The Empire Project: The Rise and Fall of the British World-System, 1830–1970 (89 page)

12 THE PRICE OF SURVIVAL, 1943–1951

Amid the calamities that crashed over them in 1942, it was hardly surprising that British leaders, including Churchill, should have thought mainly in terms of survival. In the course of that year, they faced the prospect of defeat in the Middle East and the loss of Egypt and the Canal, a disaster which would have meant far greater losses than those incurred at Singapore. Without their main fighting force, their hope of keeping control over India – let alone of exploiting its resources and manpower – would have been fatally weakened. The Viceroy's ability to suppress the Quit India movement would not have been helped by the sight of the Germans in Cairo. At much the same time, they could only watch helplessly as the German advance into Russia threatened the collapse of the Soviet regime. A huge reordering of Eurasia seemed on the cards with the ‘world-island’ divided between the Nazi and Japanese empires. Preserving a maritime ‘rimland’ without the Middle East, India and Southeast Asia, and keeping Britain's connection with Australia and New Zealand, would have been all but impossible. The British world-system would have been a funeral pyre.

Of course, it was true that America's entry in December 1941 had brought massive relief and the assurance, perhaps, of survival in some form. In June 1942, the battle of Midway destroyed Japan's hopes of naval control of the Western Pacific. By the end of the year, victory at Alamein and the grim Russian defence of Stalingrad seemed to promise that the relentless expansion of Germany's power had at last been contained. But neither was remotely a guarantee of ultimate victory in Europe, which depended on the Red Army and the Anglo-Americans fighting their way into the European ‘fortress’ heavily defended by the Germans and their allies. The risk of defeat, or stalemate, was high, especially in the case of an amphibious attack, the Anglo-American route. If either were to happen, then Britain's ‘survival’ would resemble that of a patient on a life-support machine: dependent indefinitely on American aid to fend off invasion; incapable of defending, supplying, financing or controlling the component parts of the pre-war imperial system. Neither Churchill nor his advisers regarded such a fate as remotely acceptable. ‘Our history and geography demand’, said Anthony Eden, ‘that we should remain a world power with world-wide interests.’
¹
They imagined survival in imperial terms, as the full recovery of the British world-system. Deprived of its ‘system’, Britain would be desperately vulnerable to the will of whatever great powers had outlasted the conflict. Real survival meant the freedom to restore London's global network of trade and resuming Britain's function as a banker and investor. It meant regaining the footholds (in the Mediterranean especially) that underpinned Britain's status as a great
European
power. It meant reaffirming Britain's leadership over the white dominions on whose loyalty, manpower and resources British influence and interests already depended in part. It meant recovering sufficient power and prestige to negotiate authoritatively over the future of India, and resist the demand (largely from American voices) that Britain's colonial territories should be administered internationally and opened to American business. It meant – above all – recreating the geopolitical conditions that secured the European mainland from a single power's domination. British leaders suspected that the failure to achieve all – or almost all – of these war aims (most of them tacit) would unravel the links and connections on which Britain's place in the world was actually (if rather mysteriously) based. In the second half of the war, much of their energy was spent in the struggle to make a military victory that would meet this demanding wish-list.

Strategy and Empire, 1943–1945

1943 was the year in which the tide of battle turned. It was also the year in which the shape of a post-war world could begin to be glimpsed, if only in outline. For the British, the signs were not reassuring. Their victories in North Africa and the successful invasion of Italy did not strengthen their hand. At the level of strategy, 1943 was to be dominated by the furious Anglo-American arguments over the priority to be given to the Mediterranean attack on Germany and the planned cross-Channel invasion already named ‘Overlord’. The British resented the scale of America's commitment to the war on Japan and suspected the motive behind American support for Kuomintang China in whose military potential they had little confidence. They were also deeply uneasy at what they regarded as the dangerous ignorance of the American planners about the risks and demands of an amphibious invasion against the full weight of German military power in the West. A premature onslaught quickly bogged down in a war of attrition (with a huge cost in life for every advance) or, worse still, a catastrophic defeat and a second Dunkirk, were bound to inflict disproportionate (and perhaps irrecoverable) damage on British resources and British prestige. On the American side, British devotion to a Mediterranean strategy, at the expense of postponing the decisive attack through Northern France to the Rhine, was cynically regarded as a means of shoring up British imperial interests and as evidence that the British lacked the stomach to fight in the theatre that mattered. Too great a delay in the onslaught on Germany would weaken the case of those in the Roosevelt administration who favoured the ‘Europe first’ strategy, against those who demanded priority for the war on Japan. In Washington's view, it would also worsen the friction with their Soviet ally and increase the danger that Stalin would make a separate peace (of which there were signs). Indeed, the British themselves were all too aware of how much their recovery depended upon Soviet success on the Eastern Front. A Soviet collapse would have released huge German reinforcements to regain the ground lost in the Mediterranean, and open the door into the Caucasus and Iran, hurling the British back into the terrible crisis of July 1942. Yet, by the same token, the Red Army's advance (it had driven the Wehrmacht out of the Caucasus and most of the Ukraine by the end of 1943) reinforced Stalin's claim to a very large voice in any eventual peace, and in the strategic decisions required to achieve it.

By late 1943, as planning began in earnest for the invasion of France the following summer, the growing reliance of the Anglo-American armies upon American manpower as well as materiel,
²
and the enormous scale of the Soviet military effort, drove home the lesson that the post-war world-order would be shaped to the wishes of these emerging ‘superpowers’ more than to Britain's. At the Teheran conference in November 1943, Stalin and Roosevelt, as Churchill later lamented, negotiated over his head. At almost the same time, a speech by Jan Smuts on ‘Thoughts on the New World’ (to the Empire Parliamentary Association in London) spelt out the dangers of the new balance of power that would follow German defeat. ‘We have moved into a strange new world…such as has not been seen for hundreds of years, perhaps not for a thousand years. Europe is completely changing…the map is being rolled up and a new map is unrolling before us.’ Three of the continent's five great powers would have vanished. ‘Germany will disappear…France has gone…Italy may never be a great power again.’ Instead, Russia would be ‘the new Colossus of Europe’, all the stronger once the threat from Japan in the rear had been vanquished. Britain would have great prestige, but ‘she will be a poor country…there is nothing left in the till’. The best hope for peace in the world, Smuts insisted, lay in a new world organisation, but one in which the ‘trinity’ of great powers exercised real leadership. But for the British to play their proper part in this required them not only to reorganise their overseas system, but also to strengthen their hand in Europe. That meant closer relations with the small democracies of Western Europe, who knew that ‘their future is with Great Britain and the next world-wide British system’. Closer union with Britain would create a ‘great European state…an equal partner with the other Colossi in the leadership of nations’.
³

Smuts called for ‘fundamental thinking’ and admitted that his ideas were ‘explosive stuff’. But his speech was a remarkable summary of the challenges facing the Churchill government in the last two years of the war. Indeed, his speculations about a British ‘closer union’ with Europe have a more than passing resemblance to the ‘European union’ for which Churchill himself was to call. Amid the press of day-to-day business before and after the landings in Normandy in June 1944, entailing the conduct of campaigns in France, Italy, Greece and Southeast Asia, and in the air over Germany, the looming shape of a Soviet-dominated Europe, from which the American armies would have quickly withdrawn at the end of the war, exerted more and more influence over British military planning. Its conclusions were deeply unwelcome. The defeat of Germany would result in a much heavier strategic burden on Britain than she had had to carry before the descent towards war after 1937. In June 1945, the Post Hostilities Planning Staff told the Chiefs of Staff Committee that even a united British Empire would be no match for Soviet aggression, and would need the help of the United States. To keep the Red Army at bay, Britain would have to be ready to give early help to her European allies, and hold a deep air defence belt in Northern Europe. To keep India safe and guard communications through the Indian Ocean would require new naval and air bases and a main base in Ceylon (Sri Lanka). To deter a Soviet advance in the Middle East, Britain's defence system there would have to be pushed further north, but with no guarantee that either the oilfields or the Suez Canal could be saved in a war. Even in peacetime, maintaining internal security in the Middle East ‘will involve a formidable military commitment’.
⁴
It is not hard to see why close cooperation between the Great Power ‘trinity’, in the new ‘world organisation’, appeared so urgently necessary to the makers of policy in London. It was the best guarantee that the British could limit the liabilities that otherwise threatened to over-tax their strength.

For, as Smuts had said candidly, there was nothing left in the till. Strictly speaking, of course, this was an exaggeration. The British had sold off their assets in dollars and acquired a great burden of overseas debt. They had retained investments in the sterling area countries, but had also assumed huge sterling obligations by their purchases from them. Egypt and certain Middle East states, the colonial territories that supplied British needs, and above all India with its army of two million men and its industrial base, built up credits in London, the so-called ‘sterling balances’. Britain's war effort was sustained in large measure by American aid, especially ‘lend-lease’. When peace came, Britain's post-war economy would carry a mass of overseas debt considerably greater than in 1919 even though the vast bulk of lend-lease (perhaps $20 billions’ worth) would be forgiven. This was one side of the ledger. But the sources of overseas income had also been damaged. This was partly a matter of the assets sold off in the war to the tune of £1.5 billion, more than one-third of the total. It was also a consequence of huge physical losses, including a large share of Britain's mercantile fleet, the largest in the world before 1939, and a valuable earner of invisible income. As part of the terms of lend-lease, the British were required to cut down their exports and withdraw from many overseas markets. By the middle of the war, their exports had fallen to well under one-third of their pre-war level.
⁵
All the main sources of overseas earnings – from exports, investments, shipping and services – had been drastically shrunk. The destruction of industrial plant at home, the conversion of much of the rest to the production of war goods, and the huge diversion of manpower into military service meant that rebuilding the civilian economy and Britain's export capacity would need a major investment as well as a period of grace. Yet the conditions laid down in return for America's wartime aid demanded the rapid return to peacetime ‘normality’ making sterling convertible (so that sterling countries could buy dollar goods freely) and ending imperial preference (to remove the tariffs imposed on dollar goods in British Empire countries since the early 1930s). On this scenario, before the British could catch their breath, or begin to scale down the vast military load of the war and its aftermath, their foreign markets would vanish and they would be bankrupt.

To avert this disaster, the British set out in the autumn of 1944 to persuade their American allies to help them revive much of their pre-war role in the world economy as soon as Germany was defeated. ‘Stage II’ – as the period between the defeat of Germany and the surrender of Japan was termed – was expected to last for a year or longer. During Stage II, the British were anxious to begin the process of civilianising their economy. More manpower would be moved into civilian production and much more effort put into the manufacture of exports. Britain would begin to start paying its way. With a nod from Roosevelt, agreements were framed to prolong wartime support and permit its application to the task of post-war recovery.
⁶
Had Stage II taken the time that the planners expected, the economic transition to peace might have been much less painful. In fact, it barely lasted three months. As soon as Japan was defeated, Roosevelt's successor, Harry S. Truman, abruptly halted lend-lease. To bail out their economy and keep it afloat, the British were forced to apply for an American loan, but without the leverage that their war effort had given them. In the graphic language of John Maynard Keynes, who had master-minded the management of Britain's external finances, the British were faced at the end of the war with a ‘financial Dunkirk’.
⁷
Without a drastic reduction of their foreign commitments, and perhaps even with one, they would have to accept years of even greater austerity than they had already endured. The financial and commercial power on which they had always relied as the ‘fourth arm’ in warfare would have vanished completely.