De Courcy, Pilcher and Hess
Recently released material in the Public Record Office throws more light on the career of Kenneth de Courcy, and perhaps indirectly, on the Hess affair. The file in question, an MI5 document, PROKV4/58, shows that de Courcy first came to the attention of the Security Service in 1934 (without explaining why) and was under intermittent observation up to the outbreak of war with Germany. Thereafter he was ‘kept under close observation’, particularly in view of his association with ‘appeasers, Russophobes and Petainists’. He was also suspect because of his persistent efforts through the cultivation of British contacts to gather secret information which might find its way into enemy hands via friends in neutral diplomatic circles abroad.
I met de Courcy on three occasions while researching my book on appeasement. (1) He said that his wartime activities presented no danger to national security and that he had been framed by Victor Rothschild and covert pro-Soviet influences in the establishment. (2) Certainly de Courcy did not seem to be a Fascist or anything like one. Equally he was not exactly the eccentric loser some journalists made him out to be. During the war he was taken very seriously by the Soviet Union which devoted a considerable amount of time and trouble to countering what was felt in Moscow to be his extreme Rightist views.
Why did the Russians bother? De Courcy ran a publication called Review of World Affairs, a kind of running commentary on the international scene. The USSR suspected that this was an arms length British intelligence operation whose purpose was to sow distrust between members of the wartime Grand Alliance so that when the war finished Britain would be positioned for an anti-Soviet foreign policy. This anxiety sounds like a characteristic piece of Stalinist paranoia – but it is actually not entirely without foundation.
Before the war de Courcy did possess genuinely high level contacts in the British establishment. His papers, now kept at the Hoover Institution for War, Revolution and Peace at Stanford University, show that he really did go on unofficial diplomatic missions in the late 1930s, and that his reports went to Prime Minister Neville Chamberlain and to Stewart Menzies, Deputy to the Chief of SIS, Hugh Sinclair (until the latter’s death in November 1939 when Menzies took over). Another of his supporters in the government was R. A. Butler, junior Minister at the Foreign Office from 1938-41 (this is confirmed by the MI5 report). De Courcy told me that both Chamberlain and Menzies believed in rearmament against Germany but that they preferred the option of a long cold war against it to open conflict. They feared this would open up western Europe to Soviet influence. Moreover they wanted to avoid British financial dependence on the USA and the mortgaging of the Empire to the Americans, which they feared would be the result of a long hot war. In addition Chamberlain wanted to avoid a return to the war socialism of 1914-18. In 1919-21 it had been possible to thwart plans to extend much of this into the peace; next time the chances would not be so high.
This support for what de Courcy called ‘imperial isolationism’ was behind his work for appeasement and behind the activities of his ‘Imperial Policy Group’ (IPG), a right-wing pressure group established in 1934. (This was what probably attracted the interest of the security services to him in the first place.) After the outbreak of war members of the IPG continued to lobby for an early peace and they were encouraged by de Courcy, whose contacts in France convinced him that there was no hope of determined resistance there if Germany attacked. Since British military strategy turned on the ability of France to hold back the Germans while the Reich’s economy was strangled by a British-led blockade, this was a very discouraging piece of information.
One of the IPG contacts noted by MI5 was Lt-Col William S. Pilcher, whose name has been mentioned in the context of the Hess affair. Pilcher had served in the Grenadier Guards until 1936 when he retired on full pay (he was then 48). The report confirms a link between the two men and offers at least some corroborating evidence for a strange story de Courcy told me. This was that when the Hess affair blew up Pilcher found out what had happened and made no secret of his disgust at the way the Churchill Coalition had handled the peace offer. As a result of his indiscretion he was court-martialled and whisked off to a remote house in Scotland where he spent the next 30 years in isolation, apart from periodic visits from none other than Stewart Menzies, until his exile ended in the early 1970s.
The MI5 papers show that Pilcher was indeed court-martialled, on 25 August 1941, and it was decided that he would be ‘severely reprimanded’. The charge was that he had passed to de Courcy details of an intelligence summary relating to German troop dispositions on the continent. It says nothing about Hess – but the accusation could be what de Courcy told me it was, namely a ‘trumped-up charge’. It is odd that such an experienced man as Pilcher should have leaked secret, war-related documents to de Courcy – unless, of course, the whole operation was indeed an arms-length MI6 ploy. De Courcy, it is clear, knew Menzies. He told me that the IPG itself was an ‘MI6 front’. Fanciful self-promotion? The circumstantial evidence is against this, particularly when we read Who’s Who for 1940 and discover that in 1920-21 Pilcher was ‘specially employed, British Military Mission, Warsaw, Poland’. This is certainly suggestive of an SIS background – and at the time of the short, sharp Russo-Polish war.
The evidence in fact does not prove but tends to support the theory that de Courcy and Pilcher were part of a covert MI6 effort to promote a pro-Imperial and anti-Bolshevik outlook in the British establishment. This would have had general backing from the government up to Chamberlain’s replacement by Churchill in May 1940. Thereafter it would have been treated with great suspicion and after Operation Barbarossa it would certainly have been seen as potentially very harmful. Menzies, backed up by Bletchley Park, made himself invulnerable. This did not happen to Pilcher, nor to de Courcy, whose role as background adviser disappeared during the war and never returned.
Both men were effectively left stranded by the tide of history. It is perhaps not surprising that the Hess affair should have been the turning point. Whatever the level of de Courcy’s and of Pilcher’s involvement in this (and now three writers have come up with a book in which they claim to show how Pilcher was indeed a central figure) (3) the proposed arrangements – Britain to keep its Imperial role but Nazi Germany to dominate Europe including Russia to the Urals – were not a million miles removed from what had been discussed at a more formal level in 1939.
The 1949 sterling crisis: a CIA connection?
The 1949 sterling devaluation, of 20 per cent, was the first of the postwar era. For many years the sterling crisis was put down to overpriced exports working in combination with a recession in the U.S. to leave sterling area dollar revenues plummeting while import requirements remained high. In general the received wisdom amongst economic historians is that the devaluation was justified.
But the causes of the pressure on sterling may not have been as straightforward as they seemed. During late 1948 and into 1949 there was growing black market speculation against sterling, mainly through what were called ‘cheap sterling’ operations. These began to worry the Bank of England and leading officials there started to argue that the extension of the exchange control system to try and throttle this activity would probably end in sterling’s reduction to the status of a purely domestic currency like the rouble. This was what lay behind the Bank’s conversion to deregulation of the foreign exchange markets accompanied by a return to a pro-market domestic macroeconomic policy in the period after 1949.(4)
This is itself quite interesting, particularly since no one seems to have had a clear idea of how much sterling was leaking out of the system as a result of these activities. Since they were either illegal, not written down, or conducted through third parties with dummy accounts, it was almost impossible to find out. But regardless of this lack of data the speculation was enough to persuade the Bank that it was time to consider a significant reorientation of policy.
What is even more interesting is that by the late spring and early summer of 1949 there were well-founded reports that U.S. banks were engaging in this black market trading. This activity was encouraged by a worsening sterling area deficit with the dollar area but there was an additional cause for it in releases of foreign-held sterling. These accounts were supposed to lie unused, by agreement between the holders and the Bank of England. In fact the owners were exchanging them for dollars at a rate well below the official one in a growing number of international financial centres. By summer 1949 it became possible to buy dollars even from reputable Wall Street banks at just $3.25 to the pound – when the official rate was $4.03. This cheap sterling, acquired by the Bank, could then be used to buy British goods at a discount. H. J. Isner of Ullman and Company suggested that as much as 33 per cent of all British exports to the United States were being financed this way.
Would the intervention of these big boys, said to include ‘Guaranty, Chase, City and many others'(5) have been 100% commercial? The point is that the sterling area in those days was a managed currency bloc which actively discriminated against the dollar via exchange and import controls to preserve foreign exchange reserves. Neither the U.S. Treasury nor the Economic Co-operation Administration (ECA), which was running the Marshall Plan in Europe, were at all happy about this and the Truman administration was under pressure to act on the issue from business lobbies. On top of all this the Marshall Plan was designed to salvage the liberal-capitalist objective of a world economy based on non-discrimination.
Would prestigious East Coast Banks have engaged in anti-sterling dealing at this time without official encouragement from U.S. officials who saw sterling as the major obstacle to the reconstruction of a ‘one-world’ economy and who wanted to enhance the role of the price mechanism in postwar Britain?
The question of a British exchange rate adjustment was raised in the IMF during the first months of 1949 and a resolution was passed in favour of sterling devaluation. This had to be with the approval of the Truman administration, its influence being exercised via the National Advisory Council (NAC), set up in 1945 to co-ordinate U.S. foreign economic policy. As Frank Southard from the NAC told George Bolton of the Bank of England, there was in Washington ‘a conviction that a soft currency area representing the sterling area and western Europe was being created.’ He said that it would become impossible for ECA representatives to go before Congress and argue for approval of continuing Marshall aid allocations unless this trend were reversed.(6)
What it boils down to is this. Washington had made a massive strategic investment in the Marshall Plan. By the spring and summer of 1949 there was real anxiety about the outcome of the project. All kinds of pressure were available to U.S. policy makers in pursuit of their objectives. Southard’s conversation with Bolton was one example. But there were other, covert avenues. These have been explored by Sallie Pisani in her study on the CIA and the Marshall Plan which shows there was co-operation as well as personnel overlap between ECA and the CIA. The key figure was Richard Bissell, Deputy Administrator of ECA (and later Deputy Director of Plans at the CIA and in charge of covert operations), who handled the funds which were diverted to OPC (Office of Policy Co-ordination, the clandestine arm of the Agency) for special projects in western Europe.(7) In these circumstances it does not seem fanciful to suggest that the encouragement of black market currency dealings designed to destabilise sterling in the summer of 1949 might have had the status of a deniable operation.
Notes
- Profits of Peace, (Oxford: Clarendon,1996)
- A subject covered by John Burnes “One Boggis-Rolfe or two?” in Lobster 38
- Lynn Picknett, Clive Prince and Stephen Pryor with assistance from Robert Brydon, Double Standards: the Rudolf Hess Cover-Up, (London: Little, Brown and Co, 2001.)
- Its advocacy of Operation Robot, the plan to make the pound convertible at a floating rate, is rooted in this conjuncture
- John Fforde, The Bank of England and Public Policy 1941-1958 (Cambridge: Cambridge University Press, 1992), p. 235.
- PRO FO 371/75577, UE2971/150/53, report by Bolton to Sir Henry Wilson-Smith (Head of Overseas Finance), 12 May 1949.
- See Sallie Pisani, The CIA and the Marshall Plan (Edinburgh: Edinburgh University Press, 1991), pp. 70-79.