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The Diplomacy of Finance: British Financial Missions to The United States 1914–1918*

Published online by Cambridge University Press:  11 February 2009

Kathleen Burk
Kathleen Burk
Affiliation:
St Hugh's College, Oxford
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Extract

It is a commonplace among historians of the First World War that during this period Britain and America changed positions as dorninant and subordinate financial powers. The great gap in the histories, however, has been any description of how this came about, Historians of the period have generally relied on one book, E. V. Morgan's Studies in Brtish financial policy 1914–1925 (1952), with the occasional use of Henry F. Grady's British war finance, 1914–1919 (1923). Both are very useful, and within its field Morgan in particular will be difficult to supplant; but within the context of Anglo-American relations they only treat one side of the stroy. It is clear that during the war Britain was dependent increasingly on American finance, private and later public, both to supply her civilian and military populations and to fight the war; and further, that by late 1916 decisions taken in America could have a direct bearing on British ability to finance her own operations. Once America entered the war this influence became even more direct. Negotiations over finance largely took place in America, by means of temporary and permanent missions. This article will describe the most important of these missions, and trace the gradual change in the balance of British and American financial power.

Type
Articles
Information
The Historical Journal , Volume 22 , Issue 2 , June 1979 , pp. 351 - 372
Copyright
Copyright © Cambridge University Press 1979

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References

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3 Board of Trade, ‘A brief note on the dependence of the United Kingdom on United States supplies’, 6 Nov. 1916, Cabinet papers, P.R.O., Cab. 42/23/7. For the period Aug. 1914 to April 1917 satisfactory figures on expenditure by Britain in the U.S. do not seem to be available. For the period up to Oct. 1915, according to Keynes, ‘with few exceptions there are no figures on which to base an independent estimate…’. However, the following approximate monthly figures for the later period are indicative of the scale of expenditure: Oct. 1915 to Mar. 1916 (U.S. and Canada, excluding payments to maintain exchange), £11 million; May 1916 to Sept. 1916 (U.S. only, including exchange), £44 million; Oct. 1916 to Mar. 1917 (U.S. only, including exchange), £61 million. See The collected writings of John Maynard Keynes, ed. Johnson, E. (Royal Economic Society, 1971), XVI, 138, 203, 238Google Scholar.

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22 Cab. 37/157/40.

23 Ibid.

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25 Cab. 37/161/9. Spring-Rice to Grey, 5 Dec. 1916, F.O. 371/2800.

26 U.S. Senate, Munitions industry, v, 200–1, 204–5. Spring-Rice to Grey, 1 Dec. 1916, F.O. 371/2800. Diary, 19 Nov. 1916, Charles Hamlin papers, Library of Congress, vol. 4. Hamlin was a member of the Federal Reserve Board from its inception.

27 Diary, 25 Nov., 27 Nov. 1916, Hamlin papers, vol. 4. For text of warning see New York Times of 28 Nov. 1916.

28 U.S. Senate, Munitions industry, VI, 132. Spring-Rice to Grey, 5 Dec. 1916, F.O. 371/2800.

29 Minutes of the war committee, 28 Nov. 1916, Cab. 42/26/2.

30 Keynes, ed. Johnson, XVI, 211.

31 Ibid. Keynes' memory was slightly at fault: the true figures were $17m, $8m and $4m. Minutes of the war cabinet, 9 Dec. 1916, Cab. 37/161/9.

32 Minutes of the war committee, 28 Nov. 1916, Cab. 42/26/2.

33 Minutes on Spring-Rice to Grey, 5 Dec. 1916, F.O. 371/2800.

34 Minute on Spring-Rice to Balfour, 27 Dec. 1916, F.O. 371/2800.

35 Bradbury to Balfour, F.O. 371/3070.

36 Treasury to Balfour to Spring-Rice, 1 Feb. 1917, F.O. 371/3070. Addison to Bonar Law, 14 Dec. 1916, Addison papers, Box 22.

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41 McFadyean, A., ‘Memorandum on the general situation in the U.S.A.’, 13 06 1917, T.172/422, fos. 30–2. Broesamle, pp. 120–4, 146Google Scholar.

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43 Lever's diary, 23 Apr. 1917, T.172/429, fo. 100. Diary, 25 Apr., 26 Apr. 1917, Hamlin papers, vol. 4. Lever's diary, 2 May 1917, T.172/429, fos. 105–7; 12 May 1917. fos. 118–19.

44 Lever's diary, 9 Apr. 1917, T. 172/429, fos. 85–6; 2 May 1917, fos. 105–7. Chancellor to Lever, 6 May, 9 May 1917; Lever to chancellor, 11 May 1917, F.O. 371/3114.

45 Treasury to Lever, 7 May 1917, F.O. 371/3114. N.s., n.d., F.O. 800/208, fo. 332.

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48 Lever to chancellor, 7 May 1917, F.O. 371/3114. Lever to chancellor, 25 May 1917, F.O. 371/3113.

49 Lever's diary, 2 May 1917, T.172/429, fos. 105–7; ” May 1917, fos. 117–18.

50 Wilson papers, Library of Congress, 2/87.

51 Chancellor to Balfour, 25 May 1917, T. 172/424, fo. 39. Balfour to Barclay, 26 May 1917; Balfour to Cecil, 26 May 1917, F.O. 800/208.

52 Balfour to Cecil, 5 May 1917, F.O. 800/208, fos. 210–11. War cab. 147, 25 May 1917, Cab. 21/54. War cab. 152, 31 May 1917, Cab. 23/2.

53 Gilbert, Charles, American financing of World War I (Westport, 1970), pp. 122–3Google Scholar. Lever's diary, 13June 1917, T. 172/429, fos. 138–9. Lever to chancellor, 13June 1917 F.O. 371/3114. Lever to chancellor, 27 June 1917, F.O. 371/3115. Northcliffe to prime minister, 27 June 1917, F.O. 371/3120. Crawford to F.O., 27 June 1917, F.O. 371 /3115.

54 Lever to chancellor, 19 May 1917, F.O. 371/3114.

55 Crawford to F.O., 3 July 1917, F.O. 371/3115 Lever to chancellor, 19 May 1917, F.O. 371/3114.

56 Department of State, Papers relating to the foreign relations of the United States, 1917, supplement 2, the World War (Washington, 1932), pp. 543–5Google Scholar.

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58 Chancellor to Page, 23 July 1917, F.O. 371/3120. William Hines Page was the American ambassador to Britain.

59 $185m announced on 25 July for August and $400m in late August for September. Northcliffe to chancellor, 26 July 1917. F.O. 371/3115 McAdoo to the president, 26 Aug. 1917, Wilson papers, 4/194.

60 Lever's diary, 20 July 1917, T.172/430, fo. 4. Treasury to cabinet secretariat, 7 July 1917, Cab. 21/123. Chancellor to Page, 23 July 1917, F.O. 371/3120.

61 Keynes to Chalmers to chancellor, 28 July 1917, T. 172/443, fos. 61–2; Minute by Chalmers on same. War cab. 199, 30 July 1917, Cab. 23/3. Lloyd George to Northcliffe, 30 July 1917; Spring-Rice to F.O., 31 July 1917, F.O. 371/3116.

62 Chancellor to McAdoo, 30 July 1917, F.O. 371/3115.

63 Spring-Rice to F.O., 31 July 1917; Balfour to Spring-Rice, 2 Aug. 1917, F.O. 371/3116. Spring-Rice to Balfour, 3 Aug. 1917, F.O. 800/242. McAdoo to Page for chancellor, 16 Aug. 1917, F.O. 371/3121. For tables on the rate of exchange, see Morgan, E. V., Studies in British financial policy, 1314–25 (London, 1952), pp. 345–8Google Scholar.

64 Crosby to Lansing, 28 June 1917, U.S. Treasury papers, National Archives, Box 119, File GB 132/17–3. Lever's diary, 28 June 1917, T.172/429, fos. 151–2.

65 Lever's diary, 9 Mar. 1917, T. 172/429, fos. 61–2. Crawford to F.O., 4 July 1917, F.O. 371/3115 State Dep., Foreign relations, 1917, supplement 2: pp. 539–43. ‘ Memorandum of conference held in Crosby's office’, 5 07 1917Google Scholar, U.S. Treasury papers, Box 116, GB 132–4.

66 Northcliffe to chancellor, 5 July 1917, William Wiseman papers, Yale University Library, 91/91. Wiseman's official position was head of British secret service in the United States, but he was also a close confidant of House. For further information see Fowler, W. B., British-American relations, 1917–1918: The role of Sir William Wiseman (Princeton, 1969)Google Scholar.

67 Lever to chancellor, 1 Aug. 1917 F.0. 371/3116. Blackett's diary, 31 July 1917, T. 172/430, fo. 23; Lever's diary, 10 Aug. 1917, fo. 23; Blackett's diary, 10 Aug. 1917, fo. 26; Blackett's diary, 22 Aug. 1917, fo. 30. Basil Blackett was Lever's assistant. Lever to chancellor, 15 Aug. 1917, F.O. 371/3116. J. P. Morgan to McAdoo, 16 Aug. 1917; McAdoo to Morgan, 20 Aug. 1917, McAdoo papers, Library of Congress, Box 185.

68 House papers, box 10.

69 Wiseman to Drummond, 3 July 1917, Wiseman papers, 90/42.

70 Willert to Wiseman, 18 Aug. 1917, Wiseman papers, 90/4. Spring-Rice reported that McAdoo was ‘resentful of… a misunderstanding arising out of some conversations with Lever’. Spring-Rice to Balfour, 13 July 1917, F.O. 800/242. Wiseman to Drummond, 13 July 1917, F.O. 800/209. Diary, 9 July 1917, Frank L. Polk papers, Yale University Library, 88/2. Polk was the counsellor at the State Department. Diary, 10 July 1917, House papers, vol. 11.

71 Chancellor to Page, 23 July 1917, F.0.371/3120. McAdoo, W. G., Crowded years (London, 1932), p. 400Google Scholar. Diary, 7 July 1917, House papers, vol. n.

72 Diary, 2 July 1917, House papers, vol. n.

73 Ibid. Wiseman to Northcliffe, 3 July 1917, Wiseman papers, 90/22. Fowler, Wiseman, p. 50. Diary, 16 July 1917, House papers, vol. 11.

74 Chancellor to Stamfordham, 23 Aug. 1917, T. 172/434, fos. 59–593. Montgomery Hyde, Lord Reading, p. 214. Fowler, Wiseman, p. 55. F.O. to Northcliffe, 30 Aug. 1917, F.0.800/209. Diary, 2 Sept. 1917, House papers, vol. 11.

75 For a description of Reading's approach see Reading to chancellor, 14 Sept. 1917, T. 172/433. fo. 96; and Reading to chancellor, 17 Oct. 1917, T. 172/437, fos. 69–73. For McAdoo's response see McAdoo, Crowded years, p. 396. Reading to prime minister, war cab. and Balfour, 27 Oct. 1917; Reading to chancellor, 27 Oct. 1917; Reading to McAdoo, 28 Oct. 1917, Reading papers, India Office Library, F. 118/114.

76 Lever to chancellor, 11 Jan. 1918, T.172/444, fos. 19–21. Lever to chancellor, 19 Jan. 1918, T.172/448, fos. 58–60; Chancellor to Lever, 23 Jan. 1918, fo. 42.

77 Wiseman to Reading, ?27 Jan. 1918, F.O. 800/223. Lever to chancellor, 11 Jan. 1918, T. 172/p444, fos. 19–21. Lever to chancellor, 19 Jan. 1918, T.172/448, fos. 58–60.

78 Lever to chancellor, 27 Jan. 1918, T. 172/448, fos. 25–6. Chancellor to Lever, 6 Feb. 1918, T. 172/449, fo. 160.

79 Chancellor to Reading, 8 May 1918, T. 172/445, fos. 11–14.

80 Chancellor to Reading, 16 Feb. 1918, T.172/449, fos. 92–3. McAdoo to the president, 6 Mar. 1918, U.S. Treasury papers, Box ii7, GB 132. 1. Reading to chancellor, 24 Apr. 1918, T.i 72/445, fos. 24–6.

81 Chancellor to Reading, 28 Apr. 1918, T.172/p445, fo. 22.

82 T.I72/445, fos. 20–1.

83 Keynes, ed. Johnson, xvi, 287.

84 Keynes' first draft of chancellor to Reading, 8 May 1918, T.172/445, fos. 11–14.

85 Ibid.

86 House to Wiseman, 25 Aug. 1917, Wiseman papers, 90/26.

87 See McAdoo's letter to the president of 30 April 1917, quoted above. The president himself wrote to House on 21 July 1917 that ‘…England and France have not the same views with regard to peace that we have by any means. When the war is over we can force them to our way of thinking, because by that time they will, among other things, be financially in our hands…’ House papers, Box 121.

88 In Oct. 1918 McAdoo nearly requested Lever's recall. He was forest by the considerations that if Lever returned to Britain, the British would probably treat him as an expert on the United States; further, asking for his recall without specifying charges might lead the Europeans to request the departure of Crosby from Europe in reprisal. McAdoo to Crosby, 18 Oct. 1918, U.S. Treasury papers, box 116, file GB 132.3 (not sent); ibid., Rathbone to McAdoo.

89 Departmen t of th e Treasury, Annual report of the secretary of the treasury on the state of the finances for the fiscal year ended June 30, 1919 (Washington, 1920).

90 France was never treated in the same manner as Italy and Russia, since she tried to maintain her position as an equal and pay her own way as far as possible. Keynes commented in March 1916 that Britain had only one ally, France, and that the rest were mercenaries (Keynes, ed. Johnson, xvi, 187). For details of French missions in America see Kaspi, André, Le temps des Américains: le concours américain á la France en 1917–1918 (Paris, 1976)Google Scholar.