Maynard's War Chapter 25
The Voyage Out
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November 1917
President Wilson had eventually declared war on Germany on 6th April. Nobody understood why it had taken so long. The last hope for a negotiated end to the war disappeared two months earlier when Germany began targeting American merchant vessels. Keynes knew American involvement would make an Allied victory more likely, but it would not be quick. The prospect left him feeling more depressed than at any time since the war began.
The case for a negotiated peace was stronger than ever: it was the only way to ensure that post-armistice negotiations could be conducted between two more or less equal sides. Without a victor, negotiations would be difficult, but they would at least stand a chance of delivering an outcome that reasonable people on both sides would find acceptable. If, as now seemed likely, the war was to be fought to a conclusion with the Germans routed, then subsequent negotiations would be inevitably one-sided. From conversations with key people in the French government, Keynes already had a sense that should victory come, Germany could expect no mercy in the peace.
At the Treasury everything was changing. After three years of managing an almost impossible financial situation, Keynes’ role was now more straightforward. With the Americans on board there was no longer any question of running out of money. His job now was to ensure loans were arranged on terms that would not give the Americans an unfair economic advantage once the war was over. To aid him in his task, his new boss, Bonar Law, had given him his own department with seventeen staff. This meant he could delegate much of the reading and writing, leaving him to concentrate on the essential aspects of the job for which only he was qualified.
The bulk of his work now involved negotiations with both the American Government and the American banks, principally J.P. Morgan. The process was not aided by unhelpful competition between the various institutions of financial governance on both sides of the Atlantic. If relations between the Treasury, the Bank of England and the London-based commercial banks were strained, their mutually-felt antagonism was nothing compared with the situation across the Atlantic, where the Treasury Department, the Federal Reserve Board, Congress and Wall Street were at perpetual war with one another. Matters were not helped by the British Embassy in Washington. For some time, Treasury officials had been struggling to keep the ambassador, Sir Cecil Spring Rice, as far from negotiations as possible.
And so Keynes found himself aboard the S.S. Louis en route to New York. He was looking forward to a week of enforced rest while at sea and was thrilled to be visiting to the United States for the first time. He was making the trip in the company of the Lord Chief Justice, Lord Reading, a fascinating character with an excellent mind whose considerable influence far exceeded his public profile.
Reading had been a close confident of Asquith’s, but that relationship was pre-dated by an excellent one with Lloyd George. He had been one of the more articulate supporters of Lloyd George’s 1909 budget which had included a radical proposal to tax land values. The budget had eventually fallen after it was blocked in the House of Lords, but the episode led to the 1911 Parliament Act, which removed the Lords’ right of veto over finance bills. Keynes had been an admirer of Reading ever since, so was looking forward to spending time with him; one of the few politicians, he suspected, from whom he might learn something.
It was the longest sea voyage Keynes had undertaken and, two days in, it was not going well. He had barely suffered any sickness on the way back from Nice with McKenna, but this was altogether different. The sea didn’t look especially rough but its effect on Keynes’ constitution was catastrophic. When his appendix had burst he had been lucky, or so his doctor had told him, to escape death, though he hadn’t felt remotely as ill as he did now. Movement was nigh on impossible, so, having dragged himself up to the deck after missing breakfast, on deck he resolved to stay, swathed in blankets until, as Reading promised it would, his body had become used to the movement of the ship and the overwhelming nausea had abated.
It was while his suffering was at its peak that the Lord Chief Justice, quite unaffected himself, decided to regale him with tales of the sinking of the Titanic. Reading had been lead counsel for the Board of Trade at the enquiry into the tragedy, so had plenty of tales to tell. But being reminded of hundreds of people freezing to death in the North Atlantic when his own ship was under military escort did little to improve Keynes’ sense of well-being.
Thankfully, on day four, he woke not only free of nausea, but feeling rested and ready to do what little work was required in preparation for the string of meetings scheduled in New York and Washington. He spent the rest of the voyage enjoying the ship’s remarkably good food, some excellent wine, and stimulating conversation with Reading on various aspects of the law and economics.
Their arrival in New York was spectacular. Keynes made his way to the bow and felt a surge of excitement as first the Statue of Liberty, then the Manhattan skyline came into view. He reflected on the remarkable achievements of the United States in its short history and wondered quite how it had made itself the most powerful nation on the planet only three decades after a civil war which had threatened to destroy it.
There was no time for sightseeing however; they were straight on to a train to Washington and into a meeting with Sir Samuel Hardman, Financial Secretary to the Treasury, who had been in Washington for several weeks leading negotiations with the US Treasury.
Keynes liked Hardman but suspected he lacked the diplomatic experience for such a difficult negotiation. The US Treasury Secretary, William McAdoo, who happened to be President Wilson’s son-in-law, seemed only concerned with cementing his own position and had no qualms about abusing his family connection to do so. Since their last meeting, three weeks ago, he had refused even to see Hardman, so Reading and Keynes would have to prepare carefully for their meeting with him.
In the meantime, protocol required them to pay a visit to the British Embassy for an audience with the ambassador. Keynes expected Spring-Rice to be a diplomat of the old school, and so it proved. The look of disdain on his face when Keynes was introduced suggested he thought it quite inappropriate for anyone under the age of fifty to be involved in government.
In the preceding months, Keynes’ job had been made unnecessarily difficult by the ignorance and obstinacy of the ambassador and his staff. He now had the opportunity to expose them. “Delighted to meet you your excellency” he said, as they were introduced, thrusting out his hand forcing the ambassador into a handshake he was clearly keen to avoid. “I must say,” he continued, “it is a great pleasure to be here. I can assure you we’ll do everything we can to help you in your efforts to implement government policy.” Keynes looked at Reading whose expression remained neutral. He took this as a signal to continue as he had begun. “Of course, we are aware there have been problems. I believe Lord Reading is the third Special Commissioner assigned to your delegation in the last six months.”
Spring-Rice turned away from Keynes. “Who did you say this was, Reading?” he asked.
“Mr Keynes, your excellency.”
“And what precisely is his role?”
“He’s here to help us sort out the problem with the American banks.”
“I mean what’s his job, back in London?”
“He’s the head of ‘A’ division, in the Treasury.”
“Which division?”
“No Sir, not a division, ‘A’ Division. It’s a new department, set up to report directly to the Chancellor, which Mr Keynes leads.”
“Well, you can tell Mr Keynes that I don’t very much like his tone.”
Keynes could remain silent no longer. “You know I’m very happy for you to tell me that yourself, Sir, as I’m standing here.”
“Reading, do something with this dreadful man,” Spring-Rice said, reddening in the face.
“I’m afraid Sir, the only thing I’m permitted to do with Mr Keynes is to ensure his opinions are heard. You see he is the most respected expert on international finance in the entire Government, which is why he’s here.” Reading indicated to Keynes to continue.
“And the first thing I’d like to arrange, ideally this afternoon, is a meeting with your economic advisor, so I can better understand why the relationship between our Government and the US Treasury has broken down so completely.” Spring-Rice was unable to respond. Instead he turned tail and disappeared through a door muttering under his breath. Keynes looked at Reading, slightly sheepishly. “Did I go too far?” he asked.
“Probably,” Reading replied, “but you’ll get your meeting.”
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