by Adam Tooze
The official American response to the Keynes plan was less insulting than their reaction to the French. But the rejection was no less decisive.46 The Treasury denounced the plan as yet another European effort to turn America into the chief reparations claimant and as a threat to America’s own creditworthiness.47 Keynes’s scheme would leave the world awash with dubious debt, accelerate inflation, and perpetuate the role of the state in the world economy, which was the root of so much discord.48 The irresistible congressional pressure for tax cuts ruled out any write-down of US war loans to Europe.49 Washington was not blind to the fact that to demand immediate repayment of the inter-Allied debts would cause a dramatic crisis. In September 1919 the Wilson administration announced a two-year moratorium on the payment of interest on inter-Allied debts.50 But Washington made clear that this was a unilateral concession, not to be regarded as part of any grand bargain. Both principal and interest would eventually be paid in full. The Treasury reiterated its warning against any attempt by debtors to form a common front. It would negotiate with each European power separately. There would be no linkage between war debts and reparations.
Meanwhile France was running desperately short of dollars. In the autumn several large municipal loans came dangerously close to default in New York.51 The US Treasury gave its grudging assent to a new French approach to Wall Street, but emphasized that American investors would expect at least 6 per cent in interest and would expect to be repaid in dollars, not devalued francs. In fact, the Treasury was far too optimistic. From Wall Street, Paris learned that given the unresolved overhang of $3 billion in inter-Allied loans, it would have difficulty negotiating even short-term credits. The governors of the Federal Reserve thought that the French would be lucky to attract lenders even at the punishing interest rate of 12 per cent. Given the whip hand exercised by the US Treasury, a peace whose terms were defined by the private capital markets was coming to look from a European point of view ominously like a ‘peace without victory’.
16
Compliance in Europe
Reflecting on his first failure to overturn the post-war order, in his prison cell in Landsberg in early 1924, Adolf Hitler described in Mein Kampf how he awoke in November 1918, half blinded in a military hospital, to discover that the Armistice had been declared and that Germany was dissolving in revolution. He resolved to become a politician so as to fight the new world that had come so suddenly into existence.1 Benito Mussolini was already a politician before the war. But the war transformed him too, as it transformed Hitler. Though Mussolini was to succeed where Hitler failed in taking advantage of the post-war crisis, in their methods and their basic historical vision they were in profound agreement. Modern Italy and modern Germany had been made barely three generations earlier, during the convulsive mid-nineteenth-century disintegration of Europe’s post-Napoleonic order. What was to unite Hitler and Mussolini was their common reaction to the world crisis unleashed by World War I. The reality of world power as represented by the Big Three at Versailles was what they had to contend with. As Lloyd George commented to one of Wilson’s inner circle in May 1919, ‘as long as America, England and France stand together, we can keep the world from going to pieces’.2
The question that haunted both Hitler and Mussolini was what history held in store for Germany and Italy if Lloyd George was right. Neither Mussolini nor Hitler began their post-war careers by scorning the Western democracies, as the braggadocio of the 1930s might suggest. In the aftermath of World War I they regarded the Western Powers with a mixture of awe, fear, envy and resentment. In the spring of 1919 Mussolini spoke of Italy as a ‘proletarian nation’.3 The economic and military might of the Big Three was obvious. But democratic politics was not moribund in 1919 either. There had never been anything like Woodrow Wilson’s global celebrity. Yet it was not Wilson who Mussolini and Hitler regarded as the model of a truly popular modern politician, but Lloyd George.4 For both Mussolini and Hitler, it was Britain’s war leader who had fashioned a demotic, popular ideology that energized an entire empire. It was to the Western Powers, the all-mighty defenders of the new order, that the future belonged, unless the insurgents could rally against their oppressive power.
In the fateful weeks between March and June 1919, Mussolini and Hitler were still faces in a crowd, Mussolini’s somewhat more prominent. But in both Italy and Germany the nationalist groundswell was broad-based. Millions clamoured that their nations must not accept the place allotted to them in the new order being devised at Paris. They must attempt to assert their autonomy before it was too late. Nevertheless when the time came on 28 June 1919, the representatives of both Italy and Germany signed the Versailles Treaty. In the arguments between Britain and France and the United States we see what gave the peace its amorphous shape. In the struggles in Germany and Italy over acceptance we see the forces that held the peace in place.
I
After warding off the last Austrian offensive on the Piave river line in the summer of 1918, the Italian armies had bided their time before launching a crushing offensive on 24 October, the anniversary of Caporetto. In a matter of days the Austro-Hungarian Army collapsed and the Habsburg Empire disintegrated. Over the winter of 1918–19 the problem facing the Italian political class was what to make of this hard-won victory. In the first half of 1918 it had still seemed as though Prime Minister Orlando might move decisively to the center-left, making Italy the sponsor of self-determination throughout the Adriatic. But by December Sidney Sonnino was still in place as Foreign Minister and the broad-based coalition that Orlando had assembled in the wake of the Caporetto disaster was disintegrating. Both Bissolatti, the leading pro-war socialist, and Orlando’s pro-American Finance Minister, Francesco Nitti, resigned. The supporters of the annexationist London Treaty were in full cry. But the far left was rallying as well. The space for compromise was rapidly shrinking. President Wilson attracted large crowds when he visited Italy in January 1919. But when, shortly after Wilson’s departure, Bissolati attempted to present his vision at a League of Nations at rally in Milan, he was howled down by a mob with Mussolini to the fore.5
In 1918 the London Treaty had remained a domestic political issue. In 1919 it became an international cause célèbre, a test of the significance of the new international politics. Wilson was not unaccommodating to Italy. He enjoyed the company of Orlando. Sonnino had an upright reputation as an honest dealer. To the dismay of his purist supporters, Wilson was willing to offer Italy an extremely generous settlement at the expense of defeated Austria, giving Rome full command of the Brenner Pass along with its German-speaking population.6 But the London Treaty was odious. Under its terms, for the sake of Italy’s aggrandizement alone 1.3 million Slavs, 230,000 Austrians and tens of thousands of Greeks and Turks would have been transferred to Italian sovereignty. But Sonnino was unmovable. Virtually alone amongst the conference participants he refused even to pay lip-service to the new norms.7 Though it might now be denounced by President Wilson, the London Treaty had been a solemn undertaking between Italy, Britain and France. Was a treaty to be dismissed as a mere scrap of paper, for which Italy had laid down the lives of more than half a million of its young men? For what had the Entente fought the war, if not for the sanctity of treaties? What terrified London and Paris was that if Rome had stuck to this line, they would have been faced with a stark choice between one regime of international legitimacy and another – the sanctity of treaties on the one hand and the emerging norms of a new liberal order on the other. The prospect of a head-on clash between the Europeans and Wilson left the conference in a state of deep agitation. For Lloyd George it would have been nothing less than a ‘catastrophe if the European powers and the United States’ had been divided by this legacy of the past.8
It was precisely because they realized the conflict facing them that both Britain and France had so actively supported the democratic interventionist wing of the Italian wartime coalition. If Rome would relinquish the territories promi
sed in 1915, they offered instead to support Italian claims to influence in the Adriatic on the grounds of self-determination – by way of the Italian enclaves dotted along the eastern Adriatic coastline since the Middle Ages. Ironically, it was as part of this alternative, liberal programme of war aims that the democratic interventionists first raised the claim to the Italianate port city of Fiume, which under the Treaty of London had been assigned to Croatia. This exclusion had long rankled with Italian nationalists and over the winter of 1918–19 the demand for Fiume was taken up by Orlando. Though this helped to pacify the nationalist mob, in Paris the result was damaging incoherence. In an outrageously assertive memorandum presented to the Versailles conference on 7 February 1919, Rome claimed both its rights under the Treaty of London and Fiume, on grounds of ethnic self-determination.9
Fiume may have been an Italian town, but its hinterland was clearly Slav. Furthermore, it was the only major port city of the new Yugoslav state. President Wilson was willing to impose a severe peace on what was left of Austria. But the interests of Yugoslavia, an Entente ally, had to be defended. Wilson’s experts were adamant that to make any concession to Italy would be to succumb to the worst habits of the ‘old order’.10 Britain was desperate not to clash with Wilson and was sponsoring the new Yugoslavia. Orlando’s demand for both the honouring of the London Treaty and Fiume gave Arthur Balfour, the Foreign Secretary, the chance he needed. It was not London but Rome that was overturning the spirit and the letter of the 1915 agreement. In light of the Italian demand for Fiume, Britain no longer felt bound by the embarrassing terms of the London Treaty.11 The French were more vulnerable to Italian pressure than the British. But to exploit that weakness Rome would have needed to act fast. Once the Big Three had reached agreement on Germany in early April, Clemenceau set his face against Italy. On 20 April as Orlando realized his predicament, there were embarrassing scenes as the Italian Prime Minister was reduced to tears.12 On 23 April at Wilson’s insistence, France and Britain jointly declared that Fiume would remain as part of Yugoslavia.
This was followed by a further unprecedented step. Over the head of the official delegation of a friendly government President Wilson issued a manifesto to the Italian people. America was ‘Italy’s friend’, the American President declared. The two countries were ‘linked in blood as well as in affection’. But America had been privileged ‘by the generous commission of her associates . . . to initiate the peace . . .’ and ‘to initiate it upon terms she had herself formulated’. The United States was now under a ‘compulsion’ to ‘square every decision she takes a part in with those principles’. Wilson chose not to mention the fact that in October 1918 Italy had protested the armistice negotiations and argued against the inclusion of the 14 Points. Now he asked Italians to accept that America was bound. ‘She can do nothing else. She trusts Italy, and in her trust believes that Italy will ask nothing of her that cannot be made unmistakably consistent with those sacred obligations.’13
This direct appeal to the Italian population was the most dramatic expression of Wilson’s distance from Europe’s political institutions. If the British were regarded as imperialist recidivists and the French as ‘selfish’, the Wilsonian attitude toward the Italian political class was little short of contemptuous. In the wake of the military disaster at Caporetto in October 1917, US propaganda had been welcomed into Italy by the Orlando administration both as a sign of the new government’s liberalism and as a substantial contribution to morale.14 By August 1918 American speakers in southern Italy claimed to have encountered audiences that ‘worshipped’ the name of Wilson and had memorized entire passages from his speeches. To Charles Merriman, the chief of US propaganda, it seemed that Wilson should simply bypass the ‘unpopular stench’ that was ‘called government’ in Italy. If he put himself forward to the Italian population as their true leader, Wilson ‘could so easily capture the whole situation for himself and do it in a perfectly legitimate and natural way’. All he had to do was to ‘come down and play moral politics to the crowded and expectant galleries’.15 The Wilsonians had hoped to put this to the test during the President’s tour of Italy in January 1919, but Orlando denied Wilson the chance to address the adoring crowds in Rome. Now Wilson was making up for lost time. For his press secretary Ray Stannard Baker, Wilson’s challenge to Rome marked the ‘greatest moment of the Conference’, bringing ‘to the surface’ the ‘two forces which have so long been struggling in secret’.16 Nor was Wilson content to rely on public diplomacy. On 23 April, whilst he approved an urgent $100 million credit for France, he ordered the suspension of any further financial assistance for Italy.17 When Stannard Baker warned Orlando’s aides that America would soon be ending support for the lira, the President applauded.18
The point was not lost on Orlando. Wilson, he spluttered, had ‘addressed himself directly to the people of Italy along the lines which he had used to eliminate the Hohenzollerns as the ruling class of Germany’.19 As was clear to all present at the conference, the American President had challenged the Italian Prime Minister’s right to speak for his people.20 On the evening of 24 April, Orlando and Sonnino quit Paris to hold counsel with the cabinet and the Italian parliament.21 In truth, both men were increasingly isolated not only in Paris, but within the Italian political class. Sonnino was no longer radical enough for the far right. Orlando had ruined his credentials with the left. But dissatisfaction with the government was emphatically not the same as being willing to accept an American President dictating terms to Italy. Even pro-war, pro-American voices such as Bissolati or the socialist Salvemini were indignant. They had not imagined that a ‘peace of equals’ would imply that Italy would be placed on the same footing as the rough and ready nation state of Yugoslavia. As Salvemini saw it, Wilson was venting on Italy his frustration at the shipwreck of his larger vision at the hands of Britain and France. Why did Wilson not have the courage to explain to the American people that if they demanded recognition of the Monroe Doctrine, other nations were entitled to the consideration of their regional interests too?22 Wilson was ‘remaking his virginity’ at Italy’s expense.23
With tempers running high, the Chamber of Deputies gave Orlando a resounding vote of confidence. In Rome there were outrages against the American flag. The embassy, Red Cross and YMCA buildings had to be placed under armed protection.24 But this did not resolve the impasse in Paris. Orlando waited to be invited back to the conference. But no call ever came. Italy was important, but in truth it was not indispensable to the new order. The League of Nations Covenant was slightly amended to allow Italy to join at a later stage. The Big Three presented Germany with the peace treaty on 7 May and Orlando and Sonnino were left to slink back to Versailles without fanfare. They returned because not to do so would have turned Italy’s victory into a dangerous isolation on the international stage. At the very least the country was in desperate need of coal deliveries from Britain and financial relief from America.25 In 1913 Italy’s coal imports had run at a rate of 900,000 tons per month. In the last two years of the war they had been throttled to barely 500,000 tons.26 Its grain imports were similarly starved. Italy desperately needed the cooperation of its wartime allies. But as several further humiliating rounds of argument were to reveal, the Italians would be granted neither the full extent of the London Treaty nor the national totem of Fiume.