Mellon vs Churchill. By Jill Eicher. Pegasus; 368 pages; $32 and £22
How far should America involve itself in Europe’s wars? It is the most urgent question for the transatlantic alliance, and it is well over 100 years old. Donald Trump intends to force more of the financial burden for the war in Ukraine onto Europeans. Anyone interested in his chances of success might enjoy reading about a battle America’s Department of the Treasury fought a century ago to do just that.
That battle is the subject of a new book by Jill Eicher, a former Treasury official. During and immediately after the first world war America lent European allies more than $10bn, with Britain borrowing the biggest chunk (some $4bn). In today’s dollars that $10bn is equivalent to around $180bn—roughly what America’s Department of Defence estimates it has spent on the war in Ukraine. Yet at the time it would have seemed far larger: it was the biggest liability ever recorded on America’s balance-sheet, and nearly half the national debt. Most of it had been raised by selling patriotically branded “victory” and “liberty” bonds to Americans. Whether the government could collect its dues had huge political salience.
Meanwhile, Winston Churchill, then Britain’s chancellor of the exchequer, was bellowing about “monstrous debts” from across the Atlantic. They had “been scored up by one great country against another”, he said, and yet “far exceed the means and methods of payment”. Collection in full would be self-defeating, since it would impoverish Europe, thereby hurting America’s own exports and “taking the bread out of the mouths of their own working people”. The stage was set, in other words, for an enormous tussle over how much of the debt would actually be repaid.
Churchill and his oratory are famous. Andrew Mellon, his counterpart in America, is half-forgotten. Ms Eicher’s masterstroke, therefore, is to cast the wrangling between Britain’s and America’s finance ministries as a clash of the two individuals—much as the newspapers of the day did. In one sense, you could think of Mellon as an earlier Elon Musk: a fabulously successful businessman drafted into government by a president hoping he would put the country’s finances in order. The parallels end there. Contemporaries noted that Mellon “disliked public speaking, avoided publicity, and shunned the spotlight”. Mr Musk is not generally accused of such things. Nor was Churchill.
Mellon’s shyness did not prevent him from driving a hard bargain. In 1923 Stanley Baldwin, Churchill’s predecessor as chancellor, arrived in Washington with a mandate to agree a maximum annual repayment of $166m. He returned to London urging Andrew Bonar Law, the prime minister, to instead agree to $161m a year for a decade, and $184m thereafter. “We paid in blood; they did not,” muttered Bonar Law, who had lost two sons in the war and bitterly opposed Mellon’s terms. His cabinet ratified them anyway.
Churchill then took control of Britain’s purse strings and tried to reduce the debt burden. He would “obliterate and delete all war debts” owed to Britain if Mellon acted similarly, he said; if not, he would collect only “as much and no more” from the other allies as was required to repay America. Characteristically, he detailed what has been called a “collect-if-you-will-America-but-shame-on-you” policy not in private but in Parliament. In the press, Uncle Sam became “Uncle Shylock”.
By contrast, Mellon’s public silence echoes throughout Ms Eicher’s book. His backroom dealing, though, was what prevailed. By 1927 Mellon had reached agreements with Britain and the other allies to refund 97% of the principal America had lent them, albeit at lower interest rates.
Such post-war negotiations might seem dull and technical. In fact, Ms Eicher spins them into a gripping yarn. And her story is all the more compelling for its coda. Events overtook Mellon’s deals, and they did not last long. By 1934 the Depression had hobbled Europe; Britain, France, Belgium and Italy had all defaulted on their loans. In the meantime, a German named Adolf Hitler had risen to power, with a programme revolving around the repudiation of war debts. Americans might have convinced Europe to pay for one war, but it may have ended up costing them far more in the long run. ■
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