The Empire Project: The Rise and Fall of the British World-System, 1830–1970 (92 page)

Within a matter of weeks, then, the new Labour government was confronted by a mass of problems so grave as to amount to a general crisis – economic, geostrategic, political – of the British world-system. The struggle for survival in war was succeeded by a struggle for survival in peace. In the autumn of 1945, the immediate pressure was eased by a dollar loan from the United States of $3.75 billion (some £750 million). But the terms were arduous, and much more severe than Keynes who had hoped for a gift of $5 billion (£1.2 billion) had expected.
⁴⁸
The British were required to dismantle the barriers that favoured the trade between sterling area countries and to allow holders of sterling to exchange it for dollars by mid-1947. Indeed, the United States government saw the main purpose of the loan as being to allow those countries who had built up large sterling credits in London to exchange them for dollars if they wished to do so. The sterling economy was to be blasted open to American exports. When the terms became public, there was widespread unease (there had been much private unease in the Bank of England and Treasury). The loan agreement was an ‘economic Munich’, declared Robert Boothby, a Conservative MP. However unpalatable, it could not be rejected. It was not just a matter of averting an imminent crisis: rejecting the loan, said Dalton, the Chancellor, ‘would mean less food of every kind except bread and potatoes’.
⁴⁹
British hopes of reviving their pre-war commercial and financial position also depended upon the breathing space that the loan would give them. ‘The way to remain an international banker’, Keynes told the House of Lords, ‘is to allow cheques to be drawn upon you; the way to destroy the sterling area is to prey on it and try to live on it. The way to retain it is to restore its privileges and opportunities as soon as possible to what they were before the war.’
⁵⁰
Indeed, the early signs were hopeful: as millions of servicemen and women were demobilised, the task of reconverting the war economy got under way. 1946 was an
annus mirabilis
. Exports went up, the stock exchange rose. At the Lord Mayor's banquet in October, the traditional venue for an authoritative statement of the economic outlook, the Chancellor of the Exchequer, Hugh Dalton, gave a sunny account of Britain's progress and prospects. The fly in the ointment was the burden of overseas costs, the very delicate balance between dollar income and spending, and the huge size of the ‘sterling balances’, whose owners were impatient to release them for current consumption: including India (with some £1.3 billion) and Egypt (with £400 million).

Meanwhile, the Labour cabinet struggled on with the task of easing the pressures on Britain's world-system. There was little scope for reducing their commitments in Europe while Germany's fate remained unresolved. No agreement was reached between the Soviet Union and the Western Powers. That meant the continuing occupation of Germany and meeting the desperate shortage of food in the British zone: a ‘colony’ that was costing £100 million a year.
⁵¹
For similar reasons – the need to contain Soviet influence until a peace treaty was signed – aid had to be sent to Greece and Turkey who barred the way against a Soviet advance to the Mediterranean. In India, they hoped to forestall serious unrest by taking the political initiative. In January 1946, Attlee pressed the case for sending a Cabinet Mission (whose real leader was Cripps) to settle the terms on which independence would be given. It was already apparent that a constitution acceptable to both the Congress and the Muslim League would be very hard to contrive, and that the leaders of the Congress were deeply suspicious that the British would favour Muslim demands for a balkanised India. In London, by contrast, there was still a white hope that, by promising swift independence, a new Indian ‘dominion’ would emerge, willing if not eager to uphold its old British connection. Once hot heads had cooled, so the argument ran, the Indian leaders would see that their economic self-interest, strategic exposure (to Soviet aggression) and political ethos made alignment with Britain the inevitable choice. With British encouragement, India might even assume the role of a regional power, sharing with Britain diplomatic supervision of Southeast Asia. Hence it was the primary aim of the Cabinet Mission to find a constitutional formula that preserved Indian unity by hook or by crook. But their Heath Robinson scheme for a three-tier federation (combining Hindu and Muslim ‘sub-federations’) was also inspired by the fear that the division of India would suck Britain into a vortex of chaos. By mid-1946, it was accepted in London that there were no longer the means to crush an Indian mass movement: the arm of coercion on which British rule had relied as its last resort had withered at last.
⁵²

The British were also at pains to pre-empt the local resentment that was expected to boil up in Egypt, where their wartime occupation had grossly exceeded the limits permitted by the 1936 treaty. Here, too, they were hoping that a ‘generous’ offer would pave the way for an Anglo-Egyptian agreement that would tie Cairo in to a system of regional defence under British command. The key issue here was the right to reactivate the bases in the Suez Canal Zone if an external threat was detected. In May 1946, after much internal debate between the soldiers and diplomats, the British declared themselves willing to evacuate Egypt completely over the course of five years. There were further disputes over how much consultation should take place between London and Cairo before a ‘threat’ was acknowledged and the bases reopened, and over what undertakings should be formalised in a treaty. Then, towards the end of the year, Egypt's old claim to its Sudanese ‘colony’ (in theory an Anglo-Egyptian condominium, in practice ruled solely by Britain) became a fresh bone of contention. The minister, Sidky, with whom the British were dealing, was pushed out of office and the negotiations collapsed.

By the end of the year, the British had little to show for their efforts to adjust their world-system and reduce the costs it imposed – financial, strategic and political. It may have been this that fuelled the persistent critique directed by Attlee towards the retention of Britain's large Middle Eastern
imperium
. Attlee had expressed misgivings about the original plan to seek British trusteeship over Cyrenaica and Tripolitania, Italy's Libyan ex-colonies. He had warned (in February 1946) against the cost of defence, running at twice the level expected at the end of the war. He challenged the claim of the Foreign Office and the Chiefs of Staff that the Middle East was vital to Britain's world interests. He remained deeply committed to the idea of a ‘world organisation’, and opposed to ‘old-fashioned’ manoeuvres and policies that might prevent its fruition. Britain's entrenchment in the post-war Middle East, he repeatedly argued, would be regarded by Russia as a threatening move. It would discourage Moscow's commitment to a new international order centred upon the United Nations and might even provoke Soviet aggression in Europe. Nor had Britain the means to build up the weak Middle East states against a Soviet advance. Agreement with Russia, not confrontation, was the only safe course.

Attlee's ideas were those of an ardent internationalist who hoped that victory in the Second World War marked the end of the age of predatory imperialisms, the vale of tears through which the world had struggled since the early 1930s.
⁵³
But they were not a rejection of British world power. Attlee acknowledged that the great new fact of world politics was American power, and that the independence of India would limit Britain's ability to exert influence in Asia. But he was far from writing off Britain's claims on the loyal partnership of the dominions or its colonial rights elsewhere in the world, especially in Africa. At the dominion prime ministers meeting in April 1946, he had hoped to commit them to a unified system of Commonwealth defence but had to accept a much more decentralised formula whereby each dominion took responsibility in its region ‘to maintain conditions favourable to the British Commonwealth and to accept joint responsibility for their defence in war’.
⁵⁴
Britain's vulnerability to external attack made it wise, so he thought, to relocate certain vital industries to the safety of Australia. And Britain's links with the two Pacific dominions could be maintained by a line that ran across Africa, not through the Mediterranean and Middle East. Embedded in Attlee's approach was an old not a new view of empire. Like Bonar Law, or Balfour or many Gladstonians, Attlee regarded the Middle East as a dangerous outpost, made even more dangerous in the era of air power. It would be far better to make it into a neutral zone – a ‘wide glacis of desert and Arabs’ was the phrase Dalton remembered – separating the spheres of British and Russian predominance, than to run the risks and bear the costs of an
imperium
still more extensive than that Britain had seized after 1918.
⁵⁵

Attlee was Prime Minister, and his comments were trenchant. But he never came close to winning the argument, and by February 1947 had abandoned the effort. He faced the combined opposition of the Foreign Office and Chiefs of Staff: indeed, it may have been the threat of the latter to resign en masse that forced him into retreat. The central weakness of Attlee's position was its optimistic view of Russian intentions, justified by faith, it had to be said, rather than by works. His proposal that the Middle East become a ‘neutral zone’ assumed

Map 11 The Middle East in 1945

that Stalin would not revive the designs on the Straits and North Persia, that he had already revealed, once British power was withdrawn. The Chiefs of Staff were incredulous at Attlee's ‘naivety’; Bevin's answer was lapidary, almost Curzonian. He dismissed Attlee's suggestion that withdrawal from the Middle East would assuage Russian aggression: ‘It would be Munich over again, only on a world scale, with Greece, Turkey and Persia as the victims in place of Czechoslovakia…Russia would certainly fill the gap we leave empty, whatever her promises.’ It would wreck Britain's relations with the United States, on whose aid Britain depended, and whose leaders had just been persuaded that American interests, like those of Britain, required the Middle East to be held. ‘If we now withdraw at this moment, I should expect them to write us off entirely.’ Nor was the Middle East economically valueless: it was worth £100 million to Britain ‘and possibly a great difference in our future dollar earnings’. Indeed, the Middle East might take India's place as an economic partner for Britain. If, instead, Britain left, hard on the heels of its departure from India, it ‘would appear to the world as the abdication of our position as a world power’. India would move towards Russia; ‘the effect on the Dominions would be incalculable.’
⁵⁶
Here was the case, cast in oracular terms, that Britain's survival as a power in the world now hinged – in the geopolitical conditions that Soviet advance had created – on this dangerous salient in Middle Eurasia.

Ironically, Attlee's reluctant endorsement of the Middle East policy occurred on the eve of the
annus horribilis
, the year in which British world power seemed less real than the threat of financial and political bankruptcy. A terrible winter brought on a fuel crisis and damaged the export drive (to raise British earnings by 50 per cent above the pre-war level) on which hopes of recovery were pinned. The American loan was being quickly used up. In March 1947, Stafford Cripps, the avenging angel of socialism, forecast a long period of austerity. In July 1947, under the terms of the Anglo-American loan, holders of sterling could convert their pounds into dollars. The result was disastrous. Britain's dollar reserves, already depleted by the cost of American imports, sank like a stone. Faced with sterling's collapse, London abruptly suspended convertibility on 20 August. Rations of petrol and food were reduced, and potatoes joined the list of rationed supplies. The Cabinet agonised over how many men could be spared from the civilian economy, how large the army should be and how long those ‘called up’ should serve in the armed forces. At Dalton's insistence, the provision of aid to Turkey and Greece had already been scrapped: this was the burden that the United States now assumed under the ‘Truman Doctrine’ promising help to those states fearful of Soviet aggression. Against this background of deepening economic gloom, the government faced an impasse in its effort to ease India into an agreed independence. With no sign of a compromise between the Congress and the League, growing communal friction and rising anxiety that the British in India would be caught up in a storm of political violence, panic in London began to set in. The Cabinet Mission had failed. Attlee and his colleagues rejected the Viceroy, Lord Wavell's, ‘breakdown plan’ (a staged withdrawal to the Indian ports, handing power over province by province) as a recipe for turmoil, but had no plan of their own. The sacking of Wavell and the choice of Mountbatten were acts of inspired desperation. But Attlee was forced to give Mountbatten a virtual free hand to decide on the timing and settle the manner of Britain's departure. Mountbatten was lucky. His arrival in India in March 1947 coincided with the grudging recognition in the Congress that, without an early transfer of power, and agreement on partition, the spiral of communal violence would destroy their authority over the Indian masses as much as that of the British. This was the chink through which Mountbatten would drive with ruthless diplomacy to impose partitioned independence in August 1947.
⁵⁷