The Empire Project: The Rise and Fall of the British World-System, 1830–1970 (94 page)

For the foreseeable future, then, the Labour government pinned its hopes of economic revival to closer integration with the sterling Commonwealth countries (mainly Australia, New Zealand and South Africa), the rapid development of their most valuable dependencies (including Malaya, the Gold Coast and Northern Rhodesia) and the drastic expansion of output from Britain's oil concessions in the Middle East. Only in this way could they restore some equilibrium between Britain's dollar income and outgoings, build up the reserves required for sterling's eventual return to convertible status, and (above all) protect the British economy from a drastic slump in employment and living standards. Pressing arguments of geostrategy pushed them in the same outward direction. By the end of 1947, the failure of the Council of Foreign Ministers meeting in London in November–December, had convinced British leaders that a negotiated settlement with Stalin was more remote than ever. Deterring a Soviet advance into, or its subversion of, the Western European states meant a military build-up, and a firmer commitment by London to the defence of the half-continent. In the Western European Union in January 1948 and the Brussels Treaty a few months later, the British pledged themselves more deeply to their European partners than in any previous peacetime. But they were all too aware that the military means to make good this commitment were scanty at best. Without adequate means to defeat the Soviet Union on land, a ‘Middle East’ strategy to bomb Southern Russia (despite its manifold shortcomings
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) remained the best option. The argument went wider. On 5 January 1948, Attlee had broadcast an attack on Soviet imperialism in Europe. A week later, he appealed for Australian and New Zealand support. Britain, he told prime ministers Chifley and Fraser, had proposed a ‘Western European Regional Economic and Security Group’. Britain would provide the ‘political and moral leadership’, but would depend upon the material support of the United States and the Commonwealth.
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Eager as they were to elicit American help, both Attlee and Bevin were determined to avoid mere dependence on Washington. ‘If it is our aim’, remarked the Cabinet Secretary, Sir Norman Brook, ‘to achieve the leadership of a Western Union sufficiently powerful to be independent of both the Soviet and the American blocs, we must be at the heart of a Commonwealth of nations which is as large as and powerful as we can make it.’
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Bevin was blunter. ‘More stress should be laid’, he told his ministerial colleagues, ‘on the need to build up a Commonwealth defence system which together with Western Union, would result in a bloc equivalent in strength to the United States or the Soviet Union.’
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Defending Britain-in-Europe and preserving British world power were imperial tasks.

At first sight, it seems strange that, at a time of such acute economic hardship, domestic opposition to the burdens of empire was not more vociferous. By late 1947, even potatoes were rationed (bread had been rationed since mid-1946) and the ration of petrol suspended altogether. Quite apart from Britain's overseas debts, there was also a mountain of borrowing at home increasing in size from some £13 billion at the end of the war to more than £15 billion by 1951.
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Partly in consequence, the level of income tax remained at a far higher level than after the First World War. By 1951, six years into the peace, it had fallen only marginally from 10 shillings (50 per cent) in the pound to 9 shillings (45 per cent), twice the rate current in 1925. Nor was it simply a question of feeling the pinch. There was also the matter of public attitudes to empire. Britain's impoverishment had coincided with an ideological conversion to social democracy. After 1918, the blueprint for social reconstruction had been largely torn up when the government abandoned most of the levers of economic control at the onset of depression. This pattern was not repeated after 1945. Instead, the Labour government embarked upon a huge social programme to extend educational opportunity, widen access to healthcare and (most fundamental of all) secure full employment. It also took charge of two basic industries whose renovation was vital to economic recovery: transport (including railways, harbours and road haulage) and the mines. The result was high levels of public expenditure for domestic recovery and social reform. Yet, at exactly the same time, spending on defence remained obstinately high. In the late 1940s it stood at more than double the proportion of GDP spent in 1931–7, and at the end of the decade was to rise even higher. The fourth British empire was not a cheap option. It seems not a little surprising that opinion in Britain, having voted decisively for domestic reform, and facing a blizzard of taxation and rationing, failed to revolt against the deadweight of empire.

Perhaps a key part of the answer was that there was no obvious conflict between empire and social reform, between social democracy at home and imperialism abroad. The hostility to Britain's imperial commitments voiced after 1920 was largely directed against London's new empire in the Middle East, and the danger that this would provoke a Near Eastern war. Much of its force derived, however, from the angry belief that heavy spending abroad was preventing a return to economic normality and prolonging the post-war depression – a cry that appealed to the Left as well as the Right. Little of this applied in late 1947. Far from unemployment, the problem if anything was an acute shortage of manpower. The scale of Labour's domestic programme disposed of the argument that empire had delayed the renovation of British society. By mid-1948, the largest and most controversial of overseas military burdens – the garrisons in India and Palestine – had been given up. Dislike of conscription and military service abroad may have been widespread, but public resentment was probably muted by the fact that the ‘call-up’ was no longer a novelty. It had begun in peacetime on the eve of the war and had been part and parcel of the mobilisation of Britain's resources whose fairness and thoroughness were regarded as the talismans of survival and victory. Trade union antipathy to ‘national service’ and foreign military spending – a notable feature of the political climate in 1918–22 – was restrained by Bevin's massive prestige, as the principal champion of ‘imperial’ duty, and by the extent to which they could be seen as necessary for Britain's own protection against Soviet aggression. Indeed, the conflation of ‘containment’ (to safeguard Britain at home) and ‘imperial defence’ (to secure its overseas spheres) was one of the ways in which any residual opposition to imperial burdens could be readily neutralised. Finally, although there was room for doubt as to its application in practice, Labour – and particularly Bevin – had been at pains to promote a new social democratic ideology of empire. Pre-war anxiety about social crisis in the colonies (where depression had bitten deep), and growing belief in the urgency of ‘colonial development’ from above, fused with the wartime need to remake the image of empire, in the United States above all, and the chastened atmosphere of colonial failure brilliantly evoked by Margery Perham in 1942. The result was the rise of a new ideology of ‘partnership’, in which empire was the instrument of social, economic and political uplift, the imperial counterpart to the welfare state at home. Reassuring and flexible, it could easily cover a multitude of colonial sins and offered firm reassurance that what was good for Britain (the rapid expansion of colonial production) was also an act of imperial benevolence.

For these kinds of reasons, British leaders were largely able to discount the risk of opposition at home to their Churchillian ambitions. They also disposed of some vital resources to uphold Britain's influence. Despite the shortage of manpower in the civilian economy, they kept over 800,000 men in the armed services in 1948 (more than double the figure for 1938).
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With a large navy and air force, and a great network of bases, the British were far from being a negligible military power. Meanwhile, Britain's connection with the white dominions was refreshed by the flow of post-war migration. Nearly 600,000 people left Britain between 1946 and 1949, mostly to settle there. A further 700,000 followed in 1950–4.
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The commercial apparatus for investing abroad had survived the war, and enthusiasm for doing so remained deeply rooted in British economic behaviour. The hunger for capital in the sterling dominions still drew them to London. And, as the Cold War grew fiercer, Britain's great power position could be leveraged for the assistance that mattered. From 1948, Britain began to receive the Marshall Aid dollars. London had already obtained Washington's
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approval for Britain's Middle East presence. In April 1949, with the North Atlantic alliance, it secured the guarantee of American support in the event of Soviet aggression in Europe. The threat of a second Dunkirk now looked less likely. If empires depend upon the exchange of reciprocal benefits, the British had something to offer their imperial partners.

The engine-room of Labour's fourth British empire was the sterling area economy. Its performance was critical to the reconstruction and modernisation of the domestic economy, and to the wider revival of British world influence. Between 1947 and 1950, the results were mixed, but far from discouraging. 1948 was a year of recovery from the convertibility crisis. The other sterling area countries may have disliked London's determination to manage their non-sterling purchases through a centrally administered ‘dollar-pool’, but they had little real choice but to comply. They dared not risk a collapse in sterling's value, which would wipe out their holdings in London. For Australia and New Zealand especially, Britain remained their most important customer: its economic devastation would ruin them too. Indeed, for the overseas sterling area as a whole, for some four-fifths of their total exports the British market was 50 per cent greater than the American (the main exceptions were cocoa, rubber and wool).
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There was also the issue of borrowing in London. Despite the huge growth of American foreign investment, it still remained difficult for the sterling dominions to borrow much there – partly because there was little demand for their produce from the American consumer. Access to London's capital market was a valuable lever. The South African government was reluctant to accept the ‘dollar-pool’ rules, even more so when Smuts was displaced as prime minister by D. F. Malan in 1948. But Malan had to eat humble pie. Fear that his government would declare a republic led to capital flight, just at the moment when new investment was needed to expand gold production. Pretoria caved in and agreed to the exchange of its gold for sterling.
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In the colonial economies, London could set the price that was paid for their commodity exports, and restrict the manufactures they were sent in return. This was a way of exporting Britain's austerity, and reducing colonial consumption to hoard ‘British’ dollars. In the Treasury's view, selling on colonial produce was a far more promising way of increasing London's dollar income than closer relations with the Western European countries.
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Meanwhile, in a world starved of industrial goods, and with most of their pre-war competitors in disarray, the British could sell abroad all they could make. There were also promising signs that London was resuming its classical role as a supplier of capital. Some £1,500 million was sent to sterling area borrowers in 1947–9.
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To a suspicious American expert, it seemed that the British were still doing surprisingly well from their investment in empire.
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Yet Britain's position remained fundamentally fragile and with it the hope of restoring the pound sterling to equal status with the dollar in international transactions. Equality mattered because only then would London be able to recover the profitable business in banking, insurance and services that had made it so rich before 1914, and which depended upon the confidence of its overseas clients. Buoyed up by the injection of Marshall Aid dollars (some $1.2 billion), 1948 turned out well. But, in 1949, sterling was once more on the ropes. An American slowdown, the cessation of stockpiling, and (so some observers suggested) the high cost of British exports, slashed dollar earnings. The dollar deficit soared. With encouragement from Washington (where there was growing anxiety that the dollar famine in Europe would create a permanent division between the two halves of the West's trading world), London devalued the pound from $4.03 to $2.80, followed by the other sterling area countries. The following year saw a striking recovery in the British balance of payments, and a new burst of optimism. But, as we shall see, disillusion soon followed.

‘The Commonwealth nations are our closest friends’, Attlee proclaimed in the Commons foreign affairs debate in May 1948.
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Even more perhaps than before 1939, British ministers saw the white dominions as the indispensable elements of British world power. It was they that would serve as the ‘Main Support Areas’ in the event of another world war, or so the defence planners hoped. But of course Anglo-dominion relations were not so straightforward. Britain's crushing defeat in Europe and Asia in 1940–2 had broken the spell. Never again could dominion leaders blithely confide their strategic defence to the imperial centre. As we have seen, Canadian, Australian and New Zealand reactions had passed through two phases. They recognised the necessity of American aid against a great power aggressor. But they were anxious as well that the new ‘World Organisation’ would protect their ‘middle power’ status and limit the scope of American predominance. Both in Wellington and in Canberra, there had been a marked reluctance to accept London's dire warnings about Soviet intentions, and the need to form a solid anti-Soviet bloc. ‘I find myself equally opposed to the extremes of both sides’, wrote the New Zealand prime minister, Peter Fraser.
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Both in New Zealand and in Australia, mistrust of the United States was mixed with resentment at what was seen as its ungenerous treatment of Britain, and the desire to see London adopt a more independent line. As so often before, Australian leaders were irritated by London's obtuseness: its refusal to see that Australia was doing its British and imperial duty. ‘Australia today’, said the prime minister, Ben Chifley, ‘has become the great bastion of the British-speaking race south of the Equator. Strategically and economically this country has assumed a position in the Pacific on behalf of the British Commonwealth.’
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British calls for help in Europe and the Middle East would confuse and distract Australian public opinion. So Chifley bluntly rejected Attlee's urgent appeal in January 1948. ‘The Australian people…are not convinced of the desirability of…a Western alliance directed against the Soviet’, he wrote.
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Anyway, Australia would have its hands full in the Pacific if another war broke out: there would be nothing to spare. There was less consultation from the Labour government, complained his foreign minister Evatt, than there had been from Churchill – an indictment indeed!
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The view from New Zealand (as in previous times) was not so assertive. Fraser acknowledged the Soviet threat, sought London's advice on how New Zealand could help, and agreed that New Zealand should have a division to send to the Middle East on the outbreak of war.
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The following year, he pressed ahead with a scheme for compulsory military training, on which a successful referendum was held in August 1949.
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