Liberalism at Large

by Alexander Zevin

  Dissent reached a fever pitch with the fall of the Liberal government and the rise of a coalition in 1915 – which Hirst greeted with sardonic approval, as the latest treachery from Asquith. Desperate to remain prime minister, Asquith had agreed to share power with the Conservatives, so as to avoid tough questions about his responsibility for munitions shortages and the disastrous expedition to the Dardanelles that May.107 ‘I am not sorry to see the organised hypocrisy of Liberal Imperialism based upon the unholy alliance of Jingoism and Socialism falling to pieces’, Hirst told C. P. Scott, owner of the Liberal Manchester Guardian, heaping scorn on the ‘foul Lord Northcliffe pogrom of people with German names’ and the imperialists of all parties, ‘with their idiotic resolution of destroying the German nation’.108 Mounting calls for conscription had a simple goal: ‘discipline and enslave the working class and keep down Ireland’.109 By 1916, Hirst hoped that the Conservatives would take over the leadership: let them take the blame for breaking strikes, military blunders, and the brutal repression of the Easter Uprising in Ireland. If Lloyd George wanted to join the Conservatives in this work, still better: then his reputation would be tarnished, not that of Liberalism.110 That proud tradition lay vanquished. ‘Faith without deeds is vain’, Hirst wrote in his last full Economist leader. ‘But what of a political creed whose apostles work against it?’111

  Hirst was not alone in advocating neutrality before war was declared, but his intransigence after it had started set the Economist apart. Even many of his oldest friends from Oxford or pro-Boer days rallied to a moral defence of little Belgium. Hobhouse, Hammond, Murray and Massingham all lined up against Prussian militarism, while by 1916 Scott’s Manchester Guardian was backing Lloyd George to achieve victory ‘in a nation marshalled and regimented for service’.112 Hirst travelled a different path – urging neutrality to calm global financial markets and racing between Neutrality Committees in August, and thereafter the Union of Democratic Control. Alongside J. A. Hobson and other war critics, he published Bertrand Russell. The Cambridge philosopher and pacifist admired Hirst for his work at the Carnegie Endowment. Together the two men set out to secure a meeting with Woodrow Wilson – Russell calling on the American president to act as peacemaker to Europe in a letter to the Economist in December 1914 – while Hirst raised funds to defend Russell in his trials under the Military Services and Defence of the Realm Acts.113 In the Economist, Hirst pushed back not just against the persecution of conscientious objectors like Russell, but also censorship, xenophobia, and the ‘starvation blockade’ of Germany. This may not have impressed Lenin – who, reading the Economist in 1915, called it ‘a journal that speaks for British millionaires’ and ‘stands for peace just because it is afraid of revolution’ – but it earned Hirst powerful enemies.114

  Chief among them was the Times, whose attacks on the Economist probably counted for most in Hirst’s dismissal. The Economist’s line on conscription was one flash point, especially as it came into force in 1916. For the Times it was an obvious necessity, if only to end the chaotic practice of sending the best workmen to the front while leaving a mass of potential soldiers at home. ‘This, we suppose, is what the Economist means when it professes to think that we shall win the war through “the admirable elasticity of a free community”. The soul of Carthage was lulled by such specious phrases.’115 But it was over ‘financial patriotism’ that the Times landed the hardest blows. A column, ‘Through German Eyes’, began appearing, which quoted German journalists quoting unreliable English ones. The Cologne Gazette took heart from an Economist leader arguing that Britain would be unable to recover lost markets after the war, and that an imperial customs union to balance Germany was off the table now that colonies were being forced to develop their own wartime industries.116 In another, the Lokalanzeiger used ‘the authoritative London financial journal’ to show that the City favoured an early peace.117

  This campaign quickly took its toll, and by the end of June, The Times broke a story it had helped to create. ‘Questions are being asked in the City as to the prospects of a change in the editorial attitude of the Economist towards the war’, it wrote on 28 June, announcing Hirst’s imminent dismissal and replacement with Hartley Withers – from whom it expected a ‘distinct lack of continuity in this respect’.118 Hirst responded defiantly at first, citing the Economist’s ‘circulation and letter bag’ to show that its push for peace talks was ‘rapidly gaining ground in business circles’.119 Many letters did indeed arrive, though not necessarily from businessmen: Keynes, reacting to the Times, wrote, ‘I for one have thought the leading articles in the Economist amongst the very best things that have been written about the progress of the War and the proper attitude of decent people towards it.’120 But a week later on 8 July, Hirst was out. Given just half a column on page eleven to make closing remarks, he proudly accepted the accusation that he had imparted a ‘distressingly pacifist’ policy to the Economist. ‘If I could believe that I had hastened its advent by one day’, he wrote, referring to letters he had published in favour of peace negotiation, ‘and saved the precious lives and limbs that are lost in 24 hours, I should feel myself to have won a prize worth all the titles that Emperors shower on their favourites or Ministers on their supporters.’121 Unbowed, he immediately set up the journal Common Sense to keep up his campaign, with backing from the Liberals Hugh Bell, Percy Molteno and R. D. Holt: by 1917 the journal was a meeting spot for the ‘Lansdowne set’, which Hirst saw as the best chance to form a broad ‘Peace Party’ to displace the Lloyd George coalition that was committed to delivering a ‘knockout’ blow to Germany.122

  At the Economist, it was not just Hirst’s hostility to the war that had to be erased, but his financial pessimism – in a sense the more serious crime, with the trustees intensely nervous that this would destroy the paper’s circulation in the City. ‘You know how much we regret losing you’, wrote the elderly Eliza Bagehot somewhat sheepishly. ‘A newspaper is a curious property to be in’, but ‘the Economist is so + we have no choice but to submit to what the trustees arrange.’123 For Hirst, finance and liberalism died a twin death in 1914 – a point captured by Walter Layton, then a young staff editor, recalling the mood at the Economist at the start of war that August:

  Turning up the file for 1871 to see what had happened in the Franco-Prussian war, I came across a dispatch sent from Paris by a correspondent who had lived through the siege. In the course of his letter he said that from beginning to end of the war no bank in Paris ever closed its doors. I took the article in some excitement to the editor and suggested that we should reprint this extract to help to restore confidence on the financial front. He brushed it aside with the remark that ‘Grass will be growing in Lombard Street before the end of the year.’ I sadly left the office and did not return until I was appointed editor three years after the war ended.124

  Hartley Withers and Financial Patriotism: Rebuilding City Bonds

  ‘By 1916, Hirst had brought the proprietors of the Economist to the point of revolt’, according to Mary Agnes Hamilton.125 If so, their choice of Hartley Withers to replace him may have carried the fingerprints of two trustees in particular, Walter Wilson Greg and Eliza Bagehot. Withers’s book The Meaning of Money had ‘struck oil as a financial best seller’ in 1909, inviting comparisons to Bagehot, so that Eliza had asked him to follow it by writing the introduction to a new edition of Lombard Street in 1910.126 A seasoned financial journalist, Withers was an editor at the Times for five years, before stints at the Morning Post, the merchant bank Seligman Brothers, and as director of financial inquiries at the Treasury. Withers was also a patriot, according to his old paper: not only had he launched a National Committee for War Savings in 1916, as the author of ‘an excellent little new book on “International FinanceWool-dridge” ’, he ‘also differs considerably from the rather gloomy forecasts with which the Economist has lately been identified’.127

  If his expertise was somewhat narrower than that of Hirst, Withers shared important t
raits with him. Born to a Liverpool banker father in 1867, Withers attended Westminster and Christ Church, Oxford, before clerking for a stockbroker, and writing – mainly on finance – for outlets running from Liberal to Unionist, the Westminster Gazette and Economist to the Pall Mall Gazette and Spectator.128 Like Hirst, he had criticized British imperialism in South Africa, opposing both Boer wars, and mocking their justification on the basis of equal rights for English outlanders.129 In Stocks and Shares in 1910, he too dismissed fears of British industrial decline, and advised against the restriction of foreign investment, given the tangible benefits industry derived from it.130 Poverty and Waste, published in April 1914, prefigured one line of editorial continuity between past and future editors – funding the war from taxation rather than borrowing, eliminating wasteful luxury, to ensure fairness and keep inflation low. Withers praised most tax and welfare programs undertaken by the New Liberal state after 1906, even as he wanted to limit their expansion much more than Labour, or the Fabian socialists Sidney and Beatrice Webb.131 Nor was he hostile in principle to ‘peace and goodwill’ among nations, albeit after the First World War had revealed just how damaging modern warfare could be to the global trade and financial settlement systems. In a break with the past, national governments no longer paid their debts to enemy subjects, making it imperative to avoid another conflict on this scale. 132

  Less partisan in tone, with an affable, aphoristic turn of mind, what most distinguished Withers were his views on war and finance. Hirst’s Economist had mocked Poverty and Waste, finding the problem Withers addressed real enough – riotous living, the rich snapping up motorcars as the poor starved – but the remedy absurd: appealing to the better natures of the better-off to save and invest (so as to produce working-class necessities like houses or boots), without making any demands on them in the form of higher taxes, or curbing outlays on the army or navy.133 Though Withers conceded the arms race in Europe was an ‘appalling’ and ‘barbarous’ waste, it was ‘not self-indulgence, but a sacrifice cheerfully born’ and ‘a small affair’ compared to the ‘aggregate of our individual expenditure on extravagance and luxury’. Angell argued ‘war does not and cannot pay’; but he had failed to prove, put in Withers, ‘that it does not pay better to win than to be beaten’.134 In 1915 War and Lombard Street was just as pragmatic, explaining how manfully the City had faced the crisis in the days leading up to war in August 1914 – this ‘thunderbolt from a clear sky’, whose successful earthing was ‘the greatest evidence of London’s strength as a financial centre that it could have desired or dreamt of’.135

  Withers was a compelling choice for the Economist trustees, nervous that City readers might desert the paper after two years of relentless criticism and prophecies of doom. Withers’s International Finance, which came out just before he took the post, was a prospectus of the paper as he would run it, extolling the heroism of the City at war, and offering an optimistic vision for it afterwards. In it he pointed out the inconsistency of the charges levelled against besieged bankers – both of having started the war through the aegis of secret diplomacy, and of plotting to end it early in a negotiated peace. His work as a journalist covering financers had shown him that ‘the popular delusion that depicts them as hard, cruel, ruthless men, living on the blood and sweat of humanity’ was ‘about as absurd a hallucination as the stage Irishman’. Much of this was simply anti-Semitism, ‘that miserable relic of medieval barbarism’. Not all charges against finance were baseless, of course: Britain’s interventions in Egypt and South Africa had pecuniary motives. But in both cases bondholders and speculators ‘might have whistled for their money until the crack of doom if it had not been that their claims chimed in with Imperial policy’.136 The political reach of finance was minuscule where national honour was concerned; the half-empty Stock Exchange, restrictions on new listings, reduced broker fees, underwriting taken over by the central bank, all showed how much it had suffered from the present war.

  The post-war City would emerge even stronger from this experience, however, and in contrast to Hirst, Withers was prepared at this stage to see it bend somewhat on free trade. Greater concern would be needed on the part of underwriters to make productive loans, not loans for foreign nations to build battleships or cover deficits. ‘England may find it necessary’, he added, ‘to consider the policy of restricting the export of British capital to countries with which there is no chance of her ever being at war, especially to her own Dominions overseas.’ His assertion that finance was a ‘mere piece of machinery which assists, quickens, and lives on production’ even left open the possibility that speculation was something quite different from the system of credit that kept international trade turning over. What he did not doubt was that the City could defeat Germany and stave off the challenge of Wall Street. ‘If the war teaches her to work hard and consume little, so that when peace comes she has a great volume of goods to export, there is no reason why [London] should not retain much if not all of its old prestige in the world.’137 Doubts about the future of civilization, to say nothing of English bills of exchange, were banished.

  On the second anniversary of the war, and his first full issue as editor, the Economist announced its conversion. ‘And yet when all has been said that can be said concerning the awfulness of the calamity of this war’, it declared on 5 August 1916, ‘it would have been still worse for mankind if Germany’s claim to dominate Europe had been accepted, and if her brutal attack on Belgium had called in vain for an avenger.’ The blush of honour re-emerged. Allied exploits were praised – the ‘magnificent resistance by our French Allies at Verdun’; ‘glorious successes of the Russians’.138 Hirst had depicted Germans as worthy adversaries, if unlikely to win a drawn-out conflict with Britain. ‘No one needs to be told that if Germans beat us in the field or at sea, civilization is doomed’, blared the paper under its new editor, for the Central Powers stood ‘for ruthlessness and the rule of force, domination and destruction’.139 It now rejected peace overtures outright, or parsed them for weakness: ‘a mere stratagem designed to gain time, so that our enemies may improve their defences on the Western Front’, a ‘kite flown for the benefit of public opinion’.140 It scorned Wilson’s peace plan late in 1916 as a mask for American self-interest, spurred by fears of ethnic strife and unrestricted submarine attacks. Britain would formulate its own demands; in the meantime, a bloodletting might do it good.141 ‘Generations of prosperity had fattened us and weakened us’ – leaving ‘us’ vulnerable to Prussian militarism as well as industrial competition. ‘The war’s experience is, or ought to be, training us into lean and lusty commercial athletes, ready to work as hard as anybody, and to put as much care and keenness into the task of restoring our trade position.’142

  Withers’s most important editorial move was not so much his backing of the war, however, as his flattering focus on the role the City could play in winning it. This required more panache than regurgitating old slogans from the summer of 1914. On the one hand, the paper had to dispel a perception that profiteering was taking place. On the other, it sought to show that finance was just as important an asset to national prospects as adequate munitions, gas masks, naval convoys or conscripts. Curtailing extravagance was paramount on both fronts. Women in minks were as morally distressing as men slurping oysters. One leader pointed to an infamous article in the Herald, ‘How They Starve at the Ritz’, to indicate how ‘keenly organs of working-class opinion appreciate the manner in which the well-to-do classes are meeting the war needs by personal self-sacrifice’. Perceived lapses stirred up ‘a very critical and dangerous spirit’ among the poor, ‘which is expressing itself in crude and inequitable proposals for taxing capital’. And yet the notion that capitalists were growing rich was a fallacy. ‘The classes in receipt of rent and interest will receive a gross income which will be higher by the income payable to them on the various war loans’, it granted, ‘but, owing to a much higher level of taxation and the rise in prices, the net income of those who live o
n rent and interest will be considerably reduced.’ Against these ravages, rentiers had no defence, and the paper rejected the idea of adding to their pain by increasing capital gains, even to raise revenue.143 ‘We shall have to find for our Allies and ourselves well over £2,000 millions in 1917.’ Arthur Pigou, Alfred Marshall’s successor at Cambridge, was on the right track, urging in his recent letters to the Economist ‘a really vigorous use of the income tax … and a much higher and wider taxation of luxuries of all kinds’.144

  ‘The extent of its financial strength has, indeed, astonished’, the Economist proudly observed of the City, all the while warning that its ‘staying power’ depended on battling inflation.145 Average wage rates nearly doubled between 1914 and 1918 – outpaced only by the cost of living – with tight labour markets, rising rates of unionization, and unprecedented levels of spending.146 Anticipating this trend, the paper advocated joint action on the part of the City and the Treasury to soak up wages before they were spent, preferably on war loans. ‘We cannot more eloquently prove to our enemies our determination to maintain the cause of freedom and justice to a triumphant end than by rolling hundreds of millions into the coffers of the Treasury.’ The Economist shamelessly hawked loans to finance the war as ‘a rare and varied feast’, while all were invited to become ‘investors’, including the humblest. Terms were attractive, with guaranteed 5 per cent interest on thirty-year loans in the form of bearer bonds or registered stock, which could be used to pay death duties, and were tax-exempt for residents abroad.147 A speech from Chancellor Bonar Law explaining the reaction he expected from large investors to these offerings – as long as there was money, the war would not be hampered for lack of it, even if the government had to confiscate it – enchanted the Economist. ‘The enthusiasm with which this frank threat of financial compulsion was received by the Guildhall audience was remarkable evidence of the readiness of the City to suffer all things for victory.’148