A hundred years ago today, participating nations ratified agreements reached by the Allied Economic Conference of 14-17 June 1916. This didn’t have much popular impact at the time, given the competition from cataclysmic military events in progress on various fronts, and has of course been left out of the heritage showreel. On the other hand, it did mark a significant step on a road from nineteenth-century laissez-faire economics to the kind of multinational economic cooperation embodied by, for instance, the European Union – so now seems a good time to give it a mention.
Any economic historians happening to blunder into this page should probably look away now, because I’m about to generalise, big time, about an area that’s hardly my special subject. I realise that makes this journalism rather than history, but here and now I don’t mind exposing my own relative ignorance if it reminds anyone of where we came from in matters of economic cooperation – so here goes.
Classic nineteenth-century global economics – and the trade networks of the imperial age were global, if not in the instant way we understand them now – were purely national (or imperial) in outlook and involved minimal government interference in the affairs of private businesses. This was essentially the situation on the outbreak of war in 1914, though the German government had been acting in close cooperation with national businesses since the late nineteenth century, manipulating tariffs and slanting legislation in ways that were seen elsewhere (particularly in France) as key to the amazing, expanding success of the German economy.
War put a huge and unprecedented strain on economic resources for all belligerent states, while profoundly altering international patterns of trade, migration and capital flow. Long before 1916, it had become clear to European businessmen and politicians that the prosperity and security of the economic world after the peace needed some serious attention.
Among the Central Powers, the Austro-Hungarian and Ottoman economies quickly slipped into dependence on German aid, and long-term economic planning was overwhelmingly concerned with maintenance of imperial integrity – in other words with restoring pre-War economic conditions – while the essentially pre-industrial Bulgarian economy was internationally irrelevant. In Germany, the struggle to maintain a war effort in the face of Allied naval blockade called for absolute concentration of resources on immediate needs, and planning for a post-War economy never progressed beyond a plan, discussed in 1914, to absorb conquered economies into a greater German economy. The same idea lay behind wartime German management of its allies’ economies, and after Russia’s collapse in 1917 it would be applied (with disastrous results for all concerned) to German-occupied Eastern Europe – but for obvious reasons it had no direct impact on European economic planning after the German empire’s defeat and collapse.
Among the Allies, wartime economic cooperation was less one-sided. Britain remained by far the wealthiest of the partners, and Serbia was no more economically relevant than Bulgaria, but France was one of the world’s most important economies, Italy was in the throes of rapid economic growth and industrial expansion, Russia was a potentially enormous economic player and Belgium’s small economy was usefully modern. Everyone was going broke by 1916, and piling up debts (above all to the USA) as the cost of total war mushroomed beyond all prior imagining, but although the western European allies practiced close wartime economic cooperation, debates about the War’s economic aftermath had so far been conducted within individual states. Most politicians tended to see future economics solely in terms of restoring national prosperity, and it was left to business leaders, along with some political supporters, to take the lead in seeking ways to ensure a future of international economic security and balance.
The latter approach offered three main options for Allied economies. The first and simplest was an attempt to rebuild the pre-War world of interdependent but competing individual economies. The second option, equally backward looking in its way, favoured a tightening of ‘imperial preference’ trade areas, in other words attempting to make pre-War European empires more macro-economically self-sufficient. A third, more radical strand of opinion foresaw a future world economy dominated and stabilised by giant blocs of cooperating states, broadly along the lines of current international alliances. It should come as little surprise to anyone with even a passing knowledge of European economics during the last two hundred years that, by early 1916, the idea of cooperating as a bloc was particularly favoured by the French government.
A group of French political economists, led by commerce minister Étienne Clémentel, had taken on board German plans for European economic dominance in 1914, noted the widespread wartime destruction of northern French and Belgian industry, and were determined not to squander military victory through post-War economic defeat. They identified post-War economic cooperation as a means for France to secure the raw materials and markets needed for protection against any revival of German economic power, and in December 1915 – immediately after the first inter-Allied strategic summit at Chantilly – Clémentel presented these arguments to the premier, Briand. Briand, already anxious to increase the depth of wartime economic cooperation, agreed to push for an allied economic conference and put post-War cooperation on the agenda.
A preliminary conference took place in late March, when delegates from France, Britain, Russia, Italy, Belgium, Japan, Serbia and Portugal agreed in Paris on a completely pointless Declaration of Unity in military, economic and diplomatic affairs. The conference proper finally met – again in Paris and including delegates from the same states, as well as observers from the British dominions and the USA – over four days from 14 June 1916, when Clémentel presented his vision for mutual protection against any future revival German ‘economic slavery’ by formation of a post-War economic bloc that would exclude Germany. This, he proclaimed, would found ‘a new order of things, which will mark one of the dominant stages in the economic history of the world’. History would prove him right about multinational economic blocs, but 1916 wasn’t interested.
The French government’s ambitions for a prototype European economic union ran up against Italian and Russian unwillingness to abandon their pre-War links to German markets and technical expertise, and against the preference of some British and French industries for maintenance of their own pre-War trade with Germany. It also outraged Britain’s increasingly influential ‘white’ dominions, which (understandably) saw inter-European trade agreements as a threat to imperial preference. In the end, the conference resolutions ratified on 27 June (as the Paris Economic Pact) amounted to little more than an agreement to share wartime access to raw materials, along with a commitment to explore the possible benefits of long-term economic cooperation.
So big ambitions but no big deal, yet the Allied Economic Conference resonated around the world and into the future.
Across the Atlantic, Clémentel’s idea of a European economic bloc was regarded with deep suspicion as a restriction on future American trade, and became a political issue that informed both the 1916 presidential election and President Wilson’s approach to the peace in 1919. The idea was also discussed among economists in Japan, where it was seen as a corollary to their own ambitions by those who envisaged a future Japanese zone of economic dominance in south-east Asia, and particularly in China.
Meanwhile, French governments would press for European cooperation against post-War German economic revival throughout the conflict – though with little more success than in 1916 – and the spectre would continue to dominate French economic thinking into the late 1940s. After that, fear of a potentially even more dangerous Soviet Union forced a switch of priorities and drove the French to join Germany in seeking security through pan-European economic union. The rest should be history, a tale of continental security through diplomatic and economic cooperation, but seems to have been polluted by the melodramatic myths of propaganda and national heritage – and that’s my only real excuse for quietly commemorating 1916’s fearful, stillborn contribution to the modern idea of the European Union.