by Adam Tooze
In December 1926 the franc was stabilized at the aggressively priced exchange rate of 124 to the pound, or roughly 25 to the dollar.21 This inflicted a heavy loss on France’s domestic creditors. It increased the cost of imported goods into the country, but it also helped to bolster exports and made it extremely attractive to purchase French assets, bringing an unprecedented flow of gold to Paris. The stabilization not only asserted the durability of the French Republic. Poincaré was drawing conclusions from the humiliating settlement imposed on France after its victory in the Ruhr. Back in 1924 France’s financial weakness had laid it at the mercy of Britain and America. In the autumn of 1926, however, the gold flowing into the Bank of France helped, as its governor put it, to ‘reinforce in international relations the prestige and independence of the country’.22 Poincaré chose rather more dramatic language. Through their ‘internal effort’ his French countrymen would free themselves from the ‘yoke of Anglo-Saxon finance’.23 By the summer of 1927 Paris had accumulated gold and foreign exchange reserves totalling $540 million. It did not match the $6 billion France owed Britain and the United States in war debts, but it was a useful masse de manoeuvre with which to counterbalance any financial pressure, particularly from the Bank of England.24
Table 13 Doux Commerce: US Private Long-Term Foreign Investment, December 1930 (million $)
II
The Washington treaties in 1921 had halted the arms race in capital ships. In 1924 the Dawes Plan, whilst setting the stage for the economic restoration of the post-war system, defanged the Versailles Treaty. In effect, it precluded any further use of the French Army to ensure compliance. But this begged the question. Who or what would provide for the security of Europe? In the autumn of 1924, to compensate the French for the humiliation dealt to them over the Dawes Plan, Prime Minister Ramsay MacDonald joined Édouard Herriot at the League of Nations to launch a plan to beef up the League Covenant with a compulsory arbitration procedure, backed by an automatic sanctions regime and a major new disarmament initiative. But the momentum behind the so-called Geneva Protocols dissipated when Britain’s first Labour government was toppled in October 1924. Though the incoming Conservative Foreign Secretary, Austen Chamberlain, was a true Francophile, the rest of the Tory cabinet did not want to shackle Britain to a system of compulsory League arbitration.
Furthermore, the Geneva Protocols had produced a startlingly hostile reaction from Washington. Rather than welcoming the European initiative, Secretary of State Charles Evans Hughes responded that given the stiffness of the proposed sanctions mechanism, the United States would have to regard the League as potentially hostile.25 The US would not tolerate a maritime blockade unilaterally imposed by the British and French navies, even if this had the backing of the League of Nations. For the British the jeopardy in which they had found themselves during 1916, facing a potentially hostile United States in a transatlantic stand-off, had come to seem a nightmare that they must avoid at all costs.26 The only solution agreeable to Hughes was for Washington to be given a veto over the implementation of any League sanctions. But as Chamberlain pointed out, that would be to place Washington on a par with the collective authority of the League and would thus confer on the United States the status of a ‘super-State . . . a court of appeal from all proceedings of the League’. When Britain’s ambassador in America, Sir Esme Howard, replied that ‘we all have to face facts sometime’, Chamberlain shot back that ‘there is a difference between recognition of a fact and public proclamation of its consequences’.27
Chamberlain himself would have preferred to renew the offer of a bilateral British security guarantee for France. This was strongly supported by the British chiefs of staff. In a fiercely worded memorandum in February 1925, Britain’s senior soldiers insisted that it was misleading to regard such a promise as a concession to France. It was a matter of essential British self-interest and ‘only incidentally a question of French security . . .’. The war had revealed that ‘The true strategic frontier of Great Britain is the Rhine; her security depends entirely upon the present frontiers of France, Belgium and Holland being maintained and remaining in friendly hands.’28 The problem was that the French would not be satisfied with a Rhine guarantee. They wanted comprehensive military backing for the frontiers of eastern Europe. This was too much for London to contemplate. The return to the gold standard required maximum economy, not even greater commitments.29 Instead, on 20 March 1925, London announced that it was taking up a proposal made by Germany for a Rhineland security pact. This would guarantee the western borders of Europe and normalize relations with Germany by bringing it into the League. It would also have the effect of ensuring that Germany remained firmly bound to the ‘system of the West’.30 The terrifying Rapallo scenario of a Russo-German alliance would be banished.
The results of this process of compromise were the Locarno Treaties, ratified in September 1926. Notoriously, though they secured Europe’s western boundaries, they left the question of the eastern frontiers open. Germany and Poland remained unreconciled. The road to German expansion in the East was not barred shut. But as a great-power security system this was not the chief deficiency of the treaties. The real problem was not in the East, but in the West. The basic question was the attitude of America. Without backing from America, could Britain and France really contain German aggression whether directed eastwards or westwards? In 1927 it was Paris that took the initiative to try to re-engage the United States with Europe. On 7 April, the tenth anniversary of America’s entry into the war, Aristide Briand proposed to Washington a bilateral security treaty between France and the US.31 The State Department was loath to enter into any such special relationship. But given the prevailing public sentiment, the Coolidge administration could hardly deny the attractiveness of a non-aggression pact. As a substitute, in December 1927 Secretary of State Frank Kellogg proposed a multilateral pact to renounce war.32
On the afternoon of 27 August 1928, with Kellogg himself in attendance, 15 powers gathered in Paris to endorse a treaty that required its signatories to ‘condemn recourse to war for the solution of international controversies, and renounce it as an instrument of national policy in their relations with one another’. It was the first time since 1870 that a German Foreign Minister had been officially received at the Quai d’Orsay.33 The Germans had hoped to include the Soviets in the signing ceremony, but that was too much for Washington. Nevertheless the Soviet Union became the first to ratify what became known as the Kellogg-Briand Pact.34 In the course of 1928, no fewer than 33 powers signed on. By 1939, its signatories had reached 60 in number. It was the crowning glory of the new ideology of peace that dominated the late 1920s, a vision of the ‘world existing in peace’ as ‘normal and normative’, a world in which war was redefined as nothing less than a criminal ‘aberration’.35 Easily ridiculed, overwhelmed during the following generation by terrifying violence, the Kellogg-Briand Pact was not without historical vindication. In 1945, when the Allies were formulating the indictment of the Nazi leadership before the International Military Tribunal at Nuremberg, the main charge against the defendants was neither the familiar canon of war crimes codified in the nineteenth century, nor the relatively novel concept of crimes against humanity, let alone genocide, which as yet barely featured in the minds of international lawyers. The central point of the indictment drawn up by the American prosecutors was Nazi Germany’s violation of Kellogg-Briand, its crimes against peace.
The difference was that in 1945 the United States appeared as the conquering champion of a new era of internationalism. In 1928 both the French and the British had reason to read the Kellogg-Briand peace pact as an American evasion. How was it to be enforced? Washington had given no approval for British naval action. It had insisted that the pact be kept at a distance from the League. This did nothing to calm French anxiety. In 1923 Poincaré had responded to the Anglo-American refusal to take seriously France’s security needs by occupying the Ruhr. Now Fr
ance opted to work around the American roadblock through European cooperation. In September 1926, after welcoming Germany as a full member of the League of Nations, Foreign Minister Briand held secret talks with Gustav Stresemann.36 Since Germany could access American capital markets and France could not, it was proposed that the Reich should launch a large loan on Wall Street, allowing it to make a large down payment to France. In exchange, France would return the Saar coal mines and accelerate the withdrawal of its troops from the Rhineland.
If the aim of American policy was to drive France and Germany toward a rational solution to their differences, one might have expected Washington to welcome the so-called ‘Thoiry initiative’. But instead it chose to interpret the Franco-German proposal as an aggressive move to form a debtors’ cartel. The State Department vetoed the plan. Germany could borrow on its own behalf. But if it was to borrow for France, Poincaré must first persuade the French parliament to swallow a distasteful war debt deal. Indeed, to raise the pressure further, Washington gave notice that unless the Mellon-Berenger debt deal was finally ratified, it would present France in 1929 with a demand in cash for $400 million. True to his policy of reasserting France’s credibility, Poincaré did not blink. A titanic two-week struggle in the Chamber of Deputies in July 1929 over the American war debts was the last act of his political career. It broke his health and forced him into retirement at the age of 69, but ratification of Mellon-Berenger put the seal on the restoration of French credit-worthiness.37
Britain too was torn between conflicting impulses. There was intense frustration in Baldwin’s Conservative government over continuing American challenges to the legality of naval blockade. The UK Treasury fumed over every instalment of the war debts. By 1928 there were the rumblings of a strategic realignment. Perhaps London’s gamble on a strategic relationship with America had been a mistake. Perhaps Britain would do better to rally the empire as a counterweight to the United States. Or perhaps Britain ought to join France in pushing for a consolidated European bloc, including Germany and the Benelux countries. But London hesitated. Any move away from Washington was fraught with risks. If Britain were to pit the empire against the United States, the likely result would be the defection of Canada, which as part of the new and fuller conception of Dominion status had been granted permission to open its own embassy in Washington. If, on the other hand, Britain chose to pursue the European option, this would give enormous leverage to Germany. As the Foreign Office recognized, the United States was ‘a phenomenon for which there is no parallel’ in Britain’s ‘modern history’. The advantages to Britain of cooperating with the US were vast, whereas confrontation was unthinkable.38 Like the French, the British government resolved not to back away, but instead to attempt to consolidate the transatlantic relationship.39
This resolve was only reinforced when Labour under Ramsay MacDonald took office for a second time after the general election of 30 May 1929. As a convinced Atlanticist and Francophobe, MacDonald’s overriding priority was to patch up relations with the United States. He was all the more enthusiastic to be dealing with the quintessential exponent of interwar progressivism, the freshly elected Herbert Hoover. As Trotsky mockingly remarked, it was no longer Anglo-French talks that mattered: ‘If you want to discuss seriously then take the trouble to cross the Atlantic.’40 MacDonald became the first of a long line of European statesmen eager to inaugurate his term in office with a trip to America. In October 1929 at the President’s rustic retreat at Rapidan Camp in Virginia, sitting on opposite ends of a tree trunk, out of earshot of the panic on Wall Street, Hoover and MacDonald settled the agenda for what the newspapers promised would be a new, comprehensive naval disarmament conference to be hosted in London early in 1930.41
III
Robust as these structures appeared to be and resilient in the face of disappointment, if the Locarno Treaty was one anchor of the post-war order and the Pacific treaties signed at Washington were the other, then a striking feature of this new geopolitics was that it was incomplete. ‘In between’ Locarno and Washington loomed the Eurasian land mass dominated by the Soviet Union. Conversely, as seen from the point of view of Moscow, the marches of the new world order – Poland and China – appeared in the mid-1920s as twin arenas in the ongoing struggle between revolution and counter-revolution. In this struggle Moscow was on the defensive. The fact that Poland’s borders with Germany were ostentatiously excluded from the Locarno Treaty was no doubt cause for anxiety in Warsaw. But when Marshal Pilsudski staged a coup d’état in May 1926, it was in Moscow that the alarm bells rang.42 The Soviets only too well remembered his aggression six years earlier.
Pilsudksi, however, was now in defensive mode. His aim was to maintain the balance within the multi-ethnic Polish state, to uphold the status quo between Poland and the Soviet Union and Germany, and to do everything possible to modernize the Polish economy and the military. It was indicative of the balance of forces in the mid-1920s that Pilsudski estimated, quite correctly as it turned out, that neither Russia nor Germany would have the strength to mount an attack on Poland in the next ten years. It was no doubt alarming that Germany and the Soviet Union had followed up on Rapallo in April 1926 by concluding a neutrality and non-aggression pact. But unlike the non-aggression pact between those two countries in 1939, this one was truly defensive. Berlin’s main aim was to signal that it would play no part in a Polish attack on Russia instigated by France and Britain. Stresemann showed no inclination to resume the dangerous balancing game of Rapallo. When Soviet invective against Poland escalated to an alarming extent in the summer of 1927, Germany acted as a go-between, assuring the Soviets that Britain and France had no aggressive intentions and warning Moscow against any precipitate action of its own.43
With the West apparently stabilized, the question looming over the Comintern was whether in Asia too it faced a roadblock. Britain had restored its grip on India. Relations between the Western Powers and Japan were from the Soviet point of view alarmingly amicable. But China remained unsettled. At Versailles and Washington, Japan and the Western Powers had demonstrated their refusal to take Chinese nationalism seriously. The question was who would take advantage of this situation. In September 1924 factional fighting once more erupted along the eastern seaboard of China. But this was no ordinary warlord skirmish.44 For the first time Chinese generals deployed modern, World War I weaponry on a large scale. The Zhili faction and the ‘Jade General’ Wu Peifu, who took the Yangtzi valley in October 1924, seemed poised to assert their control across China. Given the bellicosity of Wu Peifu this was alarming both to the Western Powers and Japan. Japan’s Western-oriented Foreign Minister Kijuro Shidehara, a protégé of Marquis Saionji, wanted to avoid an open breach with the Washington principles, but the Zhili faction had to be stopped. Instead of unleashing the Japanese Army, Tokyo poured weapons into the armouries of Zhang Zoulin, the Manchurian warlord, and used huge bribes to break up the Zhili faction.45 By 1925 Wu Peifu’s coalition was disintegrating and as the momentum of unification reversed, Chinese politics degenerated once more into discreditable and murderous incoherence.
Washington heartily disliked Wu Peifu’s nationalism. Meanwhile for France and Britain the chaos in China was not the worst of all worlds.46 They could live with disorder so long as they could guard their spheres of interest and no Nationalist challenger emerged. But Wu Peifu’s incursions into the south had put their interests in play as well. On 30 May 1925 British police in the Shanghai concession opened fire on patriotic Chinese demonstrators, killing a dozen and wounding scores more. This gratuitous display of violence sparked an upsurge in patriotic sentiment not seen since 4 May 1919. Within weeks more than 150,000 workers in Shanghai had joined a protest strike. The result was to throw open the door to a force more menacing even than Wu Peifu – the Guomindang and the Comintern.
In the north of China the warlords drew their advisors and increasingly sophisticated armouries from the vast surplus stocks of the Entente. By
contrast from early 1923 onward, following the Sun-Joffe Declaration, the Nationalists looked to Moscow. On 6 October the revolutionary activist Mikhail Borodin arrived in Canton to provide on-the-spot guidance in the reconstruction of the Nationalist movement as a mass party.47 At the first modern National Congress of the Guomindang Party in January 1924, 10 per cent of the delegates and 25 per cent of the central executive committee members were Communist. Sun Yat-sen opened the conference with a proclamation of anti-imperialism. As a sign of respect the Congress adjourned for three days to mourn Lenin’s death that month. The Soviets reciprocated amply. To make good on Lenin’s vision of a United Front, they dispatched over 1,000 advisors and $40 million in funds to back their new allies, a far larger commitment of revolutionary resources than Moscow had ever attempted in Europe. On the Soviet model, the Guomindang set about constructing a politicized military. The Soviet civil-war hero Vasily Blyukher acted as chief military advisor. Sun Yat-sen dispatched his up-and-coming new military leader Chiang Kai-shek for training to Moscow. To indoctrinate the rank and file, party cells were organized within each military unit. A newly founded military academy on Whampoa Island was to shape a young generation of Nationalist military leaders. The school’s political commissar was Zhou Enlai, who had joined the Communist Party and become a loyal agent of the Comintern whilst on a work-study scholarship to Paris and Berlin in 1919.