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5. Own Gold
1.So L. S. Amery, whom Viscount Milner brought into Lloyd George’s government, described it to the Imperial War Cabinet in 1917. John Gallagher, ‘Nationalisms and the Crisis of Empire, 1919–1922’, Modern Asian Studies, 1981, p. 356.
2.Alfred Draper, Amritsar: Massacre That Ended the Raj, London 1981, p. 96; John Darwin, Britain, Egypt and the Middle East, New York 1981, pp. 66–79.
3.They supplemented the Royal Irish Constabulary and regular troops. Charles Townshend, The British Campaign in Ireland 1919–1921: The Development of Political and Military Policies, Oxford 1975, pp. 25, 43, 110. Jon Lawrence, ‘Forging a Peaceable Kingdom: War, Violence, and Fear of Brutalization in Post-First World War Britain’, Journal of Modern History, September 2003, pp. 557–89.
4.Taxes raised the rest. In 1914, Lloyd George had shocked with a £200 million budget; as premier in 1919, his first in peacetime was over £2,500 billion – remarkable even with a near trebling of prices. Stephen Broadberry and Peter Howlett, ‘The United Kingdom during World War I’, in The Economics of World War I, eds. Stephen Broadberry and Mark Harrison, Cambridge 2005, pp. 217–22.
5.Unpegging the pound in 1919 was intended as a step preparatory to a return to gold, giving the Bank of England time to regain control of markets and retain gold reserves without restricting credit during demobilization. Donald Winch, Economics and Policy, London 1969, p. 79.
6.Barry Eichengreen, ‘The British Economy between the Wars’, in The Cambridge Economic History of Modern Britain, eds. Roderick Floud and Paul Johnson, Cambridge 2004, Vol. II, p. 323.
7.Japan and India also began to seriously compete with Lancashire. Robert Skidelsky, ‘Retreat from Leadership’, in Balance of Power or Hegemony, ed. Benjamin M. Rowland, New York 1976, pp. 165, 173, 175–77.
8.For its secretary, Maurice Hankey, the Supreme War Council was the ‘germ of the real League of Nations’. Peter J. Yearwood, Guarantee of Peace: The League of Nations in British Policy, 1914–1925, Oxford 2009, pp. 48, 56.
9.11 December 1918, The Papers of Woodrow Wilson, ed. Arthur S. Link, Princeton 1986, Vol. 53, p. 366. For Bolshevism as both threat and spur to Wilson’s conception of ‘self-determination’, see Arno J. Mayer, Political Origins of the New Diplomacy 1917–1918, New Haven 1959, pp. 329–67; David Foglesong, America’s Secret War Against Bolshevism, Chapel Hill 1995, pp. 249–52. Britain played on such fears to secure US recognition of its protectorate over Egypt: Erez Manela, The Wilsonian Moment, Oxford 2007, pp. 145–47. Wilson’s visit to Manchester’s Free Trade Hall richly evoked his debt to its radical builders: Charles T. Thompson, The Peace Conference Day by Day, New York 1920, pp. 59–61.
10.Jan Smuts, The League of Nations, A Practical Suggestion, London 1918, p. 11. George Curry, ‘Woodrow Wilson, Jan Smuts, and the Versailles Settlement’, American Historical Review, July 1961, pp. 968–86; Mark Mazower, No Enchanted Palace, Princeton 2009, pp. 30–38. For Wilson, the racial hierarchy that placed white men above black at home extended outwards, and was one justification for his interventions in Mexico, Haiti, the Dominican Republic and the Philippines. His entente with Smuts in Paris had a firm basis: Manela, Wilsonian Moment, pp. 19–34.
11.Susan Pedersen, The Guardians: The League of Nations and the Crisis of Empire, Oxford 2015, pp. 40–41. In 1919, Britain secured the Afghan-Indian border using aerial bombing. Churchill had high hopes for it in Arabia and everywhere else. See David Fromkin, A Peace to End All Peace, New York 1989, pp. 422, 500; David Edgerton, ‘Liberal Militarism and the British State’, New Left Review no. 185, January 1991, pp. 138–69. At the War Office, Churchill authorized the Royal Air Force to use chemical weapons against ‘recalcitrant Arabs as an experiment’ in Iraq, writing that he did not understand ‘squeamishness about the use of gas’; against ‘uncivilised tribes … gasses can be used that would cause great inconvenience and would spread a lively terror and yet would leave no serious permanent effects on most of those affected.’ This was ‘the application of western science to modern warfare’: Alexander Cockburn, The Golden Age Is in Us, London 1994, p. 191.
12.A. J. P. Taylor, English History, p. 41.
13.Lloyd George was conscious of the parallel. Lloyd George Liberal Magazine, 1920–1923, London 1973, p. 473; Peter Rowland, David Lloyd George: A Biography, London 1976, pp. 506–7. Days lost to industrial actions soared as boom went bust: from the already high 27 million in 1920 to 85.9 million in 1921, surpassed only in 1926, the year of the General Strike: Sean Glynn and John Oxborrow, Interwar Britain: A Social and Economic History, London 1976, p. 168.
14.This, more than nostalgia, explains why bankers on the Cunliffe Committee in 1918 idealized the gold standard as seamlessly adjusting rates and prices in line with gold flows. In reality, the pre-war standard had been a gold-sterling one, depending on wide availability of the latter and requiring increasingly frequent interventions from the Bank of England to maintain. De Cecco, Money and Empire, pp. 76–102; Geoffrey Ingham, Capitalism Divided? The City and Industry in British Social Development, New York 1984, pp. 176–79.
15.As Chancellor, Austen Chamberlain slashed spending by 75 per cent between 1918 and 1920: Eichengreen, British Economy, p 323; D. E. Moggridge, The Return to Gold: The Formulation of Economic Policy and Its Critics, Cambridge 1969, p. 15.
16.Bank and Treasury worked in tandem. To restore the former’s control of money markets, impaired by the volume of Treasury bills on it, debt reduction was crucial. The demand for budgetary discipline, meanwhile, made the Treasury into the chief disciplinarian, its Permanent Secretary becoming Head of the Civil Service in 1919. Ingham, Capitalism Divided, pp. 176, 181.
17.Philip Snowden, Labour’s Chancellor, quietly dropped the proposed levy in 1923, a signal his was a ‘responsible’, ‘constitutional’ party of government. Derek Aldcroft, The Inter-War Economy: Britain, 1919–1939, London 1970, pp. 329–30; Winch, Economic Policy, p. 97. Deflation reduced the cost of loans from the US, ‘but increased the value of the much larger domestic debt and the income from them’: David Edgerton, The Rise and Fall of the British Nation: A Twentieth Century History, London 2018, p. 122.
18.Ross McKibbin, Parties and People: England 1914–51, Oxford 2010, pp. 18–20. An influx of Liberals critical of the war increased Labour’s reliance on them: Hugh Dalton, Frederick Pethick-Lawrence, F. B. Lees-Smith, Sydney Arnold all played major economic roles after 1914: Boyce, British Capitalism at the Crossroads, 1919–1932, pp. 14–18. Philip Snowden admonished not only Labour’s rank and file – monetary matters ‘must be kept free from political influences’ – but even Churchill, his Liberal predecessor, for fiscal bloat: ‘a well balanced budget is not a luxury which is to be avoided; it is a necessity which is to be provided for’, he chided: Ingham, Capitalism Divided, pp. 183, 287; Winch, Economic Policy, pp. 92–93.
19.There were dissenting views about deflation and gold inside the major parties. But until 1931 – the Liberals in 1929 partially excepted – neither adopted them. Robert Skidelsky, Politicians and the Slump, London 1967, pp. 167–89.
20.David Hubback, No Ordinary Press Baron, London 1985, pp. 12–21.
21.Keynes, Marshall and Hirst helped prepare the oft-republished work: Walter Layton, An Introduction to the Study of Prices, London 1912, vi.
22.Walter Layton, Dorothy, London 1961, p. 58.
23.Stamp, who devised the excess profit duty while at the Board of Trade; Salter and Monnet on the Allied Maritime Transport Council; Drummond as private secretary to Asquith, Grey and Balfour at the Foreign Office. Yearwood, Guarantee of Peace, pp. 48, 56; Josiah Stamp, Taxation During the War, London 1931; Salter, Allied Shipping Control: An Experiment in International Cooperation, Oxford 1921. Along with Layton at Munitions, all played major and interlocking roles in the service of post-war liberal internationalism in conferences and at the League.
24.Francis Hackett, ‘War Experts’,
The New Republic, 19 May 1917. Layton impressed Lloyd George for pointing out that Russia’s request for 13.5 million tons of munitions in a few weeks could not travel over the Russian rails capable of a quarter that much a year – and for anticipating a revolution that Lord Milner failed to see coming: Hubback, No Ordinary, p. 42; Lloyd George, War Memoirs, London 1934, Vol. III, p. 1587.
25.In May 1918, Churchill made Layton chair of the ‘Clamping Committee’, tasked with co-ordinating efforts among the 12,000 officials inside the sprawling Ministry of Munitions: Geoffrey Best, Churchill and War, London 2006, p. 81. Layton stood unsuccessfully as a Liberal for Burnley in 1922, Cardiff South in 1923, and London University in 1929.
26.Labour made Layton a peer in 1947; Churchill insisted he stand as vice-president of the Consultative Assembly of the intergovernmental Council of Europe, established in 1949.
27.Readers of the Economist were, in other words, just the sort of men the new Economics Tripos were meant to train: Marshall to Layton, 2 December 1910, in The Correspondence of Alfred Marshall, Economist, ed. John K. Whitaker, Cambridge 1996, Vol. III, p. 274.
28.‘Memoirs’, Layton Papers, TCC, Box 147, p. 25.
29.‘The Way of Peace’, Economist, 19 November 1921.
30.‘The War after the War’, Economist, 9 September 1922; ‘Downing Street and the Dardanelles’, Economist, 23 September 1922. These were likely written by Arnold Toynbee, then sending dispatches to the Manchester Guardian from Greece and Turkey, resulting in The Western Question in Greece and Turkey: A Study in the Contact of Civilizations (1922). For the controversy aroused by his criticisms of the Greek invasion of Anatolia, see Richard Clogg, Politics and the Academy: Arnold Toynbee and the Koraes Chair, London 1986.
31.‘The contingency of a purely Labour government is so remote that it is not worth further consideration’, even if business circles were bound to be astonished ‘by the bourgeois character’ of Labour in office. ‘The Passing of the Coalition’, Economist, 21 October 1922. Layton never broke more than briefly with Lloyd George, whom he saw as a main force in any Liberal-Labour or centre party of the future. In 1920, Layton declined to join Philip Kerr as political secretary to Lloyd George, but a few months later was consulting Lloyd George as well as Robert Cecil and Keynes on Eric Drummond’s offer to direct the League’s financial work. In 1924, Layton drew Lloyd George into the Liberal Summer Schools, which were initially meant to exclude him when begun in 1921. Hubback, No Ordinary, pp. 51, 54, 68.
32.‘The City suffered from the foolish egocentricity of the fly on the rim that thought it made the wheel go round.’ Yet its ‘prosperity was always based, ultimately, on Britain’s industrial strength, and not the other way about’: Sydney Pollard, The Gold Standard and Employment Policies Between the Wars, London 1970, p. 16. Although in principle the paper always denied that it put the City first, in practice it typically exemplified Pollard’s image.
33.Wayne Parsons contends that Keynesianism ‘captured’ the Economist in the early 1930s, when ‘an interventionist and managerialist consensus virtually replace the old laissez-faire, free-market principles’. The paper thus ‘ensured that the Keynesian belief in managing the market economy’ was ‘incorporated into a form of discourse acceptable to the post-war financial community’. The Power of the Financial Press, New Brunswick 1990, pp. 84–85. It must, however, be added that this form affected the substance of its Keynesianism.
34.John Maynard Keynes, The Economic Consequences of the Peace, London 1919, p. 6.
35.Robert Skidelsky, John Maynard Keynes: Hopes Betrayed, London 1983, Vol. I, p. 207.
36.Hubback, No Ordinary, p. 83; note from 8 September 1955, Layton Papers, TCC, Box 82.116; Skidelsky, Keynes, Vol. I, p. 293. Keynes’s first leader for the Economist was on ‘Shippers, Bankers and Brokers’, 6 February 1909.
37.‘Position of the Banks’, Economist, 29 August 1914. This set off a firestorm, with one banker accusing Keynes of preaching from a ‘comfortable academic armchair’: ‘Gold and the Banks’, 5 September 1914. Hirst intervened to defend the bankers, in line with his view the City could not and should not facilitate the war. ‘Policy of the Banks’, 5 September 1914. Keynes replied to both in ‘Gold and the Banks’, 12 September 1914.
38.For the dissociation of laissez-faire and free trade as a defining trait of New Liberalism, see A. E. Howe, Free Trade and Liberal England, 1846–1946, Oxford 1997, p. 228; Hirst, Hirst by His Friends, p. 17. For Hirst’s shift to an exclusively negative view of the state by the 1930s, see Gladstone as Financier and Economist (1931), The Consequences of the War to Britain (1934), Liberty and Tyranny (1935). Keynes told an audience at the Liberal Summer School in 1925 (the third Layton and Ramsay Muir ran) that only New Liberalism – in contrast to outmoded creeds like socialism or laissez-faire, or modern scourges like Fascism or Bolshevism – was capable of ‘directing economic forces in the interests of social justice and social stability’. Keynes, ‘Am I a Liberal?’, Essays in Persuasion, London 1932, p. 335.
39.‘The Peace Treaty’, Economist, 27 December 1919.
40.‘A Solution to the Reparations Problem’, 11 February 1922. Keynes pursued this further: the US needed ‘to buy more and sell less’ – lower tariffs and forgive debt – or else would be obliged to make ‘an annual present’ to cover the Europeans’ account deficits. John Maynard Keynes, A Revision of the Treaty, London 1922, p. 175.
41.‘A Lost Opportunity’, 5 August 1922.
42.Keynes and the Economist both thought magnanimity might predispose the US to a more favourable debt settlement. ‘Beating About the Bush’, 12 August 1922. Keynes added that Britain should abandon claims to pension and separation payments from Germany to encourage the French to moderation. Robert Cecil et. al., Essays in Liberalism, London 1922, pp. 51, 58.
43.D. E. Moggridge, Maynard Keynes: An Economist’s Biography, London 1992, p. 389. For the pressure on Law to accept, particularly from Baldwin and Bank governor Montagu Norman, see Robert Self, Britain, America and the War Debt Controversy: The Economic Diplomacy of an Unspecial Relationship, 1917–1941, London 2006, pp. 45–53.
44.France and Italy waited to settle until 1926, paying 40 and 26 cents on the dollar respectively. Liaquat Ahamed, Lords of Finance: The Bankers Who Broke the World, New York 2009, p. 144. ‘London’s financial community’ had ‘long ago’ decided it ‘would and could pay the debt in full’: ‘Funding the American Debt’, Economist, 3 February 1923.
45.‘Our Monetary Policy’, 15 December 1923. Keynes talked of a ‘monetary revolution’, with gold demoted from ‘despot’ to ‘constitutional monarch’: Skidelsky, Keynes, Vol. II, p. 192. Yet Keynes still favoured giving central bankers great leeway. The Bank of England was ‘one of our heaven-sent institutions’, he told The Times on 25 March 1925, ‘with no interests but the public good, yet detached from the wayward influence of politics’. ‘The Return to Gold and Foreign Lending’, in The Collected Writings of John Maynard Keynes, eds. Elizabeth Johnson and Donald Moggridge, London 1978, Vol. XIX, pp. 347–48.
46.Layton’s main concern at this stage seems to have been that handing explicit control over policy to a ‘small group of men’ would provide those who wished to politicize their decisions with a clear target: ‘Our Monetary Policy’, 15 December 1923. A managed currency was inadvisable given the ‘likelihood of many changes of Government’ and the ‘contingency the Government in power may not possess the whole-hearted confidence of a majority of the nation’: Walter Layton et. al., Is Unemployment Inevitable, London 1924, p. 44.
47.‘As long as unemployment is a matter of general political importance, it is impossible that Bank rate should be regarded, as it used to be, as the secret peculium of the Pope and Cardinals of the City’: The Nation and Athenaeum, 21 July 1923. Keynes wanted to remove the peculium, not the Pope or the Cardinals.
48.John Maynard Keynes, Essays in Persuasion, New York 1932, p. 257.
49.The US showed no sign of being a proficient or willing manager of the wor
ld economy, and Keynes unfavourably contrasted it with British noblesse oblige. ‘Alternative Aims in Monetary Policy (1923)’, ‘Speeches of the Bank Chairmen, February (1925)’ in ibid., pp. 210, 235; CW, Vol. IV, pp. 139–40; CW, Vol. IX, pp. 181, 199.
50.8 August 1925.
51.Another factor was fear the Dominions might defect to the dollar. ‘Finance or Industry’, 17 October 1925. McKenna, ex-Chancellor, was chastised for ‘grudging acceptance of gold … calculated to strengthen the feeling among the less well-informed sections of this country that the operation has been manoeuvered by the bankers in their own interests, and that it has been contrary to the interests of British industry’: ‘The Bankers’ Chautauqua’, 30 January 1926. Keynes also used annual meetings to ‘deliver homilies on the economic condition of the nation and the world’ as a board member with Layton of the National Mutual Society. Keynes, Essays in Persuasion, pp. 220–43.
52.France’s move to stabilize the franc on a gold basis at this moment only added to the pressure on sterling, to the intense frustration of the Bank of England, which accused the French of hoarding. By 1930, America held 50 and France 20 per cent of the world’s gold reserves: Skidelsky, ‘International Monetary System’, pp. 171–73.
53.‘Monetary Stability and the Gold Standard’, 10 November 1928. Norman and the other governors actively hampered the League’s financial committee from appointing a Gold Delegation: Boyce, British Capitalism, pp. 167–72. After the Young Committee met the next year, Norman asked Layton to draft a charter with Sir Charles Addis for a proposed Bank of International Settlements, choosing ‘words that would place the bank beyond the reach of governments’. For Layton this was impossible, since ‘ultimately’ and ‘in the last resort’ central banks had to have ‘at least the tacit concurrence of the Government of the day’. Norman wrote Layton a few days after their interview, ‘enigmatically and skittishly’, ‘Was it not Cardinal Newman who said that the will of God is perfect freedom?’: Andrew Boyle, Montagu Norman: A Biography, London 1967, p. 247; ‘Reparations Bank’, 15 June 1929; 6 July 1929.
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