ships requisitioned by the Federal government, only a fraction were actually allocated to troop transport. As the Germans advanced to within artillery range of Paris in April 1918, Wilson was still insisting that America must maintain its growing presence on the profitable Brazil and Japan trading routes. The burden was placed instead on the British and French fleets. Already in January the British had imposed a stomach-churning shift in priorities. To free enough capacity to transport 150,000 American soldiers per month, food imports were slashed.18 When the German offensive tore into the Allied lines on 21 March, even more drastic measures were required. Turning the tables on Wilson, it was now Lloyd George who, over the head of the laggardly President, appealed directly to the American public. Wilson was so incensed that he even considered having the British ambassador recalled. ‘I fear,’ he expostulated on one occasion, ‘I will come out of the war hating [the] English.’19 But the American military authorities responded. In the month of May, 250,000 men were moved, 1.788 million men in all between February and November 1918, at least half of them on British ships.
The bottleneck of shipping reduced the transatlantic war economy to the most primitive economic trade-off: men against things. To maximize capacity American soldiers were shipped virtually without equipment. Britain and France supplied the fresh American divisions with all their rifles, machine guns, artillery, aircraft and tanks. Indeed, they had to feed them from their own depleted stocks. This human cargo was America’s major contribution to the military victory – a fresh crop of healthy, well-fed young men of prime fighting age, the likes of which had become depressingly rare in Europe.20 Due to their lack of combat experience, most of America’s army could not be thrown directly into the front line. But they were a promise of ultimate victory and a strategic cushion against the possibility of a German breakthrough. On the Italian front a single American regiment was deployed, in a purely propagandistic role. Its three battalions of 1,000 strapping young men from Ohio were moved rapidly from town to town, parading in changing uniforms so as to create the impression of tens of thousands of reinforcements.21
What actually enabled the huge transatlantic movement was the remarkable system of inter-Allied economic cooperation that the Entente had devised since 1915. Originally confined to the financing and purchasing of wheat, then the distribution of coal, inter-Allied cooperation extended in the autumn of 1917 to the common regulation of all-important shipping capacity.22 The Allied Maritime Transport Council, based in London, was made up of representatives of all the combatant governments, headed by Britain and France. Though each delegate owed primary loyalty to his national government, they collectively constituted an inter-governmental authority capable of making decisions affecting the lives of literally every inhabitant of Europe, whether civilian or soldier. Given the extremity of their situation, by early 1918 it was the Entente Powers, not Wilson, who were exploring radical new forms of cooperation and coordination. In halting Germany’s final onslaught, the Entente created precedents for inter-governmental cooperation that went beyond anything ever realized in the League of Nations. From 1916, France, Russia and Italy all borrowed on British credit. In 1916 an economic conference had met in Paris to sketch a bold vision for long-term Allied economic cooperation against common enemies. In November 1917, following the Caporetto disaster, the Supreme War Council was established. By April 1918 British and French soldiers were fighting under one supreme command. In May, Marshal Foch’s coordinating powers were extended across the entire length of the Western Front from the North Sea to the eastern Mediterranean. Meanwhile, British and French rations were weighed against each other in common purchasing and shipping plans. Through the involvement of a generation of businessmen, engineers and technocrats, such as the Briton Arthur Salter and his close colleague and friend, the Frenchman Jean Monnet, this cooperation was to provide the inspiration for the project of the European Union led by the functional integration of the European Coal and Steel Community (ECSC) after World War II.23
This third economic model spawned by the war, the model of inter-Allied cooperation, was eclipsed in historical memory by its two chief competitors – Germany’s planned economy and America’s capitalist abundance.24 Nor was this any coincidence. The victor states were liberal political economies that chafed at state regulation.25 And this opposition from within France, Italy and Britain found an eager echo in Washington.26 The Wilson administration regarded the inter-Allied institutions with profound suspicion. Before the war, breaking open the cartel arrangements and protective trade regimes of Europe’s empires had been the chief purpose of the Open Door policy. Alarmed by the bold demands of the Paris conference of 1916, which Washington viewed as a project of global cartelization and the absolute negation of the Open Door, American resistance amounted to something akin to open hostility.27 Americans who spent too long working within the inter-Allied organizations were held at arm’s length for fear that they had become ‘out of touch with the American situation . . . and become European in their views’. Wilson believed that it took only six months for Americans working in London to become ‘Anglicized’.28 In practice, however, every American intervention in Europe – Hoover’s relief programme for Belgium no less than Pershing’s independent American Army – was dependent on the cooperative logistical apparatus established by the Entente. In 1918, if Belgium continued to be fed, it was not only on account of Hoover’s organizational genius, or America’s largesse, but because the inter-Allied shipping agency placed the priority of American relief shipments even above the needs of the home fronts of France, Britain and Italy.29
II
Given the profoundly uncooperative behaviour both of General Pershing and the Wilson administration, it became commonplace in Britain to discuss the strategic balance on the Western Front as a zero sum game. If the war were won in 1918, it would be a triumph for the British Empire. If the war dragged on into 1919, Britain, like France, would find itself utterly depleted. Even if huge new levies of manpower could be raised in India or Africa, victory would be claimed by the Americans. Some even began to wonder whether Britain and France might not be better off without the American military contribution. Winston Churchill reacted with a characteristic appeal to Atlantic unity. ‘Quite apart from the imperious military need, the intermingling of British and American units on the field of battle and their endurance of losses and suffering together may exert an immeasurable effect upon the future destiny of the English-speaking people,’ he opined. It would ‘afford us perhaps the only guarantee of safety if Germany emerges stronger from the War than she entered it’.30
Other, cooler heads pointed out that fantasies of independence were vain in any case. Whether victory was won in 1918 or 1919, whether or not a large American army was involved, the Entente were dependent on the United States. Behind Detroit’s aero-engines and Pittsburgh’s steel was something less tangible but ultimately decisive, dollar credits. Since 1915 Wall Street had bankrolled the Entente. Even without the abrupt intervention of the Federal Reserve Board in November 1916 and despite the sympathetic cooperation of J. P. Morgan, the limit of the Entente’s credit would undoubtedly have been reached in the course of 1917. But instead, overriding the limit of the private capital market and replacing it with a radically new geometry of financial and economic power, one rich democracy, the United States, channelled huge public loans to London, Paris and Rome. It was this direct financing out of US public credit that helped to give the Entente its crucial margin of advantage over Germany. On 24 April 1917 Congress laid the foundation for lo
ng-term funding in the form of the Liberty Loan authorization. The initial authorization of funds for the American war effort was for $5 billion, of which as much as $3 billion were allocated for loans to the Entente. Unlike American troops, American money flowed quickly. By July 1917 Treasury Secretary William McAdoo had already advanced $685 million to Britain.31 At the time of the armistice in 1918 just over $7 billion had been taken up. By the spring of 1919 the maximum limit of $10 billion had been reached.
Money defined all the other problems. Prior to April 1917, to economize on dollar spending, a large part of British shipping had been tied up on the very long haul to Australia. After April 1917, with an abundant supply of dollars, purchasing and shipping could be concentrated on the far more efficient transatlantic route. The link between public credit and export promotion was a further defining feature of the new relationship with America. Up to April 1917 the Entente had borrowed in the United States to fund purchases from the US and overseas. A condition attached to all US congressional appropriations was that the dollars lent must be spent exclusively in America. After April 1917 the US Federal government was operating a gigantic, publicly funded export scheme. The American fiscal apparatus and the productive capacity of American business were harnessed together as never before. No previous ‘financial hegemony’ exercised by Spain, Holland or Britain between the seventeenth and nineteenth centuries had ever exercised anything approximating this scale or degree of coordination. The Inter-Allied Supply Council, formed unlike the other inter-Allied agencies at the behest of Washington, worked under the close supervision of an assistant secretary to the US Treasury and funnelled orders directly to the US War Industries Board.32