The Empire Project: The Rise and Fall of the British World-System, 1830–1970 (74 page)

But not everyone believed in the scale or immediacy of the Japanese challenge, let alone the wisdom of confronting it militarily. Britain could not fight two wars at once, said the Treasury flatly. Other expert opinion saw the Japanese threat as more economic than military, and hobbled by the resistance of Kuomintang China. Still others insisted that the Germans remained the ‘ultimate’ enemy – the phrase that crept into the Committee's report. If they were deterred, then the Japanese would not move. The fiercest attack on the navy's position came from Neville Chamberlain, now Chancellor of the Exchequer in the National Government. As Chancellor he was determined to keep defence spending within bounds, since the public finances were the bedrock of everything. But he was also (for a Chamberlain) surprisingly sceptical about the real threat from Japan and the fear it evoked in the Pacific dominions. His favoured solution was a friendly approach to Japan, perhaps even a pact.
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The much more urgent priority in Chamberlain's eyes was the protection of Britain in Europe, and against attack from the air. This was best done not by expanding the navy but by deploying a ‘deterrent’ – a large force of bombers to cripple any potential assailant. When the Cabinet came to discuss the Committee's report, Chamberlain's campaign for an Anglo-Japanese understanding won little support. The objection was obvious – that it would wreck Anglo-American relations with far-reaching effects on Britain's general position – and also decisive. But there was no real agreement on how to proceed, perhaps because of the scale of the ‘Eastern’ commitment required. Instead, Chamberlain was allowed to draw up the final recommendations – a chance he seized with a vengeance. The result was to cut back the sum proposed for the navy by some 60 per cent and put it instead towards expanding the air force.
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The sometimes angry debate in Committee and Cabinet exposed the strategic dilemma of the whole British system. If the East was neglected the whole empire might fall. If the West was exposed, Britain itself was at risk. If both were defended to the level required, Britain would be bankrupt. It was not surprising, perhaps, that policy-makers looked for less drastic solutions, and hoped to get by. The British and Americans both came to agree that the real restraint on Japan was the Soviet Union, which had much more to lose from Japan's East Asian imperialism, and had the military power to strike Japan where it mattered.
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British officials worked hard to persuade the Americans that they shared the same view of Japan as a threat and would not jeopardise Anglo-American solidarity by an approach to Japan – whatever Chamberlain said. They largely succeeded. When the naval agreements came up for review in 1934–5, President Roosevelt conveyed by a nod and a wink that no objection would be made to Britain's naval expansion: Atlantic rivalry was suspended.
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In Europe, meanwhile, the Admiralty won what it saw as a useful reprieve. Abandoning the fiction that the Germans were bound by Versailles, it got Hitler's agreement that a new German navy would be kept at just over one-third of Britain's own strength – a concession that bought time for its own naval programme.
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When the Chiefs of Staff reviewed the state of British defences at the start of 1935 (and before the agreement), they made the grudging admission that there was enough naval strength to fight Germany and Japan at the same time – as long as France was an ally. ‘With France as our Ally, the naval situation in Europe would wear a different complexion, and the main British fleet would be available to defend our Empire in the East.’
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Six months later, their view was much darker.

What had happened in between was a third great shock to the geostrategic foundations of the British world-system. In late 1934, a fierce dispute had blown up between Italy and Ethiopia on the border between the Ethiopian Ogaden and Italian Somaliland. It soon became clear that Mussolini had no intention of reaching a peaceful resolution and was set on the partial or total acquisition of Haile Selassie's empire. The French government was concerned most of all to avoid friction with Italy (its long-standing Mediterranean rival) which would weaken its hand in dealing with Hitler. In January 1935, it agreed that Rome should be free to deal with Ethiopia as it wished. This confronted the British with an unpleasant dilemma. As the strongest League power and champion of collective security, Britain could hardly look on while one League member state set out to swallow another. But taking the lead to thwart the aggressor was just as unwelcome. Britain should not be manoeuvred ‘into playing an isolated and futile role of opposition’, said Robert Vansittart, the permanent head of the Foreign Office.
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It was perfectly obvious, said a chorus of voices, that the effort to do so would enrage Mussolini, and drive him out of the League and into a compact with Hitler. Vansittart dreamed hopelessly of an imperial deal: compensating an Ethiopian cession to Italy with a tract of British Somaliland. The crisis, he said, was really the fault of ‘our hogging policy’ in not giving the Italians one of the German lost colonies. ‘I have long thought the distribution of this limited globe quite untenable and quite unjustifiable. Like fools we made it worse at Versailles…We are grossly overloaded.’
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There was no French support for such an exchange, and, by August 1935, the British were contemplating the cost if the League imposed sanctions to restrain Mussolini.

Quite apart from the danger of playing into Germany's hands, the risk of an armed confrontation with Italy was regarded with horror in the Admiralty. Britain was quite unprepared for a conflict, the First Sea Lord warned.
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The programme of replacements meant that the navy's strength would decline before it recovered at the end of the decade, so that even the loss of two or three large ships in a Mediterranean war would be calamitous.
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Both he and Hankey, the powerful Secretary to the Committee of Imperial Defence, were determined that Britain should avoid being dragged into ‘the miserable business of collective security’ (Chatfield's phrase). What was needed was a two-power fleet to counter Germany and Japan, and good relations with Italy. As matters fell out, the British had the worst of both worlds. Under pressure, the Cabinet decided to apply certain sanctions to show disapproval. But, fearing to take the decisive step of imposing sanctions on oil, in December 1935 it despatched Samuel Hoare, the Foreign Secretary, to concert with the French on a new compromise offer that would give Mussolini effective control over much of Ethiopia: the infamous Hoare–Laval pact. Amid a huge public outcry (the government had just won re-election on a platform extolling its commitment to collective security), Hoare was disowned, the pact cast aside and ‘light’ sanctions maintained. Amid continuing high tension in the Mediterranean, the means and the will were lacking to challenge Hitler's forced remilitarisation of the Rhineland in March 1936. ‘If we are seriously to consider the possibility of war with Germany’, declared the Chiefs of Staff on 1 April, ‘it is essential that the Services should be relieved of their Mediterranean responsibilities, otherwise our position is utterly unsafe.’
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In May, Mussolini declared the war in Ethiopia won. In June, the British abandoned their sanctions. But the hope of restoring Anglo-Italian amity proved very far-fetched.

‘There is now the possibility of a hostile Italy on our main line of imperial communications’, reported the Defence Requirements Committee in November 1935.
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By the following year, although there was some disagreement over Mussolini's objectives, Italy's hostility (and its alignment with Germany) had become a new fact of geopolitical life. The result was to force a drastic revision of imperial strategy. There could be no question of a war on three fronts: the Navy would have its hands full in the East and at home. The implication was brutal. Unless French support was assured, the British could not hope to maintain their naval command in the Mediterranean if a crisis arose in the East. It was a tacit admission – despite public denials – that, faced with a war in the East, the route round the Cape and not the short route via Suez might have to be used. Britain's Middle East empire would have to fend for itself.
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Of course, this was still just a grim calculation not an actual reality. But it hugely reinforced the sense of strain and anxiety that had begun to infuse British foreign policy as a whole.

It is important, however, not to exaggerate the scale of British difficulties as they appeared at this stage. In effect, what had happened was that, after the dream-like interval in which the peace of Europe had seemed safe, the British found themselves back in the world of competitive
Weltpolitik
they had known before 1914. The need to withdraw from the Mediterranean to meet the German threat had been accepted once before – in the great strategic rethink of 1912. The threat posed by Germany in 1936–7 was still modest indeed compared with that which had faced them in 1914. Of course, the real source of British, and especially naval, alarm was the new fact of dispersal. In 1914, the British could mass almost their whole fleet in the Orkneys, in the knowledge that the blockade of German sea-power would keep their Empire secure. Now they must divide their sea strength in two at opposite ends of the globe if their rivals coalesced. The most urgent requirement that followed from this was to ease the friction with Italy, while pressing on with the rearmament needed for a ‘new standard’ navy that could face down the Germans and the Japanese, simultaneously if need be. It was from this position of strength that British leaders hoped to restore ‘discipline’ to Europe's diplomacy, and persuade the Hitler regime that it would gain little by delaying a new general settlement. In the meantime, of course, they had to be cautious, and sometimes disingenuous – as when they reassured the Pacific dominions that they would guard the Mediterranean as well as sending the fleet to Singapore, come what may. ‘Singapore’, said Lord Chatfield, the First Sea Lord and professional head of the navy, ‘was first class assurance for the security of Australia.’
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It was vital not to provoke their three possible enemies into a real (as opposed to rhetorical) combination.
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But, if they kept up their guard, and avoided a crisis, the long-run alignment of forces seemed set in their favour. ‘Welfare states’, remarked Alfred Zimmern (he meant the democratic states of Europe, the United States and the white dominions), ‘enjoy an overwhelming preponderance of power, confirmed and increased by their command of the oceans, except for the time being the Western Pacific.’
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Rejecting economic concessions to Germany, Neville Chamberlain expected the improvement in world trade (and the rise in world prices) to force an eventual retreat from Hitler's policy of arms and autarky.
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Indeed, almost as much as before 1914, the British expected that their commerce power would have the last word in any global confrontation – as long as they played their cards well in the game of world politics.

The new economics of Empire

At first sight, such confidence seems strange. After all, the British economy lived in the shadow of depression as much as any other. There were also good grounds for thinking that the British had been the great losers from the economic catastrophe of 1929–31 and the huge contraction in world trade that had set in thereafter – just as they had prospered in the era of trade boom before 1914. Worse still, they had entered the depression from a position of weakness: burdened by debt; with their old staple industries of cotton and coal in decline; and with their exports held back by the high value of sterling. Because the collapse of world prices in 1930 was severest in commodities like grain, rice, rubber and minerals, it was primary producers that were hardest hit. As their incomes declined, so did their imports. For the British at home this meant a triple disaster. Much of their export trade was directed towards such primary producers, in their Empire especially. The great commodities traffic, and the reverse flow of manufactures, employed much British shipping – a critical source of invisible income. And a huge amount of British capital was still invested in the infrastructure needed to bring primary goods to market (railways, harbours, freezing works, warehousing etc.) as well as in their actual production on plantations and in mines. The slump in world trade threatened British wealth on all fronts.

Indeed, it is easy to see the 1930s as marking the great watershed in Britain's capacity to meet the economic demands of imperial power, or to sustain a world-system of which it was the leader. As many contemporaries observed, the engines that had driven the long age of expansion up to 1914 now seemed worn out. British manufactures lost their competitive edge and also a large part of their market. The failure was most glaring in the sad condition of the textile industry, especially Lancashire cottons. Before 1914, textiles made up around 40 per cent of British exports by value; and the British supplied two-thirds of the world trade in cotton goods. By 1938, that figure had fallen to around a quarter.
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In India, by far Lancashire's best market in 1913, its sales had fallen by nearly 90 per cent by the end of the 1930s.
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Overall, Britain's share of the world's manufactured exports fell from 25 per cent in 1913 to 19 per cent in 1937, partly reflecting the fact that its newer industries (like cars and pharmaceuticals) could not fill the gap left by the old and declining industries. Industrial weakness was bound to do damage to British trade and traders. Without competitive goods to sell, British trading companies that had played a large role in the organisation of commerce in Asia, Africa and Latin America found themselves under pressure from European, American and Japanese rivals. Some went to the wall and their misfortunes spilt over to affect London's place in world trade.
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These difficulties in the export of goods were matched by the fall-off in the export of capital. Partly because of the effects of the slump in the traditional fields of British investment, partly because of public and private borrowing at home, the amounts raised in London for overseas issues fell to perhaps one tenth of their pre-1914 level
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virtually all of it for sterling country destinations. In the harsh conditions of the 1930s, the British seemed to have abandoned the practice once regarded as vital to their commercial success: priming the pump of economic development in less-developed countries, and creating consumers for their export industries. Finally, as if all this was not enough, it looked as if the long surge of population growth in mainland Britain had finally petered out. The ‘export surplus’ of migrants would no longer pour out to the ‘white dominions’. Perhaps even more serious was the clear implication that, as a market for foodstuffs (the staples of Canadian, Australian and New Zealand trade), Britain was now stagnant.
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Perhaps the old mutual interest in markets, money and men between Britain and its ‘invisible empire’ of trade (inside and outside the ‘visible’ Empire) was just fading away.