Baldwin, with his great skill at compromise, restored some of the Admiralty estimates, but Churchill won in the long run; during each of his five years as chancellor, every service except the RAF saw its appropriations dwindle. Even so, the public temper was such that he was frequently attacked as a military spendthrift; the Economist faulted him on the ground that 3 percent of the national income was being allocated to defense, compared with 2 percent in the later years of Victoria’s reign. Perhaps any other chancellor would have done the same. But one expects more from Churchill, and the saddest page in this record is his repeated insistence that the ten-year rule adopted in August 1919 be extended from year to year.* He convinced the Committee of Imperial Defence that it was sound policy, though there was one demurrer. The minutes of the committee’s two hundred thirty-sixth meeting record that: “LORD BALFOUR was of the opinion that nobody could say that from any one moment war was an impossibility for the next ten years and that we could not rest in a state of unpreparedness on such an assumption by anybody. To suggest that we could be 9½ years away from preparedness would be a most dangerous suggestion.”191
Churchill was to oppose rearmament as late as 1929, when B. H. Liddell Hart wrote in the Daily Telegraph that “every important foreign Power has made startling, indeed ominous, increases of expenditure on its army…. Our Government, which has to keep watch for storm signals, would be false to its duty to this nation if it reduced our slender military strength more drastically until other nations imitate the lead which we have so repeatedly given.” In one instance Churchill was false to himself. He had inveighed against MacDonald for suggesting that the naval base at Singapore be abandoned. Now he argued that Singapore, like Iraq, could be defended by the RAF. He objected to “measuring our naval strength” against a “fancied” threat from Dai Nippon, commenting that the Admiralty was “unduly stressing the Japanese danger.” Indeed, he had been in No. 11 less than a month when he asked the Foreign Office to declare that war with Nippon would be impossible for the next twenty years. Austen Chamberlain hesitated, but the decision was made. Early in 1924 the Admiralty recommended the establishment of a submarine base at Hong Kong and the installation “as fast as possible” of new naval guns at Singapore. “For what?” asked Winston, who only a few months earlier had been Singapore’s staunchest champion. “A war with Japan! But why should there be a war with Japan? I do not believe there is the slightest chance of it in our lifetime.” He was convinced that “war with Japan is not a possibility any reasonable government need take into account.” Beatty thought otherwise. Later, with an eye on history, Winston claimed that he had been at a disadvantage because Beatty had not told him of secret telegrams bearing evidence of Japan’s aggressive designs. Still, one feels that this was not Churchill’s finest hour.192
The most sensational moment in Churchill’s first budget was his dramatic disclosure that Britain, which had left the gold standard during the war, was back on it. The Times reported that this announcement was greeted with “tremendous cheers.” After the applause had died down he said: “No responsible authority has advocated any other policy. It has always been a matter of course that we should return to it.” This was simply untrue. Beaverbrook had been against it; on the evening of Budget Day he wrote Bracken: “My opinion of Winston has not altered. I knew from the beginning that he would give in to the bankers on the Gold Standard, which, I think, is the biggest sin in this budget.” Half a century later Boothby, looking back on a long public life, said of the return to gold that “with the exception of the unilateral guarantee to Poland without Russian support, this was the most fatal step taken by the country.”193
Beaverbrook and Boothby were among the few Jeremiahs on the issue then; others, and they were almost the only others, were Winston’s old colleague Reginald McKenna, a former chancellor; John Maynard Keynes; and Vincent Vickers, who protested the move by resigning from the board of the Bank of England. Churchill has been blamed for it, and rightly so, because as chancellor he made the decision. The step was not taken lightly, however, or without learned advice. Responsibility was collective and bipartisan. In 1918 the step had been recommended by a standing committee of experts appointed by Lloyd George; a majority of Conservatives, Liberals, and Labourites had then endorsed it. Churchill regarded that endorsement as binding. According to Grigg, the new chancellor invited gold’s advocates and adversaries to dinner. Sir Otto Niemeyer of the Bank of England stated the case for gold; McKenna and Keynes argued against it. Winston thought some of the points made by McKenna and Keynes were valid. “But,” he added, staying off gold “isn’t entirely an economic matter; it [would be] a political decision, for it involves proclaiming that we cannot, for the time being at any rate, complete the undertaking which we all acclaimed was necessary in 1918, and introducing legislation accordingly.”194
The roster of men who supported it on economic grounds alone was formidable; they included Austen Chamberlain, another ex-chancellor; Montague Norman, the governor of the Bank of England; and Labour’s Philip Snowden, Churchill’s immediate predecessor at No. 11, who had intended to put Britain back on gold himself had he remained chancellor. After yielding his seals of office Snowden had eloquently set forth the case for gold in the Observer. One Labour MP, Hugh Dalton, a Keynes disciple, challenged Winston’s decision: “We on these benches will hold the Chancellor of the Exchequer strictly to account, and strictly responsible, if, as we fear, there should be a further aggravation of unemployment and of the present trade depression as a result of his action, and should it work out that men who are employed lose their jobs as a result of this deflation. Should that be so we will explain who is to blame.” But Dalton was almost alone in his own party. Labour’s leaders didn’t even put the issue to a vote. Indeed, years passed before they grasped what had happened. In 1946 Ernest Bevin told the House that Churchill had acted impulsively and “like a bolt from the blue we were suddenly met with the complete upset of the wage structure in this country.” Bevin neglected to mention that in 1929, four years after Winston had brought England back to the prewar parity of gold, Ramsay MacDonald became Labour’s prime minister for the second time while vowing to “save the pound”—to keep the British economy belted in its twenty-four-karat straitjacket.195
Why did they do it, and what did it mean? British financiers, in the Treasury and in the City, were convinced that England’s future prosperity could be assured only if London were reestablished as the financial center of the globe. This, they held, would be impossible until “the pound can look the dollar in the face.” Churchill told the House: “We have entered a period on both sides of the Atlantic when political and economic stability seems to be more assured than it has for some years. If this opportunity were missed, it might not recur soon, and the whole finance of the country would be clouded over for an indefinite period by the fact of uncertainty. ‘Now is the appointed time.’ ” Niemeyer asked doubters: “How are we, a great exporting and importing country, to live with an exchange fluctuating with gold, when the United States of America, Germany, Austria, Sweden, Holland, Switzerland, the Dominions… and Japan have a stable gold exchange?”196 To bankers, reestablishing the credit of the pound was worth any risk. In reality, any precious metal or even a flourishing economy can serve as well as gold, and many do today. The Niemeyers, Normans, and Snowdens were living in the past, when Britannia ruled the waves and the pound was regarded with respect and awe in all the world’s money markets. They assumed that the restoration of the pound’s parity with the American dollar would reestablish Britain’s prewar prosperity. None seemed to realize that England had squandered its wealth between Sarajevo and Versailles, or that the country’s shrunken export trade could no longer provide the surplus needed to reestablish London’s fiscal ascendancy over the rest of the world.
Keynes now emerged. In the Nation, the Evening Standard, and finally in a pamphlet, “The Economic Consequences of Mr Churchill,” he went for Winston’s jugular, declaring that th
e chancellor had acted “partly, perhaps, because he has no instinctive judgment to prevent him from making mistakes; partly, because, lacking this instinctive judgment, he was defeated by the clamorous voice of conventional finance; and most of all, because he was gravely misled by the experts.” The return to gold, Keynes said, “shackled” and “enslaved” the country. “The whole object is to link rigidly the City and Wall Street,” and this alarmed him because America, with its rapidly expanding economy, “lives in a vast and unceasing crescendo. Wide fluctuations, which spell unemployment and misery for us, are swamped for them in the general upward movement.” The United States could afford “temporary maladjustments” because its productivity was growing “by several per cent per annum.” Once, when Victoria reigned, that had been true of Britain. “This, however, is not our state now. Our rate of progress is slow at best,” and flaws which could have been dismissed in the nineteenth century “are now fatal. The slump of 1921 was even more violent in the United States than here, but by the end of 1922 recovery was practically complete. We still, in 1925, drag on with a million unemployed.”197
The effect of going back to gold, said Beaverbrook, was “making yet more difficult the selling of British goods abroad and so aggravating unemployment at home.” Events soon proved Keynes and Beaverbrook right. English goods which had been priced at eighteen shillings in foreign markets now cost twenty—a full pound. This handicapped all British exporters; some became hopelessly crippled. The owners of British collieries could not compete with German and American coal if they charged higher rates. Their only alternative was to cut their miners’ wages. That was ominous. Coal mining, Britain’s basic industry, was also the most highly organized and politicized; Keir Hardie, the founder of the Labour party, had been a Scottish miner. The miners’ union protested the drop in pay. The Trade Union Congress, or TUC, the English equivalent of America’s AFL-CIO, promised to back the miners all the way, and Labour MPs declared their solidarity with them. In July 1925, two days before the cuts were to go into effect, Baldwin temporized. The Treasury, he said, would subsidize the mine owners while a commission headed by Sir Herbert Samuel investigated the situation. The prime minister bought nine months of labor peace, but the cost—first estimated at £10,000,000 but ultimately £23,000,000—was exorbitant. Churchill had agreed to the stopgap, but he protested, with the rest of the cabinet, when the prime minister proposed to extend it. Keynes was in the thick of things. He asked: “Why should coal miners suffer a lower standard of life than other classes of labour? They may be lazy, good-for-nothing fellows who do not work so hard or so long as they ought to. But is there any evidence that they are more lazy or more good-for-nothing than other people?” They were, he said, “victims of the economic juggernaut,” pawns being sacrificed to bridge the gap, required by the return to gold, between $4.40 and $4.86. “The plight of coal miners,” he concluded, “is the first—but not, unless we are very lucky, the last—of the Economic Consequences of Mr Churchill.”198
Winston retorted angrily: “I have never heard of any argument more strange and so ill-founded, as that the Gold Standard is responsible for the condition of affairs in the coal industry. The Gold Standard is no more responsible than is the Gulf Stream.”199 But evidence to the contrary was accumulating; week by week the tension in the mines grew. On March 1, 1926, the Samuel Report was released. It was a thoughtful, practical document, the result of profound research, and its conclusions were an indictment of the coal owners. Over the years, Samuel and his colleagues found, the proprietors had reaped enormous profits while bleeding the industry, refusing to replace obsolete equipment. As a consequence, theirs had become a losing business. Unless the government continued its subsidy, or nationalized the collieries, the miners would have to accept lower wages now. Later, after modern equipment had been installed, their pay would rise. No one could tell when that would be. The report gave the owners and the union six weeks to reach an agreement.
At this point the prime minister should have taken a strong stand. That is what leaders are for. The owners, with their accumulated wealth, could have been pressed to a settlement. But Baldwin had recently compromised himself, declaring publicly: “All the workers of this country have got to take reductions in wages in order to help put industry on its feet.” So he temporized again. The commission’s findings, he said, were disappointing, but if both parties could live with them, the government would not object. This encouraged extremists on each side; they shredded the report with technical arguments and then rejected it outright. Up to this point, Churchill’s sympathies had been with the miners. Labour didn’t appreciate that; when the coal subsidy forced him to cut health and unemployment insurance appropriations, there were cries of “Robber!” from the Opposition benches, to which he replied that for one who had frequently been called a “murderer,” this was “a sort of promotion.” Unknown to them, he had sent young Harold Macmillan to Newcastle, asking him to report on the situation there, and on April 10 Macmillan—who felt it “a great honour to be taken into your confidence”—wrote describing “the appalling conditions in this area.” He thought that “the patience and the endurance of the workers as a whole is really remarkable. Certainly adversity brings out greater virtues than prosperity in all classes, but peculiarly so among the working people.” Churchill was optimistic; he felt certain that a way to reward these virtues would be found. After all, those on both sides were Englishmen. Speaking to the Belfast Chamber of Commerce he said that he did not share the opinion, so widespread abroad, particularly in the United States, “that Britain is down and out, that the foundations of our commerce and industrial greatness have been sapped; that the stamina of our people is impaired; that the workmen are lazy; that our employers are indolent; that our Empire is falling to pieces. I have never been able to take that view.” He assured his audience that the justifiable grievances of “our much-abused coal miners” would be peacefully resolved.200
They weren’t. Strife was now inevitable, and before it ended the conflict would cost over £800,000,000. The crisis began on May Day, 1926. That Saturday morning miners who had assembled for the day’s first seven-hour shift were notified that their future pay envelopes would be thinner. They protested and the owners locked them out. At noon the TUC General Council, meeting in London, unanimously agreed that unless wage levels were restored at once, a nationwide general strike would begin Monday at one minute before midnight. The general strike is labor’s ultimate weapon. If prolonged, it can destroy society. English legal scholars then and since have agreed that to call one, or even threaten one, is a violation of the British constitution. The prospect made the entire country tremble. Yet grave as the situation was, the TUC decision was followed by forty-eight hours of chaos more appropriate in a Marx Brothers film than in the British establishment. The General Council, after alerting affiliates to its decision, sent the prime minister a letter, formally setting the deadline and offering to negotiate. Baldwin asked for two weeks’ grace, “confident that a settlement can be reached on the basis of the Samuel Report.” Since that implied a temporary acceptance of the wage cut, and since the miners had developed the slogan “Not a penny off the pay, not a minute on the day,” the TUC replied that its membership must be consulted. It was then discovered that the miners had left London and gone home. Telegrams were dispatched recalling them, but it was late Sunday before a TUC delegation was ready to approach the government. That evening the union men called at No. 10. Nobody was home. The cabinet was meeting next door in Churchill’s house. After a long, confused delay, while the delegates waited on the pavement, Baldwin emerged with Birkenhead and said: “Gentlemen, I am sorry to say that our efforts for peace are unavailing. Something has happened at the Daily Mail and the Cabinet has empowered me to hand you this letter.” They shook hands and he said: “Goodbye; this is the end.” Gathering under a Downing Street lamp, they opened the envelope and learned that compositors at Lord Rothermere’s Daily Mail, members of the National Soc
iety of Operative Printers and Assistants, had refused to set type for a vehemently antilabor editorial titled “For King and Country.” Printers at the Express and other papers had indicated that they were prepared to do the same.201
It has become part of Labour myth that Churchill exploited this incident to force a showdown with the unions. Ernest Bevin repeated the accusation again and again; the cabinet was within “five minutes” of reaching terms for a settlement, he said, when Winston learned what was happening at the Daily Mail, “dashed up to Downing Street, ordered a meeting of the Cabinet, rushed Baldwin off his feet… and in a few minutes the ultimatum was given to us.” Stories that Churchill was hostile toward organized labor had, of course, been in circulation since Tonypandy in 1909. The misunderstanding had grown, in part, because of his diatribes on socialism, which, under Labour’s banner, had become the political voice of the working class. But he himself drew a distinction. “When all is said and done,” he wrote, “there are very few well-informed persons in Great Britain, and not many employers of labour on a large scale, who would not sooner have to deal with the British trade unions as we know them, than with the wide vagaries of communist-agitated and totally disorganized discontent.” As he had written James Lane of the bricklayers: “I take a high view of the dignity both of craftsmanship and manual labour.” Bevin’s account is absurd anyhow. Since the cabinet had gathered in Churchill’s Downing Street home, he would hardly have “dashed up Downing Street” to reach it. The conference had already begun when Baldwin and his ministers learned of the Mail wildcatters. And the news came, not from Winston, but by telephone.202