The economic background to appeasement and the search for Anglo-German detente before and during World War 2

‘The tragic and paramount thing about the rise of the new Anglo-German war was that Germany demanded an equal place with Britain as a world power and that Britain was in principle prepared to concede. But, whereas Germany demanded immediate, complete and unequivocal satisfaction of her demand, Britain — although she was ready to renounce her Eastern commitments…..as well as to allow Germany a predominant position in East and Southeast Europe and to discuss genuine world political partnership with Germany – wanted this to be done only by way of negotiation and a gradual revision of British policy. This change could be effected in a period of months, but not of days or weeks.’

From Helmut von Dirksen’s Survey of his Ambassadorship in London, May 1938 – August 1939 (Documents and Materials Relating to the eve of the Second World War, volume II: The Dirksen Papers: Moscow, 1948, p.189.)

The Interwar Political Economy

A vast and varied literature has been devoted to Britain’s appeasement of Germany. Historians have, however, generally viewed the subject as a diplomatic initiative which, in maintaining world peace, would preserve harmony within the British Commonwealth and Empire, encourage the revival of international trade, and avoid placing impossible strains on the nation’s finances. (1) It is hard to find an account of appeasement which relates it to the domestic politico-economic background from which it was developed. Yet it is arguable that any foreign policy reflects the interest of the nation-state in shaping an international environment congenial to its own preservation. This paper is the beginning of such an account.

Between 1921 and 1940 the formulation of British economic policy was dominated by the Treasury, the Bank of England and the City of London. This ‘core institutional nexus’ (2) was committed to the defence of free enterprise and the limited state against the internal threat of socialism and the external menace of Bolshevism. This meant that administrations eschewed experimentation with unorthodox finance, associated in particular with Lloyd George, Oswald Mosley and J. M. Keynes. Piecemeal social reforms, such as the extension of unemployment insurance and modest welfare benefits were introduced, but the budget was to be kept in balance, and administrations took the view that the problems of surplus industrial capacity could best be solved by the encouragement of rationalisation.(3) Britain’s historic external economic orientation, mediated through the City of London’s role as a provider of shipping, banking and insurance services and a source of investment to the rest of the world, and through the preservation of sterling’s status as an international currency, was rapidly reestablished after the vicissitudes of 1919-25 and underlined by the return to the gold standard in 1925.

This ‘normalcy’ would not have held the field for so long had its appeal been limited to Whitehall and the Square Mile. At the beginning of this period the preoccupations of the core institutional nexus matched those of industrialists. The demands of economic mobilisation for the war had resulted in a dramatic extension of both of state intervention and of trade union collective bargaining rights. Accepting that such developments followed from national emergency, for a time some employers had even backed the calls of the labour movement for the maintenance of wartime industrial arrangements into the period of reconstruction. But as the combination of the Bolshevik revolution and full employment generated unprecedented self-confidence in organised labour, strikes became common and employers became concerned that the balance of social forces might swing irreversibly toward the union movement. By 1919 the more powerful employers’ organisations such as the Engineering Employers Federation sought the restoration of managerial authority, and generally backed the deflation and retrenchment which were the price of attempting a return to the pre-war order. (4)

At the same time the pursuit of ‘sound money’ and a fixed exchange rate benefited an expanding middle class whose wealth was based on personal savings. In 1901-13 small savings amounted to only 13.2 per cent of net accumulation, but by 1924-35 they had risen in volume to take over half the total net investment.(5) The figures reflect the increase in numbers of the lower middle class and white collar workers generated by the vitality of the service sector, particularly around London and the Home Counties. Employment in occupations such as retail distribution, entertainments and local government grew by 873,000 between 1921 and 1931. Over the same period employment in primary and secondary industries fell by 957,000. (6) All this made for a large constituency, based at the popular and the political level on a fusion between the pre-1914 Liberal and Conservative parties, in favour of a liberal, anti-inflationary and anti-labour economic policy, which the Establishment used to construct a hegemonic bloc which dominated British politics up to 1940.

This dominant alliance was so well entrenched that it was able to survive the financial crisis of 1931 by making only tactical adjustments to the liberal trajectory of policy. Departing from the gold standard and adopted a floating exchange rate permitted the pursuit of a ‘cheap money’ policy based on a low bank rate. This stimulated the growth of private house building particularly in the suburbs of London, Birmingham and Manchester, leading to the expansion of firms producing cars, electrical and domestic appliances. But the rationale for this superficially unorthodox move was as much a desire to reduce the burden of the national debt on the government’s budget as an early flirtation with demand management. Reflation based on public investment remained anathema. They believed that it would require either a self-defeating increase in taxation; a programme of deficit financing which would crowd out private borrowers and force up interest rates; or an inflationary fiscal stimulus which would, in the absence of devaluation — unacceptable, given the worldwide role of sterling — set off a balance of payments crisis. The confidence of the international financial community in London would be shaken, capital would leave the country and only an increase in interest rates would be likely to stop the haemorrhage. These constraints precluded all policy options save one: the ‘Treasury view’. As a result stagnation, ameliorated only by state-encouraged rationalisation, remained the norm throughout much of the economy, above all in the coal, shipbuilding and textile industries. (7)

The National Governments never questioned the value to the country and to the world economy of maintaining sterling’s role as an internationally convertible currency, and they sought to prevent its depreciation from going too far after leaving the Gold Standard.(8) Indeed, in 1936 a substantial step towards returning to a fixed exchange rate was taken with the Tripartite Monetary Agreement with France and the United States. It is true that tariffs and a system of imperial preference were introduced in the early 1930s, but while protectionism did afford benefits to certain British manufacturers, notably of steel, via the tariff, it also safeguarded the balance of payments, and hence the exchange rate. Preferences also guaranteed markets in Britain to countries, mostly in the Commonwealth and Empire (such as Australia and India) which were short of sterling and so protected the City of London from a damaging series of defaults. (9)

Throughout the 1930s British governments worked for the liberalisation of an international economic system characterised by barriers to the movement of goods and capital imposed by countries confronted by the loss of export markets and foreign exchange as a result of the slump. (10) The liberal-capitalist British state required an export-led recovery which would be guaranteed by an increasingly open world economy: only this path to prosperity could be squared with the interests both of its governments’ supporters in the electorate and of its ruling elite.

The Anglo-German Connection

By the time Neville Chamberlain became Prime Minister in early 1937 it was clear that the future of the orthodox strategy for recovery turned on relations between London and Berlin. The interests of both the financial and industrial communities — key members of the dominant alliance — dictated close Anglo-German co-operation. The City’s interest stemmed from its financial commitments there which had grown considerably after 1919. London banks had raised money for the reconstruction of German cities and had provided a considerable volume of finance, often in the form of short-term credits, for German foreign transactions. The acceptance business had proved lucrative, especially for large, prestigious firms like Kleinworts and Schroders, in the prosperous years of the middle and late 1920s, helping Germany to maintain extensive trading connections not just with the United Kingdom but with the Dominions and the rest of the world.(11)

This process was encouraged by the Bank of England through its Governor, Montague Norman, and by successive administrations. Norman viewed the penetration of British finance into central and eastern Europe (the Bank had assisted in the Austrian and Hungarian currency stabilisations of the early 1920s) as a means of re-establishing Britain’s prewar international banking pre-eminence. (12) He was also keen to develop an Anglo-German financial partnership (13) to thwart French and American aspirations to continental hegemony and construct a European economy whose prosperity would be guaranteed by commercial and industrial collaboration between its two leading members. (14) At the same time, of course, the rebuilding of Germany as a flourishing capitalist state would provide a guarantee that Bolshevism would fail to spread beyond the borders of the Soviet Union.

The level of Britain’s financial commitment was such that the outflow of capital from Germany during the crisis of 1931 caused great anxiety in the City. A rush to call the loans in was averted by the Governor of the Bank of England, Montagu Norman, who believed that a flood of panic withdrawals would simply result in moratoria all over central Europe, with disastrous consequences for London, New York and the whole international banking system.(15) A $100 million central bank credit to Germany was renewed, keeping the German banks afloat. The next step in managing the crisis came with the International Standstill Agreement of 19 September 1931, whereby it was accepted that existing credits would be frozen, while interest payments continued.

The Standstill Agreement was meant to be temporary but was renewed in early 1932 and every year thereafter until 1939, despite the unhappiness of many of those involved in the provision of credit to Germany. For Nazi German economic policy flew in the face of the liberal principles held by the City. Under the direction of Hjalmar Schacht at the Reichsbank the Germans introduced a complex system of controls over imports and the use of foreign exchange. Trade policy was founded more and more on barter agreements with neighbouring countries which provided food and raw materials in exchange for manufactured goods, any difference in value being made up in non-convertible marks usable only in Germany. This made possible a cheap money policy and conservation of the hard currency without which neither the recovery programme nor the increasingly obvious rearmament could have been financed. London banks became uncomfortable and in 1934 negotiations for the renewal of the Standstill Agreement came close to the point of breakdown. The British considered the possibility of a unilateral clearing as the Germans made trouble about interest rates on the debts. But the Joint Committee of British Short-Term Creditors, influenced by F.C.Tiarks, a partner in Schroder’s and a director of the Bank of England, drew back, fearing a German moratorium and the implications of this for the acceptance houses in the City. The Agreement was saved and financial relations were formalised through the signature of a Payments Agreement allowing the Germans to use 55 per cent of the sterling earned through trade with Britain to be spent on purchases therefrom and 10 per cent to go to the servicing of the debts. (16)

The last period of peace, 1938-39, saw renewed crisis. First of all Germany threatened not to take over Austria’s international debts after the Anschluss. Then it became clear that in line with the autarkic trajectory of Nazi economic policy, the credits were being used not to finance trade so much as internal investment. Once again the threat of a clearing loomed. Yet the Payments Agreement was renewed and the Standstill arrangements were only terminated on the outbreak of war.

The City clung to its links with Germany, despite these provocations, for negative and for positive reasons. For a start it was hoped that the maintenance of the credit lines and the provisions of the Payments Agreement would provide the Nazis with the foreign exchange to purchase not only from Britain but from primary producers overseas. Many of these were Commonwealth and Empire countries which were in serious debt to London, and the opportunity of exporting to Germany provided one insurance against the danger of defaults. (17) Secondly, the City needed the business which would follow from an expansion of German trade. Thirdly, in the words of Sir Frederick Leith-Ross, the senior Treasury official given the task of working with the banks to preserve the Standstill and Payments arrangements:

If we were to abrogate the agreement some 40 million of short-term bills could no longer be carried by the London market and at least a proportion of these would have to be supported by the Government, while a further 80 or 90 million of long-term debts would come into default. The net effect would be seriously to disorganise the London market and to weaken our balance of payments, without any advantage to us. (18

This was said in January 1939 and similar arguments were being repeated right into the spring, after the invasion of Czechoslovakia. (19)

It was not, however, simply a Hobson’s choice for the City. The financial ties between the two countries provided a rationale for economic detente which was not simply motivated by fear. Britain and Germany were the two largest capitalist economies in Europe. Their banking institutions had collaborated for decades, to considerable mutual advantage. Germany was Britain’s leading customer outside the Empire and over the years had brought a good deal of business the City’s way. The Standstill negotiations had been fraught with difficulties but they had nevertheless generated an unusually close working relationship between the banking representatives of each nation, symbolised in the co-operation of Norman with his opposite number Schacht. In Norman’s words an ‘Anglo-German connection’ (20) had been created. The Nazis, after all, had only been in power for a few years. Behind them were sensible figures like Schacht who, it was hoped, would be able to steer Hitler in the direction of a more open and orthodox economic policy so that, as Tiarks said in March 1939, ‘free and active relations between German banks and industry…..and their London counterparts are reestablished….This development is not so far away as it seemed a short time ago’. (21) It was important that there be no confrontation with Berlin, either over the debts or over Nazi foreign policy. A tough approach might lead to the downfall of Schacht, the Nazis would probably denounce the Payments Agreement, and City banks would lose millions of pounds and ‘the traditional machinery of the Anglo-German connection’ (22) would break down.

The Anglo-German Fellowship

There was more riding on ‘the Anglo-German connection’ than the fate of the Standstill credits. Its collapse would undermine everything Norman had been working for in since 1919. Only domestic socialists and their friends in the USSR, the avowed enemy of capitalism, would benefit from a worsening of relations between London and Berlin. In these circumstances it was not surprising that important banks and their directors figured prominently on the membership list of the Anglo-German Fellowship, formed in 1935 to foster good relations between Britain and Germany. Schroder, Lazard and the Midland, for example, were corporate members. At the same time Tiarks, notwithstanding his work for Schroder and for the Bank of England, joined in an individual capacity, as did Lord Stamp and Sir Robert Kindersley, both Governors of the Bank of England, and Lord Magowan, Chairman of the Midland Bank. The Fellowship was a powerful lobby for harmony between the two countries additional to the one created by its historic, but more informal ties with the Treasury. (23) The deteriorating international climate of summer 1939 does not appear to have caused many second thoughts, and negotiations to settle ‘the international debts question’ were amongst the proposals for Anglo- German co-operation launched in great secrecy by the British government that July. (24)

The Anglo-German Fellowship was not just banking interests and their representatives. Corporate members included large firms, such as Firth-Vickers Stainless Steels, Unilever and Dunlop, whilst the directors of leading industrial concerns, for example Imperial Chemical Industries, Anglo-Iranian Oil, Tate and Lyle and the Distillers Company, joined as private individuals. (25) For industry as a whole co-operation with Germany was a logical strategy, given the international economic circumstances of the 1930s.

The mid to late 1920s had seen an expansion of the international economy, with advanced capitalist powers such as the United States, France and Germany enjoying relatively high levels of growth and employment, stimulated by the European reconstruction boom. The British economy, however, had not fully shared in this prosperity. The return to gold at the pre-war parity had created severe problems for an industrial society so heavily dependent on the export of a limited range of goods such as ships, coal and textiles. But although unemployment exceeded one million in 1929 the consensus inside British industry, articulated by its representative organisation, the Federation of British Industries (FBI), remained favourable to the continuation of free trade. The position changed, as it did elsewhere, with the slump. As bankruptcies and factory closures proliferated governments throughout the world embraced economic nationalism. In Britain the depression intensified existing deflationary pressure and the FBI swung round to a pro-tariff position in 1930. (26) At first it was hoped that domestic profits and jobs could be protected through the economic reorganisation of the Empire and Commonwealth, leaving Britain as the major industrial producer and the Dominions and colonies as suppliers of food and raw materials. The high hopes placed in the Ottawa agreements of 1932 were soon disappointed when governments in Australia, Canada and New Zealand made it clear that they were seeking to diversify out of primary products to be less vulnerable to international market forces and were not prepared to contemplate industrial rationalisation for the sake of the Mother country. (27)

By the mid 1930s British industrialists had lost confidence in the viability of an Imperial economic strategy. Equally, however, they had not recaptured their faith in free trade. The international persistence of unused capacity, low profits, unemployment and low prices made a nonsense of classical liberal teaching that economic systems were self- correcting. Secondly, the growing complexity of modern scientific industry since 1900, producing vehicles, aircraft, oil, chemicals, detergents and electrical equipment, meant expensive outlays on investment, research and development, and trained managerial personnel. (28) Throughout the advanced industrial world the trend was to economies of scale and large firms able to control all the processes of production and distribution. Such powerful industrial corporations and combinations — for example, AEG or US Steel — had become common in Germany and the United States by 1914. Even in Britain, where they were less common, the share of net output taken by the largest 100 firms in 1930 had reached 26 per cent (29), and Britain’s industrial structure was dominated by a handful of giant companies, such as ICI, Unilever, Distillers and Vickers Armstrong.(30)

The repudiation of unfettered free enterprise followed naturally from the creation of these monopolies and quasi-monopolies because the risks inherent in unrestricted competition, now significantly dubbed ‘wasteful’, were vast. Notwithstanding surplus capacity and stagnant demand, price cutting in order to clear the market flew in the face of economic logic when overheads were so high. At the same time proto-Keynesian schemes designed to stimulate expansion through public investment were regarded with suspicion in the United Kingdom: it was believed that their fiscal implications would ultimately damage recovery.(31) Circumstances therefore demanded a new approach, international economic planning conducted by governments and industry working together across national boundaries to protect market shares and prices, sustaining the profitability which in turn would generate confidence and hence capital spending.(32) The large corporation adopted a strategy dependent upon cartelisation and the encouragement of bilateral negotiations between governments to reduce tariffs.

Co-operation with German industry became central to this strategy. German firms were major rivals internationally and, as Britain’s fourth largest customer in 1929, (33) Germany itself was a lucrative market for exports. ICI set the example as early as 1930 when it concluded a series of agreements with its major rival, I. G. Farben, to share patents and world markets.(34) Other companies took longer to follow but the years after 1936 saw a determined drive for industrial detente, the catalyst being British anxiety about the precarious nature of German recovery. The FBI feared that having satiated demand in eastern Europe German producers would begin to dump exports in traditional British markets within the Empire and Latin America; or, even worse, that the Nazi experiment would collapse through a shortage of hard currency so acute that imports into the Reich would effectively cease. British industry would lose out not just in Germany but also in primary producing economies where purchasing power had recently revived as a result of German expansion. Trade statistics were already reflecting this development (a balance of payments surplus of 32 millions in 1935 had swung to a deficit of 52 millions in 1936) and talks became a matter of urgency so that exports to a buoyant German economy could be sustained.(35) From this point, therefore, negotiations were conducted both between the FBI and its opposite number, the Reichsgruppe Industrie (RI) and between specific industrial groups.(36) The discussions between the FBI and the RI were designed

to agree upon prices. Subsidiary to this, it may be possible (in some trades) to keep off certain markets; and it may be possible to prepare the way for reduction of UK duties on certain German goods. (37)

The hope was that discussions would produce terms for co-operation in mutual trade and in third markets, paving the way for ‘much closer relations between German and British industries’, founded on comprehensive cartel arrangements. Given the contemporary international climate and the government’s mounting defence budget, it could be argued that British producers should have been happy with the economic benefits of rearmament. But memories of the recession caused by demobilisation after 1919 were still clear and the FBI’s chosen strategy was generally welcomed because it implied long-term stability.(38)

By the end of March 1939 it seemed as if the ground had been cleared for Anglo-German industrial detente. British and German companies were members of cartels covering the production of iron and steel, tubes, wire rods, nitrates, salts, acids, lead, cement, silk, coal, coke, electrical goods, locomotives and cotton spinning machinery. (39) At the same time representatives from the FBI and the RI had just agreed, in Dusseldorf, on the principles of a far-reaching programme to co-operate not simply in price-fixing but also in a joint effort to stimulate international consumption of their members’ products, with the ultimate objective an ordered system of world trade based on partnership between British and German industry. The Dusseldorf negotiations reached a satisfactory conclusion even though the invasion of Czechoslovakia took place while they were in progress, and prominent industrialists supported appeasement throughout the spring and summer of 1939. In August a delegation of leading British businessmen secretly met Goering, who was in overall charge of German economic planning, to sound out the possibilities of British mediation in the German-Polish dispute. The prospect of an Anglo-German division of world markets was discussed (40); but the Polish refusal to compromise with German demands guaranteed that the industrialists would be unable to influence the course of events.

The peacemongering of the industrialists, like that of bankers, was encouraged by the government. The FBI party which departed for Dusseldorf was told that ‘the peace of Europe’ rested in its hands (41), and Lord Halifax, the Foreign Secretary, was fully informed about the August mission to meet Goering. The private interest of finance and large-scale industry worked with the grain of public policy. The level of political access enjoyed by organisations such as the Anglo-German Fellowship and the ministerial support for the industrial diplomacy of the FBI make it hard to distinguish between the international interests of the state and the foreign policy of powerful economic pressure groups.

The assumption of power by the Nazis Germany had provided Britain both with a challenge and an opportunity. The challenge was rooted partly in the unorthodox economic policy of the National Socialists. The development of an increasingly autarkic system in central Europe conflicted with the liberalising thrust of British government policy and more directly threatened to reduce the contribution of exports to the balance of trade. But Britain’s strategy for national and international economic recovery was also threatened by Nazi foreign policy. British governments were mainly sympathetic to German demands for a revision of the Treaty of Versailles. They gave the stamp of approval to Berlin’s disregard for its military provisions with the conclusion of the Anglo-German Naval Agreement in 1935. In 1936 Britain took no punitive action when Germany reoccupied the Rhineland. They worried however that Nazi territorial ambitions went beyond recapturing German territory removed at the 1919 peace settlement, and, if achieved, might threaten the European balance of power upon which British security rested. (42)

London did not, however, wish to respond to Nazi expansionism with an aggressive diplomacy which aimed to encircle Germany with hostile powers and engage it in an arms race. It is true that rearmament was accelerated under Chamberlain and to this end the government was even prepared to compromise with the balanced budget, taking out in 1937 a loan of 400 millions, repayable over 5 years at 3 per cent. But this represented the modification rather than the abandonment of financial orthodoxy. With the backing of the Prime Minister, the Treasury insisted that borrowing be limited to a figure commensurate with the savings of the public out of anxiety lest a more ambitious scheme commit the government to printing money. This, it was argued, would intensify inflationary pressures, damaging the creditworthiness of the City and inflicting injustice on the owners of fixed incomes.(43) Thus the defence programme was essentially limited to the construction of a deterrent force of fighters and bombers, the more expensive task of investment in substantial ground forces being left to the French. (44)

The British government might have been able to square a confrontational policy towards Germany with its domestic and international objectives had it been prepared to ally against Nazism with the USSR and the USA. But Chamberlain and Halifax, Foreign Secretary after Anthony Eden’s resignation in 1938, feared the westward spread of Bolshevism and did not wish to encourage this by integrating the USSR into the mainstream of European diplomacy. (45) Anglo-Soviet talks did take place in the late spring and summer of 1939 but the half-hearted manner in which London pursued these negotiations has been a subject for comment before (46) and it is arguable that for Chamberlain they were merely a way of pressing the Germans to come to an accommodation with the British.(47) At the same time the Prime Minister distrusted American economic expansionism. He recognised the importance of friendly relations with the United States, but was aware that in the event of war Britain’s dependence on American munitions and capital goods might well exceed its ability to pay for them, upsetting the balance of payments and putting downward pressure on the exchange rate. Since British gold reserves fell in value from 836 millions to 460 millions between the end of March 1938 and the end of August 1939 as rearmament sucked in an increasing volume of imports from the USA, there was some justification for this view.(48) But there was more: the talks which had eventually led to the conclusion of the 1938 Anglo-American Commercial Agreement had revealed the deep unpopularity of the Imperial Preference system which discriminated against American producers within the US government . Thus the price of assistance from the USA might well involve the demise of sterling as a world currency and the dismantling of Imperial Preference along with the reduction of Britain to the status of a satellite economy. (49)

A policy of accommodating Nazi Germany, by contrast, offered British governments a major opportunity. Schacht and Helmut Wohltat, a senior official of the German Economics Ministry and therefore responsible to Goering, recognised this and encouraged ‘economic appeasement’, giving British civil servants the clear impression that the Nazis would be prepared to modify their autarkic system of trade and payments in return for a loan of convertible sterling. (50) The opening up of the German economy was a highly attractive prospect to London because of its implications for domestic and international recovery. 1937-38 saw a downturn in world economic activity, with serious results not only for Britain’s balance of payments but for unemployment which jumped from 10.1 per cent of the insured work force to 13.2 per cent.(51) But if the Germans took more British products the trade gap would narrow and joblessness would be reduced. At the same time the accessibility of the German market to producers in the Dominions would help sterling debtors to avoid default and provide an expansionary twist to international trade. This was recognised in the revised Payments Agreement of 1938 under which 40 per cent of the sterling earned by Germany in trade with Britain could be used to purchase goods from any part of the world.

Yet there was more to German liberalisation than the direct benefits it would afford Britain and the world at large. British politicians and civil servants believed that attracting Germany away from autarky was essential to the creation of international political and economic stability. Nazi expansionism in central and eastern Europe was widely attributed to the German need for food and raw materials and the currency with which to purchase them. For a time London hoped that it might be possible to provide Germany with some of these, such as vegetable oils and fats, by returning colonies which had been transformed into League of Nations mandates by the Versailles Treaty.(52) Hitler was not interested in colonial concessions and by 1939 the consensus in the British government was that finance and trade were the keys to depriving Germany of an economic rationale for adventurism. Thus Frank Roberts, in the Central Department of the Foreign Office, argued against a British denunciation of the Payments agreement after the seizure of Czechoslovakia in March 1939.

In the present international situation the abrogation of the agreement and the adoption of a definite policy for the economic strangulation of Germany……would I think certainly drive Herr Hitler to the desperate policy of provoking war now. (53)

By the same token the government granted an increasing volume of export credits to firms involved in trade with Germany right up to late August 1939. (54)

In July and August 1939 Chamberlain authorised the offer of a full-blown economic partnership, incorporating the joint development of markets in the British Empire, China, and the USSR by British and German industry; the joint exploitation of African food and raw material resources; settlement of the international debt question; a loan for the Reichsbank; and recognition of German hegemony in eastern and south-east Europe. (55) The thinking was clear: constructive schemes of Anglo-German economic co-operation struck blows for peace because they proved to the Nazi leadership that there was no need for aggression. The path to lasting German prosperity could be cleared by commerce. It was appreciated in London that if Hitler were to have no grounds for aggressive behaviour any economic accommodation would have to be matched by territorial adjustments which recognised the legitimacy of Nazi aspirations to unite the German-speaking peoples. In 1938 Britain accepted the Anschluss and participated in the dismantling of the new Czechoslovak state. On the very eve of war the British suggested an Anglo-German non-aggression treaty and showed willingness to agree to Hitler’s demands for Danzig and the Polish corridor. (56) The appeasement of Germany was an ambitious scheme to defuse international tension once and for all via an all-embracing Anglo-German agreement which would provide the foundation for co-operation between Europe’s leading capitalist powers. (57) Stability would generate confidence, global trade and investment would expand, and the resultant prosperity would ensure the political survival of the National Government at the approaching General Election (due in 1940 at the latest) along with the liberal capitalist status quo it was determined to preserve at home and abroad. There would be no need to make compromising economic agreements with the United States, and the consolidation of German power in central and eastern Europe would mean the establishment of a strong counterweight to the Soviet Union.

War and Peace, September 1939 — May 1941

Having failed to prevent a German invasion of Poland the British were forced to declare war on Germany on 3 September 1939 as a result of the guarantee they had given to Warsaw in March. Chamberlain was exceedingly reluctant to do this and it required a good deal of pressure from the Cabinet to make him act. (58) The outbreak of hostilities against Germany did not spell the end of hopes for appeasement. On September 2 Sir Samuel Hoare, Home Secretary and one of the leading proponents of appeasement, told a German journalist that ‘Although we cannot in the circumstances avoid declaring war, we can always fulfil the letter of a declaration of war without immediately going all out.’ (59) During Chamberlain’s remaining eight months as Prime Minister this formed the basis of government policy, dignified by the term ‘limited war’, a ‘strategic synthesis’ (60) in which a partially mobilised Britain committed itself not to the total defeat of Germany but merely to the destruction of Hitlerism. The brunt of the fighting on the ground would be undertaken by the French, with Britain contributing air and naval support. It was the conventional wisdom that any German offensive would fail at the Maginot Line, German military failure in western Europe would be accompanied by social disintegration as a result of the economic blockade maintained by Britain, and Hitler would either be forced to surrender or he would be overthrown as a result of an internal revolution. (61) Through this ‘strategic synthesis’ Chamberlain hoped to square national security with the preservation of the inter-war status quo within Britain. Since there was to be no large-scale investment in the army, a rerun of the interventionism and budgetary unorthodoxy which had characterised state policy in the First World War would be unnecessary. The war could be fought according to Treasury rules. In line with this approach the Cabinet, anxious about an unbalanced budget, called for a review of the armaments programme in February 1940. In external economic policy, concern about low foreign exchange reserves led to the organisation of an export drive in the winter of 1939-40; and in April the Chancellor, Sir John Simon, resisted calls for the intensification of exchange controls on the grounds that they would undermine the international attractiveness of sterling, sentiments with which the Bank of England wholeheartedly concurred. (62)

The government, however, did not sit back and wait for either a German mistake or the overthrow of Hitler. Almost from the very start of the war it was in clandestine contact with those it felt to be members of the resistance to Hitler — apparently an assortment of Generals backed by a grouping of powerful industrialists such as the steel magnate Fritz Thyssen and by conservative and centrist political figures headed by Karl Goerdeler, the Mayor of Leipzig. The British took the view that Goering would be an acceptable transitional leader for Germany because he was not associated with the extremism and bad faith which had characterised the actions of Hitler and his Foreign Minister, Ribbentrop, after Munich. Throughout the autumn and winter of 1939-40 Goering encouraged these approaches. Through his friend Max von Hohenlohe-Langenberg’s negotiations in Switzerland with London’s agent Malcolm Christie, he led the British to believe that Germany did not have the food and raw material resources for a long war. Without going so far as to say that he would be prepared to replace Hitler, Goering did venture that he would be able to ‘secure a new code and order in Germany and even a new constitution’, and he received ‘a Royal invitation to parley’. (63)

The approach to Goering failed because the British did not receive the commitment they wanted to the removal of Hitler. Talks with the Generals suffered a hiatus, as well, when two SIS officers who had been negotiating on the government’s behalf were seized at Venlo in the Netherlands. Hitler put out the story that the SIS had been behind a bomb explosion at the Munich beer hall where he had launched his attempted 1923 putsch. (64) Nevertheless, discussions with the Generals and with the Goerdeler group were resumed at the end of 1939, and continued, sometimes with Vatican mediation, sometimes in neutral cities, into the early spring of 1940.(65) The peace terms broadly acceptable to the British did not alter significantly throughout this period. They centred in principle on the creation of a strong German state, acting as a buffer against the Soviet Union, under conservative leadership. Generally it was envisaged that Germany was to restore non-German speaking Poland and Czechoslovakia to independence, or at least to grant them autonomy; to retain hegemony over eastern and central Europe; and to adopt a liberal economic policy based on production for peace, a convertible currency, and participation in international trade.(66) The continuity with prewar discussions is obvious. With Hitler out of the way a lasting Anglo-German detente, with everything which that implied, would be possible. The declaration of war therefore cloaked the continuation of appeasement.

Although the documentary evidence is predictably thin, enough exists for us to identify some of those who backed Chamberlain’s approach to the war. Given that an early peace would render unnecessary the extension of state and working class power which had characterised the British economy in the First World War, it is to be expected that ‘a few big industrialists’ were inclined to a compromise peace. (67) Chamberlain’s correspondence reveals Lord Aberconway to be one of them, 68 and in view of his membership of the underground pro-Nazi organisation the Right Club, Alexander Walker, chairman of the Distillers Company, will have been another.(69) German Foreign Ministry papers refer to sentiments inside the City, motivated by ‘anxiety about the value of the British currency’ favourable to an Anglo-German accommodation. One banker who clearly subscribed to this opinion was Lord Holden of the Midland Bank, who, along with Aberconway, had gone to meet Goering in the abortive attempt at mediation made in August 1939. (70)

Within the Cabinet Halifax and Hoare identified themselves particularly strongly with Chamberlain’s line, as did Rab Butler, the deputy Minister at the Foreign Office. Tory grandees such as the Duke of Westminster and Lord Londonderry, and the Duke of Buccleugh, brother-in-law of the King, were anxious about the future security of the British Empire should Britain become entangled in a continental war, emerging either defeated or vastly diminished in wealth, and they continually pressed for a quick conclusion to the war. (71)

But Hitler was not a liberal imperialist interested in a gentlemanly redistribution of the world’s markets and raw material resources organised by Europe’s two leading capitalist states. True, he had said in Mein Kampf that he wished for friendship with the British Empire but it was clear that in return for this he wanted a free hand not just in eastern and central Europe but throughout the entire continent. In short Britain had to abstain from any interest whatsoever in European affairs. Not even the Chamberlain government had been prepared to grant this, and until it, or a more pliable administration was, the war had to continue. In pursuit of his objectives Hitler launched the offensive of spring 1940, before his internal enemies had summoned the courage to strike, and inflicted shattering defeats on the Anglo-French allies. His successes left him unassailable in Germany: the conquests left the Generals without grounds for action and guaranteed that there would be no food and raw material shortage to provide a motive for a coup. Chamberlain’s entire policy collapsed with the triumph of the blitzkreig. It was appropriate that the Prime Minister should resign: in May 1940 a limited war was no option. In order to avoid total defeat Britain had to begin mobilising for total war.

Total war brought with it all the consequences feared by the interwar ruling bloc. The government was reconstructed and opened to key members of the Labour Party (Clement Attlee, the leader, his deputy Arthur Greenwood, A. V. Alexander, Hugh Dalton and Herbert Morrison) and to the country’s most powerful trade unionist Ernest Bevin, General Secretary of the Transport and General Workers’ Union. There is no need here to go into detail about the British wartime political economy. (72) Suffice it to say that the government introduced planning, the conscription of labour, intensified rationing and exchange controls, and abandoned the balanced budget in favour of the Keynesian technique of national income accounting. Desperate for American munitions, capital goods and food, the Churchill Coalition made a highly unequal exchange of strategic bases in the Caribbean for a handful of old US Navy destroyers, foreshadowing Lend-Lease and the dependence on the United States which Chamberlain and his supporters has been so keen to avoid.

Although appeasement ceased to be official government policy from the moment Churchill became Prime Minister, Halifax, Hoare, Butler, the Tory grandees and senior figures in the City, were still prepared to deal with Germany. Indeed after the fall of France they were willing to go beyond what Chamberlain had offered, and were reconciled to acknowledging complete German domination of the continent in return for a guarantee of security for the United Kingdom and the Empire and for control over the Royal Navy. So urgent did they believe the situation to have become that they did not even attempt to argue for the replacement of Hitler. (73) Although Halifax failed to persuade the Cabinet to adopt this view, at the end of May both he and Butler continued to work behind the back of the Prime Minister for such a solution. In June they sent messages to Berlin through the Swedes that ‘no chance would be missed to reach a compromise peace if opportunity were offered for reasonable terms and…..no die-hards would be allowed to stand in the way’. Prytz, the Swedish Minister in London, reported to Stockholm that supporters of Halifax in Parliament believed in the real possibility that he might replace Churchill at the end of the month and initiate negotiations with Germany. This news was however leaked to the press in Stockholm and Churchill was able to forestall any progress by making belligerent speeches which committed Britain to fighting on. (74)

A similar episode occurred in July, when Halifax’s desire to explore Hitler’s latest offer seriously was frustrated when Churchill ordered him to give a public rejection on behalf of the government. Churchill knew that he could not trust either Halifax or a large part of the Conservative Party. Londonderry, Buccleugh and Westminster, for example, were all placed under surveillance at various times. (75) Hoare was appointed British Ambassador to Spain. Although the approaches to Germany continued they had to become increasingly indirect and conspiratorial if they were to be secure. Thus at the end of November the former senior SIS officer in the United States, a banker named Sir William Wiseman, discussed terms with Fitz Wiedemann, once Hitler’s adjutant, and Stephanie Hohenlohe-Waldenburg, a Nazi agent. Wiseman announced himself the spokesman for ‘a British political group headed by Lord Halifax, which hopes to bring about a lasting peace’. He added that Halifax represented a ‘very strong’ political party in the Houses of Parliament which believed in co-operation between the British Empire, Germany and the United States.

In January 1941 Tancred Borenius, a Finnish art historian with good contacts inside the British government, floated some proposals through Carl Burkhardt, President of the International Committee of the Red Cross in Geneva. Both initiatives were fundamentally the same: restoration of Holland and Belgium; Denmark to remain in the German sphere of influence; Poland to be resurrected shorn of the German provinces; France to be re- established on the same model as Poland; Germany to have a free hand in eastern Europe; and the colonies removed under the Versailles Treaty to be returned to Germany. The only major concession for which the British peacemongers looked was the replacement of Hitler, something they believed attainable now that the defeat of the Luftwaffe in the Battle of Britain had strengthened their bargaining power by destroying the prospect of a German invasion. (76)

At this stage two developments occurred. First, the possibility of removing Hitler became acceptable to the German negotiators once more. Weidemann and Hohenlohe-Waldenburg, for example, suggested his replacement by the Crown Prince Otto, or by Heinrich Himmler, the Reichsfuhrer SS. In March 1941 Himmler himself asked Burkhardt whether he thought that the British would be prepared to negotiate with him rather than Hitler. (77) The reasons for this are obscure, but it may be that with the invasion of the USSR looming senior members of the Nazi hierarchy wished for a neutral Britain and believed they could achieve this if Hitler was no longer in power. The quid pro quo was the deposition of Churchill and the reconstruction of his government. Given that Churchill was committed to the war (in December 1940 he said that ‘I would only have to lift my finger and I could have peace but I do not want it’) this was logical enough and presented no problems for the British side.(78) Nevertheless the second development created difficulties for the peace party. In December 1940, finally exasperated by Halifax’s willingness to deal with the Germans, Churchill moved him out of the way by appointing him Ambassador in Washington. (79)

Churchill’s opponents did not give up hope. Given the invulnerability of the United Kingdom to invasion and the impossibility of defeating Nazism in the absence of American and Soviet belligerence, which they did not want anyway, they believed that the Prime Minister’s strategy was futile at best; (80) at worst, he was presiding over the socialisation of the country.(81) At the start of 1941 sentiment in the City of London was unfavourable to Churchill and positively inclined to peace.(82) Halifax may have been removed from the centre of things but there were other contenders for the leadership of the peace party well placed to take advantage of discontent in the Lords and the Commons. In early March 1941 Hoare met Max Hohenlohe, who was in fact a Nazi agent.(83) He said that

the position of the British government cannot remain secure. Despite recent American legislation providing for aid to Great Britain Churchill can no longer count on a majority….. sooner or later he will be called back to London to take over the government with the precise task of concluding a compromise peace…..he will only take this mission on condition that he has full powers.

Hoare went on to say that he would have to remove Anthony Eden (a supporter of Churchill and Halifax’s replacement at the Foregn Office) to another Cabinet post, and replace him with Butler.(84) On May 10th Rudolf Hess landed in Scotland. Right up to that time there were powerful and well placed individuals who were in touch with the Germans in the service of a policy which was totally at variance with that of the government itself. It appears that both in June 1940 and in the early spring of 1941 they were fairly confident of their ultimate success in achieving an Anglo-German peace. Their failure in 1940 is not difficult to explain. But the absence of any obvious follow-up to Hoare’s prediction of March 1941 is. It cannot be said that Churchill was saved by the course of the war at this time. Certainly it is interesting that by early June 1941 the last significant pre-war appeaser in the government, Butler, knew that he would be moving from the Foreign Office to the Board of Education.(85)

There is some evidence that Hoare for one continued to dally with the Germans.(86) It appears also that other clandestine talks continued in neutral capitals. In 1942 and 1943, for example, discussions centred on the possibility of an end to the war in the west, leaving Germany free to concentrate resources on the conflict with the USSR. But the feasibility of this project declined sharply after the commitment of the USA, the USSR and Britain to the unconditional surrender of Germany. The failure of the negotiations ensured that the scenario Chamberlain and his supporters in industry, the Bank of England and the City had feared did indeed come to pass. The politico-economic consequences of total war pushed British society to the Left and prepared the way for the election of a Labour government in 1945. Britain ended the war a junior partner in the ‘special relationship’ with the United States, and by 1945 the USSR was entrenched in the heart of Europe. By 1990, however, the Soviets had gone. Deeply unpleasant though the domination of the USSR over eastern Europe was for the people who lived there, was it not preferable to Nazi hegemony? And for many British citizens the destruction of Nazi and Fascist power and the movement of their own country towards social democracy was a welcome improvement on what had gone before.

Postscript: Hess, the historian, and conspiracy

In 1973 Hugh Thomas, a British Army surgeon working at Spandau prison in Berlin, examined prisoner number 7, otherwise known as Rudolf Hess. He was startled to find that the prisoner did not have any scars or marks or traces of any kind of injury on his torso, even though it was well known that Hess had been shot through the chest and seriously wounded in 1917. Mystified, Thomas began to research into the history of his patient. He continued with this work after leaving Spandau and wrote a book, the second edition of which, Hess: A Tale of Two Murders, was published in 1988.

Thomas concluded that the man who flew to Britain in May 1941 was not Hess but a double. Why? Thomas argued that for several months at least Hitler had been making peace overtures to a right wing cabal in Britain. Hitler’s agent for contacting the British was his loyal deputy Hess, who before the war had shared Hitler’s views regarding the desirabilty of Anglo-German co-operation. But the British peace party, a powerful group of Conservative M.P.s, peers and members of the Royal family, were unhappy about deals with Hitler: their trust in him had been shaken when he reneged on the Munich Agreement and invaded Czechoslovakia. Within the Third Reich two men who knew that Hitler was an obstacle to an Anglo-German agreement were Goering and Himmler. Goering’s real influence had waned since the Battle of Britain but Himmler’s had grown. In charge of the SS and the machinery of state security, Himmler was, in fact if not in name, the second most important man in Germany. He knew that Hitler planned to invade the Soviet Union and believed that it might end disastrously without an Anglo-German agreement, closing down the western front, which Hitler would probably be unable to achieve.

Himmler reckoned, however, that he might be able to effect the deal. Such an idea had been put to the wife of Ulrich von Hassell, a leading member of the German resistance, in March 1941.87 Von Hassell had been in touch with the British since the outbreak of war and it is reasonable to assume that he would have passed on Himmler’s suggestion. On May 10 Himmler seized his chance. Hess had taken off from Augsbourg, possibly to fly to meet a British delegation in Stockholm. Between them Himmler and Goering organised the interception and shooting down of Hess and his ME 110.

Meanwhile Himmler sent into the air a man who had in the past acted as Hess’s double. His mission was to fly to Britain with an offer of peace between a Germany without Hitler and a Britain without Churchill. But the British government, tipped off by Admiral Canaris, chief of German secret intelligence, was waiting. Churchill had the double locked up for the duration of the war. At the Nuremberg trials the man who called himself Hess suffered from an extraordinary failure of memory, said nothing of interest or relevance, and was sent to prison for life.

In August 1987 the unfortunate man was murdered, probably at the behest of the British. The British had been able to conceal their determination to keep the prisoner in Spandau behind the Soviet veto on his freedom. But when the Soviets dropped their objections to his release they could not publicly object. But what would the man say once he was out? In order to avoid deep international embarrassment London contrived a convenient ‘suicide’ and the British were spared having to explain to the world just how close they came to a peace agreement with Germany in 1941.

Thomas’s theory was examined in a highly critical film by Dr Christopher Andrew of Corpus Christie College, Cambridge, for the BBC 2 history programme Timewatch in January. Andrew maintained that Hess was Hess after all and that he had probably committed suicide. The Thomas story was, Andrew suggested, the stuff of good conspiracy theory rather than of diligent and painstaking historical research. (88) There is no space here to discuss Andrew’s treatment of the medical evidence relating to the Hess affair, but it is appropriate to draw attention to the philosophy behind Andrew’s argument. It said that conspiracy theories are disreputable from the viewpoint of the serious historian. This is a fair point. During the last century political movements of the extreme right and left have often used conspiracy theory to frighten people into compliance with their outlook. Richard Hofstadter has chronicled their influence on the history of the United States, from nineteenth century currency crankery to McCarthyism.(89) Nazism was based on the belief that good honest Germans were being swindled by a vast Jewish-Bolshevik-capitalist conspiracy. Stalin and Mao sought to justify repression by claiming that domestic dissidents were plotting with the intelligence services of the bourgeois states to bring about the collapse of socialism. Substituting paranoia for dispassionate analysis and persuasion, conspiracy theories have frequently been the handmaiden of the authoritarian.

Nevertheless, the assumptions made by the Timewatch programme about conspiracy theories were deeply flawed. When historians test a theory they should concern themselves not only with the forensic details but with its fundamental plausibilty; and this can only be gauged by placing the events the hypothesis seeks to explain in a wider historical context. Remarkably, for example, Andrew suggested that the international obsession with the assassination of John F. Kennedy was a good example of unhealthy interest in conspiracies. Now while the actual circumstances of the murder may be difficult to determine we can ascertain that the President had enemies in the CIA and in the Mafia. (90) This does not mean that the CIA and the Mafia killed Kennedy: but it does mean that the hypothesis that they did is not ridiculous. Equally, with the Hess affair, while the fact that the search for an Anglo-German rapprochement was still going on on 10 May 1941 does not mean Thomas is right, it does suggest that he might be. Timewatch completely failed to deal with this aspect of the subject.

Historians should not be dismissive of all conspiracy theories. The course of Anglo-German relations in peace and war reveals that up to 1940 the British establishment was anxious to conclude a detente with Germany. The political and economic development of Britain in the 1920s and 30’s had led to the creation of an ‘Anglo-German connection’ whose maintenance was a vital interest for the constituent parts of the dominant aliance. Though this alliance was displaced as a result of military failure in May 1940, and discredited thereafter, it still attempted to complete in secrecy what Chamberlain had tried to achieve as a matter of official policy. What is this but an unsuccessful conspiracy for peace? Conspiracies do occur and historians do their profession no credit if they ridicule those who draw attention to them simply because something extraordinary and not in line with the conventional wisdom is being said.

Notes

1. Representative works, drawing on published and unpublished papers, mostly from the Cabinet and Foreign Office archives, are Colvin, Chamberlain Cabinet; Middlemas, Diplomacy of Illusion. See for example Gallagher, Decline rise and fall of the British empire; MacDonald, ‘Economic appeasement’; Shay, British rearmament in the 1930s; Wendt, Economic appeasement. Forbes (‘London banks’) has related pressure for appeasement on the government to the impact of the financial crisis of the early 1930s on City institutions involved in the acceptance business.
2. See Ingham, Capitalism divided?
   
3. Newton and Porter, Modernization frustrated, p. 61.
4. Newton and Porter, Modernization frustrated, p. 55.
5. Pollard, Development of the British economy, 1914-1980, p149.
6. Pollard, Development of the British economy, p. 185.
7. See Middleton, Towards the managed economy, pp. 84-93; Newton and Porter, Modernization frustrated, ch. 3; Pollard, Development of the British economy, pp. 66-76.
8. Redmond, ‘An indicator of the effective exchange rate’.
9. Eichengreen, ‘Sterling and the tariff’; Cain and Hopkins, ‘Gentlemenly capitalism, II’.
10. MacDonald, ‘Economic appeasement’.
11. Forbes, ‘London banks’.
12. Teichova, ‘Versailles and the expansion of the Bank of England’.
13. P.R.O. FO371/46890, C6008/688/18, interrogation of Schacht by Major E.Tilley, 9 Jul 1945.
14. Costigliola, ‘Anglo-American financial rivalry’; Teichova, ‘Versailles and the expansion of the Bank of England’.
15. Forbes, ‘London banks’, p. 574.
16. Forbes, ‘London banks’, pp. 581-2.
17. Drummond, Imperial economic policy; MacDonald, ‘Economic appeasement’, pp. 118-9.
18. P.R.O. FO371/22950, C2581/8/18, minute by Leith-Ross, 24 Jan 1939.
19. See P.R.O. FO371/22951, passim.
20. P.R.O. FO371/23000, C469/32/18, note of conversation with Norman by Ashton-Gwatkin, 15 Jan 1939.
21. Quoted in Roberts, ‘Frank Cyril Tiarks’.
22. P.R.O. FO371/23000, C469/32/18, note of conversation with Norman, 15 Jan 1939.
23. Haxey, Tory M.P., pp230-32.
24. Documents and materials relating to the eve of the Second World War, vol. II, p. 70, report by Dirksen, 21 Jul 1939.
25. Haxey, Tory M.P., pp. 230-32.
26. Holland, ‘The Federation of British Industries’, p. 290.
27. Holland, ‘The Federation of British Industries’, p. 294.
28. Hannah, Rise of the corporate economy, pp. 22-6.
29. Ingham, Capitalism divided, p. 196.
30. Hannah, Rise of the corporate ecomony, p. 62.
31. Booth, ‘Reply to Peden and Middleton’.
32. Booth, ‘Britain in the 1930s’; Holland,’The Federation of British Industries’, pp. 294-8.
33. Economist, pp.113-4, 21 Jan 1939.
34. Reader, Imperial Chemical Industries, p. 131.
35. F.B.I. papers, University of Warwick (hereafter F.B.I.), F/3/E1/13/11, ‘Foreign Trade of the United Kingdom’, 28 June 1938.
36. Holland, ‘The Federation of British Industries’, p. 298.
37. P.R.O. FO 371/22950, C1719/8/18, note by Ashton-Gwatkin of a talk with Ramsden of the F.B.I., 4 Feb 39.
38. The Engineer, 24 March 1939, quoted in the F.B.I. file of press cuttings.
39. See F.B.I. F/3/03/2/1, undated memorandum of early 1939.
40. P.R.O. FO371/22991, C11182/16/18, report of 9 August 1939.
41. Holland, ‘The Federation of British Industries’, p. 298.
42. See Wark, The ultimate enemy.
43. Shay, British rearmament in the thirties, pp. 160-1.
44. Taylor, English history, pp 501-6.
45. Cowling, Impact of Hitler, p.166.
46. Taylor, English history, pp. 544-6; Lamb, Drift to war, p. 321.
47. See Teichova, ‘Great Britain in European Affairs’.
48. Parker, ‘The pound sterling’.
49. Reynolds, The creation of the Anglo-American alliance.
50. P.R.O. T188/288, memorandum by Leith-Ross, 2 Feb 1937; MacDonald, ‘Economic Appeasement’, pp119-20.
51. Statistical abstract for the United Kingdom, table 127, p. 143.
52. Crozier, Germany’s last bid for colonies; P.R.O. T160/856/14545/3, 1936-9.
53. P.R.O. FO371/22951, C4102/8/18, 6 Apr 1939.
54. P.R.O. ECG1/19, October 1939.
55. Documents on German Foreign Policy (hereafter DGFP), Series D vol. VI, pp. 977-83, Wohltat’s minute of conversations with Sir Horace Wilson, Sir Joseph Ball and Robert Hudson, 24 Jul 1939; Documents and Material Relating to the Outbreak of the Second World War, vol.2, pp. 67-72, Dirksen’s report of 24 Jul 1939, and pp 117-124, Dirksen’s minute of a converation with Sir Horace Wilson, 3 Aug 1939; and Documenti Diplomatici Italiani, 1935-39, 8th Series, vol. XII, p557, Attolico to Ciano, 1 Aug 1939. The offer of a loan was leaked to the press, where it received such a rough reception that the government shelved the idea (see Dirksen’s report of 3 Aug 1939). The rest of the agenda, however, continued to lie on the table.
56. P.R.O. PREM1/333, memoranda by Butler, 2 Aug 1939, and by Wilson, 3 Aug 1939.
57. Reynolds, Creation of the Anglo-American alliance, p.51-2.
58. Taylor, English history, p. 552.
59. DGFP, Series D vol. VII, p. 401, report of Mitarbeiter correspondent to Berlin.
60. Milward. War, economy and society.
61. Newton and Porter, Modernization frustrated, p. 91.
62. Einzig papers, Churchill College, Cambridge, 1/18, 8 Mar 1940; Newton and Porter, Modernization frustrated, p. 92.
63. Christie papers, Churchill College, Cambridge (hereafter Christie), 180/1/24, record of telephone conversation with Hohenlohe, 8 Nov 1939. ‘Christie worked for Sir Robert Vansittart’s ‘private detective agency’ and for the slightly more official SIS underground network known as the ‘Z’ organisation. This was run by Claude Dansey, who became Assistant Chief of the Secret Service in 1939. For further information see Anthony Reed and David Fisher Colonel Z: the Secret Life of a master of spies (London, 1984), pp.168-9.
64. See Knightley, Second oldest profession, pp.129-34. Knightley quotes the memoirs of Best, one of the SIS officers, as stating ‘Hitler was to remain in power’. I can find no evidence of this remark, and it does not square with the tenor of the Christie talks which were continuing at the same time, and which, interestingly, referred on 8 November to ‘extinction (being) still difficult but might presently be achieved at a price’.
65. P.R.O. FO 371/24405-7, passim;Von Hassell, Diaries; Chadwick, Britain and the Vatican, pp. 86-100.
66. Christie, 180/1/24, 10 Nov 1939.
67. DGFP, Series D, vol.X, p.791, Consul General at Geneva to Foreign Ministry, 5 Dec 1940.
68. P.R.O. PREM 1/443, letter from Noel Buxton, 7 Mar 1940. Aberconway held many directorships in the iron, steel and shipbuilding industries. In 1939 he had been, for example, chairman of Firth Brown Steel and of Westland, and a director of the National Provincial Bank.
69. Information from Professor R.M. Griffiths (University of London). Professor Griffiths possesses the membership book of the Right Club.
70. P.R.O. PREM 1/443, letter from Noel Buxton, 7 Mar 1940. For the views of the City see DGFP, Series D, vol.VII, pp. 363-7, undated report from Baron de Ropp made late in 1939.
71. Kenneth de Courcy papers, Hoover Institution, Stanford, California, box 2 folder 2, correspondence with Lord and Lady Londonderry, 1937-41, passim.
72. See Addison, Road to 1945; Newton and Porter, Modernization frustrated ch.4.
73. Some interesting material was revealed on ‘Divided we Stand’, Thames TV, 22 May 1990.
74. The incident is described in a unpublished memoir by Sir Peter Tennant, who was officially the British Press Attache in Stockholm throughout the war. Tennant’s real function was that of a senior Special Operations Executive officer.
75. See Anthony Cave Brown,’C,’ p.271; de Courcy papers, box 2 folder 2, letter of de Courcy to
    Londonderry of 9 Oct 41.
76. See the de Courcy papers, Box 2 Folder 2, correspondence between de Courcy and Londonderry, 2 Nov 1940-17 May 1941, passim; Federal Bureau of Investigation (hereafter US F.B.I.) report 741.6211/12-24, 2 December, 1940. Another declassified US F.B.I. document (dated 28 October, 1941) reveals Hohenlohe-Waldenberg to have been a long-term Nazi agent with good connections in Britain. Interestingly, she arrived in the United States on 22 December,1939 ‘from London, England,on a non-immigrant visa to visit her son and indicated that she would remain for five months and intended to return to England’.
77. US F.B.I. report 741.6211/12-24, 2 December,1940; von Hassell, Diaries, pp.176-7.
78. DGFP, Series D, vol. XI, p792, Consul-General in Geneva to Berlin, 5 Dec 1940.
79. Gilbert, Churchill, vol VI, p. 953.
80. MacDonald, Britain,the United States and appeasement.
81. London journal of General Raymond E. Lee, pp.165-6.
82. Newton and Porter, Modernization frustrated, pp.101-2. It has to be said that Churchill himself was not especially enthusiastic about the plans for reconstruction.
83. Avon papers, University of Birmingham, Sp/43/27, Hoare to Eden 5 Jul 1943.
84. Documenti Diplomatici Italiani, 1939-43, 9th series, vol. V, Lequio, Ambassador in Madrid, to Ministry of Foreign Relations, 14 March 1941.
85. Howard, Rab, p. 107.
86. Avon papers, Sp/42/22, Hoare to Eden, 11 May 1942.
87. Von Hassell, Diaries, pp.176-7.
88. ‘Hess: an edge of conspiracy’, Timewatch (BBC2 TV), 17 Jan 1990.
89. Hofstadter, The paranoid style in American politics.
90. See for example Scott, Hoch and Stetler, The assassinations.

References

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