tooze

SITUATIONISM À L’ENVERS?
In his thoughtful consideration of Adam Tooze’s Crashed: How a Decade of Financial Crises Changed the World, Cédric Durand salutes the magnitude of Tooze’s achievement—a ‘landmark account’ of the mechanisms precipitating the economic disaster that started to engulf the West in 2008 and of the remedies and ruins that followed. Particularly impressive, he remarks, is the way the book illuminates ‘the technical workings of financial markets and asset-backed commercial paper without losing sight of the political dynamics at stake’:
As Tooze writes: ‘Political choice, ideology and agency are everywhere across the narrative with highly consequential results, not merely as disturbing factors but as vital reactions to the huge volatility and contingency generated by the malfunctioning of the giant “systems” and “machines” and apparatuses of financial engineering.’ Crashed is, indeed, a highly political book.1
At the same time, Durand observes, its narrative is no simple—or rather in this case, of course, highly complex and intricate—empirical tracking of the crisis and its outcomes. It possesses definite ‘conceptual underpinnings’, suggested by Tooze himself in acknowledging his debt to Wynne Godley’s use of ‘stock-flow consistency’ modelling of the financial interactions between public, private and foreign sectors. This in Durand’s view supplies ‘the unstated backbone’ of Tooze’s general argument.2
Both judgements appear sound. But in Durand’s exposition a paradox attaches to each of them, since by the end of his review, somewhat different notes are struck. For Godley, one of the key advantages of the stock-flow consistency approach was that it integrated the financial with the real economy, as alternative models did not. Durand, however, remarks that Crashed ‘does not discuss the concrete intertwining of the financial and productive sectors in the global economy at all’, and so ‘fails to set the financial crisis in the context of the structural crisis tendencies within contemporary capitalist economies.’ This observation in turn generates another, which might seem to put in question Durand’s overall tribute to the book. For there he writes of ‘Tooze’s unwillingness to investigate the relations between the political and the economic’, a reluctance that ‘ultimately undermines his account of the crisis decade.’ Logically, the question then arises: do these two apparent contradictions lie in Tooze’s work, or in Durand’s review of it? Or can both be coherent in their own terms?
1.conceptualizing finance
Perhaps the best way of approaching this question is to turn to Durand’s own work on the metastases of contemporary capitalism. With a reticence that does him honour—all but unheard of in an Anglosphere where even bibliographies so often become mere catalogues of self-promotion—he makes no reference to Le Capital fictif, which appeared in France in 2014 (its English edition Fictitious Capital in 2017), though its bearing on the concerns of Crashed is plain. A succinct, luminous study, it displays a combination rare in the literature on the economic landscape of the new century: in a bare 150 pages, a driving conceptual energy joined to a controlling empirical grasp of statistical data across all the major capitalist states. Organized around the growth in the object of its title—a term coined by the first Earl of Liverpool, Secretary for War in North’s administration under George iii, received by Ricardo, theorized in differing ways by Marx and Hayek alike, whose history it traces—Fictitious Capital sets out to show the character and logic of the financial system that brought the world to crisis in 2008, and has only continued to burgeon since.
What are the leading themes of the book? At the root of the instability that has triggered successive crises in the last forty years, first in the periphery and then in the core of the global capitalist economy, lies the peculiarity that distinguishes financial markets from markets in goods and services.
Whereas in normal times rising prices weaken demand in the real economy, the opposite is generally true of financial securities: the more prices increase, the more these securities are in demand. The same applies the other way round: during a crisis, the fall in prices engenders fire sales, which translate into the acceleration of the price collapse. This peculiarity of financial products derives from the fact that their purchase—dissociated from any use-value—corresponds to a purely speculative rationale; the objective is to obtain surplus-value by reselling them at a higher price at some later point.
On the way up, ‘the self-sustaining price rise fuelled by agents’ expectations is further exaggerated by credit. Indebtedness increases prices, and since the securities can serve as the counterpart to fresh loans, their increasing value allows agents to take on more debt.’ On the way down, as asset bubbles start to burst, ‘economic agents trying to meet the deadlines on their debt repayments are forced to sell at discounted prices’, unleashing ‘a self-sustaining movement towards depression, which only state intervention can interrupt’.3
Since the deregulation of capital flows in the eighties, this general mechanism has been turbo-charged by the huge expansion of financial markets within the global economic system, with not only vastly larger forms and magnitudes of private credit, public bonds and equities—the three forms of fictitious capital designated by Marx—but the development of new kinds of transaction still further removed from processes of production, as shadow banking and financial innovations twist and lengthen the chains of indebtedness. ‘Contract swaps, structured products and option contracts are multiplying and combining among themselves. They are limited by nothing other than the imaginations of the financial actors.’ High-volume speculation ceases to be an outgrowth of booms: thanks to the flexibility of derivatives, ‘it becomes an activity independent of the business cycle’.4 The result is a radical transformation of the relations between financial and commercial transactions, and a vertiginous rise in the weight of finance in the world economy. By2007, the total (notional) value of derivatives was some ten times that of global gdp. By 2013 the value of purely financial transactions outclassed those of trade and investment combined by a hundred to one.5
That such an inverted pyramid should in one way or another topple into crises is no surprise, each time requiring central banks to act as unlimited lender of last resort, and governments to sustain demand by letting deficits soar, to save the system—the crash of 2008 being the latest and most spectacular case to date. But as Durand observes, the very success of such rescue operations breeds the conditions for the next crisis. If ‘economic policies have undeniably succeeded in their effort to keep the collapse under control: all the post-war financial crises have been contained’, the subsequent return of confidence in due course undoes itself, as financial operators become increasingly willing to take new chances in the knowledge that central banks ‘will do everything to prevent systemic risk becoming a reality’. Such is the paradox of government intervention. ‘As capacities for crisis-management improve and financial actors as well as regulators become more optimistic’, financial innovation revives and regulation relaxes, leading to yet more complex and sophisticated products, expanding credit at the cost of the quality of the assets acquired. ‘This, in turn, leads to small crises which are rapidly overcome thanks to the improved capacity to handle them. This cumulative dynamic produces a financial super-cycle through which the accumulated risks become increasingly large—that is, the relative weight of speculative finance and Ponzi schemes constantly increases’, and with it the scale and cost of state intervention to contain the crisis. According to imf calculations, between the autumn of 2008 and the beginning of 2009, the total support extended to the financial sector by states and central banks of the advanced capitalist countries was equivalent to 50.4 per cent of world gdp.6
Profits without accumulation?
The swollen size of the financial sector in the economies of the West has meant, as is well known, that its share of total profits has increased too. For Durand, this raises the question, which has puzzled others working in a more or less Marxist tradition, of where these profits come from. But here, as he notes, there is a larger problem. Since the eighties, the rate of investment in the core zone of capitalism has steadily fallen, and with it rates of growth, decade by decade. Yet in the same period, profits have remained high. Indeed, as David Kotz has shown in these pages, in the United States the years between 2010 and 2017 saw a rate of accumulation lower, yet a rate of profit higher, than in any decade since the time of Reagan.7 So where are these profits in general coming from? Durand’s answer is that they represent an updated version of Hobson’s vision of the future at the start of the twentieth century: namely the extraction of high levels of profit from investment in production in zones of cheap labour on the periphery of the system, above all in Asia. If this is so, the ‘enigma of profits without accumulation’ would dissolve, because firms are indeed investing; not in their domestic economies, where growth, employment and wages stagnate, but in overseas locations, where they have secured very high rates of return.
Prima facie there are two difficulties with this argument. The first is where in principle the boundary of ‘fictitious’ capital—if defined as capital which ‘circulates without production having yet been realized, representing a claim on a future real valorization process’8—lies, since formally speaking virtually all investment meets this criterion, as capital laid out in anticipation of profitable returns.9 The second is how in practice the significance of purely financial payments, as distinct from straightforward profits from productive operations, is to be estimated in the flow of fdi to cheap labour markets.10 In taking dividends from foreign assets as a proxy for these—he cites research from the us and France—it is unclear how far Durand is simply re-tabling the first difficulty. That a ‘knot between financialization and globalization’, as he puts it, exists, is not in doubt. But how analytically it is tied remains elusive.
No such ambiguity attaches to the conclusion of his book. Contrary to received wisdom, though financial instability has ‘negative externalities that affect all actors’, it does not follow that its absence is therefore a blessing for all. Financial stability is not in itself ‘a public good from which everyone benefits’. It is enough to see the pay-offs of the operations to restore it in 2008–09. A year later the share of us government bonds held by the richest 1 per cent of the population had climbed to over 40 per cent. Durand’s verdict is trenchant:
The hegemony of finance—the most fetishized form of wealth—is only maintained by the public authorities’ unconditional support. Left to itself, fictitious capital would collapse; and yet would pull down the whole of our economies in its wake. In truth, finance is a master blackmailer. Financial hegemony dresses up in the liberal trappings of the market, yet captures the old sovereignty of the state all the better to squeeze the body of society to feed its own profits.11
ii.a staggered trilogy
Enough has been said to indicate why Durand could, for all his admiration of Crashed, conclude that ultimately it falls short of the promise of its postulates. In itself, however, such a limiting judgement offers no specification of what might explain the gap perceived between the two. What kind of method permits bracketing of the real economy in a diagnostic of the vicissitudes of finance? What sort of politics informs the architecture of the ensuing work? Initial clues to these questions can be found in two passages from Tooze’s writing. In the first, a review of Geoff Mann’s In the Long Run We Are All Dead: Keynesianism, Political Economy and Revolution (2017), he defines the distinctive virtue of Keynes’s outlook as a ‘situational and tactical awareness’ of the problems for liberal democracy inherent in the operations of the business cycle in a capitalist economy, requiring pragmatic crisis management in the form of punctual adjustments without illusion of permanency.12 In the second, from the Introduction to Crashed, he puts his political cards on the table. ‘The tenth anniversary of 2008’, he writes, ‘is not a comfortable vantage-point for a left-liberal historian whose personal loyalties are divided among England, Germany, the “island of Manhattan” and the eu.’13
To see how these remarks bear on the issues raised by Durand, it is best to consider Crashed as the third volume of a trilogy, preceded by Tooze’s two previous works, The Deluge: The Great War and the Remaking of Global Order (2014) and The Wages of Destruction: The Making and Breaking of the Nazi Economy (2006), a set which has arguably made Tooze the outstanding modern economic historian of his cohort.14 As a public voice, he is more than this, ranging across the pages of the New York Times, Wall Street Journal, Die Zeit, Der Spiegel, Financial Times, Guardian and more, as well as radio and television. The trio of books that now defines his career does not trace a continuous narrative, and its composition does not follow a chronological sequence—the first book deals with the years 1933 to 1945, the second 1916 to 1931, the third 2006 to 2018—nor possess a uniform focus. But that it displays a governing thematic unity is plain.
Hitler’s war
A massive work of detailed historical scholarship, Wages of Destruction unfolds a commanding account of the German economy that Hitler inherited on coming to power in the depths of the Depression, the rapid recovery that the Nazi regime engineered with a high-speed rearmament programme, the resource constraints it had hit by the end of the thirties, its ensuing military conquests to overcome these, their over-reaching in the invasion of the Soviet Union, and the desperate ratcheting up of production, with an intensified resort to slave labour, as defeat loomed in the east and the Allies closed in from the west. If Tooze overstates the comparative backwardness of the German economy, dragged down by its ailing small-peasant and archaic-landlord agriculture, and underrates the rise in popular consumption under the Third Reich so long as it remained at peace,15 such questions of emphasis scarcely affect the scale of his achievement, above all as his account moves into high gear, plotting the interplay between economic and military decisions in the Second World War itself.
Framing this narrative, however, is a thesis whose connexion with it is disconcertingly forced: a claim essentially supererogatory, tenuously stitched around the story it tells of the ‘making and breaking’ of the Nazi economy. Contrary to common belief, Tooze argues, in Hitler’s mind the supreme enemy against which his mobilization of the Third Reich for continental war took aim lay not in the steppes to the east, but across the ocean to the far west. Not the bacillus of Bolshevism but the might of the United States, headquarters of world Jewry, was the existential threat to Germany that obsessed him, and governed his ambitions of aggression. The destruction of Communism and conquest of Russia was just a means, not an end, Operation Barbarossa no more than a way-station—the acquisition of a territorial and resource platform capable of rivalling the vast open spaces of the American colossus, in the battle for world domination. Historically, then, ‘America should provide the pivot for our understanding of the Third Reich’. Projects of eastern expansionism, along with rabid anti-Communism and anti-Semitism, were generic features of the German right after 1918. What distinguished Hitler, defining ‘the peculiarity and motivating dynamic’ of his regime, was the centrality of America in his world-view as ‘the global hegemon in the making’, and ‘fulcrum of a world Jewish conspiracy for the ruination of Germany and the rest of Europe’.16
On what evidence did Tooze base this construction? Principally, Hitler’s so-called ‘Second Book’, an unfinished and unpublished sequel to Mein Kampf, probably composed in 1928; and a scattering of obiter dicta during the War. But neither his words nor deeds provide any coherent support for it. Like any European of his time, Hitler knew how large was America’s population and domestic market, but in the 900 pages of Mein Kampf, where the ‘infamous mental terror’ of socialism and the Jewish features of the ‘grinning, ugly face of Marxism’ have pride of place from the start, the United States is accorded not so much as a single page, even paragraph; while the occasional mentions it earns are not especially hostile. In his ‘Second Book’, Hitler did talk of the future threat to Europe from America, given the size of its population and wealth of its market, its lower production costs and stream of inventions, which could give it predominance over the Old World. But neither the substance nor the salience of the ensuing thoughts correspond to Tooze’s characterization of them.
For Hitler went on to explain that the key advantage of America lay in its ethnic composition. Nordic emigration to the New World had created in the United States a ‘new national community of the highest racial quality’, a ‘young, racially select people’, filtering immigration to extract the ‘Nordic element’ from all the nations of Europe, while barring the door to Japanese and Chinese. Russia might have a comparable land-surface, but its population was of such poor quality that it could pose no economic or political threat to the freedom of the world, merely flood it with disease. Pan-European schemes to counter the rise of America, hoping to cobble races of every sort together into some sort of union, were a delusion of Jews and half-breeds. If Germany continued to allow its best blood-lines to emigrate to the us, it was bound to deteriorate into a people of no value; only a state that could ‘raise the racial value of its people into the most practical national form’ could compete with America. In the future, conflict between Europe and America might not always be peacefully economic in nature, but the nation that would be most in danger from the us was not Germany but England.17
In other words, when Hitler turned his mind to America, in his only real disquisition on the country, it was in admiration rather than denunciation of the us, not merely as economically more advanced, but essentially and explicitly as more Aryan than Germany itself was in danger of becoming. How large did these thoughts loom in 1928? Attention to America lasts for a dozen pages—just 5 per cent of the manuscript of his Second Book. South Tyrol commands double the space. Nor is there evidence of any continuing preoccupation with the us in the succeeding years. Far from being central to his world-view, in the thirties America faded from Hitler’s horizon, as he decided that it was not, after all, a stronghold of manly Nordic virtues, but a sink-hole of mongrels and degenerates, in which at best only half—at other times they became a sixth—of the population were of decent stock, and with Jews uppermost: a state of weaklings, wracked with unemployment and enfeebled by neutrality laws, which could be discounted as a force in Weltpolitik.18
Once entrenched in power, Hitler laid out the international tasks of the Third Reich as he saw them in his ‘Four Year Plan’ memorandum of August–September 1936. It contains not a line about America. After explaining that ‘politics was the leadership and conduct of the historical struggles for life of peoples’, whose intensification since the French Revolution had found its most extreme expression in Bolshevism—bent on ‘eliminating the traditional elites of humanity and replacing them with world-wide Jewry’—and declaring that no state could withdraw or keep its distance from the ensuing confrontation, he announced in italics: ‘Since Marxism has by its victory in Russia converted one of the largest empires in the world into its base of further operations, this question has become critical. An ideologically founded, closed authoritarian will to aggression has entered the ideologically tattered democratic world.’ The democratic states were incapable of waging a successful war against Soviet Russia, leaving Germany—‘as always the ignition point of the Western world against Bolshevik attacks’—the duty of securing its own existence against impending catastrophe with every means at its disposal. ‘For the victory of Bolshevism over Germany would not end in another Versailles, but the final destruction, in fact extermination of the German people.’ The scale of such a disaster was incalculable. ‘In face of the need to defend us against this danger all other considerations recede as completely irrelevant’. Expanded rearmament, at top speed, was required to ready the German army and nation for war in four years.19 Here the abiding phobias of Mein Kampf, in its fusion of anti-Communism and anti-Semitism, had become state doctrine; the fight against Bolshevism, in Ian Kershaw’s words, ‘the lodestar of Hitler’s thinking on foreign policy’.20 The future of German expansion lay in the east, not in the west. When in 1939 his invasion of Poland led, contrary to his calculations, to British and French declarations of war with Germany, and he defeated France in short order, he expected Britain to come to terms with him, as a long-time admirer of its empire, which he had no wish to break up. Baffled by its refusal to do so, and unable to invade it by sea, as early as July 1940 he decided instead to attack Russia—in defiance of any rational strategic calculus, re-creating the war on two fronts he had always maintained was the overriding reason for German defeat in 1914–18. Military common sense would have directed the Wehrmacht south rather than east, forcing Spain—where Franco’s regime, little more than a year in the saddle, was in no position to resist an ultimatum to fall into line—into war with Britain and, with control of both sides of the Straits of Gibraltar, closing the Mediterranean, seizing Egypt and the Iraqi oilfields: a saunter compared with Operation Barbarossa.21 But the ideological premium lay where it had always been: wiping out Bolshevism and colonizing the east, in a war of extermination without counterpart in the west. Nor, in the expected aftermath of its success, was there any talk of a conquered Russia providing a platform for taking on America. Hitler’s Directive No. 32, ‘Preparations for the Period after Barbarossa’, drafted eleven days before the Russian campaign began, was free of any thought of Washington, projecting instead a sweep of the Wehrmacht around the Mediterranean, closing in on the Suez Canal—just what he had fatally foregone.
Orphaned Europe
Where America did feature in Hitler’s outlook was in the Far East, where he hoped Japan would pin down the us, preventing it from helping Britain in Europe, and incited Tokyo to launch an attack on it already in April 1941, before Japan was either resolved or ready to do so. In itself a rational enough calculation, Hitler rendered it lunatic by promising that Germany would declare war on America as soon as Japan did, and being as good as his word in December, bringing down on him the world’s greatest power without having any possibility of so much as reaching it by land, sea or air.22 Tooze correctly observes that this ‘sealed the fate of Germany’,23 without registering how fatal it also is to his construction of the centrality of America to Hitler’s world-view. For what the Führer’s gratuitous gift to Roosevelt (who would have had great difficulty in declaring war on Germany in the wake of Pearl Harbor, when national outrage and demand for retribution were focused on Japan) revealed was Hitler’s staggering level of inconsequence and ignorance where anything to do with the United States was actually concerned.
In a respectful but wide-ranging critique of Wages of Destruction, the most substantial engagement with it to date, Dylan Riley cites Adorno’s cool verdict: ‘The German ruling clique drove towards war because they were excluded from a position of imperial power. But in their exclusion lay the reason for the blind and clumsy provincialism that made Hitler’s and Ribbentrop’s policies uncompetitive and their war a gamble.’24 From 1942 onwards Hitler would, in his rambling monologues to intimates, have more to say about the us, increasingly vituperated in Nazi pronouncements as—an inherently mobile location—the headquarters of world Jewry, but never rising above know-nothing bluster and dilettantism. His world-view comprised a limited number of idées fixes—anti-Communism, anti-Semitism, a racialized social Darwinism—to which passing moods or fancies could add a wide variety of temporary hobby-horses and inconsistent opinions, vague and self-contradictory ideas about America among them.
In framing Wages of Destruction by Hitler’s relationship to America, however, Tooze was not making an arbitrary decision. For the starting-point of his narrative is not the backdrop that might be expected of a study of the Nazi economy, the Great Depression. More devastating in its effects in Germany than in any other industrial society, the slump is taken as given, without causal explanation. What takes centre stage is the tragic failure of the German elites to hold fast to the wisdom of Stresemann, the leading statesman of the twenties, in seeing that the path to recovery after defeat in the First World War lay not in futile rebellion against the settlement at Versailles but in signalling Germany’s willingness to pay reparations, and thereby opening the door to ‘a special relationship with the United States’ as the ‘dominant force in world affairs, both economically and as a future military superpower’, with the aim of positioning Germany as a key ally of Washington in a transatlantic partnership.25 But after the Dawes and Young Plans, hopeful steps in the right direction, Stresemann died and Wall Street crashed. The result was ‘the collapse of American hegemony in Europe’, leaving the continent ‘orphaned as it had not been since World War I’, and Germany at the mercy of Hitler’s demonic ambitions. Happily, with the defeat of the Third Reich, Adenauer could realize Stresemann’s vision, at last sheltering a German parliamentary democracy in the safe harbour of America, orphanage over.26
iii. wilsonian peace?
Published eight years later, The Deluge supplies the prequel to Wages. Its theme is the emergence out of the Great War of 1914–18 of a new world order, led by America, which outlasted the demise of its architect and gave way only under the strain of the Great Depression. The narrative opens with the military deadlock in Europe in 1916, and Wilson’s decision to enter the War in support of the Entente in the spring of 1917, making of the struggle ‘something far more morally and politically charged’ than a mere great-power conflict—‘a crusading victory’, an American president in the lead, ‘fought and won to uphold the rule of international law and to put down autocracy and militarism’. With the defeat of Germany and the dissolution of Austro-Hungary, the us—already a super-state towering above all others in economic might—became the master power of the succeeding peace. Its post-war hegemony, however, would be no mere replacement of what had once been the Pax Britannica. It was a paradigm shift in international relations, a deliberate attempt to construct a global economic and political order, as conceived by Wilson—a system of a new kind: ‘by common agreement, the new order had three major facets—moral authority backed by military power and economic supremacy’.27
True, though the agreement was common, it was not quite universal. By the time Wilson had taken America into the War, the February Revolution had broken out in Russia. ‘First and foremost a patriotic event’, this spelt no defection from the ranks of the Entente, whose leaders were justifiably confident that ‘Russia’s democratic revolution would re-energize the war effort, not end it’. ‘Kerensky, Tsereteli and their colleagues set themselves frantically to rebuilding the army as a fighting force’, and in the early summer of 1917 troops ‘under the dynamic command of the young war hero, Lavr Kornilov’ were making headway against the Habsburg forces in front of them.28 But to the north, Bolshevik subversion led to mutiny, and the Russian front collapsed. As peasant soldiers ‘abandoned the cause en masse’, and radicalized units around Petrograd marched on the city, the Provisional Government—‘despite its profound commitment to democratic freedom’—‘had no option but to order the mass arrest of the Bolshevik leadership’, but made the fatal mistake of failing ‘to decapitate it’ as the circumstances required, a taboo on the death penalty inhibiting the necessary executions. Three months later, Red Guards stormed the Winter Palace and nascent Russian democracy was extinguished. In power, the Bolshevik dictatorship repudiated Russia’s foreign debts—an action amounting to a rejection of ‘the very foundations of international law’, severing any possibility of an understanding with the Entente—and, signing the Treaty of Brest-Litovsk with the Central Powers, exited the War. The Allied interventions in Russia which followed this capitulation were not motivated by any counter-revolutionary intent, but simply by the aim of ousting a regime that had become, objectively speaking, a ward of German militarism. Lenin was only saved from the political bankruptcy of his collusion with Berlin by the collapse of the Second Reich in the autumn, which took the wind out of the need for these.29
The self-exclusion of Russia from the new world order in the making in 1919 did not materially affect its birth at Versailles. Treatment of Wilson and Lenin as if they were equivalent figures, ranged against each other, is a retrospective illusion, so dramatic was the implosion of Russian power at the end of the war, and so pitifully weak the emergent Bolshevik regime. The year 1919, Tooze observes, had nothing in common with 1945, when the United States and the Soviet Union squared off against each other in a bi-polar international system. Rather, it ‘resembled the unipolar moment of 1989’, when ‘the idea of reordering the world around a single power bloc and a common set of liberal, “Western” values seemed like a radical historical departure’, but in fact it was a reprise of the dramatic outcome of World War One.30 Much arguing and bargaining marked the negotiations at Versailles, but the victors stuck together in a moderate settlement, the fruit of compromise, that allowed for the eventual re-integration of Germany into the comity of leading powers under the aegis of Wilson’s brain-child, a League of Nations whose covenant was signed by all in advance of negotiations over the Treaty itself.
Tragically, however, on his return to the us, Wilson was unable to secure ratification of American membership of the League from the Senate, a ‘heartbreaking fiasco’ that was certainly in part due to his personal rigidity, and by then physical frailty.31 But the deeper roots of this disaster lay in the paradox that America, the advance guard of economic and cultural modernity in the world at large, had yet to modernize its own political order at home. Despite the Progressivist vision of leaders like the first Roosevelt and Wilson, the us state remained crabbed and confined within its eighteenth-century constitutional matrix. The archaic prerogatives of the Senate, requiring a two-thirds vote for approval of any international treaty, without equivalent anywhere else in the world, were one expression of this lag, the most direct obstruction to Wilson’s hopes. The fiscal underdevelopment of the Federal state, still essentially dependent on customs-and-excise revenues, was another. The War had been financed essentially by monetary loosening, bank credits that doubled prices. In lieu of an income tax, this was in effect an inflation tax, which when abruptly reversed by the Treasury in 1920 plunged the country into deflation and mass unemployment, putting a Republican back into the White House with the largest electoral majority of the century.
For Tooze, underlying the rhetoric of Wilson and his domestic opponents alike, and culprit for the failure of the us to rise to the challenges of the hour, was the quite recent ideology of American exceptionalism, essentially a higher form of nationalism at odds with the internationalist requirements of global leadership. Yet he detects a kernel of Burkean wisdom in this outlook, a sense of the need to preserve the continuity of the country’s history after the trauma of the Civil War. Nor did it in practice mean any decisive retreat from the tasks of building a new world order. Contrary to legend, Harding’s Administration presided over a demonstration of it more successful than Versailles: the Washington Conference of 1921–22, which saw Wilson’s defeated Republican rival of 1916, Charles Evans Hughes, pull off a triumph of internationalist diplomacy in persuading Britain and Japan to cede naval ascent gracefully to the United States, in the manner of Gorbachev yielding to Bush seventy years later. Thereafter, successive presidents and their envoys, public or private, laboured to stabilize Europe in the wake of the tensions left by the reparations clauses of Versailles, with constructive proposals for easing financial difficulties in Germany like the Dawes and Young Plans, and eventually even a moratorium offered by Hoover on the war debts of France and Britain to the us itself. Nor were these efforts at pacification of international relations without admirable European, and for that matter Asian, counterparts. In England Austen Chamberlain, in France Aristide Briand, in Germany Gustav Stresemann—every one a Nobelist—were all convinced Atlanticists, looking to the us as their indispensable partner in the pursuit of peace; so too a resolute Ramsay MacDonald and the courageous Taisho reformers in Japan.
Why then was the progressive liberal project of these forward-looking statesmen in the end derailed? Its flaw lay in the limitation of the American hegemony that it required and embodied. For common to Wilson and his successors was a refusal, not of enlightened engagement with the affairs of the rest of the world, but of the ultimate responsibility of leading an international coalition of powers to preserve free trade and collective security. Instead, their basic impulse was ‘to use America’s position of privileged detachment, and the dependence on it of the other major powers, to frame a transformation of world affairs’, the ‘better to uphold their ideal of America’s destiny’—a radical vision abroad, tied to a conservative attachment at home.32 For a decade, the combination yielded impressive achievements. But when the tragic test of the Great Depression came, it was not enough. International cooperation collapsed, and revolt against the once-hopeful moderation of the twenties erupted in the fanaticisms of the thirties, anticipated in their different ways by Hitler and Trotsky. But the very extremity of such reactions was evidence of the strength of the emergent order they sought to overthrow. The spectacular escalation of violence unleashed in the 1930s and 1940s was a testament to the kind of force that the insurgents believed themselves to be up against. It was precisely the looming potential, the future dominance of American capitalist democracy, that was the common factor impelling Hitler, Stalin, the Italian fascists and their Japanese counterparts to such radical action.33
Yet the visions of statesmen like Briand were not in vain. For the ‘restless search for a new way of securing order and peace was the expression not of a deluded idealism, but of a higher form of realism’, which understood that only international coalition and cooperation could secure peace and prosperity on earth. ‘These were the calculations of a new type of liberalism, a Realpolitik of progress’.34 That came to fruition under the second Roosevelt. It is still much needed. Striking without hesitation a contemporary note, Tooze asked: ‘Why does “the West” not play its winning hands better? Where is the capacity for management and leadership? Given the rise of China, these questions have an obvious force’.35
A Chatham House version
Clearer answers to the two questions raised by Durand—what method is implied in Tooze’s work, and what politics inform it?—start to come into view once The Deluge and Wages of Destruction are read together as instalments of a common project. In each, a ‘situational and tactical’ approach to the subject in hand determines entry to it in medias res, dispensing with a structural explanation of its origins: in Wages, the Depression, in Deluge, the First World War. In both, the overarching theme is the dynamism of American power as skeleton key to the twentieth century. In both, the political standpoint is, as self-described, that of a left-liberalism. Each of the terms around the hyphen is liable, however, to a range of meanings, and the compound has often, perhaps typically, proved unstable, one or other of its elements acquiring greater valence. Wages, as a study of the Nazi economy, offers less scope for considering the balance between them. Viewed in historical context, its central claim that Hitler’s real antagonist, the enemy that mattered, was America, not Russia, of course fitted well with axiomatic assumptions of the Cold War. If the Nazi war machine was ultimately directed against the United States, the binary struggle between democracy and totalitarianism was preserved—the Soviet Union, rather than being the principal target of Hitler’s regime and the overwhelming agent of its downfall, as in historical fact it was, becoming the even greater totalitarian danger further east, to be dealt with in due course. But gratifying though such a deduction might be to American and West German audiences, Tooze never suggests it, and the salience of the Red Army in the narrative of Wages discounts it.36
The Deluge, composed after Tooze’s move from Cambridge to Yale, is politically more outspoken, a full-throated endorsement of the victors’ self-understanding of the First World War and the abiding vision that, for all their differences, inspired their efforts to build a progressive peace after it. Historiographically it can be described, with apologies to Elie Kedourie, as a distinctive exercise in the Chatham House version of the period. By starting his narrative in 1916, Tooze avoids any reckoning with the question of what determined the outbreak of hostilities in 1914, and so of the nature of the War itself, simply asserting without further ado that American entry, provoked by German aggression, converted it into a battle for democracy and international law.
Imperialism, in this accounting, was a very recent phenomenon, global competition just a few decades old—the Seven Years’ War and conquest of India might never have happened—and once the War had come to a successful end, the world was confronted with the problem of how it was to be peacefully ordered ‘after imperialism’.37 The narrative is constructed, in other words, by taking for granted the Entente apologetics in contemporary usage, a literature now so abundant that Tooze may have felt it unnecessary to spell out its truths once again, although they have little or nothing to do with a serious understanding of the conflict. ‘The structural reality’, as Alexander Zevin has written in these pages, ‘is that the First World War took place over empires, for empires and between empires’.38 For the extent of this bed-rock fact it is enough to consult the survey of the combatants in a recent comprehensive account, Empires at War, which covers all of them, down to the Portuguese wing of the East African theatre of hostilities, where the British imperial death-toll exceeded the total of American dead in Europe.39 It was the uneven distribution of planetary spoils that precipitated the Great War: in a system where every state took for granted the connexion between power and possessions, Germany, the largest and most rapidly expanding industrial economy, surrounded by the three largest territorial powers of the continent, had no commensurate share of the plunder, while Britain had such a hugely disproportionate empire, compared with any other, that no stable international equilibrium was possible, as Lenin saw at the time and as more critical historians have pointed out since.40
The sponge that palaeo-Entente justifications pass over the First World War, taken as read by Tooze, permits an enormity to follow. The inter-imperialist slaughter that cost some 10 million lives on the battlefield, and 40 million casualties of one kind or another, is exonerated from any responsibility for the violence that followed it, attributed instead to an extremist rebellion against the pacific strength of the post-war settlement—Hitler and Trotsky twinned for the purpose. No word even refers to the scale of the killing unleashed by the liberal civilization of the Belle Époque, let alone to its socio-psychological consequences in hardening the world to more of the same, with scarcely a break after 1918. In treating of the Russian Revolution, Tooze even regrets there was not more of it during the War: had only a few more tens of thousands of peasant soldiers been able to hold on under commanders like Kornilov, without Bolshevik sedition sapping their patriotism, the solidarity of the Entente would have been saved, and the Central Powers held at bay in the East, instead of acquiring Lenin, foolishly spared the firing-squad by the Provisional Government, as their pawn. In Ireland, where ‘extreme Irish nationalists launched a suicidal assault on British power’ in 1916, damaging the responsible backing of Redmond and his party for the war effort, and the guerrilla war for independence of 1919–21 took ‘a terrible toll’, compounded by a civil war provoked by Sinn Fein’s ‘apocalyptic radicalism’, the upshot of all this mayhem ‘stored up violence for the rest of the century’.41 Some 1,400 lives were lost in the war for independence; perhaps 2,000 in the civil war. Whereas 30,000 Irishmen died in the trenches of France, the Balkans and the Middle East. Non-violently? Missing in Deluge is any sense of Henry James’s reaction to the war:
The intense unthinkability of anything so blank and infamous in an age we have been living in and taking for our own as if it were a high refinement of civilization—in spite of all conscious incongruities; finding it after all carrying this abomination in its blood, finding this to have been what it meant all the while, is like suddenly having to recognize in one’s family circle or group of best friends a band of murderers, swindlers and villains—it’s just such a similar shock.42
If the War ended as a victory for democracy and the rule of law, what of the peace that followed it? Did it embody these? Tooze finds no special fault with the Treaty of Versailles, giving credit to Wilson, Lloyd George and Clemenceau—with particular sympathy for the last—for their understandably differing concerns and willingness to compromise between them to impose a satisfactory common settlement on the country they had defeated. Since Germany was the aggressor, the war-guilt clause of the Treaty, the formal ground for extracting open-ended reparations from it, could be taken as given. What mattered was that Germans, however much they detested it, should—in their own interests—take their medicine. Keynes’s philippic against the Treaty, rhetorical tour de force though it may have been, was an irresponsible piece of mischief-making, not only encouraging reckless German resistance to paying up, but poisoning relations between London and Paris, and handing a propaganda gift to Lenin and Trotsky into the bargain. ‘No single individual did more to undermine the political legitimacy of the Versailles peace’; and no danger of the time exercises Tooze more than the possibility that the new-born German Republic would have the nerve to reject the Allied ultimatum that it must sign the Treaty on the dotted line.
Thankfully, the madness of ultras like Max Weber, who called for guerrilla resistance to it, and even such a moderate social democrat as then premier Philipp Scheidemann—who advocated a stance all too reminiscent of Trotsky’s ‘Neither Peace Nor War’ at Brest-Litovsk—was at the last minute overcome, and the Treaty accepted by Germany. There was still much recidivism in Weimar, whose Rapallo Pact with the pariah Soviet state reached by Rathenau three years later—‘a self-indulgent nationalist fantasy’—was not in keeping with the spirit of Versailles; and another high-risk crisis the next year, when France occupied the Rhineland to ensure its portion of reparations was coughed up. But Stresemann, unlike Rathenau, had understood all along that Germany must look to America to improve its situation, and in 1924 the Dawes Plan, supplying funds from Wall Street to ease reparation payments, rescued German democracy by taking the sting from Versailles.
Such judgements follow naturally from the premise that the Great War saw a triumph of relative good over evil. Retribution was required, and to rejoin the ranks of respectability the offender must for its own good accept the measure of punishment, by no means excessive, meted out to it. That no stable peace could be built on such a self-serving historical fiction, rejected as dishonest and unjust by the virtual entirety of the nation forced to accept it, is a consideration that cannot occur within this mental framework. So too the thought that Germany might have avoided the rise of Hitler had it taken the course advocated by Weber or Scheidemann, refused the diktat of the Allies and let them see what benefit occupation of the country would bring them, in face of all the inevitable resistance, and how long their own populations would have put up with it.43 In the Germany of 1919, such resistance would have united most of the politically active country. By their capitulation, the centrist politicians who feature as the heroes of the hour in Tooze ensured that the banner of a rejection which they themselves knew was perfectly justified, and was bound in due course to prevail, would pass to the radical Right alone. The foundations of the edifice erected at Versailles were rotten from the start, foreordained to collapse.
Stripling hegemon?
The fate of Germany—so hopeful as long as Stresemann was at the helm—forms the central thread of Tooze’s narrative of the new world order that emerged after 1918. But the panoramic scope is wide, a notable strength of the book, encompassing China, Japan, India, Egypt, South Africa, even a slide inserted from Patagonia. What balance-sheet of American hegemony, as postulated by Tooze, emerges from it? If the conceptual setting of Deluge situates it at a point along the political spectrum where liberalism ceases to have any particular implication with the left—its account of the Russian Revolution is of pure-bred Cold War stock44—the subsequent story it tells is much more ambiguous. Tooze does not venture full-scale portraits of any of his protagonists, but much of what he reports of Wilson is plainly incompatible with the role initially assigned him of prophet and principal architect of a world made safe for peace and democracy. ‘Thrilled’ by America’s victorious war with Spain and seizure of her Caribbean and Pacific colonies, ‘more aggressive than any of his predecessors’ in dispatching troops to the Caribbean and Mexico, devoted to the preservation of—in his own words—‘white supremacy on this planet’, Wilson made no mention of self-determination in his Fourteen Points, vetoed discussion of Ireland at Versailles, and had no truck with Japan’s call for a commitment to racial equality in the Covenant of the League, enthroning instead the Monroe Doctrine as one of its founding principles.45
In 1919, having cut off financial aid to Italy to oblige it to scrap the treaty with Britain and France which awarded its entry into the War on their side with gains in Tyrol and the Adriatic, within days Wilson was telling China it must abide by the treaty extorted from it according Japan gains in Shandong and Manchuria, because ‘the sacredness of treaties’ was one of the principles for which the War had been fought.46 At home, the world champion of democracy presided over the greatest single wave of political repression in modern American history, replete with a pogrom against immigrants of the wrong ethnic background. All this can be found in Deluge. But it is never aggregated, and the mass arrests of 1919 are tacitly deflected to Wilson’s Attorney-General.
Beyond the person, the larger question is whether Tooze’s picture of global American dominance already in the inter-war period—over allies, effectual up to the Depression; in the imaginary of opponents, throughout—is accurate. Certainly, the signal merit of Deluge is its demonstration of the continuing leverage enjoyed by the us over the leading European states by the loop between the war debts to it of Britain, France and Italy, and the reparations owed France and Britain by Germany, leaving Washington in a position to adjust the two as suited its interests. The gist of Tooze’s exposition of this financial chokehold is that it was generally, though not invariably, put to benign purpose, seeking to temper the sharp edge of the arrangements at Versailles and restore Germany to what today would be called ‘the international community’. Underplayed, however, are two features of the transatlantic relationship: the implacability of the avarice of the American state—entitled, one might argue, to the later sobriquet of vulture capitalism—in extracting compensation for its support of the Entente regardless of the relative burdens of the War; and the unsleeping fear of revolution that led the us to back political reaction wherever required to crush any threat of it, nurturing excellent relations with Mussolini from the start.47
To the financial arsenal of us power, the Washington Conference added naval gains. But how far did these two assets—money and warships—permit an American hegemony, the term persistently used by Tooze to describe the us role in the world from 1919 to 1932? This was a period when the size of the American army, under 200,000, was smaller than that of Portugal; when the us Foreign Service, dating only from 1924, was still pupal;48 when it had no embassy in Moscow; when its presence in China could not compare with that of Britain, effectively in charge of the country’s fiscal system; when in Europe it was a bystander to the sequel to Versailles at Locarno. What was the initiative for which it was best known? The Kellog–Briand ‘Peace Pact’ of 1928, a wish-list of feel-good futility, leaving scarcely a trace in the history of the thirties.
All this followed from the reality to which Tooze himself draws attention in describing the fiasco of Wilson’s project when he got back to America in 1919: the stunted, only half-modern character of the Federal state machine itself. But after arguing and illustrating that with force, he fails to remember it when otherwise writing throughout of American hegemony—even of European orphanage once it faded, as if kindly parental guidance by Washington had alone kept the Old World safe till the slump. The claim is jumping the gun. The world of 1919 was in no sense unipolar. us hegemony would, of course, come in due course. But backdating it to the time of Harding and Coolidge is an anachronism, answering to an authorial hobby-horse rather than the historical record.