Chapter Two: the First World
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CHAPTER TWO THE FIRST WORLD WAR During the First World War, Charles and Frank Altschul and the interconnected network of firms in London, Paris, and New York to which they belonged ranged themselves uncompromisingly with the Allied powers, Great Britain and France, and hoped that the war would permanently strengthen links between those powers and the United States. It was not necessarily a foregone conclusion that the two Altschuls should take this position. The outbreak of the First World War in August 1914 represented a major challenge to the cosmopolitan financial elite to which both men belonged, and likewise to the German American and American Jewish communities. The conflict disrupted the intricate network of financial ties linking the great Anglo-European banking houses, as belligerent governments imposed economic and financial controls and sought to deprive their enemies of access to resources of every kind, including basic commodities, munitions of war, and access to credit and loans.1 For almost three years, from August 1914 to April 1917, the United States remained neutral in the war. This did not, however, ensure the country immunity from its impact. During that time, bitter political debates raged over just how strongly the United States government headed by Democratic President Woodrow Wilson should assert the rights of American individuals and businesses to travel to and trade with belligerent nations, and how forcefully it should respond to German attacks on Allied vessels on which American citizens were travelling, or to German efforts to cut off commerce with the Allies. Those Americans who sympathized with the Allied powers, Great Britain, France, and Russia, generally supported a liberal policy in terms of permitting trade with belligerent powers. In practice British control of the seas meant that the balance of such trade was overwhelmingly in the Allies’ favor. Access to supplies from North American factories and farms, plus the funds to finance these purchases, was indeed a key factor in the Allies’ ability to wage all-out war against the Central Powers, Germany, Austria-Hungary, and the Ottoman Empire. Pro-Allied Americans also generally believed that their government should be extremely firm in defending neutral rights, even if by doing so, the country risked war with Germany over incidents in which German submarines sank passenger liners and merchant ships without warning, killing Americans traveling on them. Opponents of American intervention in the war, and those who favored the Central Powers, were usually far readier to compromise on neutral rights. Many who were pro-German, anti-war, or both, urged politicians and the government to impose a ban on private American commerce with any belligerent power, and sought to prevent belligerents using Americans loans or credits to finance such trade. In an 1 On the economic impact of the First World War, see esp. Hew Strachan, The First World War, Vol. I: To Arms (Oxford: Oxford University Press, 2001), chs. 10-11; David Stevenson, Cataclysm: The First World War as Political Tragedy (New York: Basic Books, 2004), ch. 9; Niall Ferguson, The Pity of War: Explaining World War I (New York: Basic Books, 1998), chs. 4, 5, 9, and 11; Barry Eichengreen, Golden Fetters: The Gold Standard and the Great Depression 1919-1939 (New York: Oxford University Press, 1992), 67-99; David Kynaston, The City of London, Vol. III: Illusions of Gold 1914-1945 (London: Chatto and Windus, 1999), 3-50; and Gerd Hardach, The First World War 1914-1918 (London: Allen Lane, 1977). 1 effort to prevent diplomatic crises over the loss of American lives spiraling into war, they were also willing to contemplate an embargo prohibiting American citizens from travelling on ships of 2 belligerent powers. Nowhere were the debates over these issues more intense than in the New York financial community. Many Americans who belonged to the patrician elite of the United States Northeast were immediately and profoundly pro-Allied in sympathy. Leading New York politicians, bankers, and lawyers identified themselves almost completely with the Allied cause. From August 1914 onward, the East Coast patrician elite virtually immediately adopted a staunchly pro-Allied outlook. Leading New York politicians, bankers, and lawyers identified almost completely with the Allies. They included such figures as Theodore Roosevelt and his younger cousin Franklin, then assistant secretary of the navy; the various partners of the leading investment bank, J. P. Morgan & Company; Benjamin Strong, the first governor of the new Federal Reserve Bank of New York; Robert Bacon, a former Morgan partner who had served as secretary of state; and the lawyer-politicians Elihu Root and Henry L. Stimson, members of the same law firm who each had served or would serve as both secretary of war and secretary of defense. They stressed the demands of national security and the need to maintain a balance of power by means of a German defeat and the conclusion of a formal or informal American alliance with Britain and France. This outlook emphasized military strength and permanent increases in American defense spending. Its proponents also perceived the war in moral terms, arguing vehemently that Germany was morally wrong and the Allies right, and the war a global battle for supremacy between the forces of good and evil, pitting civilization, liberty, and democracy against authoritarian “Prussianism,” “Kaiserism,” absolutism, and despotic militarism. The British and French, they contended, were defending Anglo-Saxon democratic institutions, “Christendom,” and the values of “Western civilization” against a German attempt 3 to impose Teutonic despotism on the entire world. During the First World War the Eastern foreign policy elite generally rejected President Woodrow Wilson’s advice that Americans should be “impartial in thought as well as in action”, 2 For overviews of U.S. wartime diplomacy during the 1914-1917 period of neutrality, see Arthur S. Link, Wilson: The Struggle for Neutrality 1914-1915 (Princeton: Princeton University Press, 1960); Link, Wilson: Confusions and Crises 1915-1916 (Princeton: Princeton University Press, 1964); Link, Wilson: Campaigns for Progressivism and Peace 1916-1917 Princeton: Princeton University Press, 1965); John Milton Cooper, Jr., The Vanity of Power: American Isolationism and World War I, 1915-1917 (Westport, CT: Greenwood Press, 1970); Patrick Devlin, Too Proud to Fight: Woodrow Wilson’s Neutrality (New York: Oxford University Press, 1975); John A. Thompson, Woodrow Wilson (London: Longman, 2002); and Ernest R. May, The World War and American Isolation 1914- 1917 (Chicago: Chicago University Press, 1965). 3 Priscilla Roberts, “The First World War and the Emergence of American Atlanticism, 1914-1920”, Diplomacy and Statecraft 5:3 (November 1994), 569-619; see also Priscilla Roberts, “The Anglo-American Theme: American Visions of an Atlantic Alliance, 1914-1944” Diplomatic History 21:3 (Summer 1997), 333-364; Nicholas Cull, “Selling Peace: The Origins, Promotion and Fate of the Anglo-American New Order during World War II,” Diplomacy and Statecraft 7:1 (March 1996), 1-10; Henry F. May, The End of American Innocence: A Study of the First Years of Our Own Time, 1912-1917 (London: Jonathan Cape, 1959), 363-367. 2 and found the president’s diplomacy insufficiently pro-Allied. They themselves generally supported American intervention in the war, in anticipation of which several became vigorous advocates of ‘preparedness,’ the campaign to increase United States defense spending and in many cases to introduce a national program of universal military training. United States firms supplied around 25% of the Allies’ war matériel, a vital contribution to the Allied war effort. Pro-Allied Eastern bankers lobbied for the relaxation of government controls on this trade, while the lawyers furnished legal arguments justifiying such policies on the grounds that they did not contravene American neutrality. When the United States government found itself at odds with both the Allied and Central Powers as disputes arose over the right of supposedly neutral Americans to trade with belligerent powers and to safe travel on belligerent merchant shipping, these Allied partisans almost invariably urged that their government take an uncompromising stand against Germany, while supporting more conciliatory policies toward the Allies. The Morgan firm and the New York Federal Reserve Bank took the lead in raising and facilitating the private American loans and credits which increasingly financed the Allies’ war purchases. A decisive Allied victory was, they believed, essential, since only this would suffice to guarantee lasting peace. In the longer term, they supported American membership in an international organization to maintain peace, a body in which the United States, Britain, and perhaps France would be the dominant powers, capable of imposing military and economic order upon the rest 4 of the world. Such proposals effectively represented the fulfilment of suggestions for a de facto Anglo- 5 American alliance already current among British and American elites in the prewar period. It was an outlook underpinned by popular social Darwinist ideas of the superiority of the Anglo- Saxon or English-speaking nations current in the late nineteenth and early twentieth centuries, the belief disseminated by numerous influential historians and political theorists that the Anglo- Saxon race, in effect the British and Americans, was uniquely