III From the Outbreak of War in July 1914 to the Genoa Conference, 1922

Decades of research into the immediate origins of World War I have resulted in the generally accepted view that a small group of political and military decision makers in Berlin and Vienna deliberately escalated into a major war the smaller regional conflicts in the Balkans that had been going on for many years. In July 1914 they became a threat to the rest of the world, following the assassinations of the heir to the Austro-Hungarian throne, Archduke Ferdinand, and his wife by Serb nationalists at Sarajevo.

While there is still some debate on the role of Tsarist Russia in this picture, it seems fairly certain that, except for the two emperors and their advisors in Berlin and Vienna, no other men (and they were all men) were directly responsible for the ultimate mismanagement of the crisis. Not involved in this process were the ordinary men in the belligerent countries who, from the first days of August onward, were sent to the front, where a staggering nine million of them died up to 1918. Worse, the decision makers in Berlin and Vienna, knowing that the “masses” were unlikely to support a war of aggression, hoodwinked their populations into believing that they were being mobilized for the defense of their fatherland. As Admiral Karl Alexander von Müller, the chief of the Naval Cabinet and an insider at the court in Berlin, put it so cynically in his diary on 1 August 1914, “Brilliant mood. The government has succeeded very well in making us appear as the attacked.”¹

From all that is known, businessmen did not participate in the decision making either. On the contrary, they were desperately hoping that peace would prevail. We saw this in the previous chapter with respect to the British and American worries about a major war. But this was also true of many German businessmen. Albert Ballin, who had a personal relationship with Wilhelm II, is a good case in point. As will emerge in a moment, he, although powerless when it came to having a direct input into decision making in Berlin, tried his best but was ignored.

Meanwhile Germany’s recruits went to the front, just as the recruits of the other nations of Europe did, believing that—as we now know correctly—they had in fact been attacked by the Central Powers. Grossly underestimating the dynamics of modern warfare among industrialized great powers in the twentieth century, they all thought that it would be a short war and that they would be home again by Christmas 1914. Their slaughter in the trenches of the Western Front or in the war of movement in the east between Russia and the two Central European monarchies was to last over four years and cost a minimum of twenty million lives.

As to the motives of the military and political advisors around Wilhelm II and Franz Joseph II, the emperor of the Habsburg Empire, there continues to be a division of views among academic historians. On the one hand, there are those who argue that the decision makers in Berlin in particular wanted to use the Sarajevo murders for the unleashing of an all-out war against France and Russia, while they hoped that Britain would stay out of the conflict.² Other historians have insisted that in early July the German and Austro-Hungarian leaderships merely opted for a “punishment” of Serbia by Vienna, after which they planned to call an international conference that would curb Serbian ambitions on the Balkans and restabilize the Habsburg Empire.³ However, this local-war strategy that, as Bethmann Hollweg acknowledged at the start of July, was very risky, finally collapsed when on 25 July Russia appeared on the scene as the protector of Serbia, indicating that it would not permit a humiliation of its Slavic client state. By this time the German military, which had spent the previous weeks on vacation, had returned to Berlin to learn about the shipwreck of Bethmann’s localization strategy and insisted that there was no alternative to waging a war against France and Russia.

It is also important that they expected to win this war quickly under a plan that Helmuth von Moltke, the chief of the general staff in Berlin, had refined on the basis of an idea developed by his predecessor Alfred von Schlieffen:⁴ Moltke wanted to invade France and Belgium first and, expecting a swift victory in the west, then send his troops eastward to defeat the Russians, whose mobilization would not be completed until after the German conquest of Paris. In a way, this was the German generals’ solution to the problem of war between industrial nations in the twentieth century: while Norman Angell and the business community believed war to be unthinkable because of the catastrophic consequences for all countries involved, Moltke thought that a major conflict was still winnable, provided it started in 1914 and was conducted as a lightning war that lasted no more than a few weeks.⁵

As to the possibility that Britain might enter the conflict on the Franco-Russian side, the German generals did not take it seriously. The British Cabinet was expected to remain neutral, and should it decide to intervene, it would take time to raise an army and to prepare it for battle since the country did not have the draft.⁶ In other words, the war in the west would by then have been won by the Germans, just as the campaign in the east was assumed to end with a subsequent early victory over Russia.

Whatever their differences about how to interpret the beginning of the crisis in early July 1914, most historians are agreed that Moltke’s strategic gamble contained a strong dose of preventive war calculations. Apart from viewing developments inside Germany and the rise of the Social Democrats with alarm, he and his colleagues assumed that, following the loss of the naval arms race against Britain in 1911–12, the country would also find itself in a militarily inferior position once the French and Russian rearmament programs had been completed by 1915–16. There is a very telling statement that foreign secretary Gottlieb von Jagow recorded after a meeting with Moltke in March 1914:⁷ “The prospects for the future weighed heavily upon him. Russia would have finished arming in 2 to 3 years. The military superiority of our enemies’ military power would be so great then that he did not know how he could deal with it. Now we would still be more or less a match for it. In his view there was no alternative but to fight a preventive war so as to beat the enemy while we could still emerge fairly well from the struggle. The Chief of the General Staff therefore put it to me that our policy should be geared to bringing about an early war.”

This argument was apparently also adopted by the kaiser at this time. On 21 June Max Warburg, the banker, met Wilhelm II at a banquet in Hamburg, at which he found the latter in a very agitated state about Russia’s armaments and railroad building in the western parts of the Tsarist Empire. He then rambled on about war breaking out by 1916 and that in light of Russian and French military superiority at that point, it would be better for Germany to start a war soon rather than to wait until it was too late. Gloomy thoughts about the future of the Habsburg Empire also circulated throughout 1914 in Vienna, where Moltke’s opposite number, Franz Conrad von Hötzendorf, was among the advocates of a strike before the military balance had shifted against the Central Powers.

Countless historians of politics and diplomacy have meticulously analyzed the moves that the European governments, and those in Berlin and Vienna in particular, made during the last weeks, days, and hours of peace. A fair amount is by now also known about popular responses to the threat and eventual outbreak of World War I. Much less has been written on the business communities of Europe and those of Britain, the United States, and Germany in particular. Unlike the monarchs of Austria-Hungary and Germany they had no constitutional powers to declare war and hence had no direct part in Berlin’s and Vienna’s decision to unleash a major war. The question therefore is this: what role did these communities play in the summer of 1914? This question is best approached from three different angles: (1) What were the basic attitudes toward a great power conflict at this point? (2) What were the reactions of the markets and the general public, once the possibility of war appeared on the horizon and then became a reality in August 1914? (3) What actions, if any, did businessmen take to try to prevent a catastrophe?

As to the first issue, a good deal of evidence has already been presented in chapter II to show that businessmen in Europe and the United States feared a clash of arms among the great powers in the years before 1914. They accurately predicted the enormous disruptions that it would bring to the world economy and trade between the major industrial nations and had been warning of this since 1909–10, if not long before. Warburg made this point again in a different way when—as mentioned above—he saw Wilhelm II on 21 June 1914. Trying to counter the latter’s hawkish mood, he remarked that Germany “was growing stronger with every year of peace, [while] our enemies are getting weaker. Waiting could only be to the country’s advantage.”⁸ In making this point, he was evidently thinking of the country’s economic success and considered an informal commercial penetration of its neighbors preferable to formal conquest and military occupation.⁹

Warnings about the disruptive consequences of war appeared in the press and in personal statements by other businessmen in July 1914.¹⁰On 28 July, the day of the Austro-Hungarian attack in Serbia, the WSJ wrote,¹¹ “The whole world is engaged in business as never before. Industrial Germany in thirty years has far outrun military Germany. … Throughout the civilized world, villages have become mill centers; towns have become cities; empires have succeeded states, and the Empire in the modern world is commercial and not martial.” On 1 August, J.P. Morgan raised his influential voice by warning,¹² “Alarming as the news is from Europe, I am still hoping that there will not be a general war. While the gravity of the present situation can hardly be exaggerated, there is still the opportunity for a sobering second-thought of the people of Europe to prevail over their first impulses. If the delicate situation can be held in abeyance for a few days, I should expect a rising tide of protest from the people who are to pay for war with their blood and their property.” He continued, “It is idle to say that America will not be hurt by a general European war. The wholesale waste of capital involved in such a catastrophe would result in a distribution of the losses the world over, but the loss here would be infinitesimal compared with the losses to the countries immediately involved.”

Frank Vanderlip of NCB, too, believed that something unprecedented might happen if there was war. After all, “the world is so much more closely related financially than it ever was before and the commitments of every character are on so much larger [a] scale that the light of past experience is of very little use.”¹³ He felt that the crisis might be “cleared up in a few days” or “it might break into a flame that might involve all the large powers and then there would be financial chaos.” Indeed, the stock markets around the world had begun to react to the looming crisis at the end of July. On 1 August, the WSJ reported that “with the exception of the Chicago Board of Trade, every exchange in America and practically everyone in Europe” had closed on the previous day.¹⁴ As early as 27 July the Russian national bank had suspended its gold convertibility.

Meanwhile in London, the Bank of England had increased its bank rate first from 3 to 4 percent and on 31 July to 8 percent, a day later even to 10 percent. The immediate effect was a run on banks by savers and the closing of the stock markets. Bond prices and consols had also begun to fall. As Prime Minister Herbert H. Asquith recorded in his diary,¹⁵ “The City … is in a terrible state of depression and paralysis. … The prospect is very black.” On 27 July Lord Rothschild had noted in London that everyone in the City talked about nothing else “but the European situation and the consequences that might arise if serious steps were not taken to prevent a European conflagration.”¹⁶ After the Austro-Hungarian invasion of Serbia, he added on 30 July,¹⁷ “Clumsy as Austria may have been, it would be ultra-criminal if millions of liveswere sacrificed in order to sanctify the theory of murder, a brutal murder which the Servians [sic] have committed.”

Panic also occurred in France. The Paris branch of the Rothschilds advised the sale of large quantities of consols. By 28 July, German banks began “to withdraw deposits and [to] round up positions.”¹⁸ Deposit banks holdings shrank by some 20 percent and by early August the Reichsbank’s discount rate had gone up to 6 percent. Attempts to prevent disaster must also be seen against the background of popular demonstrations in major German cities warning Austria-Hungary against attacking Serbia. Jean Jaurès, the leader of the French socialists, called for an emergency congress of the Second International to be held in Brussels to mobilize the working-class movements of Europe against the impending slaughter of its members and the rest of Europe’s young men.¹⁹ But it was too late to organize this kind of resistance, and on 31 July Jaurès was assassinated by a nationalist fanatic.

As to the third issue of whether businessmen proactively tried to stop the slide into war, there is the verdict by historian Alfred Vagts.²⁰ Writing in the 1930s, he charged the German business community with too much deference, if not even cowardice, for not having used their good connections to Wilhelm II more decisively to avert what they, just as their colleagues in Britain, France, and America, acknowledged would be a catastrophe. As Vagts put it rather sarcastically, “there were the elites of politicians and bureaucrats, against whose noble work capital was, in its majority interest, too cowardly to stand up.”

There is also Ballin’s retrospective self-reproach for not having intervened more forcefully with the kaiser. He added that he had lacked the courage to do so and, not knowing of Moltke’s role, later refused to meet Jagow, accusing him that he “must carry the terrible responsibility for the stage-management of this war which is costing Germany generations of splendid people and is throwing it back 100 years.”²¹ In December 1915 he told the Reich chancellor that he “rejected all [of] Bethmann’s protestations and excuses [about the unleashing of the war] as fairy tales that he should be ashamed to tell.”²² He added, “I have spent my entire life building up something which has been of immense value to the German Reich, and then you come along with a couple of others and destroy it all.” He considered this conflict the most stupid war “that world history has ever seen,” and when Germany was defeated in 1918 and with his shipping empire in tatters, he, after several attempts to end the war and advocating the abdication of Wilhelm II, became so depressed that he committed suicide on 9 November.²³

Yet, Vagts’s criticism and Ballin’s self-reproach seem to go too far. Bankers in particular did try to get the decision makers to think twice about the wisdom of their plans. On 31 July, Rothschild endeavored to persuade the London Times to tone down its defiant language against Germany and contacted his cousins in Paris as well as Paul Schwabach in Berlin. The former were supposed to influence French president Raymond Poincaré to ask the Tsarist government to hold back as “the calamity [of a war] would be greater than anything ever seen or known before.”²⁴ He was of course also thinking of the large investments and loans that the French had put into Russia, their alliance partner since the mid-1890s.

Ballin went even further when, encouraged by Jagow, he sailed to Britain, believing that he was on a mission to prevent war altogether.²⁵ But the German Foreign Ministry, totally in the dark about Britain’s attitude, was apparently more interested in finding out, if she would stay out of the conflict. While in London, Ballin met with Foreign Secretary Sir Edward Grey, as well as with Lord Morley, Lord Haldane, and Winston Churchill. He came away with the impression—later disputed by the British and also erroneous, as events were to demonstrate—that Britain would stay out. It is possible that Ballin was so anxious to stop the outbreak of war that he believed in the success of his larger quest and did not realize that he was being used by Jagow for Berlin’s much narrower calculations of keeping Britain neutral, while Moltke launched his attack against Belgium, Luxemburg, and France in the west.

The more fundamental reason for the failure of the business community to stop the conflict at the end of July was that it was aristocrats, not businessmen, who held the political power in matters of foreign policy and above all the right to declare war. They were said to live in different universes, as not even the arms manufacturers, such as Skoda, wanted a major war.²⁶ And this also applied to the power structure in Berlin, buttressed as it was by the exclusive privilege of the monarch, enshrined in the Reich Constitution, to decide on whether to wage war or stay at peace.

What all this added up to was that, just as the demonstrations by workers in different German cities, organized to warn Austria-Hungary against an invasion of Serbia, or Jaurès’s attempt to rally the Second International proved futile, businessmen maneuvered similarly helplessly in the face of the powers held by the German and Austro-Hungarian military and their supreme commanders, Wilhelm II and Franz Joseph I. Not surprisingly, Vanderlip was among those who expected catastrophe. Writing to his wife on 30 July he was “still hopeful that the result will not be a general conflagration.”²⁷ Nevertheless, he judged to situation to be “undoubtedly very critical.” In another letter to her of 4 August, the day when Britain entered the war and the Wilson administration decided to remain neutral, Vanderlip added,²⁸ “In the quiet of the country, so far away from the actual stress of the moment, you cannot possibly have any conception of what has happened to the world. Civilization has broken down, and there is the most absolute derangement of our affairs.”

Consequently, he was now on duty by day and by night, although he also felt that “we have things as well in hand as they can be in a cyclone which is still raging.” This, he thought, was due “largely to the fact that the country is by no means awake to the extent of the calamity. We are having to think along lines and about things that men, who are now alive, never thought before.” It struck him “as if it would take some Jules Verne plot of a changed law of nature, or some equally impossible premise and then figure out what consequences would flow from that.” However, this time it was not Verne’s “fiction; it is very real and substantial.” A week later, he told Lucy Evan Chew,²⁹ “It is of course very hard to predict with any degree of certainty what the outcome of affairs in Europe will be, but it looks to me as though Paris would have far from the artistic atmosphere for a long time to come.”

Meanwhile, on 3 August, WSJ had ventured a firmer prediction that focused on the consequences that the kaiser’s decision had for Germany:³⁰ “Already the German mercantile marine is tying itself up in neutral ports, while the thrifty British vessels are doing the business. It is said that the German naval officers were daily raising their glasses to ‘the Day’ [of the great battle at sea with Britain]. It is by no means improbable that Germany, with everything to lose and little enough to gain, will in a short time be praying desperately for the night.” Indeed, Ballin’s HAPAG was the first victim of Wilhelm’s decision to wage a major war. Some 50 percent of his employees were called up. Another four thousand who were employed at the HAPAG offices around the world were interned as enemy aliens. There were also the huge material losses. The ships that happened to be in German ports became what Lamar Cecil termed a “moth ball fleet … permanently [stationed] on the Elbe” river.³¹

Others that happened to be in British or French ports around the world were immediately sequestered; those in the ports of neutral countries, and of the United States in particular, sought refuge from capture by the Royal Navy until, following the American entry into the war in April 1917, they were used to transport Allied soldiers to the Western Front. North German Lloyd’s ships suffered the same fate. Just before the outbreak of war two HAPAG and two NGL liners with some 4,100 passengers onboard were sailing in the Atlantic and were apparently caught by the British blockade. Meanwhile an embargo had been imposed on a dozen HAPAG steamers with a total tonnage of 155,000, while the tonnage of the nine NGL steamers held in American ports amounted to 123,000.

There is also the curious story of the Kronprinzessin Cecelia that illustrates the confusion that broke out with the imposition of the British blockade.³² In late July, she was on her voyage to Europe. Among her cargo were $10 million in gold bars for Britain and France. Portsmouth and Cherbourg were to be her first stops before she was to sail on to Germany. The skipper was then told to go straight to Hamburg for fear that she might be seized in Portsmouth. The Germans also wanted to get hold of the gold. But when there was no further news from her, it was assumed that she had been captured with her precious cargo by the Royal Navy—until the vessel turned up unexpectedly in Bar Harbor, Maine, on 4 August. Passengers reported that they were taken on a rather scary escape at full speed in dense fog from the waters west of the Scilly Islands back to the United States. Having continued her journey in American waters from Bar Harbor to New York, the gold was handed over to the Guarantee Trust against the promise that it would be returned to the original shippers. This seems to have happened after the requisite documents were found in Kronprinzessin Cecelia’s mail bags. Vanderlip was one of the bankers who felt greatly relieved by this outcome. The NCB share of the gold amounted to one-fifth, that is, some $2 million. They gave a further boost to its reserves that had already gone up by 25 percent thanks to the inflow of monies from abroad.

If German shipping was very badly hit, hundreds of commercial and manufacturing firms involved in international trade lost their overseas investments and the goods that were in transit to Germany or had been waiting to be exported to destinations overseas. Inbound goods were seized by the Royal Navy and its tight blockade in the North Sea. Imports to Germany were held up in the ports of neutrals. In 1913 Germany had foreign investments to the tune of 230 million pounds sterling, over 50 percent of which was outside Europe. In short, if the outbreak of war constituted an unprecedented challenge to British, American, and French finance and industry, the impact on the German economy was nothing less than catastrophic. The WSJ reported on 8 August that Britain had severed the cables that ran from New York to Germany via the Azores.³³ As Vanderlip confirmed in a letter to his wife of 11 August, the country had by then been “wholly cut off from any sort of communication.”³⁴

With a general war looming, J.P. Morgan had been confident on 1 August “that the whole American people will co-operate to restore normal conditions throughout this country at the earliest possible moment.”³⁵ And indeed, once the first shock had been overcome, the situation in the United States began to stabilize. As Vanderlip wrote to his wife on 11 August, things were certainly going well at NCB “although down in my heart are some apprehensions of the very gravest character.”³⁶ He thought it “possible that we will pull through everything without any more serious trouble than we have had.” After all, he and his colleagues had “been very fore-handed and intelligent in managing the whole situation.” Meanwhile “the country happily is keeping asleep so that everyone is keeping his head.” Nevertheless, as he wrote in another letter of 21 August to William Sloan at Colorado College, some markets remained closed, at least “for the present,” and there was little trading in securities.³⁷

Thenceforth the problems facing the United States were not so much economic as they were political, and this in turn was related to the ethnic makeup of American society. The Wilson administration was realistic enough to expect the population to wake up to the enormity of the conflict across the Atlantic sooner or later. But the president also knew that, while there was an outburst of anti-German feeling over the treatment of Belgium and a basic Anglophilia among the East Coast elites, many of whose families had emigrated from Britain, over 20 percent of the population hailed from the German-speaking lands and were, initially at least, pro-German. In light of Britain’s troubles in Ireland, Irish Americans were also hostile to the Allies, and overall it is important to emphasize that pro-British sentiments did not imply a strong popular demand to intervene on the side of the Allies.

To avoid internal cultural-political divisions, but also for economic reasons, Washington tried hard to maintain strict neutrality between the two warring blocs. The economic consideration was that the country was in a very advantageous position to supply the belligerents with agricultural produce, raw materials, and industrial goods. These exports had to be financed and, while many prewar contacts had existed with the German banking community, they had now been disrupted. Meanwhile the links with the Allies and with the London City in particular had grown closer even before the war began. Increasingly, the British-American relationship became “special” in a positive way while that with Germany went downhill.

However, this Anglo-American closeness was being undermined by the actions of the Royal Navy. Under international law, trade between neutrals was to continue. Anxious to block all supplies to Germany, including those that had initially been destined for neutral Dutch ports, Britain began to search all American vessels for contraband and to seize those goods that were deemed to have Germany as their final destination. Thus, Standard Oil of New Jersey found on 3 August 1914 that, as oil would be regarded as contraband, the company would be “unable to ship any oil whatever for the time being, as it is liable to seizure no matter what flag the vessel carrying the oil” was flying.³⁸ Worse, the carrying of contraband, the attempt to run a blockade, or the rendering of any “unneutral service” also made “neutral merchant ships liable to confiscation.” The 1909 London Naval Conference had attempted to constitute a prize court that would adjudicate disputes. But Britain had refused to accept an international solution so that “the nation making the capture of a neutral merchant ship” was free to handle cases in its own national prize court. Consequently, and much to the irritation of the Americans, Britain interpreted the prize law very narrowly. Protests led to some temporary wavering on the part of London. Still, the practice of searching American ships continued, casting a shadow over Anglo-American relations.³⁹

In the meantime, the Germans had discovered that their high seas fleet of battleships with which Tirpitz had been planning since the turn of the century to out-build the Royal Navy and, if necessary, to defeat it in a major battle in the North Sea, was not strong enough to seek an all-or-nothing confrontation. The kaiser now embarked upon a massive submarine building program. These U-boats soon began to hunt and sink British vessels in the Atlantic on their way to deliver war-essential supplies to British ports. Again, there were specific procedures under international law to be observed. A ship stopped by a German submarine had to be ordered to evacuate its crew to the lifeboats before it was torpedoed and sunk. Since submarines could accommodate only a few evacuees, the lifeboats were left to fend for themselves on the high seas.

The first British response to this tactic was to arm merchant ships with light guns against which a surfaced submarine had insufficient armor. Consequently, the Germans began to torpedo British vessels without warning from a submerged position. It did not take long for this practice also to be used against ocean liners with even greater loss of life, including citizens from neutral countries and from the United States in particular. The resulting diplomatic tensions between Washington and Berlin reached a first climax in the summer of 1915 when the ocean liner Lusitania was torpedoed. Some 1,200 passengers lost their lives, among them 124 Americans. Soon thereafter the passengers of the Arabia suffered the same fate.⁴⁰

While the Imperial Navy insisted that submarine warfare was a foolproof strategy for starving and defeating Britain, Theobald von Bethmann-Hollweg, fearful of an American entry into the war, succeeded in imposing restraints on submarine warfare. The Germans also tried to break the blockade by building large submarines to be deployed not to attack merchant shipping in the Atlantic, but to get valuable contraband cargo from the United States to Germany. Although this enterprise never got beyond its embryonic stage, there is nevertheless the intriguing case of the submarine Deutschland that in July 1916 suddenly surfaced in the mouth of the Delaware River, causing a public sensation and much diplomatic activity.⁴¹ German motives for this mission remained obscure since the skipper and other Germans refused to reveal what kinds of goods the submarine had come to load. But it may be that the Reich government also wanted to test American neutrality during this period of slightly improved relations.

All this came to an end when Bethmann lost his internal battle in Berlin against the military in February 1917. With an extremely bloody war continuing on land without a German victory in sight, the admirals once more gained the upper hand over the civilian government in Berlin, claiming that with a resumption of unrestricted submarine warfare the Imperial Navy could sink enough tonnage per month over several months to bring the British to their knees. After this it did not take long for further losses of American lives to occur. Moreover, the infamous Zimmermann Telegram, intercepted by the British and passed on to Washington, revealed that Berlin was trying to forge an alliance with Mexico with the aim of encouraging that country to start a war for the reconquest of Texas, Arizona, and New Mexico.⁴² Wilson, who had only a few months earlier made major efforts to get negotiations for a “peace without victory” started among the European combatants, angrily abandoned these initiatives and on 6 April 1917 got Congress to support a declaration of war on Germany.

These developments affected not only American popular attitudes toward Britain and Germany, but also the policies of industry, commerce, and finance. This was the period when British-American relations, the tensions over the seizure of contraband notwithstanding, became closer and closer, culminating in the American entry into the war on the Allied side. It was also the phase when German-American relations got progressively worse.

Upon entering the war, the United States became a very close ally of Britain. What London needed most was more food, raw materials, and credit. Although the country’s manufacturing industries had declined in comparison to those of Germany and America for several decades, there was enough capacity and know-how in the Midlands and the English North as well as in Scotland to churn out military hardware, now in ever greater demand to supply what had become a war of attrition in northern France.⁴³ With men desperately needed in the trenches, women took their place to produce shells and guns and other vital equipment. The United States shipped the raw materials. No less important, Britain, with its predominantly urban populations, needed cereals that British agriculture could not supply in sufficient quantities, even though many fields and meadows that had lain fallow or been used for meat, wool, und dairy production were now being plowed up for grain growing. America offered foodstuffs as well as farm implements, horses, and fertilizers.

Against unlimited German submarine warfare, now in full force, the two allies refined the convoy system. The more extensive laying of antisubmarine mine barriers also made the German effort ever more dangerous. Germany’s naval strategists had calculated that a loss of 600,000 BRT per month would bring the British to sue for peace.⁴⁴ By June 1917, this target had been surpassed with the loss of 352 Allied ships and a total of 669,218 BRT. Yet, the country refused to collapse, indicating that this particular path to a German victory was reaching a culde-sac. Instead of hunger spreading in the British Isles, mass starvation came to Germany due to the Allied blockade and German agriculture’s inability to produce more food, except for a growing black market.

American deliveries to the Allies had to be financed. Before 1917, Washington’s neutrality had prevented the granting of government credits. The Allies had to rely on the American private sector, which remained cautious as long as Washington was unprepared to underwrite such credits. There was also resistance among those connected with the German-American business community. For other bankers whose sympathies lay with Britain, it was clear from the start that Britain and France had to be given credits. With the panic and turmoil of August 1914 subsiding, Wall Street had entered into negotiations with London and Paris. As early as 6 August, the WSJ wrote that “there is every reason to foresee, beyond a short period of suspense, a great boom in business in this country, created through no effort of our own.”⁴⁵

Once again, the notes and letters of Vanderlip provide a window to how the European situation was perceived in American business circles and to the practices that they adopted. In September 1914, he was convinced that American exports could be built up over time, even if “we can hardly hope that it will be equal to the losses that are already upon us as a result of the destruction of some of the great European markets.”⁴⁶ During the same month, International Harvester, which had made major investments in Europe, announced that it would not be paying out dividends because of “the tie-up in its foreign credits.” The situation was very different back home. From Chicago to the West and Northwest there was “some considerable semblance of prosperity owing to the high prices for grain and the great crop” of that year. The American economy, Vanderlip added, will “save the world financially,” just as it was “the only thing that will save Europe from utter ruin.”

One of the consequences of America’s favorable position was that large sums of money were “flowing toward New York,” while much of industry was running on overtime.⁴⁷ And yet, all this did not cause Vanderlip, the ever cautious banker, to have “foolish ideas about New York becoming the financial center of the world.” As long as the United States remained a debtor nation as it had been before the war, “we are a long ways short of that.” However, he had no doubt that “with the complete disorganization of the world’s exchanges, we are going to play a very important part” in the larger picture. It was also reassuring to him that NCB had “a position in this field of great prominence”—until after the war when the United States had become a creditor nation and Wall Street and many big corporations began to aim at being number one in the world.

The shift became visible as early as 1915. If the United States had been running a trade deficit before 1914, the balance of trade was now turning into a surplus. Up to October 1913 American exports to Germany amounted to $48 million, as against imports from that country to the tune of $15 million. The ratios with respect to Britain in October 1913 were $71 million in exports as against $20 million in imports from there. By October 1914 trade with Germany had declined very steeply as a result of the war and British blockade, whereas exports to Britain had increased by $1 million over the previous October. According to Vanderlip, this also had the effect that “we will be able … to absorb our own securities held abroad and thus decrease our indebtedness here.”⁴⁸

And yet worries about the future and how it might affect the American economy never disappeared. When Lloyd George announced that in 1915 the Allies would be spending $10 billion on top of what the war had already been costing up to the end of 1914, Vanderlip felt “that we are getting into figures that are astronomical rather than financial.”⁴⁹ It was difficult for him “to attempt to grasp what the ultimate significance of such a creation of obligations is going to mean to the world.” He added that it was “idle for any human mind to try to predict just what all this is going to mean economically.” The only counsel he had in those circumstances was to adhere to an “extreme conservatism.” A week later, he wrote that “the tragedy” in Europe was “so great that it must, of course, be profoundly depressing, and there is no chance to forget it.”⁵⁰

So, notwithstanding the tensions over contraband seizures by the Royal Navy, the American business community began to move more closely toward their British counterparts. In December 1914 there had still been some impatience because the latter expected, not explicit American neutrality, but strict partisanship. By April 1915 Vanderlip’s pro-British sympathies were palpable:⁵¹ “The English people have handled the situation masterfully,” though he wondered “if anybody could really handle it.” He continued, “The prevailing sentiment in this country is, of course [!], all pro-allies, and nobody has any doubt of the final outcome” and “a marked success for the armies or for the English navies would be productive of about as much real satisfaction in this country as in England.” In the meantime, “the horror of the war” was also growing in the United States, with everybody feeling “a deep grief in the situation and a sense of uncertainty. … We hope that soon there will be a brighter hue to the general outlook and prospects for peace.”

Only a few weeks later came the shock of the sinking of the Lusitania that inevitably stoked anti-German feelings. Yet Vanderlip was not the only one in the American business community who was still “determined to keep out of the war.”⁵² Indeed, it seemed “hardly probable that anything within reason can be done which will arouse us into a war fever.” In this respect Wilson’s policies, he added, “really represent the country, for there is utmost aversion in everyone’s mind to our becoming a belligerent either in Europe, the Orient, or Mexico.” At the same time, he reassured Sir Felix Schuster in London on 1 June 1915:⁵³ “The United States will be found firmly and courageously on the side of civilization, no matter what such a stand may involve us in.” And so Vanderlip and other businessmen vacillated between gloom and hope for a bright future, especially for their own country. On 11 June 1915, he mentioned the “feeling of relief” around the country at Wilson’s moderate reaction to the Lusitania crisis because “no one wants war.”⁵⁴ Any earlier blue-eyed notions about the war had disappeared, for “when it becomes a contest of machine shops and chemical laboratories, whatever romance there might have been in it, fades away,” even among young men. Indeed, “we are today much further from the probability of becoming involved than we have been in a long time before.” Of course, “some untoward action [may] change all this at any time.”

Two weeks later, Vanderlip was more jubilant:⁵⁵ “What a wonderful opportunity America really has to take a great place in world finance with this ability to expand credits!” The Americans may be an insular people, and there were certainly plenty of opportunities to develop the domestic market. Nevertheless, “the next great commercial period in America … is likely to be a period of expanding foreign relationships.” If there was any problem, it was cultural, that is, a lack of training, temperament, and initiative.

With international trade no longer being what it was before 1914, the field of finance and foreign exchange became a major focus of activity, and here—although Vanderlip was “personally very pessimistic about the outlook for long-term bonds”—there emerged a trend toward not only expansion but also concentration.⁵⁶ Given the high degree of fragmentation of the American banking system, NCB and other big institutions began to realize that business as well as government were bound to become more centralized and coordinated. This trend was making rapid strides in all spheres of life from 1915 onward under the exigencies of war in Europe and the conflict’s slow “totalization.”⁵⁷ Government, business, and trade unions moved more closely together, leading everywhere to the creation of war boards. The further hope was of course that this cooperation and coordination would increase efficiencies and yield productivity gains in industry.

All this meant with respect to banking that, with the American economy doing so well, the private-sector loan business remained as alluring as it was risky. To be sure, Latin America and Scandinavia were less problematical in this respect. Russia, by contrast, was a different matter, where International Harvester still saw business opportunities in 1915. But Russia had never been deemed a safe business proposition, and in light of the lengthening of the war, American business soon began to retreat from the crumbling Tsarist Empire. At the same time there were the strained finances of Britain and France. For the moment, Britain had shouldered the main burden “of supplying credit to pay for the huge purchases being made” in the United States, which in turn created “extremely serious” fresh problems.⁵⁸ Vanderlip became so worried about all these pressures that he even began to wonder about the viability of capitalist system as a whole. He added that “here in America, of course, we are having no touch of that, but in a way our commercialism is hardened and men calculate the duration of the war in figuring out possible profits and gamble in war stocks with great recklessness.”

To the New York banker this was one reason why “there is the strongest disposition to keep America out of the struggle” in “recognition of our utter unpreparedness” and with it “a growing disposition to rectify this in some measure.”⁵⁹ And yet, he doubted that this would lead to a more fundamental “regeneration of the spirit” or to get in some other way “an adequate compensation which we must ultimately pay for this destruction of life and wealth that half the world is engaged in.” He confessed that he was “depressed over the situation in world affairs.” To him it seemed “like waking up and finding that a horrible nightmare turns out to be a terrible reality.” One aspect of this was that the intensifying interaction with Britain and France was still vexed by problems.

As he put it in a very long letter to Prince Poniatowski, his long-time correspondent in Paris, while it was right “that England did the wisest possible thing in arranging for her purchases to be made through a single channel on this side” and that it was proper for France at first to approach the same source in its discussions of “financial ways and means,” “this house [i.e., J.P. Morgan] felt that this primary approach placed it in a leading position for future discussions.”⁶⁰ Having admitted, also in later remarks, to some typical Wall Street rivalries and Morgan’s position within the system, he also agreed that there was not “the greatest cooperation on the part of our unorganized financial resources.” In fact Vanderlip expressed disappointment in not “obtaining on this side the financial cooperation to which any consideration of historic friendship and personal interest ought to have led.” By way of explanation, he referred to the large debts that the United States still had abroad from earlier years. The country had made “strenuous efforts to pay our foreign debtors what we owed them” so that it would have been “unwise” to do more for one of the belligerents. Moreover, talks that were held at the time with the Department of State in Washington, which was anxious to preserve strict official neutrality, had merely resulted “in some utterances unfavorable to this country engaging in any large loan to belligerents.” Fortunately, after the “helter-skelter” start of British and French purchases in the United States and a loan largely negotiated by Morgan, centralized purchasing had brought some order and stability. Due to Morgan’s dominance there had been further tensions over the fact that one institution, that is, Morgan, “was making very great profits.” In short, early disorganization had been followed by reluctant cooperation.

Last, but by no means least, there was the problem of the larger number of German Americans, among whom there was “a small minority of opinion favorable to the German cause,” even if “speaking broadly, there is practically but one sentiment outside of those who by racial ties are naturally committed to Germany, and that sentiment is wholly with the Allies.” Although the sinking of the Arabic by a German submarine that had meanwhile occurred had “not yet [been] digested,” it could well be that pro-Allied sympathies became “crystallized into a positive alliance.” But, as Vanderlip concluded, the country as a whole still “does not want war” and was “woefully unprepared for it.”

The continuing general reluctance of the population also explains the lack of investments in foreign securities, which in turn was also related to the developing military situation on the Western Front and in Russia. There was also the fact that some corporations, such as Union Pacific, were, under their charters, not allowed to hold foreign securities. Finally, it had to be considered that “in the boards of many institutions there may be one at least among the directors who is of German origin and strenuously objects to his institution giving financial aid to the enemies of the Fatherland.” In the end, though, Vanderlip, in his letter to Poniatowski, felt compelled to return to his more general pessimism about “the consequences that may flow from this unprecedented struggle.” Occasionally, it is true, there were references to the recovery of the United States from the destruction of the Civil War. But whatever the differences, Vanderlip expressed his faith in the ultimate redemption of the obligations that Britain and France had entered into, even if the burdens were great.

In the end, he asked his correspondent in Paris what he thought should be done. The Allies needed a minimum of $500 million between now and 1 January 1916. Should they meet that new obligation by shipping gold that the United States did not need? “Indeed, it would be a dangerous thing for us to have it.” Gold would merely add to the strong reserves that banks held already, stimulating “sooner or later” further inflation. Hence other ways of repayment had to be found. A certain amount of British securities might still be placed in the United States, but the country had no appetite for taking more French or Russian government bonds, and confidence even in Britain’s national efficiency had been shaken.

While all these dilemmas arose from the ever more astronomical costs of the war on the Allied side, the German-American relationship continued to deteriorate. As we have seen, Bethmann-Hollweg succeeded in pouring oil on the rough seas after the Lusitania and Arabic disasters. In 1916, there was another incident involving the Sussex. While Wilson was looking for ways of bringing about negotiations for an armistice and eventual “peace without victory,” Washington also stepped up its military preparedness, perhaps also because, beyond all Anglophilia among the business community, there was disappointment not only with German but also with British policy making. As Vanderlip put it in August 1915, “the decadence of England’s national virility, of which we have heard so much in the last few years and seen evidences of in her political and labor troubles” had “really come to the surface very prominently during the past year.”⁶¹ Of course “out of this war, if the Allies win, there may come a new national spirit, but England today is certainly facing the greatest crisis in her history and one which might easily take away some of her imperial prestige.”

For a long time the populations in the Midwest in particular remained opposed to a direct American involvement in the war. However, by early 1917 this mood had begun to change, and not just because of the German resumption of unrestricted submarine warfare in February. At that time at the latest even the more pro-German businessmen had given up their neutralism in despair. In the case of Jacob Schiff of Kuhn, Loeb & Co., it was the outbreak of the Russian February Revolution that had pushed him to abandon his opposition, with his bank announcing that they were now “prepared to enter Allied financing if they are wanted.”⁶² Meanwhile the Anglophile Vanderlip felt that NCB was in good shape “to meet any strain that will come as a result of war, if we are to have war.” This was so despite the fact that by then “we are loaning twice the French amount through Morgan to the English interests.”⁶³ Of course, as a precaution Vanderlip had segregated “the collateral which is American securities with a very ample margin of foreign securities.”⁶⁴

The prospect that the United States would abandon their neutrality also shifted the burdens of war finance that had hitherto fallen on the private sector. By the end of March 1917, there arose the “possibility of a very large Government bond issue,” if the country did “what it seems to me we ought to do—[i.e.,] give a great credit to the allies or certainly to France.”⁶⁵ When, on 6 April, America found itself at war with Germany, it was clear that expenditures would rise even more steeply than people had ever imagined. Now Washington took the lead in initiating bond issues, seized German vessels anchored in American ports, and intervened much more directly in the domestic economy. Following European precedent, war boards were set up. Given that the country had no compulsory military service, mobilizing and preparing American men for combat on the Western Front proved difficult. Without a standing army, it took almost a year before American troops arrived in northern France. But they landed just in time to support the French and British in their effort to repulse the German offensive of March 1918.

This was the kaiser’s last major push to achieve victory in the west only a few weeks after signing the Treaty of Brest-Litovsk, which, following the Bolshevik Revolution of November 1917, had secured an end to the war in the east.⁶⁶ By July, the American contingent had increased to close to two million, and this force made a major contribution to stopping the German offensive. With the tide now reversing and the German army collapsing, Wilhelm II was told by General Erich Ludendorff and his other military advisors that the war had been lost. It was time to negotiate an armistice with the Western Allies, which was finally signed on 11 November 1918. The United States had lost around 113,000 men. Some 220,000 had been wounded.

In light of America’s great military-industrial potential, which merely had to be mobilized to tip the scales, Wilson sent a set of peace proposals to Congress on 8 January 1918, divided into Fourteen Points.⁶⁷ Some of these referred to territorial claims and demands for autonomy and self-determination, especially in East-Central Europe. But the most revolutionary clauses postulated an end to traditional secret diplomacy, a reduction of armaments, freedom of the seas, and a general association of nations “for the purpose of affording mutual guarantees of political independence and territorial integrity to great and small states alike.”

If it was one of Wilson’s peace aims to “make the world safe for democracy” and to usher in a new era of international relations, his program ran into trouble for the first time during the armistice negotiations with Germany. Anxious to avoid serious conflicts with Britain and France, he had already withdrawn the idea to secure the “freedom of the seas” that the British government was opposed to. The French then succeeded in upending the American negotiating position on reparations: the defeated countries and Germany in particular would now be expected to pay for the damage they had caused. By the time the peace conference opened in Paris in the spring of 1919, several cracks had appeared in the wartime alliance.⁶⁸ At a most fundamental level it had become clear that neither Britain nor France was genuinely interested in creating the kind of new diplomacy that Wilsonian idealism represented. At one end of the spectrum were the Bolsheviks, who were not represented at the conference table and who were promoting a radical revolutionary vision of a new world order based on Marxism-Leninism. At the other end stood Wilson’s Western Allies who wanted to continue a diplomacy that was based on national interest and traditional power politics. The French position, strongly supported by the population, was also guided by its understandable desire to gain security against its neighbor to the east against whom they had fought two major wars in 1870 and 1914. British public opinion, already in a high state of agitation and bitterness over the huge losses in human lives and wealth and worried about the cohesion of its Empire, had been whipped up further by Lloyd George’s jingoistic campaign during the national elections in the fall of 1918.⁶⁹

If the “special relationship” between the British and Americans had been strengthened during the war, it was now beginning to fray, first at the Paris Peace Conference. In 1920–21 there were attempts at cooperation, which came under strain again at the time of the Genoa Conference in 1922, to be examined later in this chapter. Ultimately, Wilson’s wartime Allies’ resistance to his peace aims at Paris became so disconcerting to him that he dug in his heels. But the conference majority, led by Britain and France, ultimately got its way, and their victory became enshrined in a number of peace treaties signed by the vanquished in various Parisian suburbs. The most important among them, also in terms of the future development of international economic and political relations, was the treaty signed by Germany at Versailles in June 1919. It contained not only some quite painful territorial losses, a demilitarization of the Rhineland, a drastic reduction of the country’s armed forces to one hundred thousand men, and reparations clauses that soon became the object of very sharp contention, but also the Covenant of the League of Nations, the first large international organization in history. Wilson had viewed this organization as a guarantor of the new diplomacy that he had been pushing for during and immediately after the war.

The Covenant was an incomplete work. Its clauses put to rest the Wilsonian principle of self-determination. In contradiction to this principle, East-Central Europe saw the emergence of states that comprised several nationalities and ethnic groups. The consideration of the peacemakers here was to create larger entities, such as Yugoslavia, Czechoslovakia, and Poland, that were strong enough to act as a cordon sanitaire against the Bolshevik “bacillus” to the east, while at the same time facilitating the containment of a militarily weakened but demographically and economically still strong Germany, now situated between France and a belt of Eastern European states with which Paris subsequently concluded separate alliance agreements. Meanwhile, the peoples in the European colonial empires, who, partly in response to Wilson’s proclamations, had founded national unification movements of their own, were denied self-determination, and many of them had to wait until after World War II before achieving independence, often after bloody wars of liberation against European colonialism. Finally, the territories that had been under the rule of the now collapsed Ottoman Empire as well as Germany’s former colonies were put under a Mandates system.⁷⁰ Its inhabitants were told that they would continue to be administered by foreign powers, mainly France and Britain, until they were deemed to be ready for independence. The nationalist ferment that this delay created in Asia and Africa finally exploded after World War II, leading to the creation of a welter of new nation-states.

However, this is not the place to discuss the problems of the Paris Peace Conference in more than broadest outline. The point is that when Wilson returned to the United States and these results, which bore the hallmark of the old international order, were put to the U.S. Senate for approval, its members were split into three factions: supporters of the president and his bid to obtain ratification, the “irreconcilables” who totally opposed the Versailles Treaty and the League of Nations, and the “reservationists” who were prepared for the United States to join the new international organization, but only if certain conditions were fulfilled and a number of amendments inserted. In order to swing the balance in favor of passage, the president began to tour the country to appeal directly to the people and thus to exert pressure on the senators. It was on this tour that he suffered a breakdown on 2 October 1919, followed by a stroke. On 19 March 1920 the Senate rejected America’s accession to the League of Nations.⁷¹

No less disastrous for the future of Europe and European-American relations was that the peace with Germany was also not accepted, since the Covenant had, rather incongruously, been made part of the Versailles Treaty. It was only eighteen months later that the United States signed a separate peace with Germany (and also with Austria and Hungary, the two truncated remnants of the Austro-Hungarian Empire). By this time the popular mood in the United States had also turned more firmly against any further political and economic commitments to Europe. The “isolationist impulse” among parts of the American population proved stronger than the country’s desire to reach out into the postwar world, as advocated by an assortment of East Coast industrial and commercial elites engaged in international trade.⁷² In these circumstances the Europeans were largely left to sort out on their own the truly staggering socioeconomic and political legacies of World War I.

This is therefore the point at which to look more closely at the relationships that American big business developed with Britain and Germany after World War I. The best way to move into the larger question of American businessmen’s perceptions and policies toward these two economies and toward Europe more generally is to begin with Frank Vanderlip. Time and again, he had raised his influential voice on the topics of the day in letters to friends, colleagues, and men involved in the Wilson administration. He had also firmly committed himself to the organization of the war effort. He was put in charge of the government’s “war savings certificate program” and actively contributed to the war effort in many other ways.⁷³

But in early 1919, he decided to leave the NCB at age fifty-five. At the time, there was a good deal of press speculation as to why he had taken this step. There were rumors that he had fallen out with James Stillman, who had expressed a desire to take over the NCB presidency.⁷⁴Retrospectively, Vanderlip wrote to W. S. Cassell in 1933 that, as the “relinquishing of the presidency was what I wished,” he had signaled his intention to the board, provided that “my stock in the bank (I was the second largest stock-holder at the time) was taken at a price that was satisfactory to me.” Although “some members of the Board rather vigorously objected,” a settlement was eventually reached between the Rockefellers, Stillman, and Vanderlip that was satisfactory to the three parties. It seems therefore more likely that he was simply exhausted from the stresses and strains that his many jobs and activities had imposed upon him. He wanted to be free of daily chores in order to be able to read and travel and to use his great knowledge and experience to write articles and books that would influence American elite opinion.

He, who had always had wider intellectual interests, had become wealthy enough to live a more contemplative life. To be able to step back and to take a more long-term view of the future may also have been related to the fact that from the start of the war he had always seen the destructive effects of a conflict that had become ever more total, devouring millions of human lives and huge material resources all around the globe. He never doubted that the American economic and political system was strong and resilient enough to withstand the shock and secure victory against Germany and its allies.⁷⁵ When it was all over, he hoped for the inauguration of a successful reconstruction program, provided that it was launched without delay. At the same time, he found it impossible to join the optimists in the business community who expected a quick and almost automatic general recovery under the leadership of the greatly strengthened United States with its highly productive industries and powerful banks.

After his resignation from NCB, Vanderlip spent the spring of 1919 in Western Europe. His analyses of the situation there are to be found, in the first instance, in a number of letters that he wrote to friends and politicians after his return. Their tone is quite different from the optimism that many American companies exuded in the summer of 1919. Writing to W. B. Wilson, the U.S. secretary of labor, on 20 May 1919, he was quite firm that “a return to prewar conditions at an early stage” was “impossible.”⁷⁶ He had found industry and agriculture in Europe “completely disorganized.” Production costs would remain high “for some time to come which will affect world prices.” He realized how important exports had become in peacetime for an industrial system that had been greatly expanded for military production and now, that the conflict was over and conversion to civilian production took place, had to find new markets. Accordingly and as early as November 1918, he submitted a plan to improve the efficiency and quality of American production to William Redfield, the secretary of commerce in the Wilson administration.⁷⁷ It was to be “the basis of a movement which would be of great value to our industries and to our people” and “one of the incidental results would be a great stride in foreign trade.” Recommending a certification system for American goods, he wrote, “We know, as we get into the scientific management business, how essential it is, in buying large quantities of material, to have some authoritative knowledge of what it is we are buying.” While he encouraged the government to set an example, he also felt that “many large business organizations now [similarly] see the wisdom of having a real scientific knowledge of the quality and character of the things they buy.”

The problem was that this efficiency drive to increase foreign trade was of limited use if the trading partners were distressingly weak. As he wrote on 7 July 1919 after his trip to Europe,⁷⁸ “Just now, with a fresh view of the suffering of Europe in my mind, I feel that the world is really in a very seriously troubled state.” A “serious disorganization” was part of “the economic breakdown in Europe.” Anglophile that he was, he had spent some part of his trip to Europe in Britain and now reported to Frank Trumbull, a British friend in Ashdown Forest, that he very much appreciated the “difficulties of the English situation” and the pressures of American competition that had vexed British industry long before 1914:⁷⁹ “We are sending ship-plates to England” and have “recently successfully bid on rails for the Glasgow tramways.” In New England he was told that “they are now making cotton goods actually [at a] lower [price there] than they are at Lancaster,” one of the traditional centers of the British textile industry. Worse, they were “opening up a large market in the Far East.” In a letter to H. S. Pritchett in California of 16 July 1919, he confessed that he was glad to be relieved of his NCB job.⁸⁰ But not only the Russian but also the Western European situation had made him pessimistic: “The march of events in Europe seems to me to pretty well dovetail with the conclusion which I had in mind when I returned.”

Pessimism was also more generally the thread running through a book that he wrote during his return sea journey on the basis of a diary that he had kept while traveling in Europe.⁸¹ Published soon after, it garnered considerable public attention and led to invitations to give lectures about his experiences in Europe. It must be seen as a key document relating to banking and big business at this time. Vanderlip began with a description of economic conditions in northern France with its battlefields before he went on: “In picturing the devastating effect of the war on European industry, however, one must not confine the view to the Hindenburg line.” Important industries were also destroyed in Poland. Some four hundred thousand had starved there in the fighting between the Russian and German armies. Now “that great territory, the size of Kansas, is barren and without means of sustaining life. The industry of Warsaw was systematically sacked, as was that of most cities on the eastern front.” Romania, once a major exporter of grain, would, as its prime minister had told him, “be able to raise this year only a sufficient amount of food for her own population.” Finally, “Serbia was utterly despoiled.” He concluded, “If it were possible to show the exact percentage of the industrial life of Europe which has been sacrificed with shell, bomb, and incendiary torch, it would be seen that the destruction, vast as it is, bears no overwhelming relation to the whole.”

Why, Vanderlip then asked, will it be so difficult to revive European industry? He suggested to leave aside the industries of the devastated regions in northern France and to take “an unharmed industrial plant in any place located in the interior of any one of several countries.” He enumerated a few of these difficulties and then “let any American manufacturer try to imagine [that] his plant [was] faced with such a series of difficulties.” He ventured to speculate that this manufacturer, too, would have found them insurmountable. To begin with, there was the breakdown of the system of domestic transportation, compounded by the problem of a lack of raw materials, most of which had to be imported. Next there was the question of finding customers who were able to pay for finished goods. In Scandinavia or Spain they would probably have the means to settle their debt, but not in many other nations, especially those in Eastern Europe. The latter were all scrambling to obtain credit. All in all, there was a great need for goods, “but the difficulties surrounding their production and marketing are so great that up to the present time there is a condition of idleness” that was unprecedented. And so Vanderlip had come home convinced that “there can be no secure peace until the way is found to supply … credits to all industrial centers.”

After further analysis of the transportation problems, Vanderlip devoted a whole chapter to the British predicament. He reminded his readers, perhaps a bit too diplomatically, that “at no time prior to the war did she cease to make progress, although Germany and the United States in later years progressed on so much more rapid a scale that England’s premier position was being endangered.” He thought that the impression of the country “that is in the mind of the average American manufacturer who is looking forward to international competition” is that British industries had “greatly benefited by the war,” as was true of the American ones. There was also the belief “that the war would result in a great revival in British industry.” It was these notions upon which Vanderlip then poured a lot of cold water. Apart from poor housing conditions, average wages were lower “than the point at which physical efficiency of labor could be maintained.” There had been little economic change from before 1914 at home. As far as international trade before the war was concerned, “the great customer of England was the continent of Europe.” Indeed, that market had been “essential” for earning “the margin that she requires for her food imports from other countries.”

However, Britain’s European markets had experienced “an almost inconceivable disorganization.” So, unless the economies of Continental Europe were brought back to life, Britain would not be able to regain those markets. Worse than that, “our own position in international industrial markets will be in large measure influenced by England’s ability to continue successfully to compete in those markets.” The general European disarray and paralysis had now resulted in “a rapidly growing army of unemployed which was increasing directly as the demobilization of the army proceeded.” These workers had to be found jobs. Only then was there some hope that, if realized, would carry “the future of England’s industry … beyond anything ever dreamed of.”

In another chapter on the perilous state of France Vanderlip praised it for never having “stopped to count the price in courage and manhood that she must pay to defend herself from the Hun.” Maybe it was this disdain for the Germans that he did not inspect and discuss the state of the German economy. Although its industry moved to the center of the stage again a few years later, conditions were as desperate as those of Britain. To give just a few indices, by the middle of 1918 the provision of foodstuffs, if measured against one hundred points in 1913, had reached twelve index points for meat, five for fish, thirteen for eggs, and seven for vegetables. In 1920 coal production compared with 1913 stood at two-thirds, iron at one-third, and steel at 50 percent. The consumer price index had quadrupled since 1914 and the cost of living in 1920 had risen more than eightfold.

It is against this background that Vanderlip unfolded a plan that he thought could still save the situation: truly massive American credit. In fact, “the role that American banks can play in the credit situation in Europe is of vast importance and, if they will hold firmly to the line of sound commercial banking it is a role which they can play with security and profit.” However, this strategy, he continued, had to be accompanied by an American-style liberal capitalism that was based on “comfort and liberty,” and not just for a small dominant minority, but for all. After all, America was, in his view, “the greatest of democracies, pledged to the sovereign rule of majorities,” while the country “should beware of the power of minorities.” Accordingly, what had struck him “as most significant” in the state of Britain was “the changed and liberalized attitude of employers.” Vanderlip felt he had encountered this attitude among businessmen whom he had interviewed and whom he now quoted at length. The country, his interlocutors had reportedly said, would be efficient if it had a forty-eight-hour week and security against unemployment for its workforce as well as greater worker control. Here the “final step is to give labor a real interest in the profits in the business.” This would be “the lowest price at which the capitalistic regime can buy itself off from the danger of revolution,” that is, the threat of Bolshevism that was constantly on the mind of not only Vanderlip but also most other American businessmen in this period.

Even though the news that the banker brought back from his European trip was gloomy, he did not throw up his arms in despair. On the contrary, he not only was convinced that this was the great opportunity for American banking to help Europe to get back on its feet, but also asked the question, “Is New York to become the financial center of the world?” That, he added, was “a question which first arose in the minds of boasting ignorance [before the war]; but today it has become a question that is entitled to be asked in seriousness, examined with care, and answered in the light of new conditions.” This led him to a discussion of the advantages that the London City still had over the Americans. So, even if Wall Street could not yet replace London, he was convinced that the former would most certainly become “the depository of a great part of the international bank balances coming from every quarter of the world,” not least because the United States had now moved from its prewar status as a debtor nation to being a creditor country. Furthermore, “we are the greatest producers of food and raw materials and minerals in the world” so that “for years to come our commodity trade balance seems likely to run several hundred million a year in our favor.”

In Vanderlip’s eyes, the United States therefore had a great opportunity to develop a plan for the reconstruction of Europe. Certainly, the country could not simply stand apart “from the rest of the international system.” Consequently, he now proposed an “international loan to Europe.” No time was to be lost, also in light of the ever-present Bolshevik threat: “Unless there is speedy action in the direction of restarting paralyzed industry, there may follow a quick march of events toward revolutionary outbreaks in any country where idleness is continued and is followed by hunger and want.” Given the size of the international loan that would be required, it was in his view necessary to mobilize the entire financial sector. Waiting for government participation would take too long, as all legislation had to pass through U.S. Congress. Having discussed the question of loan security and other principles, Vanderlip made his appeal for the kind of huge loan that he was thinking of, “to be participated in by the United States of America, the Netherlands, the Scandinavian countries, Switzerland, Japan, those South American countries which are important exporters to Europe, and Great Britain, although the latter to perhaps a limited amount, if British interests so desired.”

This “peace loan” was to be supervised by an International Loan Commission, headquartered “in the Peace Palace at The Hague.” The commission “would determine from the facts regarding the industrial situation in each of the possible borrowing countries, the proportionate allocation of parts of the total loan to each borrowing nation.” At a later date, the commission would also decide, “in conjunction with representatives from the borrowing nations, the definite amounts of machinery, raw material, rolling stock, etc., which should be furnished.” The borrowers would “pledge a first lien upon its customs revenue to meet the interest and amortization service of that portion of the international loan allocated to that particular nation.” This, so Vanderlip ended his book, would be the first step toward “furnishing the minimum necessary to restart industry in all European nations concurrently.” To make certain that he would be heard in Washington, he wrote a memorandum [titled “1919 in Genoa, Report No. 4”] that he submitted to Colonel Edward House, Wilson’s advisor at the Paris Peace Conference, proposing “that Europe must issue Receivers’ certificates, that is to say that new loans should rank in front of all other indebtedness.”⁸² He repeated his idea of “a great international loan, the proceeds of which should be so administered as to best serve the reconstruction of industry” and then added, “The Conference of leading London financiers” later resolved “that they would be willing to join America substantially in making such a loan.”

There can be little doubt that this was a very farsighted plan that might, in some ways, be compared with the Marshall Plan after 1945, when the United States, having learned the bitter lessons of interwar politics and economics and having won another world war that it did not want, promoted the reconstruction of Western Europe, again in the face of a widely perceived threat of Bolshevism. This story will be presented in chapter VI where the differences with the post-1918 situation will also have to be discussed.⁸³ This later development, too, will be analyzed in terms of the central theme of this book, first against the background of the current chapter, then for the period 1922–33 in chapter IV, ending with the Great Slump of 1929 and the rise of Nazi Germany, and finally for the years of World War II and the post-1945 decades.

It seems that Vanderlip was not alone with his plan. As early as April 1919, WSJ had carried an article announcing that “U.S. bankers prepare to finance Europe.” By September the paper estimated that Europe needed some $5 billion as credits. Fearing a collapse of trade, John McHugh, the chair of the Commerce and Marine Division of the American Bankers Association, proposed in early 1920 to convert some $4 billion held by American investors in short-term bills of exchange into long-term investments to “open up again the flow of our [American] goods [to Europe] where they have ceased to flow.” He also tried to give this program an institutional foundation with the help of an “Edge corporation organized as a debenture bank” whose debentures would attract savings from depositors “in banks outside the main centers (New York, Chicago, Cleveland, Detroit, and San Francisco).”

There are also the ideas of former Secretary of Commerce Redfield, now president of the American Manufacturers Export Association, who took an even more long-term view than McHugh. As he put it, the problem of American manufacturers did not lie “in our lack of competing power.” Rather it was that, without branch banking of its own, all American “drafts went through banks owned by our competing countries.” The challenge was therefore for American business to show “vision and courage to do a very simple thing … [i.e., to] put American money into American-owned and American-run and American-controlled industries around the globe.”⁸⁴

Such statements show the frustrations that many American bankers and manufacturers felt that so much of international business was not transacted through New York, Chicago, or California, but through foreign banks and the City in particular. This was to be changed. New York was to become the center of global finance, so that Britain, which had already been squeezed out of its prime place in manufacturing, would also be relegated to playing second fiddle in the world of finance. It was a strategy without which the subsequent treatment of Britain in the 1920s and beyond World War II and that country’s resistance to it cannot be understood. Redfield’s vision should also be seen against the backdrop of the passage of the 1918 Webb-Pomerene Act, which mitigated the strict antitrust rules of the Sherman Act. American firms were now permitted to cooperate in international trade without fear of being prosecuted by the Department of Justice.⁸⁵

While Vanderlip’s book had a positive reception at the time, the aim of the rest of this chapter is to hold his proposals against the realities that existed first during 1919 and then to look at developments that turned the dire situation that he had encountered during his trip into a general European socioeconomic collapse. This was followed by outbreaks of political violence and attempts in 1923 at emulating the example of Benito Mussolini’s Fascist seizure of power in the previous year, that is, to overthrow, especially in Germany, the constitutional order that had been built, very precariously, in 1918–19. Once again the United States, Britain, and Germany played a key role in these developments. It took the virtual collapse of the German economy and a major crisis in the French one to find a way out, this time successfully and with the active help of American bankers and industry.

A good starting point would seem to be to look at the state of the American economy at the end of the war. By becoming a major supplier of food and military hardware to Britain and France and, from April 1917, also to its own war effort, American industry experienced a great expansion of its capacities. One indicator of this was the additional factory space that had been created. In 1915 it had amounted to some 64 million square feet; by 1918 it was 181 million. Between 1914 and 1919 the number of employees in the car industry alone rose by 162 percent from approximately 127,000 to about 343,000. Electricity generation increased threefold and iron production doubled to 37.5 million tons by 1920, far outpacing Britain’s at 8.2 million and Germany’s at 6.4 million tons.

The U.S. merchant fleet now occupied second place behind Britain’s, with a tonnage that had quadrupled since 1914 to 9.77 million. In 1918, the tonnage of merchant vessels built in American shipyards was twice the British one. Since freight rates had risen over sevenfold during the war, shipping companies kept placing large orders with the shipbuilding industry. These additional capacities were crucial to the ultimate winning of the war, but they were bound to pose a problem for the period after 1918. There was, it is true, some pent-up domestic demand due to the wartime emergency. But partly because the American involvement in World War I was relatively brief, living standards did not decline markedly and there had been no rationing as in Britain or food shortages and mass starvation as in Germany. Of course, in no way should it be forgotten that the American statistics reflected national averages and that poverty levels in the United States remained high among the lower classes and some ethnic groups, especially among African Americans in the still segregationist South and the slums of cities such as New York.⁸⁶ In this respect, the global figures of large-scale studies never tell the full story. But the literature on the more detailed picture of living conditions in various parts of the country is readily available.

As was to be expected, American industry first tried to satisfy domestic demand, which turned out to be a flash in the pan, and “postwar restocking” and export initiatives soon also ran into trouble. Domestic iron production slumped by 50 percent to 16.5 million tons by 1921, that of copper even by 80 percent; automobile output shrank by 50 percent. Soon both industrial workers and farmers were being hit hard by a slump, as wholesale prices kept rising from 100 index points in 1915 to 228 by 1920 before sinking back to 150 points in 1921. The early optimism about domestic demand now evaporated very quickly. On 15 January 1919, Forbes gave as total war damage the figure of $13.2 billion, which, the journal hoped, meant “heavy purchases of U.S. materials” by Europe.⁸⁷ The article was full of statistics about European needs and lists of what those countries would therefore want to buy from the United States. The huge losses in British shipping would, it was said, be replaced. The hopes and fears that these developments generated in American manufacturing circles must be seen together with the information on domestic and international conditions that circulated among the financial community.

Although it is difficult to know how much direct exchange there was between the bankers and the big manufacturing corporations about the situation, both were in touch with the politicians and bureaucrats in Washington and certainly both wanted something to be done long before oversupply at home put the economy into reverse gear. Creating an export outlet for surpluses required credits that would stimulate demand for American goods in Europe, much of whose own wealth had been destroyed by the war. What were the prospects of this? Judging from the available statistics, they looked good at first. In 1919, American exports reached $5.2 billion and generated a surplus of $4 billion. But, calculated in current dollars, this figure had dropped to $2.1 billion by 1921. In 1922, the surplus was a mere $700,000, reflecting a declining demand in Europe. It was exacerbated by insufficient credit that only the United States could furnish. Yet, its banks were merely prepared to give short-term loans and—a further complaint of industry—all too frequently to American agriculture, whose food exports to starving Europe were much in demand and certain to be paid for without long delays.

Thus in 1920, the United States exported grain to the value of $57.7 million, rising to $104.7 million in 1921; meat and meat product exports rose from $46.0 million in 1919 to $56.4 million a year later, before dropping to $49.0 million in 1921. The value of cotton exports quadrupled from 1919 to 1920 to $110.6 million and stayed at this level in 1921. But other industries that had expanded during the war were deeply worried about their future and were looking for export opportunities to Europe to complement declining domestic demand. How did things look in Europe?

Starting with Britain, the postwar boom there that lasted for a little over a year from the spring of 1919 was in effect due to an inflationary boost.⁸⁸ By March 1920 wholesale prices had increased by 200 percent in comparison to July 1914. Iron and steel production illustrates the severity of the subsequent slump particularly well, the more so since it was made worse by a decline in orders from manufacturing industry and a three-month strike by the miners in the spring of 1921. By July of that year all steelmaking had come to a standstill, so that by the end of the year steel production was 40 percent below its peak in 1917. Iron production was even lower at 25 percent of its 1913 peak. The downturn in coal production in comparison to 1913 was over 50 percent. Shipbuilding that, like the United States, witnessed an upswing after 1918 had dropped to some 38 percent from its peak in the fourth quarter of 1920.

The psychological impact of all this on the population was made worse by the British government’s wartime promise to reintegrate returning soldiers into their former jobs. There was also the hope of job creation through investments and imports by its American ally. With the levels of poverty high, Whitehall focused on the expansion of welfare programs to provide not only for disabled veterans but also for war widows and orphans. To make things worse, the labor reintegration program was much less successful than expected. By June 1921, the British unemployment rate reached 23.1 percent so that some 2.1 million Britons and their families had to rely on welfare benefits.⁸⁹ The annual average for the year was 15.3 percent, to which must be added some one million in part-time work. Clearly, government and Parliament had to do something about these conditions. The 1920 National Insurance Act brought some 12 million Britons into this particular system of welfare. Another wartime promise to provide better housing at affordable rents had been created by the 1919 Housing Act. None of these measures were able to stem a rising tide of protests and demonstrations that reached a first peak on Armistice Day in 1922.

Badly battered by these developments, British businessmen, headed by the Federation of British Industries (FBI), responded with attempts to rationalize production, streamline management, and put pressure on the workforce to work longer and harder and to accept lower wages. While the government and the Labour Party were in basic agreement with FBI strategy, tensions arose over the level of dividends and over whether the reduction of high prices should come before wage reductions. In short, it was not in a condition to pay for American imports, and the plight of Britain was therefore another reason why the early postwar boom in the United States was running out of steam.

In France, economic problems arose not so much in the south of the country, where agriculture was still dominant, but in the industrial North.⁹⁰ If factories had not been leveled by the fighting, the Germans had flooded the mines and wrecked the iron works on their retreat in 1918. During the war female industrial labor had increased quite tangibly. Thus the Renault car factories employed a mere 4 percent of women in 1914. By 1918 the percentage was 31.6. However, in order to create jobs for returning soldiers, women were urged to devote themselves to their families and to have children. As a result the number of births did in fact rise from 313,000 in 1913 to 403,500 in 1919—a welcome increase in light of the high wartime losses of men and the traditional French fear of being demographically far behind Germany, their dangerous eastern neighbor. All these measures did not prevent massive protests. Lorraine’s miners went on strike as early as 1919, followed by the metal workers, railroad workers, and white-collar employees in 1920, and on 1 May of that year the Confédération Générale du Travail (CGT) called for a general strike. As elsewhere in Europe, there was pressure on the government in Paris to look after the victims of the war. French casualties had been twice as high as Britain’s (1.34 million as against 700,000). So, it was not only the disabled veterans who were clamoring for support, but also widows and orphans.

A few German key figures on the collapse of production, the undersupply of basic foodstuffs, and inflation in 1918–19 were given a moment ago. Economic deprivation was exacerbated by the chaos resulting from the November Revolution and the civil war that followed in 1919 between leftist radicals in the industrial centers of the country and the Free Corps units. The latter had been raised to stop attempts by German Bolsheviks, inspired by the Leninist revolution in Russia, to seize power.⁹¹ As far as the reestablishment of economic relations with the United States was concerned, there was a good deal of perfectly understandable hatred of the Germans who were blamed for having unleashed the war and for causing the death of millions.

Playing on popular feelings, anti-German articles continued to appear in the American business press. Thus, on 3 June 1919 WSJ published a piece about the Versailles Treaty that warned,⁹² “So long as the well-known qualities of arrogance, impertinence, bad faith and hypocrisy go to make up the German mind, it is impossible to argue with the German.” Referring to the question of responsibility for the outbreak of the war, the paper added, “Germany cannot say she did not know that going to war meant risking all she had.” But even if the Allies took “all she has in public and private” property, “the damage inflicted by Germany would not be made good.”

Inevitably perhaps, there was also hostility toward German firms, most expressly with regard to the chemical industry that reveals much about pre-1914 German-American rivalries, discussed in chapter II. On 28 December 1918, Forbes announced somewhat triumphantly,⁹³ “Germany thought she had us eating out of her hands” in the field of chemicals, and this may have been true before the war. But now “our chemists have produced as good dyestuffs as Germany was ever able to make, and moreover we have not only equaled the skills of the Huns in producing pigments for the coloring of cotton, woolens, and silk fabrics, but we have in some instances excelled them.” Consequently, the “nation is now independent of German supplies of dyes and potash.” The article concluded, “For our entire chemical industry, the war has undoubtedly been a blessing in disguise. We have long been possessed of the materials and the technical brains for the work, but before the war we lacked the plants and the incentives to bestir ourselves to bring our production of chemicals up to its proper place in relation to the world’s output.” If true, this was certainly a striking reversal of fortunes in the chemical industries. And yet, behind this so blatantly articulated animosity, cooperation quietly resumed in this branch of industry as in others.⁹⁴

Many American companies—anxious to revive prewar markets in Europe—took a pragmatic approach. Even before Washington relaxed the restrictions of the Trading with the Enemy Act in the summer of 1919, American firms had made contact with their German counterparts. As early as October 1919 the Berlin government signed an agreement with Standard Oil—before 1914 an unwelcome trust with a tendency to dominate—to deliver oil and gasoline. American farmers tried to sell their surplus production to starving Germans. In June 1920 the HAPAG shipping firm made an agreement with the American Ship and Commerce Company (which was part of the Harriman empire) to cooperate. Two months later, North German Lloyd followed suit by signing a contract with the U.S. Mail Steamship Company. While this helped to restore disrupted transatlantic shipping links, the resumption of contact between Walther Rathenau’s AEG and General Electric, on the one hand, and between Siemens and Westinghouse, on the other, was no less significant. Other companies, most of which had invested in and traded with Germany before 1914, also put out feelers, among them International Harvester, Otis, Singer, NCR, and the Guggenheim copper empire. The chemicals trusts also began to talk to each other with a view to reestablishing prewar cooperation and the sharing of patents that had been officially confiscated during the war.

All these efforts at exploiting the superior post-1918 international position of the United States were moderately successful in the very early postwar period. This was also a time when American banks were prepared to extend credit lines to agriculture and industry. They, too, harbored a good deal of optimism when they considered what had been destroyed by the war and—objectively correct—now ought to be replaced. But as Vanderlip had suggested in his book, much larger sums of money were required to finance these exports and European reconstruction. It was not just Vanderlip’s reports on economic conditions in Europe but also their own observations that caused American big business to wonder whether they would ever get paid for their deliveries and whether the upheaval that the war had created in all spheres of life was so profound that Britain and Germany were not at all to be seen as the promising foreign market that the Americans were so eagerly looking for. Given these uncertainties in both the domestic and foreign markets, the recession finally hit the United States with full force in 1921.

Sensing the beginnings of this recession, America’s financial institutions were reluctant to commit themselves without guarantees from the administration in Washington. They looked at the loans that had already been given during the war—before 1917 mainly by the private sector, and after the American entry into the war by the federal government. Even at that time there had been some question as to whether the British and the French would be able to repay those wartime loans and whether government loans had priority over private ones. After 1918 it was clearly even riskier to extend credit for postwar reconstruction, all the more so since the U.S. government refused to guarantee private loans and, given the political mood in the country, was even less inclined to commit any further official funds to Britain and France, let alone Germany. Due to the war, the gross domestic debt of the federal government had increased to $25.3 billion, over $10 billion of which had gone as loans to the Allies. Banks were prepared to grant short-term domestic loans and to some small extent also to Western Europe. But what was needed was a long-term commitment to reconstruction from both the private and public sectors. Vanderlip’s American-led international loan project required billions, not a few millions.

Before dealing with the further development of an already badly tangled situation, it is useful to return to Vanderlip’s large correspondence with American business community. He was among the first whose mood had lapsed into pessimism. It is doubtful that he ever hoped that his grand European rescue plan with the Scandinavians and Swiss was more than a dream. If nothing else, achieving coordination with the banks in several countries was probably unrealistic in those years. If any one national economy could fulfill the role he had assigned in his plan, it was the American one. But only a few months after advancing his proposal, he wrote to the owner of the Robert Benson Company in London on 22 September 1919,⁹⁵ “There seems to have been nothing done in any adequate way in the direction of financing the needs of Europe.” One reason for this was that Washington “has not been disposed to forward any comprehensive movement while awaiting the Ratification of the Peace Treaty, and the bankers have been so busy with important affairs flowing over their desks that they have not seemed to feel the necessity for coordinated action for mobilizing [the] credit that I believe is desirable.” The United States, to be sure, might well experience a shock when the export drive of 1919 ran into trouble. Worse, Vanderlip could not see “how Europe can continue to pay for [American] exports on the scale that she has been paying unless new credit can be granted.” Consequently he expected Europe to pass through an “extremely serious period” in “the next few months.”

This meant, as he wrote to Ellery Sedgwick in Boston on 3 January 1920, that no loans to Europe would be forthcoming:⁹⁶ “In view of the great expansion of credit” that had already taken place, he doubted “whether we will be able to make loans” that Europe needed “if people are to be put back to work in time to save Europe from a financial breakdown.” Certainly past European expenditures, large imports, and small exports had made a breakdown a serious possibility, and “what effect that would have on our own affairs seems to me but faintly comprehended.”

Two months later, Vanderlip, writing to George Burnham in Philadelphia, put his finger on the main problem:⁹⁷ “The great difficulty in granting” credit to Europe “at the present time lies in the political instability of these governments.” Not yet quite expecting an American recession, he continued that American manufacturers had large domestic markets and were hence reluctant to sell goods abroad when payment was so uncertain. This, Vanderlip admitted, opened up a “vicious circuit” that “in truth we have [already] been travelling.” America’s banks would not “give credit because there will be risk as long as there is industrial paralysis” in Europe. Conversely, “there will be industrial paralysis until credits can be obtained with which to pay for food and raw materials.” Referring back to his book, he wrote, “The plan I proposed last May would have been large enough to have broken into that circuit.” However, by March 1920 it had become “impossible to do anything on a large scale to make funds available between now and the next harvest.” If the Europeans can tighten their belts till then, “some such plan might be helpful.” But “our inertia will be in part to blame,” should privations lead “to revolution in the meantime.” Vanderlip could not have put the dilemmas of the moment more succinctly.

In a letter to Senator Maggiorino Ferraris, dated 19 March 1920, Vanderlip harkened back to what he had urged a year ago:⁹⁸ “Had we last May recognized the economic forces at work in Europe and mobilized credit in a comprehensive effort to start European industries, I think we could have accomplished a great deal.” To be sure, some additional credit that had been given had resulted in an export surplus of $4 billion over imports. But he then enumerated once more the dangers of the situation: many European industries were still without food and raw materials, and bank credits had expanded “to a dangerous point of inflation.” There were high taxes and, while the wealthy held back with their investments, not much capital was coming from small investors either. In short, American businessmen did not “dare … make fresh loans for fear that the governments are unstable” while the latter “cannot be stable when people are cold, idle, and hungry.”

Vanderlip had reserved his worst fears for Central Europe, where revolutionary movements might lead “to the extension of the Bolshevik area.” Indeed, only a week earlier he had written to Charles A. Stone, evidently with reference to the Right-radical anti-Republican Kapp Putsch in Berlin in March 1920, that, while the news of it was not “in the least surprising,” it was nevertheless “the sort of thing that makes any serious consideration of immediate business enterprise of any kind, in Central Europe at least, out of the question.”⁹⁹ Vanderlip’s wavering between hope and pessimism continued into 1921. On 18 September, sitting in his room in the Grand Hotel in Florence, he described conditions between Europe and the United States to his colleague Dr. Norman Barnesby of the Bank of Commerce.¹⁰⁰ Those in America, he thought, were “so superior to those existing anywhere here that it makes one cheerful in comparison.” Yet he was “by no means altogether pessimistic about European affairs.” There may be “some financial smashes of governments, but Europe is [also] getting down to work.” He believed that the region was “going to pull out of this awful mess.” But a week later, he wrote to H. E. Benedict in New York: “I am extremely pessimistic about the financial conditions of several of the countries, particularly Austria and Germany, though industrial conditions” were looking up. This made him less pessimistic “overall” than he had been “two years ago.” On 30 September 1921 he wrote in another letter to Benedict that the German mark was in the crisis that he had anticipated:¹⁰¹ “I see nothing that can save it.” In short, Vanderlip was at sea and so were his colleagues.

By the autumn of 1921 it had become increasingly clear to the big business community that the reconstruction of the European economies was foundering on a set of interrelated problems stemming from the terrible costs and sociopolitical legacies of World War I. The French were concerned not only about getting reparations payments from Germany but also about their military security against their eastern neighbor. Meanwhile, the German economy was going downhill even before an exact figure of Allied reparations demands had been agreed upon by all sides. The amount was expected to be sizeable also because the Americans were not prepared to cancel the wartime loans that they had given to Britain and France. As Stephen Schuker has shown, all attempts in Congress to reduce or even cancel those debts ran into strong opposition because the American taxpayer would have had to foot the bill.¹⁰² This in turn made the American banking community increasingly unwilling to provide fresh credit on the scale that Vanderlip had outlined in his book. It might have been different if Washington had guaranteed long-term credits that were needed, but such guarantees were impossible to obtain as long as the popular mood was opposed to an official reengagement in Europe. Although the banks were in principle free to give credit, they were not prepared to take the full risk. Congress had to agree to be part of a deal, underwritten by American tax dollars, and that was impossible to achieve, at least as far as aid for Europe was concerned.

By 1921, American big business, facing a recession and looking for exports to sell its surplus production, was lobbying the administration to do something, and this time attention turned not to Europe but to the Far East and hence to transpacific relations that dated back to the pre-1914 period. Here it was to some extent a concern about the rise of Japan as an industrial power that had kept out of the war and was now also looking for markets in its immediate neighborhood on the Asian mainland. By focusing on Asia, there was also the realization that the United States did not face in the Far East the same hopelessly intractable problems as in Europe, with reparations, war loans, economic exhaustion, unstable territorial border agreements, and high popular emotions on all sides. Might it be easier in the Far East to put together a set of agreements between the great powers that guaranteed territorial integrity, security, a reduction of armaments, and expanded trade that a troubled American industry was desperately looking for in 1921 and that American public opinion was not reluctant (as with respect to Europe) to support?

These were the calculations behind a diplomatic initiative, developed by the U.S. administration, that led to a major international conference, held in Washington from 12 November 1921 to 6 February 1922.¹⁰³ After weeks of negotiations no fewer than three treaties were signed by the invitees that became collectively known as the “Washington System.” Reminding the world that the United States was not just an Atlantic power but also a Pacific one, it may be said to have represented the postwar Pax Americana in Asia after the Pax Americana and the reconstruction plan that Vanderlip and others had in mind for Europe had run into trouble and now had to wait until 1923–24. Without going into the details of the negotiations in Washington during the winter of 1921–22, they ended in three international treaties:

Given that the myth and lure of the “unlimited China market” had been propagated before and that American industry was clamoring for unencumbered access to foreign markets, it was clear that big business welcomed not only the security arrangements but particularly also the opportunities for exports that the Washington System was expected to offer. But without this being loudly trumpeted, the Open Door in Asia was also directed against the Closed Door of preferential tariffs that the British, Dutch, Portuguese, Belgian, Italian, and French Empires had maintained and, indeed, promoted.

It appears that these moves in the Far East and the American unwillingness or inability to forge a European Washington System in 1919–22, in turn stimulated the British government to try to take a lead in Europe where the Americans feared to tread. It will be remembered that Britain under Lloyd George’s leadership had been among those powers at Paris that had opposed Wilson’s ideas on self-determination, peace, and postwar prosperity. As Wilson had observed at the time “the British have appointed a lot of committees … to maintain Britain supreme commercially all over the world.” London and the other colonial powers hence thought it essential to preserve their empires with their protectionist tariffs. Thanks to the Paris Peace, they had even enlarged their possessions through the Mandates system under the League of Nations. This is where fresh cracks had appeared in the “special relationship” that the two Anglo-Saxon powers had forged during the war and that London was now hoping to perpetuate by inviting the United States to join a rescue operation of its own. But Washington remained suspicious of British motives, and after weeks of talks “considered Lloyd George’s grand scheme for European reconstruction [to be] premature at best.”¹⁰⁴

A further reason for growing tensions between the “Lion and the Eagle” (Carl Parrini) had been that Britain, seeing itself as one of the victors, was not prepared to play a secondary role in the international financial system behind the United States. The City seems to have been aware of the ambitions of Wall Street that Redfield had articulated in 1920. According to assistant secretary of state Norman Davies, the British had been afraid ever since the Paris Peace Conference that they had lost their prewar position in finance.¹⁰⁵ Hence the quest to return to the gold standard that the country had so humiliatingly had to abandon in 1918. Although exhausted by the war, Britain continued to see both its financial and its manufacturing systems to be strong enough to put forward its own solutions to the postwar crisis. If the Americans could not bring themselves to help in the reconstruction of Europe, the Empire and Commonwealth would seize an initiative. For London such an effort included the reconstruction of Bolshevik Russia that Washington, more fiercely anticommunist than the more pragmatic Britons, was even less prepared to contemplate than the reconstruction of Germany or Western Europe.

Finally—and a factor never to be underestimated in politics—there was the personality of Prime Minister David Lloyd George, a man of great self-confidence, if not even arrogance, who believed that he could pull off a major success for his country that would reshape Europe. In the spring of 1919, he had tried to draw the Wilson administration into a joint venture by arguing that “in the financial sphere, the problem of restoring Europe is almost certainly too great for private enterprise alone.”¹⁰⁶ Consequently, he saw “only two possible courses, [i.e.,] direct assistance and various forms of guaranteed finance.”¹⁰⁷ He asked Wilson to guarantee American private bank loans to lift Europe out of its troubles. In a plan that John Maynard Keynes had drafted, these loans would be issued as long-term bonds linked to future German reparations payments. The U.S. president refused to be drawn into this bargain. As he wrote to Lloyd George, “it would not be possible for me to secure from the Congress of the United States authority to place a Federal guarantee upon bonds of European origin.”¹⁰⁸ He added, “Our Treasury also holds the view (and in this again I concur) that to the very limit of what is practicable such credits as it may be wise to grant should be extended through the medium of the usual private channels rather than through the several governments.”

It was a position that his Republican successor upheld in subsequent years. Worse, by the end of 1921, the attitude of the U.S. administration had hardened. What Lloyd George had presented as a mere economic conference had, in Secretary of State Hughes’s view, “a wider political purpose.” U.S. Secretary of Commerce Herbert Hoover even went so far as to suspect that the proposed Genoa Conference and the preconference at Cannes aimed at reasserting Britain’s position “as the hub of a revived world economy and to lure Germany and Russia into the British orbit.”¹⁰⁹ No American official—certainly not Hughes—would have been prepared to join such a plan. It was irritating enough to Washington that the United Kingdom continued to rely on its Empire as a preferential trading bloc.

With his appeal for a partnership rebuffed in the fall of 1921, Lloyd George went ahead without the Americans in his aim to reintegrate both Germany and Russia into a treaty structure of Western Europe that, with the City as the hub, would facilitate commercial cooperation and uplift the economies of the entire region. Once the door to greater trust and prosperity had been opened, Lloyd George hoped that the other thorny problems of the time, including the Franco-German conflict, could also be tackled. In this sense, the plan, just like the Washington System and the Consortium in the Far East, also contained a security element—the idea to reduce armaments in Europe not merely as a confidence-building measure, but also to contain the still enormous costs of the postwar military establishments and thereby to relieve national budgets when reductions of welfare expenditures were impossible for reasons of electoral politics.

In this complex web, Britain was thus not just interested in better relations with Russia that Lloyd George thought would benefit British industry and finance, he was probably also spurred by the fact that on 25 August 1921, Berlin and Washington—until then still in a state of war because of the American failure to ratify the Versailles Treaty—had signed a separate peace.¹¹⁰ While, as has been mentioned, contacts between German and American firms and German-American trade had been resumed as early as 1919, the treaty certainly made future trade relations easier that, in light of the size and importance of the German industrial economy, everyone knew was crucial to any future American reconstruction effort in Europe. The treaty was strengthened in the fall 1923 by a trade agreement with a most-favored-nation clause—a topic to be examined in detail in the next chapter in connection with the reparations issue.

With two million Britons unemployed and also the Irish problem on his hands, Lloyd George found a partner for his plan in Aristide Briand, the French prime minister, who, unlike his much more nationalist successor Raymond Poincaré, also preferred conciliation to confrontation. A first sign that the British prime minister had overrated his ability to bring his plan to a successful conclusion emerged at a preliminary meeting at Cannes in January 1922 at which German and Russian participation as well as a Franco-British alliance were discussed.¹¹¹ Unhappy about the impact that the German presence might have on the reparations payments that Berlin had been told in October 1921 it would have to pay, deputies of the French Chamber rebelled and Briand was called back from Cannes to Paris where he was forced to resign on 12 January. Poincaré stepped into his shoes. Lloyd George was undeterred, and invitations went out to the governments of Europe, including the Germans and the Bolsheviks, to convene at Genoa in April 1922. With a major objective being to rebuild economic relations with Russia and to try to stabilize the European economic and political situation without American leadership, the Cannes meeting had agreed on a number of principles on which the negotiations with the Bolsheviks were to be based.

While the details of these principles need not be enumerated here, it is important that the Genoa initiative was based on a British commitment of the kind that Washington had declined to make to its own bankers: A few months earlier, the British Parliament under Lloyd George’s leadership had passed the Exports Credits Act that gave official guarantees to British foreign trade. It was now hoped that at Genoa it would be possible to establish an International Corporation charged with stimulating trade with Russia that would similarly be underwritten by the other participating governments.¹¹² Washington, as reluctant as ever, merely sent observers.

Once the conference had started on the basis of the Cannes principles, another major setback to the negotiations with the Russia occurred: the Germans and Russians signed, right in the middle, a separate agreement at Rapallo that, apart from an expansion of trade, resumed diplomatic relations.¹¹³ Although an accord between the two outsiders to the Paris Treaty System of 1919 had been on the cards since 1920–21,¹¹⁴ it put a huge damper on the Genoa Conference’s more optimistic beginnings. There was still the question of whether, if nothing else, a nonaggression pact might come out of weeks of formal and informal meetings, modeled after the earlier Pacific treaty that had laid down specific naval ratios. But eventually, facing a French refusal to shrink its land forces even after the reduction of the German army to one hundred thousand men in the Versailles Treaty, Lloyd George became disheartened that his vision of a British-led stabilization and reconstruction of Europe could be realized.

This is not to say that it should not have been tried. Yet it showed that Britain, whatever its global ambitions, just did not have the power and influence to pull it off. Its demise (and that of Lloyd George) had the unfortunate consequence that it reinforced the tensions with France over how to deal with the enormous problem of German reparations. This had become so hopelessly entangled that the knot needed to be cut by one mighty stroke that could be delivered only by the Americans with their superior financial power.

If this is the larger picture that we can glean retrospectively from the relevant sources and the secondary literature on the Genoa Conference and its context, it is fortunate that, apart from the delegation of American observers, we also have the notes and impressions of an experienced American businessman who went to Genoa in the spring 1922 and subsequently gathered his own information on the state of the various European national economies: Frank Vanderlip.

Having arrived in Genoa and keeping his ear to the ground, Vanderlip reported on 17 April that there existed two viewpoints at the end of the first week.¹¹⁵ According to the first one, there was no hope of finding a “quick formula for the economic reconstruction of Europe.” The second view was that it was “a real achievement to bring together the highest representatives of thirty-four nations and … to hold them together in a fairly amiable state of mind.” Overall, Vanderlip felt that there would be many more conferences “before Europe’s economic reconstruction is accomplished.” Still, he was also impressed by the “great many bankers and captains of industry” who had also come and who were fully aware of the “growing seriousness of the general European situation.” Consequently, “the need for the Conference is beyond all question.”

He added that on opening day Lloyd George had “put the greatest emphasis on the pressing need to reestablish economic relations with Russia.”¹¹⁶ The trouble was that that country was not at the “center of the European problem,” and “its rehabilitation would in any case” take many years. Nor would the opening of the Russian market do more than “create a plan to sell goods on credit,” and it would take a long time before there would be “a surplus of production” to enable Russia to participate in a mutual exchange for the general welfare of Europe. To Vanderlip, Germany’s problems were the really “pressing [and] menacing” ones and among those reparations were at the top of the list: “With reparations demands unaltered, Germany faces inevitably financial collapse.” This in turn would have political and social consequences of “vital importance” that were “likely to be contagious.”

Furthermore there was France’s financial situation, with an unbalanced budget and an extensive floating of obligations. The amount of “short-term treasury notes” stood at [$?]80 billion.¹¹⁷ These debts, he observed, were sustained “by the hope that reparations expenditures would be recoverable from indemnities.” But should Germany experience “a financial collapse, the French financial position will fall as a sickening weight on the French people.” This is why French politicians had to retain “the financial confidence of their constituents” and “why they present[ed] a front as hard as steel against any discussions of reparations” at Genoa. Worse, this predicament was “what may drive France to extreme military measures, hoping to collect [from Germany] by force what she has been unable to collect by treaty.” At the same time, there was the German situation whose greatest danger lay “in its contagious possibilities.” If France’s confidence were shaken, “it may incite France to measures of force” against Germany. Indeed, as Vanderlip feared himself, the possibility of a French occupation of the Ruhr region was already looming on the horizon. And so, the “storm center of the European situation” was on the Rhine and “not on the Volga.”

In his Report “No. 2,” Vanderlip agreed that “this conference was not the place for American participation,” since it was “not economic,” but political.¹¹⁸ However, in his view this did not mean “that we should not participate in a future one.” In this respect, “Wall Street could learn a lesson from Washington” which is “one of reserve, and of conserving ammunition for a time when its use will be much more effective than at present.” This applied especially “in the matter of fresh European credits until the situation has further ripened.” When the time for financial commitments by the United States had come, “financial statesmanship” would be deployed.

For yet another time, Vanderlip came back to the problem of broad reparations demands that “would financially ruin Germany” resulting “in social and political upheavals there which would create fresh dangers of the first importance to Europe.”¹¹⁹ But he had also been hearing views that “the blindness of the French view with regard to the ultimate significance of the French attitude to indemnities” was “believed to be paralleled by the blindness of the American view in demanding full satisfaction of the debts due by European countries.” Turning to the British role in the Franco-German conflict, the American banker felt that London would use economic pressure to prevent a French invasion of the Ruhr area and that some other road had to be found to provide France with further funds to enable her to keep her financial equilibrium and the confidence of the French investor.¹²⁰

One scheme that Vanderlip seems to have heard of relating to Genoa was a loan by banks in Britain and France to the tune of £108 million over three years; another one was to fix reparations at £100 million per year for forty-two years. The idea behind the loan was that “a breathing spell [was] being given to Germany before payments began at this rate.”¹²¹ What is so interesting about all these notes and the reason why they have been quoted here is that they contained all the various elements that were later cast into American-led reparations plans and implemented in 1924.¹²² The tragedy was that this became possible only after the French had invaded the Ruhr in January 1923 and wrecked both the German economy and their own in precisely the way that Vanderlip had feared in the spring of 1922. This is why his notes from Genoa, some of which were published in the United States, are so invaluable for an understanding also of American policy that will be examined in the next chapter.

While all these ideas were being formulated at Genoa, “the political turmoil arising out of the German-Russian Treaty” began to upset the deliberations of the Financial Section of the conference.¹²³ Some people thought that a “real Entente” had been forged “between those two great countries” and “persons holding that belief picture the development of a vast Teutonic-Slavic coalition and see the division between eastern and western Europe moving from the Vistula to the Rhine.”¹²⁴It would mean a crumbling of Poland and the absorption of Austria and Hungary by this coalition. For Vanderlip, it was also intriguing to learn that “American interests now working with German interests in the shipping business have extended their participation to a German-Russian shipping undertaking.” Perhaps the worst consequence was that the Rapallo Treaty had “made all discussion of a breathing spell for Germany impossible for the moment.”¹²⁵ There had been some chance of this before the Treaty. Now it was gone.

Though critical of German behavior, Vanderlip also heard plenty of criticism of the American banks from European bankers. However, he also thought that, if they were in the American position, they, too, would “for the time being withhold loans and discourage the transfer of funds to make investments” in Europe.¹²⁶ He continued, “They would reserve their financial strength and then use it freely when the opportunity offered [itself] to use it more effectively for Europe’s [re]habilitation and more certainly for American prestige.” When this “proper time” had come and “when the right action has been taken here [in Europe] and a united front presented, we should contribute most liberally from our redundant stock of gold.” For the moment, though, Vanderlip doubted “the wisdom of involving the resources of the Federal Reserve Bank in the enterprise.”

His conversations with “the most eminent Financiers of Germany who are in attendance here,” seem to have confirmed him in his caution.¹²⁷ They had told him “that if Germany does not have relief, this will ensure the most serious economic consequences within [a time frame of between] 90 days and six months, and that is without reference to whether France should invade the Ruhr or not.” The German bankers foresaw the “danger of a revolutionary development as a result of rising prices that will follow [the] continued depreciation of the Mark, and they regard such depreciation as inevitable unless relief is offered.” The great disadvantage of the whole conference was, of course, that the agenda prohibited discussion of intergovernmental debts and reparations. Consequently Vanderlip’s interlocutors felt that “they are permitted only to discuss external symptoms, but are prevented from dealing with the real disease.”

On 21 April 1922, Vanderlip produced his sixth assessment with discussions of the “English Project for an International Corporation” to which the British delegation attached “great importance.”¹²⁸ This corporation was to be set up “under English law” and to be run by “a British Chairman and Secretariat.” The other countries were then to create National Corporations “under their domestic laws.” Belgium, Holland, Norway, and Sweden, he learned, had indicated their support, while “France is hesitating, Germany is expected to cooperate and, it is hoped, America will” as well. The calculation behind this was apparently openly spoken about. It was based on the belief “that financial power will for the next ten years be the most potent influence in making European governments behave themselves.” Consequently, the “scheme really takes on a strong political flavor as well as promising an important instrument for the economic development of backward eastern European countries—perhaps Russia in particular.”

Overall, the corporation was to take on only “large matters” that, for reasons of their volatility, private enterprises would not touch.¹²⁹ Its proponents, Vanderlip continued, had “exceedingly clear ideas of its potential importance as a powerful instrument to influence the conduct of eastern European government[s].” They were deemed to be more potent than “military sanction.” He also noted that the Russian reply to the schemes and demands that were put to them was “surprisingly moderate and promising”—no doubt helped by that fact that Lenin had meanwhile promulgated his New Economic Policy. After the rigidities of war communism during the civil war, he had created a freer market for domestic and foreign entrepreneurs.

Vanderlip then came back to the plight of the Germans.¹³⁰ They had argued that their situation was hopeless unless there was a moratorium on reparations payments in gold, and temporary help to buy food. They felt that Britain understood the emergency, “that America, except for very few, is profoundly ignorant, and that France’s vision is obscured by a Chamber of Deputies that has learned nothing since the armistice.” Ultimately, the Germans with whom the American banker had been talking had said “that the moral force of America is the only thing that can bring order out of chaos.” The stress was thereby on “our moral force,” and there was “distinctly” no suggestion that American dollars be invested “at the present time.” They had added “that America could perform the greatest of world services if we could make it clear that we insisted upon Europe setting its political house in order before we give financial aid.” Still, the Germans did not merely exhort and blame others at Genoa. They acknowledged “that they have injured their situation with the nations of western Europe by the German-Russian treaty incident.” They regretted “the injury, but not the action.”

After further notes about the complexities of Anglo-French relations and about American caution, Vanderlip summarized the discussions on a nonaggression pact with Russia as an antidote the British fears of Bolshevism.¹³¹ Lloyd George had proclaimed that Genoa would be a failure without such a pact.¹³² But the French kept opposing it, arguing that it should not apply to the enforcement of the Paris peace treaties. There was also the point that France wanted protection against future German aggression for which a British guarantee was needed. Beyond this, everything revolved in the end around money. For Russia a “great cash credit is sine qua non of any rapprochement with Western Europe.”¹³³ But the Europeans were “utterly unprepared to pledge any such credit,” and Vanderlip could therefore only turn to his colleagues back home telling them that “directly in front of American financiers is opening the opportunity profoundly to influence the European situation for good. The world needs at the moment statesmanship on the part of American bankers. If they will shape their course on lines of both sound finance and sound statesmanship, Americans make an important contribution to the salvation of Europe.”¹³⁴

Until the end of his stay in Genoa, Vanderlip continued to hammer home the points that he had been making in previous weeks: the crisis of the German economy, the threat of a French invasion of the Ruhr industrial region, the inability of France to see that “she cannot milk the cow and cut her throat at the same time,” Russo-German cooperation and the menace of Bolshevism, and the American financial capacity to help but its political reluctance to make a move.¹³⁵ In the end, he thought that the conference had failed because Lloyd George had not prepared it sufficiently. And ultimately there was also “a defect of moral fiber of the British Premier: He undertook to deal with the situation in a spirit of compromise where compromise was impossible.”¹³⁶ He had been too much of an “opportunist” who had no more than a “superficial” understanding of the facts and a feeble grip on principles. This was no doubt a harsh verdict on the British prime minister, but it tallies fairly well with the conclusion that Carole Fink reached at the end of her important monograph.

However, there was also the problem of the “selfish nationalism” of France that was shaped “by domestic political necessities” rather than by a “broadminded sincere desire to reconstruct Europe.”¹³⁷ Vanderlip also had a few proposals for what might be done with Russia, but ended up by admitting that it was difficult to predict the future. Since Lloyd George’s nonaggression pact had also been scuttled—“effectively torpedoed by Benes,” the Czech president—he saw a 75 to 80 percent chance of fresh European hostilities breaking out during the current year. If one thinks of the Ruhr occupation that began in January 1923, he was not far off the mark. Nor was he in his analyses of the European situation and the suggestions he had made to get out of the hole into which the region had fallen as a result of a catastrophic world war. It is to the slow realization of many of these suggestions insofar as they involved the United States that we must turn in the next chapter. It will look at the (ephemeral) successes of American policies toward Europe and toward Germany and Britain in particular in the mid-1920s, up to the Great Depression. During the first phase, the German-American business relationship became “special” again in a positive sense in that big business made Weimar Germany its main base in Europe.

By contrast, U.S. relations with Britain were vexed by various political problems, also relating to London’s trying to uphold its position as a great power with a large colonial empire. As to British-American business relations, many links continued from World War I and even from before 1914. But, as Genoa had shown, the country’s commercial and industrial clout had further weakened after the war. On the Russian question, Washington’s resistance had won the day against Lloyd George’s design, while at the same time “the State and Commerce Departments combined had … opened the door to the possibility of commerce in Russia and the Near East on American terms.”¹³⁸ Nor had the British prime minister succeeded in activating the promises that the more modern potential of German industry seemed to offer, also for a more general stabilization of Europe as a whole. Again it was only the Americans who had the capacity to do that.