Darwin J. The Empire Project. The Rise and Fall of the British World-System, 1830-1970

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325 / The war for Empire, 1914–1919

C$714 million). In manpower, industrial production and dollars, the

oldest dominion had been an indispensable ally.

India’s case was different, though no less important. India was

rich in manpower but poor in industry. Even more than in the domin-

ions, whose money-markets were under-developed by comparison with

Britain’s, it was difﬁcult to mobilise capital there. Under rules laid down

before 1914, London bore the cost of sending troops out of India – both

Indians and the British garrison – to a theatre of war. But, in September

1914, the Indian government agreed to meet the ‘normal’ cost of such

forces as if they were in India.

This included Indian soldiers serving

in France. By the end of the war, more than one million Indians had

served overseas, and the Indian government had recruited over 800,000

volunteers to the army.

The economic price was considerable. While

India piled up credits abroad with the sale of exports and London’s pay-

ments for the army, little of this could be remitted in earnings, still less

in gold. Strict exchange controls prevented trade in non-essential goods,

and an embargo on grain exports reinforced the effects of a shortage of

shipping (heavily concentrated in the short-haul Atlantic) to the detri-

ment of grain producers. After 1916, the burden of war became steadily

heavier. In 1917, the Viceroy’s government made a gift of £100 million

to Britain, equivalent to India’s annual revenue. It meant, remarked an

Indian member of the legislative council (which was not consulted), that

‘for a lifetime of a generation internal improvements of even the most

necessary kind will be considerably hampered’.

Inﬂation accelerated.

The tax burden per head of population rose by 65 per cent between

1914–15 and 1918–19.

Public debt grew by half. In the last year of the

war, as London faced the terrible wastage of British manpower, Indian

resources were pressed more and more heavily. The Viceroy promised

to raise a further half a million men in April 1918

and to meet the

ordinary costs of a much larger part of the Indian forces overseas. The

military budget rocketed upwards, doubling government spending by

the end of the war. Like the dominions, though without their freedom

of choice, India made a critical contribution to the economic cost of

defending the British world-system.

Imperial aid reduced British dependence upon the United States

and eased the strain upon sterling. It helped blunt the danger that ﬁnan-

cial and naval primacy – the woolsack and the trident – would both

cross the Atlantic at the end of the war. In fact, for a number of reasons,

the American challenge proved curiously muted. The economic muscle

326 / ‘The great liner is sinking’

on which Woodrow Wilson had hoped to rely was not strong enough.

The war had ended too soon. ‘We cannot afford to enter into a com-

petitive ﬁght [with British shipping] for some time to come’, warned his

Shipping Commissioner in late 1918.

With two million Americans

marooned in Europe, a shipping war with the British was out of the

question. Nor were the British in need of American dollars once the

shooting stopped. When the American treasury cut off its dollar loans,

European countries ceased to buy American goods. Wilson’s govern-

ment also proved surprisingly reluctant to discuss economic coopera-

tion with its European associates so that the universal free trade that

was meant to accompany the League of Nations (and foster American

industrial power) remained still-born. Indeed, the economic role of the

American government shrank swiftly at the end of the war and there

was little love lost between the Wilson administration and the money

barons in New York, whom his ﬁnance minister (and also his son-in-

law) described as ‘reactionary, sinister, unscrupulous, mercenary and

sordid’.

Nor did the war mark the prelude to the global triumph

of American trade. In Latin America, there was a permanent shift in

America’s favour, although in Argentina particularly, British exporters

staged a strong recovery.

But the overall picture was much less posi-

tive. By the mid-1920s, the real value of American exports was hardly

above its pre-war level.

The United States had broken free from the

commercial imperium once wielded from London. But it still lacked the

means, and perhaps the motive, to build one of its own.

Rumours that the British had lost their premier place in the

world economy by the end of the war were thus somewhat exagger-

ated. They remained the economic superpower with the largest foreign

trade, the largest foreign income, the largest share of international ser-

vices and the largest merchant ﬂeet. Nevertheless, the war did bring a

critical change, though it took time for the effects to become obvious.

The place occupied by the City and its commercial empire in the British

world-system was sharply modiﬁed. Before the war the City had enjoyed

remarkable freedom from governmental control. It had been a commer-

cial republic with its own imperium: cosmopolitan, self-interested and

self-regulated. During the war it was brought brusquely to heel and its

liberties cut down. Treasury control became stronger and stronger. By

January 1917, it had the power to requisition all foreign securities.

Its view, not that of the Bank of England, was now decisive on interest

rates and the gold reserve.

The Treasury decided where capital could

327 / The war for Empire, 1914–1919

be exported and for what purpose. After the war, ‘informal’ controls

persisted, to channel investment into sterling countries, partly to protect

the exchange rate.

Secondly, there was no doubt that the City’s place

in international ﬁnance had been seriously weakened by the massive

wartime sell-off of dollar securities, the most mobile and therefore the

most valuable of assets.

To have disposed of so much of its holding

in the world’s largest and strongest economy was bound to reduce the

City’s capacity to invest abroad and to aggravate Britain’s dollar deﬁcit,

a marked feature even in pre-war times. Thirdly, the war had meant

a huge rise in domestic borrowing in Britain: government debt rose

tenfold from £700 million in 1914 to £7.5 billion in 1919.

Financing

this home-grown debt became a major preoccupation of both govern-

ment and City, driving up interest rates and redirecting capital from

export overseas. The war made the City poorer, more inward-looking

and more vulnerable to external shocks.

These changes in the City’s position were the most obvious

sign that the powerful symbiosis between economics and politics repre-

sented by the ‘imperialism of free trade’ had been seriously weakened.

The unrestricted ﬂow of trade into, through and out of Britain had

made London the entrepot of the world. It had maximised Britain’s

income from shipping and services as well as her earnings from over-

seas property. It had spun two virtuous circles of wealth and power.

The entrepot function, free trade, ready supplies of capital and credit

and sterling–gold convertibility had made the City the reserve bank of

most secondary states. They in turn were obliged to accept the com-

mercial and ﬁnancial disciplines expected by the London market. To

retreat from the gold standard into a paper currency, or to default

on their obligations, meant a stoppage in the stream of capital and

credit on which their hopes of material progress (in an expanding world

economy) depended. A developing economy like Canada, remarked the

banker Robert Brand in 1913, ‘had as much interest in maintaining

unchecked the ﬂow of capital from England as a city has in preventing

the supply of water being cut off.’

The beneﬁts accruing to Britain

were not only proﬁtable investment. British ﬁnancial, commercial and

even engineering practice was diffused more widely. British-based mer-

chant houses managed much of world trade. Information and market

expertise ﬂowed increasingly to London. The huge British investment

in telecommunications tightened the grip of the British news media

on the information that passed to the ‘Outer World’. In more subtle

328 / ‘The great liner is sinking’

ways, the circulation of news, information and ideas, the prestige and

volume of cultural (as well as material) imports, and the freer move-

ment of pilgrims, tourists and migrants reduced the inﬂuence of local

or regional identity. The scope for imperial or ‘pan-British’ loyalties

(among others) was widened. It was not fantastic before 1914 to imag-

ine a ‘liberal empire’ attached to Britain by cultural and ideological as

well as commercial attraction.

But the commercial engine-room of this free-trade empire had

been damaged by the war, and its machinery dislocated. With its

resources straitened, its integrating function in the British world-system

was throttled back. Without the carrot of credit, the stick of discipline

was much harder to wield. The new technologies of transport and com-

munications, the vital circuits of imperial power, were more difﬁcult

to fund. The full modernisation of military power – the top priority of

pre-war governments – was too costly to contemplate. The expansive

energies symbolised by the huge outpouring of capital and migrants

before 1914 were checked, though post-war emigration revived for a

while. But, when the world economy collapsed into depression after

1929, the imperialism of free trade would beat a ﬁnal retreat in the face

of a new world order.

The politics of solidarity

The war was bound to strain the political relations between Britain and

its most important partners in the imperial association. The contribu-

tions in men or money made by the dominions, India and Ireland to

the imperial war effort became a central issue in their local politics.

The question was even more sharply posed in those other countries

where British rule (or its virtual equivalent – as in Egypt) had comman-

deered the resources to ﬁght or imposed stringent controls on grounds

of security. In East and West Africa, for example, the ‘sideshow’ wars

for German colonies meant labour conscription and social disruption

on a major scale. Death, separation, disease and famine for Africans

followed in the wake of the imperialists’ grand quarrel. During the

war, but mostly at its end (since wartime regulation restrained public

debate), the political cost of ‘British connection’, the hope of reward for

imperial loyalty and the demand for compensation for sufferings borne,

329 / The war for Empire, 1914–1919

reopened long-standing questions about the ordering of the imperial

system.

War politics in Britain

Britain was no exception to this general rule, although the debate about

empire was more muted than elsewhere. British leaders had always been

wary of the complaint that empire had become too costly. They were

uneasy with the claim that imperial expenditure beneﬁted the few and

cost the many. ‘The more the empire expands, the more the Cham-

berlains contract’ had been the radical gibe against Joseph Chamber-

lain’s expansionist enthusiasm – a reference to the family’s manufac-

turing interests. Before 1914, however, when the most visible charge of

empire had been the soaring budget of the Royal Navy, radical criticism

was aimed not at the intolerable burden of defending the empire but

at the unproven need to defend Britain with such costly armaments.

With the navy concentrated in the North Sea, it would have been hard

to argue that it was imperial commitments that were costing Britain

dear. So, unlike the mid- or late-Victorian radicals, who denounced

feckless empire-building in India and Egypt as the enemy of domestic

peace, Edwardian radicals were bound to take a different tack. But

the argument that battleship-building was the needless provocation of

a peaceable Germany,

or that colonial concessions would appease a

disgruntled Berlin, had limited purchase on public opinion. It was the

dispute over how much naval power was needed to defend Britain itself

that was the real threat to the admirals’ plans.

The immediate casus belli (the integrity of Belgium) and the

shock of the German advance reinforced the pre-war consensus that

the target of German aggression was British independence and great

power status in Europe. From ﬁrst to last, the Western Front consumed

by far the largest proportion of British resources and the largest toll of

British dead. It preoccupied British opinion to the exclusion of almost

every other theatre. In this titanic struggle, the role of Britain’s imperial

partners and dependants became assistance in the common cause. With

Canadian, Australian, New Zealand, South African and Indian troops

on the Western Front, it would have been strange to complain that the

Empire was a drain on British power.

Yet its converse, the idea that ‘closer union’ with the Empire

countries (especially the white dominions) was now essential to British

330 / ‘The great liner is sinking’

survival, peddled by self-styled ‘imperialists’ before the war, made lim-

ited headway. For the ﬁrst eighteen months of the war, it was blocked by

the survival of the Asquithian consensus, remodelled as a coalition min-

istry in May 1915. Asquith’s ﬁercest critics had been Milner’s band of

followers.

They denounced the refusal of the Asquithian regime (and

its coalition Tory allies) to accept the logic of total war and cast off the

mentality of laissez-faire. They looked forward to cleansing the Augean

stable of party politics with its ‘old gang’. They hoped for a new align-

ment in which ‘imperialism’ – offering social reform, a more pro-active

state and ‘closer unity’ with the white dominions – would confront

‘socialism’ – the disruptive forces of class warfare, anti-imperialism and

anti-capitalism. A modernised imperial state, mobilising British and

imperial resources, and commanding the ‘race-patriotism’ of British

peoples at home and abroad, was needed if Britain was to survive

the struggle of ‘world states’ that the war represented. Had the war

ended in 1915 or 1916, they would have remained voices crying in the

wilderness. But, by the latter part of 1916, the Milnerites had found

powerful new allies. Lord Northcliffe, proprietor of The Times and the

Daily Mail, had joined the chorus against Asquith. So had Sir Edward

Carson, the uncrowned king of Ulster and darling of the Tory ultras

against Home Rule. But it was Lloyd George’s revolt against Asquith

that was decisive.

From the early months of the war, Lloyd George had been the

Liberal minister most identiﬁed with the building of a war economy. As

minister of munitions and then Secretary of State for War (after Kitch-

ener’s death), his political inﬂuence (perhaps survival) depended upon

military success. By late 1916, he was as radically discontented with

Asquithian complacency as the Milnerites, with whom he had secret

contacts. When Asquith reneged in early December upon an agree-

ment to hand over daily management of the war to a small committee

under his presidency, Lloyd George resigned. But to the chagrin of the

Asquithians, it was he who won over their Tory allies, and a critical fol-

lowing among Liberal MPs, to form a new government whose mandate

was victory at (almost) any price. In this new regime, the Milnerites

were strongly represented – a sign of Lloyd George’s openness to new

ideas and his need for a network that would help break the grip of

the Asquithian ‘establishment’. Milner himself became a member of the

small ‘war cabinet’ of ﬁve and Lloyd George’s ﬁrst lieutenant in the

running of the war. Bonar Law, the Tory leader, was the indispensable

331 / The war for Empire, 1914–1919

guarantor of a Commons majority. And Arthur Henderson was the

vital link with the trade unions and Labour. But Milner, with his knowl-

edge of ﬁnance, his military and dominion connections and (as an Old

Egyptian Hand) his Middle East expertise, became the workhorse of the

war effort. In Lloyd George’s eyes, he had other virtues as well. ‘Milner

and I stand for very much the same things’, he told his conﬁdant, the

newspaper proprietor George Riddell, in February 1917. ‘He is a poor

man and so am I. He does not represent the landed and capitalist classes

any more than I do. He is keen on social reform and so am I.’

an embattled prime minister dependent on the support of his bitterest

pre-war enemies, trust was a luxury. But Milner, he told Riddell a year

later, ‘is a man of ﬁrst class courage’.

The question was whether Milner and his followers would be

able to turn Britain’s domestic politics in the imperial direction for

which they longed. Many omens were favourable. The party system

against which Milner had railed was to all intents suspended. Pub-

lic opinion was shaped more by the press than by parliament, and

the Milnerites had plenty of friends in the press: it was their natu-

ral element. The Times was practically their house journal, its editor,

Geoffrey Dawson, one of Milner’s prot

es. On the economic front,

the food crisis of 1917–18 and the dollar shortage drove home their

pre-war arguments for domestic and imperial self-sufﬁciency. Milner’s

Corn Production Act (1917) was designed to renovate Britain’s dilap-

idated agrarian economy by incentives and controls.

The report of

the Dominions Royal Commission urged the creation of an impe-

rial development board to channel investment into Empire resources.

Another committee urged tariff protection for strategic industries.

Milner himself played an active role in making a new Ministry of

Health to spearhead social reform and post-war ‘reconstruction’. The

siege economy would be reborn in peacetime as the engine of a

new imperialism. Laissez-faire and ‘cosmopolitanism’ would be swept

away.

In fact, the Milnerites’ ambition outran their inﬂuence. In

September 1918, Milner pressed on Lloyd George the importance of

not returning to the ‘old ways’. The key question was now ‘national

development’. ‘The business nation should deal on specially favourable

terms with its friends among the nations, and, ﬁrst and foremost, with

its own kith, the nations of its own civilisation and ideals, who can

be reckoned on to be always friendly.’

Lloyd George ignored him.

332 / ‘The great liner is sinking’

There was little support for Milnerite reconstruction at the end of the

war: quite the contrary. From business interests there were vehement

demands to dismantle the apparatus of wartime controls on proﬁt and

production, reducing the scale and scope of government intervention

as nearly as possible to its pre-war proportions. The call for a return

to ‘normality’ was powerfully seconded in the City, which hoped for

an early return to its old ﬁnancial freedom. Secondly, it turned out that

the war had suspended the party system but not destroyed it. A new

‘imperial’ constitution to smash the parties’ grip was as far away as

ever. Proportional representation, which Milner favoured for similar

reasons,

was not adopted, and, though the coalition was renewed in

December 1918, the huge Conservative majority in the post-war Com-

mons soon proved as stultifyingly parochial as its pre-war counterpart.

Thirdly, and chieﬂy, the war had mobilised a powerful new enemy

to the Milnerite vision of tariff reform and imperial unity: organised

labour.

The outbreak of the war had split the Labour party. The party

leader, Ramsay MacDonald, opposed entry. The trade union leaders,

who supplied the party with its funds and membership, supported the

government. As the party’s de facto chief, Arthur Henderson joined the

Asquith coalition and then the Lloyd George war cabinet. But trade

union patriotism was not without strings. ‘Dilution’ (the replacement

of skilled by unskilled labour for the duration) was unpopular: any

form of industrial conscription was anathema. The system of ‘leav-

ing certiﬁcates’ (to permit a change of employment) was a constant

source of friction. Price rises evoked ﬁerce complaints about proﬁteer-

ing. There was a widespread suspicion that employers would exploit

wartime ﬂexibility in the workplace to drive down wages once peace

had come. As inﬂation accelerated, shortages increased, and the struggle

for manpower intensiﬁed, ‘unofﬁcial’ militancy grew and strikes pro-

liferated. Trade union membership swelled from 3.4 million in 1913

to 5.4 million ﬁve years later. In the Labour movement as a whole,

early support for the war modulated into a more questioning attitude.

American intervention and revolution in Russia heightened anticipa-

tions of a new world order. By the end of 1917, party differences over

the conﬂict had been largely reconciled. The anti-war faction now com-

manded general approval for a ‘peace of democratisation’, with a limit

on armaments, no annexations, and ‘the abandonment of any form

of imperialism’.

When the Labour party adopted a new constitution

333 / The war for Empire, 1914–1919

in January 1918, with individual party membership and a country-

wide electoral organisation, a formidable new opposition was in the

making.

What made it all the more signiﬁcant was the vast extension of

the franchise for which the wartime mobilisation of men and women

had made an unanswerable case. Under the third reform Act of 1918,

universal male suffrage and votes for women over thirty tripled the pre-

war electorate. Little was known of the new voters’ opinions, though

much might be guessed. Lloyd George had made haste in January 1918

to declare his democratic war aims.

The Conservative party leadership

feared a radical tide rolling westward from Russia. When the prospects

of a Liberal reunion were shattered in the acrimony of the Maurice

debate in May 1918, they embraced coalition with Lloyd George’s

followers as the best defence against the ‘impact of labour’. Among

Conservatives, a spirit of caution, defensiveness and introversion was

even more deeply ingrained by the economic turbulence of the aftermath

and the fear of a labour ‘revolt’. The war had transformed British

politics, but not in the direction for which Milner had hoped.

The dominions: Canada, Australia, New Zealand

The ﬁve self-governing states of the Empire (we must not forget New-

foundland) had no choice about entering the conﬂict. When their head

of state, King George V, declared war on the advice of his British min-

isters, they were in the ﬁght whether they liked it or not. But their

contribution to the war effort was another matter entirely. In principle,

the dominion governments were free to cheer from the sidelines, or to

make only token gestures of support. In practice, their response was

astonishing. In Australia, the Commonwealth prime minister promised

help ‘to the last man and the last shilling’. In Canada and New Zealand,

the sentiment was the same (South Africa was a special case). By the

end of the war, over a million men from the dominions had served

on its battleﬁelds, the vast majority in the terrible charnel-house of the

Western Front. In the two largest, Canada and Australia, over 13 per

cent of adult males had served overseas; in New Zealand, the ﬁgure

exceeded 19 per cent. The proportion who were killed or wounded was

appallingly high: nearly 50 per cent of the Canadians, 59 per cent of

New Zealanders and 65 per cent of Australians. Over 60,000 Cana-

dians were killed, 59,000 Australians and 16,000 New Zealanders.

The cost of raising and equipping armies for the imperial war was met

334 / ‘The great liner is sinking’

(in these three cases) by the dominion governments themselves who

incurred, like Britain, a heavy burden of war debt.

Cooperation on this scale and under such stressful conditions

was bound to be difﬁcult. As the war went on interminably, and the

losses mounted up, the differences between London and the dominion

governments grew sharper. In the ﬁrst two years of the struggle, three

factors had mitigated these tensions. The dominion leaders were con-

tent (perhaps surprisingly so) to leave the daily conduct of the war to

British ministers in London, perhaps on the argument that their own

expertise was so limited as to rule out assuming any responsibility for

the deployment of their forces. Indeed, it was not until the summer of

1918 that the dominion governments mounted a sustained attack on

the deﬁciencies of the British high command after the disastrous set-

backs of the spring. Secondly, for Australia, New Zealand and South

Africa, where anxiety about local security was greatest, the outbreak

of war promised immediate territorial gains in their own backyard:

in German New Guinea, Samoa and South West Africa. Thirdly, the

economic burdens of war were eased by the large and growing scale

of British purchases, and by the general prosperity that came with the

booming demand for the commodities the dominions produced. Loy-

alty and self-interest marched in the same direction. Even so, there was

friction. The dominions were infuriated by the British government’s

initial reluctance to let them borrow in London, fearing that such a

stoppage would capsize their credit-based economies. They were deter-

mined to keep their volunteer armies together as ‘national’ units and

not to see them dispersed among other British troops. And, by 1916,

dominion leaders were becoming increasingly anxious to have, and

to be seen to have, greater inﬂuence over the purposes for which the

war was being fought. W. M. Hughes, the Australian premier, spent

much of 1916 in London, partly to negotiate the sale of the wool-

clip, but also to stake a claim for inﬂuence at the imperial centre. The

Canadian premier, Robert Borden, an outspoken advocate of dominion

inﬂuence over British foreign policy before 1914, was enraged by the

frigid response of the Colonial Secretary, Bonar Law, to his request for

greater participation in imperial policy. Canada had sent 101,000 men

overseas, he told his London representative in October 1915, and had

just authorised an increase to 250,000. ‘We deem ourselves entitled

to fuller information and consultation respecting general policy in war

operations.’

By January 1916, when the Canadian commitment was