Darwin J. The Empire Project. The Rise and Fall of the British World-System, 1830-1970
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545 / The price of survival, 1943–1951
and social reform. Yet, at exactly the same time, spending on defence
remained obstinately high. In the late 1940s it stood at more than dou-
ble 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 com-
mitments 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
546 / ‘The great liner is sinking’
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 coun-
terpart 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 pro-
duction) 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).
72
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.
73
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
de facto 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 ster-
ling 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 dis-
liked London’s determination to manage their non-sterling purchases
547 / The price of survival, 1943–1951
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 cus-
tomer: 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).
74
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 mar-
ket was a valuable lever. The South African government was reluctant
to accept the ‘dollar-pool’ rules, even more so when Smuts was dis-
placed 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.
75
In the colonial economies, London could set the
price that was paid for their commodity exports, and restrict the manu-
factures they were sent in return. This was a way of exporting Britain’s
austerity, and reducing colonial consumption to hoard ‘British’ dol-
lars. In the Treasury’s view, selling on colonial produce was a far more
promising way of increasing London’s dollar income than closer rela-
tions with the Western European countries.
76
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.
77
To a suspicious American expert, it seemed
that the British were still doing surprisingly well from their investment
in empire.
78
Yet Britain’s position remained fundamentally fragile and with
it the hope of restoring the pound sterling to equal status with the dol-
lar 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
548 / ‘The great liner is sinking’
well. But, in 1949, sterling was once more on the ropes. An American
slowdown, the cessation of stockpiling, and (so some observers sug-
gested) 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 cre-
ate 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 strik-
ing 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.
79
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 crush-
ing 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 predomi-
nance. 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.
80
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.’
81
British calls for help in Europe and the Middle
East would confuse and distract Australian public opinion. So Chifley
549 / The price of survival, 1943–1951
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.
82
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 govern-
ment, complained his foreign minister Evatt, than there had been from
Churchill – an indictment indeed!
83
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.
84
The following year, he pressed ahead
with a scheme for compulsory military training, on which a successful
referendum was held in August 1949.
85
1949 was a year of political change in both Australia and New
Zealand. The new New Zealand prime minister, Sidney Holland, was an
ardent imperial patriot. ‘I love the British Empire with all my heart’, had
been his response to the great sterling crisis of August 1947.
86
The Aus-
tralian election restored Robert Menzies to power after a gap of eight
years. Menzies, like Holland, was a vocal exponent of the British con-
nection and (in his case) of a British Australia. As a wealthy lawyer from
Melbourne (Australia’s financial capital with close ties to the City), he
was deeply attached to the strength and stability of British institutions
(‘the quietness, the tolerance, the sense of values, the ordered justice,
the security of England’).
87
But Menzies was far from being Downing
Street’s doormat. There was too little awareness of empire in Britain,
he thought on a visit in 1948.
88
Yet Menzies saw Australia’s future
as more reliant than ever on its closeness to Britain. The Australian
economy would be a ‘food arsenal’ for Europe: its growth was tied
up with Britain’s recovery and the survival of sterling.
89
He was also
keenly aware of Australia’s deep isolation and clutched at the hope that
it could be a member of NATO. He seized the great chance given by
London’s nuclear ambitions to offer Australia as Britain’s partner and
test-ground.
90
He was not in a hurry to promise Australian troops to
the Middle East theatre. But, after the outbreak of war in Korea in June
1950 (which intensified fears of an imminent world war), he reversed
Chifley’s stance and (some eighteen months later) committed Australia
to a Middle East role.
91
The timing was not accidental. By that time,
the Australia–New Zealand–United States security pact (ANZUS) was
settled, the ‘Near North’ was now guarded by American sea-power and
550 / ‘The great liner is sinking’
the British were committed to the defence of Malaya. With the back
door now bolted, Menzies was ready to do his imperial duty.
92
Economic and strategic self-interest fused with their sense of a
British identity to make the Southern dominions the most reliable part-
ners in the fourth British empire. With the senior dominion (the term
itself was slipping out of use), Britain’s post-war relations were some-
what more complex. There were plenty of voices still raised to assert
that Canada was, in Brooke Claxton’s phrase, ‘a British nation in North
America’, or to argue, like George Grant, that ‘if we have no link with
the British Commonwealth we shall soon cease to be a nation.’
93
‘New-
foundland’ (whose adhesion to Canada was then under discussion) ‘is
ultra-loyal to the British Crown’, remarked an Ontario newspaper. ‘We
can stand some of that too.’
94
Canada’s Britishness was regarded by
most English Canadians as an uncontroversial fact.
95
Mackenzie King,
then the outgoing prime minister, warned his successor, St Laurent, that
the Conservative opposition would exploit ‘British’ sentiment to press
for a stronger commitment to imperial defence – a call bound to inflame
French Canadian feeling and threaten the cohesion of the Liberal party.
‘You will probably have to fight all Sir Wilfrid’s [Laurier’s] battles over
again.’
96
Yet King himself was deeply uneasy about showing too much
preference for Canada’s ties with America over those with Britain.
The Canadian problem lay in striking the balance. It was per-
fectly clear, a senior military officer had remarked in August 1945,that
Canada was ‘not going to participate in a war . . . over the frontiers of
Iraq or to preserve the Indian Ocean as a British lake’. But, as two
great wars had shown, ‘the Canadian people have, on the occasion of a
great emergency arising, quickly realised that the security of the United
Kingdom is a vital interest’.
97
Mackenzie King’s instinct (a habitual
reflex) was to avoid any forward commitment, but a greater theoretical
risk was that Canada’s integration into America’s continental defence
system would constrain its ability to lend Britain its aid. NATO averted
this danger. From the Canadian angle, the North Atlantic Treaty signed
in April 1949 was the perfect solution: Canada would contribute to
North Atlantic defence alongside its two great partners: pragmatism,
sentiment and self-interest were reconciled. But, in commercial rela-
tions, such compromise was elusive. This was not for want of Canadian
efforts. The British market was hugely important to Canada, taking
40 per cent of Canadian exports before the war.
98
The sterling they
earned helped to offset Canada’s large deficit with the United States.
551 / The price of survival, 1943–1951
During the war, Britain’s shortage of dollars had been met by allowing
American aid to be spent in Canada. After the war, Canadian eager-
ness to restore the old pattern had been part of the motive for the
large dollar loan they advanced to Britain. But nothing went right. The
Canadians had banked on a swift British revival. The convertibility
crisis was a shattering blow. As Britain’s dollar purchases were cut to
the bone, Canada’s balance of payments also lurched into crisis. Mar-
shall Aid dollars eased things for a while, and allowed London to pay
for Canadian wheat. But the second sterling crisis in 1949 marked a
parting of ways. The British tried to persuade the Canadians to accept
inconvertible sterling, and to help British exports by restricting their
purchase of American goods. To the Canadians it seemed like a trans-
parent manoeuvre, to suck them willy-nilly into the sterling area
99
and
give a great boost to its dollar reserve. It was also bound to infuriate
Washington.
100
Ottawa drew back. But its export dilemma was not
fully resolved until the Korean war boom widened the American mar-
ket for Canadian manufactures and foodstuffs. By the early 1950s, 54
per cent of Canadian exports (40 per cent in 1937) were sent there, and
17 per cent to Britain. A mere 9 per cent of Canadian imports (half the
pre-war percentage) were now drawn from Britain. Canada’s economic
and strategic integration into the imperial system of its great southern
neighbour looked almost irreversible.
With the fourth dominion, relations had never been easy and
seemed likely to worsen. In South African politics, the dominant fact
was that Afrikaners formed a majority of the white population who
alone (except for a handful of ‘coloured’ or mixed-race voters) had the
franchise. The extent of republican or nationalist feeling among the
Afrikaner electorate was thus a critical issue and a vociferous minority
of Afrikaner politicians had long demanded a republic and secession
from the Empire (one was assumed to lead to the other). Yet South
Africa had entered the Second World War freely and its soldiers and
airmen – including many Afrikaners – fought beside British and other
Empire troops. This seemed to suggest that for a significant fraction
of Afrikaner opinion the republican path was divisive and dangerous,
alienating the ‘English’ minority and isolating South Africa. General
Smuts was regarded – in Britain especially – as the indispensable leader.
His global prestige, local charisma and political skill (‘Slim Jannie’ was
a nickname with somewhat mixed connotations) made him the ideal
(Afrikaner) champion of Anglo-Afrikaner amity and South Africa’s
552 / ‘The great liner is sinking’
Commonwealth membership. It was his intervention that had tipped
the balance in the vote to enter the war. As the wartime prime minister,
he had faced down the furious outcry of the anti-war faction and the
paramilitary violence of the Ossewa Brandwag (the name was meant to
invoke the Voortrekker tradition), while the Allied victory in Africa had
helped his supporters to electoral victory in 1943. After the war, despite
the strains of economic transition, and the fiasco of Smuts’ attempt to
get United Nations approval to incorporate South West Africa (still
a League mandate) into the Union, defeat by the Nationalists seemed
highly unlikely so long as Smuts was leader of the United party.
101
But,
at the general election in 1948, Smuts was defeated – despite winning
a majority of the popular vote – and the Nationalists came to power
under D. F. Malan.
This was bound to set the alarm bells ringing in London. On
any view of Britain’s post-war system, South Africa was a large and
important component. In the Second World War, as a semi-industrial
economy, a supplier of gold, and a great naval and air base in the South
Atlantic and Indian Ocean, its cooperation had been vital to the imperial
war effort. In a future war against the Soviet Union, it was expected to
become perhaps even more valuable. Declaring a republic and leaving
the Commonwealth would create a huge crisis in Anglo-South African
relations at a critical moment. There was already the danger that a
Nationalist government would demand the return of the Simonstown
base and renew the old pressure for the ‘High Commission Territories’
(Basutoland, Bechuanaland and Swaziland – today’s Lesotho, Botswana
and Swaziland) to be incorporated as part of the Union. Nor was it
likely that a government so explicitly committed to baaskap (white
supremacy) and apartheid (racial separation) would fit very willingly
into a Commonwealth group that had just been enlarged by three Asian
dominions. But, as it turned out, Malan was pragmatic and his hand was
weak. The capital flight that greeted his victory threatened economic
disaster. Malan was forced to place his dollar income in the sterling
area pool in return for access to the London capital market – a major
concession that Smuts had escaped, with considerable benefit to the
white standard of living.
102
The referendum on a republic was put off
sine die. And, since fear of communism was even more of a bogey in the
National than in the United party, a retreat into the laager away from
European complications (that had had great appeal in the inter-war
years) now looked less wise.
553 / The price of survival, 1943–1951
Malan’s dilemma was neatly exposed in the wider debate set
off over the Commonwealth’s future in 1948–9. It was triggered by
the question of India’s status. Nehru and the Congress had accepted
‘dominion status’ in 1947 as an expedient to quicken the transfer of
power before a new Indian constitution was framed. It soon became
obvious that the new constitution would take a republican form. Within
the Congress there were also those who disliked any formal connection,
whether material or symbolic, with the imperial past and who were
deeply suspicious that the British intended to drag India back into their
imperialist toils. A Congress party resolution in December 1948 pro-
claimed its commitment to the ‘ending of Imperialism and Colonialism’
and declared that Indian foreign policy should ‘avoid entanglement in
military or similar alliances which tend to divide up the world in rival
groups’. India’s ‘complete independence’ meant that ‘her present asso-
ciation with the United Kingdom and the Commonwealth of Nations
will necessarily have to change’.
103
The difficulty lay in the strong sup-
position that allegiance to the Crown was the essential element in Com-
monwealth membership: a dominion that rejected the king as its head
of state automatically left the Commonwealth. In 1948, this had led
to the departure of both Burma and Eire (the former Irish Free State).
‘There can be no doubt’, reported a British official committee, ‘that the
king has been the symbol and expression of that community of feeling
which has been the mainspring of cooperation particularly at times of
crisis . . . Some South African politicians . . . recommend the severance of
allegiance to the Crown on the very ground that some South Africans
are influenced . . . by the emotional pull of the Commonwealth connec-
tion and that South Africa’s decision to declare war in 1939 would not
have been taken but for this sense of “obligation”.’
104
The dilemma
was whether to loosen the monarchical bond, risk the erosion of the
Crown’s ‘emotional pull’ and weaken the solidarity of the Common-
wealth’s ‘central countries’ (defined as Britain, Canada, Australia and
New Zealand)
105
or to maintain the old ‘rule’ and exclude a republican
India.
It was India’s geostrategic importance that weighed most with
London. If India’s request for a new kind of membership was rejected,
what would the consequences be? In the climate of 1948–9, it was hard
to be insouciant. For all their eagerness to win American backing, Attlee
and Bevin saw themselves at that moment as the heroic builders of a
grand coalition against the Soviet threat, now being extended – with the
554 / ‘The great liner is sinking’
advance of Mao’s armies in China – into Asia as well. Western European
Union and Commonwealth backing were its vital components. Whether
India contributed to ‘Commonwealth defence’ or not, ‘her exclusion
from the Commonwealth against her own wishes would encourage her
to concentrate her attention on the creation of an Asiatic bloc, isolated
from and possibly hostile to the Western Powers.’
106
If India left, it
might be followed by Pakistan and Ceylon (Sri Lanka), and by Britain’s
other Asian colonies as they became independent. It was ‘a matter of
major importance’, the Cabinet were told, ‘that the leading power in
South East Asia should remain a member of the Commonwealth’.
107
In
the Chiefs of Staff’s view, keeping India in offered the best chance for
the common defence of South Asia, and for Britain’s getting access in
wartime to India’s manpower and industry. But a formula acceptable
to the ‘old dominions’ was not easy to find. New Zealand did not want
a ‘flabby Commonwealth with no guiding principle’: it might be better
if India stayed out.
108
Even at this late stage, Attlee himself tried rather
desperately to dissuade Nehru. ‘Does a republic really appeal to the
masses in India? . . . [R]epublicanism is an alien import from Europe’,
he urged.
109
But, in the end, all the dominion governments accepted
that keeping India in was of vital importance, and in this ‘can-do’
atmosphere a compromise formula was hammered out at the Com-
monwealth prime ministers meeting in April 1949. India accepted the
king ‘as the symbol of free association’ of the Commonwealth’s inde-
pendent member nations and ‘as such the Head of the Commonwealth’.
The remaining dominions declared their position unchanged. The real
surprise of the meeting was what Malan had to say. Malan had been
worried by the phrase ‘head of the Commonwealth’, fearing its ‘super-
state’ overtones – an old phobia in South Africa and of the Liberals in
Canada. But he affirmed South African loyalty to the Commonwealth.
‘South Africa cannot stand isolated, but must have friends and must
find them generally among the like-minded nations . . . but more espe-
cially . . . in the inner circle of the free and independent nations of the
Commonwealth.’
110
It was a remarkable u-turn, and opinion in South
Africa was divided on Malan’s real intentions. But Baring (the British
representative there) was convinced that Malan actually meant what he
said.
111
The successful inclusion of republican India and Malan’s public
confession of Commonwealth faith were promising signs that the will
was there to preserve the British connection and to acknowledge the