The Ghost at All Our Feasts
The Deluge: The Great War and the Remaking of Global Order, Adam Tooze, 2014.
Note: As per usual, I wrote this about a month ago. Since then, Tooze has put out a number of newsletters harkening back to The Deluge. I recommend giving them a read (here, here, and here).
In his 1933 commentary on the Paris peace conferences, Vita Sackville-West’s husband, Harold Nicolson - who had participated in a minor capacity during the negotiations - declared that the United States had been “the ghost at all our feasts”.1 In a different sense, I have felt this sentiment resonate in all the books I have tackled recently. In Charles Maier, Martin Daunton, and Gerald Feldman, America is essential and peripheral at the same time. An excerpt of a Woodrow Wilson speech here, a response to J.P Morgan there - The United States never takes centre-stage. It flickers in and out of their work. However, Wilson’s United States was the architect of the post-war order in 1919. It held an unprecedented role as the world’s creditor. And as the twenties rolled on, its absent power - in the treaty it did not sign, the league it did not join, and the debts it refused to negotiate - stood at the centre of each crisis. Hence Nicolson’s remark; and perhaps, why the United States is so elusive in much of the literature. But ghosts deserve investigation.
In The Deluge, Adam Tooze does exactly this. First, a confession: I have read this book before. Years ago, as a high school student. But after my little tour of interwar political economy, I thought it wise to return to The Deluge with better-informed eyes. Tooze’s book is, of course, a special beast. A synthesis on a grand scale, focussing on international relations and liberalism in crisis, Tooze darts from Lenin to Wilson as fluently as between China and Italy. In this sense, The Deluge is perhaps closer to Nicholas Mulder’s The Economic Weapon than to Maier’s Recasting Bourgeois Europe, or Feldman’s The Great Disorder. But I thought it was the perfect way to tie off a brief vista through the fraught political economy of Europe after the First World War. Because, at the end of the day, Tooze centres the story that propels Maier’s thesis on European corporatism, Daunton’s account of British fiscal development, and Feldman’s anatomisation of the Weimar inflation: the reverberating financial consequences of the Great War. The Deluge globalises this story, reorienting it around the United States. But the motor is still the same.
Tooze’s point of departure is not the Treaty of Versailles, but the conditions surrounding the entry of the United States into war in April 1917. Of greatest importance is the newfound dependence of the allied powers - Britain, Italy, and France - on the United States that had been brewing since the first war loans were raised in 1914. By 1917, barring the decision to run a war economy in the German style, the ability of the allies to continue was dependent on a diminishing appetite in the United States for their debt. There were signs in 1916 that Woodrow Wilson might force a negotiated “peace without victory” by turning off the taps. Tooze speculates that if Germany had not made the fateful decision to reactivate unrestricted submarine warfare and try entice Mexico to enter the war, this may well have eventuated. British and French officials, at least, were very afraid it would. But Germany did follow terrible decisions, and the United States did enter the war. The credit kept flowing.
This gave the United States considerable influence to dictate terms come the Treaty of Versailles. Instead of focussing on the burdens placed on Germany - as have most since Keynes - Tooze centres the financial architecture Wilson’s politics imposed. In essence, it has three key characteristics. First there is the simultaneous persistence of, and disengagement with, Germany. A full carve-up of Germany did not take place at Versailles. The Reich was shaved, but not eviscerated. At the same time, however, there was no well-structured plan for reintegrating Germany into the world economy. Particularly, suggestions that loans for Germany might be raised in the United States encountered hostility in government and finance - on top of the fact that after the Senate failed to ratify Versailles the United States remained technically at war with Germany until 1921.
Another cause for concern was France. France had wanted one of two things at Versailles: either a free hand to extract from Germany sufficient resources to meet its debt and reconstruction costs, including disassembling the Reich if need be; or a watertight alliance with the United States and/or Britain that accompanied a clear promise of mutual responsibility for the enforcement of reparations, to France, from Germany. France received neither. Wilsonianism prohibited the destruction of Germany while at the same time recoiling from ‘imperialist’ strategic commitments in the old world. This semi-contradictory agenda was, Tooze argues, the “basic impulse” of interwar American strategy. One could even argue that the raison d’etre of the book is unravelling how an attempt by the United States to use “privileged detachment” and dependency “to frame a transformation in world affairs” facilitated a decade of crisis. It is certainly a theme Tooze returns to again and again.
These issues culminate in and are superseded by the component of the post-war financial order which I think The Deluge handles best: the importance of the inter-allied debts. French dependence on reparations was exacerbated by an American insistence that inter-allied debts should be honoured in full. The United States had made clear at Versailles that no discussions of cancellation or reduction would be countenanced. In fairness, a complete cancellation of inter-allied debts would have cost the United States £1.668 billion, and ‘given’ France about a third that amount. Cancellation was opposed for a reason. But American opposition to negotiations on inter-allied debts is directly linked to the French resistance towards a more lenient position on reparations; as the absence of an arrangement on inter-allied debts meant France felt compelled to tighten the screws on Germany.
This financial architecture would interact with the deflationary wave driven from the United States in 1920 to produce the conditions of the “world-wide Thermidor”. In emphasising the American origins of this event, so central to the narrative in Recasting Bourgeois Europe, Tooze significantly rewrites the conventional story of the interwar years. Before the deflationary wave there was the global inflation. Most severe in Germany (as Feldman explains, for a variety of war-related and political reasons), it manifested everywhere, even in the United States, the only major country still on the Gold Standard after the war. As Maier and Feldman (and, more recently, Clara Mattei) document well, this inflation - and the social upheaval it threatened - made the desire to return to financial, fiscal, and industrial orthodoxy immense. Britain was pivotal to the deflationary push. It boasted the fiscal firepower which France and Italy lacked, alongside a unique ideological commitment to the credit of its empire. However, Tooze wants to stress that it was the United States that ultimately determined the extent of deflation. Rate hikes by the Fed pushed Britain beyond its ‘reasonable reach’, leaving the Bank of England to counter American deflation in addition to the discrepancy in wartime inflation that it had bargained with. The result was a global deflationary wave that even gave a pause to Germany’s inflation (the era Feldman describes as the ‘temporary stabilisation’). As Mattei would point out, the deflation achieved its goal: the restoration of capital order. But it inflamed the weaknesses of the financial architecture left by Versailles.
This thread brings us to late 1923 - for Tooze, the “culminating point of the post-war crisis… [where] everything had once more come to pivot on the United States”. What would it take for the two inextricable vetos - French refusal to negotiate on reparations, and American refusal to negotiate on inter-allied debts - to be overcome? The answer, Tooze argues, is a total French victory in the Ruhr that left Germany “prostrate as never before”. Feldman explains in detail how German “passive resistance” policy was a debacle, as I discussed recently. Tooze agrees. But unlike Feldman, Tooze wrings out how the Dawes Plan - the US-backed deal that overcame both roadblocks, decided a new reparations schedule, and facilitated loans from the United States to Germany - was produced by the strategic implications a French victory in the Ruhr held. A potential unified Franco-German industrial state was too much for the United States to handle. For France, pressing their victory and cleaving the Ruhr from Germany risked sabotaging any hoped for Anglo-American security alliance. A fragile stability, even under the canopy of absent American power, was achieved. Tooze quips that Wilson “chuckled in his freshly-dug grave”. Dawes produced peace without victory. I suppose the only caveat is how briefly it lasted.
After this culminating point of the post-war crisis, I have to admit that The Deluge loses the thread somewhat. The pacing, steadily increasing through the book, quickens to a dash after 1924. Tooze’s narrative becomes a bit lost within a frantic tour of interwar global history. The cutting edge that I have tried to get across - that charts the postwar crisis and the role of the United States within it from 1917, via Versailles, to Dawes - is dulled, as Tooze races to tie up all his (many) threads and set the scene for the next war. This is not to say The Deluge loses the plot, but it does become harder for the reader to find - whether this is entirely an issue of compression, or concealing of more substantial theoretical issues, I am not sure. In any case, the first two-thirds of the book are by far the strongest.
The Deluge is a story about geopolitics and strategy that involves economics, rather than an economic story which incorporates elements of grand strategy. When I first read it, this was not obvious to me. But it should have been. A point that sits beneath the entire book is made explicit by Tooze in his conclusion: that liberalism’s search for order “was the expression not of deluded idealism, but of a higher form of realism”. With this in mind, it is only natural the strategic dimension dominates. The Dawes Plan looms larger for Tooze than it does for Feldman. For the latter, the stabilisation of Weimar Germany pivots more on the Rentenmark. This is mostly an issue of emphasis. But there is a hint of the costs incurred by Tooze’s merger of geopolitics and economic history. While rendering possible a lucid synthesis, it inevitably induces some distortion. My younger self once thought The Deluge could sufficiently explain the sweep of interwar history alone. I would not be so naïve now. But if I was allowed just one argument, I would still choose The Deluge in a heartbeat.
This quote can be found in the conclusion of The Deluge. It is a popular line - even making the title of a recent (if highly dubious) history by Robert Kagan (deliciously and gently skewered by Thomas Meaney)