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The American economy may have overtaken Britain in the second half of the 19th century. However, World War I was needed for British politicians to begin to understand the outcome, and it has now coincided with the loss of global financial leadership.
Fighting wars and maintaining an empire becomes increasingly difficult when the country relies on the kindness of strangers to fund its debts. In the early stages of World War I, Britain was both a lender and a borrower, and could deceive the widespread neutrality of conflict financing in terms of international debt.
Still, there were significant differences. The UK mainly rented out to Russia and France, but borrowed from the US. Russia scrapped its debt after the 1917 revolution and France, combining its ability to pay for Germany’s receipt of reparations.
Debt negotiations in the 1920s are dry and inexplicable subjects. But former US Treasury official Jill Eicher found a way to bring them back to life by focusing on the two main characters: Andrew Mellon, Secretary of the Treasury from 1921 to 1932, and Winston Churchill, president of the UK from 1924 to 1929. . . Each country will face again, and what the world is facing today. ”
In contrast, Churchill was restless, ambitious and had a great phrase change. He is remembered as an indifferent Prime Minister with little business insight. But he quickly grasped the economics of European postwar debt, saying, “As long as these enormous debts lie in the world… That trade is heavy and severely limited.” He also understood politics. The idea that the US had a moral obligation to cancel war debt could always appeal to British voters.
The crease of Eicher’s fascinating story is that it is not Churchill who signed Melon and Melon in 1924 in British debt, but former Prime Minister Stanley Baldwin.
Winston Churchill (left) and Stanley Baldwin in 1925 © Bettmann Archive
Baldwin, influenced by Bank of England Governor Montague Norman, believed that the UK’s financial reliability depends on accepting its obligations and paying off its obligations. Churchill may not have liked the deal, but in order to fulfill his ambitions to become prime minister, Baldwin was now prime minister, so he had to accept it. And, ironically, Churchill was to exacerbate the problem by accepting Norman’s advice to bring Sterling back to the gold standard of Prewar Parity, a financial orthodox act that he would regret at the end of his days.
Ultimately, the terms of the debt agreement proved to be irrelevant. Germany suspended compensation in 1931, and France was liable for debt the following year. The painful British government 18 months later led everything except the name Stanley Baldwin, debt to the US. It is the first and last default since the 17th century.
Fortunately, when it comes to funding for World War II, the US and Churchill-led Britain quickly learned lessons. The UK has accepted its lower financial position. The United States recognized its role in ensuring peace in Europe, recognising that cooperation rather than conflict is the best route to economic stability. Current administrations on both sides of the Atlantic may find this book useful.
Mellon vs Churchill: The Untold Story of the Finance Titans During the War by Jill Eicher Pegasus Books £22/$32, 368 pages
Nicholas Macpherson is the former executive secretary of the UK Treasury Department.
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