The policy of appeasement that was pursued in the years immediately preceding the Second World War will always be an issue of controversy and heated historical debate. The main aim of appeasement, as pursued under Chamberlain, was to avoid another devastating war in Europe. This meant negotiation and compromise with the Third Reich, and the belief that war was never inevitable and too costly an enterprise to be entered into until all alternative, viable measures had been exhausted. With the gift of hindsight we know that ultimately the policy failed and as such the appeasers have been heavily criticised, most famously by ‘Cato’ in the ‘Guilty Men’ of 1940 and by Winston Churchill in his war memoirs. Such criticisms remain heavily influential today and contemporary governments still use the example of appeasement in order to justify military action against regimes that have comparative similarities with the Third Reich, as with Iraq.
However, within the academic world the debate surrounding appeasement is being revised constantly. In the 1960s many writers came to view the efforts taken by the Chamberlain administration to avoid war as highly reasonable and even necessary. Today the debate continues and the revisionist school is coming under revision itself. This issue has many potential areas for debate; with several different factors all meriting study in their own right. One such aspect of the appeasement debate is whether the economic weakness of Britain was the deciding factor in why the Chamberlain government followed the policy.
In the aftermath of the Great War the British economy was exhausted. Britain’s role had been as the financial mainstay1 of the Allied cause and as a result its massive fiscal resources had been severely depleted, industry had suffered exceedingly and by the end of 1918 the United States were owed $3.7 billion in war debts. The reparations that Germany were ordered to pay in the Treaty of Versailles were designed to alleviate some of these economic hardships. These payments created an economic cycle, the U.S. loaned money to Germany, Germany paid reparations to the Allies and the Allies made payments on debts to America that they had accumulated as a result of the war. Therefore, with the Wall Street crash of 1929 the world economy was severely affected.
In 1931 the Great Depression had taken its toll in Europe, provoking the British Prime Minister James Ramsay Macdonald to create a coalition government, the National Government, in order to deal with the economic slump. The government took several measures in order to protect the British economy. Some of these measures went against liberal, orthodox economic policy. After the First World War it was essential to reconstruct the economy. It was felt that in order to compete for global financial leadership and avoid isolation Britain would have to return to gold at the pre-war level. Free Trade was also seen as imperative for British economic recovery.
The 1931 crisis meant that the government had to turn to a policy of retrenchment. The Banks were freed from having to sell in gold and sterling became a currency with a floating exchange rate. Britain reneged on its support of Free Trade with the introduction of tariffs, protectionism and Imperial Preference. The latter guaranteed British exports to debtor countries such as Canada, which enabled the maintenance of the loans they had raised in London2. However, the government still embraced economic orthodoxy in the pursuit of low taxes, a balanced budget and the support of market forces. The idea of the government taking a more aggressively active role, such as loan-financed public works, was unpopular. The government preferred to follow liberal orthodox policies whenever possible.
Due to this it was still important for Britain to have good relations with other powerful capitalist nations. The British economy depended upon exports for prosperity. With the rise of Nazi Germany the good economic relations with that country, that were vital to many British economic interests, were jeopardised. Britain needed an open international economy in order to secure prosperity, however this became increasingly difficult as countries continued to erect barriers in order to deal with their own economic problems. The foreign policy of Nazi Germany was becoming increasingly ‘autarkic’3, meaning that it was becoming increasingly self-sufficient and Britain was threatened with the loss of many lucrative markets. There was also concern as to what would become of British loans made to the Weimar Republic as the foreign exchange system of Germany deteriorated.
It was important to the British economy, which depended upon export markets, to maintain good economic relations with the Third Reich. Had Britain been able to secure a close relationship with either the Soviet Union or the United States, then it is certain that the National Government need not have pursued an accommodation with Germany so vigorously. However, the Soviet Union was regarded suspiciously because of profound ideological disparities and the United States looked unfavourably upon Imperial Preference, whilst Britain was wary of American expansionism. Therefore, the National Government hoped to reach an Anglo-German agreement in order to provoke growth in commerce and renewed stability in international relations, thereby securing domestic prosperity.
The Nazi move away from participation in the international economy demanded a response from London. Preserving London’s international financial position was seen as central to national security. After 1919 the City had penetrated the German economy to a great extent, assisting with the rebuilding of German cities and aiding Germany in developing extensive trading connections with Britain and the Dominions. It was hoped that Anglo-German financial partnership would ensure European prosperity. Viewed as such it is apparent that Chamberlain, first as the Chancellor of the Exchequer and later as Prime Minister, wanted to maintain good economic relations with the Third Reich.
In the summer of 1931 the collapse of the Credit Anstalt and ensuing economic crisis in Germany had severe repercussions for several leading British finance houses. The Standstill Agreement of the same year was another blow to British creditors who had made considerable investments in Germany. The agreement stipulated that existing credits would be frozen, while interest payments were to be continued4 and although it was initially a temporary measure it was renewed annually until the outbreak of war in 1939. The Agreement almost collapsed in 1934 when it was suggested that the debt be unilaterally cleared by sequestering German balances. However, it was feared that the German reaction would have severe repercussions on Anglo-German trade as well as perhaps preventing any repayment of British investment, therefore the Standstill Agreement passed. In order to help recuperate some finance from Germany the Payments Agreement was formalised, and by the end of 1936 the credits to German banks and industry had fallen by 30 percent.5
Therefore, the economic situation in Britain was certainly a factor in the promoting British accommodation with Germany. It was not necessarily economic weakness, although the financial might of the Empire was certainly waning, rather the fact that the economic system in Britain required co-operation with another major capitalist power. It would have required a massive move from the status quo to convert Britain into a more autarkic style of government. As a satiated power whose ‘sole object is to keep what we want and live in peace…’6, the idea of revolutionising the economic system was not a feasible one. Another factor linked to the economic situation is that of armaments. According to international liberal policy, British public opinion and British government assessment disarmament was an attractive policy in the aftermath of the First World War. Peace was the desirable climate in which British interests would prosper and it became popular to divert public spending from armaments to projects for social improvement.
This was certainly the policy of Chamberlain, although a conservative he believed in social improvement. Disarmament was a popular policy and was pursued actively, more so than by any other power that had ostensibly supported it at Versailles. By 1932 defence spending was at its lowest level in modern times. Chamberlain as the Chancellor of the Exchequer regarded finance as Britain’s ‘fourth arm’ of defence. Therefore, when many called for rearmament in late 1933 because of the failure of the Disarmament Conference and the obvious threat that German rearmament under the Nazi’s posed, Chamberlain advocated it only in reference to financial considerations. The recovery of the economy was still of paramount importance to him. Rearmament was not to be completed until January 1939. Therefore, economic considerations were directly linked to appeasement, in that rearmament was a costly procedure but necessary if Britain was to adopt a more aggressive policy.
However, when looking directly at the measures taken by the Chamberlain government to appease Hitler it is apparent that motives, other than economics influenced the decisions taken. The attitude towards war in itself had changed exceedingly since, and as a result of the First World War. War was no longer viewed so favourably as a method to settle disputes in the international arena. Diplomacy was preferred, and in Britain public opinion was generally against military action.
The shadows cast by the Great War generated a general horror of conflict. It is unlikely that Chamberlain would have had great support had he declared war against Germany before 1939. Furthermore, Chamberlain himself found war abhorrent, ‘armed conflict between nations is a nightmare to me;’7. He was also convinced that the Dominions would not have supported war during 1938, and the ostensible agreement reached was a significant relief to all concerned. The aggressive steps of the Third Reich in regards to the Czechoslovakian crisis of 1938, were not viewed by the appeasers as reason enough to enter war if negotiation could be reached. It was only when it became apparent to even the most ardent of appeasers that Hitler was intent upon war and not willing to pursue conventional means of international diplomacy, that war became inevitable.
Another motive behind appeasement was the general consensus that the Paris Peace Settlement had been overly harsh on Germany. Hitler was able to justify his motives, Anshluss, expansionist policies, rearmament and refusal to pay reparations through Versailles. The idea that he was redressing the wrongs visited on his people was popular. Hitler was able to hide his more alarming aspirations through manipulating the inherent evils of the Treaty. It is also possible that Chamberlain was convinced that he could solve the problems of the world, whilst avoiding war, through his own skills and the personal relationship he had with Hitler.
He did not like the Fuhrer or have affection for the Nazis, but he was convinced that the League of Nations was incapable of ensuring the peace and that the regional pacts and ‘high-minded covenants such as Macdonald’s Geneva Protocol’8 were equally ineffective. He had faith that there was a common element of humanity in all people and that no one pursued war for its own sake. He sadly misunderstood Hitler, and it is perhaps this generous and hopeful assessment of the human condition that has provoked the most extreme criticism of him. With hindsight we know that appeasement was a grossly inadequate way of dealing with Hitler and that Chamberlain was ill equipped to deal with him, due to his over self-confidence and misconceptions.
Appeasement will provoke discussion and reinterpretation for many years to come. The 1930s, especially the years of the Chamberlain premiership, 1937-39, were years of constant change, political upheaval, economic insecurity and international conflict. The unique nature of the Third Reich meant that it was extremely difficult, if not impossible, for the British government to have averted war with them. Chamberlain and his cabinet did have other options open to them, such as rapprochement with the United States or with the Soviet Union, but the path they chose given their subjective outlooks and the climate of the day was not unreasonable. Britain had certainly gone through a stage of severe economic difficulty, and the importance of the economy to Chamberlain definitely had influence over the foreign policy that his government pursued.
War was undesirable, partly because it was expensive. However, there were alternatives to avoiding war other than appeasement. Had Britain been economically strong then it is still likely that the Chamberlain administration would have engaged in appeasement. It was not in the nations interests to take part in war or become overly involved in international relations. Therefore, economic considerations always factored in foreign policy, but they were not central to the way in which that policy would be conducted.
1Adams, R.J.Q., British Politics and Foreign Policy in the Age of Appeasement, 1935-39, (1993), pg.2.
2 Newton, S., Profits of Peace: The Political Economy of Anglo-German Appeasement, (1996)., pg4.
3 Ibid, pg. 5.
4 Ibid, pg. 59.
5 Ibid, pg. 61.
6 Kennedy, Realities Behind Diplomacy, pg.256. in Adams R.J.Q., British Politics and Foreign Policy in the age of Appeasement, 1935-39, (1993), pg.7.
7 Dutton, D., Neville Chamberlain, (2001), pg. 205.
8 Adams R.J.Q., British Politics and Foreign Policy in the age of Appeasement, 1935-39, (1993), pg.159.