The United States And Fascist Italy: The Rise Of American Finance In Europe [1st Edition] 1107002451, 9781107002456, 1316235890, 9781316235898, 113902180X, 9781139021807, 1316247236, 9781316247235, 1316249131, 9781316249130

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The United States And Fascist Italy: The Rise Of American Finance In Europe [1st Edition]
 1107002451, 9781107002456, 1316235890, 9781316235898, 113902180X, 9781139021807, 1316247236, 9781316247235, 1316249131, 9781316249130

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Table of contents :
Cover......Page 1
Half-title Page......Page 3
Title Page......Page 4
Copyright Page......Page 5
Dedication......Page 6
Contents......Page 8
Abbreviations......Page 10
Preface to the English Edition: “Je ne regrette rien”......Page 12
Preface to the Italian Edition: Sources, words, and debts......Page 38
Translator’s Preface......Page 46
1. American Economic Power after the First World War......Page 50
2. Class Conflict in the United States......Page 53
3. The Defeat of the American Working Class......Page 58
4. American Expansion in Europe......Page 62
5. American Policy for European Stabilization......Page 71
1. United States’ Policy and the Isolation of Italy before Fascism......Page 77
2. American Reactions to the Rise of Fascism......Page 85
3. The Matteotti Crisis and the Manipulation of the Press......Page 99
4. American Reactions to Mussolini’s Early Foreign Policy......Page 117
5. The Shaping of Italian Foreign Policy......Page 126
6. Mussolini’s Policy toward the United States......Page 131
1. The Question of War Debt......Page 135
2. The Role of the House of Morgan......Page 139
3. Italian War Debt: Background......Page 143
4. The Start of Negotiations......Page 154
5. The Volpi Mission......Page 166
6. Explaining the Accord......Page 180
7. American Investments in Italy......Page 190
8. The Morgan Bank and Investments......Page 199
9. American Investments in Europe......Page 214
10. The Stabilization of the Lira......Page 219
1. The Economic Crisis and International Relations......Page 241
2. Hoover and Stimson’s Foreign Policy......Page 248
3. Italian Foreign Policy from Mussolini to Grandi......Page 251
4. The London Naval Conference......Page 259
5. The World Disarmament Conference......Page 271
6. Economic Collaboration between the United States and Italy in the Face of the Crisis......Page 288
7. Grandi’s Visit to Washington......Page 306
8. The Lausanne Conference......Page 315
9. The Significance of Grandi’s Policies......Page 318
1. Foreign Policy during the Roosevelt Administration......Page 336
2. Roosevelt and Italian Fascism......Page 347
3. War in Ethiopia. Challenges the Principle of Collective Security......Page 358
4. The Role of the United States......Page 362
5. The Position of the Roosevelt Administration......Page 366
6. Italo-American Trade and the Oil Question......Page 375
7. The Debate on the Embargo of Raw Materials......Page 385
8. The Neutrality Act of 1936......Page 391
9. The Solidifying of Political Factions......Page 393
10. Italian-Americans and the Ethiopian War......Page 398
11. The Opposition of Exporters......Page 405
12. American Diplomats and Appeasement......Page 409
13. The Morgan Bank and Appeasement......Page 417
14. The Origins of American Opposition to the Dictatorships......Page 428
Conclusion......Page 438
Index......Page 446

Citation preview

The United States and Fascist Italy The Rise of American Finance in Europe

Originally published in Italian in 1980, Gli Stati Uniti e il fascismo. Alle origini dell’egemonia americana in Italia is regarded today as a crucial text on the relationship between the United States and Italy during the interwar years. Aside from the addition of two new prefaces – one by the author and one by the book’s translator, Molly Tambor – the original text has remained unchanged, so that Anglophone readers now have the opportunity to engage with this classic work. By analyzing the enduring relationship between the United States – especially its financial establishment – and Fascist Italy up until Mussolini’s conquest of Ethiopia in 1935, this book provides answers to some key questions about the interconnectedness of America’s rise to hegemonic global financial power in the twentieth century and its support of Italian Fascism during this time. Gian Giacomo Migone was Professor of History of Euroatlantic Relations at the University of Torino, Italy. He is the author of Problemi di storia nei rapporti tra Italia e Stati Uniti (1971) and Banchieri Americani e Mussolini (1979), as well as of numerous essays concerning Euro-Atlantic relations before, during, and after the Cold War. In 1989 he was Lauro de Bosis Lecturer of Italian Civilization at Harvard University. A member of the Italian Senate from 1992 to 2001, he chaired its Foreign Relations Committee for seven years, as well as the Advisory Board of the United Nations System Staff College and the Civilian Affairs Committee of the NATO Parliamentary Assembly. He is the founder and first editor of L’ Indice dei libri del mese, an Italian cultural monthly. Molly Tambor is Assistant Professor of European History at Long Island University Post. She is the author of The Lost Wave: Women and Democracy in Postwar Italy (2014).

The United States and Fascist Italy The Rise of American Finance in Europe

GIAN GIACOMO MIGONE Università degli studi di Torino Translated by

MOLLY TAMBOR Long Island University

32 Avenue of the Americas, New York, ny 10013-2473, usa Cambridge University Press is part of the University of Cambridge. It furthers the University’s mission by disseminating knowledge in the pursuit of education, learning, and research at the highest international levels of excellence. www.cambridge.org Information on this title: www.cambridge.org/9781107002456 The translation of this work has been funded by SEPS Segretariato Europeo Per Le Pubblicazioni Scientifiche

Via Val d’Aposa 7 – 40123 Bologna – Italy [email protected] – www.seps.it © Gian Giacomo Migone 1980, 2015 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published in Italian as Gli Stati Uniti e il fascismo. Alle origini dell’egemonia americana in Italia by Feltrinelli Editore 1980 First English edition 2015 Printed in the United States of America A catalog record for this publication is available from the British Library. Library of Congress Cataloging in Publication Data Migone, Gian Giacomo. [Stati Uniti e il fascismo. English] The United States and fascist Italy : the rise of American finance in Europe / Gian Giacomo Migone ; translated by Molly Tambor. pages cm isbn 978-1-107-00245-6 (hardback) 1. United States – Foreign relations – Italy. 2. Italy – Foreign relations – United States. 3. Fascism – Italy – History. 4. United States – Foreign economic relations – 20th century. I. Title. e183.8.i8m5413 2015 327.73045–dc23 2015002698 isbn 978-1-107-00245-6 Hardback Cambridge University Press has no responsibility for the persistence or accuracy of urls for external or third-party Internet Web sites referred to in this publication and does not guarantee that any content on such Web sites is, or will remain, accurate or appropriate. Cover: Il Becco Giallo, 1928

Every discourse on power is implicitly a discourse on what is outside that power; that is, a discourse on a different and alternative power. Domenico Jervolino

Contents

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Abbreviations Preface to the English Edition: “Je ne regrette rien” Preface to the Italian Edition: Sources, words, and debts Translator’s Preface Introduction: The Origins of American Hegemony in Europe American Economic Power after the First World War Class Conflict in the United States The Defeat of the American Working Class American Expansion in Europe American Policy for European Stabilization 1

The United States and the Rise of Fascism in Italy United States’ Policy and the Isolation of Italy before Fascism American Reactions to the Rise of Fascism The Matteotti Crisis and the Manipulation of the Press American Reactions to Mussolini’s Early Foreign Policy The Shaping of Italian Foreign Policy Mussolini’s Policy toward the United States

2

United States Economic Policy toward Italy The Question of War Debt The Role of the House of Morgan Italian War Debt: Background The Start of Negotiations The Volpi Mission Explaining the Accord American Investments in Italy The Morgan Bank and Investments vii

xi xxxvii xlv 1 1 4 9 13 22 28 28 36 50 68 77 82 86 86 90 94 105 117 131 141 150

Contents

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3

4

American Investments in Europe The Stabilization of the Lira

165 170

The United States and Italy Confront the Great Depression The Economic Crisis and International Relations Hoover and Stimson’s Foreign Policy Italian Foreign Policy from Mussolini to Grandi The London Naval Conference The World Disarmament Conference Economic Collaboration between the United States and Italy in the Face of the Crisis Grandi’s Visit to Washington The Lausanne Conference The Significance of Grandi’s Policies Roosevelt and Fascist Italy, from the London Economic Conference to the Italo-Ethiopian War (1933–1936) Foreign Policy during the Roosevelt Administration Roosevelt and Italian Fascism War in Ethiopia Challenges the Principle of Collective Security The Role of the United States The Position of the Roosevelt Administration Italo-American Trade and the Oil Question The Debate on the Embargo of Raw Materials The Neutrality Act of 1936 The Solidifying of Political Factions Italian-Americans and the Ethiopian War The Opposition of Exporters American Diplomats and Appeasement The Morgan Bank and Appeasement The Origins of American Opposition to the Dictatorships

192 192 199 202 210 222 239 257 266 269 287 287 298 309 313 317 326 336 342 344 349 356 360 368 379

Conclusion

389

Index

397

Abbreviations

AADS AALP AC-DM AC-GC ACS-FAS ACS-GVM ACS-MCP ADG

AGF AMAE ASMAE-AAW ASMAE-AG ASMAE-ASG BE BIAG BIAGSRE BIAGUS

Alberto de’ Stefani Archive Alberto Pirelli Archive Dwight Morrow Archive, Amherst College Gelasio Caetani Papers, Archivio Caetani Agenzia Stefani Papers, Archivio Centrale dello Stato Giuseppe Volpi di Misurata Papers, Archivio Centrale dello Stato Ministry of Popular Culture Papers, Archivio Centrale dello Stato Dino Grandi Archive (many of the papers in this archive are collected in drafts for a subsequently published volume; the pertinent section is indicated in Roman numerals) Giovanni Fummi Archive Archives du Ministère des Affaires Etrangères, Paris Political Affairs Archive, Archivo Storico del Ministero degli Affari Esteri, Rome Archive of the Cabinet, Archivio Storico del Ministero degli Affari Esteri, Rome Archive of the Secretary General, Archivio Storico del Ministero degli Affari Esteri, Rome Bank of England Archive General Archive of the Banca d’Italia General Archive of the Banca d’Italia, Foreign Relations Section General Archive of the Banca d’Italia, Research Office ix

x

BLCU-GLH BLCU-NMB CFR DDI FDRL-OF FDRL-PSF FRBNY FRBNY-BS FRUS-DP HUGSBA-TWL HUHL-JCG HUHL-JPM HUHL-WP LC-CC LC-CEH LC-CH LC-HPF LC-NHD LC-WEB LC-WED LC-WJC MHS-FBK NA-DS NA-IR PRO-CAB PRO-FO YUL-HLS

List of Abbreviations George L. Harrison Archive, Butler Library, Columbia University Nicholas Murray Butler Archive, Butler Library, Columbia University Council on Foreign Relations Archive, New York Italian Diplomatic Documents Official Files, Franklin D. Roosevelt Library President’s Secretary Files, Franklin D. Roosevelt Library Federal Reserve Bank of New York Archive Benjamin Strong Archive, Federal Reserve Bank of New York Foreign Relations of the United States, Diplomatic Papers Thomas W. Lamont Archive, Graduate School of Business Administration, Harvard University Joseph C. Grew Archive, Houghton Library, Harvard University J. Pierrepoint Moffatt Archive, Houghton Library, Harvard University William Phillips Archive, Houghton Library, Harvard University Calvin Coolidge Presidential Papers, Library of Congress Charles Evans Hughes Archive, Library of Congress Cordell Hull Archive, Library of Congress Henry P. Fletcher Archive, Library of Congress Norman H. Davis Archive, Library of Congress William E. Borah Archive, Library of Congress William E. Dodd Archive, Library of Congress Wilbur J. Carr Archive, Library of Congress Frank B. Kellogg Archive, Minnesota Historical Society Department of State Archive, National Archives Italian Records, National Archives Cabinet Archive, Public Records Office, London Foreign Office Archive, Public Records Office, London Henry L. Stimson Archive, Yale University Library

Preface to the English Edition: “Je ne regrette rien”

1. what history? I started out with the best of intentions. Since my book was written in Italian thirty-five years ago, the idea was to sweep the dust off it with a preface that provided the reader with a meticulous update of further contributions as well as reactions and comments to it by other scholars and a levelheaded discussion of the corrections they inspired. I am not going to do so, with a few exceptions as I go along. To be honest, I do not think anything has been added that would lead me to change my basic interpretations more or less as they were formulated a long time ago. Like Edith Piaf, “Je ne regrette rien.” So revise the text, no. But explain the point of view from which it was written and why I believe it remains relevant today, yes. In so doing it is also my intent to lead my new readers into a universe of human reactions and a pantheon that will seem remote and even exotic to most of them, but perhaps worth a visit. Any historian should live up to Marc Bloch’s memento: she or he “. . . is like the ogre of the fable. Where he can feel the scent of human flesh, there is his prey.”1 But the ogre itself is not devoid of human frailty, even if it sometimes pretends the opposite is the case. The choice of prey and how it sees it, plays with it, and devours it is deeply affected by its humanity. Any historiographical exploration should go beyond the written word of the person who reconstructs the past and ask what affected that particular interpretation or school of thought, while questioning its relevance to ongoing discussion.

1

M. Bloch, Apologia della storia o Mestiere dello storico, Torino: 1969, p. 35.

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I believe Benedetto Croce was right when he wrote that “All true history is contemporary history.”2 Whatever the object and chronology of the research, its relevance will be measured by contemporary standards. Also, any author could and should bring to his or her scholarship, however documented and aseptic its formulations, the imprint of culture, life, personal experience, and accumulated convictions as affected by the contemporary events that surround and imbue his or her research and writing. While Gaetano Salvemini liked to disagree with Croce, especially on political issues and attitudes, in this respect he tread a similar path, only going one step further. On many occasions he pointed out that he did not believe in objectivity, but rather in what he called intellectual honesty. Better if the convictions of the historian, even prejudices possibly reflected in his or her scholarship, were clearly stated. According to Salvemini, as well as to Marc Bloch, writing history requires a hypothesis in order to select the questions relevant to set a course and interrogate a constant flood of documents; growing at a rate all the more impressive the more recent the events to be reconstructed, I should add. What Salvemini called intellectual honesty was the duty to adapt or even change or abandon any such initial hypothesis in the face of evidence that contradicted it. Historical facts do exist. Sometimes it is the benefit of hindsight – a legitimate though not always indispensable tool of any historian – that establishes a set of facts, rather than the detailed interpretation of documents regarding episodes not always relevant. As E. H. Carr would claim, writing history is like describing, reproducing, even photographing a range of mountains. The mountains are there, but the perspective, the angle, the lens, and the objective are the photographer’s choice.3 Guided by this conception of our trade, I remember a critical comment of my American mentor, Ernest May: “I see what you mean. But what mostly stimulates me is more like the curiosity of the scientist who wants to understand and describe the characteristics and movements of the object of his or her attention.” I could not, and would not, deny this need, nevertheless recognizing that it did not and does not represent my primary motivation in the choice of the objects of my research. Otherwise, I still feel, rather than a historian, I might as well have tried to become a botanist or an entomologist. 2

3

“Ogni vera storia è storia contemporanea,” in G. Galasso, ed., Teoria e storia della storiografia, Milano: 1989. E. H. Carr, What Is History? London: 1965, pp. 7–30.

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Another one of my American teachers, H. Stuart Hughes, used to say that, as a scholar of intellectual history, he always felt that the most productive attitude was a sort of gradually growing love–hate relationship with the author whose texts he was analyzing. I was to discover similar feelings reconstructing the strategies and machinations of my Morgan bankers or appraised Mussolini’s acute understanding of his need for moderation in order to satisfy their requirement of stabilization of the European scene in the 1920s. I hated them because, in the process of stabilizing capitalist Europe, they also contributed to consolidating the Fascist regime in Italy, but I could not help feeling waves of admiration for their strategic capacity to act as surrogates, substitutes (or could it have been usurpers?), of an otherwise isolationist American diplomacy, while turning it into moneta sonante, solid coin, as an almost secondary purpose. Every scholar has his or her own means of reconciling the apparently conflicting needs for passion and detachment. But it is in the choice of the object of inquiry, rather than in subsequent writing, that the historian legitimately shows his or her colors – whether guided by passions or even, affected by a personal perception of past events that stems from a vision held as a contemporary human being. Because, without passion there is no scholarship. As Saverio Vertone, my friend and colleague in the Italian Senate, used to say, “Our mind is like a vessel, more or less well equipped with sails; but without the winds of passion, it goes nowhere!” In Bloch’s Feudal Society, as well as in Salvemini’s reconstruction of social conflicts in late thirteenth-century Florence (not only in Mussolini diplomatico and throughout his abundant, obviously militant writings), this passion is not hard to recognize, in the choice of subject, the man, the times he lived in, and the culture he was imbued with – even the militant’s motivation behind the impeccable scholarship.4 And what about another great historian, Franco Venturi? It is no coincidence that he chose to write his first book, La jeunesse de Diderot, as a young anti-Fascist exile in France, followed by a pathbreaking study of Russian populism researched while experiencing the Stalinist Soviet Union as a cultural attaché in Moscow, only to then settle down in Torino to work on his five-volume study of Italian eighteenth-century illuminism, significantly dedicated to all those who have tried to reform his and their country, at any stage of its history.5

4

5

M. Bloch, Feudal Society, 2 volumes, New York: 1989; G. Salvemini, Magnati e popolani in Firenze dal 1280 al 1295, Firenze: 1899; Mussolini diplomatico, Bari: 1952. F. Venturi, Jeunesse de Diderot (de 1713 à 1753), Paris: 1939; Il populismo russo, 2 volumes, Torino: 1952; Settecento riformatore, 5 volumes, Torino: 1970–1990.

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These examples and many others bear out Croce’s and Salvemini’s call for an all-encompassing contemporary history that does not substitute, but indeed requires, the scholarly detachment, mixed with curiosity – in itself a passion – that other scholars such as May expected from their graduate students, perhaps nurtured by the mix of empathy and antipathy Stuart Hughes discreetly tried to convey to us as we were dealing sometimes too single-mindedly with our favorite heroes or villains. When advising a student or a junior colleague in the choice of the subject of a thesis or a book, the first question ought to be “Where does your interest, if not passion, lead you?” followed by “What is the silence you feel needs to be broken? You are going to spend a lot of time and energy that you do not want to waste!” Erudition for its own sake, quantity at the expense of quality, particularly tempting in the case of contemporary history, with so many new documentary sources readily available, should obviously be avoided, though what we might call the “academic system” is slanted in the opposite direction. No historian should ever forget that final, vitriolic remark that concluded an otherwise laudatory review by Malcolm Muggeridge of an exquisitely researched and written monograph (I quote from memory): “But do we really need to know so much about so little?” The choice of an object of research responds to a need to break a silence, the silence of history, often favored if not dictated by the convenience of a public, even political, silence. Of course it can also be caused by lack of available documentation or simply because a given object has been temporarily put to rest by previous scholarship, the possible results discounted as too obvious to be worth further investigation, or by a prevailing methodological fashion that causes the profession to look elsewhere. But there frequently also can be (I say this from my own experience) a silence dictated by expediency, whether social, academic, or blatantly political – conscious or, more often, unconscious. Expediency is by definition varied or multifaceted, inspired by a prevailing ideology or balance of power; the outcome of a war or its possible effects on another war still being waged; or, indeed, the silence of the defeated, who may consider it necessary to remain silent. For many years after the Second World War, any suffering endured by the defeated Germans, especially if cruelly inflicted by the victors, was considered off limits, for opposite but converging reasons, by scholars both German and of “victorious” nationality. It took Kurt Vonnegut to break that deafening silence over Dresden and another writer, John Hersey, to do so in the case of Hiroshima, but for years their example

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was not followed by scholarly authors.6 And, to pick a different example, even today, how much do we know of the anti-Semitism of the upper classes, even in democratic countries, before they saw fit to react against Hitler’s aggression? Ethically speaking, it is what Julien Benda called la trahison des clercs, the treason of the intellectuals who remain conveniently silent. Breaking this silence or what can be defined as the existing state of the art is an essential factor not only of scholarship, but in any public debate and can, perhaps, be extended to any field of human knowledge, often surprisingly subservient to fads or fashion. Many colleagues (Stefano Sciuto, a distinguished physicist, and indeed my daughter, Thi-Sao Migone, a biomedical scientist) have taught me that even the harder sciences are likewise affected. In our case, a legitimate question, by no means the only or decisive one, is “What piece of historical investigation, no matter how far distant in the past, can be relevant to the public debate as I see it?” This leads me back to my own motivations in embarking on thirteen years of research and how I was affected by it.

2. growing up with history on my mind Where, indeed, was public motivation for young Italians coming of age in the 1950s, who in their childhood had experienced war on their own territory, with recent memories of foreign occupations, and who lived with the pain and satisfaction of reconstruction? They had to seek it in the more vital part of the Risorgimento and, subsequently, in the most conspicuous popular resistance movement against German occupation in Europe and the remnants of the Fascist regime. In the foundations of a democratic Republic, as against a Monarchy that first surrendered to Fascism but also ensured the continuity of an opportunistic ruling class; indeed in a Constitution of which many of us were and still are proud. Many others, even a majority of the middle and upper classes, were nostalgic of the recent past that, until and throughout the war, had assured their social status, strenuously trying to forget its end in defeat and national humiliation. Their main concern was that stability and social order should not be questioned. Even today, sixty years later, I feel at times that we are not free from this syndrome. Therefore the Church, the United States, and the Christian Democratic Party were expedient resources, even at the cost of prolonged national subalternity. Present 6

K. Vonnegut, Slaughterhouse-Five or The Children’s Crusade, New York: 1969; J. Hersey, Hiroshima, New York: 1946.

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governments still find it convenient to blame unpopular measures on some superior authority. When I arrived at the University of Rome as a student in 1959, it was still a stronghold of neo- and crypto-Fascists. As the capital city, with its concentration of bureaucracy, Rome was the part of the country that had most benefited from the Fascist regime. This was not typical of the rest of Italy, but the reality I came up against in the late 1950s. Although the majority of the student body did not take part in varsity politics, the Fascists and a dissident pro-Nazi splinter group held the democratically elected majority of the student parliament, while all the others – the Christian Democrats, the Socialists, the Communists, and the conservative Liberali, not to be confused with American liberals – could only hope for the recurrent feuds within the extreme right, in order to find some breathing space. Fortunately, the faculty was more varied than the politically motivated element of the student body. Of course there were tensions even within the anti-Fascist minority (the country as a whole was politically controlled by centrist coalitions led by the Christian Democratic Party); between those, like myself, who had demonstrated against the invasion of Hungary and the supporters of a Communist party – the Partito Comunista Italiano (PCI) – that waited twelve more years, until the subsequent invasion of Czechoslovakia, to renounce its allegiance to Moscow. But all in all, as we moved in and around the monumental marble buildings of the University of Rome, a constant reminder of a past that would not go away, it was from that past that we wanted to distance ourselves. If not to Moscow and to its local representatives, where did we look? Those of us who were politically aware and socially privileged – almost all those who could pursue a university degree in the 1950s and early 1960s in Italy were at least middle class – thought we did our duty as citizens by voting for the first time for one of the so-called democratic parties, the Christian Democrats and their allies. Yet the Church of Pius XII, even Eisenhower’s America, could hardly stir up the passion of Italians in their early twenties. The physical reconstruction of the country led by the Christian Democratic Party, while providing a majority of Italians with bread and reasonable hope for more, was nonetheless offensive to the natural and artistic beauty of the country and obviously tainted by corruption. What attracted me and many young Catholics were not the endlessly scheming Christian Democrats in power but the gust of fresh air produced by the election of John XXIII – Papa Giovanni, as we called him. As I moved from Rome to the Catholic University of Milan, attracted by its campus, full of freewheeling, freethinking leftwing Catholics, I

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happily joined a political and cultural circle committed to the Catholic trade union (Cisl) I was later to join, to a variety of socially active groups and intellectually relevant periodicals, and more rarely to the left wing of the Christian Democratic Party. In the background were the reformist papacy of John XXIII and the Archbishop of Milan, Giovanni Battista Montini, who would become Pope John’s successor. There were also Ettore Passerin d’Entrèves, professor of history and my future Italian mentor, who would teach me to disagree without attempting to veto divergent interpretations of past and present, and, indeed, Giuseppe Lazzati, charismatic editor of the local Catholic daily L’Italia (soon I was to write its foreign policy editorials), a distinguished scholar of early Christian literature, and former Resistance leader who also was one of the founding fathers of the Italian constitution. They all acted as progressively inspired, protective divinities of a different future. Yet, the hierarchically structured university had been conceived by its founder, the Franciscan psychologist Agostino Gemelli, to shield a future Catholic ruling class from the gradually all-encompassing Fascist state. To achieve this end, according to the order enforced by Padre Gemelli, the university had to be at least as authoritarian as the surrounding Fascist regime.7 Fifteen years after the fall of Fascism, this philosophy still translated itself into a sort of unctuous and strongly hierarchical fundamentalism. The scene was set for a silent but radical rebellion on the part of the students, especially those more exposed to these rulings while living in one of the residential colleges. No wonder that it later became one of the focal points of the 1968 student upheaval. The king of Cambodia, Norodom Sihanouk, used to say that one of his sons came home from the Sorbonne a confirmed Communist, whereas the other, a student of the University of Beijing, became a staunch supporter of Western capitalism. In our case it could not be either. What we were up against was a peculiar form of authoritarian Catholicism, in stark contrast even to the aggiornamento forespoken by Pope John, not so different from the inspiration currently offered by Pope Francis. The rebellious mood in the Catholic University took the form of a new demand for separation between Church and State, a growing unease when faced with the political capital accumulated by the Christian Democratic Party, and an equally growing resentment against the trappings of the Cold War as such, rather than the total allegiance to one or the other camp imposed upon and required by the 7

This is the conclusion that can be reached from reading Giorgio Rumi and other historians of this institution. See Storia dell’Università Cattolica del Sacro Cuore, vol. I, Milano: 2007.

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previous generation. Though some of us produced a prudently dissident Catholic periodical, Relazioni Sociali, others the more radical Questitalia (“la sinistra del Cardinale,” the Cardinal’s left, the latter would call us), major sources of our political culture were Il Mondo and L’Espresso, lay publications with a distinctly anticlerical slant, as well as the French daily Le Monde. We were more-or-less observant Catholics but resented anything that smacked of pure hierarchical authority within our own world. We believed in democracy and greater social justice, federalism, and a united Europe, with Third World sympathies, as an alternative to flat-out Western allegiance with American and indeed Soviet interference in the Italian political process. We hated nationalism as a remnant of Fascism but wanted self-government. Some of us were more realistically driven, like Romano Prodi, future prime minister; others socially committed to the Catholic trade unions and even, like myself, looking out for a longterm political perspective on the left with no concessions to the dominant political parties (the Christian Democratic Party and the PCI). We were all for the so-called opening to the left that included the reformist Socialist Party (PSI) in the government, but only the boldest among us were ready to vote for it – prudent progressives, sons and daughters (very few daughters) of the tranquillized 1950s who rarely demonstrated in the streets and did not even think of occupying public buildings (this was a few years before the fatal 1968), passionate readers of Hannah Arendt’s antitotalitarian analysis and Jacques Maritain’s firm distinction between religion and political engagement however religiously motivated. The politically less committed were a silent majority who had their future professions in mind. But most of us were inspired by Pope John and John F. Kennedy. The fact that Kennedy was to be the first Catholic who could become president of the United States was also relevant to our feelings. Kennedy was also the second president of the United States, after Woodrow Wilson, to become an icon in the most remote villages of rural and mountainous Italy, even making inroads in the Communist strongholds of Tuscany and Aemilia. But to me and my moderately rebellious friends he was something more: a new hope within that Western world that was our habitat, more as a fact than by choice the lesser of two evils in the context of a Cold War that seemed tailor-made to split Europe and our own country, while keeping it subservient. Wilson, Franklin D. Roosevelt, and, to some extent, Kennedy (as later Barack Obama) spoke a language that was better understood in Europe than in their own country (“Un Européen” Charles de Gaulle called Kennedy at his death) as I was about to find out, in the years spent in Cambridge, Massachusetts, as a

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graduate student in history. These presidents did not reject forms of American exceptionalism but in different ways projected it beyond recurrent European and indeed American nationalism, to outline a new world order. First and foremost, they represented values and institutions in stark contrast to the Soviet system and domination of Eastern Europe. For a while Kennedy made us forget the brutal power game played by the United States in Italy and many other countries, the McCarthy years, the frustrated hope for détente, even the halfhearted, failed invasion of Cuba. The Kennedy years, to me and many others at the time, were defined by the New Frontier, Peace Corps, Alliance for Progress, and Atlantic Partnership – even opening to the left in Italy as the White House accepted this change despite a reluctant State Department and an equally reluctant majority of the ruling Christian Democratic Party. “Kennedy has captured your imagination” was the disconsolate comment of Millicent Fenwick, a fervent Republican friend of the elder generation. Even after having overcome my crush for the New Frontier, I had embarked on a lifelong love affair with the institutions of a country that at the time I only knew from hearsay. An ideal pick for the Harkness Foundation – which was offering an American advanced education to “future leaders” (an expression we, the happy few, in a somewhat self-derogatory manner, recognized as an exemplary Americanism) in our respective countries – the beneficiaries were progressively inspired, but anti- or at least safely non-Communists. Perhaps by no coincidence, the Harkness program was subsequently limited to students from the Commonwealth, as it had originally been, when an increasing amount of Fellows came back to Europe as radical critics of the Vietnam War and U.S. foreign policy. In 1964 expectations were still high. On the spur of the Dallas murder, a tragedy for all of us, Lyndon Johnson’s Great Society meant the return of the New Deal commitment to social welfare which, as educated Europeans, we missed in the United States. In Washington I was privileged enough to meet William McChesney Martin, a longtime chair of the Federal Reserve, and the Bohlens (old family friends of my parents), as well as Francis Biddle, Jim Rowe Jr., Thomas Corcoran (“Tommy the Cork”), and other New Dealers, including Hubert Humphrey. They were mostly friends of Adlai Stevenson and Eleanor Roosevelt, who, in spite of grief for Kennedy’s death, felt more at home with the new president. Those of us who ventured to the Deep South, at some personal risk, with a New York or, even worse, Massachusetts license plate saw with their own eyes that Black America was on the move and that, in spite of recurring atrocities, sweeping civil rights legislation would eliminate Jim Crow from that part of the world,

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though racial problems remained unsolved. In the footsteps of Italo Calvino, our Roman smugness led us to believe that racism was exclusively American or South African, not having yet experimented with the consequences of immigration from the South in our own countries. The atmosphere at Harvard seemed to me consistently liberal, open-minded, and receptive to young people’s independent thought. All in all American institutions had resisted the onslaught of Communism in a manner consistent with the values of the Founding Fathers, guidelines for a federalist dream of a peaceful Europe that I shared with my friends at home.

3. how this book came to be It all started at a graduate seminar in 1965 on U.S. foreign policy in the 1920s – a seminar about nothing, according to then-prevailing historiographic wisdom, dominated by the concept of an all-encompassing isolationism – which was in itself further proof of Ernest May’s perceptiveness. Only later would I find some antidotes of this orthodoxy in the writings of historians that were not mainstream at the time. I was curious about American reactions to the advent of Fascism in my country. I became even more curious when I found out that those reactions, both in the media and in available diplomatic correspondence, were positive, with very few qualifications and exceptions, once ascertained that the coup d’état did not lead to further disorder, but to stability. This challenged my perception of liberal democracy and its relationship to similar values in other countries. A confirmed Wilsonian, I had not yet discovered the darker sides of American interventionism. Why, then, would the introduction of a dictatorship in one of Europe’s bigger countries, a former ally in a victorious world war, be good news to the New York Times as well as to the State Department? This, for me, was the big question my teachers did not answer but considered well worth pursuing. My initial paper was more descriptive than explanatory, but, after strong encouragement from authoritative and diverse sources, even contemporary witnesses (Walter Lippmann and Iris Origo, among others),8 it grew into my Italian thesis, a set of articles, and, after thirteen years of research, the book that has now been translated into English. The answer to the initial question required

8

“The subject is of great importance and interest, and I hope you will pursue it to the end,” Walter Lippmann wrote to me, February 25, 1965. For continuity between Wilsonism and subsequent republican policies, See V. Gandhi, “I limiti dell’ internationalismo Wilsoniano”, in Comunità, xxxv, n-83, pp.96–152.

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understanding events, interests, and culture on both sides of the Atlantic, even if the inquiry, in both its initial and subsequent forms, was conducted from the point of view of what I came to define as the hegemonic power. This was a definition that could not be taken for granted for that early phase of expansion of American financial interests in Europe (the subtitle of the Italian edition – The Origins of American Hegemony in Europe – has even recently been subject to criticism). Yet subsequent American leadership in Western Europe, the Marshall Plan, and indeed the vision of an integrated Europe in which Germany no longer was a potential threat to its neighbors, I perceived, was not only the outcome of a victorious war and a necessity dictated by the containment of the Soviet Union. It had deeper roots, mainly financial, in a previous period and was subsequently sanctioned by the Bretton Woods agreements. Nonetheless, the way Mussolini handled American views and interests, while reconciling them to the material as well as the rhetorical needs of his regime, could not be ignored. I have always found it ludicrous to claim, as some American diplomatic historians have, that U.S. foreign policy can be studied regardless of sources and comprehension of other countries concerned. Perhaps this is the historiographic reflection of a cultural unipolarism that explains some of the least successful American endeavors abroad. But for that first question, concerning the swift and enduring approval of the Mussolini coup, with a naiveté at the time totally unencumbered by any Marxist culture, I had no simple reply. My initial preoccupation was to avoid the generic pitfall of so-called diplomatic history, still rampant in Italy and elsewhere: an exclusive focus on diplomatic documents, what A. J. P. Taylor would define as “what a clerk writes to another clerk.” I realized from the very beginning that American diplomats reporting from Rome, though consistently more than positive, indeed enthusiastic, about the budding Fascist regime, were only a part of the explanation. Focusing mainly on the press led me to the right path. The editorials of the New York Times, rather than the Boston Evening Transcript – of course to be compared to many other sources – gave me the temperature of those in command rather than the obvious silliness of an ambassador. His name was Richard Washburn Child, future editor of the Saturday Evening Post, biographer, and staunch propagandist of Mussolini, flattered out of his mind by a prescient visit, in itself significant, by the dictator and deeply affected by a high-flying Roman aristocracy most ambassadors liked to socialize with. After all, newspapers had editors and owners, not devoid of interests and relationships beyond journalism, who liked to travel, accustomed to formulating a point of view toward any international

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development of a dimension that could not be ignored, in spite of the isolationist mood prevailing on the other side of the Atlantic. I gradually discovered that the American ambassador and his successors were not individual tenors but part of a chorus. And that chorus, with very few politically marginal discordant views – as proved by John Diggins’s accurate exploration of printed sources9 – only briefly ceased to sing after the murder of Giacomo Matteotti, a Social Democrat who turned out to be Mussolini’s bravest opponent in Parliament, which shook the regime in the mid-1920s. The music resumed until and beyond the invasion of Abyssinia in the mid-1930s. This clearly required a set of explanations not immediately available to a curious graduate student. That liberal naiveté perhaps served me well. When I paid a visit to Raffaele Mattioli,10 his question was “Are you a Marxist?” My answer was clearly in the negative, but also that, by reading documents produced by central banks and investment bankers rather than Marx and Engels, maybe I was about to become one. This answer seemed to satisfy the old man, who then helped me gain further access to otherwise-sealed banking archives. As of today I would put it the way my senior pupil, Piero Bairati, did: “Marxism is like my old car. I use it whenever I need it.” It was easy to find out that the key to American consensus regarding Fascism in Italy was the need for stability, stability at all costs, in Italy as well as in Europe as a whole, then and not only then. But what kind of stability? Confronted by a coup d’état of the extreme right, the first and only question asked by the papers and by the conventional wisdom they both reflected and guided was whether the March on Rome was a further chapter of the political instability, recurring violence, and, above all, social and industrial strife that had marked the Italian scene since the end of the war and that echoed in American minds as the Red Scare described by John Dos Passos. This was a natural preoccupation, also nourished by minor inconveniences that had been faced by even the well-endowed American tourist. The future slogan of Fascism making itself salonfähig, fit for good society from abroad, was already lurking around the corner: “Now the trains run on time!” 9

10

J.P. Diggins, Mussolini and Fascism: The View from America, Princeton: 1972; “Flirtation with Fascism: American Pragmatic Liberals and Mussolini’s Italy,” American Historical Review 71, no. 2 (1966), 487–506; “Mussolini and America: Hero-Worship, Charisma and the ‘Vulgar Talent,’” Historian 26, no. 4 (1967), 559–585. A culturally influential banker with a close relationship to Piero Sraffa, the Cambridge University economist, and first editor of Antonio Gramsci’s writings.

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All in all, the prevailing view of the American establishment (with the notable exception of Walter Lippmann and very few others) was similar to the one that brought their Italian counterparts to encourage the Fascist movement to take power. Preceding events in Italy, even if observed from a safe distance, had hardly been reassuring: endemic labor unrest, with the Bolshevik revolution in the background, and political instability caused by the introduction of a proportional electoral system dominated by the two structured parties. The Socialists and the Catholic Popolari, roughly representative of a social and democratic majority if allied, should not be allowed access to power. The only test to which Mussolini was submitted by the most influential opinion abroad (reactions of the conservative press in France and Britain were pretty similar), as well as at home, was the capacity to reestablish law and order, a reassuring context for sound business. A test he could pass with flying colors since, as a matter of fact, after the failure of the occupation of major factories in 1921, most of the violence and lawlessness had been produced by the movement of which he was the undisputed head. Also, according to prevailing opinion in the formerly allied countries, stability was worth the price of some bombastic but substantially innocuous nationalistic rhetoric for internal consumption. A further question: why this double standard? Why was a government seized by a show of force, unopposed by those legally in power, with a prime minister who, under a parliamentary constitution, received the support from a parliament under threat acceptable in Rome but not, according to prevailing standards, in Washington, Paris, or London? For two simple reasons, I was gradually to understand. Forces that represented the continuity of power in Italian government and society, traditional interlocutors of any other government, whether democratic or authoritarian – king, armed forces and public administration, business, Church and Free Masonry, with the former Liberali as their representatives in Parliament – had after all permitted if not publicly supported the coup d’état.11 Furthermore, all too often the assumption was that Italy could not be kept to the standards of more-advanced countries. Italians should be ruled with a firm hand. Or, as Winston Churchill politely put it, during a subsequent visit to Italy (January 1927): Different nations have different ways of doing the same thing. Expressions and words sometimes lead to errors. Values and formulations attributed to words often 11

Among others, see: G.G. Migone, “Giolitti e l’avvento del fascismo”, pp. 45–91, in E. Passerin d’ Entrèves, L’eta giolittiana e le origini del fascismo, Torino: 1963.

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have a different meaning from country to country. No political issue can be judged outside its atmosphere and context. Had I been Italian I am sure I would have been with you from beginning to end in your victorious struggle against the beastly appetites and passions of Leninism. But in Britain we have not yet had to face this danger in the same poisonous form. We have our peculiar way of doing things, but I do not have the least doubt that, in our struggle, we shall be able to strangle Communism.12

So much for the difference between democracy and dictatorship – a matter of words. According to the words of Churchill who, more and before anybody else, successfully inspired and led the war against the regime he had endorsed less than twenty years before. No wonder the British did not want his previous correspondence with Mussolini to fall into the wrong hands. For the same reasons, previously coddled dictators, once defeated, are better dead than defendants in a court of justice. Likewise, in 1945 Giuseppe Volpi di Misurata, after having been tortured by the Germans, was about to face a trial for his Fascist antecedents and personal gains. From a clinic, he wrote a letter to Thomas Lamont, the senior partner of J.P. Morgan, asking for testimony in his favor. Lamont who, in close association with Volpi – at the time minister of finance, had negotiated all the loans and coached Mussolini’s Italy through the settlement of the war debt and the stabilization of the currency – conveniently wrote Volpi off with a note on his letter stating that he thought better than to answer it.13 I found it all the more paradoxical that Italian antiFascists who had faced exile or long prison terms, and in many cases led the resistance movement against German occupation, should find themselves in the position of representing a vanquished state – which was a fact – but be expected to take individual responsibility for all the misdemeanors they had fought, in the face of victors who, up to and beyond the Abyssinian War, had been friendly and even supportive of the regime in Italy. Juvenile moralism on my part? Probably so, with a bit of hurt national pride. What struck me, reading Churchill’s words for the first time – so similar to statements of American office holders and opinion leaders – was the implicit condescension in the double standard, but also the transparent fear of any threat from the left, long before the Cold War, at the root of so many acts of appeasement toward authoritarian regimes at the other extreme of the political spectrum. Even on the part of Churchill to whom,

12

13

“Corriere della Sera,” January 21, 1927 (my translation, since the original text is in Italian as published by the Italian press). HUGSBA-TWL, Giuseppe Volpi di Misurata to Thomas W. Lamont.

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more than to any other single statesman, all Europeans owe so much, in terms of individual and collective freedom.

4. the heart of the matter Even at that time I was able to understand that the leaders of any large country with an important economy could not ignore their peers, regardless of the nature of their governments. Yet it did take the Roosevelt administration, after seventeen years, to establish diplomatic relations with the Soviet Union, whereas in October 1922 the secretary of state, Charles Evans Hughes, wasted no time in sending the formal, traditional message of greetings to Mussolini as the politically self-appointed prime minister of Italy. Why this difference? In going through reams of personal papers produced by diplomats during the Roosevelt administration, such as those of William Phillips and J. Pierrepont Moffat, I remember being struck by the isolation and ridicule suffered by William Dodd and George S. Messersmith. As documented by Robert Dallek, and more recently in literary form by Erik Larson,14 Dodd (ambassador to Germany, a historian by profession) and Messersmith (at first consul general in Berlin and subsequently minister in Vienna until the Anschluss) were ostracized for their lucid but “premature” analysis of the Nazi regime and where it would lead. These observations sat in stark contrast to the thinly veiled anti-Semitism of a privileged diplomatic and social ruling class, both in Europe and in the United States, and in politically diverse governments. Until Roosevelt’s Quarantine Speech (October 1937) any consistently critical attitude against the dictatorships the future allies would find themselves at war with was considered, to say the least, unprofessional and out of order by most career diplomats on both sides of the Atlantic. According to many of his colleagues, Dodd was a naive amateur, and even the secretary of state himself, Cordell Hull, was all too often written off as a doctrinaire and oldfashioned Southern Wilsonian. As Arnold Offner pointed out, the roots of appeasement were by no means confined to the European side of the Atlantic.15 David Schmitz, without taking the trouble to quote me or any other author or document in a language other than English, has 14

15

R. Dallek, Democrat and Diplomat: The Life of William E. Dodd, New York: 1968; E. Larson, The Garden of Beasts: Love, Terror and an American Family in Hitler’s Berlin, New York: 2011. A. A. Offner, American Appeasement: United States Foreign Policy and Germany, 1933– 1938, Cambridge, MA: 1969.

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confirmed my analysis in this regard and rightly linked the American attitude toward the Fascist dictatorship to a subsequent trend in the history of U.S. foreign policy.16 Even FDR would call a convenient dictator “an s.o.b., but our s.o.b.” And on at least one occasion he called Mussolini “that admirable Italian gentleman” but was otherwise far more receptive to any critical analysis of European dictatorships than were the professional diplomats in the State Department, before and during his administration. Unfortunately, there were never any Dodds or Messersmiths posted in Rome!17 During the 1920s, congeniality toward the Fascist regime was stretched to the point of quickly awakening the hope of finding in the upcoming Italian leadership an important European partner as well as a financial client. If this potential was written between the lines of the editorials in the mainstream press, it was obvious to the researcher who would delve into the papers of the Morgan Bank, its senior partner Thomas Lamont, and, subsequently, the main central banks, beginning with the crucial Federal Bank of New York to which the system delegated its foreign policies (its chairman, Benjamin Strong, also happened to be linked to the House of Morgan). This is because, in spite of the era’s prevailing historiographical orthodoxy – the varied arguments of William Appleman Williams, Walter La Feber, Carl Parrini, Stephen Schuker and Melvyn Leffler, as well as Charles S. Maier, were important exceptions – there was an American foreign policy, even in the isolationist 1920s. It was not only executed and discreetly supported by the government and its official diplomacy, but it was in fact taken over by the bankers who were filling a vacuum of power as justified by the small government, laissez faire ideology dominating the “Republican Twenties.” Even at first glance these sources opened up new venues of interpretation of the quest for European stability, as pursued in New York and Washington, of which Mussolini’s new Italy paradoxically became, if not a protagonist, a highly relevant recipient. All this amounted to a significant culture shock for me, a naive liberal, selectively pro-American Italian, fortunately also imbued with an antitotalitarian Hannah Arendt point of view. Yet I was reluctant to substitute 16

17

D. F. Schmitz, The United States and Right-Wing Dictatorships, New York: 2006. see p.48 of this book. Also see M. Martelli, Mussolini e l’America. Le relazioni italoìstatunitensi dal 1922 al 1941, Milano: 2006. C. Damiani, Mussolini e gli Stati Uniti (1922–1935), Bologna: 1980; R. Quartararo, I rapporti italo-americani durante il fascismo, Napoli: 1999. D. F. Schmitz, The United States and Fascist Italy, 1922–1940, Chapel Hill and London: 1988, pp. 135–190.

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my ideological glasses with another pair that seemed more suitable for my discoveries. There was another way out. The varied origins of the papers I was looking at led me to believe that it was necessary to bridge the gaps separating political, diplomatic, and cultural history from economic and even social sources. After all, reality past and present or, more specifically, power as it was structured, did not obey the laws of academic specialization. While diplomatic historians rarely bothered to look at documents and facts produced outside government, or consider statistical, political, and electoral constraints, even if relevant to the object of their investigations, economic historians mostly extracted from the past case studies to prove or disprove their economic theories, as I found out in a (to me) disappointing seminar on the monetary policies of the 1920s organized by Franco Modigliani at MIT. It was as if someone, in describing a baseball game, concentrated on the batting while ignoring the innings or vice versa. What private and central bankers tried to do in the 1920s, before being put back in their places by the Wall Street crash and the New Deal, was highly political, in a sense an impoverished substitute for the foreign policy pursued by the Wilson administration in the previous decade, no longer palatable to an isolationist public. Since the Republican administrations could not and would not explicitly respond to the new challenges of an increasingly hegemonic U.S. economy emerging from First World War as a socially stabilized creditor nation with an expanding industry, the bankers could and would do so. Or, as I put it in 1971, a foreign policy was . . . directly pursued by the bankers who had an interest in promoting loans and investments in Europe. In this framework the House of Morgan had an undisputed leadership role. Subsequently the Federal Reserve Bank of New York, at first in partnership, then substituting the Bank of England, promoted international monetary cooperation. The actors of these policies were all firmly convinced that European reconstruction was tightly linked to monetary stabilization. According to dogmatic thinking prevailing at the time, stabilization could only rest on a general return to gold.18

Russell Leffingwell – a former assistant secretary of the treasury in the Harding administration and the monetary expert among the Morgan partners – produced a plan that would see stabilization and the return to the gold exchange standard of the currencies of France, Belgium, and Italy. Though this did not happen, except in Italy, due to the opposition

18

G. G. Migone, “Aspetti internazionali della stabilizzazione della lira: il piano Leffingwell”, Problemi di storia nei rapporti tra Italia e Stati Uniti, Torino: 1971, p. 43.

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of the Banque de France, the plan outlined a strategy supported by the United Kingdom, Germany, and Italy.19 Its intent was very political, both in means and in ends. The earnings and commissions of the private bankers, who orchestrated the planning and to a great extent carried it out, almost came as an afterthought of the geopolitical power game they were playing. This was not a sordid money game the Nye Committee or any street-corner Marxist might imagine, nor only money for the sake of money, but money as a condition and consequence of access to power as such and, whenever necessary, the exercise of political power. It meant no more wars on the European continent. Stability was not only monetary, but also had to be social and military. Already after that world war, the reconstruction of a socially stabilized Europe, beyond Bolshevik urgings, was a natural field of expansion for redundant capital, of which there was plenty in the America of the 1920s. This was consistent with the kind of picture subsequently painted by Charles Maier’s Recasting Bourgeois Europe, which I defended in a lively discussion with Charles Kindleberger – one of the rare economic historians interested in the political outcome of finance – who accused both of us of reducing history to a bankers’ conspiracy. Of course neither of us thought it was.20 While the whole policy had an obviously class-oriented slant, the exalted role of the bankers on the American side was a consequence of the strictures of American isolationism: there was a vacuum of political power in contrast with the potentially enhanced role of the United States in European affairs. Somebody had to fill that vacuum. The rest of it was pretty much aboveboard, albeit conservative, diplomacy. A constructive attitude toward Germany during the 1920s was a reasonable if belated litmus test of cooperation to this end, on which the special relationship with the United Kingdom was founded, with révanchiste France cast in the role of the troublemaker. In all honesty, it was a policy that produced the Locarno treaty and the neutralization of war debt and reparations as factors of financial instability, through the Dawes and the Young plans. It was also the only important attempt to prop up the Weimar Republic as an alternative to what was to come, before it was swept away by the subsequent financial tsunami and the rise of the Third Reich. Yet, too little too late, with the American government conspicuously absent, thereafter. 19

20

Emile Moreau, Souvenirs d’un governeur de la Banque de France. Histoire de la stabilisation du Franc (1926–1928), Paris: 1954. Charles S. Maier, Recasting Bourgeois Europe, Cambridge, MA: 1975.

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5. the tail wagging the dog It was not difficult to understand how nicely Benito Mussolini’s needs fitted into this framework. To explore them was to discover a Mussolini very different from the one of the subservient and indeed brutal friendship with Hitler of the final years of Fascism.21 Even his first instructions to the embassy in Washington, a few days after having taken power, showed an acute understanding of the interests and sensitivities, strengths and weaknesses of his future American interlocutors, as well as an uncanny capacity of the professional journalist, that he also was, to manipulate them through flattery. The messages sent to the United States emphasized, first and foremost, Mussolini’s personal capacity to reestablish law and order, respect for existing relationships and treaties, and honoring debts in order to reestablish a normal flow of capital and commerce (particularly important from and to the United States). He carefully avoided sore subjects such as racist American immigration laws and any conflict with Germany, the pivot of belated American efforts to stabilize Europe. But why was the United States so crucial in Mussolini’s foreign policy to make all these efforts worthwhile, from the very beginning up until the Abyssinian War? The answer that gradually emerged from my research was more complex than originally expected. Not only badly needed financial resources were at stake, but also the consolidation of the regime that to a large extent depended on international acceptance and recognition, both political and financial. The means and resources of the new government were submitted to an acid test. Even a biased researcher could not ignore the succession of facts provided by the dictator, all obviously inspired by an understanding of American strength. All this was potentially hegemonic, but still confined to the realm of finance, which was the object of desire in Mussolini’s effort to consolidate the regime. In the twenties he had the obvious advantage of an administration in Washington with no territorial or colonial claims and with a clear mandate to stay clear of any direct involvement of the American government or Wilsonian ambition to arbitrate European disputes, with the notable exception of discouraging any conflict with Weimar Germany. Therefore, any outlet of nationalist tension – after all one of the motors of the Fascist quest for power – should be moderated, in order not to destabilize Europe and antagonize American opinion. Such a policy, I came to understand,

21

F. W. D. Deakin, The Brutal Friendship: Mussolini, Hitler and the Fall of Fascism, London and New York: 1962.

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was particularly Mussolinian from the very beginning and could only be developed by choosing the right representatives of Italian policy and finding the right interlocutors on the other side of the Atlantic; while most of his followers, Italian nationalists also embedded in the professional diplomatic ranks, were still stuck with their anti-Wilsonian feelings – “La Vittoria Tradita!” – a remnant of the frustrations of the Paris Peace Conference. If the anti-Socialist brutality of the movement had been essential for establishing a minority leadership in power, subsequently all the resources of the ruling class had to be used in order to consolidate it, both in Italy and abroad. To this end, the best and the brightest were at hand. Prince Gelasio Caetani, a distinguished war veteran and mining engineer who had spent years in the Colorado mines, was the ideal person to épater les bourgeois of Washington while also being able to speak to the feelings of the ordinary American. His appointment as ambassador in Washington was a small, early masterpiece, when telephones, air transport, and computers had not yet deflated the function of diplomacy, especially in distant capitals.22 Caetani’s second-in-command was the same Augusto Rosso who, as ambassador, would become the master organizer of the ItalianAmerican vote, when it was needed, to avoid American sanctions against the conquest of Abyssinia. It was the Volpis, the Pirellis, the Stringhers, the Beneduces, the Jungs – all important protagonists of public and private finance, well before the advent of Fascism – that Mussolini sent to Washington to clear the path, by reaching a debt settlement the French had refused to face, for an impressive series of public and private loans on the American market. To truly succeed, however, something more than the financial resources of a leading bank was needed. It was the political savvy and the corresponding network of connections which also came with the Morgan partners that coached their Fascist counterparts, all too ready to learn, through the pitfalls of Washington politics and, even more important, the selected kind of information (not propaganda!) to be conveyed to the American public through a supposedly neutral mainstream press. At the right moment, Dwight Morrow, another Morgan partner, was trotted out to overcome Herbert Hoover’s resistance to a lenient debt settlement by dangling the Italian-American vote in front of his presidential ambitions. 22

G. G. Migone, Il regime fascista e le comunità italo-americane: la missione di Gelasio Caetani (1922–1925), in Migone, Problemi di storia nei rapporti tra Italia e Stati Uniti, Torino: 1971, p. 25.

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But it was up to Lamont himself, the senior partner of J.P. Morgan & Co. as well as its main strategist for Europe, to issue a stern warning to their Italian client, when it became necessary, not to trespass the sacred rule that excluded any friction with Germany such as indulging in polemics over South Tyrol, the main bone of contention between Italian and German nationalists.23 The final plum, from Mussolini’s as well as from J.P. Morgan & Co.’s point of view, was the stabilization and the return of the lira to the gold exchange standard. J. P. Morgan, Jr., personally swept aside the halfhearted resistance of Montagu Norman, the legendary governor of the Bank of England. Before giving in, and after having lucidly assessed American superior strength, Norman apologized to Morgan for being “too liberal” in his reluctance to believe in the required autonomy of the Banca d’Italia in its dealings with the Fascist government.24 Here again political expediency, as formulated by American bankers recognized as new hegemons by Norman, triumphed even over financial dogma. Meanwhile, parliaments, indeed governments, were unaware of what was going on, or chose to look away, while ignoring the broader political issue. The stabilization of the lira, which took place in 1927, became the international stabilization of the regime, right up to its defeat by those who had, to a large extent, consolidated it. Was this a lack of strategic thinking? It can be so stated without the risk of any anachronism. After all, the ultraorthodox Montagu Norman correctly sensed the nature of the Italian government as the weak spot of the whole scheme. But he had to bow to the superior strength of American finance even in the 1920s. In fact, Mussolini was not the only political Fascist to keep relations with the United States running for more than a decade. Dino Grandi, the undersecretary of state and subsequently foreign minister, described himself to me during an eight-hour interview as “quel pizzico di politica,” of political flair that the war debt delegation required. Volpi, the minister of finance who headed it, was himself a businessman recruited by Mussolini: more obviously so, Pirelli, Beneduce, and Alberti. Yet, by no coincidence, he was convinced that the Fascisti, once in power, had to rely heavily on the support, the skills as well as the international

23

24

HUGBA-TWL, bk. 190, fol. 19, Thomas W. Lamont to Giovanni Fummi, New York, March 4, 1926. BE, bk. Italy, sec. 62, Montagu Norman to J. P. Morgan, Jr., London, November 19, 1926.

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credibility of the traditional establishment. Grandi was also a quick learner. After having become, at age 34, the youngest foreign minister in the history of Italy, he remained, till the bitter end, the staunchest ally of the United States in European affairs, whether it be disarmament, finance, or ending the war. Indeed, it was he who took a leading role in bringing down the regime on July 25, 1943. He developed a personal relationship with his American counterpart, Henry Stimson, that lasted long beyond the economic crisis and the breakup of economic interdependence as sanctioned by the outcome of the London Conference of 1933. But it was the Abyssinian War that, somewhat surprisingly, became the crowning event, but also the turning point, in the relationship between the United States and Fascist Italy. This is not to say that Roosevelt had any Fascist sympathies – quite the opposite. The economic engineering of the 1930s that favored some mutual intellectual interests between some New Dealers and Italian technocrats – notably Rexford Tugwell, and the founders of IRI, the Banca Nazionale del Lavoro in Italy – never spilled over into the political realm, as analyzed by Maurizio Vaudagna’s study.25 But Roosevelt, who should be considered a closet Wilsonian, given his political origins and cosmopolitan breeding, also had an all too obvious sense of political expediency. When it got to the point of deciding whether the U.S. government was going to conform to the League of Nations’ sanctions that deprived Mussolini of the oil and trucks he absolutely needed for his belated colonial adventure, Roosevelt confined his policy to “moral sanctions.” In the context of a crucial election year, 1936, with not only the president’s future but with many Democratic members of Congress on the firingline, it was politically expedient to be on the side of the formidable coalition of interests that favored the breaking of sanctions on the part of the American government and giving Mussolini what he needed to win what was to be the last classical colonial war. For disparate reasons, not only the industries directly concerned (oil and transport) but also such diverse forces as the Catholic Church, dominated by Irish-American hierarchy, and the U.S. Navy a constant rival of the British, were in favor of giving Mussolini what was not his due in terms of international law and organization, ironically to a large extent conceived in the United States. But the final and probably decisive push came from the concert of Italian-American organizations, strongly pro-Fascist and carefully but discreetly organized 25

M. Vaudagna, Corporativismo e New Deal. Integrazione e conflitto sociale negli Stati Uniti (1933–1941), Torino: 1981.

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by the Italian embassy and consulates, which bombarded with thousands upon thousands of letters the relevant members of Congress eager to be reelected. At that point, the reluctant president caved in to domestic realities. Meanwhile, Adolf Hitler was watching closely what was to become the first major act of appeasement by the democracies. If even the militarily shaky Italians would not be stopped, what could the German government achieve, with its rapidly growing military might?26

6. as of today Of course it was not only research that pushed me further left of center at the time. Many things happened in Italy and elsewhere in the late ’60s. Martin Luther King Jr. and Bobby Kennedy were assassinated. The Vietnam War made me feel like most midwestern students who filled Washington streets during the moratoriums starting in 1969: latecomers radicalized by Lyndon Johnson’s surges and Richard Nixon’s homicidal bombings in hot pursuit of a “decent interval” that never materialized. During those summers I could and did walk straight out of the National Archives to join the demonstrations taking place on Pennsylvania Avenue or the sit-downs between the FBI and the Department of Justice. In those same years I was deeply committed to the student and working-class movements, particularly intense in Torino, where I earned my living. The PCI would not fully represent these movements, convinced as it was, perhaps rightly so, that any attempt to violate the Cold War rules – the conventio ad excludendum of the left from the Italian government – if not in the form of a coalition with the Christian Democratic Party, would lead to a Santiago scenario. Some of that came anyhow in the diluted shape of bombs and terrorism, first black then red, conveniently stabilizing the status quo ante, the Christian Democrats with lesser allies remaining in power, without support from the PCI, and Italy confirmed as a sort of Bulgaria of NATO (to use Gianni Baget-Bozzo’s flippant definition), with some Middle Eastern infidelities, but with an enduring commitment to European federalism that I totally shared. All this in an effort to reconcile detached scholarship, applied to the reconstruction of a not-so-distant past with present militancy. Yet, as I read through the translation of the Introduction of this volume, as it stands in the English edition, I cannot but notice that it is the expression of a

26

B. Harris, Jr., The United States and the Italo-Ethiopian Crisis, Redwood City, CA: 1964.

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prevailing political atmosphere different from when I wrote the rest of the book somewhat later. By 1980, the upheaval of the 1970s had failed and it was time to return to a less loaded choice of words if not to diverse perspectives. I said I would not use the word imperialism to describe American foreign policy, not noticing that, in writing the Introduction, I had done so. During the George W. Bush administration, that word became fashionable once more – briefly so, but in an appreciative sense. A militant viewpoint is similar to intense illumination: the object it hits is unsparingly exposed and adds clairvoyance to those who take advantage of it, but the risk is that, outside its range, the dark appears even darker. Here the love–hate relationship advocated by H. Stuart Hughes is indispensable. To be adequately understood, to become a part of the greater knowledge of the past, even Mussolini’s and Thomas Lamont’s tactics have to be considered objects of grudging admiration. But what can the story I am telling in English for the first time mean to those who read it a good thirty years from the time it was published in Italy, almost fifty from when first it was planned. To borrow the answer my son Sebastiano, a painter, invariably gives when somebody asks for an interpretation of what he has painted: the picture is as you see it, what you want it to be – no more, no less. This is ultimately true, also in the case of this and other books. With an effort, in this preface, to reconstruct what motivated the painter, with an equally determined effort to keep it clear of any conscious manipulation (of the unconscious by definition I cannot be called to account for). Any contemporary reader of this book will find a certain amount of déjà vu in the present, though historical analogies are to be taken con le pinze, with great circumspection, particularly now that anachronisms have become part of the daily bread we are served. There are in the sequence of events described elements I might signal to the attention of those who read or look at the picture I have tried to paint – or at least further questions suggested by today’s problems and challenges. Conspiracies, both real and supposed or even invented, have always existed. Some raise important moral and judicial issues, but the ogrehistorian, as well as the periclean statesman, is more interested in the consequences of ascertained facts. As Cicero said, “Cui prodest, scelus,” though not necessarily “is fecit.” He who benefits from an act is not automatically its author, Cicero not withstanding. What always counts, in the reconstruction of the past, in order to understand the present, is the sequence of events. Eric Foner said in a recent debate that surprises occur in history though he might agree they are preceded by vestiges difficult, sometimes impossible, to perceive by contemporaries lacking the benefit

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of hindsight. What is it that leads democratic governments to accept, indeed support, autocratic governments, even to the point of having to wage war against them in a not-so-distant future? Is this still happening? What role do those permanently in power, without a democratic mandate, play? Do they tolerate democratic governments only in as far as they provide the desirable stability? In the case of Italy, is there any analogy in the quest, on the part of established Italian interests, of regimes as different as Mussolini’s and more contemporary ones, that have in common the leadership of a vir novus dicendi peritus, a single individual, unencumbered by the past, with means of communication with the populace, as a safeguard against forces alien to those interests? Or is there an inherent and persistent weakness in the body politic of Italy, the contrast between an industrialized North and a less developed South, that makes it more vulnerable than other Western countries to such occurrences? Indeed, is it a political and social laboratory, ominous for the future of us all? Can it all be ascribed to the lack of institutional tradition of a country, heir to ancient civilizations, with a relatively recent nationhood, but still struggling to achieve self-government in the face of external pressures? Is there a void of political power, in both cases, on both sides of the Atlantic, that favors such developments? Does such a void more easily occur at the end of wars, whether hot or cold, that makes governments less relevant and requires new forms of global governance not to be easily found? Do moneyed interests take advantage of such a void of power in order to acquire greater political power? What role does the culture of elites, translated into conventional wisdom, play in translating vested interest into policies? What, indeed, are the limitations of democratic, institutional power, confronted by an enduring, complex power structure governed by the hubris of greed? Und so weiter. G. G. M. Katokoufounissi, August 2014

Preface to the Italian Edition: Sources, words, and debts

This book is one of the results of research I conducted for years and which became both the vehicle for and the product of my formation. To briefly explain its origins allows me to define its nature and intent, and also to thank, most sincerely and directly, those who encouraged and facilitated it. The beginning was accidental. In the autumn of 1964 I attended, at Harvard University, one of the seminars that Ernest May annually dedicated to a period of U.S. foreign policy. That year the subject he had chosen was the 1920s, and, perhaps due to my nationality, it fell to me to write a paper on the attitudes of the Republican administration and the American press toward the rise of Fascism. I discovered that the reactions were not those that, with my point of view of the time, I had expected from the nation formed by its inheritance of a great liberal revolution toward the birth of the first Fascist state. My curiosity was naturally awakened. I was encouraged to pursue this question by May and William Langer, as well as by several Italian friends, foremost Ettore Passerin d’ Entrèves, the mentor who convinced me to turn the paper into a thesis at the Catholic University of Milano. As a first step I began a consultation, which was to last for years, of the endless but extremely well-ordered diplomatic papers at the National Archives in Washington (where I received invaluable help from Mrs. Dowling and Mrs. Nicastro, who, not without a certain severity, presided over the section of the archives where I worked most) and the numerous private collections housed in various American libraries (among which were most importantly the Franklin D. Roosevelt Library and the

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Library of Congress, where I was extended the assistance of Horace Hilb and the friendship of Sammy Washington, both of whom helped me view many daily newspapers of the era). John Phillips and John Callaway were also of great assistance in this treasure hunt across the United States. Nonetheless, the collected judgments and reactions of diplomats and journalists were not sufficiently illuminating to allow me to understand the motivations, not only cultural and ideological (which Diggins had already dealt with very well, if perhaps with excessive indulgence) but political and material, that generated them. Even without many resources to guide me, I realized quickly that the specific question of the American stance toward Fascism was inextricable from a double set of other problems that demanded more dimension and complexity from the work than I had imagined. First of all, American policy toward any single European country cannot be taken out of the context of the overall relations between Europe and America. There was no policy of stabilization toward Italy per se, but instead, as Charles Maier has argued, a policy of European stabilization within which Italy’s situation was only one aspect. There was no policy of American neutrality with regard to the Italian occupation of Ethiopia, but rather the more general question of America’s stance with regard to the various conflicts and crises (among which was Ethiopia) that led to the Second World War. And so on. In this larger context I had to reconstruct a web of material and political connections, as well as the ideological, propagandistic, and cultural exchanges, which extended far beyond diplomatic relations, between the two countries. This meant considering the world of business, cultural institutions, emigration, tourism, and significant individuals from the two countries in question. It was this multiplicity of connections that became the pivot point around which the research revolved, although I was forced at times to make choices that may now appear reductive. I am sorry to have deprived readers of several “pearls” I discovered, especially in terms of the opinions of American businessmen concerning the regime; these constitute the ideological background of important relations, but the choice was justified by the work already completed by Diggins on the same matter. I am more sorry not to have treated all those forms of influence, indirect but weighty, that the culture of American industry exerted on Italian society, including during the Fascist period and especially with regard to businessmen, above all in the organization of labor. Again in this case I am partially justified by the work other scholars – such as Giulio Sapelli, Maurizio Vaudagna, and Sandra Lorini – have already done on the topic. In the framework I set for myself it was necessary, at least in this phase, to limit the field of

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investigation to those consciously and willfully built relationships, in an effort to reconstruct them on the basis of the documents themselves. It was also necessary to analyze who were the protagonists in this narrative; what interests, opinions, and sentiments motivated them; and which political faction and social class they belonged to (even though a social history of the governing classes still needs to be written). The teachings of many historians (from Bloch to Salvemini) who have theorized or practiced this concrete method have been powerfully in my mind. At this point it is worth the trouble to explain the methodology a bit further. If we exclude a few intuitive insights from contemporaries who themselves lived the history I try to reconstruct here (again, Gaetano Salvemini comes immediately to mind, but also Antonio Gramsci, who commented on this topic that one understands a dependent country by studying its metropole’s policy toward it), until very recently conventional wisdom held that the United States (and its major allies) had little or nothing to do with Fascist Italy until the moment when they came to defeat it militarily. Or there was the argument, which crystallized during the war, that the history between the two nations was one not of conflict but of reciprocal diffidence going back to the origins of a regime totally hostile to liberal democracy – in the name of which, to a great extent, both world wars were fought. It happened, in this way, that many members of Italian anti-Fascism – after suffering prison, exile, and political and social ostracism during the twenty years of the regime – chose (or felt constrained to choose) to represent their country as completely defeated by men they chose (or felt constrained to choose) to represent as victors, when the truth was that those men and that country had been collaborators for years. That version of history, so freighted with political and idealistic significance, and still so relevant to contemporary politics, cannot be revised through prejudices or ideological affirmations. I had to inductively reconstruct the judgments, relationships, attitudes, and decisions of that time using hard evidence; I had to analyze that overabundance of sources whose existence is the blessing and the curse of the contemporary historian. While theory may be necessary, it could not be my bread and butter, at least not in that phase of the research; theorizing had to be saved for a later work, or indeed to become the task of others. I even imposed a basic limit on my terminology, for example, avoiding the vocabulary of imperialism, in order not to enter into theoretical controversies. The problem of theory must be confronted eventually, but it cannot create shortcuts in the primary task of careful analysis of the evidence. Nonetheless, in the context of the study of the relationship between Italy and the ascendant great power, I realized that I had to make

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a further choice: to focus my attention first of all upon the material aspect of those relations, particularly on the financial. Again, this was not a case of a priori judgment (it was perhaps my good fortune at the beginning of this research that I was not yet even capable of making such a judgment); rather it was an acquisition made through the inductive nature of the analysis required by the sources. Even to one who was not an economist by training or profession, it was quickly clear that many of the opinions and political designs of the period were rooted in the need for the expansion of American finance and business, which had grown enormously in the course of the First World War. Corresponding to this necessity was Fascist Italy’s need to secure funding and, above all, support for its own policy of internal stabilization in the context of the global system being created in those years under the guidance of American bankers and officials (men whose guidance was constrained, however, by the prudence dictated by the political climate in the wake of the failure to ratify the Treaty of Versailles). Similarly, there was no way to offer a comprehensive interpretation of the economic crisis in the context of this research. And yet the specific attempts of Hoover and his Italian interlocutors to confront the crisis – without abandoning the continuity of action recommended to them by their experience of the 1920s – suggested some important conclusions to be made about the effects of the Great Depression on international relations. The specific case of Italy and the United States present a very telling example. Maurizio Vaudagna has dedicated serious study to the similar problems and behaviors that developed in a later period, during the Roosevelt administration and the time of Fascist corporativism (without, however, losing sight of the fundamental differences separating those two worlds). For my own purposes it was important to re-create the focal points of a relationship that was headed toward dissolution, especially as a result of the rise of National Socialism in Germany, and the change of Mussolini’s foreign policy orientation once all the material conditions were met. At the same time, the question of oil – which illustrates the always-vital problem of the supply of raw materials – brought to light not only the ongoing influence of an existing positive image of Fascist Italy, but also the presence of interests, ethnic bonds, and biases that together nourished that political and historiographical constellation generally labeled isolationism and which is too often relegated to the status of a mere rhetorical flourish of American agrarian populism. This investigative framework required a further set of documentary sources, not as easily consulted, and a further round of advice,

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encouragement, and comment. Walter Lippmann pushed me to explore a trail he had previously blazed as a contemporary critic of those events I was called to re-create. William McChesney Martin was able to confirm, from a different vantage point, the importance of that financial aspect on which I was focused, and to authorize my access, with the help of Stephen V. O. Clarke and Evelyne Knowlton, to the archives of the Federal Reserve Bank of New York. He also suggested that I study more fully the papers of Thomas W. Lamont at the Baker Library of Harvard University, which illustrate the central role of the Morgan Bank in American life – not only economic life – and in relations with Fascist Italy. His colleagues Lord Cobbold and Guido Carli (with their junior colleagues Barnes, Cantuti, Badaloni, Pascucci, and Valente) allowed me to enlarge my research to the archives of the Bank of England and the Banca d’Italia. But documents do not suffice. We must also exchange ideas and information among friends and colleagues. Renato Mori not only facilitated my research in the archives of the Ministero degli esteri, which he directed at that time, but initiated me in the intricacies of Fascist foreign policy, which I could not make the principal object or expertise of my study, though I had no choice but to reckon with it. I owe Giorgio Mori (who was the first to introduce the themes at the center of this book into Italian historiography) and Valerio Castronuovo for similar aid in the terrain of Fascist political economy. Friends such as Guido Quazza, Nicola Tranfaglia, Marco Fini, and Gian Piero Brega guided me, encouraged me, and often urged me on in the most difficult phase of my work. Protagonists of the events narrated in this work gave me information and commented on my ideas. This is most true of Dino Grandi, but also of William Phillips, James Clement Dunn, Alberto Rossi-Longhi, Leonardo Vitetti, Andrea Ferrero, Vincenzo Fagiuoli, and Bartolomeo Migone, Sr. I am grateful to Leopoldo Pirelli, Pietro de’ Stefani, and Luisa Fummi for letting me consult their fathers’ archives, as I am to Hubert and Lelia Howard, who allowed me access to the papers of Gelasio Caetani. It would be difficult to list all the things Iris Origo has tried to teach me about writing. I hope she will not think that she completely wasted her time. I will spare readers the details of the various phases this book has gone through, even after my research was done. It is enough here to note that it lays no claim to comprehensive and organic coverage of American policy toward Italy. Rather, I have tried to concentrate my attention on a few fundamental focal points, keeping in mind that which has already been and will in the future be published on the topic. For example, it has seemed opportune to delve into the particulars of the attempts to consolidate war

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debts, until now an untouched topic, rather than to go into detail about the stabilization of the lira, which I have written about elsewhere. In general I have tried to avoid abstract terminology, generic labels, or overly specific jargon. In some cases I have not succeeded. So I would like to specify that I use the names Italy, France, and so on only in order to indicate a continual political behavior by the governments of the state in question. Like many other students of the history of international foreign relations, I have had to fall back on the expression “public opinion,” especially in the case of the United States and Great Britain. It could require an entire volume to define this phrase – and there have been those who have tried to do so – but I am forced, for various reasons, to limit myself to the clarification that by public opinion I mean those sectors of the public that, through newspapers and other media, receive information and occasionally express opinions about the foreign policy of their country. More easily understood, for its universal definition, is the expression “ruling class” [originally classe dirigente in Italian – trans.]. In my usage, this indicates those who occupy positions of power such that they are able to guide or influence those choices that determine the political, economic, and social life of their country. With regard to the concept of isolationism, one may claim that the entire book – but particularly the Introduction, Chapter 4, and the Conclusion – is dedicated to clarifying its meaning. Last, I have used the term “hegemony,” which appears even in the book’s title, to indicate a relationship of dependence, which, as defined by Charles Maier, is consented to, at least by that governing class that is dependent. The search for the origins of that hegemony, which reaches its fullest form after the Second World War, is the subject of this book. Even though we may be pushed in a thousand ways to work individually, some of us struggle to fight this private war with the support of those contexts and communities to which we nonetheless belong. Thus, the ordinary dedication of my colleagues in the Comitato di storia americana (first among them its founder Giorgio Spini) was of great help to me in the course of this research, as were the many informal conversations with my friends (two in particular, Dora Marucco and Achille Erba) in the Facolta’ di scienze politiche in Turin. They helped me appreciate the stimulus of other disciplines, methodologies, and ways of thinking. Finally, Piero Bairati, Maurizio Vaudagna, Aldo Lanza, Nadia Venturini, Giampaolo Pavani, Vera Gandi, Federico Romero, Sergio Ciccolari Micaldi, Paola Elia, Maddalena Tirabassi, and Pino Conte shared with me the intense work and rewards that went along with this research. My gratitude to Concetta Fiorenti, Daniela Garavello, and Signora Riassetto, who dealt

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with some of the most unpleasant aspects of the project. Pia Moltoni prepared the index, and Loris Calzini contributed decisively to the correction of the text. Contrary to the mostly Anglo-Saxon tradition, I believe it worthwhile to exclude one’s private sentiments from this kind of preface. The disproportion between one’s own debts in this sphere and that which can be expressed by a simple thanks on paper is too obvious. Still, I would like to make an exception, or rather two: this book is dedicated to my father Bartolomeo and to my son Bartolomeo. In a certain sense, they represent what made it possible and what may follow from it. G. G. M. Torino, August 1979

post script For some mysterious reason, when I wrote this Introduction to the Italian edition, I omitted to acknowledge some of my most relevant debts of gratitude. I seize this occasion to make amends. Without Luciana Bertello’s capacity to organize a constantly growing archive, now open to other scholars at the Fondazione Einaudi of Torino, I would probably have lost my way. Also, without the support of Inge Feltrinelli as well as Gian Piero Brega’s and Giacomo Lenzini’s guidance at Feltrinelli Editore, this book would not have seen light in its present form. This also goes for the version in the English language, identical to the Italian except for the Preface. Had not Frank Smith decided so, with Eric Crahan and, last but not least, Debbie Gershenowitz following in his footsteps, this book would not be in the hands of the reader. Had they not found a person with the specific competence and scholarly clout of Molly Tambor, with whom I am happy to have established a “colleague to colleague” relationship, it might have been “lost in translation.” In addition, there is the varied support for the project I received from colleagues such as Giuseppe Berta, David Ellwood, Giovanni Levi, James Miller, Nadia Venturini, and, at an earlier stage, Stephen Schuker. I also want to thank Francesca Somenzari, who prepared the index. To reread oneself after thirty-five years it quite an ordeal. Most of it seems obvious, at the risk of being obsolete, the better part unachievable with waning forces at one’s disposal. Be that as it may, this state of mind is also reflected in the time and energy I had to muster in writing the new part, the Preface to the present edition. In so doing, I am grateful to Donata

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Origo, who once more tried to improve my faltering English; to Debbie, who also edited this part; and to Vicky DeGrazia, Nadia Venturini, and Luigi Guarna, who gave me sound advice, some of which I did not follow, thus absolving them and everybody else from responsibility for the shortcomings of the final product. I am also grateful for the impeccably professional support offered by Philip Alexander as project manager and by Lois Tardio as copy editor of the final version of this book. Finally, I owe the credit to my wife, Anna Viacava, if I have been at all successful in sorting out the electronic as well as emotional obstacles the text has encountered on its way. This English as well as the original edition is and remains dedicated to Bartolomeo, my father, and to Bartolomeo, my eldest son, who shared it all in different ways. So did Mason Hammond to whom remains my loving memory. I gratefully acknowledge the financial support of the Department of History, University of Torino, SEPS of Bologna, as well as the selfcontained wisdom with which Agnese Incisa has supported the whole enterprise. Katokoufounissi, August 2014

Translator’s Preface

Gli Stati Uniti e il fascismo. Alle origini dell’egemonia americana in Italia was originally published in Italian in 1980 and has since become a fairly definitive text on the topic of the international relations between Italy and the United States in the interwar years – and by extension an economic and political history of Europe and the United States in the same period. It contains some powerful and surprising arguments about the Fascist regime and how it was supported and stabilized in the international arena as well as discussion of the true origins of America’s rise to hegemonic global power in the twentieth century. Cambridge University Press has agreed to translate and publish it in English as a way of introducing Anglophone readers to a “classic,” and I have had the privilege and the challenge of serving as the translator. The classic status of the book, its familiarity to so many Italian scholars, and its potential usefulness to English-language readers have both humbled and spurred me on in this effort. The book bases itself very extensively on primary archival sources, many from diplomacy and international relations, but also and perhaps more significantly on economic and financial records, particularly a fascinating collection of letters and reports exchanged among the partners and employees of the J.P. Morgan banking house. As I worked through the text, I came to believe that this combination of source bases and therefore of historical disciplines constituted perhaps Gian Giacomo Migone’s most important contribution. The book is not based on a simplistic Marxist argument that economic interest drives historical change and conflict, but rather on the insight that economics is a political, and cultural, exchange and that politicians – and citizens – who abandon official intervention and participation leave the financiers and bankers and businesspeople to conduct xlv

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American foreign relations themselves. By the late 1930s, American politicians had little room left to maneuver in the face of the rising Fascist threat and, as Migone argues, few reasons not to approach the problem with the same combination of economic instruments and social and ideological formative motivations that they had been operating with since the end of the First World War. It is not a complaint or excuse, but an experience of translators so common as to have become a cliché: tradurre è tradire, to translate is to betray. In this case the difficulty had a further layer, in that our goal was not translating only the meaning of a different language, but the language of a different time, in the life of the author and in the norms of our discipline. In choosing to translate the original text rather than to issue a new edition in English, the decision was made on the side of staying as faithful as possible to its vocabulary and forms of expression, but I have made some attempts to neutralize or update terms that either never carried the same connotations in English or no longer do in either language. Readers should note in particular the translation choices made regarding a few key terms. In the case of the word hegemony, which could hardly be avoided because it is in the book’s original title, I have used it when the context was truly the Gramscian theoretical sense but in many other places have instead translated it as “dominance” when that seemed to fulfill the necessary meaning and the more theoretical term might have brought along too much political baggage. In the original text, Migone made use of the term classe dirigente; in English today the Marxist “ruling class” is just too blunt an instrument for the diverse coalition of elite families, groups, and interests that controlled a great deal of the decision-making power in distinct but overlapping arenas of business and industry, finance, and government and international relations. The author is actually quite careful in distinguishing these differing spheres and how they interacted; so I have variously rendered the original as “governing classes,” “elites,” or even “business leaders” and so on according to context. However, what may have been lost in that decision is the author’s clear sense that there was a unifying class background and identity among these various historical actors that did have causal significance. I hope I have not obscured that argument. As a corollary, terminology such as classe operaia, movimento operaio, and so on has usually been rendered according to context as either “workers” or “organized labor,” as opposed to “working class” or even the extreme “proletariat” to reflect the fact that the American labor movement generally was not and is not discussed in terminology as influenced

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by Marxism as has been the case in Europe. In Chapter 1, I have perhaps been over-literal in using restorationism in connection with the conservatism and/or the reactionary nature of Fascism; but it is my sense that this was meant in the original text as historically specific vocabulary, and I chose to retain it. The capitalization of the word Fascism was also my choice, when it refers to the specific Italian regime in power from 1922 to 1943 that called itself by this name; I left it uncapitalized when the meaning referred to the political science category of generic fascism that may apply to more than one regime or movement in more than one historical period. I have left a very few words, such as squadristi, the paramilitary enforcers known also as Blackshirts, in the original Italian, adding a short translator’s note at the moment of their first usage to explain the term but believing, again, that certain terms are close to being the proper names of historically specific groups, events, and actors in any language. Finally, the retrieval of the original words of the English-language sources has been solved in a dual way: I would like to thank the two research assistants, Luigi Guarna in Italy and Grace Delmolino in the United States, who tracked down as many relevant quotations as they could. Where this was no longer possible, author and translator have collaborated to paraphrase rather than translate and risk misappropriations. Despite the classic relevance of the book to explaining the period it takes as its explicit topic, I believe it has a new relevance that also makes its translation important as today’s Europe becomes ever more enmeshed in the ongoing fallout from another frightening economic crisis and the effects of globalization. Today’s America cannot be allowed to disregard the fact that its global economic involvement will inevitably carry political and social effects, and again raise the issue of intervention in Europe and the rest of the world. Is the rise of reactionary authoritarian political movements still a possible outcome of such circumstances? Neither scholars nor the more general public should ignore the question. While most professional historians scorn the saying that those who ignore history are doomed to repeat it, certainly no one would deny that it is our job to discern causality. It is no coincidence that Italy was a bellwether and test case in the 1920s and 1930s; it has a long history as a “laboratory of politics,” and today this is still true. As an object of study and historical argument, the book combines both “classic” and immediate relevance. I wish to thank Cambridge University Press for this opportunity to spend a long time immersed in an important historical investigation. My immense gratitude goes to Gian Giacomo Migone for so generously collaborating with me and sharing his thoughts and suggestions – and

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corrections! It can be so hard for writers to restrain their natural possessiveness and protectiveness of their own prose, but he encouraged this junior scholar to exercise my own historical judgment, with grace and generosity. I learned a great deal in getting to know this book; I have been provoked to new thoughts on the history of Fascism in Italy and the history of the United States of America in Europe; my hope is that I have made it possible for all his new readers to have that experience too. Molly Tambor New York, February 2013

introduction The Origins of American Hegemony in Europe*

1. american economic power after the first world war Let us focus on the great turning point in global power relations that the First World War accelerated. The American GNP was $33 billion in 1914, $45 billion in 1916, and $61 billion in 1918, and reached $72 billion in 1920. In other words, the national product had doubled from the effect of wartime production. The Industrial Revolution, as is known, had reached the United States later than it had the most industrialized countries of Europe. And yet the process of growth, which the war gave a decisive push, was of such proportions that when the crash occurred in 1929, the United States national product was greater than those of Great Britain, Germany, France, Canada, Japan, and seventeen other states put together. Equally important was the degree to which the American commercial and financial relationship with the rest of the world had changed. American gold reserves at the start of the war, in August 1914, were worth $1.887 billion; at the moment of the signing of the armistice in November 1918 they were $3.079 billion; and at the end of 1925 they had reached a total of $4.547 billion. This, according to the calculations of the American finance authorities, equaled almost exactly half of all global gold reserves, estimated to total $9,407,61,000.1 This extraordinary growth in gold reserves is only one indication of the progress of commerce during the war. In the * This introduction, in slightly different form, was previously published in Guido Quazza, ed., Riforme e rivoluzione nel mondo contemporanea (Torino: Einaudi, 1977) and in Rivista di storia contemporanea no. 4 (1974). 1 See for example J. B. Duroselle, From Wilson to Roosevelt: Foreign Policy of the United States, 1913–1945, New York and Evanston, IL: 1963, p. 133.

1

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course of the war – calculating from the second half of 1914 until the end of 1919 – the United States exported products worth a total of 31.9 billion lire (Lit). This means that the annual average of exports during the war was more than double the amount in 1913, already fairly elevated compared to previous years. Imports in the same period reached Lit 15.2 billion, for a Lit 16.7 billion favorable difference in the balance of trade. These figures are all the more remarkable given that a considerable portion of the imports was made up of agricultural products or raw materials from American-owned plantations or mines in Latin America and Canada. But the data that most directly illustrate the change in the financial position of the United States are those regarding investments and loans. Indeed, the war had transformed the United States from a traditionally debtor nation into a creditor. On July 1, 1914, the privately held foreign debt, not counting loans, touched $3.688 billion, whereas on December 31, 1919, the balance was $2.971 billion in credit. If to these figures, which are only privately held credits, investments, and property, we add the government loans offered by the United States in the course of the war, the credit balance toward the rest of the world had become $12.562 billion.2 Among the principle debtors were the great powers from before the war. Great Britain owed the American Treasury $4.3 billion, France $3.4 billion, and Italy $1.6 billion.3 These figures precisely demonstrate the different role that the United States had assumed after the First World War. And yet it is not enough to note only the quantitative dimension of the phenomenon. At the same time, the American productive sector had undergone an important transformation, both cause and consequence of its extraordinary growth. Traditional progressive historiography in America highlights the way that the demands of the wartime economy had made Washington the center of the American economy for the first time. With the creation of the War Industries Board, the War Finance Corporation, and the many institutions aimed at planning war production and distribution, the American economy is supposed to have overcome the old free market models and to have begun to test the reform opportunities offered by a more planned economy. In this model the government is no longer a passive witness to the market interests shown by private actors. Arthur Schlesinger Jr. argues that the war had forced Wilson to abandon his plans 2

3

See C. Lewis, with the collaboration of K. T. Schlotterbeck, America’s Stake in International Investments, Washington, D.C., 1938, pp. 450 passim. Duroselle, From Wilson, p. 133.

1. American Economic Power after the First World War

3

for a “new freedom,” the slogan with which he had rationally and consistently reaffirmed a full-fledged free enterprise model of government as having the function only to suppress, using antitrust laws, those forms of production that broke the rules of the market. If the financier Bernard Baruch was able to state that the war had demonstrated how the economy could be aimed at responding to national goals rather than those determined by whoever had purchasing power, we can see that those years represent a first trial of the statist reform of the 1930s.4 Although this type of analysis is certainly not unfounded, it lacks a fundamental element: the attitude of large-scale industry regarding its presumed loss of authority. It is no accident that a large share of the men who had rushed to Washington to direct the new centralized economy for the symbolic salary of a dollar a month came from the executive boards of the great financial houses of Wall Street and of major American industries. The creation of coordinating agencies, if not of a true planned economy, turned out to be a transitory phenomenon swept away by the Republican return of the 1920s, only to bloom again during the New Deal. What instead had permanent consequences was the process of rationalization and further concentration in sectors of production that were in some way reflected by those planning agencies. The great majority of the men who served in these agencies returned to directing their own industries having encouraged their further development and, above all – this being the prime element of novelty – having discovered that the state could become a formidable force for the consolidation and expansion of private economic power. The promoters of state economic intervention proclaimed a victory that the Sherman Antitrust Act did not apply to its directives. But was it really a victory of state dirigisme inflicted on the Calvinistic liberalism of Wilson? Or did private interests, having taken control of the economic levers of the state, get rid of this law, which, as compatible ideologically as it was with a capitalist market system, might have caused consternation if some irresponsible politician tried to brandish it? The concentration of production during wartime afterwards allowed a whole class of bosses, unscrupulous yet all told rather provincial, to reach a new level of awareness not only of the service the state could render, but also of the new role that the American economy was called to play on the world stage, of the opportunities that resulted from this role, and of the new demands for business and labor organization that accompanied it. These were the years that saw the birth of the government economic agencies and a whole series of new 4

See A. M. Schlesinger Jr., The Crisis of the Old Order, Boston: 1957, pp. 37–41.

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employers’ organizations that tried to coordinate capitalist power but also to win new forms of its articulation, intervention, and pressure on the organs of government.

2. class conflict in the united states Possibly the most important result of this discovery of the federal government as a subject of economic policy on the part of American employers was the integrating and subordinating role that it could play with regard to the workers’ movement. Even in the moments when, with the Coolidge administration, the federal government was once again forcefully proclaimed to be totally passive, this role would not be abandoned. It would then reemerge with maximum force during the Second World War. This is a central issue inasmuch as the defeat of the American working class was one of the indispensable conditions for the later expansion of American capital abroad; and it heavily mortgaged the possibilities for struggle in Europe in the 1920s. It was precisely the state of war that allowed the government to promote a period of interclass collaboration and of repression, in cases where that collaboration failed. This formula may seem obvious, but it must not be forgotten, since it had powerful effects on the later events of the American class relationship and indeed on the entire structure of working-class organization. The war thus provided the usual interest of the executive in demanding military discipline at production workplaces, along with the ulterior moral blackmail that working in the factory was a privilege compared to having to fight in the trenches. Every form of conflict or insubordination was denounced as giving aid to the enemy. Adding to this repressive mechanism, common to all wartime, was the bourgeois panic resulting from the Bolshevik revolution. This fear reached its height in March 1919, when the Third International was founded and, at the same time, insurrection in Bavaria and Hungary seemed to threaten the expansion of revolution to other countries. The war had provided the Justice Department with the occasion and the excuse for a frontal attack on the only American unions that were actually anticapitalist. Both the Socialist Party and the Industrial Workers of the World – which on the eve of the First World War were sizable organizations – were decimated. By the end of the war, the Socialist Party had gone from five thousand to three thousand locals in the entire United States. Eugene Debs, leader of the Wobblies (as the revolutionary unionists of the IWW were called), was in prison with many of his comrades, convicted of sabotaging the war effort. There were two main weapons in the fight

2. Class Conflict in the United States

5

against these organizations: beyond direct repression: the dismantling of the war industry and reconversion to peacetime production offered ample occasion to destroy the painstaking work of union organization in the past years.5 The great centers of industrial power had, then, in these cases also been able to make use of the executive’s services to directly intervene in social conflicts. Although the great personalities of finance and industry had not let themselves get carried away by the anti-Bolshevik fanaticism of the time, they were perfectly capable of benefiting from its effects even as they distanced themselves from political or ideological involvement. The repression of every radical tendency of the workers’ movement, and particularly of any autonomy for it, was a necessary condition for making feasible the collaborative schemes they advocated. But the men who rendered these services also had to answer to their own constituents, who were immersed in the climate of fanaticism that the war had unleashed against the forces of the Left. They could not maintain the aristocratic reserve of a Rockefeller or of the associates of the House of Morgan in the face of provincial America’s zealous demonstrations; indeed, they were forced to make themselves its spokespeople. A. Mitchell Palmer, Woodrow Wilson’s attorney general, assessed in this way the situation in 1919: Like a prairie-fire, the blaze of revolution was sweeping over every American institution of law and order a year ago. It was eating its way into the homes of the American workman, its sharp tongues of revolutionary heat were licking the altars of the churches, leaping into the belfry of the school bell, crawling into the sacred corners of American homes, seeking to replace marriage vows with libertine laws, burning up the foundations of society.6

What events had elicited such judgments, which, even as they exploited emotions still needed to have some kind of basis in fact? In effect, the frontal attack on Socialist and trade unionist organizations that had taken place during the war had not been enough to completely suffocate the fighting spirit in the working class. There were too many objective forces feeding it in the year immediately following the end of the war. Although the rate of population growth had been notable (the United States had gone from 91,972,000 inhabitants in 1910 to 105,711,000 in 1920), more than three-quarters of this growth was from births, whereas immigration had 5

6

See J. Weinstein, The Disease of Socialism in America, 1912–1925, New York: 1967, pp. 231ff. Cited in Schlesinger Jr., The Crisis, pp. 42–43.

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slowed considerably during the war. In 1918, the vertical drop nearly anticipated the same effects that the restrictive laws of 1921 and 1924 would have. It follows that the workforce had grown substantially more slowly than the population as a whole. In the face of the enormous expansion of wartime production, unemployment had gone down, and the infrequent turnover of the workforce had allowed for more stable ties among workers; all these were favorable conditions for collective organization. Furthermore, the disproportion between the visible growth of production and profits and the workers’ standard of living, particularly in some sectors, was a continual stimulus to working-class protest. In the spring of 1919, inflationary pressure began to be felt; prices rose until, at the end of 1920, they were 105 percent greater than before the war.7 If this fact contributed to the gradual isolation of the working-class struggle, it is also clear that it served to increase those struggles, as bit by bit the working class felt the bite of inflation on their pay. Meanwhile, the Bolshevik revolution had served not only to frighten the middle class, but had also enormously encouraged the workers, to the point that the mere mention of Lenin’s name was enough to electrify any meeting.8 Even the old craft unions, based on a tradition and a membership that tended to the corporative, underwent an evident radicalization. Union leaders modeled themselves not after the Bolsheviks, but rather more after the style of the Nottingham program with which British Labour had requested the nationalization of basic industries. Nonetheless, their old cooperative habits were shaken by a new ideological current that, while certainly not the revolutionary inferno of Palmer’s rants, did upset the traditional pragmatism and tactical caution of Anglo-American trade unionism.9 Starting in January 1919, a general strike in Seattle that lasted five days – a very unusual event in the United States – created a state of high tension throughout the country. The city’s mayor led a repression that successfully mobilized the middle class against the strikers, sufficient to defeat them but not to reassure public opinion, which was encouraged by the great majority of newspapers to believe that the nation was on the cusp of revolution. This atmosphere was intensified by a series of attempted assassinations directed at such personages as the mayor of Seattle and Palmer himself. Thus began a true strategy of tension [this is 7

8

9

See G. Soule, Prosperity Decade: From War to Depression: 1917–1929, New York: 1947, pp. 81–95. See the testimony of John Dos Passos reported by W. E. Leuchtenburg, The Perils of Prosperity, 1914–1932, Chicago: 1957, p. 71. Ibid., p. 71.

2. Class Conflict in the United States

7

a literal translation of an Italian concept, where repression, or the lack of it, on the part of a public authority serves the purpose of finding consensus in manipulating public opinion through fear, so that the people will in turn demand a stronger state – trans.] on the part of the state, which, throughout the rest of the year, was intertwined with workers’ protests. The assassination attempts were generally attributed to “the reds,” and only the most “responsible” sectors of the employing class restrained themselves by blaming them on anarchists. When, immediately following the first wave of attacks, the Boston police went on multiple strikes – a form of protest that, despite being extraneous to the workers’ movement, deeply unnerved conventional wisdom for its effects on public safety – the repercussions were visible among the steelworkers of U.S. Steel and coalminers. All these strike efforts had some common characteristics: they were moments of great popular mobilization and participation; they either bypassed union leadership completely or did so at crucial moments; they were harshly repressed by both the total intransigence of the employers and the liberal use of police force (there were 20 deaths in Gary, Indiana); and, except for a raise in miners’ salaries, they did not lead to substantial results. All this transpired in a situation in which the organized workers’ movement, especially but not exclusively in its most radical forms, had sustained a continuous attack throughout the course of the war. John Dos Passos wrote in the spring of 1919: Any spring is a time of overturn, but then Lenin was alive, the Seattle general strike had seemed the beginning of the flood instead of the beginning of the ebb . . .10

The sum of tensions of that terrible year set the scene for a defeat that the subsequent repressive operations of Palmer, the divisions that split the Socialist Party in three factions, and, finally, the deflation of 1920–1921 definitively consolidated. The ideological fuel of wartime, inflation, the protests that lacked political leadership and were therefore easy instruments for the propaganda of the opposition, the terrorist attacks, and the repression were bad enough. These ingredients then combined with deflation and an unemployment rate bolstered by a temporary increase in immigration, and together they resulted in an effective strategy that employers ably exploited even if they had not themselves explicitly understood the links among them. 10

Quoted in William E. Leuchtenburg, The Perils of Prosperity, 1914–1932, 2nd ed., Chicago: University of Chicago Press, 1993, p. 69.

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After the defeat of 1919 began a long period of social calm interrupted only by the financial crisis. This peace was disturbed by a few important protests such as the railway strike of 1922, the great miners’ strike in Pittsburgh in 1925, and the miners’ strikes such as those in Colorado that marked the definitive sunset by the end of the 1920s of the International Workers of the World. These protests, while occasionally very large, were sporadic and ended for the most part in defeat. Counting the average annual number of work stoppages between 1916 and 1921 as a base of 100, from 1922 to 1925 the average fell to 34 and 43, respectively; and from 1926 to 1930 it went all the way down to 18 and 11. A further measure of the crisis in organized labor is the drop in membership in labor unions in the same period, a phenomenon that hit the industrial unions – among them some of the most activist – harder than the more corporative ones linked to artisan crafts, which not only held steady but actually grew significantly in some cases.11 It would be mistaken to believe that the flood of union busting belonged only to 1919–1920, the culminating period of the confrontation. An unyielding response to every form of workers’ activism had characterized the entire process of industrialization, even if the intervention of the federal government as such occurred only upon the growth of the direct role of the state in the economy marked by First World War. In the 1920s the repression continued, in the same vein begun in 1919, with the violent crackdown of the police on strikers but also through the consolidation of permanent forms of repression that became for a long time a fixed characteristic of American society. These included discrimination against union organizers; the so-called “yellow dog” contract, in which the worker agreed at the moment of hiring not to join any unions; and the indiscriminate use by the courts of sentences that, with specious arguments but creating substantial precedent, made strikes illegal and ordered the arrest of strike leaders. There was widespread and sometimes violent use of scabs. Finally, a few of the biggest corporations, such as Ford, pioneered the systematic construction of company unions. American employers refined these tools and put them to use throughout the 1920s. These initiatives were coordinated and adjusted at the national level by the employers’ associations, whose perhaps most important campaign – known as the American Plan and created in the significant year of 1919 – was aimed at destroying the so-called

11

See I. Bernstein, The Lean Years: A History of the American Worker, 1920–1933, Baltimore: 1966, p. 86.

3. The Defeat of the American Working Class

9

closed shops, in which unions were able to control hiring in contexts favorable to their own interests.

3. the defeat of the american working class Still, the defeat of organized labor was not due exclusively to the unscrupulous use of coercion on the part of the state and private employers. The other factor in this defeat came from the unions’ politics of ongoing involvement – in a subordinate role – in schemes of collaboration and co-management. This was not merely a matter of generic factors such as the “individualistic social climate” that, according to Irving Bernstein, prioritized hierarchy and social mobility over the communitarian or solidaristic values promoted by organized labor (it is difficult to ascertain whether that attitude was cause or consequence of the defeat of the working class). Rather, it is important to remember that the specific politics promoted by significant sectors of the propertied class led John D. Rockefeller Jr. to advocate the doctrine of Employee Representation Plans (known as the Rockefeller Plan) and the idea of industrial democracy, which included a limited but significant effort at co-management and created important ties between the trade unions and Taylorism. At the same time some of the most intransigent employers, such as Ford, tended more and more to intervene in every aspect of their workers’ lives according to the growing idea of personnel management. Trade unions certainly suffered from this two-front assault – both repression and co-management. In the course of the 1920s, certain characteristics of this assault were further emphasized: the allegiance to a politics of profitability and productivity inherent in Taylorism was reinforced by the wartime climate in which industrial workers were seen as privileged, the divisions among professional trade unions grew as their jurisdictions became further separated, and the unions themselves promoted financial and insurance activity over ideological and political activism. These were all natural developments, but they were notably intensified by the particular origins and character of American syndicalism.12 A purely theoretical explanation of the development of American syndicalism is totally insufficient to account for its specific features. The weakness of unionism cannot be explained away simply by the repressive mechanisms enforced by employers or by ascribing a philosophy of moderation to union leadership. To understand the way that conditions 12

See Bernstein, The Lean Years, pp. 91ff.

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stabilized to produce this weakness, it is absolutely necessary to incorporate an analysis of the economic developments of this period. A long period of expansion had begun after the 1920–1921 recession and was interrupted only by the Great Depression. According to the calculations of Simon Kuznets based on the contemporary value of the dollar, the GNP grew 43.7 percent from 1919 to 1929, at an average annual increment of 6.2 percent. But the principal aspect of those years is the growth of productivity, which in the industrial manufacturing sector grew 72 percent by worker per hour in the same period.13 This growth came mostly from technological advances, but also from corporate restructuring and a new organization of labor that intensified the rhythms and output of the workforce. It should be noted that the rate of real wage increases did not follow the rate of profit increases. Beyond the reasons given above for this phenomenon, we must also consider the rise of unemployment. Even though immigration was forcibly limited, the flow of manpower from country to city, the ongoing entry of women into the workforce, and the above-mentioned advances in technology all diminished the negotiating power of workers so that even in a period of overall economic expansion, unemployment in vast sectors of the working class exerted a continual downward pressure on wages. It may not be a coincidence that during this period no government statistics existed; according to Weintraub, the unemployment rate wavered between 10 percent and 13 percent among eligible workers between 1924 and 1929.14 Despite all these limits on economic development, there is no doubt that, as Bernstein observes, it was strong enough to quiet worker hostility so that collaborative initiatives continued, and the ideology of comanagement between workers’ organizations and employers was consolidated. Even if real wages did not match profit growth, class imbalance increased, and the concentration of wealth and power among elites grew to an impressive degree, still the relative improvement in the economic situation did make itself felt among the masses – both with respect to the past and with respect to the rest of the world, the latter being a consideration with real weight in a nation of immigrants. In the course of the war it was the federal government that took a series of initiatives to respond to workers’ demands by imposing such regulations as the eight-hour workday in more sectors and an increase in salary levels. In the 1920s, the government returned to a more lethargic attitude, but, in the meantime, the 13 14

See S. Kuznets, National Income and Its Composition: 1919–1938, New York: 1941. D. Weintraub, Unemployment and Increasing Productivity in Technological Trends and National Policy, Washington, D.C.: 1937, p. 75.

3. The Defeat of the American Working Class

11

ground had been prepared for a laissez-faire capitalist expansion strong enough to maintain and encourage the support for co-management within the trade union movement. In American historiography, perhaps because some historians have too often focused on the individual towering figures of capitalism rather than on the overall statistics of American economics, or perhaps because they were not able to look beyond the short-term economic policy to discover the true measure of continuity in this binary of repression and integration – present in the Democratic reformist administration of Wilson as well as in successive Republican administrations – there are those who sustain a “parenthesis” interpretation whereby the politics of favoring capitalist interests and punishing the working classes are exclusively a Republican choice, a moment of greed and corruption sandwiched between the grand seasons of reform represented by Woodrow Wilson and Franklin Roosevelt. Nonetheless, the most notable aspect of this period is that, despite the different economic policies of the Wilson administration and the successive Republican administrations, there remained substantial continuity in the government’s and employers’ approach. The trade union movement had no alternative but to be increasingly absorbed into this model. Even Franklin Roosevelt had to come to terms with the demands of work discipline for productivity, which a new war again dramatized, even after the working classes had been his principal ally in a process of sweeping away the capitalist politics of the preceding epoch. An important element of the continuity between Wilson and his successors was the full awareness that, in order for the United States to play the global role the economic system called it to, it was necessary not to block or slow down the increase of productivity. In this context it becomes clear that the process of normalization of this specific relationship between capital and workforce unleashed on workplaces immediately after the war – and stabilized in the following years – was a fundamental basis for the expansion of American capital in the global system. This is why it is impossible to agree with Schlesinger and other liberal historians who dismiss the repressive aspects of the Wilson administration as an aberration due to war hysteria or to Wilson’s serious illness in the final phase of his presidency without attempting to reconcile these actions with the reformist ideals that informed his foreign policy and his belief that the state could play a reforming role in the economy.15 In reality, had production been slowed by workforce activism, one of the critical ingredients for 15

See Schlesinger, The Crisis, p. 45.

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wartime expansion of production would have been missing. By the time the Second World War was over, some goals had been achieved: in spite of the efforts of the CIO, there was almost no class-based or radical organization in the factories, and the moderate orientation of union leadership was consolidated as a given. In 1919, as we have seen, the situation was different. In those far more fluid circumstances, a test of strength was unavoidable. Although the demands of wartime allowed the state to act as a steamroller in the production sector, working-class combativeness as it emerged in 1919 made it clear that no equilibrium had yet been reached. It follows that the head-on class battle in that period did not conflict with Wilsonian reformism, but instead represented a natural prerequisite for further expansion of the economy and for more ambitious plans outside the United States. It is no coincidence that the sole meaningful concession to the unions in this period was the legislation to restrict immigration. The usual historiographical interpretation of the two immigration laws paints them as an expression of the isolationist spirit dominating the United States at the time, emphasizing the racist character evidenced by their discrimination among applications according to country of provenance. This is all true, just as it is true that the ideology of war and the fear of Bolshevism aided repression in the postwar era; yet neither claim touches the root of the problem. Restricting immigration contributed to lowering unemployment and, therefore, increased the inflexibility of the workforce, and yet American employers, who were certainly used to having their own way, had no choice but to accept. It may be true, as we have seen, that even without the escape valve of immigration there was really no great danger of mass unemployment with its accompanying pressures. It is also true that Congress, more responsive to the isolationist mood of the country, could not ignore constituents’ opinions on this rather inflammatory issue. Nonetheless, it is significant that the only important concession made to unions was so full of compensations at the strategic level. Indeed, immigration restriction might have offered greater negotiating power to the unions, but it also helped to isolate them. The isolation of the working class is a key characteristic in the most advanced industrial countries of the twentieth century – one of the principal conditions for enclosing the production sector in a corporative structure so that national working-class interests are subordinated to the common interest of profitable relationships with the rest of the world. Even without claiming that the American ruling elite was explicitly conscious of this interest – American hegemony was still in its earliest days at this time – it was clear that in the struggle of the American working class both the question of its own power to resist future

4. American Expansion in Europe

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repression and the question of other industrialized nations’ class and production relations were at stake. Therefore, every measure that contributed not only to its defeat but also to its isolation – and the block on immigration was a step in this direction – was actually a victory for international business over any potentially internationalist working-class movement. The nationalism of American union leaders, particularly strong in men such as Gompers, was further strengthened by the immigration law debates in the same way that the hiring of blacks as strikebreakers had intensified racial conflict in the lower classes.16 It was at precisely this same time that the AFL took on an international political role dictated by the State Department – a role it has never since dropped, and which has led it to sponsor anti-Communist and anti-internationalist policies in the European syndicalist movement and in developing nations.17

4. american expansion in europe There were, then, several fundamental conditions for the expansion of American capitalism beyond national borders: from the overabundance of liquid capital to a subordinated working class in the process of rapid integration with the general goals of an economy that it could not and would not control. To what point did there exist the entrepreneurial mentality capable of these new tasks? Herbert Feis, who in that era lent his efforts as economic adviser to the State Department, interpreted the state of mind of the American ruling elite in these words: For most Americans our participation in the First World War was an arousing experience. It was the first time that their lives and thoughts were touched by events abroad; the first time they made real contact with foreign peoples; while for many bankers and business men it was the first time they made money out of foreign business. The country was swept with an exciting sense of greatness, at playing so decisive a part in the world’s affairs. This did not fade out when the war ended. We had won the war. We were ready in our sprouting confidence to take on the next jobs; to clean up the rubble of the war and get the world going again. Europe would be put on its feet. American energy, shrewdness, honesty, skill – and above all else – American dollars, bring the world back to “normalcy.”18

16

17

18

On Gompers’ ideology and American syndicalism of the period, see Bernstein, The Lean Years, pp. 91–101. R. Radosh, American Labor and United States Foreign Policy: The Cold War in the Unions from Gompers to Lovestone, New York: 1969. H. Feis, 1919–1932: The Diplomacy of the Dollar, New York: 1966, p. 3.

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Feis’s description is a fairly accurate expression of the intertwining of interests and ideals, of vocation to communitarian responsibility and will to power, typical of all hegemonic designs. We have become accustomed to the image of Wilson, with his Fourteen Points, as a prophet of humanitarianism, generous if a bit ingenuous, who spoke in the name of supranationalism and democracy against the petty nationalisms that had caused the war. Strange as it may seem, it was only in the late 1960s that American historians – until then apparently totally immune to Marxist influence – began to question the facile dualist image of an internationalist Wilson bravely taking on the isolationism that reimposed itself after the signing of the Treaty of Versailles and that led Congress to refuse to ratify the League of Nations.19 Nor is the opposing oversimplification true, that Wilson’s political program was a simple propagandistic disguise of American capitalism’s interests in profit and domination. Empire always has an idealized projection of its will to power. It is indeed one of the signs of a power on the rise, when an imperial project has the capacity to build wide consent for those very objectives that increase its own direct power. Wilson was perfectly aware that the “Bolshevik poison,” as he called it, had the character of a global protest; the idealistic message it contained had to be contrasted to an equally attractive “new world order.” As opposed to more modest men such as Hoover, who saw the Bolshevik revolution as merely a challenge to vested interests, Wilson realized that it would require the ruling elite of the capitalist world to defend and redefine themselves in ideological terms.20 As always, the problem was to create a project that reconciled American interests within a larger plan, so as to elicit consent beyond the rational and enlightened sectors of the ruling elite – of those who, in victory as in defeat, had been shaken to the core by the costs of the war and the precedent of the Russian Revolution. As Carl P. Parrini has shown, already by 1916 the leading voices of American political and economic opinion were convinced that worldwide trade regulation and finance reform were necessary if the United States were to increase its export sales of the goods and services it was producing in ever greater quantities. When they spoke of the “Open Door” policy, borrowing the old term used by the British to force China to grant trade concessions, it was with the understanding that American 19

20

A. J. Mayer, Politics and Diplomacy of Peacemaking: Containment and Counterrevolution at Versailles, 1918–1919, New York: 1967; on the economic aspects, of particular importance is C. P. Parrini, Heir to Empire: United States Economic Diplomacy, 1916–1923, Pittsburgh: 1969. Parrini, Heir to Empire, p. 253.

4. American Expansion in Europe

15

businessmen were by rights free to conquer every market they had the wherewithal to reach. According to Parrini, this would require that they (1) resolve by compromise interest-group conflicts at home between bankers and manufacturers, importers and exporters, industry and agriculture; (2) build an international commercial system which would allow American business to topple and replace British business interests as the managing component of the world economy; (3) create new institutional means of performing the politically stabilizing task which Great Britain alone had performed before 1914.21

To this list I would add the need to forge a relationship with their own working class that prevented organized workers from obtaining a substantial redistribution of profits within American society and stopped them from building any international networks that might be a resource for strengthening their autonomy. At war’s end, these objectives were no longer merely a potential strategy awaiting the ripening of events as being hammered out in debates by the National Foreign Trade Council. We have already seen to what extent wartime conditions had reinforced the conditions necessary for their implementation. With the growth of the production system and the availability of American capital, it was becoming urgent to solve certain problems. All the latest innovations of the production system targeted export. If those newly opened foreign markets were not maintained and enlarged, including through the introduction of different products now that the war was over and demand would change, America risked not only a cut in national income but also a dangerous imbalance, in the near future, of supply and demand. Capital, too, needed external market outlets. Without wage, fiscal, or public spending policy, for which as yet no political or economic precedents existed (we cannot forget that, even into the 1920s, an associate of the Morgan Bank felt it necessary to warn his colleague not to advertise their reading of Keynes for fear it would discredit them), the overabundance of capital would encourage speculation and itself imbalance supply and demand. Indeed, that is precisely what happened by the end of the decade, even despite the considerable flow of capital abroad that did occur. Further, there remained the problem of shoring up and eventually enlarging the previously existing foreign markets in which American goods and funds were already important players. It became immediately evident that no halfhearted economic measures could suffice in the postwar period. At every level the interdependence of the global market was more

21

Ibid., p. 127.

16

The Origins of American Hegemony in Europe

visible; further, it seemed clear that the recovery of the world economy depended on the reconstruction of Europe. America’s successful establishment of hegemony in the heart of the industrialized Old World was not only political and strategic wishful thinking. Beyond any such long-range aims was the fact that every economic problem, even the most seemingly distant, was directly related to the reconstruction of Europe. Take for example Latin America. If Europe were unable to import raw materials from Latin America, those countries in turn would be unable to import products from the United States and would be generally weakened in their domestic economies, with the consequence that American investments in those economies would fail to pay off. Other links to the European situation were far more obvious: only the capitalist reconstruction of Europe would provide the necessary means to pay for American imports, and only in the context of such a reconstruction would American capital find profitable gains. As Paul M. Warburg said to a convention of bankers in New York in 1921: If I were to translate America’s position with regard to the economic problems into plain business language, I should say: we are substantial creditors to the Old World Corporation, which is our best client and which is facing great financial difficulties. Is it our interest to let this corporation go into insolvency and disintegration, or shall we encourage and further a reorganization?22

The rhetorical nature of the question was clear. Moreover, implicit in the very form of the question was the fact that an affirmative answer to the second option would require the creation of a hegemonic relationship to the Old World, since, when a supplier rescues his main client, the funds he lends transform a relationship of equal trade into one of dependency. This inherent intent certainly also corresponds to the list of criteria above. It would serve a tangible and immediate interest of the American economy, but also respond to the need of the European economy to reconstruct itself; and it would stabilize social conflicts so as to forestall the revolutionary wave from Russia that threatened to swamp at least all the defeated nations. And yet this plan quickly hit obstacles, mostly political ones. Crucially, the most important factor for the economic recovery of Europe was the reconstruction of Germany. The European country with the greatest industrial potential was also the one that had most suffered from the war. The German middle classes had first weathered the threat of revolution and then been decimated, with the working class, by galloping 22

Quoted in ibid., p. 124.

4. American Expansion in Europe

17

inflation. Without the reconstruction of Germany and its industrial sector, no European recovery was conceivable. This was the realistic and concrete basis for Wilson’s magnanimous attitude toward the defeated power: far from a pure and simple hypocrisy, as sectors of opinion in Europe had it, this was an important example of how to express a material interest as a universal value, easily understood and initially admired by many others. Nonetheless, Wilson confronted a serious obstacle, as is well known, in the political opposition from Great Britain and, even more strongly, France. These victorious powers needed to appease public opinion and supposedly protect their future military security by imposing onerous reparations to make Germany’s recovery impossible and exclude it from its previous prominent position in international commerce. This policy, culminating in the disastrous occupation of the Ruhr, ended only when first Great Britain and then France realized that their economic destinies were intimately linked to those of Germany and that they could not do without American financial support. For the Americans, the attitude a nation took toward Germany became a political litmus test; even in 1925–1926, American financiers were demanding that the Italian government exhibit a “constructive” attitude toward Germany as one of their conditions for the loans and economic as well as political aid they provided to the Fascist regime. On this as on other fundamental points of American foreign economic policy, there was near perfect continuity between Wilson and his Republican successors. It was this principle that Wilson advocated in his debates with Clemenceau and Lloyd George in Versailles; and it was still this principle that American bankers insisted the British and French accept with the Dawes and Young Plans. The seemingly dramatic rift between Wilson and the Republicans over the League of Nations was nothing more than secondary; the effective presence of the United States in European affairs was a given and had only to be defined in its particulars and protagonists. Public opinion was for the most part isolationist; this had its effect on the Senate, such that it would not ratify any formal pledges of alliance or any institutionalization of such ties – which was just what the League of Nations was meant to do. The most influential men of the Republican Party, those who would dominate the government in the following administrations – Hughes, Mellon, Hoover – were just as aware as Wilson of the necessity of a growing and permanent commitment in Europe, as were those commerce and finance sectors that they represented. They opposed the League of Nations partly for political opportunism, playing up to prevailing isolationist sentiment – they knew well that the peace treaty

18

The Origins of American Hegemony in Europe

would be the downfall of the Wilson administration and the Democrats in the next election – and partly out of a true conviction that institutionalized alliances would weaken the United States; but they never for a moment questioned the economic role the United States would play in Europe. This substantial agreement on the goals of the highest government officials during the First World War and the 1920s did remove all difficulties from the path of the United States toward this new leadership role. True, all the necessary conditions for this role were in place: a production system of the right proportions; the ongoing availability of capital, supported by policies that taxed the highest incomes lightly; and low salaries. The balance created between repression and integration of the working classes had, as shown above, resulted in a sufficiently docile workforce. Ongoing growth, combined with weak opposition from workers, effectively constituted the ideal conditions for America’s foreign economic role. Although the nature of this role, obvious enough even before America’s intervention began, had been formulated in clear political and idealistic terms by Woodrow Wilson, though painful conflicts of interest lasted longer among government insiders; and this undermined the consistency of the United States’ efforts in playing its hand abroad. A hegemonic project needs internal coherence of the forces promoting it in order to achieve consistent action outside the metropole; neither simple force nor a clear formulation of goals will suffice. Several other conditions are necessary: an objective understanding of the external circumstances in which one intends to intervene; a reciprocally reinforcing relationship between one’s economic and governing agents; a web of infrastructure – whether of banks or government offices – to promote one’s actions; and, finally, a social and political establishment willing to make, and require of others, certain sacrifices so that further pressure to be exercised toward reluctant former allies may be judicious and efficient. From this point of view, the relatively sudden change in the United States’ position with respect to the rest of the world created notable problems. One example is the role of the state; as shown above, there was not wide divergence at this level over foreign objectives, and the isolationists had a more or less marginalized voice. Nonetheless, the reality of the larger public that they reflected – far removed from the concerns and objectives of the executive levels of finance and manufacturing – did carry some weight. Such people were not interested in, and above all not ready for, the new role their country was about to undertake. Lacking concrete political direction, the way this public opinion expressed itself was purely ideological. Beyond opposing the League of Nations, which, as was stated

4. American Expansion in Europe

19

above, some politicians did even though they had no doubts about America’s hegemonic calling overall, this type of public pressure put the brakes on any external actions of the American government as such. United States official representatives therefore became the advocates of an absurd distinction between the economic sphere, in which the American presence was legitimate and aligned with the general values of the nation, and the political sphere, from which the United States must remain completely absent. This obviously did not mean that Americans conducted no politics abroad; rather it meant that businessmen and bankers directly conducted their own foreign politics, without the mediation or resources of the representatives of the government. For this reason, the American government insisted for a long time that economic conferences between nations were the arena of businessmen and bankers rather than government officials. Further, those officials were absent from various more strictly political centers, beginning with the Council of the League of Nations, where current crises, territorial disputes, and other political topics were debated. This did not substantially impair the bargaining power of the United States or impede it from weighing in on the affairs of Europe and its most important political controversies. It did mean, however, that the United States deprived itself of a range of pressuring devices that might have served their goals. Some American officials were forced to fall back on the most curious pretenses and hairsplitting in order to steer clear of isolationist criticism from those members of Congress who, perhaps precisely because they had no ability to change the course of events, took every opportunity to rail against apparent violations of the isolationist creed. Even if this did not materially affect the general trend toward opening new markets and new avenues of influence in the world, there was a real lack of that common interest and consensus among public opinion, government officials, and wielders of economic power that is characteristic of a mature hegemonic policy. There was not even clear consent on the role of government, particularly that of the State Department and the Department of Commerce, in foreign economic policy making. Particularly vexing was the question of whether these departments could approve private loans, their most broadly consequential activity. The Republican administrations of Harding, Coolidge, and Hoover confronted this same problem; despite their declarations to the contrary, this proves the argument that the United States was building a hegemonic identity that made any purely passive government relationship to the market an obsolete option. We have

20

The Origins of American Hegemony in Europe

evidence from Feis that even this fear of being accused of imperialism or of “dollar diplomacy,” in the phrase coined in the Taft administration, made a certain prudence necessary during these administrations. The secretary of state limited himself to asking bankers to preemptively submit their loan proposals to the State Department and to identifying a few cases in which the department would veto the authorization of such loans.23 In reality, the only vetoes to take effect were against those countries whose war debts had not been discharged or negotiated, or those whose governments the United States did not diplomatically recognize (which was a euphemism for the Soviet Union). The prohibition on loans for rearmament was merely a propagandistic sop to isolationist opinion. The dispute that really mattered, pitting Hughes and Mellon against Hoover, was between manufacturing and finance. Hoover, representing industrial interests, was more favorably inclined toward governmental participation in loan vetting than was Hughes. He was opposed to an indiscriminate flow of loans whose approvals were due to the greed of bankers to make their commissions on any transaction and not to their concern with the future solvency of the client. This point needs clarification: the majority of foreign loans were awarded by single banks or bank consortiums, which then issued bonds on the American market. Accordingly, though the reputation of the issuing bank may have been at stake, the actual risk as to the client’s solvency was acquired directly by the individual buyer of the bonds. Given this insulation from loss, only the most circumspect banks, such as the House of Morgan, bothered to act prudently; and this practice quite unintentionally resulted in some nasty surprises, particularly after the crash and particularly for smaller investors who had entered the market attracted by the high interest rates. Hoover’s reservations were well founded in this sense, although his position stemmed from deeper concerns than the merely moralistic. Indeed, the manufacturing industry, and especially the National Foreign Trade Council that represented it in foreign commerce matters, pressed through Hoover for the articulation of a credit policy to be closely tied to the expansionist needs of American industry in world markets. For a long time, American employers’ associations had studied Great Britain’s history of financial and commercial empire building. They had come to the justified conclusion that a large part of British commercial development was due to the relationship in which British banks had funded commercial endeavors. When a British bank issued a loan for a railroad in Argentina, it required that the raw materials for its 23

Feis, 1919–1932, pp. 18ff.

4. American Expansion in Europe

21

building be purchased in Great Britain, that the technical consultants be British, and that they, in turn, initiate a practice by which replacement parts and all other supplementary materials be imported from the homeland. American industrialists lobbied bankers to add the same conditions to their services, and the government to promote and regulate the system. Bankers, after a few minimally fruitful attempts, concluded that such a clause would reduce their potential clientele. In the end, argued Benjamin Strong (head of the Federal Reserve Bank of New York) in their name, such restrictions were counterproductive, for banks and for foreign commerce.24 Indeed, the total volume of American exports was linked to the free flow of capital, which allowed debtors to reconstruct their economies and, in the final analysis, to buy American exports. According to the bankers’ thinking, the success of British exports was not due to a clause in their loan contracts, but rather to a long and effortful cultivation of the relationship between banks and exporters. The exporters’ request was, it’s true, an oversimplification of the situation; more well-founded was their other proposal, also imitating the British case, to create more numerous branches of American banks abroad. This would contribute to that specific capillary collaboration between credit and exports that was characteristic of successful imperial practice, in such countries as those of Latin America. The manufacturing industry, however, suffered from internal differences. Whereas several of the strongest sectors were capable of championing free trade, large swathes of midsize and small industry feared foreign competition and pressured Congress to protect them in 1922 when it debated a new law on import customs, the Fordney-McCumber Act. Great Britain and France found an easy target in that law’s proposed high tariffs, pointing out the hypocrisy of the United States’ free trade moralism toward them in tandem with such high protectionist barriers for itself. In truth, the Fordney-McCumber Act, while fixing high tariffs in compliance with the pressures from medium and small industry, also reflected a fundamental necessity of the American expansionist strategy. In order to expand their markets, Americans set themselves two main goals: with regard to industrialized nations – in particular Europe – they claimed the status of most favored nation in order to enjoy all the benefits offered between states, affirming their readiness to sign trade treaties at any time with nations that offered such a relationship; with regard to nonindustrialized nations, they pursued an open-door policy.25 Such goals were in no way trivial because, 24 25

Parrini, Heir to Empire, p. 188. Ibid., p. 238.

22

The Origins of American Hegemony in Europe

were they to succeed, it would mean that the European powers had renounced every form of imperial preference in their colonies and spheres of influence, whereas the status of most favored nation would have created a free trade zone among all the most developed nations – a zone that would in the long run encourage the prevailing interest of the strongest industrial power. Given this significance, such a strategy had more than formal continuity with the free trade program of Woodrow Wilson. Clearly these goals were not short-term ones, and the new customs law had the main objective of providing the government with strong tools of influence in the “right” direction, since, starting from a level of high tariffs, the government had ample ability to concede exemptions for reciprocal favors.

5. american policy for european stabilization The viewpoint of the bankers, which finally prevailed, differed significantly from that of the government. It was true that they too had a particular interest in this situation – to loan money and profit from commissions and interest. Many were therefore unconcerned with the productivity of the actual loan and were even willing to take on risks lightly since it was investors who would be liable for them. Hoover and the industrialists he represented during his term as secretary of commerce were correct in their judgment against bankers for this. But the great banking establishments, starting with the legendary House of Morgan, were in reality the only American institutions with a long familiarity in foreign relations and in particular with Europe. The banking class had long studied, and admired, the way in which the British had played their role in the world; bankers were, in consequence, the most ready to inherit their position. Men such as Strong, Lamont, and Leffingwell had nothing in common with the isolationists, but neither did they share the simplistic drive of the manufacturers who believed they could easily translate their current strength into external domination. This did not make them any less decisive in their quest for those results they knew the American economy was capable of. On the contrary, they thought quite justifiably that the destiny of European capitalism was linked to their ability to smoothly take over its previous hegemonic position – and to do so without causing ulterior inter-imperial conflicts. For this reason, beyond any self-interest in the matter, they would not commit themselves to any one single recipe for success. For example, the construction of branches abroad helped to create a hegemonic system, but that was not an end in itself: the opening of a branch only made sense inasmuch as, in that precise moment, new business opportunities were

5. American Policy for European Stabilization

23

opening there. Further, again notwithstanding their own interests, they would never have made the mistake of fooling themselves that they could conquer a dominating commercial presence throughout the world merely by extrapolating from the preceding imperialist experience the single expedient of conditioning their loans with trade requirements, especially in the European context. The lesson to be learned was far more complex. In relations with the other economic and political forces in America, the bankers were concerned above all about balancing the outsized level of the goals – which they otherwise shared – and the prices each was willing to pay to reach such goals. In fact, they criticized the new high tariff levels in that, as many bankers of the time reasoned, they protected many industries that had no need of protection and excluded American farmers and industrialists from foreign markets that would be ready to buy their products. It was impossible to establish free trade without being open to the ultimate consequences of that credo, just as it was impossible to effectively combat the preferential British system or the double tariff system of France and sustain the United States’ own preferential regimes in Central America. Perhaps they did not realize, as Parrini argues, that American industry had to protect itself from a flood of discount-priced European products until the subject currencies had stabilized. It is more likely that many industries did realize it and that precisely for this reason they obstinately pursued a general return to the gold standard. Above all, they were convinced that in order to reach the most ambitious goals, it was impossible to accelerate on every path at the same time. An example is the attitude of the finance sector toward the problem of war debt when Secretary of the Treasury Mellon, responding to those who claimed total repayment, asserted that it was in the national interest of the United States to think of the financial reorganization of Europe along the same general lines as the reorganization of some large industrial corporation heavily involved after some severe depression. We have become, whether we like it or not, the most important creditor of Europe. In this capacity we are like the general creditors of the embarrassed corporation. Our money is in and we want it out, but it is impossible to get more than the debtor can pay. If we insist on too difficult terms, we receive nothing. We must then settle upon such terms as will give our debtor reasonable opportunity to live and prosper.26

This was the continual refrain of American finance. The hegemonic viewpoint is certainly not lacking in these kinds of affirmations; and yet, 26

Cited in ibid., p. 257.

24

The Origins of American Hegemony in Europe

even when in 1924 Great Britain still had not resigned itself to the new distribution of power, American bankers, especially the House of Morgan, insisted on avoiding a head-on confrontation. To every intransigent stand Americans tried to take – be it the doctrinaire internationalism of Wilson, the pressure of public opinion that all war debts should be called in, or the impatience of industry to break down European protectionism – the financiers preferred compromise and mediation. Ever since the Paris Economic Conference of 1916, Great Britain and France had prepared precise measures to respond to the inevitable expansion of America; they worked to reinforce national industries through subventions, technical assistance, and customs taxes to protect European markets and their imperial spheres of influence. In the case of Great Britain, this represented the overturning of a free trade policy that had reigned since 1815 and that had coincided with the period of greatest splendor of the British Empire. At the end of the war, a succession of economic conferences culminating in Genoa were held to create mechanisms to contain the American economic presence, to curb the importation of American products, and to exclude American activity in the commerce or finance of those undeveloped areas subject to British and French rule. Included in this strategy was the partially successful attempt to build a privileged position by claiming the market shares that had been Germany’s and by acquiring concessions and mandates in those parts of the world, starting with Turkey and the Middle East, that had been under German control or influence. The English were perfectly aware that nothing could be done to prevent American competition; yet for a long time they fooled themselves into believing that they could make use of American capital with no return other than their interest payments on loans and without allowing that capital to generate any developments under its own auspices. Throughout this period, Great Britain continued to seek good relations with France by supporting a punitive policy against Germany to keep it economically weak, which also promised the benefit of greater national security for both Great Britain and France. With regard to this policy, American financiers, particularly the Federal Reserve Bank of New York and the House of Morgan, were accused of weakness by the other less patient sectors of the American economy. In the face of manufacturing’s insistence on the creation of an alternative foreign banking system, one closely linked to American commerce, Morgan continued its traditional relationship with the English, preferring in many cases to do business through British banks. In the past, this had been the result of a subordinate status, since both the British production apparatus

5. American Policy for European Stabilization

25

and its financial resources had been superior to those of the United States. But the associates at Morgan were convinced that the changed status of American conditions would eventually pay off without the need to change this practice. The reversal on the German question came at the end of 1923, when even the French had to admit that the occupation of the Ruhr and their punitive politics had only succeeded in provoking rampant inflation in Germany, inflation that affected France as well, causing a 25 percent fall in the value of the franc and posing the risk of worldwide crisis. At this point, the government of English prime minister Stanley Baldwin finally requested the intervention of American capital. American terms dictated that no new economic conference be called; instead, a commission of experts was nominated to create the Dawes Plan, which called for a drastic reduction in German reparations payments, the reorganization of the Reichsbank under Allied supervision, and the launching of a sizable loan program in which private American capital would play a dominant role. France and Great Britain had no choice but to finally resign themselves to the fact that, without the reconstruction of Germany, the general recovery of the overall European economy was impossible. From this moment forward, the role of American finance in Europe underwent a radical change. Key in this change was not only the use of American capital – the only kind available in sufficient quantity – but also the fact that the Europeans themselves had requested American intervention, accepting for the first time the underlying political realities. France had to abandon its intransigent stance, Great Britain could not control and exploit American money while keeping the Americans subordinated, and Germany must be reconstructed. From the approval of the Dawes Plan until the crash, these postulates of American policy dominated Europe. This was American political success at its fullest, even if, given the strictures imposed by the isolationists, it was American bankers and financiers who conducted those politics themselves, in their continued pursuit of equilibrium in Europe. The Locarno Conference, which marked the high point of concord for European capitalism, was a natural result of the Dawes Plan – proof of how necessary not only American capital, but also American political mediation, had become in Europe. The Americans enjoyed an enormous financial advantage as well as the unique position of not belonging to any side but their own in European affairs. In this sense, even the isolationism that kept Americans from officially participating in political institutions abroad was an advantage, distancing them from the riskiest hot-button debates. American financial support, at

26

The Origins of American Hegemony in Europe

least in the short term, did not appear to carry political conditions. From the point of view of the minor powers, first of all Italy, there did not appear to be any American intent to dominate in the European balance of power, which made them more attractive allies than any European nation competing for great power status. It was more objectively the material weight and economic vitality of American capital that built control in these years. Nonetheless, there did exist an American awareness that U.S. economic success in Europe depended on the general and well-ordered development of European capitalism. It was necessary, therefore, to contain and to discourage nationalist trends in each country, in order to prevent any disruption to the process of rationalization and stabilization carried forward by American capital. In every case, the actions of American bankers aimed at encouraging the growth of inter-European ties. These were, indeed, the years of Austen Chamberlain, Stresemann, and Briand; the Locarno Conference; and the Geneva Protocol. Last but not least, as we shall see, these were also the years in which the newcomer, the Italian dictator, played a successful, mediating role in Europe, with the growing financial support of American capital and the consent of the U.S. government. Being, with the U.K., the guarantor of the Locarno treaty, became its political dividend. It is this political function of American capital in Europe that is a new historical development; more to the point, it is the element that made the American presence in Europe more than just financial, but hegemonic. This turning point of the American financial presence in Europe had quantifiable results in the sense that, after the passage of the Dawes Plan and the Locarno Conference, the New York stock market showed enormous growth in European offerings. As the fears of a new conflict among European powers – particularly acute during the occupation of the Ruhr and influenced by worries about inflation and social instability – subsided, confidence in the future stability of European economies rose. The flow of American finance grew in volume, not only directed toward the principal European governments, but also as requested by a wide variety of municipal and local governments and by numerous private companies. Direct investments grew as well, although they would not constitute a notable element of the European economy until after the Second World War. There was one further goal that American financiers pursued with tenacity since the end of the war that, after the approval of the Dawes Plan, finally took hold. Several nations of secondary importance had already returned to the gold standard in previous years, when monetary stabilization was still the prerogative of the League of Nations Finance

5. American Policy for European Stabilization

27

Commission, led by the director of the Bank of England. After the Dawes Plan, Montagu Norman continued to promote stabilization, but it was by now the Americans, represented by Benjamin Strong, head of the Federal Reserve Bank of New York, calling the shots. Between 1925 and 1928 came the stabilizations, in rapid succession, of the pound sterling, the Belgian franc, the Italian lira, the Polish zloty, the French franc, and the Romanian leu. All of these currencies, only excepting the French franc, were stabilized with the help of international credit – partially private, partially furnished by the issuing institutions under the conditions fixed by Strong and the bankers of the House of Morgan with the concurrence of the Bank of England. Various reasons lay behind American finance’s pursuit of the gold standard. First was their conviction that any liberalization of exchange rates was not possible as long as there existed the danger that, following a devaluation of European currencies, cheap European products might flood the American market. Therefore, in pursuing monetary stabilization, the bankers were preparing the ground to force American industry into accepting a more courageous politics of exchange. There was also a more narrowly banking-related reason, which was, however, of heavy consequence. The motivation of a loan issuer is to ensure the return of the loaned funds, with interest, in a currency that has not lost value in the interim. Even if the loans were issued in dollars, the devaluation of local currencies could still increase the risk of insolubility for the debtor nation. From this basic consideration followed the desire of American bankers for general conditions of economic and social stability in the debtor nations. The return to the gold standard, preceded by a deflationary process of variable intensity, was seen as a guarantee of an overall readjustment of a country’s economic situation that could in turn offer greater reliability to its creditors. This belief had been reinforced by the inflation and conflicts of the immediate postwar period. In such conditions, the process of stabilization, in which American capital played a decisive role, was not merely a monetary operation, but the sealing of a class system into a stable hierarchy. By the mid-1920s, American capital had obtained, through its own real power, two prerogatives that truly gave the United States the political function of a world financial center – in other words, a hegemonic role. Not only did the Americans now play the role of mediator among the European states – as witness the Dawes Plan and the Locarno Conference – but they had become guarantors of the political and social order of the individual nations whose economies they now influenced with their capital.

chapter 1 The United States and the Rise of Fascism in Italy

1. united states’ policy and the isolation of italy before fascism In order to understand how the expansion of United States’ foreign policy translated into specific American policy toward Italy, it is necessary to take a few steps back. The Italian government, perhaps more than any other, was affected by Wilson’s politicking at Versailles.1 As is well known, the president’s plan for peace encountered serious obstacles in the course of those negotiations.2 It was neither coincidence nor the result of shady machinations (as Vittorio Emanuele Orlando would suggest many years later in his memoirs3) that Italy suffered the most from the conflicts between Wilson, with his Fourteen Points, and each of the other victorious powers in turn. Wilson enjoyed a position of particular strength, as described 1

2

3

On Italian-American relations during and after the First World War, see L. T. Ventry, “Prospettive delle relazioni italo-americane nell’ultimo anno della prima guerra mondiale,” in Archivio Storico Italiano, 1971, pp. 103–123; O. Barié, “Wilson e il wilsonismo nella coscienza politica italiana, 1917–1919,” in Atti del I Congresso Internazionale di Storia Americana, Italian e Stati Uniti dall’indipendenza ad oggi (1776–1976), Genova: 1978, pp. 75–89; R. Vivarelli, Il dopoguerra, Napoli: 1967, p. III. The following works also indirectly treat this question: V. S. Mamatey, The United States and East Central Europe, 1914–1918, Princeton: 1957; A. Ara, L’Austia-Ungheria nella politica americana durante la prima guerra mondiale, Rome: 1973. See especially A. J. Mayer, Political Origins of the New Diplomacy, 1917–1918, New Haven: 1959; idem, Politics and Diplomacy of Peacemaking: Containment and Counterrevolution at Versailles, 1918–1919, London: 1968; and A. Link, Wilson the Diplomatist: A Look at His Major Foreign Policies, Baltimore: 1957. V. E. Orlando, Memorie, 1915–1919, Rodolfo Mosca, ed., Milano: 1960, pp. 445–469.

28

1. United States’ Policy and the Isolation of Italy before Fascism 29 previously, thanks to the manufacturing and financial resources of his country. In addition, he benefited from the political and moral power conferred by the United States’ decisive role in the war (in spite of its late entry and small number of troops); by his refusal to be involved in the secret alliances among the Allied powers; and, above all, by his total freedom of maneuver.4 The United States had neither territorial nor war reparations demands to bargain for; rather, it was in its interest to ensure a new balance of power among the nations and a reconstruction of the European capitalist economy within them. This concern more than any other was the United States’ motivation, since it was the best guarantee that the Soviet revolution would not spread. Great Britain and France, as well as Italy, weakened by the war and constrained by very different questions of public opinion and popular morale because their populaces had borne the direct brunt of the war effort, repeatedly opposed Wilson’s efforts to put his Fourteen Points into effect. This was especially true when it came to the treatment of the defeated powers, especially Germany. Wilson insisted on taking the long view, which required generosity toward Germany and aid for its economic reconstruction; this was totally incompatible with the punitive claims of Lloyd George and Clemençeau. Given their formidable power when united, it is no surprise that Wilson had success overcoming their resistance only when it came to deciding the fate of Italy, weakest of the so-called victorious great powers. Wilson had no real enmity against Italy, but simply found it was in regard to Italy that he had his only opportunity to demonstrate his intransigence and stay wedded to principles on which, in so many other negotiating points, he had to give way to the French and the English. The negotiating position of Orlando and Sonnino was further weakened by the fact that their claims were based on one of those very secret treaty alliances – the so-called Treaty of London [in Italian, known as the patto di Londra, or London Pact – trans.] – that Wilson strongly derided and considered illegitimate.5 An unbridgeable gap thus opened between the American president’s wish to fulfill his program based on national self-determination and the Italians’ territorial claims on South Tyrol and especially on Istria and in Dalmatia. Wilsonian moralizing was not the problem here, despite the vituperative complaints against it by Italy’s liberale governing class [the 4 5

See Mayer, Politics and Diplomacy. M. Toscano, Il patto di Londra; storia diplomatica dell’intervento italiano (1914–1915), Bologna: 1934. The text of the treaty is reproduced in an appendix.

30

The United States and the Rise of Fascism in Italy

Italian word is left untranslated in this case to denote its difference from the English word liberal; it refers to the historical period during which the Italian state was a constitutional monarchy, established after Italian unification in 1861 and ended by the Fascist seizure of power in 1922 – trans.]. The decisive factor was Wilson’s need to present to the Senate and American public a peace treaty that in some fashion still resembled the promises he had made on his departure for Versailles.6 Nor could the Italian representatives obtain the cooperation of their French and British colleagues, who were more than happy to free themselves from the commitments made in the Treaty of London and relieved to let Wilsonian rigor exhaust itself outside the range of their own immediate interests. Meanwhile, Orlando and Sonnino were vulnerable to the pressure of the frustrated nationalism of much of the Italian bourgeoisie – a nationalism endorsed by those members of the liberale governing class who, against Giolitti’s opposition, had decided Italian participation in the war, but that now threatened to overwhelm them.7 The compromise reached at Versailles – to set the border at Brenner, sacrificing a good slice of the German-speaking inhabitants, but to give up the admittedly excessive aspirations for Dalmatia that had been included in the Treaty of London – left many Italians disillusioned and frustrated, and in any case did not completely fulfill Wilsonian principles (since many inhabitants of the South Tyrol who spoke and considered themselves Germanic were placed under Italian sovereignty).8 The treaty talks were not the only arena for conflicting aims between the two countries. In 1921, the U.S. Congress approved the first law to drastically limit immigration; this was both an economic and a social blow. Until the outbreak of war, Italy had been able to rely on immigration to the United States as an escape valve for a large and growing number of its unemployed and unskilled workforce. Furthermore, emigrants’ remittances had become an important positive factor in Italy’s balance of payments. But even worse were the political and moral connotations of the

6

7

8

See D. Fleming, The United States and the League of Nations, 1918–1920, New York and London: 1932; T. A. Bailey, Woodrow Wilson and the Lost Peace, New York: 1945; and idem, Woodrow Wilson and the Great Betrayal, New York: 1945. See especially N. Valeri, Da Giolitti a Mussolni. Momenti della crisi del liberalism, Florence: 1958, pp. 20ff. See G. Salvemini, Mussolini diplomatico, Bari: 1952, pp. 17–33. F. Coppola, La rivoluzione fascista e la politica mondiale, Rome: 1923, is a good example of the typical nationalist state of mind. For the Fascist movement’s orientation on foreign policy, see G. Rumi, Alle origini della politica estera fascista (1919–1923), Bari: 1968.

1. United States’ Policy and the Isolation of Italy before Fascism 31 law’s limits. The criteria for setting quotas on immigrants from each country was based on the number of inhabitants from that country of origin in 1910 and assigned a maximum of 3 percent of that number for new immigrants. The year 1910 had been chosen to drastically reduce the number of immigrants from those countries that in recent years had been responsible for the largest influx; for clearly racist motives, the law struck most harshly at those nationalities considered undesirable by important factions of Congress.9 In Italy’s case, the allowable immigration was reduced to the laughable number of 42,057 annual entries.10 The situation was made worse in 1924 by a law that took the 1890 census as the new parameter, allowing the immigration of 2 percent of a country’s residents in that year and further accentuating the racially discriminatory character of the quotas, particularly with respect to Italians. Clearly, such legislation, beyond merely inflicting a serious material loss and a further motive for social tensions, also aggravated the inferiority complex and the frustrated nationalism of much of the Italian populace in the immediate postwar period. There was perhaps no comparison with the passions elicited by the supposed betrayals at Versailles, but neither was it a meaningless circumstance in the context of the paranoid suspicions of the time. It would be excessive, and biased, to claim a direct causal relationship between these conflicts and the crisis of the liberale regime in Italy, or to go so far, as some actually have, as to blame the Americans for the rise of Fascism.11 Still, one may note that in general the international context did favor the crisis of the constitutional state and the eventual Fascist rise to power. After all, the incapacity or the impossibility of Wilson’s realization of his program (so that not his excessive stringency in relation to Italy, but his lack of such in relation to others, was the main obstacle to the balance of power he sought) weighed on Europe in the postwar era, prolonging a state of tension that, in the case of Italy, ended up favoring reactionary extremists. It is further true that the restrictive immigration laws illustrated another aspect of Wilson’s difficulties, or rather of the internationalist program he advocated. The laws were the result of a public opinion still unprepared and unwilling to take on a commitment to world politics, and they were also the product of a complex mediation of social relations in 9

10

11

P. Nazzaro, “L’Immigrant Quota Act del 1921, la crisi del sistema liberale e l’avvento del fascismo in Italia,” in Gli Italiani negli Stati Uniti, Florence: 1970. G. G. Migone, I rapport tra gli Stati Uniti e l’Italia all’epoca dell’avvento del fascismo (ottobre 1922-luglio 1923), unpublished thesis, Università Cattolica del Sacro Cuore, Milan: 1964–1965, p. 27. Nazzaro, “L’Immigrant Quota Act del 1921.”

32

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which, as indicated previously, the working classes had been offered the blocking of immigration in exchange for their assimilation and subordination. This widened the gap – and the conflict – between those employed workers already professionalized, organized, and naturalized and the various individual groups of newly arrived immigrants. That division of the working classes along racial lines both illustrated the repressive, xenophobic, and antidemocratic furor of American politics of the era and constituted the necessary condition for the expansionist aims of the American economic elite, favored by a compromise with their working force.12 The fundamental weaknesses that brought on the crisis of prewar Italy and prevented restabilization or moderate solutions are actually well known. If we still want to examine the international aspects of that crisis, it is not as important to focus on the peace treaty or on Wilson’s role in it, or even on the American immigration limits, as it is to emphasize the lack of any international order capable of encouraging Italy to follow a plan for reconstruction that would have bolstered the constitutional state. The succession of prime ministers in the three years between the end of the war and the advent of Fascism could not find foreign interlocutors willing or able to intervene in the Italian situation. The Italy of the Triple Alliance had traditionally looked to Berlin, but since the German defeat there was no one there capable of playing an active external role.13 The same was true of France and Great Britain, which did not have the economic strength to intervene in the Italian financial crisis or even to negotiate their own decisions in such a way as to consider their possible internal effects on the Italian situation. Italy could only turn to the United States: government and finance experts such as Nitti and Giolitti understood this perfectly. Yet there was no American response, outside of some vague promises of loans that failed to materialize.14 When the Italian government tried to launch a bond issue 12

13

14

See for example I. Bernstein, The Lean Years: A History of the American Worker, 1920–1933, Baltimore: 1966, pp. 91–101. See especially G. Mori, “Banche industria e imperialismo nell‘età giolittiana,’” in Studi storici no. 3 (1975); R. A. Webster, “L’imperialismo industriale italiano, 1908–1915,” in Studio sul prefascismo, Torino: 1974. For example, the ambassador to Rome, Richard W. Child, wrote to the State Department on April 6, 1922: “I am informed by Nitti and by don Sturzo, who are, as Giolitti ages, the most able and rising personages of Italian politics; that there are great opportunities for American interests in the reorganization of the metallurgic industry, in contacts for public works, and before too long, in the development of hydroelectric power throughout the country. The proposal comes, as you can see, from men whose tolerance toward Germany

1. United States’ Policy and the Isolation of Italy before Fascism 33 on the American stock market without the necessary endorsement of the major banks, it was a terrible failure – so damaging that it squelched every possibility of another attempt for a long time.15 How, then, to explain the failure to find succor, from this as from any other source? Why could Giolitti not obtain an audience with the great centers of international power when he enjoyed immense personal prestige and his work to restore governmental stability was successful, from the victory over the factory occupations to the Treaty of Rapallo?16 Why was Giolitti denied that which would be given to Mussolini, and not so long after? The temptation is to simply answer that Italian risk was too high for international markets. Conditions in Italy during this period are well known; there is no need to summarize them all. It is enough to point out that the instability, in which some claimed to see evidence of Bolshevik subversion, was at such high levels as to discourage the intervention of foreign capital. One may add that foreign investors, especially Americans, were not only waiting for Italian risk to subside, but also were hoping for a process of recovery that would guarantee their investments. All this is true but not sufficiently explanatory. It would have presupposed the existence of some structure of Western cooperation, already consolidated and led by an American political and financial cohort perfectly capable of influencing any individual situation like that of Italy, and of consciously waiting for the proper conditions for its actions to materialize. But no such structure or unified consciousness existed in that postwar scene, as discussed previously. No massive and concerted effort to repair the Italian crisis was forestalled by fear of revolution, or by the endemic instability of Italian society, or because someone was waiting for the Blackshirts to seize power. Above all, as Federico Chabod argued, with the abandonment of the factory occupations, the momentum of the Socialist and proletarian offensive slowed precipitously, and the reactionary backlash followed it.

15

16

made them the target of criticism; but they are probably above all Italians, and they realize that Germany is in no state to profit from these opportunities . . .” (NA-DS, 865.60/7, Rome, Richard Washburn Child to Charles Evans Hughes, April 6, 1922). Nonetheless, this attempt, like others, found no answering echo in practical events. See BIAG b 12, 1919–1920, f. Nuovo consorzio per l’emissione e il collocamento in America di Buoni del Tesoro Italiano in Dollari, Annuncio di emissione; Domenico Gidoni to Bonaldo Stringher, New York, July 26, 1920, with this report by Gidoni: “Il prestito italiano in dollari negli S.U. d’America,” July 1920; Pro Memoria (unsigned), January 15, 1921, in which it is affirmed: “The completely meager result of the bond sale was $9,966,800, compared to the $25,000,000 issued; this was caused by various forms of apathy, political, monetary, financial, and social . . .” See G. G. Migone, “Giovanni Giolitti and the Rise of Fascism,” in E. Passerin d’Entrèves, ed., Dal nazionalismo al fascismo, Torino: 1967.

34

The United States and the Rise of Fascism in Italy

Anyone outside of Italy could hardly have prevented what was about to happen as governmental and parliamentary instability was ongoing.17 On October 31, 1922, commenting on the March on Rome, the New York Times asserted in an editorial that Giolitti had preempted a Bolshevik revolution by allowing the revolutionaries to occupy the factories, at which point they revealed their own incompetence to run them.18 Several days earlier, the U.S. ambassador to Rome, Richard Washburn Child, had offered the opinion that Giolitti’s shrewdness “had thrown the Communists into disarray and confusion.”19 Still, it would later become a commonplace among Mussolini’s many American sympathizers that he had been the one to save Italy from the Bolshevik menace. Although this kind of consideration might have had some importance if an American or international intervention were a real possibility, in this period the power struggles among the United States, France, and Great Britain were too far from resolution. Only upon the approval of the Dawes Plan did the European great powers finally see the necessity of turning to American bankers, and therefore to the American government. And only upon that realization did other forms of cooperation become possible: the economic reconstruction of Germany, with the drastic reduction of demands for reparations; the agreement to restructure war debts; and the Treaty of Locarno, which lessened political tension in Western Europe. Only at this point did Americans begin to show initiative in the extension of private credit to European economies and in the operations for monetary stabilization on the part of the central banks. A process, therefore, that did not begin until 1924 and culminated in 1926 – not coincidentally the very year that the Fascist regime definitively secured power – finally ended just before the crash that led to the Great Depression.20

17 18 19

20

See F. Chabod, L’Italia contemporanea (1918–1948), Torino: 1961, pp. 61–66. New York Times, October 31, 1922. NA-DS, Records relating to political relations between the United States and Italy, microcopy 527, Roll 10, Richard Washburn Child to Charles Evans Hughes, Rome, October 9, 1922. On American foreign economic policy of the period: H. Feis, 1919–1932: The Diplomacy of the Dollar, New York: 1966; C. Parrini, Heir to Empire: United States Economic Diplomacy, 1916–1923, Pittsburgh: 1969; J. H. Wilson, American Business and Foreign Policy, Boston: 1973; J. Brandes, Herbert Hoover and Economic Diplomacy: Department of Commerce Policy, 1921–1928, Pittsburgh: 1962; L. Gardner, Economic Aspects of New Deal Diplomacy, Madison: 1964, pp. 3–24; C. Kindleberger, The World in Depression, 1929– 1939, Berkeley and Los Angeles: 1973, pp. 31–57; W. A. Williams, “The Legend of Isolationism in the 1920’s,” in Science and Society no. 18 (Winter 1954) (tr. It. in Le frontiere dell’impero Americano. La cultura dell’ ‘espansione’ nella politica statunitense, Bari: 1978,

1. United States’ Policy and the Isolation of Italy before Fascism 35 It follows that the bankers and, more generally, the American governing elite who gave Nitti and Giolitti no hearing were not worrying about Italian risk, but rather about European risk. Apart from any greater concerns they might have had about the Italian situation in those years, such men were held back by the general instability of the whole continent – an instability that, in some cases, remained a problem well after the rise of Fascism in Italy. Examples abound: the occupation of the Ruhr; the galloping inflation in Weimar Germany; the corresponding endemic crises in the French government; the continuing Western attempts to intervene in Russia and in the Central European insurrections; even the recurrent offensives of the English working class, which refused to accept defeat until after the culminating general strike of May 1926. Not only was the necessary social and economic stability lacking, but any generally accepted recipe to establish them as well; all the proposals of the time still bore the pp. 95–124); R. H. Van Meter, Jr., The United States and European Recovery, 1918–1923: A Study of Public Policy and Private Finance, unpublished thesis, University of Wisconsin, 1971; M. P. Leffler, “Political Isolationism, Economic Expansionism, or Diplomatic Realism: American Policy toward Western Europe 1921–1933,” in Perspectives in American History vol. VIII, 1974. On the financial expansion of the United States in France, Germany, and Italy, respectively, see C. S. Maier, Recasting Bourgeois Europe, Princeton, N.J: 1975; S. A. Schuker, The End of French Predominance in Europe: The Financial Crisis and the Adoption of the Dawes Plan, Chapel Hill: 1924; idem, The Adoption of the Dawes Plan, 1976; M. P. Leffler, The Struggle for Stability: American Policy toward France, 1921–1933, unpublished thesis, Ohio State University, 1972; W. Link, Die Amerikanische Stabilisierungspolitik in Deutschland 1921–1932, Dusseldorf: 1970; G. G. Migone, “Aspetti internazionli della stabilizzazione della lira: il Piano Leffingwell,” in Problemi di storia nei rapporti tra Italia e Stati Uniti, Torino: 1971; idem, “La stabilizzazione della lira: la finanza Americana e Mussolini,” in Rivista di storia contemporanea no. 2 (1973); idem, “Gli Stati Uniti e le prime misure di stabilizzzione della lira (estate 1926),” in G. Spini, G. G. Migone, and M. Teodori, eds., Italia e America dalla Grande Guerra ad oggi, Venice: 1976; idem, “Governo, grande stampa e banche americane alla vigilia del discorso di Pesaro,” in Rivista di storia contemporanea no. 4 (1979); G. Stammati, “La collaborazione finanziaria e monetaria fra l’Italia e gli Stati Uniti d’America fra il 1918 e il 1967,” in Le relazioni economiche tra l’Italia e gli Statti Uniti d’America, Rome: 1976, pp. 51–88. On the specifically monetary aspects of the American policy of stabilization in Europe, see R. H. Meyer, Bankers’ Diplomacy: Monetary Stabilization in the Twenties, New York and London: 1970; L. V. Chandler, Benjamin Strong Central Banker, Washington, D.C.: 1958; S. V. O. Clarke, Central Bank Cooperation 1924–1931, New York: 1967; P. P. Abrahams, “American Bankers and the Economic Tactics of Peace,” in Journal of American History no. 56 (1969); E. R. Wicker, “Federal Reserve Monetary Policy 1922–1933: A Reinterpretation,” in Journal of Political Economy no. 73 (1965). Finally, on the research and debates of the time, see C. Lewis, America’s Stake in International Investments, Washington, D.C.: 1938; idem, The United States and Foreign Investment Problems, Washington, D.C.: 1948, pp. 7–46; P. Einzig, The Fight for Financial Supremacy, London: 1931; E. Staley, War and the Private Investor, Garden City, NY: 1935; F. A. Southard, Jr., American Industry in Europe, Boston and New York: 1931; G. P. Auld, The Dawes Plan and the New Economics, Garden City, NY: 1927; C. W. Phelps, The Foreign Expansion of American Banks, New York: 1927.

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stamp of a dated Wilsonian idealism. If to all this we add the reminder that within the United States the politics of intervention still met with considerable isolationist opposition, starting with the refusal to ratify the Treaty of Versailles and the successive defeat of the Democratic Party in the 1920 presidential elections, it is more than clear how any attempt to rush into intervention in Italy before the rise of Fascism would have encountered insuperable obstacles.

2. american reactions to the rise of fascism In truth, not even the Fascist seizure of power was enough to radically transform American policy with regard to Italy. Certainly, when Mussolini came to power there were immediate repercussions for American attitudes toward Italy. The American political elite showed alacrity in offering a positive interpretation of the changes brought about by the March on Rome.21 The evidence from the American press and in archival materials shows that before the seizure of power, Americans had paid little attention to the actions of Fascist squadristi or to the early successes of the Fascist

21

On this subject the fundamental text is J. P Diggins, Mussolini and Fascism: The View from America, Princeton: 1972, pp. 3–262 (tr. It. L’America, Mussolini e il fascismo, Bari:1972), and the thesis from which it derives (Mussolini’s Italy: The View from America, University of Southern California, 1964). For a more detailed analysis, see J. B. Carter, American Reactions to Italian Fascism, 1919–1933, unpublished thesis, Columbia University, 1954, pp. 1–40. On Catholic opinion, W. B. Smith, The Attitude of American Catholics toward Italian Fascism between the Two Wars, unpublished thesis, Catholic University of America, 1962, pp. 56–102. See also G. G. Migone, “Introduzione,” in G. Spini, G. G. Migone, and M. Teodori, eds., Italia e America dalla Grande Guerra ad oggi, pp. 23–32, as well as idem, I rapport tra Stati Uniti e Itaia all’epoca dell’avvento del fascismo, unpublished thesis, Università Cattolica del S. Cuore, Milano 1964–1965. On other great powers’ opinions, E. Di Nolfo, “L’opinione pubblica europea e l’ascesa al potere di Mussolini,” in Il Mulino October 1954, pp. 635ff.; on France, P. Milza, L’Italie devant l’opinion francaise (1920–1940), Paris: 1967 and C. Vivanti, “La stampa francese di fronte al fascismo (luglio 1922–gennaio 1925),” in Rivista storica del socialismo, Jan.–Apr. 1965, pp. 52ff.; on Great Britain, A. Berselli, L’opinione pubblica inglese e l’avvento del fascismo, Milan: 1971; E. FasanoGuarino, “Il ‘Times’ di fronte al fascismo,” in Rivista storica del socialismo, May–Dec. 1965, pp. 165ff.; R. J. B. Bosworth, “The British Press, the Conservatives and Mussolini (1920–1934),” Journal of Contemporary History no. 2 (1970): 163ff.; on Germany, K. P. Hoepke, La destra tedesca e il fascismo, Bologna 1971; K. E. Lonne, “Il fascismo italiano nel giudizio del cattolicesimo politico della Repubblica di Weimar,” in Storia contemporanea, Dec. 1971, pp. 697ff.; J. Petersen, Hitler e Mussolini. La difficile alleanza, Bari: 1975, pp. 5–54; R. De Felice, Mussolini il Duce. Gli anni del consenso. 1929–1936, Torino: 1974, pp. 418–442; on Belgium, C. Pinzani, “Socialdemocrazia belga e fascismo italiano,” in Movimento operaio e socialista, Jan.–Mar. 1966, pp. 9ff.

2. American Reactions to the Rise of Fascism

37

movement. But in the moments just prior to the March on Rome there was substantial apprehension, even among those American observers who would soon express approval and even enthusiasm for Fascism as a legitimate form of government. These apprehensions centered on the question of what effect an ultranationalist government might have on Italian foreign policy. On October 9, 1922, Ambassador Child had signaled that the Fascists might have a dangerous influence from just this point of view.22 In a longer report the following day, after having declared the state of relations between the United States and Italy satisfactory, Child specified that the only threat to those relations came from the unpredictable forces of Fascist nationalism.23 On October 30, after having received just days earlier a peculiar visit from Mussolini, who was on his way to the Fascist Congress of Naples – a visit in itself indicative of the importance that “Il Duce” attributed to relations with the United States, since it came at a moment when he was overwhelmingly busy with affairs of state – Child repeated his warning that the Fascist regime would practice a chauvinistic and reckless foreign policy.24 The comments in the mainstream American press on the eve of the March were even more weighty, as they focused less on the nature of Fascism and more on what were called its “excesses.” The Boston Evening Transcript (a conservative daily typical of New England politics at that time – which is to say predominantly Republican) made a particularly scornful analogy between the Fascists and the Ku Klux Klan, saying it was as unlikely that Italians would continue to accept the former’s excesses as it had been that Americans would support the latter.25 Similarly, an editorial in the New York Times, a moderate progressive paper of generically democratic and internationalist beliefs, expressed worry on October 28 regarding Fascist violence against the laws and against individuals.26 The Christian Science Monitor offered similar comments.27 One is left with the impression that most Americans recognized the Fascist offensive as a positive drive to restore law and order in the face of 22 23

24

25 26 27

R.W. Child, report cited. NA-DS, Record relating to Political Relations between the United States and Italy, microscopy 527, Roll 1, Richard Washburn Child to Charles Evans Hughes, Rome, October 10, 1922. NA-DS, Record relating to Political Relations between the United States and Italy, microscopy 527, Roll 10, Richard Washburn Child to Charles Evans Hughes, Rome, October 30, 1922. The Boston Evening Transcript, October 26, 1922. The New York Times, October 28, 1922. The Christian Science Monitor, September 27, 1922.

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the threat from the Socialist workers’ movements, but that they wished to operate with some caution – not only due to the contradictions and opposing factions that might arise from the violence of the situation before the regime could install itself with stability, but also because of some troubling and subversive ambiguities in Fascism’s message that seemed to threaten more than just the organized working class movement.28 The alarm expressed on the eve of the March on Rome contained the embryo of a misinterpretation that would become ever more frequent in the American reactions following Fascism’s seizure of power. Inasmuch as it was not Fascism itself, but its excesses, that were condemned, the possibility was retained to distinguish between a “healthy” Fascism and subversive tendencies within it. Ambassador Child again anticipated the kind of attitude that would develop in the press, predicting that the healthier elements of the party would prevail since they would not be able to escape the responsibilities of power. He wrote that they would come to understand the necessity of renouncing the overambitious demands made before the March on Rome.29 It is easy to understand how, in this logical frame and in response to this kind of rhetoric, Benito Mussolini came to appear as the guarantor of the essentially stabilizing and antisubversive character of the regime. In this same way, the most rambunctious squadristi, those who would become the “leftists of the regime,” served the important function of legitimating Mussolini’s role as stabilizing dictator. On November 28, 1922, the chargé d’affaires at the Rome embassy, Franklin Mott Gunther, wrote to Secretary of State Hughes that only Mussolini’s personal prestige was keeping other elements from unpredictable behavior. The American embassy identified those elements as belonging to the extremist factions of the party, or even more threateningly, “as those Socialists and Communists who would pounce at any opportunity.”30 It is not at all surprising, though somewhat bizarre, that just a few months later the U.S. embassy would be thrown into great alarm over the rumors that the Fascists intended to abolish the monarchy, even though Child reported 28

29

30

For analogous reactions in the European press and public opinion, see the works cited in Note 21. NA-DS, Record relating to Political Relations between the United States and Italy, microscopy 527, Roll 10, Richard Washburn Child to Charles Evans Hughes, Rome, November 11, 1922. NA-DS, Record relating to Political Relations between the United States and Italy, microscopy 527, Roll 10, Richard Washburn Child to Charles Evans Hughes, Rome, November 28, 1922.

2. American Reactions to the Rise of Fascism

39

that Mussolini’s honesty and past record reassured them.31 By June 5, 1923, Child felt capable of declaring any such danger past.32 In a certain sense it was the very rise of Fascism, its seizure of power, that melted the reserve of the earlier occasion. This was not due only to opportunism – a less relevant motivation in foreign politics than within Italy itself – but more because, notoriously, there did not appear to be any better antidote against subversive elements than a massive dose of power. Nor did the image of a defeated liberale Italy provoke undue nostalgia or worry that that power might be too indiscriminate. As the days passed and Mussolini consolidated his power, the U.S. newspapers became less and less critical of him. The regime began to enjoy the benefits of the fait accompli. There were no further criticisms of the means used to take power, and the regime’s successes were recorded with growing admiration. The comparisons to the disorder of the past were numerous. Typical of this change was the position of the same Christian Science Monitor that only days earlier had chimed in with the analogy of the Ku Klux Klan:33 Although it would seem unthinkable here in the United States for such an extragovernment body as the Fascisti to exist with powers of initiative and effective action in a democracy, nevertheless in modern Italy, with a rapidly changing ministry, and the Nation still feeling her way in administrative government, in the attempt to unify widely diverse populations, this movement is generally conceded to have been an undisguised blessing; some, indeed, speak of it as a force that has saved the Nation.

And, even more explicitly: Finally, Fascismo in Italy is a spiritual movement, born in the patriotic imagination and loyalties of the Italian temperament, and furnishing a distinct evidence of the potential power and youthfulness of the Nation.

Here is the refrain of the so-called Italian revolution, according to which, in that moment, in those historical circumstances, the traditional standard of democratic judgment did not apply. As I have written elsewhere,34 sympathy and approval of Fascism by those who were supposedly 31

32 33

34

NA-DS, Record relating to Political Relations between the United States and Italy, microscopy 527, Roll 10, Richard Washburn Child to Charles Evans Hughes, Rome, June 2, 1922. Ibid., June 5, 1923. Clayton, Sedgwick C. “Fascismo in Italy Stands for Restoring State’s Authority,” The Christian Science Monitor, October 31, 1922, p. 1. G. G. Migone, op. cit., p. 203.

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loyal to a liberal constitutionalist tradition was frequently explained away by calling upon some imagined special Italian character and circumstances.35 The racist connotations of this justification were only slightly veiled: what would be inadmissible in a country with a democratic tradition, especially an Anglo-Saxon one, was downright necessary in Italy’s case, particularly the Italy of the interwar years. Occasionally this distinction was made in the name of tolerance. As Child put it: I have learned to believe ever more firmly that it is a great error to be so sure of one’s principles as to impose them upon others.36

The Cincinnati Times-Star and the Herald Tribune (a conservative Republican paper in New York) showed actual enthusiasm as the latter declared:37 The real strength of the new Ministry lies in the ability and fearlessness of its strong head and in the honesty and sincerity of its individual members.

The Boston Evening Transcript had explicitly condemned Fascism on October 26; but only four days later, here was its latest opinion:38 Once in possession of the reins of power, it seems likely that Fascisti leaders will grows [sic] less dictatorial in their methods, and that, obeying a common law of politics, they will abandon somewhat the reactionary spirit that has theretofore committed them to so many acts of violence.

Several of Mussolini’s initial actions began to show fruit in the American press. In particular, his appointments of government ministers gave a very good impression. It rapidly became habitual for the press to note these individual acts of the new regime, still surrounded with mystery and curiosity in the United States, without much concern for principles. Addressing those readers who might still entertain scruples, the Transcript declared under the headline “Mussolini’s Good Start”:39

35

36 37 38 39

De Felice, op. cit., p. 330, appropriately cites a judgment of Winston Churchill’s that is worth recording here for its exemplary illustration of this way of thinking: “Different nations have different ways of doing the same thing . . . Had been an Italian, I am sure that I should have been with you from start to finish in your victorious struggle against . . . Leninism. But in Britain we have not yet had to face this danger in the same poisonous form . . . but I do not have the least doubt that, in our struggle, we shall be able to strangle communism.” (Corriere della Sera, Jan 21 1927). R. W. Child, “Preface,” in B. Mussolini, My Autobiography, London: 1928. The Literary Digest, vol. 75, November 18, 1922, p. 17. The Boston Evening Transcript, October 30, 1922, p. 14. Ibid., November 1, 1922, section II, p. 2.

2. American Reactions to the Rise of Fascism

41

Although a dictator and the leader of a successful coup, Signor Mussolini has shown no disposition to remain indefinitely as a dictator, nor to rely permanently upon the Fascisti to keep him in office.

His coalition government was proof of this claim, according to an editorial the following day, which praised the conservative character and patriotism of the Fascist movement and predicted that it would not show such folly as to pursue imperialist expansion.40 The qualities attributed to Fascism and to its “duce” were by now characterized by normalcy – that is to say by the ideology of normalization that dominated American politics after the war, when a wave of antiWilsonian restorationism swept the country. Mussolini’s energy would frequently be compared to that of Theodore Roosevelt.41 The essentially conservative and restorationist character of the Fascist seizure of power corresponded well with the orientation of the incumbent Republican administrations during the twenties. Equally reassuring were Mussolini’s business-oriented proposals and his “frank patriotism,” especially in the eyes of the industrial and financial interests that also happened to control a large section of the U.S. press.42 If on the one hand ideological affinities helped guarantee a warm reception of the Fascist government by the American press – once some rhetorical fancy footwork had helped them pass over its lack of respect for democratic institutions – on the other hand there was also the influence of those goals held by those sectors of the American political and financial elite that desired European reconstruction and a corollary American expansion. This point of view was continually presented in the major New York banking institutions as well as the less isolationist circles of the Republican administrative caste. Right from the start, East Coast journalistic opinion attributed particular importance to the stability that Fascism would bring to Italy’s tormented politics. The Christian Science Monitor, for example, wrote: His Government will be obliged to work fast and give tangible evidence of success if the colossal task which it has assumed is accomplished before the inevitable reaction sets in. Not for the justification of coercive government, but for the sake of

40 41

42

Ibid., November 2, 1922, section II, p. 2. See for example the opinion of John A. James-James in “Watch Italy Grow,” Current Opinion, vol. LXXXIV (February 1923), p. 142; according to whom Mussolini was “rather like our own Theodore Roosevelt! Young, ardent, honest, filled with high ideals.” On American nationalism see J. B. Duroselle, From Wilson to Roosevelt: Foreign Policy of the United States, 1913–1945, New York and Evanston, IL: 1963, chapter 1.

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the country, the friends of Italy hope for the success of the reconstructive policy of Benito Mussolini.43

Mussolini’s regime therefore coincided from the beginning with a state of emergency that justified extraordinary measures and at the same time demanded a serious commitment to reconstruction. The damage stemmed not so much from the war itself, already receding into the past, but from the mismanagement of the preceding governments. Both the American press and the diplomatic corps shared a harsh judgment of Mussolini’s predecessors and also of the very political system they had generated. The ambassadorial reports are full of contemptuous references to the “decadent” Italian democracy, as evidenced by the instability of its governments and its corruption. The result had been, according to the U.S. embassy, that the great majority of public opinion now supported Fascism, whose enemies were weak and discredited.44 The comments in the press were generally of the same tenor.45 Principal American observers did not pay attention to the workers’ movement and its organizations unless it was to condemn their “subversive” goals. Thus, they saw no alternative to Fascism other than the old stato liberale with all its weaknesses, some of which seemed utterly intolerable in the light of the American constitutional experience, which strongly rejected the kind of parliamentary system of which Italy in 1921–1922 was an exaggeratedly dysfunctional exemplar. Particularly the weakness and instability of the executive, in comparison with the powerful presidential role in the United States, seemed a grave anomaly that Mussolini’s strong government – characterized in an embassy report as “legal” dictatorship – seemed to remediate properly.46 The anti-European sentiments typical of the isolationist era, but also the preoccupations of those sectors of the American governing class that did want intervention in Europe, combined to emphasize European instability and to blame the weaknesses that created it on exactly the kind of system the old regime in Italy exemplified, and which Mussolini had 43 44

45

46

“The Big Stick in Italy,” The Christian Science Monitor, November 20, 1922, p. 18. NA-DS, Record relating to the relations between the United States and Italy, Richard Washburn Child to Charles Evans Hughes, Rome, November 11, 1922. See for example The Forum, vol. 69 (February 1923), pp. 1200, 1299 and vol. 70 (March 1923), p. 1306; according to which the preceding regime was nothing but “a feeble pseudo-democracy,” economically “unhealthy” because of “the old policies of subsidies and favors for everyone . . . who could swing sufficient influence.” NA-DS, Record relating to the relations between the United States and Italy, Richard Washburn Child to Charles Evans Hughes, Rome, November 2, 1922.

2. American Reactions to the Rise of Fascism

43

happily defeated. It is interesting to note how the form of the debate on Fascism in the United States proposed it as a model of stabilization for all of Europe, while Mussolini – more prudent in this matter at least – made sure to specify that he did not see Fascism as an export product. Foreign Affairs, the well-respected magazine of the Council on Foreign Relations, explained its choice to publish a debate on Fascism with the observation that however much some may have wished to criticize Mussolini, he was the man who now held dictatorial power in Italy. This power seemed unlikely to slip and was an important factor in European politics as a whole.47 But the most authoritative newspaper of record in the United States, after some initial hesitation, had grandly opened the discussion of Fascism as an international model. In fact, the New York Times clearly took a positive position toward the Fascist cause. After a few days of reticence, the first-page headlines read: “An Italy Transformed”; “A Great Wave of Patriotism Re-unites All Classes Under Mussolini”; “Workmen and Employers Combine in Sacrifice for the General Good”; “Bolshevism Stamped Out . . .” The Rome correspondent allowed his political leanings to show clearly, and the New York editorial staff, responsible for writing the headlines, did not tone down the favorable stance. The content of the article revealed the author’s scorn for the defeated regime, as well as his participatory enthusiasm for the new: “A new set of young men is now in office . . .”; “Mussolini has torn the veil from the fetish of communism . . .”; “The spirit of mutual courtesy and toleration exists in relations between one class and another”; and so on.48 It appeared that the myth of early Fascism had been swallowed whole and regurgitated for the American populace in the pages of the most important daily paper of the United States. Nor did the press limit itself to expressing mere admiration or simple approval. As time passed and the solidity of the so-called Fascist “experiment” seemed to gain confirmation, several newspapers continued to construct a theory of Fascism. A few of these voices were above all suspicion, given their habitual and uncompromising defense of democracy in their own country. The New York Times was not only the most important but also the most democratic of the major daily newspapers of its time. When all the others had gone nationalistic and xenophobic, the 47 48

Foreign Affairs, February 1923. “Italy Transformed; Money, Gems, Work Given to State.” New York Times, January 1, 1923.

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Times had remained faithful to the Wilsonian tradition. There was no inherent sympathy for populist isolationism or authoritarian rule that should have made it vulnerable to becoming Fascism’s dupe. And yet, the exclamations reported above were not an isolated case. An editorial of December 19th called Mussolini’s “. . . the most interesting governmental experiment of the day. He came at the end of a short but exhausting period in which the people of every country got their fill of ordinary government, its inefficiencies and cowardices and compromises and stupidities.”49 The American press did not even criticize the electoral majority law introduced by Mussolini [usually known as the Acerbo Law, it awarded the party with the largest share of votes two-thirds of the deputy seats. It was passed in 1923 to assure the Fascist Party a majority in Parliament in the upcoming elections – trans.], comparing it to the United States’ own Electoral College. Americans obviously did not consider Mussolini a dictator in the normal sense of the word, even if he was something more than simply a strong executive power in a democratic system; perhaps they thought of him as an innovator who had found a third way between democracy and dictatorship. According to the New York Times, it was only between this third way and the traditional old European parliamentary system that a choice could be made. That this third way, as it was imagined, might have some points in common with American presidential democracy, specifically the power and stability of the executive, only seemed to make it more attractive. At the point when Mussolini had already made his speech calling the Parliament a sordid and gray chamber [on November 16, 1922, Mussolini had addressed the Chamber of Deputies, saying he could have turned it into a mere encampment for his men but had chosen to cooperate with already-existing political factions; the speech was seen as foreshadowing his intentions to make Italy a one-party state – trans.]. Americans failed to make a fundamental distinction: the American Congress acted freely and autonomously in its role as a check on executive power, while Mussolini’s plans promised no such liberty for the Chamber of Deputies. The reactions of American officials to Mussolini’s assumption of power were formal yet courteous, as is usual in the case of governmental change in an allied country where there is no doubt of the legitimacy of the new administration. By itself this deserves note if we remember that the U.S. government waited many years before formally recognizing the Soviet Union, following a tradition that led it to reject recognition not so much 49

“No Room for Rivals,” The New York Times, December 19, 1922.

2. American Reactions to the Rise of Fascism

45

on any juridically reasoned basis but rather on grounds of morality and principle. And yet, despite the fact that Mussolini had created his government through a coup – a royally sanctioned one after the fact, to be sure, but it had still been done through the use of force – the State Department showed absolutely no doubt that recognition ought to be immediately conferred.50 Once the apprehensions from just before the March on Rome had disappeared, the climate in the Republican administration of Harding was markedly favorable to the new regime, leaving aside a few uncertainties about Mussolini’s intentions in foreign policy. As already indicated, from the very first moment of Mussolini’s rise to power Ambassador Child had become his ardent supporter, in public and in private. George Harvey, old nemesis of Woodrow Wilson and now ambassador in London, wrote a telegraph calling for Child to show sympathy and cooperation toward the Fascists in light of their position as the dealers of the deathblow to Bolshevism in that country. Despite their lack of experience, he applauded their instincts and thought that guidance and new responsibilities would cool their ardor.51 Child certainly did not need to be asked twice; but even more prudent functionaries of the State Department allowed themselves to radiate general satisfaction regarding the events in Italy. The undersecretary of state, William Phillips – unsuspecting of his destiny to occupy the embassy in Rome at the moment of Pearl Harbor and the Italian declaration of war – gave repeated signs of sharing Child’s enthusiasm for Mussolini’s government.52 As for the extremely authoritative Secretary of State Charles Evans Hughes (twice Republican candidate for president and later chief justice of 50

51

52

Migone, op. cit, p. 126. On the refusal to recognize the Soviet Union, R. W. Leopold, The Growth of American Foreign Policy, New York: 1964, p. 479. NA-DS, Records relating to the relations between the United States and Italy, microscopy 527, Roll 10, George Harvey to Charles Evans Hughes, London, October 31, 1922. William Phillips wrote in his diary on October 23, 1923, that Dick Child, ambassador in Italy, and a guest in the White House, had visited that morning. He described Child’s enthusiasm about Mussolini and noted that Child did not at all agree with Ned Lowry that the Italians were exhausted from his demands and incapable of following him. Child thought Mussolini was stronger than ever and told Phillips that the manner in which Mussolini took power and his relationship to power made him believe from the beginning. See HUHL-WP, Diary, October 23, 1923. See also the official praise offered by Phillips, according to State Department etiquette, in several reports by Franklin M. Gunther: NA-DS, Records relating to the relations between United States and Italy, microscopy 527, Roll 10, William Phelps to Franklin Mott Gunther, Washington, D.C., January 4 and January 29, 1923. On Phillips’ later attitude toward Fascist Italy, see his autobiography Ventures in Diplomacy, in truth not very informative; so too his oral history testimony for the Oral History Project hosted at Butler Library at Columbia University. Richer in information is the Masters thesis of M. C. Kellett, William Phillips and Italo-American

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The United States and the Rise of Fascism in Italy

the Supreme Court), he grew in the course of his tenure in the State Department to hold a clear pro-Fascist leaning, which he expressed at a banquet for the Italy-American Society at the height of the subsequent Matteotti Crisis, 1924. Hughes made a public declaration in praise of the unity, vigor, and determination that Italy’s people and her new leaders were showing to reach a new level of prosperity in the postwar era. He did not appear to appreciate that this unity had been achieved because of the assassination of one of Mussolini’s principal political opponents; a death the leader, Hughes appraised, was accused of instigating. The accusation had led the opposition to temporarily withdraw from Parliament in an act known as the Aventine Secession, in order to demonstrate its rejection of the Fascist government. The singular coincidence with the political crisis of the regime, the cautious but explicit reference to his work of reconstruction, left no doubt: the secretary of state had given public notice that his government counted on Mussolini as its interlocutor in the development of an economic cooperation that was rapidly maturing (1924 was not only the year of the Matteotti affair, but also the Dawes Plan, which swept away many of the obstacles to American capital’s expansion in Europe). In the meantime Child had not held back in encouraging good relations between the two governments. Among other things, he had proposed a visit by the king and queen to the United States, a few months after the king called Mussolini to form a government.53 Child is interesting not so much for his role as ambassador as for that of propagandist, because his testimony in favor of Fascism seems typical of the average American tourist of the era, a wealthier and more influential type than is today the case.54 In a certain sense, Child is one of the creators of that early pro-Fascist rhetoric among

53

54

Relations, 1936–1940; a Case Study of the New Diplomacy, unpublished thesis, Princeton University 1957. The secretary of state replied to Child that he was in favor of the visit as long as it was a courtesy trip and not an official state visit, which since it was a question of monarchs, would set a precedent requiring much delicacy. See NA-DS, Records relating to internal affairs of Italy, microscopy 527, Roll 19, Charles Evans Hughes to Richard Washburn Child, Washington, D.C., June 12, 1923. Child used the occasion to invite Mussolini to an intimate lunch, at which he obtained his enthusiastic consent, demonstrated in a message from Mussolini to Vittorio Emanuele III in which he enumerated the political and especially economic opportunities to be had from such a visit. See DDI, VII, 2, 102. It was probably the lack of enthusiasm on the part of the king that ended this plan, even without an explicit American invitation. See especially Child’s introduction, cited above, to the Autobiography of Mussolini, but also R. W. Child, A Diplomat Looks at Europe, New York: 1925; idem, The Writing on the Wall, New York: 1929. See also his numerous articles in the most popular American periodical of the time, the Saturday Evening Post: “Making of Mussolini,” v. CXCVI (June

2. American Reactions to the Rise of Fascism

47

American observers: he appreciated the youthful and idealistic manner of the squadristi, an energy many Americans commented on finding pleasing; he complimented the restored order found even in the little matters that made tourists’ travels easier; he noted the return to normal productivity that businessmen transferred to Italy would appreciate; he described the magnetic personality of Mussolini by comparing it to Theodore Roosevelt; he even mentioned the proverbial trains which now ran on time. Child’s reports and the submissions of American journalists stationed in Italy echoed the applause of American tourists in Rome’s hotels recorded by Dino Grandi [later the foreign minister, Grandi was an early supporter of Mussolini and had been elected to the Chamber of Deputies as one of the thirty-five Fascist Party members who won seats in 1921 – trans.]; but all this had consequences beyond the emotional, superficial first impression they give.55 A crowning example of all this appeared in the magazine The New Republic, expressing the position of the more radical sectors of mainstream American politics (that is, those who are still within the range of the major political parties and who participate in national elections). This was the only publication of its kind, with a national readership, that after a first blush of infatuation took an editorial stance against Fascism.56 And yet this solitary opponent of Mussolini did not hesitate to publish a correspondent’s article composed entirely of the commonplaces which by then formed the decisive political judgment of nearly the entire contemporary American elite: the theme of the reassuring return of productivity and order. Right from the beginning, most Americans saw and appreciated the Fascist coup d’état for one particular aspect: the Italian version of a return to normalcy, a goal supported with great energy in the United States and advocated by them as a model for all of the turbulent European countries.57 It is striking how this idea, the return of order, squashed every other possible concern. One might expect that the destruction of that constitutional order which was supposed to be the hallmark of the

55 56 57

28, 1924); “What Does Mussolini Mean?” v. CXCVII (July 26, 1924); “Open the Gates,” v. CXCVII (July 12, 1924); and “Mussolini Now,” V CC (March 24, 1928). Dino Grandi, interview with the author, Taormina: January 3, 1970. Migone, op. cit., pp. 159ff.; Diggins, op. cit., pp. 228–231, 386–387. Migone, “Gli Stati Uniti e l’avvento del fascismo;” see also Diggins, op. cit.; Carter, op. cit.; L. A. De Santi, United States Relations with Italy under Mussolini, 1922–1941, A study based on the documents of the Department of State and documents from the captured files of Mussolini, unpublished thesis, Columbia University, 1952, pp. 30ff.; J. M. Berutti, ItaloAmerican Diplomatic Relations, 1922–1928, unpublished thesis, Stanford University, 1960, pp. 5–8; A. DeConde, Half Bitter, Half Sweet. An Excursion into Italian-American History, New York: 1971, pp. 162–205; C. Damiani, Mussolini e gli Stati Uniti, 1922–1935, Bologna: 1980.

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liberal democratic order would elicit some reaction in the nation founded on one of the world’s great liberal revolutions. Instead critiques and negative evaluations were utterly marginalized, nearly completely confined to Marxist and extreme factions, often within minority ethnic communities.58 When such concerns appeared, they were argued away with the only seemingly thoughtful justification that it would be wrong to judge the utterly foreign context of Italian politics according to the same democratic-constitutional categories that applied in a natural way only in the nations of Anglo-Saxon legal tradition. This editorial and diplomatic interpretation on the rise of Fascism constitutes significant early evidence of what would become an American historical tendency: ever more frequent toleration of exceptions to democratic rule, in the name of ever more imposing American interests. The nearly unanimous consent to Fascism in the United States provokes serious questions on the nature and the limits of the American ideology and practice of democracy. At the same time it is important to observe that that consent was also, if not exclusively, the product of a specific set of historical values, interests, and mindsets that characterized the United States of the Twenties.59 The desire for a return to normalcy, in a larger sense than merely economic productivity, was particularly strong. As argued above, the need for economic expansion and therefore for stable and friendly partners, was foremost in the minds of American elites, particularly financial elites; and was never more than in this historical period determinative of their political and ideological orientation, as well as that of a larger range of American public opinion. After the traumatic return of the obligation to engage in European politics and participate in a world war, after the successive obligation to commit to the peace negotiations, the resentments of the American public toward Europe had become an influential factor. Yet equally influential was the displeasure of economic leaders with this attitude, finding it necessary to continue looking to Europe. In a certain sense Mussolini’s undertaking came to signify for Americans a rebuke to those other European governments who remained in disorder, so that approval of Fascism became a shared position among both isolationists and those who waited impatiently for the right conditions – the rise of stable and capable partners – to recommence internationalist politics. 58

59

A. Dadà, “Contributo metodologico per una storia dell’emigrazione e dell’antifascismo italiani negli Stati Uniti,” in Annali dell’Istituto di storia della Facoltà di magistero, University of Florence, 1979; P. Nazzaro, “Il Manifesto dell’Alleanza antifascista del Nord America,” in Affari Sociali Internazionali vol. II, no. 1–2 (June 1974): 171–185. See especially S. Adler, The Isolationist Impulse.

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Indicative in this sense is the comparison with France, where American efforts (especially American financiers’ efforts) to carry forward a politics of European engagement were not as straightforward. Dwight Morrow, banker for Morgan (and a man destined for the highest offices if not for his premature death, according to his illustrious biographer60), exclaimed that despots whole purpose was to put into place those reforms which could not be obtained through democratic means.61 When Mussolini did reform the Banca d’Italia, it is not hard to imagine the conclusions Morrow and his fellow banking colleagues involved in monetary stabilization drew as a consequence. When, on the other hand, the Briand-Peret government of France refused to join the American plan for stabilization, another Morgan Bank partner, Thomas W. Lamont, quickly asserted that history was repeating itself since there was still no one in the government with sufficient mental clarity, or courage, to carry through a constructive plan.62 When the Italian government, through Alberto Pirelli, gave its approval for the same plan, Lamont concluded that the entire problem rested in the absence of any real man from the government and banking world of France.63 Considering what France and French democracy have meant in the history of the United States, these comments and unfavorable comparisons are striking. One need not invoke the solidarity between Jefferson and Tom Paine; it is enough to recall how the American intervention in the First World War was motivated by the enthusiastic call to defend democracy in France against the threat of the Central Empires. Morgan Bank was in fact the driving force behind the financial and propaganda effort supporting intervention. Given this background the preference for Mussolini’s Italy was a true about-face, one with deep roots and necessarily motivated by more than mere opportunism. In more ample sections of the American populace, there was certainly a notable contrast between the idealistic motivations that led them to accept the sacrifice of their neutrality in European conflicts, and the negative results the peace treaties produced among them. The France of Clemenceau, more than any other country or any other government, became a symbol of that intransigence that served to perpetuate the threat of war and to render meaningless America’s military contribution. Not only that; the state of mind that led an important part of the governing elite to align itself with Fascist Italy and distance

60 61 62 63

H. Nicolson, Dwight Morrow, London: 1935, p. 380. Migone, “Aspetti Internazionali”, p. 64. Ibid., p. 77. Ibid., p. 92.

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itself from France was inspired by more than just the Treaty of Versailles and Poincaré’s re-occupation of the Ruhr. It was a consequence of the political changes taking place in the United States after the First World War: the imposition of social order, at the expense of a more advanced liberal tradition and the respect of civil rights; the xenophobic campaign against immigration, and the rejuvenation of isolationism; all of which were inextricably linked to the wave of repression hitting organized labor in the postwar. Behind a picture of apparent security and prosperity, the need for normalcy in the Twenties masked a profound crisis, if not in the liberal tradition of reform and respect for civil rights themselves, then in their interpretation.64 It was, therefore, completely logical that French parliamentary democracy, and for that matter the parliamentary regime that Fascism had replaced, which had seemed particularly deteriorated, became an easy target for those who were more and more committed to social order as a value, and to capitalist rationalism over the guidance and development of democracy. Finally it must be added that in this political and ideological situation a serious political conflict was brewing between those Americans who favored the expansion of American capital, requiring the economic reconstruction of a socially stabilized Europe, and large sectors of the French, protective of their own economy and perfectly willing to use force to guarantee their territorial and military security against Germany. But Germany’s recovery, to Americans, was nothing less than the linchpin for European reconstruction.65 Mussolini, for such Americans, represented order and rationality; a rationality that seemed in concert with their economic and political objectives. The source of Mussolini’s personal popularity abroad is also found in this explanation, bolstered as it was by that other American predilection, for the man of action.66

3. the matteotti crisis and the manipulation of the press Mussolini’s first moves in his campaign to woo the foreign press showed that he was well aware of the residual doubts that might exist among influential sectors of the major Western powers. Although the first accounts 64

65 66

See for example the testimony of John Dos Passos reported in W. E. Leuchtenburg, The Perils of Prosperity, 1914–1932, Chicago: 1957, pp. 71ff. Schuker, pp. 232–294. Diggins, Mussolini and Fascism, pp. 58–76.

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were reassuring, there was some fear of the extremist nature of the Fascist movement; not so much of its subversion of the existing constitutional order but of the eventual possibility that this subversive force would undermine law and order. Only the least informed dreaded that Mussolini, with his Socialist origins, might transform into an apostle of social revolution. Rather, there was the concern that the extremist elements who “inevitably” joined popular mass movements like Fascism could take hold and reactivate those political and social opponents who seemed miraculously passive given the conflicts they had produced in previous years.67 As we have seen, the function of the Fascist “extreme left,” which would become the Fascism of Farinacci (a significant representative of this tendency), was for Mussolini that they provided him, to American eyes, with a credible role as a moderate, guarantor of the constructive and essentially conservative character of the Fascist regime. Mussolini’s declarations and his concrete actions, and those of his ministers, were directed toward the establishment of stability, toward the discipline of the subaltern classes in a system of bourgeois law and order, toward the continuity of essential state structures, and toward the recovery of free enterprise. They squarely hit their target. Mussolini was not only the man who saved Italy from chaos and Bolshevism (this myth would only be reinforced as the years went on), but he was also the man who assured a legal and relatively bloodless – if not exactly consensual – seizure and consolidation of power. Thus was assured the interpretation of the most serious crisis of the regime’s early years: the crisis following the assassination of Giacomo Matteotti. Despite the fact that American and foreign journalists could not help but report deeply incriminating aspects of the affair, the interpretative scheme held fast according to which Mussolini was the final guarantor of law and order. Indeed, the conviction was strengthened that he was the only possible guarantor, seeing that the old political elite had been irredeemably discredited, as the Aventine Secession proved [during the crisis, opposition deputies left the chamber and met on the Adventine hilltrans.]; that the Church and the monarchy did not enjoy the necessary support from the people, nor the necessary unity in their reciprocal relations to act as an alternative; and a reawakening of organized labor was, if anything, the very danger American observers wished most to avoid.

67

Dino Grandi, Interview. Grandi underlines how Mussolini was perfectly aware of the necessity to demonstrate his capacity to impose discipline in his own ranks. This is the most important lens through which to interpret the organization of the squadristi into state militias.

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The assassination of Matteotti, and what it represented for the relations between the Fascist regime and the American public and its government, offer a useful point of entry for analyzing the intense energy Mussolini and his collaborators dedicated to conquering the American press. Salvemini noted how Mussolini had made good use of his substantial abilities as a propagandist and his expertise in the techniques of mass communication in his role as international diplomat. He wrote of Mussolini: “Outside of Italy he could not crack heads; he had to win minds.”68 Scanning the ministerial files dedicated to international relations with the United States, the reader is struck not only by the widespread and frequent proposals of action with regard to centers of power, newspapers, and influential individuals who might help shape the regime’s public image, but also the use of an impressive variety of techniques. People who were only minor public figures but might have sway in crucial contexts were courted with compliments and promises of direct contact with Mussolini designed to appeal to their desire for greater visibility and influence; others were offered favors (for foreign journalists, this was often a tax break on the cost of sending international telegrams). Titles and honorifics were awarded to citizens of a nation which constitutionally rejected such distinctions; curiously this rarely alienated the American individual in question. In more rare but more important cases, direct pressure might be applied, especially through Morgan Bank, on the owners of a news organization to produce the desired editorial stance. It is also striking how much personal and nearly feverish energy Mussolini himself gave to such problems, which were apparently never too small to merit his personal attention. Only financial questions, dealing with war debts and the later stabilization of the lira, occupied him to the same extent when it came to relations with the United States. Mussolini’s general objective was evidently to assure that his regime and his actions were presented in the most favorable light at all times. More specifically in terms of the United States, the dictator was anxious that his hold on power appears unshakable and, as much as possible, based on mass consensus. He well knew that isolated aspects or events that contrasted too strongly with American ideology might be damaging to the regime’s popularity; but his main concern was to control the diffusion of his own image so as to constantly reassure Americans that they were dealing with an interlocutor capable of controlling the internal affairs of Italy. He knew his guarantee of stability constituted his single 68

Salvemini, Mussolini diplomatico, p. 384.

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most valuable trait in the eyes of American powerbrokers, especially the financiers who needed to be able to count on favorable future conditions for their European investments. Conversely, he knew that their confidence and intervention would further shore up the very stability of his regime so prized by all. This was why Mussolini, in the course of the crisis created by the resignation of the members of the Partito popolare from his cabinet [the earliest explicitly Catholic party and the heir to the second postwar’s dominant party, the Christian Democrats; the People’s Party was divided over whether to join Mussolini’s coalition governments or pass over to the opposition – trans.], sent one of his terse directives to his diplomats: Press reactions must be carefully monitored, energetically rebutted when they criticize Fascism which is now the national government. Above all it is necessary to correct news articles claiming any governmental instability, which is very solid very popular loved by all and supported by all the youth of Italy.69

Since Ambassador Caetani was on leave in Rome, it was the chargè d’affaires Augusto Rosso, who would become one of Dino Grandi’s main collaborators and later the ambassador to Washington during the war in Ethiopia, who received this order and whose immediate concern was instead to avoid any sort of public demonstration that might be counterproductive in the American context.70 In this he differed not at all from his superior Caetani, who would write regarding the continual pressure from the ultra-Fascists among the Italo-American community that: Our good friends must know by now that in the United States there is freedom of the press (and too much) and that the State Department has no intention or ability to intervene in the matter.71

It would be mistaken to imagine that men like Caetani and Rosso were half-hearted, or that they did not serve the regime, as the hotheads would 69

70

71

ASMAE-AAW, b. 184, F. Caso Matteotti, Elezioni, Benito Mussolini to Gelasio Caetani, Rome, July 10, 1923. It reflects the same objectives as the directive emanated upon the absorption of socialist co-ops by the Fascist movement (AC-CG, b. A-2, f. 2, Benito Mussolini to Gelasio Caetani, Rome, August 18, 1923) and as that issued in regards to the support of the regime by the working and rural masses (AC-CG, b. A-2, f. 2 Benito Mussolini to Gelasio Caetani, Rome, August 11, 1923). See all B.M. to G.C., August 13, 1923, on the national budget and B.M. to G.C. on the political orientation of CGIL, the national trade union. ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Augusto Rosso to Benito Mussolini, Washington, D.C., July 18, 1923. ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to John Di Silvestro, Washington, D.C., June 21, 1924.

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claim. Nor should we apply to them the argument that has been made about certain nationalist or career diplomat circles, that they served the state but not the regime. They did not oppose the identification of the state and the regime that Mussolini built; but they served it with intelligence and, in the case treated here, with a full consciousness of the context in which they had been called to act. For them the defense of the Fascist government was equivalent to the defense of the state, just as the antiFascists who declared themselves in opposition to the regime were renegades who damaged the fatherland in the eyes of the rest of the world. They gave their government their technical competence, an expertise that led them to avoid sterile demonstrations in a free press state in favor of less dramatic but more effective means. They stood up to criticism from more doctrinaire Fascists and firmly reminded Mussolini that behaving in those ways that would most build credit in the United States was in the best interests of his regime at home in Italy as well. Meanwhile Rosso also moved to reassure Mussolini that he had no reason to worry about his treatment in the American press: Outside of a few minor radical papers, the largest and most influential news organizations of this country have from the beginning shown marked sympathy for the Italian Fascist movement, in which they see the most effective instrument of Italian economic recovery through the establishment of law and order, and social discipline. This attitude has never changed, and several accomplishments of Your Excellency’s government (bureaucratic reform, elimination of wasteful government spending, financial policy, etc.) have given the American press occasion to reaffirm the their confident good wishes for Fascism’s success.

In such conditions, Rosso concluded, the embassy had rarely seen reason to intervene.72 One could hardly summarize more clearly the tone of the American press since the rise of Fascism and the reasons behind its popularity there. In making Mussolini understand that it would be superfluous or even counterproductive to interfere in a situation already going so well, Rosso was confirming that exactly the matter which most concerned “il Duce” – the impression of the regime’s stability – that most bolstered confidence in him among Americans. He made this evaluation in summer 1923, but the regime’s popularity in the United States survived a further and more difficult challenge as well, in the form of the Matteotti affair, because yet again in that instance Mussolini would succeed in emerging, to the 72

Rosso to Mussolini, July 18, 1923.

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Americans’ eyes, as the true guarantor of that social order that concerned them above all else. The American government was not directly involved in the crisis following Giacomo Matteotti’s assassination, according to the international tradition that government official did not comment on one another’s internal affairs. Nonetheless, the American government was strongly interested in gaining an accurate picture of what was really happening on the ground in Italy. In no moment of the crisis did the American Embassy in Rome acknowledge any doubt that, whatever temporary troubles it might be experiencing, Mussolini and his regime would survive the opposition’s attacks. In concise terms, Ambassador Fletcher – who had just replaced Child upon the latter’s resignation – and his colleagues reasoned that Matteotti’s assassination was not the work of the regime, much less of Mussolini himself, but of his most extremist followers; and that the leader was sincere in his intention to continue governing according to constitutional norms. In a certain sense the crisis gave Mussolini the perfect excuse to clean house, liquidating the most seditious and violent elements of the movement, as Caetani suggested in an interview with the undersecretary of state, Grew.73 Most of all, Mussolini’s government would survive (and it was a good thing that it would survive) because, according to Fletcher, the people did not want to return to the parliamentary incompetence and social disorder that had caused the Fascist revolution.74 Since there were no possible substitutes for Mussolini within the Fascist party, he remained the only sure sponsor of that social order Fletcher described Italians as holding so dear, but which in truth American elites wanted preserved at all costs.75 The Washington administration offered no difference of opinion. We have already seen how Hughes chose to express his admiration for the “indefatigable industry of the . . . [Italian] people and their leaders” at the very height of the Matteotti crisis.76 Nor would Hughes fail to distribute to the press the text of a telegram from Fletcher giving assurances that all

73

74

75

76

HUHL-JCG, Conversation, The Italian Ambassador, Don Gelasio Caetani, Washington, D.C., June 23, 1924. NA_DS, 865.00/325, Henry Prather Fletcher to Charles Evans Hughes, Rome, June 23, 1924. The United States consul in Rome was the most objective observer, although he took care not to differ from his Ambassador’s analysis. He did, however, show greater courage in signaling the presence of an ever more visible opposition to the regime. See LC-WJC, Leon Dominian to Wilbur J. Carr, Rome, June 24, 1924. HUHL-JCG, Grew, Diary, November 10, 1924.

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of Italy was perfectly in order in the midst of another delicate moment.77 In the meantime the secretary of the treasury, Andrew Mellon, directly concerned in American finance’s plans for monetary stabilization in Europe, had also contributed to reinforcing Mussolini’s position. In a campaign speech on October 10, 1924, Mellon recalled the nefarious influence of the Socialists in Italy after the war, and, ignoring the present political crisis, caused precisely by the abuse of political power, concluded that a strong hand had intervened to restabilize the Italian government, on the solid basis of government by party and not by compromise. The Italian government, he declared, had set itself the task of freeing industry from government regulation and lowering taxes, and that year the budget was nearly balanced. This observation was relevant in a campaign speech since, not coincidentally, the policy Mellon set at the treasury was a rigid defense of laissez-faire economics, and Mussolini was presented as a principal exemplar of the success of that ideology.78 The reactions of the press to the Matteotti crisis were less uniform and less prudent than those of the State Department, although they did not disclaim the fundamental interpretation offered by those officials. Nonetheless, for the first time since the Fascist seizure of power, a few of the more politically influential papers voiced serious reservations concerning the nature of the regime. Particularly the World in New York, the Boston Herald, the Chicago Evening Post, and the Baltimore Sun distinguished themselves by harsh judgments centered mainly on Mussolini’s inability to keep his own movement under control.79 What is notable here is how the preoccupations did not reach their height in the days immediately following the crime, but in November, when Mussolini seemed to vacillate and hinted that he might revoke the Acerbo electoral law. It was only at that moment, when the American press sensed that Mussolini was wavering in his determination to secure his regime’s survival, that even previously friendly newspapers like the New York 77

78

79

AC-GC, Gelasio Caetani to Benito Mussolini, Washington, D.C., January 22, 1925. The moment was delicate because the Hearst organization had just published a report that described Italy as being in a prerevolutionary situation. ASMAE-AAW, b. 140, f. Italia. Questioni finanziarie economiche, tel. 348/255 Gelasio Caetani to Benito Mussolini, Washington, D.C., October 31, 1924; ibid., 3 November 1924. ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to Benito Mussolini, Washington, D.C., June 27, 1924; ASMAE-AG, b. 163, Reparto Generale 42; uccisione Matteotti, tel. n. 186, Gelasio Caetani to Benito Mussolini, Washington, D.C., June 21, 1924; ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, il R. Console d’Italia in Baltimore to Gelasio Caetani, Baltimore, MD, November 19, 1924.

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Times and the New York Herald qualified their support for the Italian dictator.80 Despite these doubts, in general the reassuring messages sent by the embassy were well founded. The hesitations of November 1924 were quickly overcome when Mussolini proved to have the situation well in hand in January 1925, and the most influential sectors of the American press realigned themselves with the diplomats and financiers in the essential conviction that, notwithstanding the Matteotti “incident” (as it came to be considered after the fact), only Mussolini was able to guide them to their ultimate goal: the stabilization of Italian society. This message from Caetani (but there were others of the same tenor) gives an accurate picture of the position of the mainstream press: Excepting a few notoriously antifascist papers like the World in New York, the American press generally continues to maintain its equanimity regarding the Matteotti affair. The Times has always published editorials inspired by sympathy for Your Excellency’s government. The dominant ideas are that Mussolini and Fascism were betrayed by some small violent faction, that Mussolini will have the energy to clean house, that the great majority of Italians maintain complete faith in him. As a whole the press reaction is fairly quiet, perhaps because it is election season here.81

Particularly useful, from the Fascist point of view, was the publication of a series of apologetic articles in the most widely read periodical in the United States at the time, the Saturday Evening Post, two million copies sold weekly, written by the ex-ambassador and journalist Richard Washburn Child.82 Still, it was not so much the editorial comments which gave the regime trouble, since they were rarely truly hostile, as the publication of several news stories considered false and tendentious by Fascist officials. What 80

81

82

Diggins, p. 33; The New York Herald, November 15, 1924; The New York Times, December 23–24, 1924. ASMAE-AG, b. 163, Reparto generale 42 uccisione Matteotti, te. N. 186, Gelasio Caetani to Benito Mussolini, Washington, D.C., June 21, 1924; see also ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, tel cif. 26, il R. Console in Boston, Ferrante, to Gelasio Caetani, Boston, MA, June 26, 1924; ASME-AG, p. 163, Reparto Generale 49: uccisione On. Matteotti, tel. n. 191, Gelasio Caetani to Benito Mussolini, Washington, D.C., June 27, 1924; ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, tel. cif. 236/191, Gelasio Caetani to Benito Mussolini, Washington, D.C., June 26, 1924; on the publication of Cesare Rossi’s memorandum in the New York Times, ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, tel. cif. 434/368, Gelasio Caetani to Benito Mussolini, Washington, D.C., December 31, 1924. See also Boston Transcript, June 25, 1924; Springfield Union, June 25 and 27, 1924. ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, tel. 236/191, Gelasio Caetani to Benito Mussolini, Washington, D.C., June 27, 1924.

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they, and above all their leader, perceived as dangerous was not any ideological opposition – which, if it came from socialist-leaning or ethnic minority communities, actually aided the regime in terms of American reception, large swathes of whose elite and general public held xenophobic opinions – but rather any information that, accurate or not, threw doubts on the stability of the regime. In the face of this danger Mussolini reacted first with censorship, that is with an embargo on the reports that foreign journalists sent their papers in the first days immediately following Matteotti’s disappearance. Mussolini then suspended this extreme remedy when he realized that it would produce further negative reactions. In the first place foreign papers, when they received no dispatches from their Italian correspondents, simply published reports from other foreign bureaus, which were even more hostile and speculative than those versions would have been.83 In the second place, the use of censorship was a delicate question in countries like the United States, where it constituted an attempted breach of the freedom of the press. Thus the New York Times published a fundamentally impartial report under the decidedly less innocuous headline “ITALIAN PRESS PROTESTS: Opposition Papers Denounce Mussolini’s Censorship Decree.”84 In the United States, it was more desirable that the regime use the less spectacular, but arguably more efficacious means at its disposal: those separate interventions and pressures that the embassy and the Roman government itself exerted on the editorial staff and particularly on the ownership of those newspapers that might cause any embarrassment for the regime. It is worth examining a few of these interventions, which paint a useful picture of the extensive and patient work of Mussolini and reveal the type of American interests that found themselves aligned with him. An atypical example was the New York World, since its director Walter Lippmann had a strong personality which did not offer Mussolini or his ambassadors opportunities to decisively sway him; even so it is interesting what a variety and quantity of attempts were made to influence him, even before the Matteotti crisis became a pressing problem. Guido Jung, future 83

84

ASMAE-AG, b. 163, Reparto Generale 49: su censura stampa estera, tel. n. 213, Servizio Stampa, Legazione d’Italia a Vienna a Benito Mussolini, Vienna, June 21, 1924: “Telegram blockage from Italy due to censorship provoking the spread of exaggerated rumors from Paris Berlin many questions from newspapers.” Marginal note: “Abolish censorship. Mussolini.” See also tel. n. 7278, Giacomo Paolucci Barone to the Legazione d’Italia a Vienna, Rome, June 24, 1924. The New York Times, July 10, 1924. See also on this topic BIAGSRE, Pratiche Varie, b. 64, anno 1924, Mario Pennachio to Bonaldo Stringher, New York, N.Y., July 11, 1924.

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Minister of Finance, wrote to Caetani from Rome in November 1923. Salvatore Cortesi had just sent him a copy of a series of articles from the World with the bylines of William Bolitho and Kajetan Dunbar, both quite hostile to Fascism. Jung wrote: I am certain that the articles haven’t escaped your attention; having to read them was one of the least pleasurable tasks of my afternoon. Tomorrow I will give Cortesi the financial information he requested in order to write a response to those articles’ claims about the financial policies of Fascism. It seems that Cortesi was alerted by the military or naval attaché of the local American Embassy, who wrote to ask if he knew who those World correspondents were. I wanted to let you know, despite your likely awareness of the issue, because it demonstrates once again how important it is for us to coordinate our propaganda work. . . . The overall tone . . . of the articles corresponds perfectly to that presumptuous and boorish mentality of the true American, which angers me most not for its antifascism but for the anti-Italian prejudice that inspires it.85

What is most striking about this letter is the pattern of events it implies. The World published some articles that were hostile toward Fascism. The American Embassy in Rome alerted Salvatore Cortesi, the notoriously philo-Fascist correspondent of the Associated Press, who then hastened to refute the articles, with the help of the Fascist official (though he identified as a nationalist) Jung, who in his turn invited the Italian ambassador in Washington to take action in the case. The World’s publication of a negative opinion of Fascism provoked the collaboration of officials from both governments and the principal news agency of the American press in the common intent to silence one of the few voices to dissent from the great chorus of praise raised in tribute to Mussolini. The World merited all this attention because it was the only daily paper with political influence at a national level (it must be remembered that at this time no American daily paper, not even the New York Times, had complete local distribution throughout the country) to maintain a consistently critical stance on the Fascist regime even outside of those specific moments when an individual event (e.g., the eve of the March on Rome, the Corfu incident in 1923, or the Matteotti assassination) caused other papers to raise isolated objections. The World was a paper read by the governing class, and though its politics were inspired by Walter Lippmann’s democratic ideals, it was also well enmeshed in the

85

ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Guido Jung to Gelasio Caetani, Rome, [?] November 1923.

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interests of Wall Street and reflected the concerns of the Council of Foreign Relations, of which Lippmann was an important member.86 More than anyone else it was Thomas Lamont who tried repeatedly to influence Lippmann to diminish the criticisms of Fascism in the New York World.87 Although these pressures did not succeed in deflecting Lippmann, he must have had to take them into consideration, especially in terms of the economic aspects which most interested the partners at Morgan, who were very powerful in the publishing world. This exchange of letters between Lamont and Lippmann, just before the Matteotti crisis, is good evidence of the well-rooted admiration for Mussolini and de’ Stefani’s economic policies among American financial elites; it also attests to the efforts on behalf of the Fascist government made by Morgan Bank. And yet the letters also project a certain reciprocal respect between the two men. Lamont wrote: Though I know you may not have time to read them, I have sent you copies of the most recent speech given by Ambassador Caetani [who] makes particular reference to the great progress the Italian government, under the guide of Mussolini and his professor-minister of Finance [de’ Stefani], has succeeded in accomplishing, implementing a financial reform that, naturally, signifies stability, prosperity, and happiness for the Italian people.88

Lippmann answered in his turn: I will bring the speech of the Italian ambassador with me to the countryside, and I promise to read it this weekend, but I hope that the somewhat disconnected observations I made at his house have not caused him to believe that I fail to recognize the progress that has been made on the financial front.

Even Lippmann was forced to pay heed to Lamont’s persuasion, discreet as it was, and in order to avoid hypocrisy he fell back on the dubious distinction between economic and political spheres.89

86

87

88

89

HUGSBA-TWL, b. 190, f. 14, Thomas W. Lamont wrote to Gelasio Caetani, New York, April 21, 1924, saying that the New York World was an authoritative paper and its editor was anxious to do things well and to tell the truth. Lamont said he wished to furnish him with factual information if it were possible. ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to Thomas W. Lamont, Washington, D.C., April 24, 1924; HUGSBA-TWL, b. 190, f. 14, Thomas W. Lamont to Walter Lippmann, New York, April 29, 1924; see also Diggins, pp. 24, 50–52. HUGSBA-TWL, b. 190, f. 14, Thomas W. Lamont to Walter Lippmann, New York, April 29, 1924. HUGSBA-TWL, b. 190, f. 14, Walter Lippmann to Thomas W. Lamont, New York, May 2, 1924.

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The opinion expressed by the World on the Matteotti affair provoked new resentments from the regime,90 even though its editorials were more cautious than in the past.91 Nonetheless there were other articles, again with Kajetan Dunbar’s byline, containing several inaccuracies which gave Caetani the chance to send Lippmann a letter of complaint and correction.92 Nor did Lamont’s ongoing efforts to modify Lippmann’s position cease, actually intensifying as he prepared for a trip to Italy.93 The Fascist government joined these efforts, trying the tactic of personal flattery on Lippmann through those repeated assurances that, as Lamont had said, he was “anxious to do the right thing and tell the truth.”94 An entirely different species of persuasive tactics were used on the Chicago Tribune. The greatest daily of the Midwest, owned by Colonel McCormick, famous for its reactionary and isolationist tendencies, had initially been favorable toward the Fascist regime, calling it “the most striking and successful attempt of the middle classes to meet the tide of revolutionary socialism.”95 But after the assassination of Matteotti, it had voiced its worries regarding Mussolini’s capacity to keep the Italian situation under control,96 in strong enough terms to lead Caetani to classify it in “the same batch” as Il Martello (the newspaper of ItaloAmerican anarchists) and the New York World.97 In the days

90

91

92

93

94

95 96

97

ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to John Di Silvestro, Washington, D.C., June 21, 1924. Probably also as a result of the remonstrations from the Italian embassy, see ASMAEAAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to the Director of the “New York World,” Washington, D.C., December 24, 1924. ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to Benito Mussolini, Washington, D.C., December 22, 1924; and Gelasio Caetani to Walter Lippmann, Washington, D.C., December 24, 1924. Diggins, p. 51; LC-HPF, Thomas W. Lamont to Henry P. Fletcher, New York, March 19, 1926; NA-IR 432, Thomas W. Lamont to Giacomo de Martino, New York, January 23, 1929. HUGSBA-TWL, b. 190, f. 14, Thomas W. Lamont to Gelasio Caetani, New York, April 21, 1924; LC-HPF, Thomas W. Lamont to Henry P. Fletcher, New York, March 19, 1926. Chicago Tribune, November 4, 1922, cited in Diggins, p. 31. AC-CG, b. A 2bis, tel. cif. 7191, Benito Mussolini a Gelasio Caetani, Rome, June 22, 1924, and tel. cif. 231/188, Gelasio Caetani to Benito Mussolini, Washington, D.C., June 24, 1924. Asked by Mussolini, Caetani described the position of the Chicago Tribune by reminding him of an article which had emphasized the “dangers and weaknesses of a regime that the paper calls dictatorial.” ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to John Di Silvestro, Washington, D.C., June 21, 1924.

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immediately following the crime, Mr. Shumate, the administrative director of the paper, went to Rome along with George Raffalovich from the newspaper’s Paris bureau. Through the good offices of Eugenio Coselschi, a businessman who had contacts in the Ministry of Foreign Affairs, they met with Salvatore Contarini. They asked the permanent undersecretary to present them to Costanzo Ciano, Gino Olivetti, and Senator Rava so that they could invite these leaders (of the navy, major industry, and the Italian board of tourism, respectively) to contribute advertising to a special supplement the Tribune planned to dedicate to Italy.98 They simultaneously made clear that Shumate was putting the paper at the government’s disposal to influence American public opinion regarding the regime at that delicate moment, and insisted that the former had nothing to do with the supplement they were planning. As Raffalovich wrote, “If we want to enjoy a favorable American opinion, we have to tend to it in the American fashion.” He added, “We shouldn’t fear the press, but make use of it.”99 A few months later the owner of the Chicago Tribune approved the expulsion from Italy of his Rome correspondent, George Seldes, without any protest. Nor did he publish any of the material Seldes brought back with him on the Matteotti crime.100 The Chicago Tribune would go on to become a principal supporter of Italy in the war with Ethiopia, encouraging Mussolini to prioritize the “commercial, evangelical, scientific and humanitarian purposes” of the venture. Mussolini has been reading too much and still not enough history. He sees the territorial profits of pushing in, but, with the breath of Caesars in his nostrils, he has ignored the fact that the penetration must have prima facie commercial, evangelical, scientific, and humanitarian purposes.101

In other cases more brusque tactics were effective, especially where there was a previous collaborative relationship that the Matteotti affair might have damaged. Such was the case with the great chain of papers controlled by William Randolph Hearst, with whom the regime had long had good relations, which would resume and continue to be ever more useful during the war in Ethiopia. In particular the editorial head of the chain, Arthur 98

99

100 101

ASMAE-ASG, b. 175 già 174, n. 4 f. 2: Comm. Eugenio Coselschi, Giorgio Raffalovich, Eugenio Coselschi to Salvatore Contarini, Rome, July 2, 1924. ASMAE-ASG, b. 175 già 174, n. 4 f. 2: Comm. Eugenio Coselschi, Giorgio Raffalovich, letter from Giorgio Raffalovich, Rome, July 2, 1924. Diggins, pp. 43–46. “Bombs on Ethiopia,” Chicago Tribune, October 4, 1935.

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Brisbane, had been conveniently wooed with the conferral of the title of commendatore.102 The evening of January 14, 1925, the Hearst paper published a report sent from Chiasso, with the byline C. F. Bertelli, that described the conflicts in the Italian parliament, mentioned Fascist terrorism, and declared the king’s intention to dismiss Mussolini.103 Caetani, following the advice of Brisbane,104 sent a telegram of polite protest to William Randolph Hearst, calling upon his constant friendship toward Italy.105 He received in return a profound apology, in which Hearst said he had already noticed the publications and told his New York and Paris offices to suppress further articles in a planned series because he found them partisan and propagandistic. He suggested that Caetani give a direct interview to respond, and closed by expressing his admiration for the Italian leader, assuring him that he was confident the Italian people supported Fascism.106 But this had not been enough for Hearst. One of his foremost titles, the New York American, had already published on January 17 an editorial discrediting the Bertelli report, warning the American public not to pay heed to alarmist news about Italy.107 At the same time, Hearst had the Italian correspondent fired (he had worked for the Corriere della Sera) and threatened Bertelli with the same fate.108 Finally, as promised, the Evening Post and the Brooklyn Eagle published an interview with Caetani, while all the other Hearst papers published an interview Mussolini gave to the philo-Fascist journalist Verner von Wiegand on the front page. In a telegram to Brisbane, Hearst revealed the motives behind his reaction to the Bertelli report. He said he did not believe it was

102

103

104 105

106

107

108

AC-CG, b. A 3, Gelasio Caetani to Benito Mussolini, Washington, D.C., January 22, 1925. AC-CG, b. A 2bis, tel. n. 19/13 Gelasio Caetani to Benito Mussolini, Washington, D.C., January 15, 1925. AC-GC, b. A 20/2, Arthur Brisbane to Gelasio Caetani, New York, January 22, 1925. AC-GC, b. A 3, tel. di Gelasio Caetani to William Randolph Hearst, New York, attachment n. 1 a: Gelasio Caetani to Benito Mussolini, Washington, D.C., January 22, 1925. AC-GC, b. A 3, tel. of William Randolph Hearst to Gelasio Caetani, New York, attachment n.2 a: Gelasio Caetani to Benito Mussolini, Washington, D.C., January 22, 1925. AC-GC, b. A 2bis, tel. n. 21/15, Gelasio Caetani to Benito Mussolini, Washington, D.C., January 17, 1925. AC-GC, b. A 3, tel. William Randolph Hearst to Arthur Brisbane, Los Angeles, CA, January 17, 1925, attachment n. 3 Gelasio Caetani to Benito Mussolini, Washington, D.C., January 22, 1925.

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true, and that it was intensely unpleasant for Italians in the United States and should not be published if it was unpopular with American readers [author’s italics].109 The whole episode is an interesting revelation of the way that the so-called popular American press chose its own news stories. The decisive factor here was not the ambassador’s protest, nor the regime’s previous courtship of Hearst and Brisbane, but the fact that the millionaire publisher considered the news unpopular not only among Italo-American readers, who were indeed a considerable percentage of his audience, but among American readers in general, because of the popularity that Mussolini already enjoyed among them. However the influence of the ambassador’s intervention should not be altogether discounted, especially since he was constantly supported in these matters by the Morgan Bank. In fact, Thomas Lamont organized a lunch at this same time specifically in order to give Caetani a platform for explaining his version of events to the editors and commentators of the New York Times, the New York Herald Tribune, the New York World, the New York Evening World, the New York Evening Sun, and the New York Evening Post.110 Naturally, the regime dedicated the most attention to the press agencies who sent reports to those American newspapers without correspondents stationed in Rome; because of their appearance of neutrality unattached to any one editorial staff as they were, their reporters had quite a bit of influence. As shown by Diggins, the head of the Associated Press’ Rome bureau, Salvatore Cortesi, played a crucial role in the management and distribution of information about the Fascist regime.111 His son Arnaldo became the correspondent for the New York Times. Both were fervent supporters of Mussolini: at the height of the Matteotti crisis, Arone di San Valentino, head of the press office of the Ministry of Foreign Affairs, called Salvatore “our excellent friend,”112 while from Washington Caetani characterized Arnaldo’s articles in the New York Times as “truly splendid” just when the world’s press was offering its harshest critiques of the regime.113 109 110

111

112

113

Ibid. AC-CG, b. A 3, Gelasio Caetani to Benito Mussolini, Washington, D.C., January 22, 1925. Diggins, p. 44; an earlier treatment is by G. Salvemini, “Firenze,” in L’Italia Libera, September 16, 1944, reprinted in G. Salvemini, L’Italia vista dall’America, Enzo Tagliacozzo, ed., Milano: 1969, pp. 571–574. ACS-MCP, b. 105, f. 18 Stampa Estera, Appunto del Capo Ufficio Stampa del Minstero degli Affari Esteri, Arone di San Valentino, Rome, August 15, 1924. AC-GC, b. A 2bis, tel. di Gelasio Caetani to Benito Mussolini, Washington, D.C., January 8, 1925.

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Another Associated Press correspondent gave a dramatic description of how the Roman bureau functioned: The important fact is that the AP backed up everything pro-Fascist of Salvatore Cortesi’s to the hilt . . .. The AP in Europe crawls on its belly. The AP says as a basic maxim that the Government in power must be presumed to be right . . . AP must never run any chance of being kicked out of any important news center.114

When in August 1924, with Cortesi and his second-in-command absent, the journalist on duty, a Miss Underwood characterized by Arone as “philo-fascist,”115 posted news from the opposition press of Communist demonstrations on the agency feed, she was threatened with expulsion and by personal order of Mussolini required to formally apologize and issue a correction.116 Generally, the embassy showed no mercy even with its friends, inundating them with detailed notes on reports judged insufficiently favorable toward the regime.117 The United Press International showed comparable openness to this kind of cooperation under the direction of its Roman bureau chief, Thomas B. Morgan.118 The New York Times was also the object of continual attention from Italian authorities. The paper’s attitude toward the regime can only be described as vacillating, from moment to moment as well as among editorial opinion, chronicle, and commentary. As discussed above, the judgment this most important paper of the United States gave on the March on Rome had been generally positive, while the subsequent occupation of Corfu had occasioned its most vehement criticisms.119 Those criticisms 114

115

116

117

118 119

Diggins, p. 45. Diggins’ assertion that Winner (the quoted correspondent) was “too severe” cannot be accepted. In fact, there were numerous examples of the cozy relationship between the AP and the regime. The complaints of de Martino, in NA-IR 423, Giacomo de Martino a Benito Mussolini, Washington, D.C., February 3, 1926, cited by Diggins are not conclusive because of the extreme susceptibility of the ambassador and his interest in arguing for the continued existence of Washington bureau of the Stefani Agency. See ACS-FAS: Manlio Morgagni, b. 1 End of December 1933, Manlio Morgagni, “Relazione per il Capo dell’Ufficio Stampa del Capo del Governo.” Rome, December 23, 1932. ACS-MCP. B. 105, f. 18 Stampa Estera, Appunto del Capo Ufficio Stampa del Ministero degli Affari Esteri, Arone di San Valentino, Rome, August 15, 1924. ACS-MCP. B. 105, f. 18 Stampa Estera, tel. n. 9944, Benito Mussolini to Augusto Rosso, Rome, August 15, 1924; see also tel. n. 270, Augusto Rosso, charge d’affaires of the Italian embassy, to Benito Mussolini, Washington, D.C., August 12, 1924, found also in AC-GC, b. A 2bis. See for example ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to Nancy Cox McCormick, Washington, D.C., December 8, 1924. Diggins, pp. 53n, 56. ASMAE-AAW, b. 152, f. Conflitto Italo-Greco, s.f. Stampa, Augusto Rosso to Benito Mussolini, Washington, D.C., September 6, 1923.

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softened, presumably, after Caetani contacted numerous editorial writers and exerted some pressure on the owners as well through Mortimer Schiff, partner in Wall Street’s biggest Jewish investment bank, Kuhn, Loeb and Company.120 Still the editorial critique in the Times grew sharper in the course of the Matteotti crisis, during which the following appeared in its pages on December 23, 1924, in reference to threats made by Italo Balbo: The fact that the same methods of violence which two years ago were employed against Communists are now invoked against “dissident” Fascisti reveals a rift within the party itself. It is the inevitable outcome of the dictatorship method, for which we have a parallel in the present factional struggle in Russia.121

As Diggins observed, the New York Times was the only important daily to characterize Fascism as a dictatorship in its editorial pages, contrasting it – at least for a few years – with the ideals of liberty and democracy.122 What is significant, however, is that the criticism reached its most bitter extremes at the moment when the general American conviction was that Mussolini was about to accept a form of government based on the principles of representative democracy, and therefore in the moment in which his power, understood to reside in the stability of his regime, appeared weakest. Only a few months later the same New York Times would favorably report on the proclamation of the corporatist state, which had the merit of “stealing thunder from the Left and of giving power to hitherto unrepresented social units.”123 Once again the American press purported to find echoes of its own traditions in the affirmations of Fascism. According to the Times, the Mussolinian concept of state authority . . . has many points in common with that of the men who inspired our own Constitution – JOHN ADAMS, HAMILTON, WASHINGTON. The uninformed will of “the many” is to be “balanced” by the experience and the wisdom of “the few.”124

However, the same paper would later attack the plan of the regime to substitute corporatism for political and territorial representation.125 120

121 122 123 124 125

ASMAE-AAW, b. 152, f. Conflitto Italo_Greco, s.f. Stampa, Felica Bava to Gelasio Caetani, New York, N.Y., October 4, 1923, and tel. n. 313, Gelasio Caetani to Benito Mussolini, Washington, D.C., 10 October 1923; found also in AC-GC, b. A 2bis. “Mussolini at Bay,” New York Times, December 23, 1924. Diggins, p. 31. Ibid., p. 32. “‘Revolution’ in Italy,” New York Times, October 11, 1925. Ibid., December 12, 1925.

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Once safely past the shoals of the occupation of Corfu and the Matteotti crisis, however, the New York Times oscillated less and less in its editorial comments on Fascism. Outside of some worries raised by the Italo-German polemics over the South Tyrol or Alto-Adige region, in the course of 1926 the New York daily sympathetically portrayed the ratification of the agreement on war debt by the U.S. Senate, supported the process of stabilization of the lira, and went along with the Morgan Bank’s constant pressure in following the various American bond issues for Italy in great detail. Finally, the same Wilsonian commitment that had led the journal to campaign against the occupation of Corfu also motivated it to support the Geneva politicking of Dino Grandi and the mediating role Mussolini assumed for himself in European politics. This went on right up until the moment when the war in Ethiopia forced a definitive rupture.126 The foregoing all occurred on the editorial pages; but the New York Times of course also consisted of correspondents’ submissions, special features, and letters and comments from outside contributors and foreign affairs experts. As stated, the Rome bureau of the Times had a consistently favorable approach to the regime. In the early years, the paper published numerous apologias by Walter Littlefield, who like Brisbane was promptly decorated with an Italian honorific title.127 Similarly, the regime cemented its friendship with Herbert Matthews by allowing him access, as the only foreign correspondent so recognized, to reporting from the front lines in Ethiopia.128 But the most important example was Anne O’Hare McCormick, who first as a special correspondent and later as the columnist for foreign politics, could claim to be the first, back in 1919, to predict Mussolini’s dazzling career.129 For much of the regime’s two decades she defended his foreign policy (including the invasion of Ethiopia, the dispatch of “volunteers” to the civil war in Spain, and the Rome-Berlin Axis) in her column, carrying on what even the understated Diggins called “a political love affair with an idealized Italy and its noble leader.”130 For his part, Mussolini received McCormick as if she were, as Salvemini expressed

126 127

128 129 130

Diggins, p. 32. ASMAE-AAP 1919–1930, b. 1599, Stati Uniti (7362–7369), Walter Littlefield to Benito Mussolini, New York, December 13, 1924, in the margin Arone wrote: “Walter Littlefield is not the Editor in chief of the New York Times. He is a contributor and a committed longtime friend of Italy.” See also Diggins, p. 25. M. Berger, The Story of the New York Times 1851–1951, New York: 1951, pp. 419–421. Ibid., pp. 326–327. Diggins, p. 48.

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it, “the queen of Sheba paying a visit to the court of King Solomon.”131 Interestingly, both McCormick and Matthews went right on offering counsel to the Italian people regarding their political choices even after the fall of Fascism.

4. american reactions to mussolini’s early foreign policy A different kind of fear was slower to subside regarding Mussolini’s foreign policy; because in this field the Italian leader’s behavior was far less reassuring to Americans right from the very beginning. After the seizure of power, and with the exception of the Matteotti assassination, Fascism no longer appeared to be causing internal disorder such as to harm its external image. In foreign politics, although he maintained a respectful attitude toward the European and global balance of power until the attack on Ethiopia, he could not ignore that the Italian middle classes had, in recent history, been utterly permeated not only by a solid constitutional ideology, but by heavy doses of nationalistic propaganda. While he usually chose targets designed to avoid the tender spots of European politics which might invite the intervention of Great Britain or the United States, from time to time he was constrained to do some saber rattling to satisfy his base. An exemplary gesture of this type came when French and Belgian troops occupied the Ruhr beginning on January 11, 1923. This initiative by French President Raymond Poincaré was intended to put direct and brutal pressure on the German government in order to force it to restart reparations payments. For its part Germany responded with passive resistance in the Ruhr valley and galloping inflation of its currency. It was clear that this aggression, and its consequences for the German economy (and following that, the French economy itself, which saw a 20% fall in the value of the franc), only elicited firm hostility on the part of the British and angered the Americans, who had accepted Germany’s non-payment of reparations and who considered the recovery of the German economy the linchpin of the entire European reconstruction.132 It is worth examining Mussolini’s treatment of this situation in detail, since it reveals his duplicity, but above all the care he took not to come into direct conflict with the Anglophone powers. Initially Mussolini supported, 131 132

G. Salvemini, Mussolini diplomatico, Bari: 1952. AC-GC, b. A 1, f. 1. Te;. N. 37 G.M., Gelasio Caetani to Benito Mussolini, Washington, D.C., January 7, 1923, found also in ASMAE-AAW, b. 152, f. Crisi Italiana 1919, etc.

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if only rhetorically, Poincaré’s occupation of the Ruhr and the goal of forcing Germany to honor her reparation obligations.133 He then modified this attitude in response to American reactions.134 On the very day of January 11, 1923, Ambassador Caetani telegraphed from Washington: Italian action supporting France not clearly understood by Americans unaware of significance. Resentment toward France running high and may reflect on Italy.135

Caetani was seriously concerned and Mussolini, for his part, promptly reacted to his tone. While he continued to communicate solidarity to Poincaré privately,136 the dictator pivoted publicly. On January 18 he ordered Caetani to work on convincing the State Department to “take moderating action to avoid the serious dangers of the situation.”137 Caetani had already communicated Italy’s solidarity to Hughes, in a rather forced circumlocution by which he offered Italy’s “technical and political”138 assistance as long as only peaceful means were contemplated.139 The ambassador’s initiative proved to be a smart move.140 The secretary of state, presented with the Italian request, not only could not reprimand the Italian representative for his government’s pro-French stance, but was also put on the defensive regarding the old problem of American isolationism.141 He could only respond that the United States had already proposed its preferred solution to the reparations problem. France had rejected it and Italy had not commented. Furthermore the United States had no intention of enforcing the terms of a treaty they had not ratified. At most Hughes said he was willing to encourage the American ambassador in Paris to take some action which however could be “neither official nor officious.” He 133

134

135

136 137 138

139

140

141

ASMAE-AAW, b. 152, f. Crisi Italiana 1919 etc. tel. n. 112, Benito Mussolini to Gelasio Caetani, Rome, January 12, 1923. PRO-FO, 371/8704, 848, Sir Ronald Graham ro the Marquess Curzon of Kedleston, Rome, January 16, 1923. DDI, VII, 1, 335, tel. di Gelasio Caetani to Benito Mussolini, Washington, D.C., January 11, 1923. DDI, VVI, 1, 414. DDI, VII, 1, 371. PRO-FO, 371/8704, 848, Sir Ronald Graham to the Marquess Curzon of Kedleston, Rome, January 16, 1923. AC-GC, b. A 1, f. 1, tel. n. 19, Gelasio Caetani to Benito Mussolini, Washington, D.C., January 12, 1923, and LC-CEH, b. 175, Charles Evans Hughes, “Memorandum of Interview with the Italian Ambassador,” Washington, D.C., January 19, 1923. AC-GC, b. A 2bis, tel. n. 33, G.M., Gelasio Caetani to Benito Mussolini, Washington, D.C., January 19, 1923. LC-CEH, b. 175, Charles Evans Hughes, “Memorandum of Interview with the Italian Ambassador,” Washington, D.C., January 18, 1923; and “Memorandum of Interview with the Italian Ambassador,” Washington, D.C., January 19, 1923.

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also observed that France could stand to learn a concrete lesson that coercive methods between states were hardly profitable. This American statement ended up causing real trouble for Mussolini from the French when Poincaré found out that Hughes had been solicited to action by the Italians. Poincaré lodged a complaint with Romano Avezzana, the ambassador in Paris, who passed it on to Mussolini on January 25.142 In Mussolini’s response to Romano Avezzana, he portrayed the result of his explicit order as merely “a rather generic action on the part of the embassy in Washington,” making it seem as though Mussolini intended to shift away any blame or to mislead Avezzana himself.143 Most interesting is the conclusion of the telegram, in which the goal of the initiative is defined as “smoothing things over, since he [Caetani] informed me that the Americans were seriously irritated with France.” Purely altruistic motives, therefore. In reality, as was logical, it was the Italian image in the United States that Mussolini cared about smoothing over. Ever the opportunist, Mussolini had sensed an opportunity in the intemperate action of Poincaré. He could no more disregard the necessity of safeguarding coal supplies than could Poincaré, but he well knew that his international reputation as guarantor of stability was more important than any participation in French adventures, especially given Poincaré’s lack of good press in London and Washington. He made this clear in a telegram sent to Romano Avezzana on February 1: It is necessary to remember that, given the attitude of England and the United States [my italics], Italy must scrupulously avoid sharing any responsibility in the political and military coercion that France and Belgium have been forced to undertake in the Ruhr and the Rhine.144

Without explicitly mentioning the United States, Mussolini’s duplicitous course in this affair is even more strongly emphasized in another telegram to Avezzana from the previous day: I reconfirm that the Royal Government, while not believing it possible to turn away from France, still desires to absolutely avoid any shared responsibility in these events.145

Equally significant was Mussolini’s apprehension when Caetani had to inform him of American irritation. Caetani noted that public opinion 142 143 144 145

DDI, VII, 1, 405. DDI, VII, 1, 414. DDI, VII, 1, 441. DDI, VII, 1, 431.

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judged that Italian support of the French in the War Reparations Commission contradicted a clear rejection of military occupation of the Ruhr and the coercive methods it entailed.146 Mussolini answered: This public opinion must be made aware of the difficulty of our position criticizing the current state of affairs, that we do not retreat from but take responsibility for the legitimate safeguarding of our interests, which lie in acting as moderator and brake on both parties’ contentions.147

In the course of the occupation of the Ruhr, Mussolini revealed his respect for the hierarchy of the great powers, even if his ambiguous declarations, perhaps accentuated by his inexperience (at this point he had been conducting the foreign policy of the nation for little more than two months), did raise a few eyebrows in London and Washington. In the end Caetani, who as ambassador had valuable skill in breaking bad news to his superior, wrote to Mussolini: The economic considerations [the dependence on coal supplies] the opportunity to show friendship and moderating influence and the necessity of guarding our own interests which have already been too often damaged, do not suffice in the American mind to justify the moral support given to France in an act which puts global interests in danger [. . .] from the questions posed me by many persons I deduce that the public still fails to understand the Italian position. In particular they do not understand how Italy expected to constrain Germany to pay reparations without resorting to coercive measures backed by military force.148

Mussolini’s diplomatic initiatives, late as they were, had eased Washington’s concerns and perhaps avoided negative press. But the question of European peace remained the preeminent interest of the Republican administration, despite its great caution in taking any position in matters it considered outside its jurisdiction owing to the isolationism prevalent in the country. A few months later, in August 1923, one of Mussolini’s decisions would raise the problem of the Italian dictator’s role in world peace even more strongly for the American government, even if it was on a less delicate issue. The facts are well known.149 On August 27, General Tellini and four 146 147

148

149

DDI, VII, 1, 335 and 398. DDI, VII, 1, 415 tel. from Benito Mussolini to Gelasio Caetani and AC-GC b. A 2, f. 1, tel. n. 237, Benito Mussolini to Gelasio Caetani, Rome, January 18, 1923. AC-GC, b. A 3, Gelasio Caetani to Benito Mussolini, Allegato “G,” Washington, D.C., January 28, 1923. James Barros, The Corfu Incident of 1923, Princeton: 1965; Catherine S. Kadradic, International Delimitation of Albania, 1921–1925, unpublished thesis, Columbia University, 1956; Piere Lasturel, L’Affaire Gréco-Italienne de 1923, Paris: 1925;

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other Italian military men were assassinated; they were members of an international commission charged with settling the Greek-Albanian border. On August 29, Mussolini issued an ultimatum, perceived as humiliating by the Greek government, and two days later he ordered the bombardment and occupation of the island of Corfu, during which several civilians were killed by accident as they tried to flee. The Greek government appealed to the League of Nations, where the great powers tried to avoid conflict by referring the question to the Conference of Ambassadors in Paris. The Conference ordered Italy to evacuate Corfu and Greece to accede to some Italian demands as reparation. The American press did not focus only on the question of Italian foreign policy and the danger of Mussolini’s aggression. The Corfu incident was, in a certain sense, the continuation of hostilities between those who supported the League of Nations and those who had opposed American adhesion since 1919 following Woodrow Wilson’s initiative to create it; the latter continued to insist on a rigid separation of American policy from all the wicked doings of the Old Country. The virulence of the condemnations of Mussolini in the New York Times had its source in this domestic conflict. At first the New York daily recognized the gravity of the assassination of Tellini and his assistants, but it quickly came to portray the Italian ultimatum as the more dangerous, comparing it to the AustroHungarian demands on Serbia that helped spark the First World War.150 Several days later, in an editorial significantly entitled “Italian Imperialism,” the Times repeated several anti-British statements made by Mussolini before the March on Rome, expressed the suspicion that Mussolini wanted to turn the Adriatic into an Italian lake, and called for the sanction of “international opinion and international judgment.”151 Inevitably this analysis ended up calling into question the very nature of the Fascist regime, stating

150 151

Stephan Nicoglou, L’Affair de Corfou et la Société des Nations, Dijon: 1925; Ettore Anchieri, “L’esordio della Politica Estera Fascista,” Il Politico, anno XX, n. 2 (1955): 211–231; Antonio Foschini, “A trenta anni dall’occupazione di Corfü,” Nuova Antologia anno 88 fasc. 1836 (December 1948): 401–412; Manley O. Hudson, “How the League of Nations Met the Corfu Crisis,” World Peace Foundation, VI n. 3 (1923): 176–210; Vittorio Scialoia, “La Società della Nazioni ed il conflitto italo-greco,” Rivista di Diritto Pubblico e della Pubblica Amministrazione in Italia, serie II anno XVI fasc. I (January 1924): 69–74; Charles De Visscher, “L’Interprétation du Pacte au lendemain du différend Italo-Grec,” Revue de Droit International et de Législation Comparée, 3ème Série, V (1924): 213–230, 377–396; Quincy Wright, “The Neutralization of Corfu,” American Journal of International Law, 18 n. 1 (1924): 104–108. The New York Times, August 31, 1923. Ibid., September 4, 1923.

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that “Fascismo may be as high-handed as it pleases within the boundaries of Italy. But it cannot project its arbitrary measures into international relations” without violating the Covenant of the League of Nations and activating the sanctions it provided for.152 It was with some embarrassment in succeeding editorials that the Times tried to downplay the virtual incapacity of Geneva to assert its jurisdiction in the Corfu controversy,153 while Mussolini was characterized as “the most dangerous kind of autocrat – a muddle-headed autocrat with an uneasy conscience” who had used force to attain a goal when the proper result could have been achieved through tranquil negotiation.154 All the newspapers associated with the Wilsonian legacy, such as the Boston Herald,155 or who in any case wanted to preserve the image of the League of Nations in order to leave open the possibility of some form of political involvement with Europe, expressed similar sentiments. The World, while belonging to that political faction which opposed isolationism, used the episode to remind readers of the justness of its antiFascist opinion.156 The Chicago Tribune headed the opposing faction, those who were sworn enemies of the League of Nations and all those who, in the United States, continued to defend the principle of collective security and to call for a more active role in international politics. Their analysis of Mussolini’s actions was equally harsh,157 but they did not hide their satisfaction at the difficulties of Geneva in imposing its will on Italy. The Tribune wrote: Confronted by a crisis of the first rank, imperiling the peace of Europe, the much vaunted machinery of the league stalls hopelessly. The supreme council is exposed for what it is, merely, a shadow cast by the latest concert of the powers, which is no different in its motive and end, its strength and weakness, than the concerts of the past. Italy is a member of the league and of the supreme council. [. . .] Yet the Italian government gives not a moment’s consideration to this, but acts precisely as if there were no league.158

As the days passed, the campaign conducted by the Chicago Tribune and other newspapers159 like the New York Herald Tribune160 grew 152 153 154 155 156

157 158 159 160

Ibid., September 7, 1923. Ibid., September 10, 1923. Ibid., October 2, 1923. The Boston Herald, September 6, 1923. The New York World, September 3, 1923; Detroit Free Press, September 5, 1923; Saint Louis Star, September 5, 1923; Saint Louis Times, September 5, 1923. The Chicago Daily Tribune, August 31, 1923. Ibid., September 5, 1923. The Commercial Tribune, September 12, 1923. The New York Herald Tribune, September 10, 1923.

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harsher, not so much in its criticisms of Mussolini, for whom the papers showed and would continue to show real sympathy, as against Geneva and their hated Great Britain.161 The conclusion could be none other than that already implied in the first editorial the Chicago Tribune dedicated to the topic: To enter the league is to enter European politics as it has been and is; to be futile or to take sides in European politics; to be flaunted or to assume the task of enforcing a decision framed according to the interests of European governments which pull the wires working delegates at Geneva.162

The isolationist press had used Mussolini’s actions to refocus their own polemic, while the New York Times adopted a language regarding the Fascist regime that it would not use again until the Thirties. But the upshot was that journalistic rhetoric became so heated that Rosso, who usually refused to dignify media criticisms with a reply, felt constrained to request a special fund to mount a new press agency.163 The Coolidge administration, for its part, had been considerably more passive than the press; completely passive, in fact. The undersecretary of state William Phillips – who found himself substituting for Hughes during the height of the crisis – had limited himself to sending President Coolidge the telegrams he received in order to keep the president up to date.164 In a letter to Coolidge, Phillips characterized two telegrams he had received from Ambassador Child euphemistically as “a bit surprising” in that they showed Child regurgitating in his usual noncritical fashion every tidbit passed on to him by the Italian Ministry of Foreign Affairs.165 When the permanent undersecretary of the British Foreign Office, Sir William Tyrrell, dared to propose to the U.S. Charge d’affaires Post Wheeler that their respective governments might recall their representatives from Rome to penalize the aggressive politics of Mussolini toward Greece, not only did Phillips telegraph to Wheeler that it would be indecorous on the part of his government to take on any independent initiative, but he referred to Tyrrell’s proposal as a purely personal initiative that

161 162 163

164

165

“The Knots in the Lion’s Tail,” The Chicago Daily Tribune, September 15, 1923. “The League Is Sunk,” The Chicago Daily Tribune, September 5, 1923. AC-GC, b. A 1, f. 3, tel. n. 283, Augusto Rosso to Benito Mussolini, Washington, D.C., September 5, 1923. LC-CC, reel 90, b. 178a, William Phillips to Calvin Coolidge, Washington, D.C., August 31, 1923; September 1, 1923; September 2, 1923; September 3, 1923; September 4, 1923; September 14, 1923; September 15, 1923. Ibid., September 2, 1923 and September 3, 1923.

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did not represent the point of view of the British government.166 If the extremely prudent Phillips used such strong language, he must have been convinced that not only was American intervention inopportune, but that the British government had no similar intent either. To the Italian Charge d’affaires Augusto Rosso, who informed him as to Roman instructions on the issue, Phillips made no comment at all (nor did Rosso find it necessary to ask for it).167 The papers tried every which way to get a statement from the State Department, but without success.168 When the Conference of Ambassadors was involved in the issue, Phillips limited himself to telegraphing the American ambassador in Paris and asking him to observe the same discretion.169 When, finally, Secretary of State Hughes returned to Washington, Rosso noted its result in “the fact that the Washington Post, notoriously the mouthpiece of government circles, which had at first violently attacked Italian politics, recently returned to a much more dispassionate tone.”170 The rigid silence maintained by the American government, however, did not mean that it was indifferent to events. Men like Hughes and Mellon well knew that the recurrence of the controversy over the League of Nations and its further loss of stature served to harden polemical attitudes in the country and made it more difficult than ever to conduct the politics of rapprochement with Europe they had hoped to encourage within the financial sector. Even if neither of them would have attempted to reopen the question of American participation in the Geneva assembly, they knew that its proven legitimacy would have offered them more room for maneuver. Significant in this regard was the report of the Morgan bank’s Thomas W. Lamont, in the days before the Corfu incident, to the British delegate to Geneva Lord Robert Cecil, on his dialogue with Mussolini during a recent meeting in Rome. Lamont asked if there were a chance Mussolini might participate in the autumn meeting of the League of Nations. 166

167

168

169

170

NA-DS, 765.68/26, tel. from William Phillips to Post P. Wheeler, Washington, D.C., September 3, 1923, cited in Barros, p. 87. AC-CG, b. A 1, f. 2, tel. n. 279, Augusto Rosso to Benito Mussolini, Washington, D.C., September 4, 1923. ASMAE-AAW, b. 152, f. Conflitto Italo-Greco, s.f. Stampa, tel. n. 287, Augusto Rosso to Benito Mussolini, Washington, D.C., September 10, 1923. LC-CC, reel 90, b. 178a, William Phillips to Calvin Coolidge, Washington, D.C., September 4, 1923. Phillips wrote that he had sent instructions to the embassy in Paris that if the question arose in the Conference of Ambassadors, they should maintain the maximum discretion, limiting themselves to reporting back on the proceedings of the Conference. ASMAE-AAW, b. 152, f. Conflitto Italo-Greco, s.f. Stampa, tel. n. 287, Augusto Rosso to Benito Mussolini, Washington, D.C., September 10, 1923.

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Mussolini replied that he was satisfied with the invitation and said he would consider it warmly, but observed that the United States were not yet members of the League. Lamont answered no, but there was some momentum in favor of the League in the United States, much stronger than many American officials might think, and the mere fact that a premier of his power and stature would commit to attending the next sessions would have importance in American eyes. Lamont continued to pursue this same topic with the Minister of Finance Alberto de’ Stefani.171 Still, Corfu remained an isolated episode in the opinion of the Fascist regime that was consolidating itself, including in those sectors of the press that had been most struck in their dedication to the cause of the League of Nations. Probably they were convinced that the Fascist regime was rapidly stabilizing (even at the cost of some insobrieties that were clearly crowd pleasing gestures); that there were no better alternatives, and that it would end up following a more prudent path in foreign policy as in other areas. The haughty refusal of Phillips to any suggestion of cooperative measures as proposed by Tyrrell, and the intervention of Hughes with the Washington Post that Rosso supposed he had detected, certainly supported the interpretation that Washington continued to pursue an isolationist course of rigid neutrality.172 But it was also possible that they were the signs of a well-rooted conviction that Mussolini’s Italy was destined to serve as America’s partner in the project of reconstructing Europe. Both the popularity the regime had won in previous months and the ever-increasing distaste for France’s domestic and foreign policies contributed to casting Italy in this role. Either way the passive attitude displayed by the American government – whether it was a reflection of isolationism that Coolidge and Phillips felt particularly strongly, or part of a more subtle plan to cultivate good future relations with Mussolini – had aided the aggressor and weakened the League. Above all, as Barros demonstrated,173 the refusal of the United States to participate in any collective initiative had the effect of discouraging those who wanted to apply the Covenant’s sanctions against Mussolini, and of offering those who were reluctant to do so the splendid alibi that without the United States no sanctions could be effective. In this way the ground had been prepared for the war in Ethiopia.

171

172 173

HUGSBA-TWL, b. 86, f. 22, Thomas W. Lamont to Lord Robert Cecil, New York, May 22, 1923. Barros, p. 87. Ibid., pp. 177, 281, 302–307.

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5. the shaping of italian foreign policy It must be said that for a few years, the benevolent neutrality of the United States during the Corfu incident proved an accurate prediction of the direction of Italian foreign policy. The most important players in the Republican administrations and on Wall Street saw it as a litmus test of European politics in terms of each state’s attitude toward the economic reconstruction of Germany and the choice between Paris and London as principal point of reference. Although Mussolini’s early policies have been described as a politics of equidistance – between ex allies and ex enemies, and between the French and the English174 – in reality his choice of one side became ever more clear in the course of the Twenties. On the German question, Mussolini had already placed himself relatively far away from the French stance of absolute intransigence by positioning himself as mediator between France and Great Britain on the issue of reparations. During the occupation of the Ruhr he had coped with a situation made more difficult by the various government pressures and public opinion outcries in Great Britain and the United States by transforming his apparent initial support for Poincaré into a virtual alliance with the powers of the opposite side. His relations with Great Britain – which were important to the Americans since, apart from the rivalries and resentments that may have festered between the empire in decline and the one on the rise, Great Britain was still the main American partner for reconstruction in Germany and in Europe in general – had certainly followed a tortuous path. The arrogance and formality of Lord Curzon made the British foreign secretary the least suitable person to negotiate with Mussolini at the time of his rise to power, when he was personally insecure and desperately searching for some successes to legitimize him in the eyes of his citizens.175 What’s more, the Corfu incident appeared to be a challenge aimed specifically at Great Britain, the most committed defender of the League’s prestige as well as the

174

175

R. Moscati, “Il revisionismo fascista – Il periodo Grandi e la nuova fase della politica estera,” in La politica estera italiana dal 1914 al 1943, Torino: 1963, p. 96. PRO-FO, 371/7660,840, tel. n. 97, Lord Curzon to Foreign Office, Lausanne, December 10, 1922: “From what Contarini said to me yesterday I think it more than likely that Mussolini having failed with blackmail here may renew attempt in London. He will certainly be reluctant to return to Rome without some triumph for Italian policy. I told Contarini that while Foreign Office and Board of Trade would be glad to give any explanations, question of concession to Italian demands could not be satisfactorily pursued except by ordinary diplomatic methods or until Lausanne conference is over. Italians seem wholly incapable of understanding an orderly or gentlemanly diplomacy and Mussolini only differs from Schanzer in substituting a blunderbuss for a popgun.”

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traditional hegemon in the eastern Mediterranean. It was thus easy for France to offer cautious support to Mussolini, in this way thumbing its nose at Great Britain at the same time that it retained the escape route of blaming any outcome on the Conference of Ambassadors and not risking its own reputation in the process.176 Naturally the Quai d’Orsay hoped in this way to soften Mussolini toward its own positions, particularly regarding the German question. The obstacles to such an alliance, or even just a rapprochement, between France and Italy, however, were real and numerous. Even with strong political will in favor of such an alliance – and that did not exist – it would have been difficult to consummate. The many conflicts of interest in the Mediterranean and in Africa; French irritation at Italian irredentism; and, most of all, what Ruggero Moscati called the “internal conflict of the regime”177 which had led the French to offer refuge to many political exiles fleeing Italy were incompatible with a politics of mutual friendship. The fact was that these tensions and conflicts with France were actually useful to the Fascist regime as an area in which to focus the anger of the movement’s most ebullient spirits at a time when the rest of Mussolini’s foreign policy was guided by the need to proceed calmly and quietly. As Moscati rightly argued: Immediately after Corfu Mussolini officially, and with his usual ardor, inaugurated a “new course” with a legalistic inspiration. This led him to reverse his previous anti-League position and to initiate a politics of accord with England.

Naturally, “Mussolini the diplomat continued to feel pressured by suggestions and hints which led him, no longer to contemplate coups, but to a certain continual restless agitation.”178 But a fundamental choice had been made and was destined to endure for quite a few years, even to consolidate further during Dino Grandi’s tenure as Minister of Foreign Affairs. It would be a mistake to see this as proof of the bureaucracy’s ability to guide diplomacy without Mussolini’s interference, or of Contarini’s personal power; still, from the little direct evidence of Contarini’s thought process during his period of maximum influence it is clear that the “new course” was in substantial parallel with his own preferences. For example, far away in Washington, Caetani felt the continual need to stay informed as to Rome’s policy orientations; he and his

176 177

178

Moscati, “Gli esordi della politica estera fascista – Il periodo Contarini – Corfü,” p. 86. Moscati, “Locarno – Il revisionismo fascista – Il periodo Grandi e la nuova fase della politica estera,” p. 97. Moscati, “Gli esordi della politica estera fascista – Il periodo Contarini- Corfü,” p. 89.

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colleagues in other foreign capitals shared this need since their official orders were frequently parsimonious and usually limited to specific cases. Thus when Caetani’s friend and erstwhile colleague as finance attaché at the embassy, Guido Jung, moved back to Rome to work for the minister of finance Alberto de’ Stefani, Caetani asked him to stay in touch as an additional source. It was in this way that when Contarini attended a meeting on war debt on October 23, 1923, with the banker and reparations expert Mario Alberti and another official, Gino Buti, Jung was able to inform Caetani that Contarini had expressed himself in unusual detail on the subject of the government’s foreign policy: In this and in other occasions I have had rather long conversations with Contarini on the subject and I believe you will find their content useful [. . .] Contarini claimed to tell me everything, but naturally given his long familiarity with diplomatic negotiations it has become second nature for him, and one can never be sure Contarini is saying exactly what he thinks. Nevertheless, here is what he explicitly declared: 1) that despite all the Corfus of the world, he cannot conceive of an Italian policy that is not in accord with England; 2) that the apparent successes of France do not deceive him into believing that there is any real possibility of their substituting their exclusively self-interested policy for an economic systematization of the reparations problem; 3) that given the unreliability of English politics, it had never been possible for us to take a decisive stance toward France, since we do not want to put ourselves in the position of explicit friction with them unless we can be absolutely sure of English support. Some advances were made with England in the spring, some outbursts occurred when the King of England visited and in a few other moments, but whenever we tried to arrive at a clear commitment, no conclusion was reached. 4) Although it is a destructive policy, we have no choice but to allow these quarrels go on, to be judged not as an efficient part of a European collaboration, but in order to let these adversaries weaken themselves in the process. In this sense the disruptive action of the French has favored us substantially in Germany, inasmuch as the question of the Alto Adige has been forgotten even by the Bavarians who are most closely in contact with the irredentist zone. 5) In sum it seemed to me that our course of action was to allow France to compromise itself, given the strong unlikelihood of their success. On the other hand we will collaborate in reconstruction when that becomes possible. For my part I argued to Contarini that Italy needs German reconstruction for our own economic interest. As I told him, this need is felt more strongly in the South, which is largely agricultural and which had, in a Germany with a strong buying power, one of its best clients. In the North, naturally, they are primarily concerned with German industry, which in its most recent form no longer provides any sort of protection for Italian industry but is rather a drag on every productive capacity.

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While I am completely in agreement with Contarini, I remain very concerned that our current practice, in the context of the hard realities which face us, we might lack the necessary decisiveness and willpower to confront the inevitable risks and might miss the opportunity to affirm our power at this stage and, worse, in the future.179

The synthesis of Contarini’s political vision, as well as the exchange to which it gave rise with the future minister of finance, contains an interesting confirmation of the underlying perspective shaping the development of Italian foreign policy in the Twenties. Mussolini’s government aimed to consolidate the Fascist regime, and there is no reason to be surprised at this. Every government of a country so dependent on foreign conditions must above all consider the effect of its foreign policies on its own internal stability. This was even more true for Mussolini’s government, which had overturned the constitutional tradition that still dominated the international context in which it moved. The goal of reinforcing the regime was certainly undermined by the problem of consent, including from those nationalists who were not necessarily part of the Fascist movement. The international discrediting of the Italian governments before Fascism constituted a further real problem, one which Dino Grandi illustrated when he recalled the many days Carlo Schanzer had to spend in London as he waited to be formally received as Foreign Minister by Lord Curzon.180 The outcomes of episodes like that of Territet [when Mussolini first met with Poincaré and Curzon; it was not a grand success for the image of Fascism – trans.], and especially Corfü, were influenced by this context just as much as they were by any aggressive Fascist agenda or personal immoderation of Mussolini’s. At the same time, Mussolini showed himself to be perfectly aware that the stability of his regime depended on how he positioned his country in relation to the power struggles going on at the international level. This was the problem addressed by Contarini and Jung in their exchange, and in which ambassadors in the major capitals, such as Caetani, were trying to gain some initiative. It was on this question that Mussolini, the strongest Italian economic players, the bureaucracy, and the nationalist circles that were well represented in each of them had to find common ground. There was little room for doubt: Corfu and Territet, at that stage, were merely episodes in a very limited context of possible acts and policies; they could not serve as the basis for a grand foreign policy platform, at least not in the contemporary international situation (the global effects of the Great Depression would change some of these 179 180

AC-GC, A 20/1,Guido Jung to Gelasio Caetani, Rome, October 28, 1923. Dino Grandi, Interview.

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underlying conditions). Especially as long as Curzon directed the Foreign Office, the British unreliability of which Contarini spoke was unlikely to allow for any openly antagonistic stance toward France; yet the opposite position was equally unthinkable. This was true because France’s foreign policy of the time was so clearly a search for primacy among great powers. It therefore created conflicts which any Italian government, even a nonFascist one, would not have been able to support. But – even more seriously for Mussolini, who needed to back the winning horse – such an ambition was foolishly unrealistic on France’s part. Leaving aside the structural and political reasons that Mussolini could make such a prediction in 1923, the fatal flaw in France’s ambition was just what Contarini had noted when he said that their policy was “exclusively self-interested.” The point was that France’s foreign policy was designed to serve the power and especially the security of France, but took absolutely no account of offering anything to the other states; a hegemon cannot become such without offering some consistent benefits to its potential allies. In sum, Italy had nothing to gain and perhaps much to lose in a Europe dominated by French power. Following Contarini’s logic, there remained only Great Britain, although with time it would become clear that the “unreliability” of which Italians accused the British was in reality the traditional desire of that nation to reinforce the balance of power on the continent. The Foreign Office was worried by French aggression and greed and how they prevented the reconstruction of Germany – which Great Britain thought indispensable – but had absolutely no intention of taking any concrete anti-French action or of encouraging such action on the part of others. It was certainly desirable that Rome choose London over Paris, but the Foreign Office would not be made to choose Rome over Paris, as Contarini may have wished. The foreign affairs officials, with the help of Jung, had however correctly ascertained the primary common ground between Italy and Great Britain: the goal of European reconstruction to be achieved by the moral and material recovery of Germany. Jung’s observations on this score were right on the mark, in noting that the recovery of the German economy would aid Italian agriculture – an interest that the regime held dear, especially in that period – but also Italian industry, which was guilty of being shortsighted it if imagined that the elimination of German competition would compensate, in the long run, for the loss of such a fundamentally important export market. The United States, on the other hand, was completely absent from the Eurocentric and essentially nineteenth-century imagination of Contarini (or at least from Jung’s portrayal of it). Jung and Caetani were both well

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aware that the most crucial driving force of a European reconstruction, beginning with Germany, would be American capital. While Great Britain focused mainly on maintaining political equilibrium in Europe, the United States had the financial resources for a vast program of economic reconstruction, founded on monetary stabilization, that could serve as the basis for its own productivity expansion. Nonetheless, the program described by Contarini was not only compatible with but beneficial to the creation of an American primacy that anyone, like Jung, who was familiar with the new American reality, would know was one of the undeniable bases of the new global politics since the end of the First World War.

6. mussolini’s policy toward the united states There is no lack of evidence that Benito Mussolini understood far better than his prestigious chief official at the Foreign Office – its secretary general, Senator Salvatore Contarini – just how important the United States had become in world politics. Indeed, there is no doubt that the favorable response in America to Fascism’s seizure of power awoke an answering attentiveness in Mussolini toward a country that appeared poised to become the single most powerful nation in the world. Only two months after the March on Rome, on January 12, 1923, Benito Mussolini telegraphed Gelasio Caetani with the following talking points for a banquet given in his honor: 1) Internal order has been completely reestablished in Italy. 2) All the party militias have been dissolved and the Fascist militia has been absorbed by the State military. 3) The government is not a dictatorship because it has not dissolved the Parliament, which will confront beginning next February great issues of international importance, among which will be the conventions of Washington [on naval disarmament and Eastern politics]. 4) Loyal respect for all treaties and a politics of European equilibrium. 5) Energetic cuts and stringent savings in the bureaucracy. 6) Income growth and greater labor productivity: three months since the total cessation of strikes. 7) Hope that the United States will create greater access for our most qualified emigrants. 8) Recognition of the debts which will be repaid at the earliest possibility. 9) Invitation to all Americans to visit Italy and see for themselves that order and tranquility are complete.181

In the most concise terms, Mussolini demonstrated a complete understanding of American reactions to Italian political events, of their concerns regarding future Italian foreign policy, and of the arguments of political

181

DDI, VII, 1, 341.

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economy that would give the best impression to the American business class. Furthermore, he deftly presented the two most important problems that would affect the two countries’ relations in the immediate future with his cautious reference to emigration and his expression of readiness to repay the war debts, limited by current capability but clearly not meant to obstruct the further development of cooperation with American capital. Above all, he took care to emphasize the restoration of order in Italy. The goals Mussolini had set himself were laid out even more explicitly several months later in a message to Vittorio Emanuele III, in which he urged the king to visit the United States: I consider it my duty to remind Your Majesty that I consider this voyage of the highest benefit to the Country. Given the economic and financial situation Italy in which finds herself today there is no doubt that the return of migratory flow into the United States and cooperation with American capital represent two elements of vital importance for us. Beyond the economic advantages of an agreement with the United States it would be of immense benefit to Italy, both directly and because of the inarguable influence it would have on our relations with other States, who would value us more highly, and among them none more than England.182

These few lines show the primary importance Mussolini attached to relations with the United States. This trend of thought was not yet widespread, not even among Italian diplomats who had not actually been stationed there, and that can only be explained by the special ability of the dictator to distinguish, at least in the short term, the real disposition of power and his best approach to it. His reference to the benefits that Italy would draw from good relations with the United States was prescient in that it prefigured a Europe in which the preferences and inclinations of the greatest extra-European power would determine opportunity and hierarchy, even if he did tend to underestimate the difficulty in getting the isolationist government of Washington to commit itself in such a manner. He also saw clearly the special relationship that linked the two Anglophone powers, which would make Italy’s relations with Washington an indispensable ingredient for a rapprochement with London, and vice versa. At the same time he again emphasized the two concrete areas of dialogue with the American government: immigration and the need for capital. Quite soon the facts would show that there was little to be done to affect immigration policy: the considerable efforts of Ambassador Caetani in this matter faltered not as a consequence of any political choice of the Harding 182

DDI, VI, 2, 162.

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administration, but because of the real strength of mass public opinion, firm in this matter because it was a convenient outlet for the diffuse isolationist sentiments of the post-Wilsonian period and a guarantee of higher employment levels for native-born organized labor.183 It is worth noting that Mussolini, usually prompt to woo the nationalistic sentiments of his base with theatrical gestures that were either innocuous or of short duration – or both – in this case was careful not to create or encourage any demonstrations of resentment. Despite the material and moral damage inflicted by American immigration policy and its explicit racism, the Italian government accepted the necessity not to harm any other aspects of its relationship with the United States in light of the immense consequences it could have for the affirmation and consolidation of the regime. In recompense the equally attentive Fascist policy toward Italians already resident in the United States was far more fruitful.184 Gaetano Salvemini was particularly sensitive in analyzing the condition and the state of mind of the Italo-American immigrants who, with the only exception of those who had already committed to an opposition politics, were naturally moved to sympathize with and often to enthusiastically support the new Italian regime.185 They saw the Fascist government, and in particular the personality of Mussolini, as an important redemptive factor given the subordinate position in which they found themselves in their host country, with a poor image that previous Italian government had done little to improve. It must be emphasized that they felt this way due to the prestige that the Fascist regime enjoyed among those very Americans who discriminated against them and whom the more successful Italian immigrants tried to emulate. It was natural to hope that this greater prestige might somehow reflect on them. Since the overwhelming majority of Italo-Americans occupied lower rungs of the American social ladder, this subordination manifested itself in their judgments regarding their country of origin.186 This would become even more clear when the events of the Second World War changed the

183

184

185

186

I. Bernstein, The Lean Years. A History of the American Worker. 1920–1923, Baltimore: 1966, pp. 86ff. G.G. Migone, “Il regime fascista e le comunità italo-americane: la missione di Gelasio Caetani (1922–1925),” pp. 25–41; U. S. Nelli, The Italians in Chicago. 1880–1930, New York: 1970. G.G. Migone, “A proposito de ‘L’Italia vista dall’America’ di Gaetano Salvemini,” pp. 95–156; G. Salvemini, “L’attività fascista negli Stati Uniti,” pp. 21–35; Diggins, pp. 111–143. Migone, “Il regime fascista e le comunità italo-americane.”

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attitude of the American elite toward Fascism and Italo-Americans, and the overwhelming majority of the latter, including many who had been highly visible pro-Fascists, obediently changed their opinions accordingly. In this case, the Fascist government was quick to gather the fruits of the favorable atmosphere by spreading the argument in Italian-American communities that the regime was identical with the state and that, therefore, patriotism for one’s faraway fatherland could only express itself as support for the regime.187 This line of argument also allowed the Fascists to paint antifascism as not only subversive, but treasonous; and antifascists as enemies of the nation. Perhaps even more significant was the decision not to support, and later to actively suppress, Blackshirt squads in the United States.188 This helped create a favorable attitude toward the naturalization of Italian immigrants who, as American citizens, would render important services to the regime, especially during the war in Ethiopia, but also during the negotiations to consolidate Italy’s war debts.

187 188

Ibid. E. Santarelli, II, 2nd ed., Rome: 1973, pp. 93–100; Santarelli, “I fasci italiani all’estero. Note ed appunti” in Studi urbinati, di storia, letteratura, filosofia, XLV, 1971, 1–2, pp. 1307–1328; Diggins, 108–111; Migone, “Il regime fascista e le comunità italoamericane” cit.; and especially L. Bertello, I fasci degli Stati Uniti d’America: propaganda fascista e comunità italiane, unpublished thesis, University of Torino, 1972–1973.

chapter 2 United States Economic Policy toward Italy

1. the question of war debt The question of war debt became one of the principal obstacles to the American expansion into Europe pursued by decisive sectors of the political elite – particularly the financial sectors – even after Woodrow Wilson’s defeat. Many bankers and government officials, like Mellon and Hughes, would willingly have forgiven war debts in return for the cancellation of Germany’s reparation payments. Reparations were seriously depressing Germany’s economy, whose recovery was seen as necessary for a more general European reconstruction. The financial and commercial opportunities that would open through Europe’s economic growth were far more important to the United States than the recovery of the loans Americans had extended to the Allies for the war effort. Never was this more clear than at the moment when the Dawes Plan1 and the Locarno Pact2 had created the minimum conditions for a renewed commitment to European capital.3 Yet government officials, and especially those who were in elected office, had to reckon with a public whose isolationist sentiments were still largely echoed by Congress and could still lose them votes in coming elections. An anonymous American citizen wrote to the Italian ambassador during one of the key points of the war debt negotiations, telling him 1

2 3

W. Link, Die amerikanische Stabilisierungspolitik in Deutschland 1921–32, Düsseldorf: 1970. J. Jacobson, Locarno Diplomacy: Germany and the West, 1925–1929, Princeton: 1972. B. Glad, Charles Evans Hughes and the Illusions of Innocence: A Study in American Diplomacy. Urbana, IL, and London: 1966.

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that the “Latins” revealed their true colors when announcing to the American government that they would pay their debts only when they got good and ready. This action, he wrote, confirmed the image Americans had of Italians in the United States. He had problems with every Italian he ever offered credit to, because they had neither honor nor principles. Italians only had a great talent for whining and begging, and did not even “know” what honesty was. He contrasted Englishmen, who always paid their bills, and said Congress did the right thing when it stopped “mongoloids” of the Italian species from coming to his country.4 While few Americans, and certainly not most members of Congress, would have expressed themselves in such vulgar terms, this letter exposed the snarl of resentments, racist impulses, and isolationist beliefs that the war debts negotiations elicited in the United States. They had been the driving force behind the defeat of Wilsonian politics and the victory of President Harding in the 1920 elections. The Republican Party convention of that year had ended in a compromise that was a de facto victory for the internationalist finance and manufacturing faction of the party, which was evident from the makeup of the cabinet of Warren Harding, previously an insignificant former journalist from Marion, Ohio. Nonetheless, the interests that had so solidly claimed the key posts of the new administration knew very well that any too-flagrant violation of the political and ideological tastes of the masses that comprised their constituency would compromise their future ability to favor an expansionist policy. They had to observe certain elementary rules of prudence in order not to reinflame the isolationist opposition, whose class and regional roots might pit populist farmers against the hated big city bankers of New York and Boston and throw the precarious unity of their party into crisis. Following these rules of prudence meant avoiding formal choices or gestures that would be immediately perceptible to Congress and the public. Not even the most fervent internationalist or Wilsonian in the Republican administration was willing to support the formal joining of the League of Nations. Any accord or treaty that might involve the United States in further European conflicts was vehemently rejected by members of Congress and the public opinion they represented. In addition, the U.S. government had to walk softly, making use wherever possible of experts, bankers, and businessmen in lieu of politicians and diplomats in the international context. The actions of 4

ASMAE-AAW, bk. 176, fol. Debiti, Anonymous to Gelasio Caetani, Philadelphia, Pennsylvania, June 6, 1925.

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private citizens as representatives of civil society would not directly involve the government and could irritate only the most intolerant of isolationists. These were usually rural populists who saw Wall Street fat cats as betrayers of a healthy America in the arms of a decadent Europe; in the 1920s, the more widespread public image of the businessman was that of a people’s hero, whose good sense and respect for the bottom line offered a sure guiding hand to the government. Thus, the Harding and Coolidge administrations portrayed various conferences and international initiatives in which Americans participated as mere gatherings of experts, not meetings of government representatives in their official capacity. The commissions led by General Dawes and Owen D. Young that dealt with reparations and German reconstruction were an example of this strategy. On other occasions, such as the Lausanne Peace Conference, which began meeting at the end of 1922 to settle the situation in the Middle East – especially the problem of Turkey – the United States sent official representatives who limited themselves to affirming the principle of the Open Door policy, reemphasizing the noninvolvement of the United States in any political or territorial dispute and protecting the interests of a few private American companies in the region. In this context, the question of war debt was especially delicate. The debts were owed by just those formerly allied European countries that were most likely to attract isolationist ire. Although these were state debts, during this period of high canonical capitalist ethos, they were seen as equally binding as private loans. The famous comment of Calvin Coolidge, when asked about the opportuneness of cancelling war debts, “They hired the money, didn’t they?” reflects the simplistic but also harsh mindset on budget questions that prevailed in Congress and outside the restricted circles of finance. While the president was certainly involved in the plans of the expansionists, he had to toe the line drawn by his electorate. In a sense, the delicacy of the theme was decisive, because it was the point of intersection between the internationalist and expansionist strategy that reigned in the Harding and Coolidge administrations and the isolationist opinion that dominated outside. A truly explicit confrontation of ideas on debt between the executive and Congress, expansionists and isolationists, would have potentially derailed the future success of those banking houses that had government approval to plan the advance of American capital into reconstructed European markets. What was necessary was to pass some formal measures that corresponded to the wishes of the most rigid defenders of the “sanctity” of debt but at the same time committed Congress to negotiation. The

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nightmare scenario was represented by the still-vivid memory of the failure to ratify the Treaty of Versailles; no one wanted to repeat Wilson’s mistakes, especially in the matter of forcing the Congress to have a stake in the negotiations of the very accords they would have to approve. Congress therefore promulgated a law that awarded the power to negotiate debt consolidation not to the State Department or the Department of the Treasury but to a special commission consisting of both the heads of these departments as well as representatives from both houses of Congress.5 But this was not enough to satisfy those who wanted to collect on all war debts. The executive branch had to accept an order that subordinated the power of the State Department to extend credit, even from private sources, to the requirement that loans could go only to governments that had consolidated their war debt. This was a very unusual decision for a country in which government controls on private economic activity had traditionally been mild to nonexistent, and in which at the time laissezfaire ideology was a cornerstone principal of government. Evidently this measure had been necessary as a way to exert pressure on European countries to take their war debt seriously. Without it, Hughes, Mellon, and their banking cohort risked being caught between the unwillingness of each individual European state to repay their debts and the ever more intolerant American public opinion that rejected the idea of negotiating those obligations. The financiers were more than willing to clear the balance sheet in order to make economic penetration of European markets possible, even without the support of public opinion, but for that exact reason they needed to avoid any direct confrontation. On the debt issue, as in other cases, they preferred a strategy of conceding in rhetoric and then proceeding in practice; the Europeans would have to resign themselves to negotiating with Congress in order to gain access to American capital, while in return the captains of finance would make sure to guarantee favorable conditions in the accords thus produced. Given this situation, it was of utmost importance that each European government cooperate in this carefully choreographed dance. Mussolini distinguished himself from the outset in this role. His first orders to his embassy in Washington, as well as the way he addressed the American press and the American business community, demonstrated his comprehension of the crucial weight of the debt issue in facilitating any future relationship with American finance. 5

J. M. Berutti, Italo-American Diplomatic Relations, 1922–28, unpublished thesis, Stanford University, 1960, p. 145.

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Mussolini’s economic program, as it was presented by his first finance minister, Alberto de’ Stefani, was completely in harmony with the wishes of private industry in that it followed a laissez faire philosophy of avoiding any form of state intervention. The constant references to the need for a stable currency and a balanced budget were sure to find a most favorable reception among foreign bankers, in particular the Americans. Both Mussolini and his ambassador in Washington, efficient spokesman and propagandist Gelasio Caetani, courted them assiduously. The Italians were acutely conscious that the availability of capital was crucial to the goal of stabilizing the Italian economy and that the only realistic source of that capital would be the United States. They were equally aware that access to that capital would be dependent on a satisfactory resolution of the war debt issue; yet this was an onerous problem given the scarce resources in Italian state coffers. Mussolini therefore recognized from the moment he took power both the existence and the obligation of war debt, both as a legal and a moral issue. In other words, he was convinced that the debt must be settled and that it would be counterproductive to dispute its validity if he wanted to continue pursuing Fascism’s ambitious financial goals.

2. the role of the house of morgan In studying the abundant and detailed documentation available on the issue of war debt, the lasting impression is that the biggest merit of Mussolini and his staff was to surround themselves with the best counsel and heed their advice. Among all the possible interlocutors in the banking world, the Fascist government privileged J.P. Morgan & Co. becoming one of their principal clients. As agent for its affairs, Italy had hired Kidder, Peabody & Co.; and Charles Miller, of the First National Bank of New York, also had excellent contacts in the Italian business world. Still, the House of Morgan was correctly judged to be best suited for guiding a foreign government such as that of Italy through the long and complex path leading to economic success, starting with the key first step of reaching an accord on war debt. This path was essentially a political one, even though the issues at stake were financial, as always happens when the clients are nation-states and not private companies or citizens. In this case, the complexity of American economic and foreign policy, expansionist yet rigorously careful not to reawaken latent isolationist opposition, as well as the particularities of the Italian regime meant that every discussion, every single move was freighted with unique

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difficulties that were certainly not going to be resolved like an ordinary commercial contract. Who better than the partners of the House of Morgan to carry out a project that combined the traditional order of financial transaction – credit and loans – and the most delicate political mediation? The Fascist government, and with it Italy’s major industries, had to be introduced to the world of American finance in such a way that a successful debut would ensure a future of access to credit, the return of the lira to the gold standard, and the inclusion of Italy in the international finance community (and of the Bank of Italy in the cooperation among central banks). The expected reinforcement of the Fascist regime on both internal and international levels was an additional reminder of the political connotations of this strategy. Without summarizing at length the history of the Morgan Bank and how it became the most prestigious and influential investment bank – a true nodal point linking fundamental sectors of manufacturing, industry, commerce, and finance – let it be remembered that in those years, since the financing of the Dawes Plan, the bank held the role of guiding force in the American economy. Morgan Bank negotiated nearly all the credit offered to European governments, municipalities, and major industries in the name of the banking consortia that issued bonds on the American financial markets.6 It must be added that the forced abdication of American officials from a more direct management of financial connections resulted in the default responsibility of bankers, and especially those of Morgan Bank, for carrying out initiatives and accords with European states when they came to terms with the passivity of the American government. Morgan associates became men of state, as the business they conducted, the loans they secured, and the interest they collected served not only their own profits but the larger policies of their country in relation to foreign representatives of the highest levels. This direct and individual mode of statecraft by businessmen was anomalous but made perfect sense in the context of their own prestige and financial power, as well as the consistency and collegiality with which they carried out policy initiatives that had been formulated, after all, in their own offices.7 For example – and simply to mention those associates who had 6

7

T. W. Lamont, Across World Frontiers, New York: 1951; L. Corey, The House of Morgan, A Social Biography of the Masters of Money, New York: 1930; E. P. Hoyt, The House of Morgan, New York: 1966; V. P. Carosso, Investment Banking in America. A History, Cambridge, MA: 1970. H. Nicolson, Dwight Morrow, New York: 1935, p. 146. “As has already been stated, the system followed by J. P. Morgan & Co. was a cooperative system. No specific branch of business was, except in special circumstances, assigned to any individual partner;

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the most direct involvement in the Italian case – Thomas W. Lamont, who would succeed J. P. Morgan, Jr., as senior partner, was part of the American delegation to the Versailles conference; Russell Leffingwell was the undersecretary of the treasury during the Woodrow Wilson administration; Dwight Morrow later became the ambassador to Mexico and a member of the Senate. It is difficult to precisely date the beginning of the privileged relationship between the Fascist government and the House of Morgan. The first direct interview that Thomas W. Lamont had with Mussolini on May 16, 1923, was certainly quite important, since from that moment on a continuous exchange of information and suggestions flowed back and forth between the main investment bank of New York and the Fascist regime. There are no extant minutes of the meeting, but Lamont had made an eight-point outline in preparation. He began by pointing out how much the Morgan bankers had always supported Italy and the Italy-American Society and then went on to warn that the world was watching Italy carefully and that the Italians would need to protect their good relations with the United States as well as conduct a policy to encourage private capital to flow toward Italy. Lamont mixed promises of help and assurances that his colleagues could guarantee the same debt deal that England, France, and Belgium had received, with reminders of the need to catch up to other countries that had already moved forward financially and offers of expert advice. His last point was to ask for Mussolini’s opinion on the question of the Ruhr.8 The striking thing here is how Lamont offered himself not primarily for banking services, but for political ones. He offered Mussolini advice before he offered capital. He was careful to invite the Italian head of state to show no hurry in the search for loans, both in order to prevent the Italian government from acting solely from commercial motives that might favor competition from other banks for Italy’s business and, above all, to emphasize the uniqueness of the services he was capable of offering: experience and influence as an insider to U.S. politics. Lamont actually planned to bring up several political issues that were by no means casual. It was important to discuss war debt because the willingness of the Italian government to honor its obligations was a basic condition for obtaining full credit in the United States, and the question of the Ruhr was a vital test

8

the responsibility was pooled. The partners would meet Mr. Morgan either in his private office, or less formally at luncheon, and would discuss together the problems of current business. It would thus be a mistake to attribute to the wisdom or initiative of any single partner policies which were in fact the corporate contribution of them all.” HUGSBA-TWL, bk. 190, fol. 13, T. W. Lamont, Mussolini – Rome, May 16, 1923.

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of the compatibility of Italian foreign policy with the future designs of American bankers, violently hostile to the policy Poincaré was pursuing at the time. It is difficult to define encounters between men of such stature as those simply as bankers extending their expertise to an ordinary client. The power Morgan associates held in American society frequently made them seem to be the true interlocutors of Italian financial policy makers – capable at every turn of securing reasonable terms for their Italian clients from American sources, able to influence the press and other means affecting public opinion toward favorable interpretations of the regime, and prepared to advise the regime of the best way to avoid raising the prejudices of Congress or to navigate the particularities of American preferences and propaganda. Through their representative in Rome, Giovanni Fummi, who was in continual contact first with de’ Stefani and later with Volpi and with Bonaldo Stringher (and, when necessary, with Mussolini himself), or directly by Thomas Lamont’s annual visits to Italy, Morgan Bank always signaled which attitudes or rhetoric of foreign relations risked causing negative effects among American decision makers and in what ways each specific undertaking of the regime could be best valued. Lamont frequently made sure to note that aggressive speech regarding Germany, even if it was packaged for domestic consumption, had bad effects in the United States, where it was a fundamental condition of foreign cooperation that the power in question demonstrates the correct attitude toward Germany.9 On one occasion, he signaled that a campaign targeted at the Italo-American community in support of the lira – such as the one Mussolini had been about to launch around the time of the Pesaro speech [this was an August 1926 speech in which Mussolini announced a “battle for the lira” that would aim at revaluing the lira at the “quota 90,” or 90 lira to the English pound sterling – trans.] – would be interpreted in more influential circles as a sign of the weakness of Italian currency and, in

9

J. P. Diggins, Mussolini and Fascism: The View from America, Princeton: 1972, pp. 49–50, 147–148, 151–154. Thomas W. Lamont was an indefatigable organizer of pro-Fascist propaganda, through his own public statements (of which he made prudent use, so that they would not lose their effect) as well as through letters and interviews with journalists and editors and his activities as president of the Italy-American Society. In 1927 he also took on the task of creating a press office for the Italian government. Naturally this activity also allowed him the opportunity of forming a critical view of some aspects and choices of Italian policies that, in his view, damaged the image of Fascist Italy in the United States and therefore the credit it secured on American markets.

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the worst-case scenario, as undue government intervention.10 Finally, he never got tired of reminding the Italians that propaganda, in order to be well received in the United States, had to be “factual”; that is, it had to be presented in the form of apparently neutral information and supported by hard data. The House of Morgan went so far as to manage the most important cultural activities promoted by the Italian government in the United States. Lamont himself was president of the Italy-American Society for some time, and the House of Morgan continued to be its principal sponsor. Later, J.P. Morgan, Jr., would have an important role, together with Nicholas Murray Butler, the president of Columbia University and an enthusiastic supporter of the Fascist regime, in the promotion of the Casa Italiana, an organization for research and Italian cultural activity that had its home at the university. Perhaps the most striking commitment of the Morgan Bank was the creation of an Italian governmental press office, located in New York, especially dedicated to economic propaganda.11 The services provided by the House of Morgan to the Italian government, in sum, were not those usually offered even by the largest banks to important clients. The way in which the final phase of the war debt negotiations was handled is the final proof of this peculiarity.

3. italian war debt: background The forms and timing of the negotiations of Italy’s war debts to the United States reflect the discrepancy between the demands of American domestic politics and the concrete developments of the economic and political organization of Europe, to which were also added the natural financial impediments on the Italian side. The Wilson administration, following the wishes of several allies and in particular Italy, had made the successful effort to avoid allowing the question of debt and its eventual reduction to be placed on the agenda at the Versailles peace conference.12 But the argument gained renewed attention during the presidential election campaign of 1920, in which the Republican candidate, future president Warren G. Harding, tried to satisfy the xenophobic wave sweeping the nation by promising to collect on all outstanding credit. Following up on that campaign promise, in June 1921,

10

11 12

ASMAE-AAW, bk. 272, fol. A-32, sf. Finanza italiana, anni 1925–1926, tel. from Giacomo de Martino to Benito Mussolini, September 25, 1926, p. 11. Diggins, p. 50. Berutti, p. 144.

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Secretary of the Treasury Andrew Mellon asked Congress for the power to begin negotiations with debtors; in response, he was given the chairmanship of a mixed commission with members from both houses as well as the participation of the secretary of state. Thus, on April 18, 1922, the secretary of state, Charles Evans Hughes, announced the respective debt totals to each debtor nation and invited these countries to send delegations to Washington to settle their terms in discussion with the World War Foreign Debt Commission. The weakness of these initiatives, which gave them only a preliminary character since their only concrete power was to create a structure for negotiation, stemmed from the problem that the European powers were not yet ready to open such negotiations. Until the Genoa Conference of 1922, the Europeans still tended to believe that they could do without American capital, or at least manage not to depend on it in their pursuit of economic reconstruction and stabilization. Given this belief, few were willing to confront the political commitments that Americans would demand in return for the financial resources. In fact, the accords that did follow, for Italy as in other cases, were the direct result of their undeniable need to gain access to American capital and did not occur until after the turning point of the Dawes Plan and the Locarno Pact. The Italian governments preceding the Fascist seizure of power were hesitant even to formally declare their willingness to recognize their debt, using arguments already outlined above. Typical of this reluctance was the message sent by Giovanni Giolitti to his ambassador in Washington on March 22, 1920: Public opinion is very opposed to any debt settlement even in favorable terms because there is the conviction that sums spent for common cause do not count as actual debts. They do not understand why Italy ought to be the first to make accords that imply recognition of actual debt. Best strategy is to leave the question untreated for now.13

On July 26, 1922, the Facta government responded to the Hughes announcement by declaring its intention to send a delegation to Washington. In reality, there was internal opposition between the minister of foreign affairs, Schanzer, who was willing to make the trip, and the minister of the treasury, Paratore, who argued that the conditions for beginning negotiation were completely absent.14 But, beyond the budgetary 13

14

ASMAE-AAW, bk. 14C, fol. Debiti di Guerra, A-21, tel. 6136, Giolitti to Rolandi Ricci, March 22, 1920. Berutti, p. 147; ASMAE-AAW, bk. 176, fol. Debiti di Guerra, Notes for his Excellency the Minister (unsigned), February 5, 1925.

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objections of the minister of the treasury, there were solid reasons for which neither Giolitti nor much less Facta, nor any other Liberale government, would have been able to officially recognize the war debt, even had they understood the necessity of doing so in order to obtain the capital they certainly did know was needed. The popular infatuation with Wilson and the United States had not lasted long in the press of the disappointment over the vittoria mutilata [the “mutilated victory,” the Italian expression for the resentment Italian nationalists felt at the peace terms after First World War – trans.], for which Wilson was held primarily responsible. The Liberale-era governments were beholden to the nationalist animosity of the bourgeoisie, despite this being one of the crucial themes by which Fascism asserted itself. Only Giolitti had had any success extricating himself from its demands. Although he confronted the problem of Fiume and signed the Treaty of Rapallo with Yugoslavia, he could not also at the same time anger the nationalists and a large part of Italy’s economic elite with the question of war debt. It is one of the most frequent political paradoxes that only the person who ultimately personifies a political position has sufficient power to make a decision contrary to that stance. According to this maxim, it was only natural that it would take Benito Mussolini to be the first prime minister to declare his intention to settle the debt and, what was more, to accept each condition the American government would present in the matter. Dino Grandi argued that this behavior was due to Mussolini’s weakness for conformity and respectability, especially in his early days in power.15 Although this is a psychologically plausible observation, the truth is that this conformist appearance was a political choice, of which Grandi himself was one of the best examples; and it was at its most visible in Mussolini’s own behavior only in the early years of the regime, when he had a very strong need for legitimation, not only in a personal sense, but in a political one. In other words, having seized power in barely legal fashion, Fascism had to show that it was capable of running the state in such a way as to reassure conservative opinion both domestically and abroad. What better way to pay homage to the sanctity of private property than to commit oneself to honoring a controversial debt, especially when the creditor could play a decisive role in the economic destiny of the nation? Nor can we forget that, along with the will to respect the financial commitments of the government, Mussolini had advanced, from his very first statements, requests for American capital and for increased opportunities for emigration. 15

Dino Grandi, interview with author, Taormina: January 3, 1970.

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This is not to say that the prevarications were over, on the contrary. What would not be repeated, not even in the internal communiqués of the Fascist government, were the curt tones used by Giolitti to refuse even the consideration of the problem. It was not until the autumn of 1924, when the presidential elections had confirmed Calvin Coolidge’s victory (he had already served, having as vice president substituted for Harding after his death in office) and the Dawes Plan had been approved the previous spring, that the Americans’ invitation appear obligatory. The secretary of state could not hold off Congress any longer, as those representatives became more concerned about European issues in the aftermath of the occupation of the Ruhr. Hughes himself realized that it was not realistic to expect the Italian government to be ready to open negotiations until after those with Great Britain were complete and those with France had at least begun. The secretary of state, while he rejected on principle every Italian excuse for postponing negotiations, called for the Italian government to at least go on record officially with the reasons why it would not begin negotiations and to reaffirm publicly that its own solvency was not in danger.16 His request was fulfilled in the following month, May 1923, in a speech in Milan given by Minister of Finance Alberto de’ Stefani and by Ambassador Caetani in New York. In reality, the American government too was rather hesitant regarding the best way to proceed. Adding to the lack of zeal on the part of Hughes were the discreet pressures exerted by Secretary of Commerce Herbert Hoover, who, in a meeting with Guido Jung, financial attaché of the Italian embassy, laid out what would be his position even in the final phase of negotiation: Italy had an interest in resolving the debt issue as quickly as possible to clear away the obstacle it presented to the reestablishment of normal economic relations between the two countries, by paying the capital on the loan, while the interest could be cancelled or at least deferred.17 Beneath the mask of the friendly opposing counsel, Hoover hid the more rigid position present in the Coolidge administration (excepting the president himself, who had to consider the electoral effects of every side of the issue) against the European states. Hoover was no isolationist: a serious connoisseur of the American production system, he too looked forward to an American program of expansion, but he was 16

17

AC-GC, bk. A-2bis, tel. 107, Gelasio Caetani to Benito Mussolini, Washington, D.C., March 20, 1923. ASMAE-AAP, 1919–1930, bk. 1597 Stati Uniti (7358–7360), tel. 133, Gelasio Caetani to Benito Mussolini, Washington, D.C., April 10, 1923; AC-GC, bk. A 4, tel. 158, Gelasio Caetani to Benito Mussolini, Washington, D.C., April 20, 1923.

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more inclined than some of his banker and governmental peers to use any instrument at hand for defending the interests of individually powerful American business leaders.18 Mellon’s absence from this phase of the discussions was notable. He was, after all, the president of the commission charged by Congress with conducting the negotiations for the United States. His position against such an accord, which he thought intemperate, is more comprehensible in light of the advice arriving at the Italian embassy from those elements of the financial sector most interested in relations with the Fascist government. In December 1923, the banker Otto Kahn, senior partner of Kuhn, Loeb & Co., had expressed his opinion that the U.S. government had no desire to pressure debtor states and that it was probable as time went on that Italy would be able to obtain more favorable conditions, although the Americans would only want to offer those conditions when they could be sure that this would guarantee the final resolution of the European problem. That is, rather than encourage pacification in Europe, they wanted to ensure its stability.19 This was precisely the crucial point: as long as the conditions were not sufficiently mature for the stabilization of Europe. Accords for the consolidation of Italian debts and those of France remained only ends in themselves. They could not alone serve as the measures that would successfully open the doors of the American financial market. The market was certainly favorable but needed basic clarification regarding the German question (especially in the case of France and its attitude toward reparations) in order to begin the operation of expanding its capital throughout the Continent. Between the lines of Kahn’s message, it is easy to see how Hoover’s position – more attentive to commercial than financial conditions – might be different. But his was a minority position. More symptomatic was that General Dawes, involved in the negotiations to reorganize Germany, was very careful to have Secretary Hughes let Alberto Pirelli, the Italian expert, know that neither France nor Italy should worry at all about the debt question, on which there was no intention to pressure them.20 The Morgan Bank associates confirmed this reading of the situation. As Caetani telegraphed to Mussolini on January 6, 1925:

18

19

20

C. Parrini, Heir to Empire: United States Economic Diplomacy, 1916–1923, Pittsburgh: 1969, pp. 189–190; Wilson, American Business, pp. 101–122. AC-GC, bk. A 20 fol. 1. Gelasio Caetani to Guido Jung, Washington, D.C., December 6, 1923. AC-GC, bk. A 20 fol. 2, Alberto Pirelli to Gelasio Caetani, Paris, January 24, 1924.

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Yesterday in speaking with Lamont and Morgan they said that Italy is in a rather favorable position in terms of the debt question. Not only has no one criticized Italy for not opening negotiations, but in their opinion it was opportune to wait until no further arguments were outstanding with France before proceeding.21

Lamont, who followed the debt situation carefully for his Italian client, had also previously told Caetani that, in his opinion, there was no real desire in the Coolidge administration to get down to brass tacks.22 In reality, it was the comparison to France that would become the ongoing point of reference for Italy, not only regarding the question of war debt, but in general for relations with the United States. The reasons are clear. From the American point of view, France had become a negative example in the course of the postwar era. Starting with Clemenceau’s stubborn nationalist and anti-German attitude at the Versailles peace conference and continuing by logical extension in Poincaré’s harsh policies on reparations (culminating in the occupation of the Ruhr), France ended up as an obstacle and an irritant. Whether from the point of view of the expansionists of the American elite or from that of pacifist and anti-interventionist public opinion, France appeared reckless for insisting on consolidating the results of the world war through the use of force in the name of security. The change caused by Aristide Briand’s influence on French foreign policy, which the French economic interests most open to Wall Street cooperation had lined up behind, was never enough to cancel out the negative image that American elites and public opinion had formed of France from the Third Republic’s characteristically precarious parliamentary majorities and endemic government crises. The war debt issue was no exception, whether due to the scarce political will of Poincaré (accompanied by a few imprudent statements) or to the minimal American inclination to make concessions for a power that stood as an obstacle to their desired European pacification – the condition that would finally allow American capital to penetrate the Weimar Republic. This situation offered a magnificent opportunity for the Fascist government in Italy. Italian nationalism needed a scapegoat as well (since neither Great Britain nor the United States could be cast in the role, for evident reasons that were not only economic), and France fit the bill perfectly. France was a perfect target, not only for the traditional Mediterranean

21

22

ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2. Debiti dell’Italia verso l’America, A 61, tel. 21, Gelasio Caetani to Benito Mussolini, Washington, D.C., January 6, 1925. HUGSBA-TWL, Thomas W. Lamont to Gelasio Caetani, New York, December 5, 1924; ASMAE-AAW, Gelasio Caetani to Benito Mussolini, Washington, D.C., December 6, 1924.

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controversies – accentuated by the ideological zeal (which was however only rhetorical) with which the Fascists waved the banners of Tunisia, Nice, and Corsica – but also for the role French democracy played in hosting exiled anti-Fascists. On the war debt issue, as for that matter on every other occasion, Mussolini and his collaborators were eager to exceed France, taking its place in the esteem and consideration of the Anglo-American powers. As Dino Grandi testified, in every phase of the negotiations, the errors and inappropriate behavior of the French minister of finance, Caillaux, were carefully cataloged and scrupulously avoided by his Italian counterparts.23 Perhaps also for this reason, in the course of 1924, not only did Mussolini avoid any disagreements with his creditors in the most absolute fashion, but he also tried to respond openly to even the most gentle requests addressed to Italy by the Americans. There were the previously mentioned public statements of Mussolini, de’ Stefani, and Caetani, and Mussolini was concerned not to allow American inquiries for clarification to go unheeded. The way in which “il Duce” responded to Hoover’s informal overtures, to which Caetani had shown sensitivity, was revealing: while inviting the ambassador to wait “to be addressed at least in any official capacity,” he authorized Caetani in case of necessity to proceed with the negotiations, giving up the need to wait for the results of the French case.24 Naturally Mussolini was happy to drop the subject when there was no decisive initiative forthcoming on the part of the secretary of state after these informal inquiries. Whereas the ambassador in Washington felt the more immediate pressure of the issue, which would have to be dealt with sooner or later,25 both Minister of Finance de’ Stefani26 and Alberto Pirelli27 insisted that more time was necessary, above all to observe the results of the French negotiations, even if they were convinced (and here 23

24 25

26 27

Grandi, interview; ACS-GVM, bk. 11, Trattative con Washington, fol. F, Appunti del dr. Alberto Pirelli intorno ai negoziati di Washington per il consolidamento del debito di Guerra dell’Italia verso gli Stati Uniti (Notes of Dr. Alberto Pirelli on the Washington negotiations for consolidation of Italian war debt to the United States). Dictated on board the Mauritania during the return voyage, November 25–30, 1925. The memoir is also in AALP. AC-GC bk. A4, Benito Mussolini to Gelasio Caetani, Rome, October 31, 1923. AC-GC bk. A 20 fol. 2, Gelasio Caetani concluded his personal letter to de’ Stefani agreeing that in the “current climate of hysteria and electoral demagoguery” it was inopportune to open negotiations, noting nonetheless that “it would be necessary to arrive at some form of agreement in order not to remain in financial uncertainty and to clear away the reciprocal mistrust.” Washington, D.C., April 25, 1924. AC-GC, bk. A 20 fol. 2, Alberto de’ Stefani to Gelasio Caetani, Rome, April 7, 1924. AC-GC, bk. A 20 fol. 2, Alberto Pirelli to Gelasio Caetani, Paris, February 21, 1924.

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they agreed with the Washington ambassador) that the consolidation of the war debt with the United States was an indispensable step on the road to restabilizing the country’s credit. Once the electoral period was over, the preparation of de Martino’s mission, which was to take over from Caetani as ambassador in Washington, D.C.,28 and above all some signs of impatience from Andrew Mellon, secretary of the treasury, caused a transformation into what became the first actual phase of official negotiations. It was significant that Andrew Mellon, breaking his silence, discreetly raised the question of Italian inertia on the topic of war debt. Mellon, cozy with the banking community, represented the social sector most favorable toward the Italian government, but also most influential in the Coolidge administration. With the presidential election behind them and, especially, after the approval of the Dawes Plan, he felt that the situation had sufficiently matured. The way this news emerged – solicited by a false news item by a French press agency – produced a considerable effect in the Italian government.29 On May 2, 1924, Mellon wrote to the secretary of state that he hoped the Italian government would now advance definitive proposals to repay its debt to the United States and would not hold back a decision until the French accords had been made.30 Hughes had spoken to Caetani in a similar vein during the ambassador’s farewell visit.31 After several further prevarications, the new secretary of state, Frank Kellogg, who had replaced Hughes in the incoming Coolidge administration, indicated to Ambassador de Martino that he had no objection to beginning a concrete negotiation with Secretary of the Treasury Mellon, giving him to understand that any further postponements would be seen with disfavor by the Americans. In truth, Kellogg, who had come from the Senate, was perhaps more sensitive than his predecessor to the sentiments

28

29

30

31

NA-DS, 800.51W89 Italy/18, Henry P Fletcher to Charles Evans Hughes, Washington, D.C., February 16, 1925. NA-DS, 800.51W89 Italy/19, Henry P. Fletcher to Charles Evans Hughes, Rome, January 28, 1925; NA-DS, 800.51W89 Italy/14, Leland Harrison to Andrew Mellon, Washington, D.C., January 16, 1925; NA-DS, 800.51W89 Italy/15 tel. 15, Henry P. Fletcher to Charles Evans Hughes, Rome, January 23, 1925; NA-DS, 800.51W89 Italy/16, Andrew Mellon to Charles Evans Hughes, Washington, D.C., January 24, 1925; NA-DS, 800.51W89 Italy/ 15, tel. 12, Charles Evans Hughes to Henry P. Fletcher, Washington, D.C., January 27, 1925. NA-DS, 800.51W89 Italy/27, Andrew Mellon to Frank Kellogg, Washington, D.C., May 2, 1925. LC-CEH, bk. 175, Memorandum of interview with Italian ambassador (Don Gelasio Caetani), Washington, D.C., Tuesday February 3, 1925.

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of Congress. The administration wished to appear already hard at work on negotiations with each of the major debtor nations. Throughout the month of May, de Martino had three meetings with Mellon, with the participation of Undersecretary of the Treasury Garrard Winston (who did not miss the chance to show his sympathy for the Italian government).32 De Martino, for his part, was in continual telegraphic contact with Rome and received frequent instructions from Mussolini.33 For the first time, the two governments began to craft an accord, although the conversations revolved around Italian proposals, while Mellon and Winston limited themselves to taking notes or raising specific objections. In the course of these conversations, but especially in the exchange of messages between Mussolini (who followed every development regarding the debt in a nearly obsessive manner) and de Martino, the main points for the following phase of debate were very soon set out. The single and most important concession made by the Americans was to explicitly accept the principle of capacity to pay. In other words, it was already taken for granted that the debt would not only be substantially reduced but that the debtor nation would have substantial discretion in repayment. It was actually Mellon himself who asked de Martino to prepare a study documenting the limits of the Italian government’s capacity for payments. Only if an agreement included supervisory mechanisms on the part of the creditor, however, were inspections or supervision allowed – this was the case for Germany’s reparations, for instance – while the Italians decided against it. Following Mussolini’s instructions, de Martino excluded this possibility, though his American interlocutors were surprised to hear that the Italians had contemplated it at all as an acceptable possibility. Another point on which the Americans indicated – tacitly, but right from the outset – that they were willing to compromise was the forgiveness of interest. Since they had previously indicated that any reduction in the capital of the loan amount was inopportune (for obvious political and 32

33

ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti d’Italia verso l’America, A, 61–62, tel. 112, Giacomo de Martino to Benito Mussolini, Washington, D.C., May 13, 1925; ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti d’Italia verso l’America, tel. 742, Giacomo de Martino to Benito Mussolini, Washington, D.C., May 14, 1925; ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti d’Italia verso l’America, A, 61–62, tel. 833, Giacomo de Martino to Benito Mussolini, Washington, D.C., May 27, 1925; tel. 842, 28 May 1925; tel. 850, May 29, 1925. ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti d’Italia verso l’America, A 61–62, tel. 428, Benito Mussolini to Giacomo de Martino, Rome, May 23, 1925; tel. 515, June 12, 1925; tel. 527, June 13, 1925.

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propagandistic reasons), only a drastic reduction of accumulated and future interest could make the principle of capacity to pay in any way meaningful. As a preliminary proposal, the Italian government requested the total cancellation of interest. In response, Undersecretary Winston merely observed that this would amount to a 90 percent reduction of the debt in terms of the projected repayment schedule. In other words, the American government entered into bargaining on the question of interest, reserving the right to finalize the numbers at the negotiating table, in relation to the Italian government’s capacity to pay, but appeared to accept even major reductions as a possibility. Probably the most onerous requests on the Italians’ part had to do with the schedule of payments: a moratorium of ten years followed by a payment schedule spread out over the next ninety years, with gradually increasing annual payments. Although Mellon had left open some room for discussion on this point in their initial meetings, the American government – here spoken for primarily by Secretary of State Kellogg – very quickly showed a rigid opposition to any moratorium.34 The reasons were obvious. The Republican administration needed above all other things to demonstrate to public opinion that it was demanding results and not promises from the European states. These results could of course be quite modest, but they must be immediate and concrete. That is why the Americans would not negotiate on the immediate initiation of payments, even minimal ones. Even the idea of an installment plan, like the sixty-two years agreed upon with the English, now appeared excessively dilatory. The only arguments that met total and inflexible rejection from the Americans, even in the preliminary phases, had to do with the relationship between reparations and war debt. The problem was this: the Italian government, according to previous agreements, had certain expectations of Germany’s remaining war reparations even after reduction had prevailed as the chosen approach after the failure of the Ruhr occupation. The Italian government intended to subordinate its own payments toward the debts it owed Great Britain and the United States to the payments it was entitled to receive as defined by the Dawes Plan. The American opposition to any linkage of reparations payments and war debt payments was based on both political and financial considerations: political in that the United 34

ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti dell’Italia verso l’America, tel. 928, Giacomo de Martino to Benito Mussolini, Washington, D.C., June 11, 1925, in which de Martino wrote: “. . . I could easily see that the Secretary of State is much more rigid than the Secretary of the Treasury.”

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States, ever since the Versailles conference, had renounced any reparations from Germany and had criticized its allies for being too demanding in this regard; financial in that linking payments to the unpredictable compliance of a third party did not represent a sound investment. The American political factions most hostile to cooperation with Europeans had exploited this tendency to link the two issues in sustaining their isolationist position and had harshly attacked all financial commitments underwritten by European governments, so that even those people and those factions who considered the war debts an obstacle to be cleared from the path of planned expansion had little choice but to go along with the dogma of separating reparations and debts. These latter participants would admit in private that such a connection existed in terms of European governments’ ability to make payments, especially in the case of countries that, like Italy, had difficulty balancing their budgets at the time. Mussolini, for his part, sensitive as always to the necessity of managing public opinion, quickly grasped the good sense of helping the Washington government’s spokesmen avoid making reparations payments a condition of Italian debt repayment. Nonetheless, he instructed his representatives to make the facts of the linkage clear to the American negotiators so that they would not have unrealistically high expectations of Italy’s ability to fulfill its commitments.35 The Italian government was moreover of the opinion that future negotiations would have to be preceded by the finalization of agreements with the other debtor nations, which had better capacity to pay (that is, with Great Britain and France). It was hoped that this would achieve both the further postponement of the actual start of payments and a favorable position relative to existing accords; Italy would be able to obtain further reductions in payment amounts on the basis of its lesser capacity to pay. In this case too, first Hughes and then Kellogg were fairly inflexible in insisting on the complete separation of each debt situation from the other, whether because of the evident risk entailed in allowing the reciprocal procrastination of the various debtors or, mostly, because of the danger that they would band together and insist on collective bargaining with their creditors.36 Confirming this stance, the U.S. government rejected 35 36

AADS, n. 55, Benito Mussolini to Giacomo de Martino, Rome, June 13, 1925. AADS, n. 34, Dino Grandi to Alberto de’ Stefani, Rome, June 2, 1925, transmitting Giacomo de Martino to Benito Mussolini, May 9, 1925. Kellogg said to de Martino that “he was aware of the Italian hypothesis that our negotiation ought to follow France’s, but he could not agree because, according to the American government, there was no interdependence among the various war debts. Every debt regards only the debtor nation and

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every attempt on the part of the debtors to place the question of war debt on the agenda of international conferences, remaining committed to the provisions of the Versailles conference and, later, of the London Conference of 1933, even though it was clear that any discussion of international economic relations could hardly avoid the question.37 In the end, the Italian government had to accept negotiating without the comparison of any final accord with France, but this primacy of his country in American relations probably actually pleased Mussolini.

4. the start of negotiations On June 15, 1925, Mussolini finally sent a telegram to de Martino authorizing him to open official negotiations with the World War Foreign Debt Commission.38 Mussolini did not appear to reach this decision without some hesitations and concerns. This was indicated not only by the direction of the preliminary talks, following the careful instructions that he continually sent to the ambassador in Washington, but also by the uncharacteristic “We’ll see!” noted in the margin after he read the telegram de Martino sent recounting Kellogg’s assurance that Italy would have no reason to regret the official opening of negotiations.39 Why did Mussolini finally decide to go ahead and cross the Rubicon? Certainly the American government’s solicitations had some effect – particularly as Mellon’s had become ever more urgent. In this situation, it would have been possible to keep finding reasons to put off the date, although there was the risk of inciting a public controversy like the one that had already embittered relations between the United States and France and had ended up damaging France’s credit on the American financial market. But there was another, decisive reason not to delay any longer: the conditions (and the need) for Italy to cement credit operations in the United States were coming to maturity. The Italian government had just successfully secured a credit line of $50 million from the Morgan Bank, but the approval of the American government

37 38

39

the American government.” De Martino answered among other things that “. . . Italy has an advantage regarding France. But how would it be practical to determine the margin of this advantage without first knowing the results of the final French agreement? The indispensable baseline would be lacking.” Berutti, pp. 141ff. ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Benito Mussolini to Giacomo de Martino, tel. 534, Rome, June 15, 1925. ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Giacomo de Martino to Benito Mussolini, tel. 964, Washington, D.C., June 16, 1925.

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had been obtained under the explicit condition that this could only apply in the case of a private banking credit line. Had it been a government bond issue, the U.S. government, according to the rules of conduct it had legislated regarding all countries that had not yet settled their war debts, “would not be able to refrain from objecting [. . .] unless the Italian government had simultaneously made the necessary steps to settle and repay its debt to the United States Government.”40 Since a loan based on a public bond issue was exactly what Mussolini planned next, as the first and most important step in a series of similar operations to fund key municipal governments and industries, the warning could not have left him indifferent. There was a disparity in opinions on this issue, present even within the delegation charged with carrying out the final phase of negotiations with the United States. Alberto Pirelli, for instance, was much less convinced of the beneficial results of trying to secure funds on the American market without strictly linking them to currency stabilization; he thus felt less urgently about the need to complete any accord with the United States regarding war debt.41 Pirelli’s views reflected the general hostility among Milanese industrialists, as well as nationalists, toward the obligatory nature of the war debt with Great Britain and the United States. Moreover, he was most concerned with the risks of excessive credit exposure in relation to the greatest capitalist powers. He felt it could not be financially healthy for Italian industry, which jealously cultivated protectionist policies in its favor from the Italian state. Nonetheless, he never expressed himself as openly in official situations as he had in writing to his father, and his caution reveals that Mussolini was far from isolated in his choices, which were viewed with approval by important figures of finance in Italy. Even Pirelli himself admitted that the loans were necessary to stabilize the currency, and his reservations did not keep him from participating actively in the negotiations to consolidate Italy’s war debt toward both Anglophone nations. It must also be noted that Thomas W. Lamont, the Morgan Bank associate most involved with Italy as a client, had alerted the Italian government that the propitious moment was at hand.42 His advice was authoritative in that he had been the one to advise against accepting the 40

41

42

ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Giacomo de Martino a Benito Mussolini, tel. 951, Washington, D.C., June 15, 1925. AALP, Posizione scelta: Riparazioni e debiti, fasc. IX, 1925–1926, n. 13300, Alberto Pirelli to Giovanni Battista Pirelli. ASMAE-AG, Pacco 160, Reparto Generale, Classe 61, sottoclasse 5 fasc. 7, Prestito in America e in Italia per spese pubbliche in Albania, tel. 1028, New York, June 22, 1925.

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offer made by Hoover earlier, during the informal meetings with Caetani and Jung. At this moment, the Italian domestic situation was favorable for the launch of a campaign for the international stabilization of the regime – which would require both the availability of American capital and the legal fixing of the currency exchange rate – while proceeding hand in hand with internal repression to establish order. In his telegram giving the go-ahead for official negotiations, Mussolini had justifiably observed: The country is completely tranquil, the government solid. The Aventine Secession is about to end and was in any case ineffective as a force for political opposition. No strikes. The Holy Year proceeds with maximum calm.43

Apart from the propagandistic intent of such communications, it was still true that the conditions both abroad and on the financial plane for the expansion of the regime’s consolidation were coming together, ever more strongly since the regime had overcome the Matteotti Crisis, a turning point of its history. A final spur to action came from the fact that the exchange rate had been suffering; if Mussolini’s insistence that this had no objective relationship to the real conditions of the country’s economy were true, then it was more urgent than ever to move forward with currency stabilization – whose first indispensable step was, precisely, the settling of war debts.44 The full-scale official negotiations between the Italian government and the American World War Foreign Debt Commission appointed by the U.S. Congress had two clear and distinct phases. The first phase was actually an extension of the preliminary informal talks. It took place in only three meetings (the first on June 25, the other two in the morning and afternoon of June 30). The composition of the delegation emphasized the limited commitment of the Italian government in this phase: Ambassador de Martino was accompanied, in addition to a few embassy staffers, only by Mario Alberti, the chief executive of the Credito Italiano bank, who usually served as second to Alberto Pirelli (of whom he was a pale copy, according to Dino Grandi).45 Alberti was already in the United States to secure a loan for public works in Albania from New York banks.46

43

44 45 46

ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Benito Mussolini to Giacomo de Martino, tel. 534, Rome, June 15, 1925. Ibid. Grandi, Interview. ASMAE-AG, pacco 160, Rep. Generale, Classe 61, sottoclasse 5, fol. 7; Prestito in America e in Italia per opere pubbliche in Albania, Giacomo de Martino to Benito Mussolini, Washington, D.C., June 15, 1925.

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Mussolini’s telegram to the delegation on the eve of the negotiations’ start is quite interesting, both because it contains a synthesis of his instructions and because it shows how central a role the Morgan Bank was assuming in his analysis (this central role was due to become yet greater in the second and decisive phase of negotiations): I maintain that Lamont of the Morgan firm can and will aid us in correctly predicting what form the major points of our accord should take in order to be best adapted to American public opinion. To that end, I ask you to keep in frequent contact with him. You may tell him that Italy needs ten years of moratorium on any payments, the cancellation of accumulated and ongoing interest, and the repayment of the capital amount only over the space of 90 years starting from an annual payment corresponding to 0.5 percent of the total sum, gradually increasing in amounts equal to those set in the English plan of payment. Since the financial burden resulting from such a settlement could remain the same in various versions of an accord, it is possible that Lamont’s deep familiarity with the people and issues involved will enable him to give us useful suggestions.47

In reality, the official instructions from Mussolini to de Martino modified the platform to communicate with Lamont. In these instructions, two possibilities were outlined, the first being: (a) cancellation of all accumulated and future interest; (b) 5-year moratorium on all payments; (c) payment on the capital in 62 annual payments, increasing according to the terms of the English settlement and beginning with a first annual payment of circa $8 million.

The second, differently, requested the cancellation only of accumulated interest and offered the nearly symbolic payment of one-half percent on the future interest starting after the eleventh annual payment; the payment of the capital amount was laid out in the same fashion as in the first proposal. Mussolini took care to note that Any modification, however slight, to these proposals must be submitted for evaluation by the Ministry of Finance to calculate its repercussions on the Italian financial situation, without any prejudicing statements on our part.

Above all, Mussolini insisted in his instructions on the necessity of maintaining the discussion at the level of general principles so that only the documentation of Italy’s capacity to pay, which was still being prepared, would dictate the details of the final formula in the settlement.48 47

48

ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti dell’Italia verso l’America, tel. 594, Benito Mussolini to Giacomo de Martino, Rome, June 23, 1925; tel. 596, June 24, 1925. ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Benito Mussolini to Giacomo de Martino, tel. 596, Rome, June 24, 1925.

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Although the main points of the settlement remained fixed over time, these instructions show Mussolini introducing new elements of flexibility designed to take into account the demands of congressional sentiment and American public opinion. This flexibility was greatest regarding the possible length of a moratorium and the various approaches to calculating interest. The Italian negotiating position was even more flexible in the proposal submitted to Mussolini by Mario Alberti, in the time between the first meeting – which had been entirely dedicated to Alberti’s analysis of the Italian capacity to pay – and the second, during which the Italian delegation finally began to discuss the specifics of the settlement terms. Alberti’s plan was the result of his preliminary conversations with Lamont, Mellon, and especially Undersecretary of the Treasury Garrard Winston. It showed a clear effort to avoid anything more than generic promises from Italy, while still mollifying the least informed and most hostile sectors of the American public. The goal was to declare Italy’s willingness to pay capital and interest following the terms of the agreement between Great Britain and the United States, but making the start date and the amount of payments conditional on a number of benchmarks reached by the Italian economy – in particular, the balance of payments and the relation between the gold standard value of the lira and its domestic purchasing power. Even the last date proposed for the start of payments, independent of such indices, would be conditional on the absence of any disturbances of the Italian economic base, to be certified by a commission of both Italian and American economists.49 This plan, in the months between the first and second phases of negotiation, was labeled “camouflage,” meaning in this case that it was designed to make Italian commitment as evanescent as possible, while masking it in such a way as to allow the Coolidge administration to portray itself to its constituents as taking a hard line with debtor nations. De’ Stefani never liked the Alberti plan, since he thought it is dangerous to recognize any responsibility for compound interest or to subordinate the payment plan to the creditors’ judgments of the health of the Italian economy.50 Mussolini, after numerous requests from Washington, gave instructions to Ambassador de Martino to stick to the original proposal, but authorized him to introduce a few elements of the 49

50

ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Giacomo de Martino to Benito Mussolini, tel. 1070, Washington, D.C., June 26, 1925. ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, tel. 1087, Giacomo de Martino to Benito Mussolini, Washington, D.C., June 27, 1925. AADS, n. 80, Alberto de’ Stefani to Benito Mussolini, Rome, July 11, 1925.

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Alberti plan at the following meeting.51 In truth, Mussolini’s position at this point was not completely clear, even though he had transmitted the numerous and stringent objections formulated by his minister of finance, thus implicitly seconding them.52 Lacking more definitive instructions from Mussolini, and given the strong opposition of de’ Stefani to the Alberti plan, the prudent burocrat de Martino tried to play it safe. In the final meeting of the negotiations, he limited himself to officially presenting the original proposal even though he knew it was unacceptable from the American point of view. He thus repeated the request for a ten-year moratorium, the total cancellation of accumulated and future interest, and a schedule of ninety years for payment (against the example of the sixty-two set by the British accord). At this point, the Americans did not relaunch any discussion; Mellon simply observed that the Italian proposal was unacceptable, and Senator Smoot added that it had no chance of being ratified by Congress. Both delegations agreed that it would be better not to publicize the Italian proposal, in order to avoid any external impression that the negotiations had reached a dead end. They decided to explain the suspension of talks with the excuse of the departure for Italy of Mario Alberti, who would have the task of gathering the documentation of Italy’s capacity to pay, material that was indispensable for the final agreement.53 The disappointment on the American side was real and spontaneous,54 although not so much as to damage their will – especially Mellon’s – to conclude a settlement both favorable to Italy and defensible to Congress. This first phase of negotiation turned out, upon closer scrutiny, to have served Mellon’s interest and that of those forces who desired Italian outlets for capital investment by creating an atmosphere that was more favorable toward the Italian government, even on the spiny problem of war debt. Mellon’s opening speech as president of the World War Foreign Debt Commission mined this vein considerably, as he remarked that Prime Minister Mussolini had acted with his customary decisiveness as soon as he knew that Italy was ready to enter a debt repayment agreement. Americans had witnessed how Italy emerged from the chaos of war, restructured its industry, reduced its spending, and balanced its budget. 51

52 53

54

ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, tel. 620, Benito Mussolini to Giacomo de Martino, Rome, June 29, 1925. Ibid., tel. 610, June 27, 1925. De Martino Report; see ASMAE-AAW, bk. 176, fol. debiti, June 26, 1925; bk. 176, June 20, 1925. Ibid.

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All this, he said, was through the leadership of one energetic man blessed with good ideas and the necessary power to carry them out. Americans, said Mellon, appreciated constructive action.55 He was, in other words, travelling the path by now well blazed by the American press as well as by American business travelers and diplomats: the portrayal of Mussolini as cornerstone of the political stabilization and economic recovery of Italy, in a near-exact imitation of the propaganda distributed by the dictator’s regime. And yet it was clear, in the case of men such as Mellon and Lamont, that they were not motivated by disingenuous ideological enthusiasm; they simply found this image useful for their own goals regarding Italy. They made use of every occasion to educate the American public in a favorable attitude toward the acceptance of a generous settlement of Italy’s war debt in order to clear the ground of any last obstacle to the development of American financial expansion in Italy. On the Americans’ part, even the fact of the pause in negotiations was used toward this end: the trip to Italy served to dramatize the accuracy and care with which the Italian government kept its accounts and would document its capacity to pay. It also made the initiation of talks with Belgium and France possible in the meantime, while public opinion continued to mature positively regarding Italy.56 Utmost care was taken, including by Secretary of State Kellogg – who had maintained the least flexible stance in the talks – to avoid any spread of rumors that there had been a breakdown in the discussions.57 On the Italian side, there was an obvious similar desire, as demonstrated by the fact that the director of the Banca d’Italia took it upon himself to inform the managers of regional bank branches that the inevitable rumors suggesting a rupture were incorrect and that the negotiations were “proceeding normally.”58 The intervention by Stringher was not motivated by some general or preventive concern, but by a precise fact: from the beginning of the negotiations until the period just after their interruption, the value of the lira had taken a dive that greatly alarmed the Italian government. In the 55

56

57

58

ASMAE-AAW, bk. 176, fol. Debiti. Dichiariazione di Andrew Mellon, Press Release of the Treasury Department, June 25, 1925; ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti dell’Italia verso l’America, tel. 1070, Giacomo de Martino to Benito Mussolini, Washington, D.C., June 26, 1925. ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, tel. 1122, Giacomo de Martino to Benito Mussolini, Washington, D.C., July 1, 1925. NA-DS, 800.51W89 Italy/36a tel. 81, Frank Kellogg to Henry P. Fletcher, Washington, D.C., July 1, 1925. BIAGSRE, bk. 15, 1925, fol. 3, Notizie sui cambi e sui mercati, sf: Filiali della Banca, Bonaldo Stringher alle sedi della Banca d’Italia di Genova, Torino, Milano, Venezia, Firenze, Napoli, Trieste.

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previous month of May, the exchange rate had remained constant between 117 and 122 lira to the pound sterling. After the middle of June, the value of the lira had begun to fall sharply, reaching a low of 131 on the day of the first meeting in Washington, 138 at the moment of the suspension of talks five days later, and hitting a low of nearly 145 on July 2. Only in the following days did it begin a slow recovery.59 This development created serious alarm in Rome. Mussolini followed the exchange rates on this and later occasions with a febrile attention, probably because he considered them, rightly or wrongly, one of the few possible concrete manifestations of public opinion on economic matters to which Italy was still accountable. Mussolini developed a particular fixation on the idea that the coincidence between the timing of the negotiations with the United States regarding war debt and the fall of the lira was proof of a deliberate sabotage of the policy of monetary stabilization. Given that the settlement of war debt was a necessary preliminary step in the ongoing consolidation of the government and economy, he saw the fall in the value of the lira as an attack threatening the very survival of the Fascist regime. The weakness of the lira first spurred Mussolini to exert pressure on the American government to renounce its refusal to approve loans from American banks until the country had reached an accord on war debt. He hoped to secure, as quickly as possible, a large bond sale directed at monetary stabilization as well as several smaller loans guaranteed by the Italian government for the cities of Rome and Naples. In a verbal memo and subsequent telegram, which the embassy was authorized to show the State Department, the Italian argument underlined the following points: the renewed weakness of the lira was proof that the possibility of a debt settlement, and therefore any prospective future disbursements of hard currency, risked diminishing Italy’s credit if it was not at the same time reinforced by new loan agreements. Mussolini’s goal in this phase was to make the Americans understand that he too had a public to satisfy. He assigned the charge d’affaires, Augusto Rosso (de Martino had returned to Rome to receive new orders, in preparation for the final phase of negotiations), the task of informing the State Department that The Minister of Finance is taking intense persuasive action regarding Italian public opinion [. . .] see article . . . in the major opposition newspaper60 [. . .] which comes close to pure and simple repudiation [. . .] This article is not the work of extremists, but reflects the impressions of the middle and industrialist classes. The government 59 60

BIAGUS, Raccolta Cambi dal 1900 al 1930. Corriere della Sera, August 20, 1925.

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is certain to win over these currents but needs widespread and generous cooperation from the American government.61

At the very moment when Mussolini made these somewhat-rare references to the phenomenon of public consent for the regime, he had already been informed of the refusal not only by the always-rigid Kellogg,62 but also by Mellon, to agree to the concession of the loans in question. They had followed the formula issued previously by the State Department, which stated that in the absence of “substantial advances” in the settlement of war debt, no further public loans could be approved. In American eyes, the argument was reversed: the conclusion of negotiations would not damage but rather improve Italian credit because, until the time when the obstacle of war debt was cleared from the path, the availability of American capital would remain severely limited.63 The Americans had the correct analysis here, since any different attitude from the Coolidge administration would have set off a chain reaction of requests from all the other debtor nations and inevitably raised the ire of Congress. The banks themselves, obviously interested in earning the commissions and interest from granting credit, were not however willing to put the larger project of stable expansion in danger with any false move. They knew that the isolationist fires were still burning in Congress and in some reactionary sectors of industry – well represented even in Hoover’s future government – and that these could be won over only on the condition that any expansion be first preceded by a satisfactory conclusion of the war debt negotiations. Lamont from the Morgan Bank continued to discreetly inform the Italian government of his capable analysis of the situation: the interruption in the negotiations should not cause Mussolini to desist from his chosen course of action. It was important not to lose focus and go running after credit that would be available when the time was right, nor would excessive stratagems and game playing be productive. Plans like the one proposed by Alberti were too obscure to provide “stable ground” for a successful settlement. It was better to stop launching trial balloons in the press, stop any operations of “camouflage” that might only have the effect of making Congress suspicious. The partners of the House of Morgan advised both the 61

62

63

ASMAE-AG, bk. 159, titolo 3, Classe 61, fol. 2, Debiti, tel. 902, Benito Mussolini to Augusto Rosso, Washington, D.C., August 25, 1925. ASMAE-AG, bk. 159, titolo 3, Classe 61, fol. 2, Debiti d’Italia verso l’America, tel. 1428, Giacomo de Martino to Benito Mussolini, Washington, D.C., August 6, 1925; tel. 1429, August 6, 1925; tel. 1434, August 7, 1925; tel. 1436, August 7, 1925. ASMAE-AG, bk. 159, titolo 3, Classe 61, fol. 2, tel. 1479, Augusto Rosso to Benito Mussolini, Washington, D.C., August 13, 1925.

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French and the Italian governments to put their cards on the table with the greatest candor, giving up any attempts to influence the discussions with feints they would renounce later in the negotiations in any case. Of this approach the Belgian delegation, led by Theunis, had been a good example. Positive terms would not fail to result. According to Lamont, the mood in Washington encouraged his belief that since a debt commission had been formed, it would push to set favorable terms for Italy’s ability to pay.64 Mussolini once again ended up following the advice of the House of Morgan. He began by entrusting himself definitively to the care of Lamont, abandoning the ruse of meeting with his competitors (specifically Chase Bank), as Alberti had at one point suggested. The decisive factor in this choice was the ability of the House of Morgan to offer political support. It acted as a mediator with the American government, and the Fascist regime absolutely needed such a liaison given its inability to secure credit without humbling itself before the debt commission. It was probably not a coincidence that Secretary of State Kellogg, the most inflexible gatekeeper of the United States’ authorization of credit to Italy, at this same time discreetly informed Ambassador de Martino that only the House of Morgan would have the capacity to organize and guarantee a bond issue for Italy, thus demonstrating, as de Martino expressed it, a . . . preference, already known to the treasury, of this government for the House of Morgan. It is also well known that the House of Morgan, and in particular Lamont and Morrow, wield influence over the war debt issue.65 Thus, the following pattern had been set: the Italian government needed to secure credit on the American market; the American government made such credit conditional on a war debt settlement; the House of Morgan was the only bank able to guarantee the most favorable terms for such a settlement. In choosing a bank to work with, the Italian government could reach only one conclusion. After a failed attempt to get the State Department to reconsider its authorization of bonds for the municipal governments,66 Mussolini was invited to return to the bargaining table for a debt accord.67 Giuseppe Volpi di Misurata’s replacement of de’ Stefani at the Ministry of Finance 64

65

66

67

HUGSBA-TWL 190–16, T. W. Lamont to Giovanni Fummi, Washington, D.C., August 19, 1925. ASMAE-AG, bk. 159, titolo 3, Classe 61, fol. 2, tel. 1372, Giacomo de Martino to Benito Mussolini, Washington, D.C., July 28, 1925. NA-DS, 800.51W89 Italy/48, Joseph C. Grew to Blair and Company, New York, September 1, 1925. ASMAE-AAW, bk. 173, fol. Debiti, Giacomo de Martino to Benito Mussolini, Washington, D.C., September 21, 1925.

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favored a speedy resolution of the problem of American credit. Product of the great northern industrial sector, specifically the electrical industry, he was personally motivated to clear the ground by settling the war debt issue. In August, the reopening of negotiations urged by Lamont and Ambassador Fletcher68 was decided at the highest levels. This time the Italian delegation was led by the new minister of finance and included Ambassador de Martino, the young undersecretary of foreign affairs Dino Grandi (who defined himself in this role as “that dash of politics that the delegation’s recipe called for”69), Ambassador Lelio Bonin Longare, and Alberto Pirelli and Mario Alberti, the expert negotiators of the Dawes Commission. Following the delegation to Washington was also the Roman representative of Morgan Bank, Giovanni Fummi. The delegation’s composition was a clear indication of Mussolini’s determination to obtain a positive result. The rumor, recounted by the American charge d’affaires in Rome, that “il Duce” had ordered the delegation not to return without the agreement in hand, was probably not unfounded. Another rumor, that he had encouraged them to be more flexible, was also likely true.70 He had by this time been giving daily attention to the contacts and negotiations for months. The recent events regarding the exchange rate and the requests for bond issues and loans had clearly convinced him that, in order to consolidate Italy’s credit status – and therefore the status of his own regime – it was absolutely necessary to reach an accord. In the aftermath, it would be possible to obtain all the funds needed on the American financial market and to launch a legislative standardization of the lira. Nor could he accept that such a “national mission” end in anything other than success. The preparations for the final phase of negotiations were proportional to the victory at stake. All issues of public order were evaluated with great care, in order that no disturbances could damage the image of Fascist Italy during the most delicate moments of the talks. The country had to appear pacified, but without giving any open evidence of excessive repression. In particular there was concern over the fallout from the recent Fascist looting of the Grand Orient Masonic Temple; no negative publicity should result from this in the United States, nor did the regime want it to become a motive for renewed opposition domestically. The regime successfully 68

69 70

NA-DS, 800.51W89 Italy/41, tel. 101, Frank Kellogg to Henry P. Fletcher, Washington, D.C., August 19, 1925; tel. 132 Henry P. Fletcher to Frank Kellogg, Rome, August 31, 1925. Dino Grandi, Interview. NA-DS, 800.51W89 Italy/59, Joseph G. Grew to Andrew W. Mellon, Rome, September 12, 1925.

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obtained the collaboration of the main leaders of the very lodge that had been attacked, all of whom pledged to cooperate with the government;71 Grand Master Raul Palermi himself had already traveled to the United States in support of the Italian delegation.72 Preparations were also underway regarding the negotiating tactics; they benefited from a considerable collection of preliminary contacts and discussions that had clarified the American position and especially identified the points of greatest resistance, whether individual personalities or the content of the terms. In the days just before the delegation’s departure, the experience of the French minister of finance Caillaux was studied with special attention in order to avoid repeating the mistakes he had made in his mission to Washington to negotiate terms on French war debt.73 One fundamental choice was made at this point: it was decided to renounce all requests that might damage the American Commission’s relations with Congress. On the eve of the departure, Mussolini called a meeting at Palazzo Chigi; in attendance were the secretary general of the Ministry of Foreign Affairs, Salvatore Contarini, as well as all the members of the delegation (only Grandi was absent). The conclusions arrived at during this meeting, which were also afterwards approved by the Cabinet, went well beyond the eventual terms of the accord with regard to the concessions the Italians decided they would be willing to accept. The request for a moratorium disappeared completely, along with the willingness to pay no more than $10 million each year in the first decade of payments. It was decided to abandon the request for a ninety-year payment schedule, settling instead on the magic number of sixty-two years (since that had been the agreed time in the accord with Great Britain). The interest needed to be “as low as possible.” The most shocking initial concession, however, was to give up the review clause – that is, to renounce any formal linkage between the German payment of reparations fixed by the Dawes Plan and the Italian payment of war debt. This decision was justified by the fact that de Martino had already been offered assurances that any future difficulties in the Italian capacity to pay would be benevolently taken into consideration and also by the need to avoid any explicit language in the accord rejecting the possibility of future alterations to its terms. Here too the defeat of the “great Caillaux” had its effect; the Italians were aware 71

72

73

ASMAE-AG, p. 172, fol. 38, Chatelain to Federzoni, tel. 3129, Alexandria, November 6, 1925. ASMAE-AG, pacco 172, fol. 38, Raul Palermi to Benito Mussolini, New York, October 17, 1925. Dino Grandi, Interview.

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that the French had never mellowed in their insistent habit of putting the German question at the center of every international negotiation.74 This final meeting concluded not only the objectives for terms, but also a decisive agreement about tactics: that the delegation needed to behave in a manner congruent with the needs and viewpoints of their counterparts across the bargaining table. This predisposition in the delegation’s plans was by no means a choice made lightly, or inspired by purely propagandistic motives.75 The minister of finance was responsible for a report prepared by a group of scientific experts (Mortara and Gini stand out from the list of names; the latter accompanied the delegation to Washington as an expert witness); the sixteen files it contained analyzed all the aspects of the Italian economy in order to define the limits of Italy’s capacity to pay. The American commission, for its part, also possessed several studies of the Italian capacity to pay that all had in common the singular characteristic of having been prepared, or at least influenced in their preparation, by Italian or pro-Italian sources. Constantine McGuire of the Institute of Economics in Washington, an American economist with ties to the Italian embassy, had been assigned the task of creating a report in English that was based on essentially the same sources. Another study, carried out by the Industrial Conference Board, was in reality the product of information provided by Alberto Pirelli to the vice president of the Bankers Trust Company, Kent. Nor was the report by the commerce attaché of the American embassy in Rome, MacLean, free from the same kinds of influence. Finally, the data provided by the research office of the House of Morgan had the obvious goal of reinforcing the Italian claims, in order to encourage a settlement in Italy’s favor. There is no reason to be surprised that all these reports agreed almost perfectly with the contents of the files presented by the Italian delegation, whatever their objective scientific value.76

5. the volpi mission Anyone closely studying the dossier of the preliminary contacts and discussions would realize that there was a strong basis for a settlement, and further that more favorable terms than those agreed to in Mussolini’s last meeting with the delegation were quite likely. In a certain sense, the new minister of finance and leader of the delegation sent to Washington had 74

75

76

AMAE-EU, 1918–1929, vol. 238, tel. 402, l’incaricato d’affari francese, Daeschner, al Ministero degli affair esteri, Washington, D.C., November 12, 1925. Dino Grandi, interview; Leonardo Vitetti, interview with author, Rome, October 21, 1969; ACS-GVM, bk. 11, Appunti Alberto Pirelli, p. 39. ACS-GVM, bk. 11, p. 37.

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already won his battle during that meeting at Palazzo Chigi – or at least he had created the conditions there for a victory. Volpi had no intention of sharing Caillaux’s fate. He had become minister in precisely this period because of the strong synchronicity between the goals of the regime and those of the industrial and financial sector from which he came; both pursued the inclusion of Italy in the international financial community and were willing to pay the necessary membership dues to their senior sponsor. As Volpi told Fletcher, during an evening stroll in the hills of Rome, he was an experienced and successful negotiator. He said that Washington might have been the most difficult bargaining table he had yet sat down to (though this is doubtful, since the Fascist regime so badly wanted a successful accord that they were ready to offer the Americans everything they could want), and it was certainly the most important, but he had no plans to suffer his first loss now of all times.77 Volpi was aware that his trip to Washington had acquired, in the eyes of the regime, the significance of a “‘national’ mission [. . .] and not, simply, an economic delegation solving a technical problem,” as Sergio Romano correctly observed: For Italy, too, the war debt campaign had political and moral implications. For Fascism it was a “divine judgement” on its international credibility, for the country a command performance of one of the roles it loved to play, that of the poor nation paying its debts honestly just as Cavour’s successors had repaid the Rothschilds and the Hambros.78

Nor were these political and moral implications simply rhetorical, given the fact that the hoped-for accord constituted an indispensable link in the chain of events that could lead to full Italian access to American capital markets, the stabilization of the lira, and the inclusion of the Banca d’Italia in the cooperative venture of the central banks linked to the gold exchange standard. It was no casual turn of phrase to define as a “divine judgement” what was actually the judgement conferred by the officials and bankers of the nation emerging as the hegemonic power of the capitalist world.79 This interpretation of the situation explains, at least in part, how Mussolini was moved to reformulate his platform so that it became infinitely more reasonable than the strict one proposed by de Martino in the negotiations’ first phase. The insistence on a moratorium, the total cancellation of all interest, the review clause to be demanded at any cost, and the schedule of ninety years all had very little in common with the orders in Volpi’s hand when he boarded the Duilio in Naples for the voyage to New 77 78 79

LG-HPF, Henry P. Fletcher, Diary, December 20, 1925. S. Romano, Giuseppe Volpi, Milan: 1979, p. 134. Ibid., p. 177.

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York.80 In addition to dropping the demands the Americans could not accept, the meeting at Palazzo Chigi had not committed the delegates to any specific final amount of debt to be recognized, inasmuch as they had instructions only to keep the interest at the “minimum possible level” [italics mine]. In fact, Volpi’s strategy was based on exactly this flexibility; he planned not to “affirm any precise amount of payments to Washington, but to offer Washington every possible bona fide showing Italy’s capacity to pay and to ask the experts in Washington to produce a number they believed Italy could realistically sustain.”81 At bottom, Volpi’s chosen strategy was intimately in accord with the earlier affirmations of Warburg and so many other American bankers: if the United States wanted to prosper from the business they could contract in Europe, they would have to take responsibility for the economic health of their debtors and potential clients. In concrete terms, this meant that it would be not only useless but damaging to require Italy to make payments that could inhibit its foreign commerce and, in the end, devalue its currency. From Volpi’s point of view, the same reasoning applied in choosing to entrust the Americans – the very agents who needed to expand their own economic activity in Italy – with the task of calculating the amount of payment. Once the war debt settlement had freed them from the congressional and public opinion limits to their intervention, their goals and Italy’s best interests would attain a perfect match and they would be likely to offer the most flexible terms of payment. This was only as much as the associates from Morgan Bank had already been suggesting for some time. It was no matter of camouflage (that is, masking a minimal or nonexistent commitment to repayment in the hopes of taking it out of the hands of those who might be hostile), then, but rather a full acceptance of American hegemony and the dogmas of its politics, that had led Volpi to this juncture. These political dogmas included the separation of reparations from debt obligation as well as the goal of economic expansion based on a Germany at the healthy core of Europe and the intent to require reliable accounting from its partners. Submitting to these traits, unlike the French who obstinately refused to conform to the new situation, would bring clear rewards in time. 80

81

“Tutta l’Italia segue coi suoi voti la missione che è salpata oggi per Washington” (All Italy sends its hopes along on the mission that set sail for Washington today), Il Giornale d’Italia, October 23, 1925. Giovanni Fummi, who transmitted this news to Lamont, who in his turn passed it on to Dwight Morrow, emphasized that he had been informed thus in the utmost secrecy, and that it might not even constitute a final decision. AC-DM, fol. Lamont, Thomas W. Lamont to Morrow, New York, October 5, 1925.

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This interpretation of the decisive and radical redefinition of the Italian approach is confirmed by the final section of the instructions determined at the Palazzo Chigi meeting, synthesizing the state’s business plan in the New York financial market: The Minister of Finance, contemporaneously with the negotiations for the settlement of the war debt, will continue to meet with American bankers to set the terms for a bond issue of $100 million over thirty years, including the Morgan loan of $50 million; a loan for the city of Rome of $50 million; a loan of circa $20 million for an equipment trust to the state railways; and a loan of circa $20 million for the Corporation of Public Works.82

If we add to these instructions the observation that, simultaneously with the Volpi mission, Alberto Beneduce also left for the United States with the assignment of pursuing the negotiations for the above-listed loans, the true nature of Volpi’s mission becomes obvious. Despite Volpi’s insistence that only Beneduce would carry out the business meetings to secure loans,83 both men were now representatives of the Italian state and Italian industry in their moment of dire need for funds (in the following months there would also be loans for Fiat and Pirelli in the offing). That need was the ultimate motive for the turning point in the war debt negotiations, and the history of their development – along with the state’s pursuit of the stabilization of the lira and the return to the gold standard – is the proof of Fascism’s role as spokesman for Italian capitalism. Any reservations expressed by Pirelli had no chance in the face of this fundamental truth. Every successful negotiating tactic needs allies on the other side of the bargaining table. In this case too there was no longer any doubt: the men designated to negotiate with the Volpi delegation, while officially filling the role of the government’s spokesmen, were also the men who, whether as the bankers or the officials conferring authorization, would organize the extension of credit to Italy once the roadblock of war debt obligations had been removed. Volpi and his colleagues, duly informed by de Marino’s embassy telegrams, were easily able to single out Mellon and his second at the treasury, Garrard Winston, as the most favorable interlocutors on the American commission. Pirelli observed, in his concluding report, that it was only apparently a contradiction that the treasury should be the most open to Italian needs: . . . in fact, in the face of a budget with circa 8 billion in revenues and a tax cut under debate of circa 300 million dollars, the Treasury cared very little about one million 82

83

ASMAE-AG, bk. 159, titolo 3, Classe 61, fol. 2, Debiti dell’Italia verso l’America, Riunione a Palazzo Chigi, Rome, October 12, 1925. “Tutta l’Italia segue,” Il Giornale d’Italia, October 23, 1925.

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more or less in payments from Italy; it was far more concerned to see the Italian monetary situation, and in general that of all Europe, stabilized and made ready for the introduction of a great backup of American gold.84

Pirelli had grasped the essential point. The banking sector and the government officials most representative of it were favorable to a proItalian settlement for exactly this reason. In the case of Mellon and Winston, this favor was quick to display itself in negotiations. The first Italian proposal was actually outlined during a secret meeting between Volpi and Winston,85 and the Italian delegates got into the habit of informing Mellon of every communication they had, even the most secret (for example, with Hoover), outside of the official meetings.86 In the world of American finance, the Italian government had by this time made its choices. In that period as in no other, the associates of the Morgan Bank became, even more than the bankers of the Fascist government, its financial and political counsel – those who could guide it through the thickets of the American power structure, avoiding congressional and isolationist pitfalls, to the point that their influence reached even into the Coolidge administration. Without a doubt, the partners of the House of Morgan were leaving nothing to chance. According to the testimony of Giovanni Fummi, the outline of what later became the final settlement of war debt was created during a meeting he had with Morgan and Lamont, in the private train compartment of the bank’s president.87 On that occasion, the two bankers (who took the utmost care to preserve the informal and indirect character of their intervention) assigned their representative in Rome, who had traveled along with the Italian delegation,88 to inform Volpi of the dimensions of the American commission’s acceptable terms for the accord. Fummi confirmed that the Italian delegation had arrived on American soil without a firm sense of the quantitative aspects of the settlement they should reach. The intention to allow the Americans to offer their evaluation of the capacity to pay was well and good (and conformed to the advice Lamont had already given de Martino just before

84 85 86

87

88

ACS-GVM, bk. 11, p. 18. Ibid., p. 17. Ibid., p. 24. Alberto Pirelli wrote in his report that “It is symptomatic that no communication with Hoover was undertaken without seeking the advice of Mellon and Winston, even though Hoover insisted every time to Pirelli that the Treasury should not know about these contacts and that Pirelli should warn the Treasury explicitly.” Dino Grandi, interview; Giovanni Fummi, interview with the author, November 11, 1969, Rome. Dino Grandi, Interview.

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the arrival of the Italian delegation89), but it was a political and strategic tactic, and certainly did not constitute an abdication of the delegation’s responsibility to agree to specific terms in the name of the Italian government. It was then very useful to know what figures the Americans had in mind or might consider acceptable; in this way it would be possible to play off those members of the commission who were less flexible against those who were most favorable to Italy’s interests. Morgan and Lamont had this kind of familiarity with the individual members of the commission and could provide this information. Whether or not they had indeed created the outline of the final agreement,90 it is indisputable that their role was important and, more importantly for this argument, demonstrative of the form of relationship developing between a European government – in this case a Fascist one – and the major investment bank of the United States. Following their usual procedure, there was a clear division of labor. Russell Leffingwell, the monetary expert of the company and former assistant secretary of the treasury, had prepared the memorandum on the financial and accounting aspects of the settlement. Dwight Morrow, friend of Coolidge and Hoover, would contribute at a later time. Thomas Lamont, entrusted with the overall guidance of the account, also managed the press and public relations, with the considerable influence of Morgan Bank behind him. The suggestions he offered in this vein to Ambassador de Martino served as an educational tract on how to carry out public relations in the United States. He had asked the statistical experts in his department to create a report showing Italy’s economic and financial difficulties at the current moment. Such an analysis, he said, must be carefully prepared so that Italy would subsequently be able to enter the financial market with favorable credit. His plan was then to meet with a good number of his friends in the press over the next few days to discuss the issue with them and offer them some information. He told de Martino that this was the preferred way to get information to the public, since any statement, especially issued before the start of negotiations in Washington, might be seen only as propaganda even if it were the exact same information provided by the press.91 Lamont could have added that any declaration on his part would have been counterproductive, especially had it become public knowledge that he

89

90 91

HUGSBA-TWL, bk. 43, fol. 2, Thomas W. Lamont to Giacomo de Martino, New York, October 25, 1925. Dino Grandi, Interview. T. W. Lamont to Giacomo de Martino, cit.

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was at the same time negotiating with Mario Alberti and then with Alberto Beneduce to put together a package of bonds and loans for Italy that would become operative only after the accord with Washington was settled. On the other hand, the journalists and editors who were his interlocutors were well aware of the political and financial clout of their informant and knew that his offerings had nothing to do with the kind of propaganda they would not touch with a ten-foot pole. Lamont worked particularly hard to cultivate progressive journalists who he knew still harbored reservations about the regime, such as Walter Lippmann at the New York World.92 The interventions of the Morgan Bank partners did not stop at influencing the external atmosphere surrounding the negotiations, though that would become very important at the moment of ratification of the eventual accord. The more immediate problem was to overcome the residual resistance within the commission, not so much to the fact of an accord as to accepting terms that would be most favorable from the Italian point of view – and therefore in line with the bankers’ ultimate goals as well. The most problematic personality in this sense was clearly Herbert Hoover. Secretary of State Kellogg, who had seemed fairly negative during the preliminary phase, did not however exercise determinative influence over financial decisions. Senator Smoot was certainly reluctant to endorse any accord that might not be sure to achieve ratification in Congress, but President Coolidge would turn out to influence him in a decisive manner right at a crucial point in the negotiations. Pirelli’s astute observation that “the most resistant elements” were those who conducted negotiations with their gaze fixed on the American domestic effects. The real problem was Hoover, the secretary of commerce. As a candidate for the presidency, he was even more inclined than the president in office to be ruled by domestic public opinion. Furthermore, in the microcosm within the American contingent of the war debt commission there was a larger conflict playing out, informatively reconstructed by Carl Parrini and Joan Hoff Wilson in their studies, between the banking interests and the industrialists within the Republican administration.93 Both groups saw Europe as the necessary future zone of American economic expansion; both were conscious that American economic power was transforming into world supremacy. The distinction between them was the tendency of the bankers to assure a painless transition of world economic 92

93

HUGSBA-TWL, bk. 121, fol. 10, Thomas Lamont to Walter Lippmann, New York, October 28, 1925. Parrini, Heir to Empire; Wilson, American Business and Foreign Policy 1920–1933.

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leadership from Great Britain to the United States, emphasizing the reconstruction of Europe founded on the stabilizing force of American capital. Men like Mellon, Morgan, and Lamont were far more willing to take on the difficulties and responsibilities presented by the Europeans, because they were convinced that the economic recovery and social stability of Europe could only result in long-term benefits and profits for a clearly hegemonic American economy. In the end, the profits of bankers were based on the commissions from bond issuance and other financial operations and services. On the contrary, the group Hoover represented was more interested in opening, as soon as possible, new markets for its goods and, where possible, in guaranteeing American investment capital a profitable terrain for the acquisition of controlling shares in those foreign industries that were potential competitors. Hoover was also far less willing to cooperate financially with Great Britain, whose banking networks he wished to see supplanted by American commerce. He did not interpret the conduct of banks, like the House of Morgan, as a long-term strategy to better support American expansion; instead, he saw in their actions the rapacious nature of the banker who pockets every commission and interest that comes his way, whether or not the client using his services will actually serve the interests of American power and expansion. According to Hoover, every financial operation ought to be linked to commercial conditions. Every investment ought to bring ulterior benefits in the expansion not only of capital but also of American products. In terms of the specific issue of war debt, he did not share the isolationist fervor of some congressional groups who, in their hostility toward the former European allies, wanted to recoup every last cent of the monies loaned as well as the compound interest on them; but nor did he want to let go of the ability to exploit limits and conditions linked to those debts in order to obtain an advantage in the expansion of American industry. This is, why for Hoover, the negotiation of the Italian war debt was also a moment of negotiation between the two conflicting tendencies in the Coolidge administration, represented in this case in the persons of Mellon and Hoover himself. For the same reason, the partners at Morgan saw in Hoover their most important target. How could Hoover be brought around to their views, and with which arguments? Dwight Morrow was the Morgan Bank partner with the closest personal ties to the future president. And yet it was Thomas W. Lamont who was chosen to approach him, because of his position as president of the Italy-American Society. Given Hoover’s well-known ambition to become president, the likelihood was that he would succeed Coolidge

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in that office during a period when the likely Democratic candidates, Cox and Davis, were weak and had already been defeated in previous elections. The Morgan Bank partners decided accordingly to use Hoover’s wishes to court voters in the Italo-American community, which was becoming an influential constituency in the 1920s. Lamont described the beginning of their conversation about the Italian war debt to Morrow, saying that he had followed Morrow’s advice and explaining how, in his position as president of the Italy-American Society, many people had approached him with the request to take some initiative on the war debt question. He had refused, telling them to trust in the work of the Commission and Herbert Hoover. Lamont had then recounted how these requests had come from all over the country; Boston, Philadelphia, and San Francisco each having local chapters of the society; and that hundreds of thousands of Republican votes were said to be controlled by the society. He professed not to attach too much importance to such claims, being totally extraneous to politics – at which point “our friend” interrupted him to say that there might be more truth in such assertions than Lamont believed.94 The form and the substance of this minor masterpiece of manipulation serve to demonstrate that Lamont was in the end no stranger to the more tactical aspects (to speak euphemistically) of politics. Lamont was careful to keep both himself and his listener above any suspicion of showing favor to a foreign power or to any private American interest, pretending to consider the political weight of Italo-American voters trivial while in reality he was emphasizing it and presenting himself as its representative. His implications in this vein, if not quite fraudulent, were certainly a colossal exaggeration. The membership of the Italy-American Society was purposefully kept totally separate from the Italo-American community at large, because the Italian government used it as a wedge for entering and influencing the restricted world of the Anglo-Saxon elite, a social group that really wanted nothing to do with the mass of that ethnic minority. Lamont thus succeeded in overcoming Hoover’s reservations toward the differing economic and foreign policy interest group to which Lamont belonged, even though the country whose debt was in question was one that Lamont’s bank would see substantial profits from as soon as the settlement was finalized. Hoover, for his part, played along: he accepted as his due the implied compliment to the incorruptibility of the Commission, but did not refuse the invitation to become the champion 94

AC-DM, fol. Lamont, Thomas W. Lamont to Dwight Morrow, New York, October 29, 1925.

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of Italo-American interests; on the contrary, he unabashedly affirmed his awareness of their political clout. It is of course impossible to measure the precise effects of Lamont and Morrow’s attempts to exploit their target’s political ambitions. This was not the only occasion in which Hoover’s presidential ambitions influenced his behavior at the bargaining table. In a difficult moment, the Italian delegates had hinted that they might request the intervention of General Dawes and the industrialist Owen D. Young, two members of the American commission who would have taken on the role of arbitrators. Pirelli recounted that this possibility induced Hoover to assume a more malleable attitude, since he did not want Dawes, his probable rival in the 1928 elections, to be able to claim the credit for a successful accord.95 Hoover had overestimated the threat, however, because it was unlikely that the Italians could have convinced those two men to go over the head of the rest of the commission, whose members they needed to retain as allies and colleagues. In his meeting with Lamont, Hoover was restrained, repeating only his well-known theory that the Italians, like any other client, were committed to repaying the capital, while the interest could be calculated according to their capacity to pay. (“In the case of Italy he was aware of their particular difficulties and expressed the hope that they would show themselves willing to repay the capital. On the question of interest, he would accept any reasonable compromise.”) Hoover’s reaction when Lamont inquired about the revision clause was, however, far more negative. Hoover was only willing to offer that the interest rate could be subject to periodic revision; this question would remain one of the most salient negotiating points up until the very last moment. Lamont was quick to respond that this would be a very difficult solution to put into practice, but Hoover stubbornly kept it alive, reproposing various forms of the issue throughout the negotiations. Volpi was forced to explicitly reject one of these proposals, in which Hoover had offered a five-year accord with interest rate revision.96 Hoover’s insistence elicited strong concerns in the Italian delegation, although in the end Lamont would turn out to have correctly read Hoover’s intentions during their meeting. Lamont wrote to Morrow that Hoover gave him the impression of intending to do his part to promote a 95 96

ACS-GVM, bk. 11, cit., p. 25. AMAE-EU, 1918–1929, vol. 238, tel. 402, chargé d’affaires of France, Daeschner, to the minister of foreign affairs, Washington, D.C., November 12, 1925, in which he maintained that a project for a provisional accord of five years formulated by Mr. Hoover, who was also responsible for a similar proposal to the French commission, had been decisively rejected by Count Volpi.

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reasonable agreement and they could conclude that the reference to the Italian vote had worked very (he italicized the word) well. Whether for this or for other motives, the fact remains that Hoover would never inquire too deeply into the plans of Mellon and the Morgan Bank partners for the Italian accord – although he did so in the French negotiations, which was worrying enough. On November 4, in the midst of the most intense negotiations, Volpi cabled Mussolini: Hoover’s attitude is however unpredictable, which is one of the decisive elements in this situation; and his indiscretion at any moment could create a repetition of the French situation and make any possible agreement seem very difficult.97

Volpi probably was not informed of the steps taken by Lamont and Morrow, and as would serve the interest of any good plenipotentiary, he was certainly overstating the difficulties of his job to his government. Nonetheless, he had observed the essential contradiction that had not been overcome, even within the commission itself, and this would emerge in the final phase of the negotiations. The French embassy, which followed the negotiations with great attention, communicated to the Quai d’Orsay that, despite Mussolini’s desire to reach a positive conclusion, the inflexible opposition of Senator Smoot as well as the more hidden but equally strong opposition of Mr. Hoover regarding more ample concessions on the part of the Americans, made such an outcome rather uncertain.98 Again, the French chargé d’affaires was probably exaggerating the difficulties, refusing to believe that the Italians would succeed where Caillaux had failed. In reality, up to a certain point the negotiations had been going smoothly ahead. Mellon had once again taken the opportunity to write a declaration, later released to the public, that praised the Fascist regime and the economic leadership of Mussolini.99 The first meetings were dedicated to a detailed examination of the Italian capacity to pay. The Italian delegation’s presentation was accompanied by the studies prepared by the Ministry of Finance, and together they produced a positive effect. In sum, the documentation showed Italy’s low capacity to pay caused by the effort to balance the budget, the burden of fiscal obligations 97

98 99

ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti dell’Italia verso l’America, Giuseppe Volpi di Misurata to Benito Mussolini, tel. 2401 Washington, D.C., November 4, 1925. AMAE-EU, tel. 402, cit. ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti dell’Italia verso l’America, tel. 2365, Giuseppe Volpi di Misurata to Benito Mussolini, Washington, D.C., November 3, 1925.

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(naturally no one delved too deeply into the diligence being applied to paying these), and the costs of reconstruction in reclaimed territories. There were also more general economic arguments regarding the low standard of living (without, however, analyzing its political and social causes) and the excessive passivity of the balance of trade, as well as technical and financial points such as the difficulty of currency transfers.100 Afterwards, the negotiators were split into two subcommittees: the first was responsible for further analyzing the capacity to pay, while the second took on the task of articulating the terms of the settlement. Of course this latter had, in addition to Volpi and Pirelli, Mellon, Smoot, and Hoover as permanent members. The Italian approach was to avoid every political or psychological stumbling block – the French reported that the Italians were careful, in presenting their proposals, to conform to the Americans’ principles and point of view101 – and this allowed the rapid formation of a consensus on the general structure of the accord. The committee agreed on a schedule of payments similar to the one in the Anglo-American agreement. The moratorium was incorporated by a reduction in the first two decades of payments. In the face of the Americans’ decided opposition to concessions in commerce and emigration, the Italians did no more than mention their desirability.102 Pirelli reported: Naturally both these elements were presented without any polemics, but merely as part of the Italian diminished capacity to pay.103

Volpi insisted more forcefully, in the absence of a revision clause, for his protestation to at least be included in the official minutes; but he had to abandon even this when Mellon finally stated that, if Volpi ever publicly declared that the accord should be interpreted as only rebus sic stantibus, he would be forced to deny it explicitly.104 Hoover himself had gone so far in informal discussions as to assert that the Italians should understand any future incapacity to pay due to changed financial conditions as legitimate reason to request a revision of the accord, even though it was absolutely impossible to put this guarantee in writing.105 The impossibility of obtain 100 101 102 103 104 105

ACS-GVM, bk. cit., pp. 37–38. AMAE-EU, tel. 402, cit. Ibid. ACS-GVM, bk. 11, cit., p. 39. AALP, Alberto Pirelli to Giuseppe Volpi di Misurata, Milano, December 3, 1925. Hoover had stated this during his conversation with Lamont: NA-DS, 800.51W89 Italy/ 77, Herbert Hoover to Frank B. Kellogg, Washington, D.C., October 29, 1925, with attachment: Department of Commerce, Memorandum of Debt Settlement between Italy and the United States. See also ACS-GVM, bk. 11, cit., pp. 45–46.

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a revision clause, even though it had been accepted in advance in the delegation’s orders, was the worst and possibly the only setback in the negotiations from the Italian perspective. Pirelli’s presentation of the numerous arguments against the revision clause, which he portrayed as superfluous and even perhaps threatening in the sense that the Americans might have made use of it to increase their demands in the event of a clear improvement in the Italian economy, only reinforced the singularity of this disappointment. On November 12, de Martino was able to state, in a meeting with his French counterpart, that only one problem remained unsolved: the calculation of the total sum to be paid by the Italian government. On this subject of central importance, things had reached a stalling point. This was because of Volpi, who, after having been so open in his approach to offering the Americans all the concessions they could want, now hoped to play his cards closer to the chest by opening with a much lower offer than the maximum figures agreed upon during the delegation’s last meeting with Mussolini in Rome.106 After an exchange of offers between the two delegations, which did not come close to defining the final sum Italy should repay, Senator Smoot – who was the principal opposition in this phase – appeared to court a breakdown in the negotiations when he formulated, as a near ultimatum, a proposal that went further than his previous offers and named the figure of 606 million dollars at 4.5 percent interest. At this point, the Italian delegation, according to Pirelli, “succeeded in communicating the precise sensation that, with the utmost regrets, the situation was becoming untenable, with the result that the American Commission was moved to go beyond what it had previously portrayed as its absolute final limits.”107 Volpi’s strategy here was to maintain a delicate equilibrium between allowing the Americans to believe that the Italians were more ready to walk away from the bargaining table than the Americans were and the truth that the Italians were completely committed to staying at the table (as his put it, “the accord may be difficult, but its failure is impossible”). At the same time, the Italian delegation was exploring every path, formal and informal, to arrive at the best possible terms. Ambassador de Martino went to the secretary of state to put his request to him

106

107

ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti dell’Italia verso l’America, tel. 2401, Giuseppe Volpi di Misurata to Benito Mussolini, Washington, D.C., November 4, 1925; tel. 2374; tel. 2400. ACS-GVM, bk. 11, cit., p. 16.

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personally.108 Most importantly of all, Dwight Morrow came on the scene and, as Alberto Pirelli put it, “undertook very effective action with the utmost discretion.”109 Making use of their close friendship, the Morgan Bank associate put direct pressure on the president of the United States.110 Coolidge, in his turn, intervened in a resolute manner with Senator Smoot, probably guaranteeing him the weight of his considerable personal prestige in Smoot’s task of procuring the necessary approval in the Senate. Coolidge had already made his opinion known with an optimistic declaration from the White House, released at the beginning of the negotiations, that according to Pirelli “had seemed to many, both Italians and Americans, somewhat premature.”111 Coolidge would show consistency in sending a congratulatory message to the president of the Italo-American Society on the occasion of its banquet in honor of Volpi at the treaty’s conclusion, in which he expressed “his great satisfaction for the friendly spirit of compromise and reconciliation on both sides which had characterized the recent negotiations for the settlement of the Italian debt to the United States and his pleasure that the accord was satisfying to both sides and as a result demonstrated a spirit of justice toward Italy as well as a spirit of equity toward the people of the United States.”112 At this point the Italian delegation was still making utmost use of all possible alliances in American society, conscious as it was that the game would not be played only at the bargaining table. For this reason, the Archbishop of San Francisco, Hanna, and the Holy See’s delegate in Washington became the spokesmen of the Catholic world, which had already shown its sympathy for Mussolini and Fascist Italy on numerous occasions.113 Further, within the Commission, which had a bipartisan makeup following American tradition, the Democrats had “shown themselves throughout the negotiations to be notably favorable to a generous settlement,” perhaps in order to force the Republican administration to publicly water down its isolationism. They undertook to secure the endorsement of the Hearst press – all the more meaningful since its 108

109 110 111 112

113

NA-DS, 800.51W89 Italy/84, Frank B. Kellogg, Conversation with the Ambassador (Nobile Giacomo de Martino), Washington, D.C., November 6, 1925. ACS-GVM, bk. 11, cit., p. 20. Giovanni Fummi, Interview. ACS-GVM, bk. 11, cit., p. 20. Ibid., pp. 6–7. The original text is in HUGSBA-TWL, 433, Calvin Coolidge to Thomas W. Lamont, Washington, D.C., November 21, 1925. On the reactions among Catholics to the Fascist regime, see W. B. Smith, The Attitude of American Catholics toward Italian Fascism between the Two World Wars, unpublished thesis, Catholic University of America, 1962.

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editorial stance was usually fanatically isolationist (although it was also fervidly pro-Fascist) – as well as the endorsement of the American Federation of Labor. That sizable union, which had never been particularly anti-Fascist,114 expressed to Coolidge its consent to an accord giving Italy favorable terms, probably because it saw its interest in protecting an important export market for American goods, which would have positive effects on the employment rate in the United States.115 In truth, the stalling point in the negotiations was also due to the internal contradictions in the American delegation, which was resolved only in a private meeting between Mellon, Hoover, and Smoot. Contrary to the suppositions of the French embassy, typical of the uncertain atmosphere still reigning outside, the disagreements were not strong enough to endanger the accord itself; they had to do instead with the most opportune form of its terms. But on this question the division between Mellon and Hoover would become significant for the whole process. The conflict between the two major personalities of the commission produced two opposing factions in the group: Kellogg, Smoot, the Democratic deputy Crisp, and Burton sided with Hoover, while only the other Democrat, Hurley, and Olney sided with Andrew Mellon.116 The secretary of the treasury proposed to conclude the negotiations offering the Italian delegation terms founded on extremely limited payments on the capital for the first five years, with successive increases on the same schedule as Great Britain’s settlement specified; in the meantime, the interest would be very modest in sum but would also increase with time, from a minimum of 0.25 percent in the first ten years to a maximum of 2 percent in the final seven years. Hoover’s proposal differed in one important point: the first ten years of payments would include no interest, but the later amounts would be calculated on the basis of two elements: (1) the effects of a tax increase on the internal stability of Italy, and (2) the effects of currency transfers on the stability of the lira.

6. explaining the accord The proposals represented two different concepts not only of the relations between Italy and the United States, but more generally of the proper road 114 115 116

Diggins, pp. 169–172. ACS-GVM, bk. 11, cit., pp. 18–19. “This last draft [the definitive one] won out only because Mellon, with his authority and showing great tact, convinced the Commission to authorize him to submit two proposals for the Italian delegation to choose between, thus giving the Italian delegation the chance to weigh in against Hoover’s proposal and in favor of the definitive settlement.” Ibid., pp. 24–25.

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for American capital penetration in Europe. Mellon argued that the absence of a definitive accord would damage Italy’s credit rating. In a later meeting with Dwight Morrow, he explained in a detailed and convincing manner his reasons for taking a strong interest in Italy’s credit. The two chatted for five or ten minutes one evening when Morrow dined at Senator Edge’s house and Mellon was there, and Mellon said that, regarding the congressional ratification, he would prefer it if the Italians accepted Hoover’s proposal since it did not deal with the problem of interest rates. But on the issue of Italy and its good credit, he was certain that it would be disadvantageous not to finalize a deal. A conditional accord would leave open doubts that would plague anyone who might in the future lend to Italy. He seemed to imagine some future American cabinet member who would try to meddle in Italy’s internal fiscal affairs, perhaps attempting to substitute the regular obligation with some contingent request by the United States. He showed great esteem for Italy’s future and the competence of its representatives in the negotiations. His only doubt was the problem of who could succeed Mussolini without causing difficulties.117 In other words, what concerned Mellon was not, naturally, the sovereignty of the Italian people or their government, but the eventual obstacles that a temporary solution to the war debt question might produce to a normal credit relationship between Italy and all those, banks and bond investors, who might wish to become Italy’s lenders. An accord that left open the future possibility of revisions based on unpredictable developments in the economic situation would introduce an element of uncertainty in the Italian payment system that would disturb American bankers as well. Mellon spoke accurately for the banking interests that stood behind him; their intent was to cut all the red tape remaining in their path since the end of the First World War and slow the development of new financial relations between the United States and Europe. Since these were the interests dominating the American economy, especially in terms of planning the American expansion into other markets, it would be wrong to believe that Mellon (and the partners of Morgan Bank he used, not coincidentally, as a channel of informal communication to the financial policy makers of the Fascist regime) represented a mere sectarian interest trying to preserve future commissions and fees for bankers. This vision of a stabilizing and expansionist plan toward Europe was based on an awareness of the by now dominant weight of the American production system and, therefore, American capital. What distinguished this vision from that of men like Hoover, closer to the 117

AC-DM, Dwight Morrow, Memorandum, Washington, D.C., November 12, 1925, p. 4.

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interests of the exporters and the manufacturers, was a greater understanding of the growing hegemony of America, of which bankers had a better overview from their Wall Street vantage point. This greater understanding also led to a lesser desire for immediate control of conditions, structures of dependency, and forms of extortion. They thought that a stabilized Europe, linked to a monetary system in which they would have an ever more dominant role, would best serve the long-term interests of American capitalism, not the rigid subordination of loans to commercial concessions, the immediate construction of its own banking network to compete with Great Britain’s, or the use of the war debt as a coercive instrument. Mellon and the House of Morgan had faith in Mussolini because he guaranteed precisely that social stability and cooperative attitude toward their plans for systematizing the international economy in order to secure the best conditions for American expansion that they needed for long-term success. The continuous concern of men like Mellon for Mussolini’s health and succession derived from the fear that, without his leadership, social tensions could reemerge either in the form of Bolshevik subversives or ultranationalist and anticapitalist Fascists and endanger the stability they needed. Hoover too, however, had been consistent in his proposals. They also presented some advantages for Italy, from a strictly economic point of view, since the ten-year deferral of interest payments meant that, among other things, from the sixth to the tenth year (that is, after a very short time) the Italian government would have saved $2,500,000, as Morrow observed. In fact, in a memorandum criticizing the final accord, prepared by Senator Borah’s office, it was correctly noted that it could be of great benefit to the debtor to have a deferral of payments. With the passing of time, the probability increased that some new circumstance would develop to prevent the payment of the planned installments.118 But this economic advantage had a political price that the Italian delegation had not missed. The disagreement between Hoover and Mellon had been resolved with the wise decision to allow the Italians to choose between the two alternatives. Indeed, Hoover was careful to ask Morrow to intercede on his behalf to encourage the Italians to choose his proposal.119 Morrow, who had helped push the negotiations forward through his meetings with Coolidge, and who was if anything more inclined to favor Mellon’s proposal, for obvious reasons, avoided this action and therefore limited himself to noting the decision taken when, at seven o’clock in the evening, Fummi came to see him 118 119

LC-WEB, bk. 542–547, Debt Settlements (unsigned, undated memorandum). AC-DM, D. Morrow; ACS-GVM, bk. 11, p. 24.

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and told him that the Italians were unanimous in their acceptance of Mellon’s proposal. They had a great faith in their country and a strong belief that, when the issue came back up in ten years, the Americans would surely want more than one-eighth of 1 percent, so it would be embarrassing for Italy’s credit to have to have a debate over its ability to pay. Further, the Italians, like the French, thought that the entire issue of debt consolidation had been used by England and the United States (of course, only with the best motives) for political maneuvering. They resented the continual demands made on them in return for favorable terms and feared interference in their foreign policy, or even their domestic affairs, as a price for a good deal. Morrow thought that this fear was especially directed toward Hoover. The Italians claimed to respect his own certainty as to his ability to design the right policies for Europe; but it seemed that the Italians thought Mellon’s offer was the one more likely to win approval in Italy, because a precise and definitive solution was considered, in Italy as in France, the necessary condition for reform of the internal financial situation as well.120 Clearly there was no problem in “getting the accord passed” in Italy, at least not in the sense Morrow had in mind, and the faith in the Italian economy professed by Fummi was of mostly propaganda value, and in any case had no decisive influence. Yet things were more or less just as Fummi described them. Volpi and his colleagues were basically concerned with Hoover’s ambition – reported to them by his political adversaries – “to solve the problem of the financial reconstruction of Europe himself once he became the president of the United States.” Above all, the possibility of an accord that left the problem of interest unresolved had been considered in the course of the preliminary discussions that took place before the delegation left for the United States. The Italian government had been and remained favorable to such an accord only as a last resort or in the case that payments on the capital were so drastically reduced as to risk a future, less favorable definition of the interest rates. Since this had not occurred, and the interest rates in the Mellon proposal were fairly favorable, the Italian delegation had no doubts about their choice of proposals. In more general terms, the most important consideration had become the need for a definitive settlement in order to move forward in securing more credit for Italy. The pursuit of an accord that was compatible with the series of loans Mussolini and Volpi were negotiating in the United States meant that the Italians had from the beginning sought an understanding with Mellon and the bankers more than with Herbert Hoover.121 120 121

AC-DM, D. Morrow, pp. 2–3. ACS-GVM, bk. 11, pp. 22–23.

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Since Morrow and Lamont, upon their consultation by telephone, found no reason to take exception to the delegation’s choice, at the next meeting the settlement was finalized. The total sum to be repaid amounted to $2,042,000,000, calculated by taking the original loan amount, subtracting the payments already made, and adding interest of 4.5 percent until December 15, 1922, and of 3 percent from then until June 15, 1925. Following Mellon’s proposal, this sum was to be repaid in sixty-two annual installments, like the American loan to Great Britain, but with the first five years of payments to be a minimum of $5 million. In the following ten years, the interest rate would be one-eighth of 1 percent, increasing each decade by one quarter of 1 percent, to reach a final rate of 1 percent. Only in the final seven years would the interest reach the amount of 2 percent.122 This accord was an indubitable financial and political victory for Fascist Italy and, in particular, for the delegation that had negotiated it. The terms were substantially better than predicted during the preparatory meeting in Rome to create the delegation’s orders. In particular, the interest rates and the amounts of the first five annual payments were more favorable than planned for (Volpi had been authorized to accept an annual sum of $8 million). Above all, the political success scored by Italy became clear in comparison with the accords reached between the United States and other debtor nations. The negotiated payments were equivalent to the cancellation of 80.4 percent of the debt, with an average interest rate of 0.4 percent. This was not far from the figure in Italy’s initial proposal that had been rejected by the United States, in which the cancellation of 90 percent of the debt had been requested. But it was even more significant compared with the 30 percent remission obtained by Great Britain with an average interest of 3.3 percent, the 50 percent negotiated just previously by Belgium, and the 60.3 percent with an average interest rate of 1.6 percent that France would bargain for in the Mellon-Berger accord the following April 1926. This result, which would cause some embarrassment for the American government in its relations with other debtor nations (and especially Belgium, which had concluded a far less favorable settlement only a few months earlier),123 was attributable to multiple factors. There is no doubt 122 123

J. M. Berutti, p. 185. For the comparison of the accords, see LC-WEB, bk. 542–547, Debt Settlements. On the American embarrassment, see ACS-GVM, bk. 11, p. 11: “It was necessary to overcome the difficulties created by the verbal assurance the Americans had given the Belgians that no one would secure more favorable terms than those conceded to them, as well as the American reluctance to give Italy concessions that might affect the French negotiations when they restarted.” On the Belgian reaction, NA-DS, 800.51W89 Italy/106, Frank Kellogg, Conversation with the Belgian Ambassador, Washington, D.C., November 24, 1925.

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that Mussolini showed clarity in his pursuit of the terms when, years before, he had taken the necessary steps to remove all the obstacles and possible additional costs to the settlement. Volpi also demonstrated an impressive negotiating strategy in his care to appear open and frank with his interlocutors, while at the same time showing the cunning of a Venetian merchant in guiding the final calculation of the payment amounts. But most determinative was the will of the United States to make its capital available to Italy through a prompt and favorable accord. In this sense, the decisive weight was provided by the financial and political esteem won by the Fascist regime and specifically by Mussolini himself in American financial circles as well as in all those areas of public opinion he could reach through their media networks. Mussolini and the Fascist regime had this access due to the significant role played by the partners of Morgan Bank, first as the advisers to the Italian government and then as wielders of influence in favor of Italy on important figures such as Herbert Hoover, to convince them to embrace concessions. There is no point in judging their actions by the standards of abstract constitutional principles or political ethics. It is obvious that in many cases they went beyond the bounds of the formal role of a private bank, no matter how illustrious (their caution and discretion demonstrate that they were perfectly aware of this). They actively intervened in the negotiations over the war debt, and their role was obviously not that of private citizens who take orders from the official representatives of their nation to support their government’s foreign policy relations. But these formal considerations had little to do with the reality of the ties between Coolidge’s cabinet and the most important exponents of American business. The de facto power of these businessmen was further reinforced by the isolationist tendencies present in Congress and American public opinion, which did not actually result in the breaking off of the relationship between the United States and Europe, but instead meant that the management of that relationship was left to informal channels. These channels, of course, were dominated by the New York financial establishment and in particular by the House of Morgan. Government officials were left to fall back on merely distinguishing which of the bankers’ international initiatives might raise alarm in Congress and managing their effects as best they could. All these initiatives had in common the overall goal of monetary stabilization (as well as political and social stabilization to facilitate it) in Europe as the precondition for the profitable expansion of American capital into Europe’s markets. Furthermore, all of the participants, from Secretary of Commerce Herbert Hoover on down, were aware that, in the words of Alberto Pirelli,

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. . . the importance to America of commercial relations with Italy is much greater than the financial need to charge interest on the war debt. Italy is a client worth around 300 million dollars a year for America, while America is a client of Italy’s worth about a quarter of that sum. The situations of France and Belgium are different in that they export to America about half as much as they import.124

Even if the American negotiators did not, as is likely, take seriously the veiled threats of the Italian delegates when they observed that the Soviet Union had insistently offered Italy the purchase of grain and coal, it did remain in the American interest to reinforce the capitalist reconstruction of the Italian economy and to support all those who assumed the responsibility for carrying out that reconstruction.125 Upon close examination, in regard to the intentions of the Coolidge administration and its closest allies in the world of finance, the war debt settlement was meant to open the doors for a closer economic cooperation that would offer the United States a primary role in the Italian economy. If the settlement had failed and this objective had not been achieved, it would not have been only Mussolini and his government that suffered. But even these considerations do not sufficiently explain the particular level of favor Italy enjoyed, given that other European countries were also part of the same American plan for capital expansion. Pirelli may have been correct in supposing that by the end of negotiations the American commission was plagued by the worry that they had gone too far in their concessions and might not be able to secure congressional ratification and public consensus for the accord. One might observe that the effort put forth by Mellon and the Morgan Bank, and even Coolidge himself, in convincing the press and the political establishment that the accord was necessary and that the Italians were honestly committed to honoring the debt even though their capacity to pay was very limited had made the stakes very high for a successful settlement. But it was so much more the fear of a failed negotiation and its negative effects that motivated the American commission members. Certainly, after the failure to negotiate with Caillaux, another failure, with the Italian delegation, would have had unpleasant effects on both the domestic and international context. The Coolidge administration might have been accused of excessive intransigence by the Democratic opposition still loyal to Wilsonian ideals; and the governments of Europe might have been moved to join together as a united front of debtor nations (as the Italian delegates had sometimes intimated would occur).126 But this 124 125 126

ACS-GVM, bk. 11, p. 38. Ibid. p. 41. AALP, 13.300, Alberto Pirelli to Giovanni Battista Pirelli.

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was not the main point. Those interests most favorable to the accord, on both sides, were so strong as to make any rupture in negotiations very unlikely. It was rather the commitment of the American negotiators in successfully predisposing the American public and political establishment to a positive outcome that then forced them to produce the promised outcome and to be as generous as possible in their terms. In other words, except for some cold feet at the last minute, the propaganda spread by the commission had done its job too well: the American negotiators had deprived themselves of their own best argument for resisting the demands of the Italians by removing any fear that the isolationists would oppose the settlement. Still, in his meetings with Mellon and Hoover on the eve of the accord’s signing, Morrow was struck by the impression of both men that congressional ratification was still in doubt.127 In reality, such last-minute worries on the part of Coolidge’s cabinet members were revealed to be unfounded. The press reactions showed that a far more positive atmosphere dominated. The New York Times, in an editorial, declared that the accord with Italy was a fait accompli that many experienced negotiators believed was the best feasible solution and criticized those Democratic members of Congress who, contrary to the recommendation of the Democratic commission members, opposed it. This opposition would not help their party return to power and made it appear that obstructionism was the only action the party took.128 For a newspaper usually close to Democratic Party positions, these were strong criticisms. In the following months there was a debate in both the Senate and the House of Representatives whose verbal violence made Ambassador de Martino’s heart skip a beat more than once, given his unfamiliarity with constitutional processes and the current political rhetoric of the United States.129 Knowing what he did about the behind-the-scenes machinations of the Morgan partners, de Martino was given a particular scare by Missouri Senator James Reed’s call for an investigative commission to look into the use of inappropriate private influence on the World War Foreign Debt Commission, in the course of which Reed made explicit reference to the role of the House of Morgan.130 Reed, who was sure he 127 128 129

130

AC-DM, D. Morrow, p. 4. New York Times, November 30, 1925. NA-DS, 800.51W89 Italy/110, Frank B. Kellogg, Conversation with the Italian Ambassador (Nobile Giacomo de Martino), Washington, D.C., December 17, 1925. NA-DS, 800.51W89 Italy/110, Frank B. Kellogg, Conversation with the Italian Ambassador (Nobile Giacomo de Martino), Washington, D.C., December 17, 1925: The

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was in the right, and justifiably so, found himself immediately under attack by the Chicago Daily News, which derided his proposal as “futile and absurd” and made the prediction – correctly, as it turned out – that it would be rejected by the Senate Foreign Relations Committeee.131 Events proved Secretary of State Kellogg right in his reassurances to de Martino that senators’ speeches rarely had any concrete results.132 The Southern Democrats in the Congress, strongly anti-Catholic and with almost no Italian constituents, were the main source of opposition, but their anti-Fascist arguments were discredited by the endorsement of people such as Senator Heflin from Alabama, a well-known supporter of the Ku Klux Klan. Even the noted progressives William Borah from Idaho (who actually was more passive than expected, due to the special attention lavished on him by Italian public relations personnel133) and Hiram Johnson of California (old archenemy of Woodrow Wilson) – joined by the future creator of the Tennessee Valley Authority, George Norris of Nebraska – were careful not to focus attention on the attempts of the antiFascist minority of the Italo-American community to explain the true political nature of the Fascist regime, instead preferring to repeat the same old arguments of isolationism. The persuasive power of those few men willing to attack the political significance of the accord – like the Democratic member of the House from Illinois, William Rainey – was diminished by the congressional habit of privileging invective over political reasoning. According to Rainey, the accord should have been rejected because Mussolini “constituted the most cruel, murderous force since the

131 132

133

ambassador seemed very worried by the speeches of Senators Reed, Norris, and Howell. Kellogg had to reassure him that such speeches were commonplace in the Senate and that it was natural for there to be opposition, but that in his opinion it would not make a difference. Chicago Daily News, November 30, 1925. NA-DS, 800.51W89 Italy/110, Frank B. Kellogg, Conversation with the Italian Ambassador (Nobile Giacomo de Martino), Washington, D.C., December 17, 1925: He wanted to know what consequences Reed’s motion would have to verify if any foreign governments, citizens, or business interests had funded or pressured U.S. officials, especially senators. Kellogg reassured him that he need not worry; nothing like that had happened. The only direct aid Italy had furnished in the matter was the report it had given the commission, and the other countries that had gone through the same process had done the same thing. Evidently Kellogg either did not know or pretended not to know about the role played by Morrow and Lamont for the House of Morgan behind the scenes of the negotiations; MHS-FBK, bk. 5, Henry P. Fletcher to Frank B. Kellogg, Rome, April 23, 1926, on the Roman reactions to the American Senate’s debates, wrote that the speeches against ratification were not as bad as de Martino had feared but were nonetheless not appreciated in Rome. Dino Grandi, interview; ACS-GVM, relazione Pirelli p. 21; LC-WEB, bk. 542–547, Settlements.

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days of the invisible council of Ten in medieval Venice.”134 Perhaps the most effective and well-argued opposition came from the future secretary of state, Cordell Hull of Tennessee.135 In the meantime, the associates of Morgan Bank were actually still working behind the scenes, providing those senators with whom they had close relationships, such as James Reed of Pennsylvania, with the necessary data to defend the settlement.136 The executive branch, from President Coolidge and Secretary of State Kellogg on down, also watched over the ratification process and did not hesitate to defend it publicly and energetically. For example, at the request of Coolidge, Kellogg met on February 4, 1926, with John H. Cowles, Grand Commander of the Southern Scottish Rite Society of Mason, to repeat his previous declaration that the U.S. government could not intercede with the Fascist government in favor of Italian Masonry or criticize the opposition of American Masonry to the ratification of the accord with Italy. Without mincing words, Kellogg – who was himself a Mason – told Cowles that he was only damaging the United States, that the accord contained all that was obtainable, and that anything more might be beyond Italy’s ability to pay. If they did not ratify this accord, there would probably not be another opportunity to negotiate a different one.137 A few days later, President Coolidge, reacting to a letter from Mellon,138 publicly declared his conviction that not to ratify the accord would put the financial position of Italy in danger and also seriously damage American exports. He vociferously criticized the Democrats, normally in favor of a generous policy on debt settlement, accusing them of opposing the ratification to serve their own domestic political agenda.139 134 135

136

137

138 139

Congressional Record, 69th Cong., 1st Sess., pp. 1977–2005; also cited in Berutti, p. 188. LC-CH. bk. 10, fol. 22, Cordell Hull to B. F. Yoakun, Washington, D.C., November 20, 1925; to Jesse H. Jones, November 20, 1925; to W. E. Chilton, November 23, 1925. All these letters demonstrate that Hull conducted a true campaign against the accord, which offended his free trade beliefs inasmuch as the agreed-upon reductions for Italy’s payments were justified by the commission in relation to high customs tariffs that slowed Italian commerce. AC-DWM, A. H. Sprigge to Dwight W. Morrow, Washington, D.C., February 16, 1926, in which it shows that the sender had been assigned by Morrow to bring Senator Reed, a Republican from Pennsylvania, various letters and documentation relating to the accord with Italy. In the course of the debate, the senator (who should not be confused with the Democrat from Missouri of the same name who was a determined enemy of the accord) distinguished himself for his role in supporting the accord’s ratification. MHS-FBK, bk. 12, Frank B. Kellogg to Henry P. Fletcher, Washington, D.C., February 5, 1926. See also John H. Cowles to Frank B. Kellogg, February 4, 1926, and the attached letter sent to all members of Congress in which the Masonic leader of the Southern States denounced the persecution of “Italian brothers.” Berutti, p. 194. Ibid., p. 195.

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In the end, the House of Representatives split down party lines, so that the strong Republican majority ensured a favorable vote for the Italian government. On January 15, 1926, the House ratified the accord with 257 votes in favor and 133 against (including only 17 Republicans). The Senate’s ratification, which took place on April 21, finally closed the Italian war debt question for good, with 54 votes in favor and 33 against.

7. american investments in italy The war debt issue had until this point kept the Italian government from accessing the New York financial market. Actually, the Bank of Italy, with the help of Morgan Bank, had obtained some forms of limited credit a few months before the conclusion of the negotiations. On January 31, 1925, the Bank of Italy had secured a three-month revolving credit line in the amount of $5 million, guaranteed by $175 million in Treasury bonds at an interest rate of 5 percent, with a Morgan Bank commission fee of one quarter of 1 percent.140 Later, in early summer, this credit line was raised to $50 million, extended not only to the Bank of Italy but also to the Bank of Naples and the Bank of Sicily, under the same conditions, underwritten by the state with a special issuance of Treasury bonds for a total value of $1,250 million. This revolving credit, by now of large dimensions, had the purpose of “defending the exchange rate, not artificially constricting it with the risk of further rebounds,” as Bonaldo Stringher wrote to the then minister of finance Alberto de’ Stefani.141 Still, the Italian government needed funding in forms other than a line of credit; it needed a true loan in order to increase the hard currency reserves in the treasury in the medium to long term. A bond issue on the American market was necessary to achieve this end. As always in these cases, the operation’s purpose was not only to make more hard currency available for a specific expense – in this case, the defense of the lira’s value, in order to eventually stabilize it definitively – but also to furnish tangible proof of the confidence a financial market as important as New York had in the Italian state and economy. In addition, it had the ulterior purpose of laying the necessary premises for an ongoing series of similar operations for the benefit of other state and municipal entities, public works consortia, and 140

141

ACS-GVM, bk. 13, fol. 104, Accordo tra la Banca d’Italia e i SIgg. J.P. Morgan and Co. di New York, January 31, 1925. ACS-GVM, bk. 13, fol. 104, Bonaldo Stringher to Alberto de’ Stefani, Rome, May 25, 1925, attached to Bonaldo Stringher and to Giuseppe Volpi di Misurata, Rome, August 10, 1925.

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those private industries with the most prestige and competitive potential on the international level. In raising revenue in this way, the campaign of social, political, and financial restoration would be consolidated and would crown the efforts of the Fascist government in the person of Alberto de’ Stefani, whose strictly canonical orthodoxy had guided the strictly economic and financial actions up to this point. The fact that Giuseppe Volpi di Misurata – product of a fundamental part of the entrepreneurial sector, electrical power, as well as a financial expert close to the Banca Commerciale – had been appointed his successor is evidence of Mussolini’s intentions. From the technical point of view, Volpi’s nomination demonstrated that the Fascist economic policy was entering a new phase, in which the capacity to maneuver and enter into contracts at the international level would be decisive. From the political point of view, it showed that private industry would be closely associated with government planning.142 There was a precise deflationary policy, aimed at helping stabilize the lira and making possible the return to the gold exchange standard and, at the same time, tapping into American capital. Both plans, which complemented each other, had the ultimate goal of definitively consolidating the regime, which, since its successful survival of the Matteotti Crisis, was in need of the clear support of the business and financial establishment of Italy. This would be not only an economic consolidation, but would also mean guaranteeing Italian industry social discipline in its labor force and high-enough profit margins to compensate for any losses from the regime’s deflationary policy (such as the reduction in salaries resulting from deflation). How to best explain the increasing intimacy between Fascism and American capital? The following may serve: It was especially important, from the American point of view, that Mussolini should not align himself with Poincaré on the question of reparations, but should participate in the politics that produced the Locarno Pact. As for domestic politics, if Mussolini did not respect the norms of liberal democracy, there were solid advantages. He had imposed a social peace through the repression of those

142

V. Castronovo, “La storia economica,” in Storia d’Italia dall’Unità a oggi, vol. 1, Turin: 1975, p. 270. For the opposite argument, R. De Felice, “Lineamenti politici della ‘quota novanta’ attraverso i documenti di Mussolini e di Volpi,” in Nuovo osservatore 1966, no. 30, who maintains that the policy of deflation, carried out by the government but essentially following Mussolini’s orders in the period 1926–1927, was really the expression and the confirmation of the autonomy of the regime from the large private economic concerns.

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subversive forces that had previously disturbed production and public order. What is more, he had formed a government that concentrated power in his own hands and thus avoided inefficiencies and obstacles from parliamentary politics and public opinion. He was capable of making the economic and administrative decisions necessary to the American financial establishment’s plans (that is, the return of European currencies to the gold standard). Mussolini, for his part, understood ever since the seizure of power that the regime would need to collaborate with American capital and, more in general, pursue the inclusion of Italy in the international financial community. The Italian economy needed foreign capital, and American capital was most abundant and available. Furthermore, the American government’s foreign policy orientation was not to be directly involved in European controversies. As a result, American capital would require fewer limits on Italian sovereignty than a similar relationship with Great Britain, or above all France.143

The urgency of getting this policy under way had only increased while the necessary preliminary step of settling the war debt was being dealt with, and now the stabilization of the lira had to be legislated. Castronovo observed: The weakening of the lira in the second half of 1925 was caused not only by the increase in the deficit, due mostly to the costly importation of agricultural goods and comestibles, but also by a major downward turn in its value in international markets.144

Whatever the origins of this downturn – anti-Fascist attacks as the regime claimed or, instead, pressure from Anglo-Saxon finance – the lesson to draw was the necessity to act in a hurry for a definitive strengthening of Italy’s still-vulnerable position in international relations. The consequence was not only the necessity of completing the first step of consolidating the debt, as discussed above, but also taking the second – loans from the American market – in a short time frame, as soon as the negotiations in Washington had been successfully concluded. For this reason, first Mario Alberti and then Alberto Beneduce, who had traveled to Washington along with the delegation, went to New York to negotiate with the Morgan Bank in parallel with the Washington talks. In this way it was possible for the Italian minister of finance to go straight to New York, as soon as Volpi and Mellon signaled that the war debt settlement was achieved, where he formalized a $100 million loan to the Italian state. Through a bond issue, the earlier revolving credit of $50 million was absorbed into this loan and the other plans for additional loans were given the green light. 143

144

G. G. Migone, “La stabilzzazione della lira: la finanza americana e Mussolini,” Rivista di storia contemporanea no. 2 (1973). Castronovo, p. 271.

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The bond certificate for “$100,000,000 Kingdom of Italy, external loan sinking fund, 7% gold bonds” set terms that remained essentially the same for future issuances.145 The bonds for the $100 million loan were sold at 94.5 percent, with an interest rate of 7.48 percent, redeemable in 1941, and were guaranteed by a sinking fund, provided by the Italian state, with yearly payments of $1,500,000. The certificate also contained a statement, authorized by Minister Volpi, that emphasized state revenue, the purpose of the issue (“The Italian government has at its disposition sufficient resources and receipts for its own operating costs, internal and external. It proposed, therefore, not to utilize any portion of the loan amount for ordinary spending, but to reserve the entire amount for currency stabilization, in order to make possible the final steps of the government’s plan for fiscal and financial policy, of which a completely stable currency constituted a vital aspect”), and the amount of its internal and foreign debt, with an explicit reference to the accord made in Washington. It is notable that the commitment to moving forward with the stabilization of the lira, insisted upon by the partners of Morgan Bank, was mentioned even in the official bond documentation, albeit in a somewhat obscure way. The equivocal statement regarding the renunciation of use of the loan provoked some arguments with the Morgan Bank, since Volpi would have recourse to the monies in order to defend the lira in the downturn. The banking consortium that presented the loan was led by J.P. Morgan & Co. and included nine other of the most important investment banks of the United States.146 Altogether, the loans’ maturities varied from ten to thirty years, with an average maturity of more than twenty years. Of the twenty-two loans sold in the American market before the economic crisis, sixteen had an interest rate set at 7 percent, four at 6.5 percent, and two at 6 percent. The loans were contracted starting in 1925, with the largest number in 1927, the year of the legal stabilization of the lira. The following table offers a picture of their chronology and, partially, of their average effective yield, which allows a calculation of their effective cost for the Italian economy. It is worth noting that the electric companies, the economic provenance of Volpi, took precedence. The loan to Edison was concluded at almost exactly the same time as the government loan. 145

146

Copies of nearly all the bond certificates are in AGF, fol. Pre-War Correspondence, including the one cited. First National Bank, New York; The National City Company, New York; Guaranty Company of New York; Bankers Trust Company, New York; Harris, Forbes & Co.; Lee, Higginson & Co.; Kidder, Peabody & Co.; Brown Brothers & Co.; Halsey, Stuart & Co. Inc.

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Effective Yield of Italian Bonds Sold on the United States Market (in chronological order)

Year

Number of loans

1925 2 1926 5 1927 11 1928 5 Total

Nominal value 110,000,000 43,400,000 118,000,000 45,150,000 316,550,000

Effective

Average

Yield

On issuance date

As of December 5, 1927

Percentage change in yield

7.24 7.44 7.10 6.40

7.20 7.33 7.17

−0.01 −0.02 −0.01

Sources: On the period 1925–1927, “Regia Ambasciata d’Italia a Washington, Ufficio del Consigliere Commerciale,” Riepilogo dei prestiti italiani collocati pubblicamente negli Stati Uniti dal 1925 al dicembre 1927 (ACS-GVM, bk. 13, fol. 161: Nuovi prestiti statali). For a summary of the earlier dates and following years, until 1934, see Bruno Rovere, Le obbligazioni italiane in dollari. L’assieme delle emissioni estere negli Stati Uniti e il riflesso sul loro andamento della politica finanziaria fascista, New York: 1935.

Some data from another source allow the reconstruction of a complete picture of the performance of American credit in Italy over a longer period (from December 31, 1914, to December 31, 1935) – in the table that follows. Under the heading “total” are included the aggregate nominal values of the bonds issued in the United States in dollars. Private loans not issued as public bonds are included where their values could be identified. Under the heading “net” are the total nominal values, less the annual sums retired. These data, in which loans to the Vatican play only a trivial role, confirm that the years 1925–1928 were absolutely crucial, while any other loans of substantial amounts were short term and mostly concentrated in the war years, with a modest aftereffect continuing into the postwar period. They also demonstrate that the economic crisis created a nearly total stoppage of the flow of capital into Italy. The data indicate (as the commercial councillor of the Italian Embassy in Washington, Romolo Angelone, underlined), first of all, the reduction in the cost of credit. For a bond of $100 million issued at 7.48 percent in 1926, the costs would fall to 7.44 percent, in 1927 to 7.10 percent, and finally in 1928 to about 6.3 percent. Overall, the interest rates varied from a low of 6 percent to a high of 7.69 percent. As a comparison, in the same period the interest rates of foreign bonds sold on the New York market

146

United States Economic Policy toward Italy Indebtedness of Italy to United States, Nominal Value (in millions of dollars) Net totals

Year

Short term

Long term

Short term

Long term

1915 1917 1920 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 At the end of 1935

25.0 − 11.3 2.0 − − 1.5 − 4.0 − − − − − − − 43.8

− − − − 4.0 111.0 38.2 120.2 52.4 8.1 10.0 − − − − − 343.9

25.0 −25.0 11.3 2.0 − −11.3 1.5 − 0.5 −4.0 − − − − − − −

− − − − 4.0 111.6 37.5 117.6 11.6 1.2 −6.3 −13.8 −13.8 −13.8 −13.8 −13.8 239.6

Source: C. Lewis, assisted by K. T. Schlottebeck, America’s Stake in International Investments, Washington, D.C.: 1938, p. 621.

varied from a low of 5.61 percent (the average for Australian bonds) to a high of 8.09 percent (the average for Czechoslovakian bonds). There was an improvement in Italian bonds over the period from December 1925 to December 1927, although the improvement was more marked for the first bonds, which were better able to be absorbed by investors in the time calculated.147 Before analyzing the bonds by sector, the aggregate of Italian borrowing throughout the entire period should be considered; this includes the market listings from December 5, 1927, the redemption limits, the effective yield, and the nominal amount of the bond. Given these figures, it is possible to categorize the various loans on the basis of the type of borrowing institution. The years analyzed are: 1925–1929 (1) Government bonds (2) Municipal bonds 147

100,000,000 60,000,000

These figures and analyses are in Riepilogo of the Regia Ambasciata, p. 3. See below, pp. 148–9

7. American Investments in Italy (3) Public utility bonds (4) Industrial bonds

147

107,250,000 51,300,000

Source: C. Lewis, assisted by K. T. Schlottebeck, America’s Stake in International Investments, Washington, D.C.: 1938.

From this table, it is clear that the bonds were divided nearly equally between government bonds (both national and municipal) and bonds for industry. If this last category is further subdivided into industrial sectors, the following table results: (1) Metalworking (automobiles and electromechanical industry) (2) Chemical (rubber and artificial materials) (3) Hydroelectric (4) Shipping and transport (5) Mining

24,5000,000 9,400,000 95,250,000 14,400,400 10,000,000

Source: C. Lewis, assisted by K. T. Schlottebeck, America’s Stake in International Investments, Washington, D.C.: 1938.

Castronovo observed that in 1925 it was again the electrical industry “just as in the Giolittian period” – although now far more sure of itself after the failure of reforms aimed at exploiting hydraulic power – that was “the pathbreaker in plant renewal and mobilization of investment funding.”148 This linkage was reflected in the amount of monies that the electrical sector managed to capture for itself on the American market. If the hydroelectrical industry bonds are added to those of the electromechanical sector, that sector reaches nearly $110,000,000 total, a substantial sum explained not only by the dynamism of the sector but also by the fact that Giuseppe Volpi di Misurata was the minister of finance and was thus the leader of negotiations with the American banking investors involved. The various American business groups founded for the purpose by the Italian electric companies represented one of many elements of continuity in the relations between American and Italian business, stretching beyond the war years.149 Fiat, and probably also Pirelli and Snia, had recourse to the American market not so much for urgent funding needs as for the prestige that they derived from having hard currency at their disposal.150

148 149 150

Castronovo, p. 266. M. Fini, Gli americani in Italia, Milano: 1976. Castronovo, p. 433.

Summary of Italian Bonds Issued Publicly in the United States December 1925–December 1929 Redemption limits

7%

1951

94½

97½

1941

1 2

1927 1927

B) Municipal loans Città di Roma Città di Milano

6½ 6½

1952 1952

91 92

58 90½ 38 90½

1937 1937

1

1926

2

1927

7% 7% 7%

1952 1937 1947

93 96½ 95½

94½ 95 94

1941 (1) 1937

4

1926

5 6 7

1927 1927 1927

7% 7% 7%

1956 1952 1952

92½ 94 93½

38 98½ 94 91

1936 1931 1937

7%

1952

96

94

1932

91¾ 97¼ 95¼ 94¾

1930 1930 1932 1931

100½

(1)

C) Public utilities loans Istituto Pubblica Utilità Consorzio Credito (A) Marittimo (B) Società Unione Esercizi Elettrici Società El. Lombarda Società Elettrica Isarco Società Adriatica di Elettricità

Maturity

1925 1926 1927 1927

International Power Securities issuances El. Generale Edison 6½ 1955 Com. Gas Torino 7 1936 El. Generale Edison 7 1957 El. Gen. Adamello 7 1952

12

1928– 1929

Italian Superpower Corporation

1 2

1926 1926

3 4

1927 1927

5

1928

6 7 8

1928 1928 1929

8 9 10 11

c) d) e) f)

D) Industrial loans Società Fiat Società di navigazione Lloyd Sabaudo Società Montecatini Società Pirelli General Rayon Co. Ltd. (Snia) Terni Ercole Marelli Breda

93¾ 100 96,37 95,50

6

1963

7

1946

7 7 7

1930–41 100–96 1937 96,50 1952 98

6

1948

6½ 6½ 7

1953 1953 1954

93

98–94 99 98¼

Year

A) Government loans Regio Tesoro

Issuing price

1925

Interest rate

Year of issuance

1

Borrower

Number

Market value as of December 5 1927

Description

(1) 1932 1937

(1) Can even be reimbursed immediately Sources: For the period 1925–1927, “Regia Ambasciata d’Italia a Washington, Ufficio del Consigliere Commerciale,” Riepilogo dei prestiti italiani collocate pubblicamente negli Stati Uniti dal 1925 al dicembre 1927 (ACS-GVM, bk. 13, fol. 161: Nuovi prestiti statali). For the following years, Rovere, pp. 303–306.

Summary of Italian Bonds Issued Publicly in the United States December 1925–December 1929

7,25 7,19 7,22

7,33 7,34 7,33

105 102½ 102½

7,60 7,50 7,40

105 105 105

Remaining debt as of December 1 1927

100 100

Return yield from payments before December 1 1927

7,22

Nominal amount issued

7,48

Amounts outstanding Percent variation in effective yield

As of December 5 1927

100

Maximum price

On date of issue

Effective yield

−0,03

100.000.000

3.105.000

96.895.000

+0,01

30.000.000 30.000.000 60.000.000

.............. .............. ..............

30.000.000 30.000.000 60.000.000

7,50 7,68 7,61

20.000.000 4.500.000 7.500.000

491.000 159.000 88.000

19.509.000 4.341.000 7.412.000

7,62½ 7,50 7,60

7,15 7,55 7,82

6.000.000 6.000.000 5.000.000

65.000 95.000 ..............

5.935.000 5.905.000 5.000.000

102½

7,35

7,54

5.000.000

107 105 105 105

7,00 7,00 7,30 7,40 7,39

7,18 7,34 7,35 7,44 7,38

10.000.000 5.000.000 10.000.000 6.000.000 85.000.000 22.250.000

235.000 100.000 51.000 46.000 1.330.000

9.765.000 4.900.000 9.949.000 5.954.000 83.670.000

7,69

6,92

10.000.000

292.000

9.708.000

7–7,45 7,50 7,15 7,41

7,75 7,05 7,13 7,21

2.400.000 10.000.000 4.000.000 26.400.000

.............. .............. 35.000 327.000

2.400.000 10.000.000 3.965.000 26.073.000

105 101–104 102 105

..............

−0,04

5.400.000 12.000.000 2.500.000 5.000.000

5.000.000

150

United States Economic Policy toward Italy

8. the morgan bank and investments The succession of bonds issued, the ways the monies were divided, the sectors thus affected, and the equilibrium between public and private beneficiaries in borrowing together paint a fairly precise picture of the economic needs of Italian industry and institutions. It remains to be analyzed how this considerable influx of dollars, concentrated in the few years before the economic crisis and the worsening of political tensions in Europe, was regulated and controlled by the bank that played the indispensable role of intermediary between borrowers and the investing public. The Morgan Bank had already had an essential part in the war debt negotiations, emerging as a potent political force. Now, regarding the bond issuances, it was again the Morgan Bank that, as fiscal agent of the Italian government, headed the bank consortia backing the great majority of the most important loans of the period. The most significant of these, from both a qualitative and political point of view, was the government bond of November 1925. The Morgan Bank’s services naturally carried a commission, to be paid regardless of the eventual success of the bond sale and the interest collected by the investors or the bank itself. When in 1932, by that time in an unfavorable political climate for investment banks and especially for the House of Morgan, the Senate Committee on Finance opened an investigation into the foreign bonds issued and relative profits made by banks, the House of Morgan submitted the following data to the committee regarding the Italian bonds: Borrower

Gross Profit

Net Profit

Italian government Credit consortium for public works Fiat Pirelli

100,000,000 4,500,000 10,000,000 4,000,000

775,139 94,352 133,212 60,039

759,126 7,869 126,234 44,282

Total

118,500,000

1,062,742

937,511

Source: New York Herald Tribune, February 1, 1932, p. 1.

Assuming the House of Morgan’s figures were accurate, it had issued foreign bonds through the consortia it headed from the end of the First World War until 1932 in the total amount of $1,875,578,000, for a net profit of $10,071,903. The bond deals it had put together for Italy were therefore less than a tenth of its total profits in the area of foreign bond issues.151 151

New York Herald Tribune, February 1, 1932, p. 1.

8. The Morgan Bank and Investments

151

This significant figure serves to explain both the attention that the House of Morgan lavished on Italian affairs and the type of role it had come to play in those affairs, with all this implied in terms of the relationship with the Fascist regime and the motivation to build a positive image for the regime in America. It would nonetheless be a serious error to reduce the entire issue to a narrow focus on the business interests linking bankers and their most important clients. It is necessary to examine more closely the relationship that developed between the Fascist government and the House of Morgan in order to understand the reasons it became so influential and just what kinds of services were really performed for the regime. There were two basic levels of the relationship between the House of Morgan and its various European government clients: on the one hand, those inherent to the normal activities conducted between creditor and borrower; on the other, a form of political and technical advising that the bank offered to the government-client on the most important financial questions faced by that state. The relationship with the Fascist regime was typical in this regard. After the first loan of $50 million, secured before the Washington accord was complete, the Morgan Bank accompanied every subsequent step of the Italian government’s financial and monetary policy with its assiduous advice and influence. Except for those moments in which a specific bond issue was negotiated, the relationship remained preponderantly on the political level from that time onward. The business relationship would seem to give the client the right to such advice, along with all the support services, resources, and political influence the house had at its disposal – or so the partners clearly thought, judging by their Herculean efforts during Italy’s war debt negotiations. Still, the clear assumption underlying the relationship was the decision on the part of the Fascist government to accept, if not explicitly endorse, the larger designs of the House of Morgan for Europe’s economic and financial future. Even the strictly business relationship alone demanded constant attention for its importance and quantitative size. Inevitably, from time to time a more strictly political question arose in the correspondence regarding the monetary issue, and equally inevitably, the two began to intertwine. The specific problem of stabilization emerged in parallel with the issuing of bonds on the New York market. Morgan Bank insisted on an immediate stabilization program; there were the prevarications by first this minister, then that; and there arose between client and banker a state of reciprocal uneasiness. This unease was not due to any actual disagreement, but

152

United States Economic Policy toward Italy

during this sensitive phase of transition in monetary policy making, any business problem might add fuel to the fire. And such problems did not fail to appear. For example, Fummi had been worried about the repercussions of dissolving the syndicate that had been formed to launch the Morgan bond of $100 million on behalf of the Italian government. This syndicate, after the issuance of the bond, had remained active in order to supervise the sale of all the bond certificates. On May 8, Fummi had been forced to inform Volpi that the House of Morgan had decreed the syndicate’s dissolution the evening before. This decision must have been precipitated by the general downturn in bond sales on the New York market, caused by the general strike in Great Britain and the resulting difficulty “to resell in the immediate future the remaining sum of bond shares in the syndicate’s possession.” Fummi added, however, that their “friends, along with two of their closest associates” had acquired all the remaining bond shares, approximately $7 million worth, with the plan of reselling them as soon as the market improved. Fummi, who cabled from Paris, characterized the decision as “a further benefit to our country” and predicted that the market would soon improve and that the sale would have “a salutary effect on Italian credit in the United States of America.” Despite the optimistic tone of the message, it was clear that Fummi was on the defensive and felt some apprehension about the reaction this news would elicit in Rome.152 Afterwards, Volpi decided to make the best of a bad situation. In response to an article in which the Berlin financial weekly Börsen-Kurier noted the dissolution of the syndicate as a sign that relations between Italy and the House of Morgan had worsened, the minister ordered the embassy to deny the report, quoting Mellon’s opinion that the dissolution was a wise choice and would improve the yields of the bond “after an initial, unavoidable drop.” Furthermore, the acquisition of the remaining bond shares on the part of the House of Morgan was to be understood as “great proof of its respect for the Italian Treasury.”153

152

153

BIAGSRE, bk. 16, Pratiche Varie, 1925–1927, fol. 3, Prestito di 100 millioni con gli Stati Uniti, Giovanni Fummi to Giuseppe Volpi di Misurata, Paris, May 8, 1926. ASMAE-AG, bk. 159, titolo 3, classe 6, fol. 2 Debiti dell’Italia verso l’America, Giuseppe Volpi di Misurata to the Italian Embassy in Berlin, Rome, May 18, 1926. The quote from Mellon, though plausible in its content, is surprising because in the telegram in which Ambassador de Martino reported on his meeting with the American secretary of the treasury, it only mentioned that Mellon agreed to the ambassador’s affirmation that the dissolution had happened at a critical moment. In addition, that telegram only arrived the following day, and it seems unlikely from the context that de Martino would have had

8. The Morgan Bank and Investments

153

These claims to satisfaction belied the real mood in Rome. As soon as he received the news of the syndicate’s dissolution, Bonaldo Stringher sent to his representative in New York, Luigi Podestà, for a confirmation of the downturn in the market for foreign bonds in New York and to ask for verification of whether this was the true reason behind the decision to dissolve the syndicate.154 Rome’s concerns were evidently nourished by the fact that the decision was occurring at the same time as a renewal of difficulties for the lira. In his telegram to de Martino on May 18, Volpi wrote that “the decision to dissolve the Morgan syndicate was no doubt inspired by their friendly sentiments toward Italy, but the speculation against the Italian lira has reached a critical point.”155 In reality, Volpi had had serious doubts concerning the friendly character of the partners’ decision. Three days after their decree, Volpi had written to Mussolini: In the meantime, American finance has clearly expressed its opinion that the French, Belgian, and Italian situations are untenable and is pushing strongly for the return to the gold standard of all the European currencies. We cannot exclude the possibility that the dissolution of the syndicate for our bond was decided by Morgan at the end of last week in connection with this American viewpoint, in order to force us to rethink our position. Certainly the loss of four points on the Morgan bond has cost us some damage.156

It was at this point that the business relationship inevitably became entwined with the more complex and political issue of monetary stabilization. Volpi showed his complete awareness of the enthusiasm with which the Morgan partners were pursuing the return to the gold standard for European currencies, and for the lira in particular. His suspicion that they might have exploited the coincidence in order to launch a further alarm signal on the precariousness of the lira’s situation was not at all implausible. There is no evidence that directly confirms or denies this interpretation in the correspondence between Leffingwell and Lamont during this period. The fact remained that the fall in bond values, however temporary, coincided curiously with the other economic developments of the moment. The timing seems even more suspect in light of the total failure to consult

154

155

156

meetings two days in a row with Mellon (ASMAE-AAW, bk. 272, fol. A-32, sottof. Finanza Italiana, anni 1925–1926, tel. cif. 424/365, Giacomo de Martino to Giuseppe Volpi di Misurata, Washington, May 19, 1926, p. 1). The affirmation cited by Volpi may have come instead from Garrard Winston, undersecretary of the treasury. BIAGSRE, bk. 16, Pratiche Varie, 1925–1927, fol. 3, Prestito di 100 millioni con gli Stati Uniti, Bonaldo Stringher to Luigi Podestà, Rome, May 10, 1926. ASMAE-AG, bk. 159, titolo 3, classe 61, fol. 2, Debiti dell’Italia verso l’America, tel. n. 1706/242, Giuseppe Volpi di Misurata to Giacomo de Martino, Rome, May 18, 1926. Cited letter from Volpi di Misurata to Mussolini, DDI, 7, IV, 310, p. 225.

154

United States Economic Policy toward Italy

with the government in question and the hurried announcement of the decision like a bolt out of the blue sky. The simultaneous heavy speculation on the lira “may have given idea here Firm was nervous about Italy and in consequence dissolved syndicate.”157 Volpi’s concerns went well beyond those of Fummi. The latter was certainly right to conclude that “there is no doubt [the] sudden dissolution of [the] syndicate has created misunderstanding.”158 But Volpi never directly expressed any negative feelings, and in one message he even recognized that the House of Morgan had acted in the best interests of Italy and acknowledged the wisdom of the action taken. The bank’s Roman representative took these views with a grain of salt, however, knowing that such public statements were dictated by circumstance and were, at most, Volpi’s attempt to put the situation in the best light. Fummi feared that these tensions could have negative repercussions on the privileged position of the Morgan firm with the Italian government. There were several bankers and bureaucrats in the Ministry of Finance who, according to Fummi, had never been “entirely cordial” to the idea that one bank only, even a bank of the stature of J.P. Morgan & Co., should have so much influence on Italian financial policy, and might have taken advantage of the situation.159 The person Fummi most had in mind would have been Luigi Pace, director general of the treasury.160 There were several other episodes that reinforced Fummi’s fears. For some time, Pace had been in contact with other American bankers to investigate the possibility of securing short-term credit. Contrary to what

157

158 159

160

HUGSBA-TWL, bk. 190, fol. 19, tel. n. 30, Giovanni Fummi to Thomas Lamont, Rome, May 17, 1926: “One must remember however that this came at inopportune moment immediately after interchange cordial message regarding Marshall Field & Co. operation which naturally made Count Volpi feel question of dissolving the Syndicate would not come up for some time whereas dissolution took place two days later. Also at same time there was heavy foreign speculation in lira. All this may have given idea here Firm was nervous about Italy and in consequence dissolved syndicate.” Ibid.: “. . . there is no doubt sudden dissolution of Syndicate has created misunderstanding.” Ibid., p. 5. Fummi’s language was fairly vague and tended to suggest that the opposition of such men was prejudiced, but he exploited the appearance of the exclusive power of J.P. Morgan & Co. “Such above situation probably gives some Italian Treasury officials and bankers who have never been entirely cordial to idea of Italy’s finances being advised by J.P. Morgan & Co. opportunity of emphasizing now to Minister of Finance that they have never much favored only one bank having so much influence on Italian financial policy even if such bank were J.P. Morgan & Co.” HUGSBA-TWL, bk. 190, fol. 19; as well as bk. 173, fol. 19, tel. n. 31, Giovanni Fummi to Thomas W. Lamont, Rome, May 17, 1926.

8. The Morgan Bank and Investments

155

Lamont supposed,161 there is some possibility that, in a moment of tension with the House of Morgan, Pace had the approval of Volpi in what might have been an exploratory attempt to discover if there were any chance to create some profitable competition among the various American banks. In truth, these attempts only served to demonstrate that the Italian government could not do without the services and good offices of the House of Morgan in order to secure the cooperation of American finance and enjoy the use of its capital markets. Several further events proved this to be the case. The Bankers Trust Company of New York had for several months processed exchange operations for a Roman bank that, in turn, acted on behalf of the government, apparently in the context of the Italian Treasury’s interventions in support of the lira. In the first days of the new drop in the lira’s value, in May 1926, Pace had asked the representative of Bankers Trust if his bank would be willing to consider a concession of a credit line in dollars in exchange for Treasury bills or, perhaps, a mail credit of $33,000,000 countersigned by J.P. Morgan & Co. However, on May 14, the Paris representative of Bankers Trust rushed into the offices of Morgan, Harjes & Co., assuring them that he would do nothing without the full approval of J.P. Morgan & Co. The Bankers Trust representative thus received the order to report to Giovanni Fummi in Rome, who in this way learned of the contacts between Pace and the Bankers Trust Company. Fummi then confronted Pace, who, in the face of a direct conflict with Morgan Bank, backed down. In fact, he immediately declared that the Italian Treasury had no need for a mail credit since, having ended the program of intervention on the exchange market, there was no further need to keep large reserves in liquidity. In regard to the short-term credit lines, for three or six months, that Pace considered normal banking operations, Fummi and Oluf Bernsten (the representative of the Bankers Trust Company in Rome) agreed that their respective New York offices would create a unified policy to follow up on the matter. Pace apparently stated that the treasury in its current situation was no longer even interested in 161

HUGSBA-TWL, bk. 173., fol. 20, tel. n. 26/4714, Thomas W. Lamont to J.P. Morgan & Co., London, May 19, 1926: “This [simultaneity of the drop in value of the lira and the dissolution of the syndicate] of course was merely a coincidence but some pesky subofficials have exaggerated that and one of these especially named Pace Director of Italian Treasury felt that Minister was relying too exclusively upon our advice. (stop) He is one who apparently without encouragement from his chief has encouraged these casual conversations with Bankers Trust Co., also extension of operations with French Ledmon & Co. etc.”

156

United States Economic Policy toward Italy

this type of credit. Evidently, after Fummi had spoken with Pace and the Paris office of Bankers Trust had turned to Morgan, Harjes & Co., Fummi had only to dictate his terms to Bernsten, who, perhaps disingenuously, had imagined that he would be able to conduct business directly with the Italian Treasury. Fummi seemed satisfied that he had reestablished his monopoly and limited himself to recommending to the firm that it should show itself willing to dispense this type of short-term credit line in the event that the Italian Treasury should feel it necessary in the future. As for Pace’s behavior, it seems that he had turned to Bankers Trust not so much to explore a new channel of American funding as to avoid communicating with the House of Morgan about the operations to support the lira’s exchange rate – a policy they notoriously opposed because they preferred a legislative solution for stabilization. The Bankers Trust Company, for its part, was clearly not willing to put its good relations with the House of Morgan in jeopardy, at least not over this particular issue. The behavior of the Paris representative as well as his rapid return to Fummi’s ranks provide clear evidence for this conclusion.162 A second episode, also involving Bankers Trust Company, happened so nearly at the same time as to constitute part of the same incident. On May 19, two days after Fummi, Pace, and Bernsten had discussed the short-term credit lines, Bankers Trust Company of New York communicated to Arthur M. Anderson, partner at Morgan, that its Paris representative had “been advised of the possibility of financing in this market on behalf of a consortium of Italian municipalities under the leadership of Beneduce and along the same lines as the loan made to consortium of Italian Public Utilities Co.”163 This consortium was to have the responsibility of securing credit on the New York financial market in order to then lend monies, in lire, to various Italian city governments. The credit was to be underwritten 162

163

On this first incident with Bankers Trust Company, see HUGSBA-TWL, bk. 173, fol. 15, and also fol. 18, tel. n. 26/2773, Morgan, Harjes & Co. to Thomas W. Lamont, Paris, May 14, 1926; as well as HUGSBA-TWL, bk. 190, fol. 19, tel. n. 32, Giovanni Fummi to Thomas W. Lamont, Rome, May 17, 1926. HUGSBA-TWL, bk. 272, fol. 30, as well as bk. 173, fol. 20, tel. n. 26/2212, J.P. Morgan & Co. to Thomas W. Lamont, New York, May 19, 1926. The same telegram was sent by Morgan Grenfell & Co. to Giovanni Fummi, on the following day. In terms of the Italian public utilities company, called Istituto di Pubblica Utilità, in question was a bond on behalf of various Italian interests that had formed a consortium for the occasion, with a maturity in 1952, and an issuing price of $93. See for example ACS-GVM, bk. 13, fol. 161, Nuovi prestiti statali, appunto della Regia Ambasciata d’Italia, Ufficio del Consigliere Commerciale.

8. The Morgan Bank and Investments

157

by a lien on local taxes and the value of the currency guaranteed by the Italian government. The Bankers Trust Company did not even attempt to conduct the operation apart from the Morgan firm, but expressed the opinion that it would be opportune to approach Beneduce to obtain “a leading position in this business.” The response of Anderson on behalf of the firm was somewhat harsh: J.P. Morgan & Co. did not believe that any such operation was imminent and maintained that, were the Italian government to undertake such an affair, the minister would have approached them directly. As a precaution, Anderson invited Fummi to speak to Volpi on the subject. Notably, the partner insisted most strongly on reaffirming the primary role of the Morgan Bank in any business that might concern the central government.164 Some time earlier, around the first of May, the discussion of a different operation, a loan on behalf of the state railway system, had confirmed the same criteria. The House of Morgan, through Fummi, had expressed to the minister their conviction that it was not a good time to dump new Italian bonds on the New York market. Volpi had responded by stating that no decision had yet been made on the topic, nor would it be taken without first consulting the firm. He added, however: “I also confirm however the advisability of regarding favourably [the proposal of] Marshall Field Glore Ward & Co. in view of their interest in our Italian affairs and the esteem which J. P. Morgan & Co. themselves have for them.”165 The minister’s statement was interesting in that it contained at the same time acceptance of the special jurisdiction of J.P. Morgan & Co. in all Italian transactions and the attempt not to exclude the possibility of doing business with a different intermediary. In reality, the negotiations between Volpi and the representative from Marshall Field, Glore, Ward & Co. had gone further than this invitation implied, to the point that the minister had approved an agreement for a bond issue, without yet having fixed the date of issuance or the price. The price would in any case have needed to conform to the current market price of Italian bond shares already issued at 7 percent. The date was also to be fixed in consideration of the market context, with the stipulation that if it were not completed before July 15, the agreement would expire and require renewal.166

164 165

166

Ibid. This letter from Volpi to Fummi is cited (possibly in translation from an original in Italian) in HUGSBA-TWL, bk. 173, fol. 18, tel. n. 26/2197, J.P. Morgan & Co. to Thomas W. Lamont, New York, May 15, 1926. Ibid., p. 2.

158

United States Economic Policy toward Italy

Once again, back in New York, Marshall Field took care to keep J.P. Morgan & Co. informed, proposing that they should share the initiative for this business. Indeed, argued the administrators at Marshall Field, even if the agreement were signed by the director general of the state railways system, it had been authorized by the government. This would be specified in the bond certificates’ accompanying information, with the note that, according to their legal department, the bond represented an obligation on the part of the Italian government itself. For this reason, the agreement was within the jurisdiction of J.P. Morgan & Co. Marshall Field himself invited Morgan to assume the leadership of the operation if it so wished. The House of Morgan headquarters asked for Lamont’s opinion on this question, though it noted that “some of us are not particularly keen about the business.” In the meantime, the partners had given formal authorization to Marshall Field, Glore, Ward & Co. to seal the deal with the railways, on the terms previously negotiated, as well as to discuss “the business here with friends like Harris Forbes & Co. in a preliminary way leaving open for the moment the question of our attitude when and if the business is to be done.”167 Again in this case, the potential competitor of the House of Morgan exercised extreme caution in proceeding, particularly at the level of headquarters. These were actually tentative efforts on the part of other financial forces to participate in the management and issuance of Italian credit. Nobody wanted to try to replace the House of Morgan. Volpi’s attitude toward all this was to encourage the increase in numbers of his American financial interlocutors, but never at the expense of the fundamental relationship with Morgan Bank. Another similar episode took place involving the Chase National Bank of New York, in participation with Blair & Co. and Lemon & Co., a French bank suspected by the Morgan partners of having promoted many of these external attempts to enter the Italian credit business. On May 18, 1926, Gates McGarrah, the president of the executive committee of Chase National Bank, appeared at the headquarters of J.P. Morgan & Co. to inform them that his and the other banks had received a request for credit from the Italian Treasury in the amount of $5 million for sixty to ninety days. This was apparently one of the short-term credit lines that Pace had called “normal banking transactions,” for the purpose of shoring up the value of the lira on the exchange market. Pace did not seem to realize that all his initiatives ended up sooner or later on a partner’s desk at Morgan Bank. McGarrah had gone to Morgan Bank, exactly like his colleagues at 167

Ibid., pp. 2–3.

8. The Morgan Bank and Investments

159

all the other banks. And yet he did not want to waste the opportunity to make his momentary (and perhaps only psychological) advantage felt. He wondered whether there had been any rift between us and the Italians. (Stop) We told him that we knew of no rift, that through Fummi we were in constant communication and that we had not been asked for any such credit. (Stop) McGarrah said he might ask Albert H. Wiggin who is in London to see you [Lamont, transl. note] and talk to you about it.168

To what conclusions should all these episodes lead? There is no doubt that they demonstrate a certain will on the part of the Italians to widen the net of their relationships with the American financial world. In theory, Pace’s attitude was perfectly reasonable: to put all their eggs in one basket with just one bank was to give up any possibility of leverage in negotiations for better terms, and to be exposed to any pressure and threats from their sole interlocutor without having recourse to alternatives. It was also natural that this sentiment should arise during a moment when Volpi, who had not yet decided to move forward with the legislative stabilization of the lira, was feeling the full weight of the Morgan Bank’s pressures to carry it out as soon as possible. As long as the policy of defending the lira’s exchange value on the markets continued, it was natural to pursue the necessary supplies of hard currency from banks other than Morgan, which did not share the firm’s disapproval of that program. It was precisely the all-encompassing nature of the relationship with the House of Morgan that was awkward, because it forced the minister to submit the entirety of Italian economic policy to the firm’s scrutiny even when all he wanted was to discuss one single, simple transaction. And yet Volpi was sufficiently aware of the power relationships within the American financial world, and between it and European governments (starting with the Italian), not to question the dominance of J.P. Morgan & Co. He knew that any attempt to enlarge Italian contacts must proceed with the greatest caution. It would also have been unthinkable to pursue alternative relationships without the authorization of a minister who was, like Volpi, master of his own bureaucracy and energetically steering the ministry’s progress. But the fact that Pace was the one to initiate most of these contacts with other banks does seem significant. Was this in order not to directly involve the minister, to the point that Lamont was able to suppose that he was not aware of Pace’s actions? When Volpi explicitly

168

HUGSBA-TWL, bk. 173, fol. 19, tel. 26/2206, J.P. Morgan & Co. to Thomas W. Lamont, New York, May 18, 1926.

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indicated to the House of Morgan that he intended to do business with another financier (this was the case with the Marshall Field-state railways loan) he was careful to repeat his intentions not to move forward without consulting the partners. What is more, when the more “clandestine” contacts did come to the attention of the Morgan Bank and their representative Giovanni Fummi, the minister offered no resistance to decisions that brought the business back under the control of the Morgan firm. Pace had, significantly, renounced his credit request when confronted about his contacts with Bankers Trust Company – or at least pronounced himself willing to deal with Morgan Bank for any further requests. Not only was any attempt to escape the control of Morgan Bank very cautious, but, at the first hint of trouble, it was abandoned promptly. The behavior of the competing American banks confirms that Volpi was right to be so careful. Perhaps he was aware of the experience of the French government when it tried to procure credit from Morgan competitors. Here is how the matter was described by Benjamin Strong, governor of the Federal Reserve Bank of New York, in a letter to his closest colleague, George L. Harrison: It seems that the French Government has been sounding out other American bankers. They had a talk with Mortimer Schiff, who very properly said that it was Morgan’s business and that anyway such credits were of no value to stabilize the franc when the French people were exporting capital. I believe they also had a talk with Blair’s representative, who took somewhat the same position, and Lamont has written a very confidential letter to Clarence Dillon discussing the matter in such a way that he thinks will result in Dillon doing nothing.169

The primacy of J.P. Morgan with regard to relationships with foreign governments was, then, fully recognized within American financial circles as well as abroad. Even the head of the Federal Reserve Bank was apparently familiar with the situation. This hierarchy was no doubt determined by the intricacies of power relationships on Wall Street as well as by the solid tradition that, starting with the war loans, the House of Morgan had established by making itself the principal link to the European market. American financial circles found it to the general good to accept this position of dominance, despite the fact that other banks certainly did not 169

Clarence Dillon was president of Dillon, Reed & Co. FRNBY-BS, BS’s trip to Europe 1926, vol. 1, April 30–July 18, n. 1000–6, Benjamin Strong to George L. Harrison, May 15, 1926. Dillon showed himself to be reasonable just as Lamont had predicted. HUGSBA-TWL, bk. 173, fol. 17, tel. n. 26/1265, Thomas W. Lamont to Morgan, Harjes & Co., London, May 19, 1926. Lamont pronounced himself pleased that the meeting with Dillon was so satisfying, though he said he had been certain it would be.

8. The Morgan Bank and Investments

161

lack the competitive spirit on other occasions regarding the House of Morgan. First of all, these other banks were not excluded from the interest that constituted the principal form of profit from this business. All the major investment banks contributed to the bond issuances once they were agreed upon. What they conceded to Morgan Bank was the biggest slice of the bond shares as well as the special commission claimed by the firm that finalized the deal. This practice allowed the concentration of power necessary to keep firm control of a set of transactions that could have otherwise become infinitely complex and politically consequential – a control that was in the best interest of the American financial community as a whole. The power of Morgan Bank consisted, in point of fact, in its profound expertise and familiarity with the political and financial actors on the European stage and in its resulting capability of fully understanding the political connotations and effects of the actions carried out. The Morgan partners were all part of that restricted elite of men of finance who often were also called on to fill governmental positions of great responsibility. They were the major builders of the global policy that American finance was constructing in Europe, from the prewar era forward. Their activity as bankers – in the strict sense as providers of capital – was inherent in their function as the true inventors and executors of financial policy. Although this role was in a certain sense secondary to their banking business, far from weakening it, it was a source of strength. Their opportunities to do business became available when their policy formulation was successful. Under such circumstances, it is not surprising that the other American banks tended not to question their roles or that, seeing the success of the House of Morgan’s management of these circumstances, they would content themselves with financial benefits that might be more limited but were dependable and predictable. The previous examples show, however, that the local representatives of the other American banks, in Rome and occasionally in Paris, were less rigid about adhering to this etiquette. They were both more closely connected to the local opportunities that presented themselves from time to time and less acutely aware of the overall strategy being pursued by American finance with the participation of its respective banking institutions. For similar reasons, it was natural that Giovanni Fummi was the representative of Morgan who was most concerned by the ups and downs in the economic relationship with Volpi and other Italian government officials. Fummi was, as previously discussed, fairly alarmed by their reactions to the news of the dissolution of the $100 million bond syndicate, as well as by the outside contact attempts made by the director general of

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the treasury. It was Fummi who asked the Morgan Bank to authorize him to offer Pace any short-term credit he might deem necessary.170 It had also been Fummi who “earnestly desire[d],” in the words of Lamont, that the Morgan Bank should assume the lead on the railways loan with Marshall Field, Glore, Ward & Co.171 Fummi’s state of anxiety was owing to the fact that he could follow all these events up close, and he noted all the worrying symptoms in the minister’s behavior. But it should also be said that Volpi’s strategy, however cautious and easy to abandon as soon as the signals looked negative, had borne some fruit. The House of Morgan had begun to consider some of the business offers to which it had previously been hostile – the shortterm credits are a case in point. There is no doubt that Lamont himself recognized the difficulties emerging in Rome and tried to meet the minister halfway. At an early stage, he cabled to New York that he agreed that the firm should lead the railways bond issue together with Marshall Field, because “Fummi says there is still [a] misunderstanding in Rome in reference to winding up [the] Bond Syndicate,” and to head up the new bond “would have [an] ameliorating effect on [the] Minister.”172 Just less than a year later, however, when the railway business with Marshall Field seemed ready for conclusion and the episode of the dissolving of the syndicate was more or less forgotten, the Morgan Bank’s definitive veto suddenly arrived – and with singular brutality. In February 1927, the bank wrote to Volpi that they noticed an almost radical change in policy compared to what George Whitney had been told the previous autumn in Rome. Whitney remembered that at the time the plan was to authorize certain private enterprises to issue foreign bonds and in this way create a reserve of foreign currency, but that the government did not intend to use its credit. A large number of bonds were now about to be issued on the American market with Volpi’s authorization; the bank could not see how Volpi would want to issue government bonds at the same time.

170

171

172

In HUGSBA-TWL, bk. 173, fol. 20, tel. n. 33, Giovanni Fummi to Thomas W. Lamont, Rome, May 19, 1926, Fummi asked Lamont to transmit his previous telegram (HUGSBA-TWL Papers, bk. 190, fol. 19, tel. 32, Giovanni Fummi to Thomas W. Lamont, Rome, May 17, 1926) to the New York headquarters in order to request authorization to communicate to Pace that the House of Morgan would be willing to offer mailing credits should the Italian government deem it useful. HUGSBA-TWL, bk. 173, fol. 19, tel. n. 26/4712, Thomas W. Lamont to J.P. Morgan & Co., London, May 18, 1926, p. 5. Ibid.

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They requested most politely but firmly that Volpi fully inform them as to his intentions. The partners also took care to inform the minister that they were in possession of the telegram in which George Raffalovich, who had served as liaison, had informed Marshall Field of the minister’s desire to conclude the railways loan, but that that bank now declared itself in agreement with the firm’s point of view on the matter. Once again, J.P. Morgan & Co. demonstrated to Volpi that he had no chance of doing business in New York’s financial markets without their approval, and moreover that such approval was dependent on not just his, but their own assessments of what was in the best interests of the Italian state’s economy. Nor did their assessment function solely through the economic merits of the situation; as in other occasions, in this message too they questioned the general intent of the minster’s politics. Was this a productive investment, or was it necessary to fill a budget deficit? What relationship did it have to the loan concluded to fund the city of Rome? Precisely how would the monies from these bonds be used? Why did the minister need to carry out an official government bond issue for this purpose? These are the types of questions they posed, which did very little to hide their concern that the Italian government was raising funds to use in new currency exchange interventions, a path they wanted to close down in order not to put off any longer their primary goal of legal stabilization of the lira.173 At this point Volpi had no choice but to retreat and try to salvage some portion of his dignity. Nor could he refuse the request to defend his policies. Morgan Bank had flexed their muscles once again and proven their monopoly over the Italian ability to raise credit on American markets. At the same time, they had clearly shown their intention to subordinate that credit raising not only to an evaluation of any single operation’s merit, but to their overall approval of Italy’s entire line of financial policy. And the only policy they planned to approve would involve the rapid and definitive stabilization of the lira, accompanied by a series of credit issues for productive goals. The unhappy minister could only respond with his thanks for the care taken to protect the prestige of Italian credit. He assured them that his policy had not changed since November 1925 and his meeting with Whitney. All the bonds he had authorized were aimed at reconstruction, be they issued by private companies or the government; he

173

ACS-GVM, bk. 13, fol. 2339, Morgan-Fummi, J.P. Morgan & Co. to Giuseppe Volpi di Misurata, New York, undated.

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could justify each one as part of the original plan to increase productivity and heal the Italian economy. At this point Volpi could do nothing more than announce that the government had chosen not to pursue the railway bond issue, portraying it as a trivial matter, despite the fact that he himself had spent the better part of a year working toward the deal. His surrender could not have been more unconditional, nor could it have gone any other way, given the political and financial power that the Morgans wielded in the United States, but most of all given the original and fundamental choice the Fascist regime had made regarding stabilization and American financing.174 Lamont, too, had always been perfectly conscious of the real balance of power in the field. His decision not to travel to Rome in May 1926 had been, in the final analysis, the most discreet and clear signal to the minister that he needed the Morgan Bank more than the bank needed him. Lamont knew very well that only vigorous American support would allow the Fascist government to succeed in stabilizing its currency – a success that was fundamental to the internal and external consolidation of the regime. He also knew that American support would only be channeled through the auspices of Morgan Bank, which at that moment controlled Italian access to the American financial market. It was true that precisely this fact conditioned the Morgan Bank’s strong interest in assuring the successful stabilization of the lira. But to Volpi it was clear that he had no alternatives to the relationship with Morgan Bank, as the other American banks had recently given ample demonstration. This is why, when Lamont informed Fummi that he would not be coming to Rome, he was also able to add, “Believe we can work situation out for all right. Don’t worry. Warmest regards.”175 Had Volpi been one of those who cared above all else to present themselves as the defenders and vindicators of national autonomy and dignity, he might have been more demoralized. But the minister had long before learned to understand and accept necessary subordinations of this kind, when he had negotiated with German financiers before the war.176

174

175

176

ACS-GVM, bk. 13, fol. 2339, Morgan-Fummi, Giuseppe Volpi di Misurata to J.P. Morgan & Co., Rome, February 10, 1927. HUGSBA-TWL, bk. 173, fol. 19, tel. n. 33, Thomas W. Lamont to Giovanni Fummi, London, May 18, 1926, 17:05. This telegram was the immediate follow-up to the one in which Lamont had informed Fummi that he would not come to Rome: HUGSBA-TWL, bk. 173, fol. 19, tel. n. 32, Thomas W. Lamont to Giovanni Fummi, London, May 18, 1926, 13:10. See on this topic Romano, p. 117 and n. 20, who writes: “The term ‘subordinate relationship,’ which has been used to describe the relations between Italy and the United States in

9. American Investments in Europe

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9. american investments in europe While the importance of the American financial contribution to the Italian economy was a given, with all the conditions such a relationship carried, the relative weight of American investments compared with the total of American investments and with the amount of them in other countries in the same period deserves some analysis. It is also useful to specify the nature of American investment in Italy – that is, to observe in what measure direct investments compared to portfolio investment. From the preceding table, it is clear that the periods of the First World War and 1924–1929 were the high points of American portfolio investment in Europe. In the period of greatest growth, 1924–1929, there was a marked but not dramatic drop in British and French shares, while there was a fairly strong growth in Italy (798%) and also in Germany (670.4%). The growth rates for these two countries were so notable that by 1929 they placed investment in Germany in first place in absolute terms and the Italian portfolio second, ahead of France and Great Britain. It must be kept in mind that if the direct investment figures were included (in which the possession of shares is accompanied by voting control in the company), the relative values would change significantly, especially as regards American investment in Great Britain. American Portfolio Investments in Europe (1897–1935), Excluding Direct Investments (millions of dollars) Country

1908

1914

Austria Belgium Bulgaria Czechoslovakia Danzig Denmark Estonia Finland France Germany Great Britain Greece

0.5 − − − − 0.3 − − − 32.3 134.8 −

0.5 − − − − 0.3 − − 10.0 23.1 121.6 3.0

1919 0.2 11.6 − 0.2 − 15.2 − − 342.5 1.6 890.5 2.6

1924 26.7 181.2 − 31.5 − 89.3 − 29.0 448.9 132.3 413.9 8.6

1929 72.3 214.2 13.4 31.8 3.0 165.2 3.8 63.2 343.4 1,019.3 286.5 28.5

1935 56.8 151.9 12.9 29.8 2.6 134.8 3.7 32.1 157.7 828.6 42.3 27.4

this period, is useful only if we forget that the men of Volpi’s generation had already gone through a similar experience with the German financial market, and they maintained that it was possible to reconcile their national priorities with the needs of a fragile and parched capitalism such as Italy’s.” Note this key term “maintained.”

United States Economic Policy toward Italy

166 Holland Hungary Ireland Italy Lithuania Luxembourg Norway Poland Romania Russia Spain Sweden Switzerland Yugoslavia Total in Europe

− − − − − − − − − 29.0 − − − − 196.9

− − − − − − 3.0 − − 29.0 − 0.5 − − 191

− − − 38.4 − − 5.0 − − 126.5 − 20.0 35.0 − 1,489.3

98.6 9.0 − 40.6 1.8 − 97.1 29.6 2.5 104.0 0.4 65.8 115.5 18.2 1,944.5

61.5 63.3 5.1 364.6 1.8 7.1 185.4 131.7 9.7 104.0 − 195.7 48.7 50.0 3,473.2

132.4 56.7 1.8 271.4 1.8 6.0 150.5 96.6 22.3 104.0 − 212.9 − 47.4 2,584.4

Source: C. Lewis, America’s Stake in International Investments, Washington, D.C.: 1938, p. 654.

On this topic there are figures from other, somewhat fragmentary sources that nonetheless establish a comparison between direct investments and portfolio investment at the end of 1930. The year 1930 was obviously a time of serious disturbances as opposed to 1929. Direct investment in Italy actually remained higher than would be predictable; in this category are included the funds for the electrical industry created through investment trusts for this purpose in the United States. Still, the comparison between the previous table and the one that follows offers some further basis for analysis. Long-Term American Investments in Europe at the End of 1930 (in thousands of dollars)

Country

Direct

Portfolio

Total

Austria Belgium Bulgaria Czechoslovakia Denmark Finland Other Baltic States France Germany Great Britain Greece Holland

17.377 65.246 0.812 4.875 15.924 1.206 10.124 161.809 243.969 497.805 10.136 44.024

97.688 188.965 13.281 30.518 167.790 78.043 6.867 309.525 1,176.988 143.587 42.851 122.574

115.065 254.211 14.093 35.393 183.723 79.249 16.991 471.334 1,420.957 640.892 52.987 166.598

9. American Investments in Europe Hungary Ireland Italy Luxemburg Norway Portugal Poland Romania Saar Territory Spain Sweden Turkey Yugoslavia Total

9.520 3.129 121.216 0.600 23.470 17.546 53.193 15.836 − 91.480 19.230 13.755 8.132 1,468.248

109.358 3.497 279.924 6.957 190.878 − 124.130 9.375 7.952 3.000 253.536 − 49.833 3,460.620

167

118.878 6.626 401.140 7.557 214.348 17.546 177.323 25.211 7.952 94.480 272.766 13.755 57.965 4,929.277

Source: U.S. Department of Commerce, Bureau of Foreign and Domestic Commerce, “American Direct Investments in Foreign Countries,” in Trade Information Bulletin no. 731, Washington, D.C., 1930, p. 10.

As can be seen from the data of the U.S. Department of Commerce, taking direct investments into account brings Italy into fourth place behind Great Britain, Germany, and France, respectively. This resulted not only from the considerable patrimony of preexisting direct investment in Great Britain and France, accumulated over the period just before that of this table’s figures (1924–1929), but also from the fact that the Italian government was fairly reluctant to give the necessary authorizations for foreign capital to acquire voting shares in Italian companies. It had been a specific political decision to create a special commission, led by the minister of finance, to carefully screen direct investments. Ever since the meetings between Volpi and Thomas Lamont of Morgan Bank at the time of Volpi’s stay in the United States, he had made clear that the government intended to maintain rigid control of every offering of shares on foreign markets by private industry.177 This intention, repeated in the Chamber of Deputies, corresponded not only to the desire and benefit of centralizing negotiations and offerings on each foreign market (and particularly the New York market), but also to the choice to avoid any foreign capital gaining too much control of Italy’s production system. In a letter of December 12, 1927, Mario Alberti – this time in his role as central director of the Credito Italiano bank – wrote to Minister Volpi in order to clarify 177

ACS-GVM, bk. 13, fol. 2339, Fummi-Giovanni, Giovanni Fummi to J.P. Morgan & Co., Rome, March 3, 1926.

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the type of concerns they had on this issue. Alberti’s purpose in writing was to emphasize the necessity of finding external sources of financing for Italian industry, especially in order to sustain investment programs in the hydroelectric and construction sectors. After having rejected ordinary short-term credit from Italian banks and savings and loans (because they were sources already exhausted in previous efforts), as well as further offerings of bonds on foreign markets (because of the difficulty of raising the necessary mortgage funds and individuating certain and permanent profits to service the interest and depreciation), Alberti proposed creating an exchange for Italian jointstock companies on foreign markets. On this point, he added significantly: Once the protection of national management of companies has been ensured, with the necessary syndicates, majority votes, and shrewd arrangements in the organization of holdings and investment trusts, there will be no reason to fear any threat to the national control of the industrial policy and practices of the country.178

Alberto Pirelli, for his part, had on multiple occasions shown his reluctance to rely excessively on American credit, especially if that would mean giving up control of Italian companies’ voting shares or allowing American companies to make major inroads on the Italian production system. At the time of the conclusion of the war debt settlement, Pirelli wrote to his father in the following terms: . . . I have never agreed with Volpi and Alberti – or for that matter Stringher, Beneduce, and others – on the necessity of raising funds in America (if not within set limits and only for the execution of clearly planned monetary rehabilitation) and therefore in my heart I have never, no matter how much my colleagues may have done, considered the settlement of our debt as inevitably linked to the negotiation of bond issues. On this theme I have continually exerted a restraining influence.179

178 179

ACS-GVM, Mario Alberti and [illegible signature] to Volpi, Milan, December 12, 1927. AALP, p. Riparazioni e Debiti, IX, 1925–1926, Alberto Pirelli to Giovanni Battista Pirelli, Washington, D.C., undated [?] November 1925. Indeed, Pirelli opposed the settlement of the war debt with the United States for years, partly for the reason cited in his letter to his father, and in part because he believed that if it were necessary, a more useful tactic would be to first settle the debt with Great Britain – a negotiation he carried out along with Sir Otto Niemeyer of the Treasury. On this topic, see AALP, 07100, Alberto Pirelli to Guido Jung, Milan, May 21, 1923, in which he reported his words to Mussolini: “When I saw the President . . . I told him: ‘You know that I am convinced of the need to say clearly to the Americans that we intend to pay them, and that is mostly because there appears to be a chance to secure reasonable conditions for that repayment; nonetheless I would have preferred that we did not announce this in public. Not because it would make our negotiations with the English government any more difficult, but because it would make the English government’s position more difficult with their Parliament and their contributors. . . . What is more, I would have thought it opportune to refer at the same time to the problem of emigration to the United States.’ The President answered that he

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If we also then consider the testimony of Dino Grandi, who recounted that Agnelli had “threatened that revolution would erupt in Turin” if Ford had been allowed to build an automobile factory in Trieste,180 it becomes clear that within Italian financial and industrial circles there was widespread resistance to the excessive influence of American capital. On one point there was nearly total unanimity: the youthful Italian industrial system should not have to compete in its own backyard, nor was it a good idea to allow a large amount of American or foreign direct investment. On these grounds, the Italian government should not cede an inch (although men like Grandi would happily have done so, as long as the political advantages were worth it), because the peaceful relationship between the regime and the most important Italian business interests depended on it. Pirelli, Agnelli, and the Credito Italiano bank formed a powerful triad on this issue. The government’s choice became clear during the final phase of the war debt negotiations, when Secretary of the Treasury Mellon’s proposal gained preference, despite its slightly more burdensome financial obligations, for fear that Hoover’s proposal, which contained a revision clause, would become an instrument for Hoover and American business interests to insinuate a direct American presence and competition into Europe. As seen previously, Dwight Morrow himself, of the Morgan Bank, had made this implication clear. Did this choice indicate a general push for autonomy from American financial influence? Obviously not. Pirelli admitted to being isolated in his opinions, and he himself stated that he wanted American support for the definitive stabilization of the lira. There is no doubt that a subordinate relationship was created not only by a colonization of industry by the hegemonic country, but that already at that earlier moment – for the more industrially developed debtor nations – the subordination was created by the great financial and monetary mechanisms the debtor states were forced to accept in order not to remain isolated from the world market. Choosing Mellon and the bankers, and rejecting Hoover and his plans, did not mean avoiding a relationship of dependence; it was simply the preference for a type of dependence that would allow the protection of the ideological summits of the regime, and even more importantly the protection of the principal Italian industries, which feared the competition of direct

180

had written the full text of that announcement by his own hand, but that he certainly accepted my criticism.” This citation sufficiently clarifies their reciprocal attitudes, not only regarding the specific problem of debt consolidation, but generally on the subject of how much priority should be given to American finance. Grandi, Interview.

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investment and foreign influence in Italy. To choose the bankers and Andrew Mellon as interlocutors signified playing by the strict rules of the game – monetary, economic, and also political – that were involved in the program of stabilization that American finance wanted to carry out in Europe. The hegemon of American capitalism – the finance sector – was not primarily interested in the direct control of European industry, as the previous table demonstrates, but rather in the overall influence that could translate into a policy of pacification and stabilization that would best prepare the ground for the profitable expansion of American capitalism in its entirety. The analysis of the relationship between Minister Volpi and the Morgan Bank proves the extent of that policy’s influence over the daily politics of the regime, up to and including the stabilization of the lira. The conclusion of that process demonstrates how permanent the nature of this influence would have become if the economic crisis had not created the conditions for a relaunching of the regime’s nationalism. This nationalism was far from merely propagandistic, and yet even it would be accompanied by novel forms of external dependence.

10. the stabilization of the lira The war debt settlement, and its ratification by the American Congress, had opened the American financial market to the Italian state, local institutions, and private business. But precisely this new indebtedness being contracted by Italians made it all the more urgent for American public and private finance to reach its traditional goal: the legal stabilization of the lira and its resulting return to the gold exchange standard. This objective was just one facet of the overall American policy toward Europe, which aimed for Europe’s political and social stabilization; monetary stabilization was seen as a powerful tool for this project. At first, monetary stabilization was guided by a financial commission of the League of Nations presided over by Montagu Norman, the governor of the Bank of England. Later, when the Europeans had stopped attempting to evade the financial dominance of the United States, Benjamin Strong, the governor of the Federal Reserve Bank of New York, became the principal protagonist in the operation.181 Strong continued to work in close concert with Montagu Norman, although the case of the lira would prove that this did not mean that they 181

L. V. Chandler, Benjamin Strong Central Banker, Washington, D.C.: 1958, pp. 128ff.; R. H. Meyer, Bankers’ Diplomacy: Monetary Stabilization in the Twenties, New York and London: 1970, pp. 1–15.

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always saw eye to eye.182 They took care to stay in contact and consult with – or pretend to consult with – their colleagues who presided over the reserve banks about the gold standard. From this “gold standard club” and their collaboration on the processes of stabilization, an international cooperation was born and grew – under American guidance (although the Bank of England was, in relative terms, stronger and more influential than it would be after the Second World War) and largely autonomous from the control of the banks’ respective governments. The case of Italy demonstrates, however, just how the activity of the reserve banks – and in particular their efforts for stabilization – was not at all unconnected to the economic interests of their respective countries, and especially to the affairs and influence of private finance. It was in fact under the auspices of Morgan Bank that the stabilization of the lira was launched. As seen above, the Morgan partners had an expansive concept of their role, as comprising not only the traditional services of business banking, but also the ongoing cultivation of the interests of their clients, in the United States and, when necessary, abroad. In this case, the client was a very special one: a government that, due to its authoritarian structure, constituted the most efficient vehicle, from the perspective of the American bankers, for establishing business relations with all the most important sectors of the Italian economy. The partners therefore recognized no limits on their field of intervention on behalf of their client: they saw no difference, for example, between politics and economy, being perfectly aware of the exclusively academic value of such a distinction in this context. The financial fortunes of Fascist Italy were not linked only to an analysis of the Italian economy. What counted, in this industrialized country with a government that no longer conformed to the contours of a traditional liberal state, was the overall image of the regime. Its stability, its historical justification, its compatibility with American values and interests – this was how the success or failure of Fascism would be judged. In the same way, anyone who cared about the financial interests of Fascist Italy could not simply address the American technicians of the economy, nor even the potential buyers of bond shares, but would have to satisfy public opinion in the larger sense, using every tool at his disposition. The partners paid meticulous attention to all the forms of leverage they could exploit in influencing public opinion positively, and particularly those sectors of the public most qualified to advance their strategy. In some cases, they 182

H. Clay, Lord Norman, London: 1947, pp. 218ff.; A. Boyle, Montagu Norman, London: 1967, pp. 146ff.

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themselves served as the direct promoters of this leverage and influence (for instance, when serving on the Council of Foreign Relations), and in others they assiduously courted those men who filled such positions.183 It would be a mistake to imagine that the partners of the House of Morgan were interested in the stabilization of the lira only because they wanted to protect the returns on their own credit agreements. The stabilization of the lira was part of an overall plan carried forward by financial agents and governments to improve and rebuild the European economy. In this array of personalities, the leadership role of the Morgan Bank partners never faltered, even when the initiative shifted to the terrain of monetary stabilization that should properly have been the jurisdiction of the reserve banks. Indeed, in the United States’ Federal Reserve System, it was the Federal Reserve Bank of New York that managed the international relations for these operations – but its governor, Benjamin Strong, was a product of the House of Morgan. The historiographical debate around the stabilization of the lira, focusing on the conclusion of its revaluation with the so-called Quota 90 [see p. 135 of communication cited in note 10 – trans.], obscured for some time the fact that the return to the gold standard was not a simple financial operation carried out by the internal economic choice of each country.184 This was the case not only because currency exchange by definition requires a relationship with other currencies, but also because at that time there was already in existence a procedure that had to be observed in order to provide the necessary backing for stabilized currencies, in which the central banks of the gold standard countries had to participate and in which a few private banks of particular influence also participated. This backing was secured through the concession of loans and was contracted in such a manner as to assure the future guarantors, headed and represented by Strong and Norman, that the value at which currency was pegged would correspond to the real value of gold held by the government through the necessary economic and financial measures performed by that government and its reserve bank system. This procedure, obviously, was not imposed by any legislative norm – not even the League of Nations could legislate or enforce such a binding rule – but by the concrete relations of power among the various entities involved. In this way, long before the

183 184

H. Nicolson, Dwight Morrow, New York: 1935, p. 146. R. De Felice, Mussolini il Fascista, Turin: 1968, pp. 222ff.; G. Gualerni, Industria e Fascismo. Per una interpretazione dello sviluppo economico Italian tra le due guerre, Milan: 1976, pp. 3–16.

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foundation of the International Monetary Fund (IMF), governments were already compelled to open the management of their economies to international discussion, to articulate their positions regarding several key issues of economic reconstruction in the postwar period (from war debt to reparations, and, in the largest sense, all the questions involved in the reconstruction of the German economy) and in general to submit to the influence of Anglo-American finance, which controlled the mechanisms of the stabilization procedure. In recompense, this same financial cabal offered the countries greater tranquility in the fluctuations of the market. The first attempt to stabilize the Belgian currency failed precisely because American private banking was not involved in the operation.185 Poincaré’s France, on the other hand, consonant with its foreign policy, preferred to stabilize its currency much later and according to its own itinerary, but it could only succeed in this due to its more robust economic and financial structure.186 In this perspective, the extreme coherence of Fascist financial policy comes into focus. From the very start, Mussolini obsequiously respected the power relations and hierarchy that reigned in world finance, having chosen to give preference to the American component. This was not only a matter of choosing the strongest interlocutor, but also the most neutral one, or rather the one whose interests did not conflict with those of Italy, at least in the immediate term. The United States would not enter into territorial disputes or attempt to play European powers against each other in order to divide them. In harmony with this choice, Mussolini had been careful to tailor his behavior so that Fascism would enjoy the best possible image enhancement among American commentators: he avoided raising the question of emigration despite the basically humiliating conditions in which Italy found itself, and he had patiently sought a settlement of the war debt in a favorable sense without violating the principal of the “sanctity of debt” so dearly held by American public opinion. The problem of stabilization was approached in the same spirit. Once they had made the choice and selected the interlocutor, Mussolini, Minister of Finance Giuseppe Volpi di Misurata, and governor of the Bank of Italy Bonaldo Stringher followed the rules of the game – perhaps stretching its rhythms somewhat – according to the substantially coherent and decisive wishes of their American partner in the affair. The discussion 185 186

Meyer, pp. 16–41. Ibid., pp. 30–31; E. Moreau, Souvenir d’un Gouverneur de la Banque de France, Paris: 1954, pp. 17ff.

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was conveniently opened by Volpi with Benjamin Strong in Washington, just after the signing of the war debt accord. Strong quickly demonstrated himself to be attentive and available, declaring himself ready to proceed despite the fact that the governor of the Bank of England immediately made his opposition known, due to the anti-German attitude of Volpi and his evident intention of having the Bank of Italy (which should have been the principal spokesperson according to the norms of the reserve banks’ governors, evidence of their expectation of autonomy from their own governments) take its proper place.187 In the interim, until Strong could travel to Rome to enter more detailed discussions, the Fascist government paid careful attention to the observations and occasional criticisms passed along from Lamont by Giovanni Fummi. One of these messages, sent on the occasion of Mussolini’s speech of February 16, 1926, in which he had responded to the anti-Italian declarations of the Bavarian prime minister Held, was especially notable: Sentiment in this country towards Italy is very much less favorable than what it was when Count Volpi and you were here. There is no need in mincing words about it. I must talk with you just as I would with one of my own partners and I must say to you that the chief disturbing factor as to sentiment has been the various utterances from time to time of your Premier. I don’t know how accurately the newspapers have reported these, and it is not my function in any event either to praise or criticize what Mr. Mussolini says. But the effect created on the public here has been that Mussolini was preparing for a fresh war. This I regard as perfectly absurd, yet one has to face the facts and that is what the public here is being led to believe, not through any anti-Fascist propaganda here but simply by reason of the regular dispatches from Rome.188

The message illuminates once again just how sensitive Americans were to everything to do with Germany and, more in general, how much any anti-German utterance seemed to threaten the renewal of conflict. The Americans reacted strongly to any seeming reinforcement of their stereotypes of Europeans as endlessly litigious and used such moments to renew their commitment to isolationism. But the message also reveals to what extent the relationship between the Fascist government and American finance served both to keep the Italians aware of every little echo of their actions in the United States and, therefore, to condition their choices and behavior at every instant.

187 188

G. G. Migone, “Aspetti internazionali della stabilizzazione della lira,” pp. 50–53. HUGSBA-TWL, bk. 190, fol. 19, Thomas W. Lamont to Giovanni Fummi, New York, March 4, 1926.

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But the Morgan Bank partners did not stop at being the mirror for American reactions to Mussolini’s politics. They continually worked to pressure the Fascist government into action on the plan to stabilize the lira, which Volpi had invited Strong to discuss in their first meeting. Volpi’s maneuvers to defend the lira’s exchange value reawakened a kind of doctrinaire furor in the partners, together with their worry that the minister of finance might consider these expedients a permanent surrogate for the only true solution to the problem of the lira: the return to the gold standard.189 In particular, the partners wished Volpi to complete the first necessary step toward his stated goal, which was to formulate a concrete plan for stabilization that defined the necessary internal measures and prepared the necessary studies for de jure stabilization. They were in no less a state of continual anxiety over the way in which Volpi, in the meantime, managed the lira and over the various manifestations of Mussolini’s foreign policy; yet simultaneously they were not immune to the attraction exerted by his authoritarian and centralized power, which seemed to open so many possibilities for unopposed action.190 It was on this basis that the so-called Leffingwell Plan was born. Named after one of the elder partners, Russell Leffingwell, thanks to his previous experience as assistant secretary of the treasury in the Wilson administration, was the principal monetary expert at the House of Morgan. Leffingwell’s initiative was encouraged by the ratification of the Italo-American war debt accord and the nearly contemporaneous conclusion of the Mellon-Berenger agreement on the French debt. According to Leffingwell, it was important to strike while the iron was hot, preparing the return to the gold standard of the three Latinate currencies in the same agreement by convincing, if possible, France, Italy, and Belgium to stabilize at the same rate. The partners were aware of the enormous difficulties such a plan presented but trusted in the despotic capability of Mussolini to facilitate its achievement. As has been written elsewhere, it was certain that in the face of this mode of reasoning, of which the Leffingwell Plan was merely one expression, American isolationism revealed all its limitations. This was an example of a fully thought-out plan for the role the United States should play in the coming years, not at the level of theory but as part of a fully informed evaluation of the economic power brokers’ means and their autonomy from the conditions isolationism imposed on the government to deploy them. While at the diplomatic level the American government was 189 190

Migone, “Aspetti internazionali,” pp. 56ff. Ibid., pp. 64–65.

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conspicuous by its absence from the European scene, Morgan himself felt completely certain that no one in France or in England – no one except J.P. Morgan & Co. – could offer the necessary leadership. Leffingwell was of the opinion that they owed it to themselves, as well as to the holders of French, Italian, and Belgian bonds and to the allied governments they had helped rescue, to exhaust every possible effort in their aid, after the war as during it.191 Apart from the almost sentimental reference to the wartime commitment (which was in itself significant), there was in this statement a precise acknowledgment of continual action involving Europe that included, but was not limited to, offering banking services. It was rather a grand economic project translated into political action, intended to channel the opportunity provided by the development of global capitalism. American financiers would not stop at providing the capital for European reconstruction, but took on the problem of the political situation in its general and particular forms (as the case of Italy demonstrates) in order to best serve the goal of the economic restructuring. The result was a wide-ranging interest in preserving peace, as well as an insistence on encouraging a unitary process, which, though headquartered in New York, would provide a broad and stable basis for European recovery and a natural outlet for the exuberance of American capital. It was a matter, in sum, of reinforcing with new monetary instruments the political future augured by the great powers at the Locarno Conference. The analogy to the second postwar period, including the Marshall Plan, social reconciliation, and American encouragement for European unification, is both apt and meaningful.192 The Leffingwell Plan, as was logical, did not have any practical results. It violated the concrete political relations among the countries concerned, given their different regimes and approaches to the specific problem of stabilizing their currencies. In these same years, France and Italy were in conflict over ideology (since France offered refuge to the Italian antiFascists), over territory and policy in the Mediterranean, and over the Fascist regime’s need to relieve nationalist tensions with a scapegoat (a role for which the Anglo-American and Germanic powers were not candidates because Italy could not afford to offend the United States). Only France, which personified the policy of intransigence toward Germany and which in the years of the Third Republic could be portrayed as not only revanchist but corrupt and unstable, could serve as both a safe and 191 192

HUGSBA-TWL, bk. 172, fol. 28, J.P. Morgan to T. W. Lamont, New York, April 2, 1926. Migone, “Aspetti internazionali,” pp. 68–69.

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plausible target. Only with the Locarno Pact, when Briand’s politics of reconciliation emerged, would Italy have to change its tone and act more favorably toward France. In the case of the Leffingwell Plan, however, the Americans had asked too much of the Fascists’ spirit of collaboration. It was one thing to soften the anti-French rhetoric in order to profit from the political role of guarantor in concert with Great Britain for the Locarno Pact’s four-way alliance. It was an entirely different matter to commit to a stabilization plan that infringed upon Italy’s sovereignty, even if it was only in a strictly monetary sense; this kind of supranational obligation was totally incompatible with Fascist ideology. Furthermore, agreeing to stabilization at a common rate would have required giving up the propaganda advantage Italy desired of stabilizing the lira at a rate higher than the French currency, a victory that seemed possible at that moment’s market values. In these circumstances, Volpi followed the simplest strategy: he serenely declared his open acceptance of the plan, fully expecting the French to be the ones to scuttle the project. In this way, he could allow the plan to die while still preparing the way for Italy’s real objective: to wait for the moment when the United States would have at its disposal much greater resources, both in the government and among financial interests, to efficiently guarantee the success of a stabilization project. The Leffingwell Plan also anticipated the future in its hints of various other attitudes that were destined to reemerge: the American pressure in favor of European economic unification; the extraneous position of the British in such matters; a clearly articulated French resistance based on its own financial sector’s search for an autonomous position and resulting hostility toward the “Anglo-Saxon” sector; and the weakness and relative acquiescence of Italy in the face of American initiatives, even the inconvenient ones, which was overcome only by shielding Italian interests behind the opposition of other powers (such as, in this case, the French). The most concrete result of the failure of the Leffingwell Plan was to increase American impatience with the French. By contrast, their admiration for the Italian regime was accentuated; it was the ever more decided opinion of the Morgan Bank partners that Mussolini was to be praised as a leader who knew what he wanted and was able to get it done efficiently. If it was not possible to pursue the uniform stabilization of the “Latin” currencies, and the Briand government was insufficiently strong to stabilize the French franc on its own, it was useless to wait indefinitely for the French. It was far more sensible to pursue stabilization with the man who was ready and willing; this would become known as the “Italian approach” to European stabilization. Thus began the planning for Benjamin Strong’s visit to

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Rome.193 It is enough at this point to observe how the conversations to which this decision gave rise, after a diligent preparation by Lamont and Fummi from the Morgan Bank, took on the characteristics of an actual negotiation. For the first time, during these talks the foremost representatives of Italian economic policy were called to account for their internal and external operations and made to understand the conditions under which the international financial community, headed by the United States, would be willing to admit Italy into their ranks. The key, of course, was joining the network of reserve banks on the gold standard. Mussolini, Volpi, and Stringher were each subjected to an experience comparable to passing their comprehensive exams: as their examiners, Strong and his companion Garrard Wilson, the undersecretary of the treasury, intended to discuss with each man the specific competencies of his position, testing him not only on the strictly financial aspects of the government’s deflationary policy, but requiring reassurance regarding the peaceful intentions of Fascist foreign policy and the stability of the regime on the basis of social pacification. It would be an exaggeration to pinpoint this meeting at the Casina Valadier of Villa Borghese between “il Duce” and the governor of the Federal Reserve Bank of New York as the decisive historical moment when, in passing a test on the economic and social conditions of Italy, Mussolini cemented Italy’s future as part of the American-led West. Still, the policy of revaluation, the return to the gold standard, and the legal stabilization of the lira were all guaranteed in this culminating moment, even if the final agreement on stabilization would take place more than a year later. And this key moment was a highlight in the larger process that such economic choices facilitated: the progressive consolidation of American engagement in the European economy, and especially in Italy, which would provide Fascist Italy with legitimate membership in the Western capitalist community, clarify its real ideological orientation, and bring it into close cooperation with the emerging dominant power of America. Strong wanted to make an objective, firstperson inspection of those conditions necessary to the successful guarantee of international support for the lira’s return to the gold standard; but he brought with him all the baggage and preconceptions of the American elite from which he came, all of which militated against his straying from the path that had been laid out by the Morgan Bank partners. Nor did his Italian interlocutors make any errors to distract him, confirming in every detail his preexisting impressions about the Fascist regime and its economy. 193

G. G. Migone, “La stablizzazione della lira: la finanza americana e Mussolini,” in Rivista di storia contemporanea no. 2 (1973): 151ff.

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The meeting with Strong was also a turning point for the Fascists. The agreement presented decisive advantages for Italy, which would be able to enter the international financial community on a sure footing and stabilize its regime politically as a result; but it was also a clear acceptance of an ongoing dependent relationship on a foreign power, which a nationalist regime could not welcome unreservedly. Strong’s visit had been preceded by the regime’s strengthening of the powers and prerogatives of the Banca d’Italia, necessary to the successful de jure stabilization of the lira, as well as a propagandistic score proving once again how efficiently the Fascist government could move toward those goals Volpi and Strong had discussed at their first meeting in Washington. After Strong’s trip to Rome, other, more significant provisions quickly followed to further the cause of stabilization.194 In August, Mussolini gave the Pesaro speech, in which he linked the stability and prestige of the regime to the fortunes of the lira; in the cabinet meeting at the end of the month, he made the first provisions for reducing monetary liquidity, transferring the remains of the $100 million Morgan bond to the Banca d’Italia and reinforcing the powers of Governor Stringher at the expense of Volpi’s.195 Days earlier, an exchange of letters between Mussolini and Volpi revealed how the ongoing drop in currency value had spurred the dictator to action; he joined his voice to the American chorus of criticism against the market interventions his minister of finance had been performing to defend the lira. In particular, he linked the ultimate consolidation of the regime to the definitive strengthening of the lira. He concluded that We must realize that we are confronting the whole financial world’s lack of faith in Italian finance, a lack of faith that explains and provokes speculation lowering

194

195

On the interpretations of the Pesaro Speech and the “quota 90,” see P. Sraffa and A. Tasca, “Politica monetaria,” in Lo Stato Operaio November–December 1927, reproduced in L. Villari, Il capitalismo italiano del novecento, Bari: 1972; R. Sarti, “Mussolini and the Industrial Leadership in the Battle of the lira 1925–1927,” in Past and Present n. 47 (1970); idem, Fascism and the Industrial Leadership in Italy 1919–1940, Berkeley: 1971; V. Castronovo, “La storia economica,” in Storia d’Italia. Dall’Unità ad oggi, Turin: 1975, vol. 4, I, pp. 267–275; M. Abrate, Moneta risparmio e credito in Piemonte nell’ultimo mezzo secolo, 1926–1976, Turin: 1977, pp. 3–14; J. S. Cohen, “La rivalutazione della lira del 1927: uno studio sulla politica economica fascista,” in G. Toniolo, ed., Lo sviluppo economico italiano 1861–1940, Bari: 1973; P. Ciocca, “L’economia italiana nel contesto internazionale,” in P. Ciocca and G. Toniolo, eds., L’economia italiana nel period fascista, Bologna: 1976. G. G. Migone, “Gli Stati Uniti e le prime misure di stablizzazione della lira (estate 1926),” in various authors, Italia e America dalla Grande Guerra ad oggi, Venice: 1976, p. 37.

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currency value. As long as this lack of faith did not have internal consequences, the situation presented no imminent danger; but the day that politics crosses the border (and in the long run it is inevitable), the distrust will spread throughout the country and cause depositors to withdraw their funds (which amount to $51 billion), and the regime would have no power to stop the collapse.196

This was not only the old Mussolinian demonology that regularly supplied the regime’s propaganda content: accusations against international speculators that eventually became a “Jewish-pluto-democratic “conspiracy; the secret intrigues of exiled anti-Fascists with unknown and unnamed international financial connections to strangle the regime. This was, above all, the clear perception of worldwide economic interdependence; the Italian economy could not ignore the existence of capitalist mechanisms of credit, guaranty, and market that linked it to the international situation. In his classified correspondence with Volpi, Mussolini affirmed that “We are alone, in the face of our grave responsibilities”; that it was a matter, once again, of battling “international liberaldemocratic concepts”; that it was necessary to save “this marvelous Italian people who have worked heroically for the past four years and now suffer like saints” from “having their throats slit with the golden blade of the Anglo-Saxons.”197 And yet he never mentions the possibility of breaking with the Anglo-Saxon financial forces, despite his claims to want to combat their ideological and cultural models. On the contrary, at the moment when he linked the survival of the regime to the faith international finance would repose in it, he was affirming that the objective of the regime was to definitively conquer that faith. He did not propose abandoning the policy, which, up until that moment, had been insufficient; rather, he wished to accentuate and increase it. He did not challenge the orthodoxy of international capitalism, but challenged himself to adhere more closely to it. If the condition for being welcomed into its drawing room was to return to the gold standard through a deflationary program, he would be the champion of deflation. “Il Duce” did not have, and could not have, his own economic agenda; he had to advocate the prevalent one, which alone could guarantee the class relations on which his regime was based. He was careful to specify that the regime, “by its totalitarian, logical and ineluctable nature,” would succeed at this agenda as well as and better than any bourgeois parliamentary government. But the promise to do so autonomously had a limited and propagandistic value. Certainly he 196 197

DDI, VII, 4, Benito Mussolini to Giuseppe Volpi di Misurata, Rome, August 8, 1926. Cited letter from Mussolini to Volpi.

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refused to allow the old guard of Italian capitalism to man the helm, although he did not disdain their collaboration (Stringher, Beneduce, Pirelli, Alberti, and Fummi were all examples), because the regime needed to steer the ship of state. As the rhythm of events showed, from the first meeting with Strong until the definitive stabilization of the lira, Mussolini’s only priority was to demonstrate that he was moving under his own steam toward the destination indicated by forces whose superior power he recognized. This was his priority in both internal and external matters. Some have seen his insistence on a specific rate for stabilization – the famous quota 90 – as a manifestation of his autonomy, and that of his favored class, the petite bourgeoisie, in the face of capitalist interests.198 Those who, however, have studied the manner in which each step of the itinerary toward the de jure stabilization of the lira and the resulting return to the gold standard was conducted in conformity with the suggestions of the leaders of American and international finance cannot give much credence to that claim. It was true that these financial elites expressed occasional perplexities regarding Mussolini’s choice of stabilization rate, but they never pursued these criticisms; evidently, they considered such details of secondary importance and did not see them as an impediment to their provision of the necessary support. Nor can it be overlooked that those same industrialists who complained about the revaluation ended up benefiting from it when it served to reinforce the power relations between them and their labor force. Even if they paid a transitional cost in terms of profits, they gained power in the long run. In sum, the most important factor was not the rate at which the currency was pegged, nor the side effects that derived from stabilization, but the fact that the regime had been able to choose for itself the path to stabilization and consolidate its power – as well as, in the end, the power of Italian capitalism and its links to international capitalism, reinforcing with the recession their combined social control over the country. The narrative of the process of stabilization itself clearly proves which social and political groups participated in and benefited from it. Prominent exponents of international finance and of the Italian economy never once left the scene, despite some grumbles. The return to the gold standard was not an affirmation of the political autonomy of the regime, but on the contrary an important, perhaps decisive, consolidation of its dependent relationship on Italian and international capital.199 198 199

De Felice, I lineamenti, and idem, Mussolini il Fascista, pp. 222–296. V. Foa, “Introduzione,” in P. Grifone, Il capitale finanziario in Italia, Turin: 1971, pp. vii–xliv; Grifone, pp. 56–77; Gualerni, pp. 16ff.

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The process did meet with some opposition. Perhaps most important among the voices raised against the rate of stabilization were those outside the country who disliked the idea of such a complete insertion of the Italian economy and the Fascist regime that guided it into the international financial system. As mentioned, the governor of the Bank of England, Montagu Norman, had from the earliest moment served as the catalyst around whom were activated those who did not wish to financially support the stabilization of the lira. Their concerns centered on two crucial issues in Italy: its policy toward Germany and the independence of the Banca d’Italia. Norman went on to indefatigably oppose external support of stabilization, weaving a dense web of correspondence with his counterparts who governed their respective central European banks, in which he sought to persuade them against the Italian operation. He further sought to inflict a sense of inferiority on the Banca d’Italia in regard to the other banks, due precisely to its status as representative of an unstabilized currency. On one particular occasion, when the Belgian franc was finally stabilized in the autumn of 1926, the Banca d’Italia was excluded from the consortium of banks that guaranteed the transaction. This was despite the fact that the Banque de France did participate, even though their currency had not yet returned to the gold standard either.200 Norman was pursuing a double strategy, blocking the policy of supporting the lira in his bilateral relations with other banks while simultaneously pressuring the Banca d’Italia (and sometimes humiliating it, as in the case of the Belgian franc). His intent may have been to rush the Italians into an unprepared stabilization, without the necessary international support, that would have had disastrous consequences.201 In reality, Norman’s opposition was not mostly of a technical nature, nor did it have so much to do with the international situation – issues such as the attitude toward Germany or the autonomy of Stringher. Rather, Norman was opposed to the nature of the regime that was to carry out the stabilization of the lira. In November 1926, after the measures Mussolini 200

201

BE, bk. Italy sec. 62, Hjalmar Schacht to Montagu Norman, Berlin, November 10, 1926; BE, bk. Italy sec. 62, Louis Franck to Montagu Norman, Brussels, November 12, 1926; BE, bk. Italy, sec. 62, Montagu Norman to Novacovics, November 15, 1926; BE bk. Italy, sec. 62, Montagu Norman to Louis Franck, London, December 22, 1926; BE, bk. Italy, sec. 62, Montagu Norman, London, December 22, 1926; BE, bk. Italy, sec. 62, Montagu Norman to G. Vissering, London, December 28, 1926. G. Falco and M. Storaci, “Fluttuazioni monetarie alla fine degli anni Venti: Belgio, Francia, e Italia,” in Studi storici, no. 1 (1975); idem, “Il ritorno all’oro in Belgio, Francia e Italia: stabilizzazione sociale e politiche monetary (1926–1928),” in Italia contemporanea no. 126 (1977).

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had put in place in the summer and early autumn, the conditions seemed ever more ripe for the lira’s return to the gold standard. Both private American bankers’ pressures to proceed and Benjamin Strong’s criticism of Norman’s reluctance grew to the point that Norman had to take the bull by the horns and reveal his true reasons for opposing the stabilization of the lira. He made this revelation to the single most authoritative and most enthusiastic advocate of the return to the gold standard, J. P. Morgan, Jr., himself. Norman took the opportunity of Morgan’s visit to London to tell him in person; but he restated his point of view in a letter he afterwards sent to Morgan, apologizing for having let him leave without saying good-bye, as he wanted to take every opportunity to let him know how grateful they all were for his help. He had planned to chat further with Morgan about Italy, he said, so that those in New York would not take offense or misunderstand him. Fascism, he wrote, had certainly replaced chaos with order in the space of a few years, and something in that line had been absolutely necessary. Il Duce had been the right man at the right time. But he was no longer the right man for Italy’s current situation; now he was part of a larger mechanism, and the tail was wagging the dog. And that tail was completely determined to stamp out any form of dissent: freedom of the press, and of speech, even in private, were being wiped out. From the economic and financial perspective, he wrote, the country seemed to have made a great deal of progress, but internal restrictions did not allow for any outside opinion to register or to determine the real state of things. Regarding the foreign bonds, he did not think that all the reasonable conditions made by foreign bankers had been fulfilled, and investors might soon begin to form a negative opinion of Italian bonds. Meanwhile, the demands of the central bankers, according to Norman, differed in quality and not in quantity from those of private bankers: the latters’ goal was to furnish funds for stabilization or other useful projects. But the funds available from the former were in less substantial amounts and could only serve as the external sign of their desire for collaboration. He wanted to emphasize the difference between these two goals, because the central banks had little history or tradition to set a precedent for their choices. They might prosper and become durable institutions, or they might turn out to be a short-lived experiment of the postwar period. While it was true that no reserve bank could be greater than its state, in order to prosper, they would have to attain and guard a certain amount of autonomy from their own governments. In Italy, where every activity was politicized, there was no banker, not even Stringher, who could risk criticizing Volpi or the government. Italy might still come out well from

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this uncertain moment, but he was sure that it was not a good circumstance for the Bank of Italy, and he compared it to other unsatisfying banking situations like those of Poland, Russia, and Spain. Norman apologized for his attitude, which Morgan had called “too liberal.” But he hoped he had explained his reasoning well and asked for more time to see how the Italian situation would develop.202 All in all, he apologized for sounding “too liberal” to J. P. Morgan’s ears, but this was his position. Norman tried to convince Morgan not to interfere in the problem of stabilizing the lira, distinguishing between the role and the standards of judgment of private bankers as opposed to the leaders of the reserve banks. This went further than his previous claim that the reserve banks must be guaranteed their independence, though that concept remained at the base of his argument. In light of later developments, the insistence with which Norman sustained the right and obligation of the reserve banks to remain above politics and to follow their own policies, including developing international relations founded on their own autonomous capacity, now seems interesting. Naturally, he neglected to acknowledge how much the “autonomous” role of his own nation’s bank was conditioned by the economies to which it was linked and by the interests dominating them. Norman was careful to underline that his reservations did not stem from anti-Fascist prejudice, as is otherwise clear from his positive evaluation of Mussolini’s restorative role at the outset of the regime. Nonetheless, he brought an unusual note into the debate as conducted by the Western elite, observing that the Fascist regime’s authoritarian nature, impermeable to external influence, could create unpredictable and uncontrollable future circumstances. In other words, Norman was arguing, not without reason, that there was not complete interdependence between the Italian regime and its economy, even if up until that point the regime had made no moves incompatible with the most rigorous strictures of capitalism. The fact was that the government had the ability to control the flow of information, including even technical analysis necessary to the best functioning of the economic system. Norman did not conclude from this that the monetary policy of the moment was misguided, only that the institutional conditions were changeable and might influence future orientations of that policy. He claimed that all this was the more crucial because the question was qualitatively different than simply offering Fascist Italy free access to the international capital market (a decision he made sure not to dispute a posteriori, least of all with J.P. Morgan). At this point, the question was 202

BE, bk. Italy sec. 62, Montagu Norman to J.P. Morgan, London, November 19, 1926.

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whether to admit Italy for the first time to the restricted circle of great powers linked to the gold standard, a circle that just at that moment was at work establishing an international monetary system. In a certain sense, this choice would mean undertaking an international project to stabilize the Italian regime. Can one make the general conclusion from Norman’s arguments that the Fascist regime was indeed autonomous from the influence of the international capital, not because it insisted on the quota 90, but on the basis of its institutional character? That is to say, did the totalitarian nature of the Fascist state render it extraneous to international capitalism? And did, therefore, the treatment of Fascist Italy by the United States and Great Britain constitute an error that Norman was trying to correct? Or was it rather the result not only of special interests, but of an overall plan carried out in those years by the leadership of the world economy? In truth, the discussion that Norman opened with J.P. Morgan, important as it may have been for the arguments it introduced and for the proof it provides of the remaining conflicts between the two greatest financial powers, is a false historical path to understanding. It seems to show that in November 1926 there was some possibility of revising the approach to Fascist Italy chosen by the principal governments and most relevant economic forces of the West. Those forces, which had viewed the Fascist seizure of power with approval, had not changed their positive judgment even when confronted with disturbing evidence of Fascism’s internal traumas – from the assassination of Giacomo Matteotti to the occupation of Corfu, and all the vindictive rhetoric toward France and other competing powers. They repeatedly chose instead to focus on the substantially prudent and respectful foreign policy of Mussolini toward the dominant powers and to facilitate Italy’s settlement of war debt and private fundraising. In so doing, they had uninterruptedly moved ahead in their consent to Italy’s eventual full inclusion in their sphere of influence. Under these conditions, not even the prestigious governor of the Bank of England could make any criticism, however well founded, that would suffice to change the course. His protests were destined to fall upon deaf ears, not just because they were late in coming and presumed the ability to change a path chosen long before, but because they rested on entirely hypothetical reasoning. They contained no negative analysis of political, much less economic, choices already made by the regime; he merely pointed out that the regime was capable of changing that orientation. That was not enough to interrupt the overall plan of the Americans, who were fundamentally indifferent to the nature of any single European regime – when

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they were not explicitly admiring of the efficiency of Fascism in contrast to the bumbling parliamentary systems. The Americans had concentrated their resources on the economic reconstruction of Europe through monetary stabilization, following the orthodox dogma of economists and capitalists of the era. It must be said in their defense that only the total overturning of the system on which they based these predictive policies – the crash of 1929 and the Great Depression – put Mussolini’s Italy and other powers in the position to begin making choices hostile to those orthodox interests. Naturally, the decision in favor of stabilizing the lira depended less on the persuasiveness of these respective arguments and more on the balance of power among the actual decision makers. Montagu Norman showed his awareness of this fact when, in his letter to Morgan, he stated that no reserve bank could be greater than the state to which it belonged.203 Still, at the end of 1926, Norman must have believed that the game was not yet over and that the Americans, and especially Benjamin Strong, had not yet made their final decision. In the course of 1927, the process of revaluing the lira continued, while at the same time several episodes allowed Norman to go on with his own passive resistance. As for the Italians, they wasted no time establishing formal banking relationships with the Federal Reserve Bank of New York and the Bank of England. Furthermore, Benjamin Strong had the chance to demonstrate his concern about the Italian tendency to intervene in price limits and salary controls, which went beyond what he considered sound. A summer meeting in New York finally cleared away these differences. The governors of the principal reserve banks met – without Stringher – and decided to push the Italian government to increase the pace of reform, authorizing the Banca d’Italia to open accounts with the Federal Reserve Bank of New York and the Bank of England. At this point, the Americans forcefully instructed Norman that the time had come, both politically and economically, to proceed with the stabilization of the lira. Strong admitted, realistically, that the status of the Banca d’Italia, in particular the autonomy of its governor, was not at the same level of the other central banks, but he concluded that in the choice between “autonomy” and “stabilization” the latter took precedence.204

203 204

Ibid. FRBNY-BS, 2, Norman to Strong; n. 1116.7, Montagu Norman to Benjamin Strong, London, November 22, 1927. The governor of the Banque de France expressed himself similarly: FRBNY, C. 261 1A,17 Italian Stabilization, Emile Moreau to Montagu Norman, Paris, December 19, 1927.

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It was revealed to Norman at this juncture the exact outlines of the decision he had to make. A secret, internal memorandum of the Bank of England clarified in five succinct points how Norman understood the reality of the situation. First, it stated, stabilization had intrinsic advantages, but its principal merit was to make a necessary step toward pacification. Second, they might favor stabilization for its intrinsic advantages, but it could also be used to defeat their objectives. Third, as bankers they could not discriminate among their clients, and Italy was obeying their conditions, at least superficially. But there was no reason to believe that Italy truly wished to collaborate. Fourth, if they did not cooperate, it was likely that stabilization would be carried out anyway and their apparent defection would cost them American favor [italics mine]. Fifth and finally, they would therefore have to proceed, despite their reservations. It might at least be opportune to notify the Italians from the start that they were not to be invited to join the community of central reserve banks unless they could prove that they would cooperate with both the letter and the spirit of the rules of cooperation among them.205 The memorandum was little more than a simple logical proof. We do not want the stabilization of the lira. The Americans want it. They are stronger than we are. We are constrained to accept stabilization because we cannot risk losing their partnership. In this sense, the decision of the reserve bank system to support the lira’s return to the gold standard was no longer really about Italy’s admission to the club of monetary cooperation. It was, more importantly, a major step along the path to the United States’ replacement of Great Britain at the summit of world finance. It was the American representatives who were able to vigorously impose their politics on the others, ignoring the admittedly well-founded concerns of the British spokesman – even though he was one of the main friends and advisers of the American financiers, as was consonant with the “special relationship” forming between the two powers in the interwar years. The Americans, however, did not hesitate in their insistence on the general consent to their longtime plan for Fascist Italy. Norman, for his part, had the good sense to be completely aware of all this and to adapt himself accordingly. Indeed, at the end of November he informed Strong that when the moment was ripe, they would be ready to join the Americans in helping the Bank of Italy stabilize the lira.206 After a rapid visit to London by Stringher in the

205 206

BE, undated memorandum. Letter from Norman to Strong, cit.

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following days, Italy issued the invitation to Strong to travel to London and conclude the negotiations. But the final meetings in London at the headquarters of the Bank of England, which took place between Stringher and Beneduce on the one hand and Strong, Norman, and Siepmann of the Bank of England on the other, were not without embarrassing moments.207 At Norman’s request, several private banks were involved – J.P. Morgan & Co. acted as the gobetween, along with Morgan, Grenfell & Co.; Hambro Bank, which traditionally represented Italian interests in London; and Rothschild Bank. Together, these banks underwrote $75 million in loans to support the stabilization, while another $75 million was provided by the reserve banks. At first the loans were covered by Strong’s and Norman’s commitments from their respective institutions. The causes of embarrassment were both the fault of Montagu Norman, who did not fully succeed in playing the British role of “good loser.” First there was the purely formal maneuver in which Norman, according to Strong’s testimony, forced Stringher to submit a written request to Moreau and Franck, respective heads of the French and Belgian reserve banks, for their bids on the loan; Norman had apparently agreed with Moreau and Franck ahead of time to give Stringher a taste of his own medicine, since he had required the same formality at the time of the Belgian stabilization. The second problem was far more significant, since the question of the rate at which to stabilize the lira ended up in debate again. Norman tried to impose a rate of 100 lire to the pound, which caused it to come out in the course of an intense interrogation of the Italian representatives that Mussolini himself had ordered the higher level. Norman had to content himself with expressing his reservations through the statements of the two governors, in which they disavowed all responsibility for the rate of stabilization. This was finally fixed at 92.5, or nineteen lire to the dollar. In reality, this was not a serious-enough disagreement to derail the process, and it did not in any case implicate Strong. He actually commented in his final report that he had been somewhat scandalized by the fact that Norman took such a position. Stabilization at 100 percent of the pound sterling would mean at the maximum a gain of 11 percent for a few categories and an equivalent loss for other categories. He was struck by the possibility that such a change could have exposed the Italian government to ridicule and could have caused a great deal of dissatisfaction, if not 207

BLCU-GLH, Strong correspondence and memoirs 1927–1928, Benjamin Strong, Memorandum Italian Stabilization Negotiation, Washington, D.C., December 26, 1927.

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active hostility. Apart from that, the information regarding the stabilization level would have been communicated to an ample number of banks and bankers, and the temptation represented by the ability to profit from that insider knowledge might have become a real and dangerous risk. Given these considerations, he was convinced that there would have been no way to justify cooperating with such a demand regarding the level for stabilization. All this had been fully discussed with Norman in private, and he had realized that Norman was ready to compromise.208 The quota 90, in the point of the view of the major reserve bank’s governor, was not, then, the fruit of Mussolini’s ideological extravagance. On the contrary, Strong severely judged Norman’s attempt to change the rate at the last minute, and, partly to safeguard the reputation of the Fascist government, he forced his British colleague to desist. Later, Louis Franck and Hjalmar Schmidt also expressed their opinion that it would not have been possible to stabilize the lira at any other level than its current value.209 More generally, the entire question of stabilization was always, even in the final phase of its negotiation, really only a secondary priority in the face of the main goal: that the lira should return to the gold standard and that its central bank should join the coalition of international monetary cooperation. As Strong concluded, even taking these points into account, he had never participated in an important negotiation that had been conducted as poorly. The true reason was that Italy had already adopted all the necessary preliminary measures, carrying them out with great vigor and success before arriving at the final decision to stabilize. The majority of other countries that had stabilized their currencies, with the sole exception of England [!], had not succeeded in reaching the same results ahead of time. Strong felt it had to be recognized that the great show of self-discipline and capacity for sacrifice made by Italy gave them the right to be supported in their plan without so much hemming and hawing.210 The sense of self-control so admired by Strong was, interestingly, nothing more than the autocratic powers enjoyed by Mussolini that the partners of the Morgan Bank had already so favorably compared to the more complicated and unpredictable procedures of the European parliamentary democracies. Similarly, the spirit of self-sacrifice that he mentioned was in reality the sacrifices imposed by the process of deflation and the repression

208 209

210

Ibid. FRBNY, C. 261, 1926, Italy-Banca d’Italia, Benjamin Strong to George L. Harrison, Evian-les-Bains, July 20, 1928. BLCU-GLH, Strong, Memorandum Italian Stabilization Negotiation.

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of the Fascist state on the classes and categories most affected by the financial operation. One may therefore conclude that the plan of the private American bankers was successfully carried out by the representatives of the major reserve banks, under the leadership of Strong, and despite the inconclusive attempts by Montagu Norman to oppose it. Strong did not hesitate to congratulate himself on this positive outcome, noting that stabilization had been agreed upon literally and exactly according to the terms he had first offered Mussolini and Volpi during his visit to Rome eighteen months previously. The bonds secured for Italy in the preceding months were now guaranteed by the consolidation of the Italian lira, and even more so by the process of strengthening the regime (and reinforcing the class structure on which it depended), just as foreseen by the American financial community involved in planning the reconstruction and restoration of all of Europe according to its vision. It was no accident that this development took place in a period coinciding with the internal stabilization of the Fascist regime as it assumed an ever more unequivocally dictatorial form and substance. Mussolini had shown himself fully deserving of Strong’s trust, and it would be difficult to argue that he had in any way exercised autonomy from Italian or international capitalist forces. He had in this way reached his goal of consolidating his regime, just as he had expressed it to Volpi in their private correspondence in August 1926 and then again publicly in his speech at Pesaro. Italian industrialists had had to submit to some sacrifices in terms of their profit margins, but they had been compensated in the reinforcement of their political and employment power through the workings of deflation. Moreover, they had won the decisive victory of liquidating the institutions of organized labor, through the combination of the Palazzo Vidoni pact [an October 1925 agreement that effectively banned independent trade unions and placed all organized labor directly under Fascist control – trans.] and the further economic and political weakening of the working classes through the deflationary lowering of salaries.211 Within this field, those who were already strongest and most competitive benefited disproportionately, so that they became even more capable of entering the international market on profitable terms and assuming, then and in the years to come, the role of go-between for international capital 211

The decrease in the real value of salaries between 1927–1930 was around 10 percent; this drop in the labor costs was accompanied by a progressive rise in productivity. See S. Romano, Giuseppe Volpi, Milan: 1979, p. 157. On the social standardization resulting from Mussolini’s economic policy, see also Foa, pp. xxxix–xliv; Castronovo, pp. 273– 276; and Gualerni, p. 38.

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and the Italian economy. The Banca d’Italia began for the first time to participate fully in the restricted circle of reserve banks engaged in the construction of an international monetary system. Thus, in December 1927, under the aegis of Benito Mussolini and the American bankers who acted in place of a still-isolationist government, began the construction of the hegemony of the United States. This hegemony, and the dependent relationships resulting from it, would be among the few historical conditions to survive the coming storm and go on growing in the years to come.

chapter 3 The United States and Italy Confront the Great Depression

1. the economic crisis and international relations It is a frequent and even trivial assertion that the Great Depression had devastating effects not only within each of the industrialized societies, but also in their relationships and their effect on the international balance of power. More rarely have historians and political observers of the era actually tried to analyze exactly how and in what measure these disruptions took place. In order to reconstruct the specific effects on the relationship between Italy and the United States, one must begin with an overall evaluation of the crisis. Charles P. Kindleberger wrote that it was useless trying to determine if the causes of the Great Depression lay mainly in the United States, and in particular in the monetary policy of the Federal Reserve Bank of New York, as Friedman and Schwartz had argued,1 or in the political and economic imbalance of the Old World, as Herbert Hoover had claimed during his second presidential campaign of 1932.2 As Kindleberger asserted, when a building burns, we could choose to blame the spark, the combustible fuel, the draft that fed the flame, the bystanders who did not put out the first flames, the contractor who did not build a flame-proof building, or the firefighters who did not arrive quickly enough, but the truth is that we must consider the full combination of these circumstances.3 1

2 3

M. Friedman and A. J. Schwartz, A Monetary History of the United States, 1867–1960, Princeton: 1963, p. 360. H. Hoover, The Memoirs of Herbert Hoover, New York: 1952, vol. III, pp. 1, 61–62, 251. C. P. Kindleberger, “The Great Depression, 1929–1933,” originally for Il Mondo Contemporaneo no. 8, director Nicola Tranfaglia, Florence: 1978, 7.

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Kindleberger’s point applies to the historical question at hand. In this work, it is not important to establish whether to blame Benjamin Strong for his errors or to flay Castor and Pollux (as Keynes called the two functionaries of the British Treasury who, in league with Clemenceau, fixed Germany’s reparations payments at an outrageous sum) for their crimes.4 What must be established, however, is the differing relevance of the economic crisis in the greatest economic power in the world compared with its effects in other countries and the influence this had on its international role. To continue Kindleberger’s metaphor, it was not one house that burned, but an entire city. And those who did not escape from the fire in the biggest building had no way to fight the fire in the rest of the city, because they were too busy saving their own property. The raising of customs barriers greatly contributed to the propagation of the crisis. On June 17, 1930, President Hoover signed the SmootHawley law; it drastically raised the principal customs taxes, up to 100 percent on some raw materials.5 In this way, Hoover – despite being firmly convinced of the necessity for an industrially strong nation to practice free trade and encourage external expansion – bowed to the combined pressures of the lobbies of agriculture and the hardest hit business sectors. Some observers did note that this helped support internal demand.6 More than one thousand orthodox economists, however, immediately signed a manifesto arguing that the United States was, with this tariff increase, denying its debtor nations the possibility of repayment and inviting reprisals by which each country would reduce its exports and its national product.7 Indeed, in the following months twenty-five nations, Italy among them, installed tariff increases that powerfully restricted their economic interdependence with the United States and favored the pursuit of more autonomous economic practices. When Roosevelt, after the first wave of internal reforms, approved the Reciprocal Tariff Act of 1934 – which allowed customs reductions of 50 percent for countries granted most favored nation status – a new allocation of resources between internal consumption and imports had already been cemented. This change was particularly notable in countries such as Italy and Germany, and the resulting modification of commerce flows had political effects as well.8 4 5 6 7 8

J. M. Keynes, The Economic Consequences of the Peace, London: 1920, p. 26. J. H. Wilson, American Business and Foreign Policy, Boston: 1973, p. 74. W. A. Lewis, Economic Survey, Philadelphia: 1950, pp. 60–61. Kindleberger, p. 27. On the commercial policies of Fascism, see G. Gualerni, Industria e Fascismo. Per una interpretazione dello sviluppo economico Italian tra le due guerre, Milan: 1976, pp. 97–106.

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The May 11, 1931, failure of Credit-Anstalt, which had been responsible for 70 percent of Austrian banking operations, is usually pinpointed as the political turning point moment for depression in Europe. That failure, due mostly to the artificial restrictions imposed on commercial and financial relations among the former Habsburg states, precipitated the financial crisis throughout central Europe. Most affected was the German financial system, which had a large presence in Austria and in the Credit-Anstalt bank; there was a massive withdrawal of foreign capital from Germany after the collapse. In turn, this made German debt holders increasingly unable to fulfill short-term obligations and finally resulted in the German government’s refusal to continue reparations payments as set by the Young Plan. At this point, the financial relationship that had developed throughout the 1920s between the United States and Germany became a problem. By the spring of 1931 Germany, on the verge of financial insolvency, had borrowed from foreign sources – in large part American – between two and one-half and three times as much money as she had actually paid out in reparations to the Allies after the beginning of the Dawes Plan of 1924. The reparations, as all informed individuals knew, were in part sent on to the United States as war debt payments, by Britain, France, and other nations. American bankers unfortunately had used the money of their fellow citizens (who, one should add, lent the money willingly enough because of the high German interest rate) to finance both the circular payments, Germany to the Allies to the United States to Germany etc., and much additional German borrowing. When the Germans began to act as if they might default these private loans, the bankers had in their possession a great mass of paper which they could not easily convert into cash to pay depositors when the word got around, and runs began on their cash holdings.9

Two typical interpretations of the causes of the crisis, by now of global dimensions, derive from this kind of analysis. Both were present at the moment as well as in successive historiography. The first is identified with Joan Hoff Wilson, an expert on that president’s foreign economic policy. It corresponds largely to Hoover’s own explanation from the beginning of the crisis, merely critiquing his failure to enact his ideas during his tenure as secretary of commerce.10 According to Wilson, Had this country adopted less traditional payments, there would have been no need for either the abnormal amount of short- and long-term foreign loans or the excessive expansion of American exports which occurred after the war.11 9

10 11

Robert H. Ferrell, American Diplomacy in the Great Depression: Hoover-Stimson Foreign Policy, 1929–1933, New Haven: Yale University Press, 1957, p. 108. Wilson, American Business, pp. 105–106. Ibid., p. 122.

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Once the New Deal was under way, this type of argument also partially coincided with the attack on bankers epitomized by the congressional investigation of investment banking’s role in foreign lending. This populist and isolationist rhetoric accused the bankers of irresponsibly promoting foreign bond issues in order to profit on commissions, without properly taking into account the risks to which they were thereby exposing the American public when they acquired those bond certificates.12 This type of interpretation was based on the obvious desire to exonerate the system itself from responsibility for causing the crisis, instead attributing the problem to mistakes made by isolated individuals. Still, what Wilson labeled abnormal quantities of loans and excessive exports did not stem from the iniquity and myopia of bankers. They were products of structural characteristics of the American economy after the First World War, those enumerated in the Introduction. In summary, these were the increase in production, which required external outlets for both its goods and its excess capital, and the fiscal policy of expanding profits without a correspondent increase in the pay and therefore the buying power of the masses, so that internal demand did not grow in tandem with supply. The existence of external outlets for American goods and capital depended to a crucial extent on the capitalist reconstruction of Europe. For this to be possible, it was necessary to invest in Europe, funds for which could only come from the United States. This investment could not only be in the form of private production and building, but included the need for loans to sustain monetary stabilization through a deflationary policy and the political and social stabilization of Europe – a stabilization necessary, in turn, to guarantee a return on those same American investments. Even Ferrell himself, despite his argument that the entire crisis stemmed from the short circuit in the capital transfer between Germany and the United States, added that, through the Dawes Plan, Germany was “able to carry through a program of re-equipment which enormously raised her industrial productivity, and included an entire remodeling of her iron and steel industry, which had been cut in two by detachment in 1919 of Alsace-Lorraine; by 1929 Germany had attained an output of raw steel only slightly short of the level of 1913.”13

12

13

This type of attack inspired a special congressional investigation. See 72nd Cong., 1st sess., “Sale of Foreign Bonds or Securities in the United States,” Hearings before the Committee on Finance, U.S. Senate, Washington, D.C., 1932. Ferrell, pp. 108–109; see also C. R. S. Harris, Germany’s Foreign Indebtedness, London: 1935, p. 11.

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One might object that this was the bankers’ policy rather than that of the American government. In reality, anyone familiar with the sources on the relationship between bankers – especially those of the House of Morgan – and the highest levels of the Harding and Coolidge administrations knows that the bankers were virtual governmental delegates in these matters and that their actions went far beyond the normal scope of investment banking. Proof of their political role was the Dawes Plan itself, marking the convergence of European statesmen, who were willing to compromise on the reparations question, and American bankers, led by J.P. Morgan and Co., who were interested in financing the reconstruction of German industry. Carrying out the plans for the stabilization and reconstruction of the European economy together, they represented a general interest motivated by the demands of the American production system as it emerged from the First World War. It may, and should, be argued that the unwillingness of large sectors of the country to accept the new responsibilities weighing on a global hegemon created serious distortions and that among them was certainly the choice to assign to private elements duties that should have been under the jurisdiction of the State Department and the treasury. But it must be remembered that those bankers belonged not only to the same class but to the same elite oligarchy of men. Then and for many years to come, the positions of foreign policy making and those of domestic economic policy were filled in alternating fashion by this group of men. This practice continued despite the protests arising from time to time from the agricultural and populist sectors. In the end, the fact that the United States had no explicitly articulated and congressionally ratified policy around which to rally all the resources of diplomacy, military, and economy – which is what did happen in and after the Second World War – had serious effects. But that in no way reduces the actions of the bankers to a simple selfish misuse of power at the expense of the overall interests of the American economy. Rather, the nature of their financial activity offered them a global vision and made them capable of carrying out an interest of state with which they were in complete agreement. In this cooperative service to a common cause, they avoided isolationist obstacles and successfully bore the public responsibility through private means. As in every capitalist economic activity, the bankers obviously also responded to normal incentives of profit. These incentives occasionally led the less accredited and tradition-inspired banks (and not only them) to make imprudent choices and to offer loans that were insufficiently solid investments, with the resulting higher margins of risk. Nor is there any

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doubt that issuing some of these loans in the form of bonds, which transferred the risk directly to the public while the bankers kept their commission no matter what the end result, favored overly casual risk assessments on the part of the bankers. But even these anomalies were the result of the extreme abundance of available capital up until 1928 (when the boom of the New York stock market created an unprecedented bubble), made possible by the policies of the Republican administrations of the preceding years. Hoover himself, who would accuse the bankers of failure in the face of a glaring problem, had as secretary of commerce limited himself to demanding that every loan correspond to an immediate advantage or profit to an American industry. Even the populist attack on the bankers in the first years of the New Deal never posed the problem of the overall legitimacy of a policy that extended American influence over most of the globe by means of social repression, pay restriction, profit protection, and disregard of social needs for resources. It simply denounced the crimes of the individual banker who chased profits at the expense of the public. In this way, the fundamental causes of the Depression were sought only in the real or assumed abuses of single actors or companies, rather than in the total lack of proportion between demand and supply deriving from deeper imbalances in the production system and the class structure. The mechanism of war debt and reparations has frequently been denounced as one of the main sources of the crisis by all those historical personages and historians wanting to minimize the internal causes. Joan Hoff Wilson went so far as to affirm, contradicting the mainstream historiography on the issue,14 that the failed cancellation of debts and reparations constituted one of the main reasons for the Depression by making the international financial system ungovernable and contributing to the short circuit between American capital and foreign payments. She further blamed American bankers for being primarily responsible for this failure. According to her, they had an interest in perpetuating both debts and reparations inasmuch as they were the basis for the bankers’ claim to exclusive technical management of finance, as well as the source of the web of loan and bonds they were able to generate.15 Wilson went on to claim that debt forgiveness would have been possible if the bankers had made any serious attempt to convince the Congress and the public of its advisability. 14

15

C. Parrini, Heir to Empire: United States Economic Diplomacy, 1916–1923, Pittsburgh: 1969, pp. 124ff.; Ferrell, pp. 106ff. Wilson, American Business, pp. 153–156.

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The truth is that this was not a case of errors in evaluation that can be attributed to some sinister influence by a specific group, but a symptom of a basic and insuperable contradiction. There were innumerable occasions in which all those involved in international finance, who had no intention of crippling the German economy for political motives, affirmed that debts and reparations constituted a threat to the political and economic stability of Europe. Why then did the bankers not fight harder for cancellation? The question deserves a clarifying response in order to demonstrate that basic contradiction that impeded the United States from taking on the leadership of the Western capitalist world between the world wars. It has been shown that the war debt issue acquired a symbolic value in isolationist politics. A politician’s refusal to compromise on the demand for debt payment became the measure of his independence from the intrigues of European politics, and of his patriotism in the defense of American interests. It was true that such a measurement left completely unspoken the actual economic significance of the issue, just as it was true that in the end isolationist opinion accepted large reductions in the capital of war debts. This was possible because the complicated distinctions between various figures, capital and interest, and mature and future interest computation made it difficult for laymen to understand just what had changed. But it was a different story when the choice was clearly whether to cancel debt altogether. The bankers could not launch a frontal attack on this risky terrain on which a defeat threatened to stop or severely slow other important aspects of their plans. Such a loss would have created even larger problems, especially for those who held elective offices, in carrying out the long-term policy of American finance. It is a serious error to underestimate the substance and depth of isolationist sentiment in those years. In summary terms, we may state that during the 1920s isolationism was partly a political myth (and subsequently an American historiographical one). This was because American capitalists, and in part statesmen, did not at all resign themselves to isolation. They continued their pursuit of external expansion. This does not mean, however, that isolationism can be disregarded. To adopt Adler’s expression, that impulse was not eradicated but only, partially, contained.16 It was not a purely ideological, or superstructural, contradiction; it was the manifestation of the social defeat of a large part of the American population in the crucial period just after the First World War. The employers won that hard-fought struggle using every means available 16

S. Adler, The Isolationist Impulse.

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and succeeded in blocking the creation of a working-class front that had shown real potential power. It therefore became necessary to vent that class dissatisfaction by directing it elsewhere, such as onto the European nations responsible for the war. Above all, xenophobic and ultranationalist feeling was exploited in order to justify and undergird social repression. In the end, immigration quotas and closures became the main concession made to organized labor, helping to direct union politics toward a corporativist and nationalist model. In other words, once again the weapon of racism was used to divide and conquer the working classes, following the recipe cooked up in the South toward populism and blacks. Of course, the experience of racism against American blacks was a cautionary example of how, once such a weapon was used, it was extremely difficult to disarm. It became particularly entrenched in a system that awarded such strong power to elected representatives who were strictly beholden to their voting constituents. To return to the main point, the idea of debt cancellation was not blocked by some few members of Congress getting on the isolationist hobbyhorse, or by a minority of ideologues. It was a pillar on which rested the whole structure of mass consent for the governing elite. If the tangle of international indebtedness did cause or at least contribute to the economic crisis, that was not due to the litigious nature of Europeans, nor to the cowardice of a few bankers and politicians, but to the fundamental character of class relations in the United States and the effects of the social struggle that had recently taken place there.

2. hoover and stimson’s foreign policy Herbert Hoover, who became president on March 4, 1929, conducted foreign policy in a manner totally coherent with his reductive interpretation of the crash. He believed it was essentially a crisis of economic confidence that did not require any radical change to American economic policy, least of all to the structural and ideological foundations of that policy. The crash was due to the continued instability of Europe and to distortions in the American banking system that Hoover did not hesitate to label “rotten.”17 Hoover never changed his basic orientation; in foreign policy as in domestic, even when faced with the most dramatic manifestations of the crisis – be it the Wall Street crash or the failure of CreditAnstalt – they only reinforced his preconceived agenda.

17

Hoover, pp. 21–26, 107.

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Among the most significant political figures of the Harding and Coolidge cabinets, Hoover was the most diffident regarding the renewal of commitments to Europe. He accepted the idea only under certain clear conditions. We have already discussed his concept for American expansion in the industrialized world as he articulated it during the negotiations on Italy’s war debt. Yet he was too much of an expert on American industry, of whose interests he had been the principal governmental guardian right up until his election to the presidency, to ignore that the extraordinary growth of American production and profits required not only expansion but the full recovery of the European economy.18 When Hoover became president, Mellon remained at his post as the secretary of the treasury, where he continued to represent the world of finance. Moreover, in place of Frank Kellogg, Henry Stimson became the new secretary of state. Stimson might have been the most Wilsonian statesman within the Republican Party. Linked to the internationalist tradition of the New York Bar Association, particularly well connected among the biggest corporate law firms, Stimson was perhaps the favorite protégé of Elihu Root. Root had been secretary of state, was the main advocate of international justice in the nation, and was known as the grand old man of the Council on Foreign Relations and all the most important New York social circles. From this background, even more than from his recent experience as governor in the Philippines, Stimson had formed a solid attachment to those principles of liberal internationalism of which Woodrow Wilson had been the most eloquent interpreter. These principles led him to favor every form of international intervention, founded on the concept of collective security. He was also capable of real discernment when it came to the political and ideological motives of any state’s international conduct – though this was limited in a fashion that his relations with Fascist Italy would reveal. Both the historiography and the memoirs of this period are full of references to the contrasts between Hoover and his secretary of state.19 In reality, we can say that these contrasts were more ideological and personal than political; they rarely surfaced in any divergences regarding important political decisions. But there were frequent psychological conflicts between the engineer from the Midwest and the cosmopolitan New York lawyer, and they viewed European events from quite different perspectives. Overcoming the tension that characterized their relationship, however, they collaborated on the main attempt made between Wilson’s 18 19

Ferrell, p. 23. See especially Ferrell, pp. 39ff.

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fall and the initial crises leading up to the Second World War to reaffirm the American political and diplomatic presence in foreign affairs. A plan for American business was already quite clear, even if the reluctance of the isolationists – which was the natural consequence of the suddenness with which such responsibilities had fallen on American shoulders after the First World War – prevented the full and unified deployment of every American resource in its service.20 Hoover and Stimson did nothing more than pursue the cautious path, already forged by previous administrations, of renewing the American commitment to world politics within the limits and in the ways that were possible without encountering congressional obstacles. Hoover was probably motivated by the belief that a greater role played directly by the government would reduce the power wielded as indirect representatives by the New York bankers. As for Stimson, his desire to participate personally and with the legitimacy of the law in solving the international crisis brought him particular enthusiasm in exploiting the more flexible conditions of isolationist politics established during the second half of the 1920s. The Locarno Pact had created a far better atmosphere than the one during the occupation of the Ruhr. Hoover and his secretary of state were ready to benefit from the clearer air. Still, despite the lesser irritability of the Congress, there were some issues that remained off limits. War debt was one example; a particularly touchy one was any collaboration with the League of Nations. But even the isolationists seemed somewhat open to discussing disarmament. Indeed, there was a general sense of pacifism, sometimes with specific religious roots, at the very heart of isolationist culture. Senator Borah had on multiple occasions since 1920 called for disarmament measures. Thus encouraged, in the spring of 1928 secretary of state Kellogg had put forward a proposal by Aristide Briand, who had initially tried to reopen dialogue with the United States regarding some form of reciprocal security pact. After the Americans refused this proposal, he transformed the original into a pact renouncing war as an instrument of national politics. The Americans promoted this pact, making it multilateral in order to commit all signatories to refusing war and to resolving their conflicts through peaceful means, and it became the Pact of Paris. Despite the completely innocuous character of the pact – it provided for no form of sanctions in the event of its breach – it was the first return to the international scene of American officials and a real step toward a renewed commitment to international politics on the part of the United States. Perhaps better 20

Kindleberger, pp. 30–33.

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known as the Kellogg-Briand Pact, it became a useful premise for the restarting of disarmament talks, which Hoover and Stimson advocated enthusiastically. First they convened a naval conference in London in January 1930; two years later came the General Disarmament Conference in Geneva. In the meantime, Stimson had not only supported but encouraged and even led the European powers and the League of Nations in a politics of pressure against Japan’s occupation of Manchuria. This was the occasion for the proclamation of the Stimson Doctrine, according to which the United States did not “intend to recognize any situation, treaty or agreement which may be brought about by means contrary to the covenants and obligations of the Pact of Paris.”21 Although Great Britain’s unwillingness, on the basis of the Lytton report, to take the lead in a concrete action against Japan frustrated Stimson’s attempt, it was clear that the greater participation of the United States would tend to rupture the limits of isolationism more and more. It was perhaps to be expected that Hoover’s intervention, necessitated by developments in the economic crisis – and starting with the so-called Hoover moratorium on war debts – would also increase American involvement in international affairs. What was the European reaction to the increased, even if still cautious and partial, American willingness to play a role in international politics? The French government, obsessed with its fear of one day having to face a new German offensive, must have viewed it with favor. This was especially true since the French had repeatedly called for American participation; but the specific positions taken by Hoover and Stimson on the questions of disarmament and war debt were certainly not what the French had hoped for. Rather, these initiatives called for reconciliation between the two major European antagonists, without the security measures that France considered a prerequisite for any form of improved relationship with Germany. Ramsay MacDonald, the British prime minister, usually sided with Hoover in these reconciliation attempts once the issue of balancing British and American naval forces had been decided. Together they called for a reduction of armaments and a general remission of international debts.

3. italian foreign policy from mussolini to grandi The case of Italy is particularly interesting. In the three years during which he was minister of foreign affairs, Dino Grandi not only conducted a policy 21

Ferrell, pp. 151–169.

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of European reconciliation and strengthening of the League of Nations that coincided with the objectives of Hoover and Stimson, but Washington became the main point of reference of Italian foreign policy. He was at least partially justified in this since, as he claimed in one of his frequent attempts to defend a policy that did not seem completely in line with Fascist ideology, he was only continuing the policy that Mussolini himself had conducted when he held the portfolio of the Foreign Ministry. As Di Nolfo wrote: Until this time Mussolini’s activity as Foreign Minister showed a sense of responsibility and a vision limited only by the consideration of Italian interests. Mussolini had not taken an autonomous or original position on any important questions between 1922 and 1929 (with the exception of the memorandum on reparations in 1923), contenting himself in every other case with following the initiatives of others and remaining at the margins of the issues.22

Nor could Mussolini entirely do without a few dramatic gestures and speeches, necessary to play to his own base; although, after the problems with Corfu, especially in terms of relations with the British, he used this classic dictatorial prerogative with greater prudence. Overall Mussolini had remained within the limits of caution. As Di Nolfo affirmed, it is difficult to distinguish any unitary and coherent theory in Mussolini’s foreign policy. Above all, it is hard to identify a specifically Fascist solution to the general problems pertaining to relations among states. Essentially, Mussolini’s foreign policy consisted in consolidating the Fascist regime and choosing how best to propagandize Fascism abroad. There was actually a coherent pattern guiding Mussolini’s conduct in this period, even if the first impression seems one of contradictory choices. Based on his perception of the balance of power in Europe and the wider world at that moment, he operated in a consistently defined field of action. At the center of political relations in those years was the conflict brewing from France’s attempts to impose upon Germany a strict implementation of the Treaty of Versailles. France was still the strongest military power in Europe. But the United States and Great Britain were instead pursuing a policy designed to favor reconciliation between the two traditional adversaries, in order to further the political and economic stability of Europe. As discussed above, the stabilization of Europe, promoted with alacrity by American bankers and supported by the British 22

E. Di Nolfo, Mussolini e la politica estera italiana (1919–1933), Padua: 1960, pp. 252ff. On the meeting Mussolini called the British and French foreign ministers to at Territet, see the classic account in R. Guariglia, Ricordi 1922–1946, Naples: 1949.

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government, necessitated first of all the economic reconstruction of Germany, a goal that excluded the ongoing moral and political humiliation of the Germans. While France’s main priority was always to bolster its own security through pacts and military alliances guaranteeing its protection from future German aggression, Great Britain preferred to prioritize multilateral power structures, above all the League of Nations, as its favored venue for performing the role of mediator. The conflict between the plan for stabilization and the French policy of security marked the entire decade in various ways. After the occupation of the Ruhr, the Dawes Plan and the Treaty of Locarno inaugurated a new period in Europe of decreasing tension; in this context, the plan for stabilization seemed to gain more permanent legitimacy. Although the American government did not directly participate in European diplomatic exchanges-for obvious reasons, it is certain that American capital, managed by American bankers, constituted the essential factor in favor of stability. Given that this was not merely a rhetorical device for defining the relations among European states, Fascist Italy was obliged to make important policy choices as well, even if they were not explicitly based on any theory of international relations. Mussolini’s Italy could not have had any hesitation regarding France, a politically unstable country full of rancor and resentment toward the rest of the world, with whom there were conflicts of interest in a multitude of issues and which appeared to Italian nationalist opinion as the party most responsible for the Italian humiliations at the Versailles peace talks. Italy’s choice was obviously to favor the Anglo-American powers, geographically much more distant, with whom there were no territorial disputes (with the sole future exception of Great Britain’s objections to Mussolini’s eventual expansionist project in Africa) and who, most importantly, held the key to the economic and financial reconstruction of Europe. Mussolini’s willingness to cooperate with the British and Americans in this conflict was obviously linked to his desire to satisfy the Americans, who would virtually cancel Italian war debt, make numerous public and private funds available through loans and bonds, and from 1926 to 1927 finally achieve the stabilization of the lira. When Montagu Norman opposed the collaboration Americans requested to help stabilize the lira, he also accused Volpi of being anti-German. Similarly, when Mussolini attacked the Bavarian minister Held regarding the territorial dispute over the Alto Adige region, he risked damaging his good relations with the American banking community more than he ever did with more aggressive acts having to do with less sensitive issues. Still, the Italian conduct regarding the occupation of the Ruhr, Alberto Pirelli’s

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treatment of the reparations issue as dictated to him by Mussolini, and the ongoing Italian hostility to any French military proposal all combine to clearly demonstrate that the Fascist choice of alliance in these matters was to favor the policies of London, Washington and, indeed, New York of reconstruction and mediation, including during the period preceding Grandi’s assumption of the duties of foreign minister. One might simply say that Mussolini’s gut instinct for power guided these choices. But it is better to consider the fact that the plan for the economic stabilization of Europe, while it required certain sacrifices, including some limitations on sovereignty in both the short and long terms, was also a plan for stabilizing the Fascist regime in both its international status and its internal class structure. Mussolini accepted American financial leadership and friendly relations with Great Britain, with the necessary political consequences, because he thereby obtained the international cooperation he needed to stabilize his own economy and consolidate the class power structure in Italy through a deflationary policy aimed at returning the lira to the gold standard. These developments strengthened the regime in both formal and practical terms. The drawback of this policy direction was to be in permanent tension with France, not only on the basis of the traditional territorial and ideological conflicts due to France’s harboring of anti-Fascist exiles, but now also regarding the great themes of European cooperation: the acceptance of the United States’ growing financial hegemony, the collaboration with Great Britain’s international politics, an attitude toward Germany nearly the opposite of France’s intolerance, and the refusal of all Parisian proposals for military security alliances. Upon closer examination, however, this was not truly a drawback for Italy; it was, rather, the necessary corollary of an extremely prudent diplomatic policy that in substance did little to protect the national autonomy that Fascist ideology loudly proclaimed ought to be Italy’s first priority in all foreign relations. As Dino Grandi confirmed, Fascist Italy not only had to take France into account, but actually needed a long period of tension with France before it was possible to create a cooperative relationship, if not an alliance.23 In a certain sense, the most difficult political moments for Mussolini were the occasions when France, usually led by Aristide Briand, showed itself willing to reenter the group of European nations inspired by the Anglo-American policy of collaboration and to accept a more relaxed approach toward Germany. It would be on just this terrain that Mussolini’s politics and Dino Grandi’s conduct as minister of foreign 23

Dino Grandi, interview with the author, Taormina: January 3, 4, 5 and 6, 1970.

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affairs would subsequently part ways and finally determine the break between the two men. The difficulty became clear with Locarno. For obvious strategic reasons, Grandi repeatedly claimed that his foreign policy was the continuation of Mussolini’s. Probably Grandi did not himself believe this, given his belief in his own original analysis. In his memoirs, the reader sees an understandable temptation to downplay Mussolini’s political acumen: “il Duce” wanted to settle the war debt out of pure conventional respectability, and not because he had understood that this was a necessary step for obtaining financial and political credit for the regime; Mussolini conducted a hostile policy toward France out of personal resentment, and not because he had chosen to privilege other alliances; and so on.24 In his interpretation of the Treaty of Locarno there are clear distinctions made not only between his own politics and those of Mussolini, but also between two different phases of Italian foreign policy. Grandi, in his most important speech on foreign policy given to the Grand Council (Gran Consiglio del Fascismo, originally the Fascist Party’s ruling council, which by 1928 was a constitutional body of state and the main institutional body of Fascist government – trans.) on October 3, 1930, spoke of the Treaty of Locarno in the following way: Can we truly say that Italy has joined this international pact out of sincere conviction? No, we cannot say this. Locarno was and is the son and heir of Geneva. Locarno was an initiative of the French and the English in the atmosphere of Geneva: that was enough to make Italians view it with antipathy and diffidence, and the reason why it was judged to be against Italian interests. We agreed to Locarno at the last minute after having maintained throughout the negotiations the position of observers, and we agreed when we were confronted with the fait accompli of German adhesion, which forced us to join in or be cut out of the concert of the four Great Powers of Europe. But we did it out of necessity and against our will. Prisoners of our own polemics, and of our anti-Geneva rhetoric, we failed to grasp that this Treaty among the four Great Powers of Europe is greatly in Italian interests as well . . .25

How should this paradox illustrated by Grandi be explained? Locarno was the most important political and diplomatic result of the stabilization plan carried out by the Anglo-American powers. It was no accident that it had been preceded by the Dawes Plan, which created the basis for a massive injection of American capital into Europe, drastically reducing the victorious powers’ calls for reparations and allowing Germany to secure 24 25

Ibid. ADG, III, D. Grandi, Discorso al Gran Consiglio del Fascismo, Rome, 2 ottobre 1930, p. 295.

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immediate sources of funding for its own industrial recovery. At the same time, as Grandi noted, Italy not only saw its own role as a great power ratified, but that role was actually increased by its position as guarantor of the treaty. The consolidation of the Fascist regime, with the repressive turn after the Matteotti affair and the failure of the Aventine secession, as well as the definitive liquidation of the political opposition and social stabilization anchored by monetary stabilization, were all part of the same logic. The direction of international politics also influenced Grandi in this direction, with the renewal of international conferences and the calming of tensions between France and Germany after the passages of the Dawes Plan and the Treaty of Locarno. In this context, he made the reevaluation of the Locarno Conference the point of departure for a wholesale acceptance of the politics of European reconciliation, which characterized the policy of his entire tenure as minister of foreign affairs. Grandi was convinced that Italy had neither the power nor the opportunity to conduct an aggressive politics in the Danube and that any pronounced attempt to revise the peace treaties concerning the region would leave Italy totally isolated. Only the more profound effects of the Great Depression and the fall of the Weimar Republic would make a more aggressive approach realistic in times to come. Given the current situation, the regime had little choice but to make a virtue out of necessity. For several years, Mussolini and the Fascist regime were encouraged to end their passive acceptance of the reigning international climate and exploit the lessened tensions by bringing the consolidation of the regime to bear in claiming leadership of the politics of international reconciliation. This task was facilitated by ongoing French reluctance, especially when the ever-changing French governments were led by men such as Tardieu who represented its most conservative and nationalist tendencies. In other words, Locarno had not succeeded in erasing the French obsession for pursuing alliances to guarantee France’s military security, which they saw as ever more threatened; and so they continued to defend the economic and territorial handicaps imposed upon Germany by the Treaty of Versailles. Such an approach allowed Grandi to pursue his pro-British policy, centered on the League of Nations and favorable to disarmament, in contrast with that of the French. He thus managed to confirm himself to London and to the American bankers as a partner of Great Britain in guaranteeing both French and German respect for the border at the Rhine. And yet there was no lack of reasons for which Mussolini and the Fascist regime, although susceptible to every formal opportunity for Italian prestige in international relations, might still view the treaty negatively and be

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suspicious of the “spirit of Locarno” as it appeared in the following years. In the first place, every direct communication between France and Germany, which was obviously going to be favored by Great Britain, generated the fear among Italian diplomats of ending up isolated in European foreign politics. This danger was clearly perceptible during several moments of the naval conference, but especially so during the 1932 economic conference at Lausanne, which provided part of the justification for Grandi’s defenestration. From Mussolini’s point of view, it was one thing to favor Great Britain and American financial policies against the French; it was altogether different to submit to a collaboration plan in which France even momentarily rose above its anti-German scruples to become a partner of the Anglo-American powers. Mussolini’s attitude toward the Leffingwell Plan was symptomatic in this regard: if the French themselves had not forced the failure of that American plan for the collective stabilization of the Latin currencies, the dictator would have suffered a major embarrassment. Mussolini wanted to stabilize the lira, and the support of American bankers was indispensable to do it, but only as a last resort would he have accepted the monetary Locarno so dear to the Morgan Bank associates. In the context of an eventual greater European concert of powers in which the Franco-German conflict would no longer be the dominant motif, the real hierarchy of power would reemerge. Mussolini’s Italy would be presented with the uncomfortable dilemma of accepting its lower rank in such an order, or of pursuing a policy on its own behalf that during the 1920s it really did not have the internal or international strength to back up. Furthermore, an eventual permanent reconciliation between France and Germany would have as its inevitable consequence the renewal of the Entente Cordiale with Great Britain. This would force Fascist Italy to abandon its hopes for blackmailing France into offering colonial concessions or in any case rising above it in the traditional conflict between the two nations. At that point it would no longer suffice to favor the richer and stronger nations as a function of anti-French competitiveness. Italy would be forced to fully confront its real position in the European power structure, as well as the contradictions between its own ideological rhetoric and the concrete demands of an economy ever more dependent on the Western capitalist system. In 1929, the year in which Dino Grandi became minister of foreign affairs after a long apprenticeship in the shadow of Mussolini and Contarini, it was no longer enough to conduct a policy founded on the otherwise solid base of cooperation with Great Britain and the American bankers; such a policy had too long avoided the question of coherence with

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its own regime’s ideology. Although it is doubtful that such choices had ever been made “on the basis of Fascism’s original and autonomous premises,” it was nonetheless true that From . . . 1929 on, first the new reparations talks and then the disarmament conferences threw into relief the great problems that [. . .] underlay the turn in the global situation, and demanded new positions on Italy’s part [. . .]. For the first time, therefore, Mussolini and Fascism were faced with problems that called into question the entire vision of international affairs that Mussolini had tried to formulate in his years as Foreign Minister. Their particular character could no longer be approached with a restricted and unilateral point of view; a more ample perspective and the consideration of the general interest had become necessary.26

In reality, as has already been argued, Grandi could make use of the fundamental choice of alliance that Mussolini had already made, though with some adjustments; he would especially have had to play the part of best behaved pupil in order to point out the contrast with the French, incapable of letting go of their oppressive and militaristic attitude toward Weimar. At the same time, the Italian economy, with the deflation required by a vigorous revaluation of the lira, had no problems of internal stability, and the effects of the Great Depression were late in reaching Italy. Nor, after the Spa conference, which had awarded the modest sum of 10 percent of the German reparations payments – augmented to 12 percent later, at The Hague – did Italy have much to loose from a policy favoring the cancellation of intergovernmental debt, which constituted an obvious obstacle to international cooperation. Grandi could therefore easily favor the cancellation of those debts and, more in general, at least give lip service to those orthodox and Wilsonian solutions for strong economies, starting with the liberalization of commercial exchange. As an industrially weak power, deprived of raw materials and poor in capital, Italy had a strong interest in any form of arms limits that did not damage its political prestige by putting it in a formally weak position with regard to France. In this case, too, it was not hard to make virtue of necessity by assuming within the embrace of the League of Nations the leadership of those small nations and especially those Socialist, radical, and Labour forces within Great Britain and France that were ideologically favorable to the politics of disarmament. What was most important, for the purposes of this analysis, was how this policy positioned Grandi in relation to the wishes of Hoover and Stimson to reinsert the United States in the European political context. 26

Di Nolfo, pp. 252–253.

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4. the london naval conference From this point of view, the naval conference of London was Grandi’s first occasion to attempt a collaboration that assumed growing importance in his eyes, and its best advantage was its coherence with some of Mussolini’s own political and economic choices in the 1920s. Such a path might lead so far as to make Italy the chief spokesperson for American foreign policy in Europe and in the League of Nations, where the United States continued to be absent, in obedience to the ongoing reluctance among American isolationist circles in the Congress and public opinion. Naval disarmament, as seen above, was a particularly friendly terrain for the reentry of the U.S. government in world politics. Indeed, the initiative came from that very conference in Washington at which such positive results had been attained, especially from the points of view of the Americans and the Italians. At that conference the proportional levels of maximum tonnage for battleships and aircraft carriers had been fixed at 5 for Great Britain and the United States, 3 for Japan, and 1.67 for France and Italy. In other words, the United States had reached parity with the major maritime power in history, while Carlo Schanzer had obtained parity for Italy with France, during one of its darkest phases for domestic and diplomatic politics. Naturally, one had to keep in mind that similar accords were important not so much for their effective reduction of arms as for their recognition of the relative political status of each nation, a position the Italian government was particularly sensitive about.27 On February 21, 1927, the Italian government had refused President Coolidge’s invitation to a conference of the signing powers of the Washington treaty for the extension of the limits to other categories of arms not mentioned in the treaty. Despite the close relations already cemented between them (this was on the eve of the stabilization of the lira with the decisive support of the American central banks), the Italian government justified its refusal with the affirmation of the principle – which it renounced when it accepted the convocation of the London Conference in 1930 – according to which “there exists an undeniable interdependence among every form of armament by any single power and it is no longer possible to adopt partial measures among only five Great maritime Powers.” The memo from the Italian government went on to add:

27

So Grandi always argued. See D. Grandi, Interview. See also ADG, II, L’adesione italiana all’invito britannico, p. 59.

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If the United States due, to its favored geographical position, has been able to reduce to the minimum its land-based arms, Italy for its unfavorable geographical position cannot expose itself, without grave risk, to a binding limit on its maritime armaments, which are already insufficient for its defensive needs.28

The refusal of the Italian government was inspired by the obvious concern not to worsen the power relationship with regard to France, which in the meantime had further reinforced its Continental dominance. What were the reasons leading the Italian government to renounce its own favored position, and wait for the planned conference on general disarmament without first confronting the issue of naval arms? The first reason was the accord reached between France and Great Britain in which the former accepted the latter’s superiority in all naval categories, in exchange for a few small concessions to the French regarding land-based disarmament, with a consequent improvement in the political atmosphere between the two major European powers. The accord had revived the old, traditional, diplomatic worry that Italy would be left isolated,29 an eventuality that brought British ex-prime minister Lloyd George to tell his fellow Liberal Party members that they were all insane to sign a pact that set them against Italy, but actually stark raving mad to sign a pact that made them America’s foe.30 In the second place, Italy had very favorably viewed the agreement between Hoover and Ramsay MacDonald, at the time of the Labour Party prime minister’s visit to the United States in the fall of 1929.31 MacDonald, who had succeeded Stanley Baldwin after an important electoral victory for Labour, wished to repair the ailing “special relationship” with the United States. In this pursuit, he accepted numerical parity in all naval arms categories as the United States had been requesting for some time and which had failed to win agreement at the 1927 conference.32 Why would Italy see this accord in a positive light? Normally, Italy preferred limitations on overall tonnage to specified single-category limits, as was logical for a weak power that could only aspire to a superior arms

28

29

30

31 32

ADG, II, Memorandum del Governo italiano all’Ambasciatore degli Stati Uniti d’America in Roma, 12 febbraio 1927 (in risposta a memorandum del Governo Americano circa una nuova conferenza sulla limitazione degli armamenti navali, del 10 febbraio 1927), pp. 62ff. ADG, II, Memorandum del Governo Italiano all’Ambasciatore di Francia in Roma, 6 ottobre 1928 (in risposta a memorandum francese del 3 agosto 1928), pp. 63–64. ADG, II, D. Lloyd George, Discorso al Congresso del Partito Liberale, Yarmouth, 1928, p. 65. ADG, II, D. Grandi, Discorso alla Camera dei Deputati, May 9, 1930, p. 173. ADG, II, Dino Grandi all’Ambasciatore d’Italia a Parigi, Rome, November 12, 1929.

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comparison in a few chosen categories, to which it devoted particular effort. This accord contradicted that oft-stated principle.33 But Grandi was aware that American engagement in European politics could only take place through a renewal of close ties, not only financial but also political, with Great Britain. He declared repeatedly that not only did he welcome the return of the United States to world politics – as witnessed also by his positive judgment regarding the Kellogg-Briand Pact, which he interpreted as a first step in the right direction34 – but that he also approved of the special friendship between those he did not hesitate to call, even publicly, “the two greatest peoples of the world.”35 Furthermore, the understanding between Hoover and MacDonald lessened the immediacy of Italy’s greater fear: a reinforcement of the alliance between France and Britain, which could only occur at the expense of Italy and of its role as guarantor and mediator. Grandi felt that the Locarno Pact had created this role for Italy to play alongside Great Britain and continually strove to maintain both nations in this partnership. Due to these motives, the Italian government was the first to respond positively to the Anglo-American invitation to the naval disarmament conference. It was immediately necessary to begin negotiations with the French, without whose cooperation the conference would be unable to reach any positive end. Negotiations got off to a promising start when Prime Minister Briand let it be understood that he was willing to extend the principle of naval parity previously accepted at the Washington Conference when he was the foreign minister of his country. After the fall of Briand’s government and his substitution by André Tardieu, with Briand back in the role of foreign minister, this possibility evaporated. When on January 21, 1930, the London Conference opened, France and Italy still had not joined in with the tentative agreement approved by the

33

34 35

ADG, II, Memorandum del Governo italiano all’AMbasciatore di Francia in Roma, 6 ottobre 1928, pp. 63–64. D. Grandi, Interview; see also ADG, II, L’adesione italiana all’invito britannico, p. 54. ADG, II, D. Grandi, Discorso alla Camera dei Deputati, Rome, May 9, 1930, p. 188: “Hasn’t isolationism been one of the fundamental motivations in the most difficult moments of the history of these two greatest of living peoples, the English and the American; and to this word ‘isolation’ have they not added, with admirable pride, the attribute ‘splendid’?” Grandi’s speech did not fail to attract the attention of the American press. The San Francisco Chronicle, on May 15, 1930, carried an article stating that Grandi was the first European prime minister to declare that the Anglo-American friendship was not a threat to any other nation, but rather the best possible form of global understanding. The paper found it significant that it took a Fascist representative to make this observation.

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so-called maritime powers – the United States, Great Britain, and Japan.36 Grandi had no choice but to present the Italian position in front of the entire conference in its most advantageous and conciliatory guise. The memorandum containing the Italian requests listed the following points: 1) Italy favors the effective reduction and not the overall limitation of naval armaments. The criteria for limitation may imply augmentation or crystallization of armaments, and result in the opposite consequence of the desired reduction. 2) Italy recognizes the existing connection between armaments and security, but maintains that the need for armaments cannot be determined in an absolute sense; rather, only a relative determination can be made compared with the armaments of other nations. 3) Italy considers these two principles as the only justifiable basis for determining general arms limitation.37

In other words, Italy declared itself open to an effective reduction of naval armaments – a propagandistic position, but believable inasmuch as disarmament corresponded to a precise interest of the poorest among the so-called great powers. In this way, Grandi won the sympathy of a significant portion of the English Parliament, to the point that one hundred Labour MPs adhered to the proposal, calling for the total abolition of both submarines and armored battleships. Earlier, both Italy and France had refused to discuss the abolition of submarines, requested of them by the major naval powers, given that they constituted an indispensable attack force for nations that could not compete on the basis of tonnage. Italy renounced this prerequisite, but asked in return that battleships also be abolished, which was of course unacceptable to both the British and the American militaries, yet sufficient to court the more pacifist members of the

36

37

ADG, II, pp. 67–72. Tel. 728, Dino Grandi to Gaetano Manzoni, Italian ambassador in Paris, Rome, October 14, 1929; tel. 342–409–83; Dino Grandi to the Italian ambassadors in London, Washington, and Tokyo, Rome, October 17, 1929; Nota di risposta del Governo Francese, Paris, October 18, 1929; tel. 973, Dino Grandi to Gaetano Manzoni, Rome, November 12, 1929; tel. 846–607, Gaetano Manzoni to Dino Grandi, Paris, November 19, 1929; tel. 1010–660, Gaetano Manzoni to Dino Grandi, Paris, December 4, 1929; Gaetano Manzoni to Dino Grandi, Paris December 15, 1929. ADG, II, D. Grandi, Discorso alla Camera dei deputati, Rome, May 9, 1930. See also DDI, 7, VII, 335, Dino Grandi to Benito Mussolini, January 29, 1930.

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House of Commons.38 But these were all preliminary skirmishes, necessary to the construction of the pacifist image of the Fascist regime among the more democratic sectors of Anglo-American public opinion. Nor did Grandi skimp on more formal expedients. In his first speech to the gathered statesmen of the conference, he only referred to Hoover as the “Head of a great state represented here to which the cause of peace owes a great deal.” The true issue, both from the Italian point of view and in terms of the success of the conference, was relations with France. The rapport between the two minor nations appeared decisive for two reasons: first, only an agreement between the two Mediterranean powers regarding their relative forces would allow their participation in a global extension of the Washington treaty; second, even in the event that an agreement could be reached as to parity or some other formula for armaments, it would be necessary for the maximum tonnage agreed upon not to exceed limits that would disrupt the maritime powers’ relative quotas. In fact, Great Britain had been forced to accept parity with the United States when faced with the latter’s ambitious construction program, but it had no intention of relinquishing its traditional “two power standard,” which held that the British fleet must be stronger than the sum of all other European naval forces. In the event that France and Italy, having reached an accord on the relative strengths of their two fleets, set a tonnage quota so high as to threaten the maintenance of the two-power standard without thereby also revising the quotas previously set among the maritime powers, the conference would have been – to make the obvious pun – sunk. It followed that the United Sates and Great Britain were both intent on reaching an agreement between France and Italy that would both solve the problem of relative strength between the two latter nations and reinforce the stability of the two-power standard and the previously agreed quotas between the former. Grandi therefore confirmed to the conference that . . . Italy is ready to accept any reduction of armaments, even to the lowest level, as long as it will not be surpassed by any other continental power.39

Fascist Italy would not relinquish its claim to parity with the French fleet, but it left to France the decision on the specific numbers – while still declaring its preference for the largest possible reduction. This meant

38

39

Daily Herald, London, January 23, 1930; ADG, II, p. 115, containing the report of a motion presented in the House of Commons by 100 MPs (97 Labourites and 3 Liberals) on March 14, 1930, calling for the elimination of battleships from all the world’s naval fleets. ADG, II, D. Grandi, Discorso alla Conferenza di Londra, January 23, 1930, p. 94.

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putting the burden of confrontation with the English and the Americans on the French if the proposed tonnage was excessive in their eyes. Grandi knew well that France, at the moment of the London Conference, was not willing to concede naval parity to Italy.40 This had been communicated to him earlier in a memorandum to that effect from the French foreign minister. But Fascist Italy could certainly not appear militarily weak compared to the stato liberale government still in power when the Washington accords were made. In compensation, the total openness regarding specific tonnage quotas allowed the Italian delegation to present itself favorably to American public opinion and to the pacifists of France and Great Britain. How did Briand articulate his strategy for the London Conference? France’s first priority was to make use of the negotiations on naval disarmament to achieve a political victory he had aimed at throughout his entire 1920s foreign policy posture: a political alliance with Great Britain, and possibly with the United States, that guaranteed French security regarding Germany and forced Fascist Italy either to join the alliance or to remain isolated. Briand presented a number of proposals he thought served this goal: the extensive interpretation of Article 16 of the Charter of the League of Nations, a Mediterranean security pact, and even an advisory pact among the great powers to isolate Germany that broke with the Locarno Pact’s approach of placing Germany and France on equal footing in formal terms. He used Great Britain and the United States’ desire to agree on naval disarmament as a negotiating tool in each of these proposals; this required that France request such an elevated tonnage limit that the two-power standard would be threatened, so that only if the great powers accepted a security pact with France would that country reduce its proposed tonnage limits. This in turn would force Great Britain to pressure Italy to accept a naval accord that formalized its inferiority relative to France, forcing the Fascist government to choose between isolation and a serious political defeat.41 Initially, the French tactic seemed destined for success. Briand presented a maximum tonnage quota that was incompatible with the interests of the greater powers and, on that basis, induced MacDonald to open negotiations for a security pact that, according to MacDonald, though without “the precise character of a military alliance,” would tend to “make obligatory for all States such military measures as could be recommended 40 41

ADG, II, tel. 11, Gaetano Manzoni to Dino Grandi, Paris, January 3, 1930, p. 79. ADG, II, Le garanzie di Locarno e le sanzioni, p. 130. See the considerations of Tardieu: DDI, 7, VII, 315, Dino Grandi to Benito Mussolini, January 21, 1930.

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by the League of Nations” on the basis of Articles 11 and 16 of the Covenant.42 At this point, the Italian delegation found itself confronting several days of dramatic difficulty under pressure from Ramsay MacDonald and inspired by French demands. In their March 27 meeting, MacDonald informed Grandi that negotiations for a security pact were about to be completed, in which case France would agree to reduce its maximum tonnage proposal from 724,479 to 600,000 (or a maximum of 650,000). Italy would be asked to accept a 400,000-ton limit in order to maintain the two-power standard. MacDonald, while declaring his regrets, “added that if Italy did not accept this proposal Great Britain would be forced to accept a four-power accord.”43 Grandi’s historical discourses on the earlier unwillingness of the British government to accept this interpretation of the Covenant and on the right of the other member nations to weigh in on the issue could do little in the face of MacDonald’s stand. Grandi risked setting off a campaign in the French press to blame Italy’s stubbornness for shipwrecking the conference, or even inviting direct action against Rome’s government to induce it to accept the proposal.44 Even if this road were not taken, it recalled unfortunate memories of Wilson’s direct call to the Italian people, bypassing the Italian delegates at the Versailles peace conference. And there remained the dilemma facing Grandi and Mussolini: accept not only diplomatic isolation but also the role of enemy of world peace, or choose a political defeat unacceptable even to an Italian government less conditioned by strict nationalist prejudices than France. The game of naval armament quota proportions, which would formalize a hierarchy among the powers, had the unfortunate characteristic of being easily apprehended by all. It would not be a mere diplomatic loss, knowledge of which the regime could keep in the strict confines of diplomats and foreign correspondents; it would become a public scandal that could not be watered down or reinterpreted convincingly even by the regime’s own press. Why then did the MacDonald and Briand proposal fail? First of all, it was due to the hostility of the United States, which Grandi continually emphasized both in his public statements and in his ongoing meetings with Secretary of State Stimson and his spokesman heading the American delegation, Hugh Gibson. The original elevated French request regarding 42

43 44

ADG, II, D. Grandi, Appunti sul interview col Primo Ministro MacDonald, London, March 28, 1930, pp. 152–153. ADG, II, Tel., Dino Grandi to Benito Mussolini, London, March 28, 1930, p. 152. Le Temps, March 30, 1930; L’Ere Nouvelle, April 5, 1930. On the pressures exerted by Briand and the Foreign Office, see for example DDI, 7, VII, 393, February 27, 1930; 7, VIII, 430, Dino Grandi to Benito Mussolini, March 15, 1930.

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maximum tonnage, necessary to Briand’s strategy, provoked a wave of protest from the American press and from important sectors of the British press and public opinion. France had no choice but to sacrifice its alreadycompromised public image, taking on the role of power hostile to the principle of disarmament in the name of a policy that was closely tied to the methods of secret diplomacy and bilateral negotiation. Such an image and methods were distinctly unpleasant to Anglo-American public opinion.45 This climate ended up weighing decisively on the crucial point for the French. When they began negotiations for the security pact that Tardieu and Briand claimed as a condition of their reconsideration of tonnage quotas, the Americans reacted bitterly. On February 17, Senator Robinson from the American delegations declared: The people of the United States are against any involvement in European political questions. They would reject any accord that explicitly or implicitly carried an American obligation to dedicate our army or our navy to enforcing international commitments in the interest of foreign powers.46

Nor did the Americans stop at clarifying that they were not willing to enter into any multilateral agreement to satisfy France’s wish for security. The Americans saw the French request as a wily attempt to exploit the American and British desire for disarmament, in order to achieve its own secondary goals. Such a stratagem drew vehement reactions from the majority of the press, but also the disappointment and growing diffidence of those who, like Stimson, did indeed wish to guide American foreign policy toward a growing engagement with international relations and yet had to demonstrate respect and caution regarding the ongoing difficulty of American domestic politics. Even if Stimson personally felt open to the French proposals and had contemplated the advisory pact, the secretary of state knew all too well that he would have to justify himself to Hoover, and above all to the Senate. This body felt no tenderness about any United States involvement in European alliances, which would only have slowed the careful progress toward a strategy of reengagement followed by

45

46

Times, February 7 and 10, 1930; Daily Herald, February 14 and 15, 1930; Daily Telegraph, February 6, 1930. ADG, II, Le garanzie di Locarno e le sanzioni, note 4, p. 149. In reality the attitude of the American delegates was frequently more prudent than this quote implies. See for example DDI, 7, VIII, 371, Pro memoria dell’incontro Grandi, MacDonald, Stimson, February 18, 1930, in which Stimson remained silent; DDI, VIII, 434, Pro memoria dell’incontro Grandi, Stimson, Morrow, March 18, 1930, defined as “frosty” by Grandi, even if in Mussolini’s favor.

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Stimson and reluctantly endorsed by his president.47 When American newspapers began to refer to a “surrender” to French solicitations, Stimson had no choice but to issue a press release denying the accusation, which definitively ended any possibility of American adherence to pacts negotiated on the sidelines of the naval disarmament conference.48 The American attitude also had an important influence on opposition opinion in Great Britain. Under these conditions, MacDonald had to abandon the negotiation; French politics had been defeated, and the Italian government – most of all Grandi himself – could breathe a sigh of relief. Naturally, what got the Italian government out of this scrape was the refusal of decisive political sectors in both the United States and Great Britain to accept the logic of security as pursued so single-mindedly by the French. The policy of Italy, and especially of Grandi, was influential in encouraging and developing that refusal. Just as Briand had targeted the narrow margins of maneuver enjoyed by MacDonald and Stimson in relation to their nations’ representative bodies by engaging in secret and restricted negotiations, Grandi exploited those same restrictions on his Anglo-American counterparts by playing to the larger public audience and appealing to its sympathy for disarmament and suspicion of secret alliances.49 It was of little import that Grandi represented a Fascist dictatorship that had repeatedly declared its nationalist ideology and desire to revoke the Versailles peace treaty and that had nothing but contempt for the pacifists and democrats of the Anglo-Saxon countries; that Italy supported disarmament only in the interest of a precise calculation of national status; or that the appeal to minor powers might appear instrumental. More than any of these issues, what counted were hard facts, and the fact was that Italian policy served the aspirations of those in the United States, as in Great Britain, who favored the reduction and control of arms but did not wish to become enmeshed in a Continental system of European alliances. As for the specific development of relations between the United States and Italy, Grandi could reasonably state before the Grand Council of Fascism that The work achieved by Italy at the London Conference has also created a close collaboration between Italy and Great Britain, and in particular [author’s emphasis] between Italy and the United States of America. These three nations, so different

47

48 49

H. Stimson and M. Bundy, On Active Service in Peace and War, New York: Harper & Brothers, 1947. Ferrell, pp. 98–99. Ibid., p. 100.

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in so many ways, have demonstrated that they possess an identical vision of the solutions to the great problems left to us by the world war. It is to be hoped that, continuing on this path forged at the Conference of London, we will develop a shared and unanimous activity in the politics of Great Britain, the United States, and Italy. The definitive clarification of the relations between Germany and France depend to a great extent on this shared and unanimous activity, as does the clarification of the relationship between France and Italy; which is to say, the peaceful future of Europe depends on it.50

It was certainly contradictory to speak of an “identical vision” in reference to Great Britain. In a different part of that same speech, Grandi referred (if blandly) to the difficult position in which the Italian delegation had found itself as long as MacDonald had seemed willing to make the accord with Briand. It was also an obvious exaggeration to say that “Italy’s moral right to naval parity with a stronger Continental force [one-power standard] than the two Anglo-Saxon powers has been recognized.”51 There was, however, an objective commonality of interest between Hoover’s policy of cautious rapprochement to European issues and Grandi’s own policies. It was not just a quirk of personality or accident that, in their frequent meetings outside the official sessions of the London Conference, Stimson and Grandi created a relationship of close cooperation that was destined to develop further in the following years and to be remembered by the secretary of defense, even after Italy’s defeat in the Second World War.52 Still, such contacts on the personal level would have had very little impact if the press and American public and congressional opinion had not enthusiastically embraced the Italo-American convergence of interests on the disarmament question and thrown into relief the positive contrast between Italian and French tactics. Typical of the American assessment was the comment in the Chicago Tribune from February 20 that Americans appreciated the Italian attitude regarding the French, who were losing prestige in public opinion. Even those Americans who did prefer the French had been disgusted by Tardieu’s rigidity.53 While France’s unpopularity rose, Italy benefited from past years’ friendly press treatment of the Fascist regime, its perceived stabilizing and antisubversive role, and the positive attention lavished on the figure of Mussolini. All this allowed the interpretation of Grandi’s foreign policy 50

51 52 53

ADG, III, D. Grandi, Discorso al Gran Consiglio del Fascismo, Rome, October 2, 1930, p. 278. Ibid., p. 277. D. Grandi, Interview. Chicago Tribune, February 20, 1930.

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not only without negative ideological judgment, but actually as a worthy manifestation of a regime about which, with very few discordant exceptions, Americans had nurtured an essentially positive opinion. It was no surprise that the public relations to which Fascist representatives had so assiduously dedicated themselves, following the example of “il Duce,” had paid off in the reports of the various foreign correspondents to American newspapers.54 Nearly the entirety of the American press, like the Labour and Liberal press in Great Britain, had formed – and went on to perpetuate – the impression that blame for a failure of the London Conference was not to be distributed equally. Whereas Italy pursued a policy that meshed perfectly with Stimson’s plans for assuming the leadership role that awaited the United States, France had concerns and habits of behavior that alienated the two great Anglophone powers and damaged its image in their public opinion. This impression was further reinforced about a year after the London Conference, on the occasion of the failure of a last attempt by the United States and Great Britain to obtain a naval accord between France and Italy.55 According to the initial terms of the accord, the Italian government, fearful of an eventual naval arms race, agreed not to apply the principle of parity.56 This was due to France’s identification of a much larger number of ships that were about to go out of commission, and which therefore could be replaced during the period contemplated. In return, Italy obtained parity with France in the construction of new ships and parity with the maritime powers in terms of maximum submarine tonnage.57 This was an important step in the intensification of the relationship between Italy and the United States. That Mussolini himself had not been extraneous to such a goal, even in this phase, is demonstrated by his statement to the Associated Press. After having boasted of the beneficial 54

55 56 57

The Chicago Daily News, June 30, 1930. This was the case of Price Bell, an American special correspondent in London, who submitted a report of the conference clearly influenced by his previous contacts with the regime, saying that France’s defeat at the London Conference was its own fault. The English, Japanese, Italian, and Americans all wanted France to achieve a satisfying deal, but the French spent the entire time worried that the Italians were out to betray them in favor of Germany and ruined their own negotiations. According to Bell, the Italians had no such intention; they actually wanted to reconcile with the French. It is debatable if the understanding with France was really so close to the Italian foreign minister’s heart, although he certainly would have preferred an outcome like that of the Washington conference to nothing at all. ADG, III, D. Grandi, Discorso al Gran Consiglio del Fascismo, Rome, March 5, 1931, p. 3. Ibid., p. 14. ADG, III, pp. 47ff., Comunicato ufficiale pubbicato contemporaneamente a Roma, Parigi, Londra del testo dell’accordo naale intervenuto tra Italia, Francia e Inghilterra.

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effects of a naval accord on the economic crisis and affirmed that “Italy has done its duty,” he concluded with the following: It was my pleasure to see that the United States had always played an efficient and objective role in bringing the negotiations for the newly accepted accord to a positive end. The people and the Government of Italy highly appreciated this role and are just as pleased to note that this new phase of world pacification was initiated with the precise and forceful statements made by President Hoover at his inauguration. I can say that the American program to reduce armaments is also the Italian program, and that I firmly hope that Italy and the United States will continue to cooperate to achieve this goal.58

Two days later, Hoover’s reply from Washington arrived, of unusual amplitude and scope for a statement on European political events. After affirming, with some exaggeration, that “the Franco-Italian naval accord signifies the completion of a work begun two years ago for the reduction of naval armaments and marks the end of naval arms races among the five Great maritime Powers,” the president underlined the United States’ role of stimulus to the accord, through Ambassador Gibson’s voyages to Rome and Paris. He concluded: I feel that the responsible heads of governments and the peoples of the world owe a debt of gratitude to the infinite patience and ability of all who have collaborated so effectively toward the settlement and that they realize the fortunate augury which the solution of this problem by direct conversations between the interested parties contained for the progress in the removal of the obstacles on the path of a general and reasonable limitation of all armaments.59

Since the economic crisis offered few occasions for Hoover to proclaim good news, the president emphasized every development in the politics of disarmament, which he considered one of the principle campaigns of his presidency. He thought of it as the path that would most effectively allow him to guide the country back to international engagement, given the positive response of public opinion to the themes of disarmament and peace. That he may have exaggerated not only the value of the agreement in question – which was, as we shall see, stillborn – but indeed the whole 58 59

ADG, III, pp. 46–47, Benito Mussolini, Dichiarazione all’Associated Press. Herbert Hoover, “Statement on the Franco-Italian Naval Agreement,” March 4, 1931, in Public Papers of the Presidents of the United States: Herbert Hoover. Containing the Public Messages, Speeches, and Statements of the President January 1 to December 31, 1931. Washington, D.C.: U.S. Government Printing Office. Consulted online at: University of Michigan Digital Library, Public Papers of the Presidents of the United States, http://quod.lib.umich.edu/p/ppotpus/ consulted October 19, 2012; ADG, III, p. 3, Herbert Hoover, Dichiarazione alla stampa Americana, March 4, 1931.

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theme of disarmament, was not unrelated to his limited comprehension of the economic crisis. He had failed to grasp the destructive effects of the crisis on not only the economies but the international relations of the nations in depression. In reality, the “patience and ability” of Briand, Henderson, and Dino Grandi as they formulated the terms of naval disarmament, which would last all of one morning, were of little value in the face of the economic storm sweeping through Germany. The German chaos weakened the American ability to intervene and severed the links of dependence and interdependence holding together the Western world. The sad epilogue of the Franco-Italian accord annulled Hoover’s efforts toward disarmament yet actually consolidated the Italian reputation for pacifism and respectable conduct. French opposition experienced a regrowth of vitality, even after the approval of the agreement by the respective parliaments. In the moment of the final drafting of the agreedupon terms, the French delegates raised new objections and proposed amendments that threw the entire accord back into question.60 In this way, the ongoing effort to reach concrete results on arms limitations was, once again, stymied. The Anglophone press did not fail to launch poison darts at the French and praise the Italians in the matter, with the result that Italy ended up with the political advantage of having emphasized its pacifism and willingness to cooperate, in stark contrast with the French neurosis over security.

5. the world disarmament conference Disarmament issues continued to remain at the center of the collaborative relationship between the Hoover administration and Fascist Italy even after the failure of a Franco-Italian accord to complete the London agreements in extremis. By this time, in fact, the preparations had begun for the World Disarmament Conference, long anticipated by the commitments of the victorious powers in the Versailles Treaty, the Locarno Pact, and the Kellogg-Briand Pact.61 The problem had become ever more pressing given 60

61

According to Grandi, the French opposition came from both military circles and the naval industry, supported by the diplomats of the Quai d’Orsay. Whereas Great Britain and Italy maintained that the text of the accord regulated all the construction undertaken by the Italian and French navies until December 31, 1936, the French argued that the deadline applied only to construction completed before that date. ADG, V, La missione di libertà, di equilibrio e di conciliazione della politica italiana, pp. 94–95; D. Grandi, Discorso al Senato del Regno, Rome, June 3, 1931, p. 105. ADG, VII, I, Clemenceau, Reponse du Président de la Conférence de la Paix aux observations de la Délégation allemande au sujet du projet de Traité de Paix, Paris, June 16, 1919.

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that the economic and social chaos in Germany appeared to be opening the door to those nationalist forces that explicitly called for rearmament. Nonetheless, French intransigence continued to demand that disarmament be compensated for by security safeguards that would protect it against Germany in the context of a new great power alliance. The French delegates to the League of Nations pushed for subsequent postponements of the conference, but the United States and Italy found themselves united in favoring its convocation, and they had the last word, as the conference was called for February of the following year in Geneva. It was therefore not a coincidence that Secretary of State Henry Stimson decided to begin his voyage in Europe with a visit to Rome, during which he would for the first time open concrete negotiations regarding the imminent conference with European statesmen. The summer of 1924, when Italy had protested in vain against then-secretary of state Charles Evans Hughes excluding Rome from his tour of the principal European capitals, now seemed far in the past. Although the dramatic financial situation that had moved Hoover to propose a moratorium on payments of governmental debts (a proposal Italy had immediately accepted) weighed heavily on the Roman proceedings, Stimson’s demeanor in his dialogue with Grandi confirmed the rumor the press had been reporting that Stimson’s European trip was mainly focused on preparing the disarmament conference. This was no surprise, since the issue was the Hoover administration’s main foreign policy priority.62 The meetings, which took place July 11 and 12, 1931, are summarized in a memorandum by Grandi. These were the early exchanges of their dialogue as he recorded them: STIMSON spoke at length of the necessity that the European and non-European states dedicate themselves seriously to the technical and political preparation for the World Disarmament Conference that is to begin next February in Geneva. It is very likely that the conference will begin slowly while all await the results of the French elections. If the parties of the Left win the French elections, there will be fewer difficulties for the Conference in reaching agreement. If the Conference does not succeed, the negative consequences would be incalculable. It represents the last hope. Should that hope be disappointed, we will witness a renewal of all the typical phenomena that inevitably precede the outbreak of a new world war. GRANDI: I declare myself in agreement with Stimson. I too believe that a victory of the Left in France would be in the best interests of all . . .63 62 63

New York Herald Tribune, July 13, 1931. ADG, V, V, D. Grandi, Appunti sui colloqui col Segretario di Stato degli Stati Unitie H. Stimson, Rome, July 11 and 12, 1931, p. 37.

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Here, then, was the Republican secretary of state, a Wall Street lawyer, together with the Fascist foreign minister, both fervently hoping for the victory of Blum and Herriot, just as Grandi had boasted happily of his collaboration with Henderson and MacDonald. The key to this apparent paradox lay in Grandi’s analysis of the French elections, an analysis that was of course the one most welcome to Stimson and the rest of the Americans at that time, who were worried by, if not downright hostile toward, French politics. France is afraid of Germany and is taken by a fever to arm itself and its allies to the teeth. Arms fever results inevitably in a fatal politics of domination. Thus, from this original fear, France arrives to the point of affirming her right to dominate all of Europe politically and militarily. France strengthens her alliances, alliances that are like all alliances – guarantees of war and not of peace. Naturally, the armament of France and her allies provokes worry and fear in the other countries, which feel constrained to arm themselves in turn, arms that reinforce French fears and encourage more new arms construction on France’s part. In this way, the more fears are fed, the more arms are built and the greater the danger of war. Together they form a vicious circle from which we must all escape together.64

The French attitude reinforced the isolationist opposition by offering men such as Senator Borah continuing arguments sustaining the uselessness of any effort to intervene in European politics and the risk that such an engagement would involve the United States in a new world order with which it would not share the same values and goals. The French pursuit of security through the politics of alliance and rearmament corresponded precisely to what the Americans – isolationists and Wilsonians alike – considered the origin of the First World War (and the most likely cause of the Second). Grandi knew this well and lost no public or private occasion to underline this risk to his American interlocutors. And Germany? What analysis did the foreign minister offer his American colleague on this issue? And how did Stimson respond? Germany in its turn proceeds in an irrational manner. The domestic situation is difficult, politics just as difficult. Nonetheless, German politics frequently assume the same character they demonstrated before the war. Defeat seems to have taught the German people nothing. Their recent customs proposal with Austria is an example. Another error Germany is on the brink of committing consists of the following: the military leaders of the Reich maintain that Germany must present itself at the coming disarmament conference with the argument that “The signatory states of the peace treaties have not fulfilled their obligation to disarm, therefore Germany has the right to arm herself.” A mistaken analysis. Germany must instead 64

Ibid., p. 38.

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say: “We have disarmed and we have obeyed the peace treaties. Now it is time for all the signatory states to equally show their good faith and fulfill the promises they made in those treaties.” STIMSON: I agree and I will speak of it with Brüning. No country will be in as advantageous a rhetorical position as Germany, if it avoids errors.65

While Grandi did succeed in introducing the element of German policy that most concerned Italy in the following years – the growth of a panGermanic threat at the Brenner Pass – he was careful not to retrace the old anti-German image that justified French politics, and which the Americans had opposed since the peace talks at Versailles. His complaints were presented as constructive criticism and were received as such by Stimson, who immediately agreed to influence Brüning to follow a line of conduct that would harmonize with his plans for European disarmament. The ever more profound disquiet of German society, and the lethal consequences it might have for the foreign policy of their governments, were present but remained implicit in the discussion between the two colleagues. What was inevitably lacking in such a conversation was an analysis of the economic roots of the politics of rearmament infecting all of Europe and of the resulting relationship between that tendency and the damages caused by the Depression. But there was one question, a kind of test case, to which Stimson was particularly sensitive and which he wished to pose to Grandi as a representative of Fascist Italy with whose perspectives he seemed to share so much: STIMSON: Is there nothing new between Rome and London? The English are today truly our brothers. The London Naval Conference sealed the understanding between Great Britain and the United States of America, which constitutes a great new departure point in the history of our two nations. GRANDI: On the character of the relationship between Italy and England I have already had the opportunity to speak to you at length during the London Conference. Friendship and cooperation with Great Britain is an accepted principle of Italian policy. The Locarno Pact happily consecrated Italy and Great Britain’s position both directly between the two of us and in regard to our common position toward France and Germany. In terms of the crucial questions at stake – disarmament, reparations, and the economic reconstruction of Europe – the governments of London and Rome walk the same path, which is also the chosen path of the United States of America.66

Grandi was well aware that the primary vehicle of American policy in Europe was and would remain Great Britain, that there was no possible 65 66

Ibid., p. 39. Ibid.

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understanding either with the officials in Washington or the bankers in New York that did not depend on the good graces of London. The relations between the two Anglo-Saxon empires, one in decline and the other endowed with the potential for an ever more extensive dominance, were characterized by collaboration, even as a transfer of power became imminent. If the Italian government wanted to develop its role as a financial client of the United States and participate in the American politics of cooperation in Europe as announced, not without some contradictions, in the Locarno Pact, the point of reference could only be London. In the face of Mussolini’s impatience on this question, Grandi often responded, with some exaggeration: Great Britain is like an old auntie, very old, from whom we hope to inherit. How does a nephew behave to encourage his old auntie to keep him in her will? He treats her with great tenderness!67

On this as on other occasions, Grandi’s excessive ambitions, or for that matter illusions, were revealed. Grandi hoped that Italy could in the future take the place of Great Britain as main European ally of the United States. In the meantime, this ambition translated itself in an obsequious adherence to every American indication of its values and priorities and in a continuous pursuit of alliance with the British. From this point of view, English liberalism and Labourite pacifism were the most favorable entry points for an Italian diplomacy which wanted to combat French dominance and aim for a reinsertion of Germany into the so-called concert of nations – a goal that would have the welcome side effect of preventing pan-Germanic nationalist aggression, which was still at that time viewed by Mussolini as a threat to Italian borders so exhaustingly conquered in the First World War. Given this verification of their general agreement on politics, Grandi thought the moment had come to advance a concrete proposal for the preparatory phase of the World Disarmament Conference. Hoover had just formulated the proposal for a moratorium on payments of international debts, which Italy had received with particular enthusiasm and regarding which he had said to Stimson: What a disappointment it would be if all the obstacles [created by France] to the American initiative were not rapidly overcome! We are well aware that the United States in that case would probably return to prioritizing in America [sic!] the habit

67

D. Grandi, Interview.

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of that traditional isolationism that Hoover has so courageously led the American Nation away from at last.

His proposal in terms of disarmament shared, by analogy, the same logic: . . . I think that it would be advantageous if all the States, in anticipation of the conclusion of the Disarmament Conference, would solemnly commit themselves from this moment to suspend their naval, land-based, and air force construction. It would be a kind of vacation or truce, in other words a moratorium on arms that would have the same political and psychological value as the moratorium Hoover created in these last few weeks on international debts. The start of the Geneva Conference would take place in an atmosphere of commitment, even a transitory one, but one that already found the States working together. This would be of great benefit to the proceedings of the negotiations for a general accord.

The minutes kept by Grandi here add that “Italy would be ready to take the initiative, but undoubtedly if it were proposed by the government of the United States of America, its success would be more likely.”68 The proposal was immediately accepted by Stimson who, after having consulted Hoover, in the next meeting with the Italian foreign minister on July 14, affirmed (according to the minutes kept by Grandi): In the meetings I am about to attend in Paris and Berlin, I will prepare the ground for the favorable reception of this initiative, which should rightly remain an Italian initiative. In any case, you may count on the unconditional support of the United States when you believe the moment is right for an official proposal to the other Governments.69

The occasion chosen by Grandi was offered by the twelfth assembly of the League of Nations. In his speech on September 7, Grandi repeated the by now customary themes of Fascist foreign policy under his direction: homage to a security that was not founded on military alliances or the militarization of international organizations, but on disarmament and the peaceful mediation of controversies; the construction of a peace favored by the cancellation of international debts, following the logic of the Hoover moratorium; the liberalization of exchange; a politics of debt forgiveness toward Germany, inspired by the Dawes and Young Plans; disarmament that constituted, on the part of the victorious powers, the fulfillment of a precise obligation to themselves and each other, as well as to Germany, who had been forced to disarm by the terms of the peace treaty. Finally,

68 69

ADG, V, V, D. Grandi, Appunti sui colloqui, p. 37. Ibid., p. 41.

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Grandi launched his proposal of a moratorium on the construction of all new arms in anticipation of the future disarmament conference’s deliberations.70 The proposal resonated with the collective anxiety provoked by the turbulent German situation, not only in Anglophone diplomatic circles, but among neutral countries as well. Still, if one believes what Grandi later recounted to Hoover, even before public opinion could react to the proposal, it had already begun to encounter serious obstacles. The French did not dare to demonstrate open opposition, but they did succeed in slowing the concrete application of the proposal’s terms. Germany’s military leaders were also opposed, but Brüning decided to adhere anyway. The British government itself gave in only after having realized that the proposal also had American origins. In fact, Ambassador Gibson had been sent specifically by the United States to help support the proposal.71 At the end of the discussion, the proposal was accepted in a motion presented by the delegates of Denmark, Norway, the Netherlands, Sweden, and Switzerland. Approved unanimously, the representatives of all the states present were invited to confirm their adherence on or before November 1. While the majority of nations – among them the United States, Great Britain, Germany, the Soviet Union, and Turkey – would have been willing to apply the moratorium immediately, the representatives of Japan, France, and their allies raised objections. As the proposal took shape in this way, Hoover and Stimson consolidated the international initiative built around the president’s disarmament plan. Hoover wanted to shore up European collaboration before the tension between France and Germany, accentuated by the predictable yet all-too-serious developments on Germany’s domestic front, exploded. Above all, the proposal of a moratorium allowed the Hoover administration to demonstrate that America’s cautious approach to the world political scene was obtaining positive results. While Stimson’s attempt to build a collective intervention against Japan was clearly in tune with American interests, it did not have the desired effect, mostly due to Great Britain’s 70

71

ADG, V, VII, D. Grandi, Discorso all XII Assemblea della Società delle Nazioni, Geneva, September 7, 1931: “All the Governments ought to commit themselves for the period of one year beginning on November 1, 1931: not to augment their spending on land-based arms for the current financial year and not to exceed the total of the same spending in the following year until the end of the moratorium; (b) not to begin building any ships, with the understanding however that ships already under construction may be completed; (c) to suspend the construction of new aviation equipment.” (p. 147) ADG, V, VIII, Gli Stati Uniti a Ginevra, pp. 152ff.

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reluctance.72 This made disarmament an even more crucial proving ground for Hoover, especially after the disappointment of the London Conference. The American press reaction was relevant in this regard: not only did they express support for Grandi’s proposal, but they saw in it the development of further possibilities for American international engagement. The New York Times commented that the government and the people of the United States had welcomed Grandi’s proposal, which found such a warm response because it was sure to increase the chances of success at the disarmament conference. Indeed, the enthusiasm of the White House led some observers to predict that the United States would soon present the same idea in even more radical form.73 The editorialists of the most authoritative American daily paper were by now publicly discussing the details of what would prove to be the Hoover Plan.74 On the very eve of Grandi’s November visit to Washington came the news that all the nations participating in the coming disarmament conference had accepted the moratorium.75 The Italian foreign minister had not only achieved a success in the preparatory phase to the conference, but had also consolidated the position of Italy as the most faithful interpreter of American policy as it was developing in relation to Europe. Grandi’s visit to Washington was extremely significant as a moment of synthesis and consolidation of two years’ worth of intense exchanges. It did not produce any specific decisions relative to the imminent disarmament conference, although that theme was at the center of the minister’s speeches as well as the somewhat spasmodic attention paid to his every move by the American press. The meetings with Hoover and Stimson confirmed the convergence of views between the two governments on the topic of disarmament as well as their more general vision of the European political situation.76 The most important result of Grandi’s visit, due also to its influence on the disarmament theme, was the strengthening of the pacifist image of Italy as a leader flanking Hoover’s administration at the vanguard of the forces for disarmament. He gave a political speech on general themes before the Council on Foreign Relations, the sancta sanctorum of the internationalist establishment of New York. There he restated the general principles of the Italian 72 73 74 75 76

D. Grandi, Interview. New York Times, September 11, 1931. See also New York Telegram, September 16, 1931. ADG, VI, IX, Il senso morale nei rappori internazionali, p. 85. ADG, VI, XI, La collaborazione tra Italia e Stati Uniti, pp. 104ff; ADG, VI, I, I colloqui di Washington, pp. 7–10.

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program for disarmament; and again at his second serious political speech, given to the Foreign Policy Association, he entirely dedicated his remarks to the issue of European security and disarmament. At every moment it was clear that Grandi implicitly contrasted himself to French Prime Minister Laval, who had also just visited the United States. Although Grandi, out of tactical considerations, avoided any direct criticisms or polemics against French policies, he did emphasize repeatedly how pleased he was that Laval had made the voyage.77 Still, his statements on security issues constituted a clear, if indirect, contradiction of French positions, articulated in terms sure to please the American press. In addition to the well-known concept according to which security was not possible except as a benefit of the process of disarmament, Grandi took particular care to emphasize the moral aspects of the pursuit of peace.78 In this spirit, Grandi also underlined another principle sure to curry favor in that singular context of moralism and realism that characterized the New York financial and political elite: that peace must be accompanied by justice, or, in other words, that Germany could be won over to the project of European pacification only on the condition that, concerning disarmament as in other issues, it receive the treatment due to it in conformity with its fulfillment of the obligations imposed by the Treaty of Versailles, and in recognition of Germany’s objective importance among the nations of Europe. He made continuous references to the decisive role of the United States, with Italy firmly committed to cooperation and support.79 This was repeated to the Foreign Policy Association: I wish to add that our hopes in the Disarmament Conference find much encouragement in the attitude of the American government and American public opinion. As soon as we realized in Italy all the earnest determination with which the United States would tackle the problem, we felt that it had finally a good chance of getting out from the nebulous state of an ideologic academy into the realm of practical possibilities. To this end, we will be only too glad to move with you with all our strength and all our heart.80 77 78

79 80

Ibid. ADG, VI, D. Grandi, Discorso al Council on Foreign Relations, New York, November 23, 1931, p. 51; Discorso alla Foreign Policy Association, New York, November 26, 1931, p. 71. ADG, VI, D. Grandi, Discorso al Council on Foreign Relations, p. 51. ADG, VI, D. Grandi, Discorso alla Foreign Policy Association, p. 76. Published in English as Grandi, Dino. 1931. Address by His Excellency Dino Grandi, minister of foreign affairs of Italy, November 26, 1931, The Waldorf Astoria, New York. New York: Foreign Policy Association.

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The goals inspiring this kind of declaration were quite clear. Grandi was pursuing a policy that did not promise immediate benefits, at least not according to the traditional standard of Italian nationalism, which measured political success in square meters of acquired territory, even empty land. The Italian foreign minister had an absolute necessity to make the results of his visit as visible and strong as possible, by emphasizing their long-term payoffs, especially in terms of the privileged relationship with the United States. He had now understood, due also to the experience of the negotiations over the war debts, that the relationship between state hierarchies, centers of private interest, and relevant circles of public opinion were notably more direct in the Anglo-American nations, but especially in the United States, than they were in the majority of European states (and above all in Fascist Italy). The close collaboration that he had managed to create with Stimson would not be valuable unless it were the expression of a more widespread consent among those Americans who were most occupied with foreign relations. In a more general sense, Grandi was also aware that the friendship with America would serve no purpose without that favorable public opinion he worked so assiduously to court. Americans must earnestly desire the development of that as yet embryonic engagement in European politics. In Grandi’s mind, the politics of disarmament were also, perhaps above all, the vehicle with which the United States would make its power felt in Europe. It was therefore necessary on the one hand to utilize this tendency in the various international assemblies by making Italy their main spokesperson, and on the other to consolidate it, convincing even the more reluctant sectors of American public opinion that the United States would successfully secure European partners for its program of disarmament and pacification. Grandi’s public statements during his trip to the United States thus tended to emphasize Italian support for Hoover and Stimson’s policies, on whose fortunes his own destiny depended as well, since he would soon have to offer his “duce” an account of his actions. It was therefore in the best interests of both Stimson and Grandi to dramatize the collaboration between their two nations as the basis for a greater coalition that would be consolidated at the conference. The American press was not slow in responding to this cue, offering numerous comments on this point, while the Boston Herald notably reprinted the message launched by Grandi more or less verbatim.81 81

Boston Herald, November 29, 1931; see also New York Times, November 27, 1931; New York American, November 29, 1931; Washington Post, November 30, 1931.

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In reality, this anticipatory atmosphere that had grown up around the convergence between the United States and Italy relative to the imminent disarmament conference would prove to be in large part merely an illusion. It was true that agreement existed; the conference proceedings would demonstrate as much. It was also true that it produced an early encouraging result: the moratorium on new arms building. But it was equally true that this convergence was not sufficient to guarantee concrete results that were more widespread and long lasting. There was no aspect of this collaboration that was not the product of propaganda concerns – or, if one prefers, of general principle rather than specific commitment. It was not solid enough to change the larger reality of European and world power relations that the Americans hoped for in February 1932 when the World Disarmament Conference opened in Geneva. In sum, the position of the United States contained the following contradiction, visible in Stimson’s affirmation during one of his inconclusive meetings with Laval and repeated later to Tardieu in April 1932: I then reviewed my attitude towards the Arms Conference stating at length what I had told Laval last October. I said I had always regarded it as more in the nature of a European peace conference than anything in which we had direct responsibility.82

Stimson had seen clearly, even during the conclusive phase of the London Conference, that it was not possible to achieve significant results even in this circumscribed area without confronting the general problems dividing Europe. Stimson had this capacity of vision; he, like Grandi, was aware that they were in a race against time. To win, it would be necessary to revise the punishments imposed on Germany by the Versailles Treaty, before the Weimar Republic succumbed to the economic crisis and the Nazi onslaught. The United States did not totally disavow the responsibilities arising from this problem: Hoover’s moratorium was a courageous decision that responded precisely to the urgency of eliminating one of the heaviest legacies of the First World War, and did so on the particularly delicate terrain of American public opinion about debt and repayment. Nor did he refrain from taking an analogous initiative on disarmament.83 The other side of this coin, however, of which both Hoover and Stimson were painfully aware, kept them from raising the issue of treaty revision with the French. The politics of reopening dialogue with Germany and 82

83

YUL, HLS, Diary, April 15, 1932. Stimson’s diaries were published as Stimson, Henry, Henry Lewis Stimson Diaries 1909–1945, New Haven: 1980. The relevant volumes are 20 and 21 (reel 4). C. O. Johnson, Borah of Idaho, New York: 1936, pp. 320, 445–448; Ferrell, pp. 20–202.

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rescuing the moribund Weimar Republic were impossible given a France armed to the teeth, militarily allied with the states on Germany’s eastern borders, and obsessed with the problem of security; this France was simultaneously aggressive and fundamentally weak, and needed the most careful maneuvering to be brought to the table or, alternatively, isolated and worked around. There was additionally the objective possibility of the Soviet Union’s support, committed as it was to a politics of democratic alliance by the presence of Litvinov at the League of Nations. All this was necessary but not sufficient. Nor was the greater willingness of French business – traditionally linked to the American market – or the radical and Socialist left within French politics enough to sway France in this direction. Even the Dawes Plan and the Locarno Pact had not succeeded in working without two fundamental conditions: American capital and some form of renewed political guarantee of French security. In 1932, at the opening of the World Disarmament Conference, the United States was no longer capable of offering either the first or the second of those conditions. The economic crisis had drastically damaged, if not eliminated, the availability of American capital, and American public opinion, while interested in concrete results toward disarmament, was nevertheless unwilling to submit to binding commitments to the ever less popular French. Even the simple advisory pact that Stimson had proposed at the end of the naval conference, that would reappear in the new disarmament conference, was incompatible with the domestic mood of Americans, nor was it in any case enough to satisfy the French.84 This was the dilemma that risked shipwrecking the whole conference: an accord could only be reached on the basis of French concessions, but those concessions could only be won through very strong pressure that would first isolate the French and then offer them some kind of quid pro quo. Only the United States could have taken the initiative in this direction, but its impotence is clearly revealed in Stimson’s diaries, where he described the preparations for Laval’s visit in October 1931 – a visit that, if the United States had been able to carry out an overall political design, would have been far more significant that Grandi’s. In his diary, Stimson related, on November 30, that the president “is so busy with his domestic and financial problems that he is not capable of thinking ahead about international ones.” Hoover was not at all interested in the coming meeting with the French prime minister: “In the first place the Laval meeting was evidently just a nuisance to him. As I told him after we had been 84

Ferrell, pp. 99, 213.

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going for awhile, it seemed to me all he was thinking about was how he could best stop Laval from picking his pocket while he was here.”85 At this same time, the president still had the American economy crumbling around him. In the last three months of 1931, the number of bank failures reached its height in absolute numbers.86 On the international front, the crisis in the Far East appeared even more tragic to American eyes. MacDonald and Simon did not realize that their failure to cooperate with Stimson in forming a collective response to Japan had further damaged the possibilities for American international engagement. The United States was also a power in the Pacific, an area toward which isolationist hostility was traditionally somewhat less intense. Hoover’s attitude in this context reflected a basic fact: the Depression had weakened the structural foundations for any foreign relations leadership on the part of his nation. Thus, Stimson was correct in his assertion that the disarmament conference, in order to be productive, would have to take the shape of a conference for European peace. He created a self-fulfilling prophecy, however, by commenting that this was the exact reason for which the United States could play only a limited role. In his bilateral meetings alongside the general conference sessions, Stimson was not only forced to repeat that he was unable to assume any commitments to guarantee French security, but he also tied the hands of MacDonald, who had to state that he was bound by the same limitations, in order to prevent the failure of the conference from being blamed on the United States.87 Under these conditions, the disarmament conference was condemned to failure, even though it did create a further reinforcement of Italo-American relations. These were however insufficient to change the general outcome. As soon as general debate began, the French leader Tardieu proposed a plan of militarization of the League of Nations as the condition for any disarmament by individual states, exposing the conflict between his approach and that of all the other participants. In particular, Italy’s Grandi and the United States’ Hugh Gibson argued for what were labeled qualitative measures of disarmament, consisting of a series of proposals for abolition of arms whose use was primarily offensive. This criterion had the advantage of being easily translated into specific and concrete measures but was unacceptable to the French, who, gauging their relative military strength inferior to that of their presumed enemy, claimed that they had 85 86 87

YUL-HLS, Diary, September 30, 1931. Ferrell, p. 198. YUL-HLS, Diary, April 21 and 23, 1932.

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no choice but to rely on offensive strategies. Many newspapers, such as the Gazette de Lausanne and the Manchester Guardian, referred to an “Anglo-American-Italian diplomatic initiative.”88 With the approval of the qualitative criterion, the conference adjourned, leaving the field to three technical committees charged with formulating concrete proposals to conform to the principle. As was predictable, when the conference reopened in June, debate was mired over the definition of aggressive and defensive arms categories. The intense consultations that had taken place in April, during Stimson’s journey through Europe, had produced no results on the matter that could have solved the impasse: European security. Stimson for his part had repeated what he had already told Laval during his trip to Washington, and MacDonald was in no position to add to or revise this position. In the meantime, the French domestic situation again gave proof of its instability as Laval’s government fell. Worse, on the eve of the reopening of the conference, Brüning’s government fell, to be replaced by the pro-Nazi von Papen, who then immediately dissolved the Reichstag. While a conference on economy met in Lausanne in an ever more dramatic context, the American delegate Gibson tried to persuade Tardieu’s successor, Herriot, that the American public would not tolerate the cancellation of international debts unless military budgets were first slashed. As was logical, MacDonald and Grandi, perfectly attuned to American needs, maintained both in Lausanne and in Geneva that debt and disarmament were inextricably linked issues. In this general context of uncertainty and anxiety, the disarmament conference had managed in four months to do nothing more than agree on a general procedural measure of doubtful significance and one concrete measure, the interdiction of poison gas as a weapon, which had been all but a given in any case. Hoover found himself once again urged on by events; unable to propose any plan for collective security for the reasons noted, he could only take the initiative in one area that Congress and public opinion would support: disarmament. Thus, on the morning of June 22, the head of the American delegation, Hugh Gibson, presented Hoover’s new proposal to the tense audience assembled for the conference. The proposal was based on both quantitative and qualitative measures. Quantitatively, Hoover requested a reduction by one-third of land-based arms (other than for police forces, which would be proportionate to the German ones, with some exceptions justified by relative imperial 88

Gazette de Lausanne, April 22, 1932; Manchester Guardian, April 14, 1932.

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“responsibilities”), of battleships in number and tonnage, and of submarines (to a limit of 35,000 tons per fleet). He further proposed the total abolition of bombardment aviation and the reduction by one-quarter of aircraft carriers, cruisers, and torpedo boats. Italy and France would have to conform to the terms of the Treaty of London on the basis of the accord concluded March 1, 1931, between Italy, Great Britain, and France and never applied.89 It was obvious that this was an extreme attempt to rescue the conference. Nor was this the only reason the proposal could not easily be ignored; it also took into account several demands advanced by the various participants. It did not stop at invoking the abolition or drastic reduction of the so-called offensive weapons (of which it avoided a specific definition, in order not to elicit new technical disagreements), but it also called for quantitative reductions. Furthermore, the proposal came from a power economically capable of bypassing the armed forces of all others, given the construction program it would have been able to carry out. Finally, it was made in the name of the world’s major creditor nation, which had in other contexts signaled that its favor toward debtor nations would be proportional to their willingness to cut their own military budgets. Nonetheless, Simon, the British foreign minister who spoke following Gibson, could not hide his government’s embarrassment. And Paul Boncourt affirmed for France that the American proposals were “so fascinating in their simplicity to actually seem too simple regarding the complexity of certain problems.” He intended by this to point out, not without reason, that the proposal tended to totally disregard the political conditions regarding the problem of security to which the French government subordinated any major disarmament measure. While the German representative Nadolny observed 89

ADG, VII, VI, Appello al buon senso e alla buona volontà, pp. 80–81; in Grandi’s notes Gibson’s proposal was recorded in the following words: “I propose a reduction of circa one-third of land-based arms. To limit the offensive character of land-based arms, I propose the adoption of those projects earlier proposed to the conference that aim for the total abolition of tanks, chemical warfare, and mobile heavy artillery. I propose the abolition of one-third of all land-based arms beyond the needs of police forces. [. . .] I propose that all states accept forces answering the needs of policing, a military proportional to Germany’s, and including some modifications for the colonial powers. I propose the total abolition of bombardment airplanes. I propose the reduction by one-third of the number and the total tonnage of battleships; by one-quarter the tonnage of aircraft carriers, cruisers, and torpedo boats; by one-third the tonnage of submarines, for which no state should maintain a tonnage greater than 35,000 tons. The Treaty of London set limits and proportions for the naval forces of the United States, Great Britain, and Japan. I propose that France and Italy cooperate with naval disarmament by adhering to the Treaty of London on the basis of the Italo-Franco-British accord of March 1, 1931.”

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that the proposal did not resolve the problem of the right to equality posed by his government, Litvinov limited himself to offering details on a few aspects of the proposal, and the Japanese delegate Matsudaira stated his opposition to reducing naval armaments. At this point, Grandi intervened, as he would later maintain, without having consulted Mussolini.90 Grandi limited himself to a brief declaration in which he affirmed that Italy accepts the plan for disarmament presented today by the American delegation to the general commission in all its parts without distinction. This acceptance is unconditional.

He listed all the measures proposed by the United States, underlining the “concrete nature of our adherence,” and concluded: It has been a year since President Hoover with his offer of a moratorium opened the path to a practical solution to the problem of disarmament. Italy did not hesitate last year and it will not hesitate today.91

Grandi’s declaration elicited what the British Labour Party newspaper, the Daily Herald, reported was the most enthusiastic applause yet generated at the disarmament conference; “Pertinax,” the commentator of the Echo de Paris, characterized the ovation as “indecent”;92 and the American delegate Hugh Gibson, in a message of congratulations, described such a spontaneous enthusiasm of which he had never seen its like in all his long experience of international assemblies.93 A message followed from Stimson, who for the first time publicly affirmed: . . . Our two Governments are working side by side toward a favorable solution to the problem of disarmament.94

While the entire American press, the neutral countries, and the social democrats sang the praises of this gesture by Fascist Italy, one message of congratulations that was conspicuously absent in the chorus was from Mussolini himself.95

90

91

92 93 94 95

D. Grandi, Interview; elsewhere in the interview, Grandi would maintain that diplomacy at some points requires prudence, at others audacity. ADG, VII, VI, D. Grandi, Discorso alla Conferenza per il disarmo, Geneva, 22 June 1932, pp. 83–84. Daily Herald, 25 June 1932; Echo de Paris, 23 June 1932. ADG, VII, VI, Hugh Gibson to Dino Grandi, 23 June 1932, pp. 91–92. ADG, VII, VI, Henry Stimson to Benito Mussolini, p. 85. ADG, VII, VI, p. 91.

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Hoover’s disarmament proposal and the declaration of support by the Italian foreign minister marked the apex of both the disarmament effort and the collaborative politics of Italy and the United States. Still, the conference ended without any real consequences. After vain attempts at an accord and the withdrawal of Hitler’s Germany from both the conference and the League of Nations, in June 1934 the conference and disarmament itself were definitively shut down. The proposal was spectacular politics and offered a surprising commitment from a United States that was just taking its first steps back onto the path of international politics after the parenthesis of the 1920s. But it was completely insufficient as a response to the gravity and especially the complexity of the problems overtaking Europe. It was a case of too little, too late. Too late because the divisive effects of the global economic and political crisis had by this time rendered the victory of National Socialism irreversible in Germany, with obvious repercussions for other reactionary dictatorships. Too little since the obvious limits of American initiative, and in general of the conduct of the only country theoretically capable of assuming global leadership, were built into their specificity. Only an initiative that had addressed the issue of disarmament but connected that action to an overall plan for European pacification, affronting both the revisionist demands of Germany and the French desire for security, would have had any chance of breaking the stalemate. In reality, the economic crisis had damaged Hoover’s ability to assume responsibilities at the international level of politics, reduced the influence and capacity of American capital compared to earlier years, and brought to the fore economic models and ideologies that did not base themselves on international interdependence but rather on bilateral exchange and the pursuit of autarchy, including in the matter of rearmament. In such conditions, even the collaboration between Stimson and Grandi was revealed to rest on shaky ground. Their shared points of view and agreement on a course of action had been conspicuous but had produced no results beyond the propagandistic. Grandi had recognized the immense potential for political and social stabilization represented by American hegemony in Europe, considering disarmament the first and most important vehicle for the realization of that vision. He had therefore adopted commitments and rhetoric that were ultimately incompatible with the real nature of the regime he represented, especially without some more material benefits to show for the compromise. It was no accident that one month after this culminating episode, Grandi was dismissed from the position of foreign minister.

6. Economic Collaboration between the United States and Italy 239

6. economic collaboration between the united states and italy in the face of the crisis The desultory progress of disarmament talks, the faceoff between France and Germany, the inability of other governments (starting with the United States) to break through that stalemate – all these were the manifestations of an ever-deteriorating situation that was intimately related to the development of the economic crisis. Yet even in the management of the crisis, the Fascist government and the Hoover administration, as long as it remained in power, maintained a collaborative relationship. The collaboration was based on what has passed on to history as the Hoover moratorium on intergovernmental debt payments. With the Young Plan (so named after the American financier Owen D. Young who presided over the relevant international panel of experts and who was the real creator of the earlier Dawes Plan) approved on June 7, 1929, the obligations of Germany had been drastically reduced. These obligations had already been lessened and linked to a plan of mostly American investment by the Dawes Plan. Now, according to the Young Plan, Germany was committed to paying annual amounts, lasting until 1988, whose amounts would increase over the course of the first thirty-six years. Still, the annual payments could amount to a minimum of only 660,000,000 deutsche marks, while the payment of the remaining amount could be deferred up to two years in the case of exchange problems – which would be handled by the new Bank for International Settlements, headquartered at Basel – or other serious impediment. The annual amount was guaranteed by a bond issue on the German railway system. Although the Young Plan constituted a compromise between the Anglo-Americans, interested in a full recovery of the German economy, and France, which had not let go of its desire to weaken Germany with any instrument available, including international payments, the experts assumed that the plan would be a definitive solution to the German debt, given that the total annual payment called for was less than Germany had successfully paid under the Dawes Plan. The United States was always in favor of the most forgiving policy on the question of reparations, which it had unilaterally renounced, but it could not explicitly call for total cancellation without calling into question the obligations assumed by its ex-allies to repay the debts contracted to America. Great Britain, with the Balfour note, but especially with the various proposals by Bonar Law at the second London Conference in 1922–1923, had ended up accepting the idea of giving up the monies

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owed it by the other allies, even at the cost of having to go on paying its own debts to the United States, all in order to obtain the cancellation of German reparations. The French refusal, motivated mainly by the conviction that French security depended on keeping Germany weak, even if by artificial means of weakening, was nonetheless strengthened as a bargaining position by the American refusal to forgive France’s own debts. The reasons for that refusal, contradictory with American plans for expansion in Europe, were explained above. Since both Congress and public opinion would not support the cancellation of debts,96 debtor nations were not given the option of subordinating them to Germany’s payment of reparations, nor was there ever the possibility of a global cancellation plan. The situation changed only after the crisis became rampant throughout central Europe. After the failure of Credit-Anstalt in May 1931, despite the attempts of the Bank of International Settlements and the Bank of England (which was itself in serious difficulty), Germany underwent a flight of capital from the deutsche mark that threatened its gold reserves and the foreign currency reserves of the Reichsbank itself. The industrial recovery of the country had been financed largely by American banks, to the point that in the middle of 1931 they possessed bills of exchange or credit instruments in Germany and Austria that totaled more than $1.7 billion.97 In the early phase of the crisis, just before the failure of Credit-Anstalt, American banks – in particular Chase National Bank and Lee, Higginson & Co. – had continued to buffer the situation by offering substantial additional credit.98 It was natural that the German financial crisis would have immediate repercussions on American banks, which, after a small recovery in early 1931 that resulted in an increase in the Dow Jones index and raised share prices, then found themselves holding large amounts of short-term, unguaranteed German debt. It was in the context of this situation that Herbert Hoover made the decision he later called “the riskiest” of his career.99 The proposal of a general moratorium on intergovernmental debt payments touched a sore nerve: not only would the United States renounce the annual payments from its debtors, but for the first time it would implicitly be admitting the link between debts and reparations – although officially Hoover still 96 97 98 99

Ferrell, p. 107; and in opposition, Wilson, pp. 155–156. Ferrell, p. 116. Ibid., p. 111. T. G. Joslin, Hoover Off the Record, New York: 1934, p. 91.

6. Economic Collaboration between the United States and Italy 241 continued to deny the existence of such a relationship.100 It was a question of principle that could have had extreme consequences, opening the way for a definitive cancellation of all international debt. It was no surprise that Stimson had been encouraging Hoover for some time toward just such a move,101 while undersecretary of the Treasury Ogden Mills was favorable toward a moratorium of at least two years and Mellon wanted a preemptive agreement with the French since – it was predictable – they would be the most reluctant to accept the proposal.102 But, as Ferrell rightly observes, these men did not have to face constituents, and they could afford to be generous.103 Herbert Hoover, like his predecessors, was in a different position with respect to the electorate; and indeed, it was only after long consultations with congressional leaders and the ensuing worsening of the crisis in Germany that the president decided to formulate his proposal.104 Hoover was encouraged by his economic advisers, who were convinced that one of the main causes of the crisis consisted in the difficulty in transferring the necessary sums for debt and reparations payments from one currency to another (despite the fact that the bank in Basel had been created for precisely this task). In reality, Hoover’s choice became obligatory when he realized that Germany, even if one imagined that Brüning’s government would act in good faith, would have to choose between making reparations payments or debt payments to American banks, but would not be able to do both. In this scenario, the American crisis, which had slowed somewhat in the early months of 1931, would take on new vigor.105 Faced with this dilemma, the president could harbor no doubt, nor did public and congressional opinion, both accepting the proposal with virtually unanimous consent.106 It would however be an oversimplification to think that Hoover had made this decision solely on the basis of a 100 101 102 103 104

105 106

Ferrell, p. 107. Joslin, p. 93. Ferrell, pp. 112–113n. Ibid., p. 108. ADG, V, p. 29, Herbert Hoover, Washington, June 22, 1931. The text of the presidential message read: “The American Government proposes the postponement during one year of all payments on intergovernmental debts, reparations and relief debts, both principal and interest, of course, not including obligations of governments held by private parties. Subject to confirmation by Congress, the American Government will postpone all payments upon the debts of foreign governments to the American Government payable during the fiscal year beginning July 1 next, conditional on a like postponement for one year of all payments on intergovernmental debts owing the important creditor powers . . .” Ferrell, p. 108. Ibid., p. 113.

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necessity that happened to conform perfectly and uniquely to his interpretation of the crisis and its solution. As is well known, the historiographical judgment of Hoover’s handling of the crisis has fluctuated considerably, becoming among other things a battlefront between New Left historians and liberal historiography.107 Beyond the caricatures of Hoover that have undoubtedly been painted by historians close to the New Deal, such as Arthur Schlesinger Jr., there is no doubt that the president, along with the entire governing class to which he belonged, had been raised on the orthodox dictum of laissez- faire and had difficulty grasping the depth of the crisis, which he tended to interpret as a short-term event produced by lack of confidence on the part of economic agents. On the basis of this analysis, the remedy was prescribed by the canon of classical economics: the crisis would purge the system of its errors, sweeping away the least competitive businesses, until recovery began as rational economic actors regained confidence. On the international level, the solution was just as obvious. Although Hoover frequently criticized the bankers, who in the course of the 1920s had concentrated on foreign loans, he stole their recipe: defense of currency stabilization and now a step in the direction of debt cancellation. Only the question of customs barriers had left him uncertain, faced as he was with a congressional offensive that he could not ignore. The moratorium was a subsequent occasion for the Fascist government – and in particular for its foreign minister, Grandi – to reinforce ties with the Hoover administration. This was no improvisation; throughout the 1920s, Mussolini had avoided aligning himself with the French position on reparations. During the London and Paris Conferences in 1922 and 1923, Mussolini had sided with the British in presenting a plan whose cardinal points were the relatedness of debt and reparations, and a bond loan plan contributing to the economic recovery of Germany. He had shown himself 107

W. A. Williams, America Confronts a Revolutionary World: 1776–1976, New York: 1976; J. Wilson, Herbert Hoover: Forgotten Progressive, Boston: 1975; W. Lippmann, The New Imperative, New York: 1935; C. Degler, “The Ordeal of Herbert Hoover,” in Yale Review (Summer 1963); A. Romasco, “Herbert Hoover’s Policies for Dealing with the Great Depression: The End of the Old Order or the Beginning of the New?” in M. Fausold and G. Mazuzan, eds., The Hoover Presidency, Albany: 1974; E. Rosen, Hoover, Roosevelt, and the Brains Trust: From Depression to New Deal, New York: 1977; M. Rothbard, “The Hoover Myth,” in J. Weinstein and D. Eakins, eds., For New America, New York: 1970; E. Hawley, “Herbert Hoover and American Corporativism 1922–1933,” in Fausold and Mazuzan, cit.; W. A. Williams, Some Presidents: From Wilson to Nixon, New York:1972; for a counterargument see A. Schlesinger, “Hoover Makes a Comeback,” in The New York Review of Books, XXVI no. 3 (March 8, 1979).

6. Economic Collaboration between the United States and Italy 243 willing to travel the path of cancellation forged by Balfour and then by Bonar Law, on the condition that Italy be liberated from its war debt obligations at the same time. The link between debts and reparations disappeared only from the public declarations made by Italian representatives during the phase of negotiations with the United States for the regulation of the war debt, since that was the most touchy subject for American public opinion, as discussed above. This was an orientation that, as well as corresponding to sensible financial reasoning, was also in line with the habitual respect Mussolini demonstrated in terms of the German policy of the Anglo-Americans. These precedents allowed Mussolini and Grandi to salute the Hoover moratorium as a decision conforming to policies long pursued by the Fascist government. In the Italian message of acceptance, it was specified that the moratorium was being agreed to “despite the fact that such proposals impose a notable sacrifice on Italy,” although it was also emphasized that its “high moral significance has been perfectly comprehended by the Italian people.”108 The proclamation of the moratorium proposal came from Hoover on June 20, 1931. The Italian message of acceptance came four days later, June 24. It was all the more significant because the Italian government used that time to call a meeting in Palazzo Chigi – “as ordered by the Head of the Government” – in which Grandi participated along with Minister of Finance Mosconi and the director of the Banca d’Italia, Gaetano Azzolini. There it was decided to give the order for immediate execution109 “of the project of the United States Government, informing Governments of Debtor Nations that Italy does not intend to claim the deposit of sums due to it according to the Young Plan or the Hague accords before the deadline of July 1. We simultaneously inform the Governments of the Creditor Nations that we will set aside those funds dedicated for our payments in anticipation of a collective decision until that same date.”110

The effect that Mussolini and Grandi intended to produce was certainly to reinforce Hoover’s positions, making his proposal reality, but it was also to isolate the French government, which had received the initiative with evident hostility. In the following days, Hoover was occupied in negotiations with the French, conducted through the Paris embassy, that concluded with a compromise: France would accept

108

109 110

ADG, V, p. 32, Dispaccio diretto dal Governo italiano al Regio Ambasciatore a Washington, Rome, June 24, 1931. ADG, V, p. 32, Dispaccio della Agenzia Stefani, Rome, June 25, 1931. ADG, V, D. Grandi, Discorso alla Conferenza di Londra per l’applicazione della moratoria Hoover, London, July 20, 1931, p. 133.

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a limited moratorium that would exempt Germany from the payment amount represented by its annual quota, which would now be postponed, while still paying France the amount corresponding to the so-called unconditional quota. This attenuation of the moratorium, but above all the delay its negotiation caused, kept Hoover’s initiative from having the explosive impact necessary to break the trend of the German banking crisis, as he had initially expected. It was then too late to prevent the situation from precipitating further. The second major bank of Germany, the Darmstädter und Nationalbank, folded. Only the intervention of the German government and a short-term loan from the major central banks to the Reichsbank stopped a total meltdown. Still, what Hoover had wanted to accomplish with the moratorium, to prevent the forfeit of payments to private American banks, had largely succeeded – and to the benefit of the American economy. But the French government was able to require political conditions for any further financial interventions in Germany’s favor.111 The episode proved that the United States, in the full midst of its own banking crisis and already heavily exposed to German financial risk, was not politically strong enough to use its financial resources in sufficient measure to close out competition from other European states, especially France. The Italian ambassador in Paris, Manzoni, had grasped French intentions from the start: Hoover Proposal: Berthelot [the secretary-general of the Quai d’Orsay] attributes it to the necessity of rescuing major American investments in Germany and also sees an electoral calculation by Hoover courting the votes of German-Americans. But he admits that it is a first step, and a sharp move, in the American style, toward the solution of all the difficulties of the European situation and the world crisis – a beginning that, whatever its contents, fair or not, ought to be received positively, but revised and adjusted. Berthelot recognizes that more than the economic aspect it is the political, and how it is linked to the economy, that must be reformed to create a rebirth of confidence in Europe and in the world so that the general situation can be calmed and improved. [. . .] I believe I may confirm the idea that here only political guarantees in addition to material ones will secure financial cooperation: one has the firm sense that the Americans and the English are very, even too much in the case of the English, committed to credit operations in Austria and Germany and cannot face the crisis there alone. They will certainly need French intervention, and the French financial situation is such that French finance is not only indispensable but will have to play the starring role, covering at least three-fifths of the operations: therefore its legitimate political demands will have to be heard and fulfilled.112 111 112

Ferrell, pp. 113–116. ADG, V, Gaetano Manzoni a Dino Grandi, Paris, June 23, 1931, p. 19.

6. Economic Collaboration between the United States and Italy 245 Grandi, for his part, did not miss the occasion to publicly and privately deplore the delays caused by France’s partial refusal to adhere to the moratorium. Beyond the usual propaganda motives, he was authentically worried about the development of the crisis that was making Germany ever more ungovernable, France ever more rigid, while taxing ever more brutally the limited goodwill of the two great Anglophone powers to stay engaged in Continental Europe’s troubles. The greatest danger to his policy did not derive from relations with France, but from an overall situation that lessened the authority of those very centers of collaboration and mediation that Grandi had worked so hard to cultivate and which he had seen as decisive: the League of Nations, the disarmament conference, and the economic conferences among the major European states. Actually, not even the Italian government had had a first reaction of total and immediate support of the moratorium. Only after American remonstrance was an effort abandoned to make Italian adherence conditional on the dissolution of the announced customs union between Germany and Austria.113 As late as during the meeting at which Grandi announced Italy’s unconditional adherence to the moratorium to the German ambassador in Rome, von Schubert, a meaningful exchange of remarks took place: GRANDI: [. . .] The German Government has declared that the project of a customs union was a way to lessen the difficulties of the German situation. Here in Hoover’s proposal we have a tool one hundred times more effective for the easing of economic difficulties. It is more than logical, therefore – it is natural – that Germany, offered such a benefit, which she will be the only one to gain from, should respond with a gesture of equal goodwill and international solidarity; that is, to go no further with a project that has raised so much alarm and concern in Europe. We don’t intend to link the Hoover proposal through any diplomatic connection to the German plans for customs unification. These are exclusively European problems that will be discussed by European Governments. VON SCHUBERT: The Government of the Reich, in my opinion, cannot accept the linkage of the two problems that regard such different fields of action. Are you telling me that the Italian Government reserves the option to re-create this condition later? GRANDI: I don’t know. Today it will not. As for tomorrow, we shall have to see.114

When Grandi concluded his meeting with von Schubert, affirming the impression that “Germany is doing its best so that Italy and France may

113 114

Moscati, Locarno, p. 117. ADG, V, D. Grandi, Appunti sul interview con l’Ambasciatore di Germania, Rome, June 24, 1931, p. 20.

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overcome the differences in sentiment and interest that have as yet divided them,”115 he was not only flaunting what genre of language even the Italian foreign minister, who usually spoke in measured tones, felt able to permit himself toward Germany before Hitler’s advent. Grandi was also expressing a profound and authentic aversion of the Italian government toward the resurgence, near its own borders, of a pan-German power strategy. With respect to Germany, the Italian reactions were contradictory: on the one hand the alignment with the United States and Great Britain in the logic of European reconciliation dictated a constructive approach usually stressed, especially since it provided a clear contrast with the French position. And yet every so often the obscure fear that Germany provoked even in Fascist Italy would take shape, particularly when the matter directly concerned Italian security and self-interest, such as in the case of the Alto Adige (or South Tyrol) and the assimilationist policy of Angleichung. Mussolini then could not help but take a stand, even at the cost of displeasing his powerful Anglophone friends. The salient fact – which relates to the meeting between the two diplomats recounted above – consisted in the strategic withdrawal (masked by hints of an ambiguous future revival) Grandi was forced to make regarding the original effort to make the suspension of the customs union a compensation for Italy’s cooperation with the moratorium. Perhaps a certain arrogance in his language was not extraneous to his goal at that moment. It is meaningful that, while France was able to force the United States into negotiations and to modify the terms of the moratorium, Fascist Italy gave up on all efforts to do so when the Americans, predictably, reacted negatively. In other words, given an opportunity to make one’s support of Germany count not in words but in deeds, Italy still privileged its image as faithful facilitator of American policies in Europe over any other advantage and therefore gave unconditional acceptance of, and obedience to, the moratorium. Chancellor Brüning, for his part, was careful not to attach any great importance – at least not to all appearances – to the veiled and vague threats proffered by Grandi to his ambassador. On June 26, two days after the Italian acceptance of the moratorium, Brüning telegraphed to Mussolini: . . . I believe I am not mistaken in saying that the action of the President of the United States is aligned completely with the far-sighted and energetic policy that Italy, under your guide, has long pursued. This is confirmed for me by the rapid decisiveness with which the Royal Italian Government has adhered without reserve to the 115

Ibid., p. 21.

6. Economic Collaboration between the United States and Italy 247 American proposal, decisiveness that finds an enthusiastic echo in all the German people.116

Brüning thus, ably, not only showed Mussolini that he recognized his behavior to be coherent in terms of reparations, but that he had seen through Mussolini’s desire to boast of his closeness to American positions, and that it was dependent on Hoover’s willingness to accept Mussolini’s policies, not the other way around. The determining factor was the power relationship between the two countries in question. The insistence on the rapid and unconditional character of the Italian decision had the double purpose of making it more difficult for Mussolini to rethink or regret it (although Grandi’s threats had only a tactical and contingent value, Brüning preferring to solidify his position) as well as to do him the favor of rejecting the rumors, damaging to both of them, about the vacillations (that indeed there had been) on the eve of the decision. Within the next few days, Henry Stimson’s visit to Rome offered Grandi the occasion for highlighting the core motivations of the Fascist government. His statements to the Associated Press on the eve of his American colleague’s arrival in Italy were inspired by the recent Hoover proposal, but went so far as to be transformed into a hymn in praise of the economic interdependence of the capitalist world. Grandi began by affirming that Hoover’s proposal was “practical” because it was “for immediate application” and asserted, somewhat rashly, that [. . .] one day it will be better understood as an act of great political wisdom when it will be clear how it worked to prevent developments that could have been very painful and serious for both America and Europe.117

This was not yet another effort to please the American public. There was an important error of analysis, common to the capitalist governing class of those years, that Grandi shared: just as Hoover maintained that the crisis was essentially the product of a failure of confidence among economic actors, so was Grandi of the opinion that it remained possible to reconstruct the European order on the basis of the restoration of confidence in international relations. Grandi added: I have always disagreed with the concept of the world as divided into geographic sectors, and in the response given precisely a year ago to the French project of 116 117

ADG, V, p. 35, Heinrich Brüning to Benito Mussolini, Berlin, June 26, 1931. ADG, V, D. Grandi, Dichiarazioni all’Associated Press, Rome, July 4, 1931, p. 127.

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a political and economic Paneuropa, I openly critiqued this concept. The Italian Government has always opposed any regime of European secession from America. These two years of crisis have proven how necessary solidarity is, not only among the States of the same continent but among the States of all continents. Just as the prosperity and well-being of a nation is the result of the well-being of each individual, so too can the general prosperity be guaranteed only by the well-being of each individual Nation. Europe cannot do without America, and if this intercontinental solidarity should spread, the world will be the better for it.118

In the moment that the crisis hit precisely those mechanisms that were the pillars of economic interdependence (from the commercial exchanges to the monetary system founded on the gold standard), Grandi took a clear stand. It would be reductive to say that Fascist foreign policy was hostile to the Europeanist projects of Briand because it saw in them the idealized or utopian projection of a French hegemony aspiring to exert its control over all of Continental Europe. While that is true, the hostility that Grandi expressed also stemmed from the conviction that the United States and secondly Great Britain were the true hegemonic powers, including in Continental Europe. Not only that, but Grandi believed that their dominance was in the main better for Italian interests than the French version would have been. This is a striking anticipation of certain future discussions that, twenty-five years later, would contrast what would come to be called the “Atlantic community,” a European community resigned to American leadership and included in a wider zone of free trade and free movement of capital, with a “Europe of the homelands” proposed by France, generally hostile toward American interference and diffident about Great Britain’s imperial ties. Just as striking is the analogy between the position of Fascist Italy in the few years preceding the worst turn of the European crisis and the position of a contemporary, democratic Italy, proeuropean but always responsive to American leadership. But these were positions of principle that would have to be revised in the harsh light of the real crisis in political relations caused by the war and the Treaty of Versailles and worsened by financial disintegration. Stimson and Grandi may have seen eye to eye in their own personal meetings, but they could not pretend that they would not be called immediately to account by men who were unlikely to bend to their reasoning. In the course of their Roman colloquy, July 11 and 12, 1931, principally concerning disarmament issues, there occurred this symptomatic exchange:

118

Ibid., pp. 127–128.

6. Economic Collaboration between the United States and Italy 249 STIMSON: [. . .] Any news from Berlin on the situation after Hoover’s proposal [for a moratorium]? GRANDI: No good news. The German Government declared that the domestic situation is dramatic and that in Berlin they blame the French Government for having compromised the effect and benefit of the President’s proposal with its quibbles . . . I believe that you, dear Stimson, will have as much work to do in Paris as in Berlin. I hope for the sake of Europe that you succeed in reconciling them so that the American gesture can have the positive results that our peoples have seen in it.119

Indeed, Stimson had a great deal of work in the following days. He had to leave Rome early, in order to hurry to Paris, because the moratorium (or what was left of it) had not actually been enough to stop the German banking crisis from worsening and having dangerous effects on the United States.120 In Paris, he went from meeting to meeting with French delegations and German representatives, in various combinations of bilateral and collective groups of the major powers. The atmosphere Grandi found there when he arrived a few days after Stimson (thus underlining the costarring role played by Italy in these high-level political and financial talks) reflected the reality of the situation: I believe that such a meeting has rarely occurred as has here taken place: an international conference of heads of state and foreign ministers of the great powers in a chaotic situation such as seen today. We are under pressure from unpredictable and uncontrolled events, without any government having been able before arriving here to prepare a plan for what should or should not be done.121

Such a reconstruction was not dictated mainly by resentment from one who felt himself excluded. The disorientation was real and stemmed from the shared feeling that, especially in Germany, events were about to run out of control that might definitively compromise the chances for European reconciliation. At the same time, the goals of the various governments and the conditions they negotiated under were such that no program was possible, not even a stopgap, to deal with the worst consequences of the economic crisis. Nor was it a reasonable expectation that the economic issues could be separated from the problem of disarmament, reproposed by Germany without appreciable results (the work for

119

120 121

ADG, V, D. Grandi, Appunti sui colloqui con il Segretario di Stato agli Esteri degli Stati Uniti H. Stimson, Rome, July 11 and 12, 1931, pp. 37–38. Ferrell, p. 116. ADG, V, D. Grandi, Relazione al Capo del Governo sui lavori del Congresso di Parigi e della Conferenza di Londra, 18–24 luglio 1931, Rome, July 27, 1931, p. 78.

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the World Disarmament Conference had become a dead letter after the failure of the first American proposals). What was missing from the start was someone capable of assuming a leadership role. Stimson and Mellon were both in Geneva in the position of needing quick fixes for the shared effects of the German financial crisis and the state of the American banking system. This prevalent need was incompatible with the role of counsel and executive for a global long-term plan to solve all the aspects of the crisis. Stimson asserted that the mainspring of American action was not the losses of American investments in Germany, but the deep conviction that German recovery was of maximum importance for the political and economic reconstruction of Europe and therefore the whole world. But his interlocutors were aware that his first task was to staunch the leak in his country’s banking system, already seriously overexposed from two years of economic crisis. Nor could Stimson hope to convince Laval – who temporarily held the post of French prime minister as he waited to turn it over to Herriot – on the strength of mere words that the pacification of Europe must pass through the reconstruction of the German economy. The French were well aware, as indicated by Berthelot’s words to Manzoni, presented above, that the Americans were financially weakened by the crisis and still strongly influenced by isolationism, which had indeed been given new vigor by the crisis itself. Finally, Hoover was about to enter the period when a president must consider his actions in light of a new campaign season, and the coming elections did not look like an easy win for him. Nor were the British in any position to play a leading role. As the events of coming weeks would demonstrate, English banks and the pound sterling itself were also damaged, even more than New York, by the German banking crisis. Obviously, all these financial considerations did not change the real hierarchy among the great powers – even wounded by the crisis, the American economy still dwarfed the French one – but there was some immediate consequence to the fact that the French government could intervene quickly with substantial aid to the Reichsbank. Stimson was forced to admit that the president of the United States did not have the ability to offer or guarantee loans. For this reason – but not only for this reason – Stimson indicated another option: American banks, he said, had already decided to intervene, as long as the Banque de France and the Bank of England did as well. The Great Depression arrived between the Dawes Plan and the conferences of Paris and London, with major effects on the foreign policy as well as the financial policy of the United States. Hoover could polemicize as much as he wanted against the foreign policy of

6. Economic Collaboration between the United States and Italy 251 American bankers throughout the 1920s, but when push came to shove, he had no choice but to admit that men such as Strong, Lamont, and Young had an ability to act that the crisis denied him. They too were now deprived of the weapon that had made them so strong in the preceding years: available capital and the possibility of committing it abroad. Under these conditions, in which neither the United States nor Great Britain could take the initiative, a power vacuum allowed direct and unproductive negotiations between Laval and Brüning to force the stalling of the whole conference. Laval, who would later take a very different tack, represented in this period the legacy of the French nationalism of Clemenceau and Poincaré. Using his strong position, he made French financial aid conditional upon political favors, which, as Brüning said to Grandi, if any French government were actually to go through with, . . . it would immediately be overthrown by popular fury, provoking a much worse political situation than the one the French Ministers intended to resolve by making these unacceptable proposals.122

The nature of the requests was more objectionable than the burden they represented: the virtual stoppage of all construction on German armored cruisers, the commitment to respect the Young Plan at the end of the moratorium, the promise to renounce any revision to the treaties despite the fact that the right to treaty revision was guaranteed in Article 19 of the League of Nations Charter, the repression of German nationalist and veterans’ associations, and a lien on customs duties to guarantee the loan. These measures would return Germany to the state of limited sovereignty to which it had been reduced by the Treaty of Versailles. Brüning knew perfectly well that they would only have hastened the rise to power of the National Socialist movement growing in strength at that very moment. This was yet another confirmation of the French interwar policy that was aggressive toward the bourgeois democrats and then became submissive and cowardly toward Hitler – aggressive rather than powerful since Laval was not capable of imposing his conditions; he simply profited from the German financial difficulties and the fact that they could not be fully solved without him. Since the political price that France demanded was excessive, Brüning had only one choice left: wait for a French government that might be more willing to negotiate, while the financial crisis went on creating social disintegration in his country. 122

Ibid., p. 90.

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If Stimson and Henderson did not succeed in imprinting their own direction on events, it comes as little surprise that things were no different for the Italian foreign minister. In Paris, Grandi limited himself to repeating that Italy would enthusiastically participate in the Hoover moratorium and was willing to take on a proportional burden of any aid package agreed upon to “offer further succor to Germany.” He did not renew the request of a German renunciation of the customs union with Austria, perhaps because he knew that Laval would see to it. In this way, Fascist Italy aligned itself once again with the United States and Great Britain, enduring the consequences of their impotence. Less predictable was Grandi’s second declaration, taken up by Laval with satisfaction: . . . The Italian Government follows with sympathy and interest the direct conversations between the French and the Germans, sincerely wishing them a favorable outcome.123

Why on earth would Grandi, who had previously not hesitated to severely criticize French harshness toward Germany, in this case pretend to believe that a positive outcome of the direct negotiations was a possibility? The most likely explanation was the separate conversations that Laval and Grandi were having at the same time in Paris. Here they outlined the hypothesis of a general political accord between France and Italy that would concede to Fascist Italy some of the African opportunities Grandi had been pursuing for some time – Ethiopia and the mandate over Cameroon were mentioned – and that, upon improving the political climate between the two countries, would induce Italy to less rigidity in its international loyalties, inconvenient as they had been from the French point of view.124 The reality was more complicated. Grandi’s expressed hope for a Franco-German accord was not at all in contradiction with the alignment of Italy with the policies of Great Britain and the United States, nor was it an isolated gesture. As we have seen, in his trip to Washington following Laval’s visit there, Grandi would take constant care not to oppose France, expressing only appreciation toward the French.125 A policy of European reconciliation, as desired by the Anglophone great powers, could not take place without France, even though it had to represent the overcoming of

123 124 125

Ibid., p. 84. Ibid., pp. 84–85. ADG, VI, I, I colloqui di Washington, p. 7.

6. Economic Collaboration between the United States and Italy 253 France’s anti-German policy. For this reason, whoever aligned himself with reconciliation could not exacerbate any conflict with France that might render an already serious situation more difficult. On top of that, he would have to show himself willing to make accommodations regarding the French. This was the tendency behind the attempt at a naval agreement with Briand, negotiated at the last moment after the failure of the London naval conference, due solely to the stubbornness of French naval and nationalist circles. Given these considerations, a favorable position on a direct accord between France and Germany served two purposes at once: first to encourage Laval’s openness; but second to confirm once again, with Stimson and Henderson as witnesses, the reasonable and pacifist nature of Fascist foreign policy. Clearly this was a policy that carried a price tag Fascist ideology would never want to pay. As long as France did not collaborate with the other great powers, the Italian role of adapting to and even anticipating its goals of pacification was not only appreciated but also won recognition. Grandi’s pacifist policy appears less contradictory to Fascist ideology once we understand it as still aggressively directed against someone. To the extent that France showed some willingness to cooperate, the Italian position would remain pleasing to the Anglophone powers but would lose its importance as the tradition of direct dialogue between Great Britain and France was reborn. This is just what came to pass at the Lausanne Conference. In the meantime, Grandi knew well that the conflict with France was largely just a concession to the publicity needs of the regime he represented. He also knew that, while it was not contradictory to the policy that he was pursuing, at least as long as France continued to play the role of main adversary of any compromise with Germany; it could hardly be reconciled with the Anglo-American objective that he was claiming to share: European pacification. It would therefore be necessary to reach an agreement with France, obtaining some solid concessions for the frustrated nationalism he had turned his back on before Italian helpfulness became superfluous, in order to reach some general European agreement that would force Italy to choose between subordination and isolation on the world stage. On this theme, Grandi wrote to Mussolini: I believe that we must avoid the damage and the danger of all the pathological situations that have become chronic. Otherwise, we end up in love with our own sins: this is the mindset of many French and many Italians right now. The ItaloFrench polemic, which has almost become a chronic illness for our two countries, also runs the risk of exhausting itself without having produced any beneficial

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results for Italy or for France itself, results that should come from a clear and concise clarification of delicate and complex situations. Add to this the experience of several months ago, which we must attentively analyze: I am speaking of the German initiative to create a political union with Austria. This sudden and unexpected event, while it clearly revealed the progress of a reborn pan-Germanic movement, also determined the creation of an automatic common front of Italy and Germany to defend and resist.126 It is clear that this is the most propitious moment to definitively clarify our relations with France, before any other German move can occur [. . .] to immobilize us again and confront us with France and Germany together, proving to France that it is superfluous to make any sacrifice for a political advantage that events are already conspiring to bring directly to it . . .127

In truth, the very fact that the French and Germans were involved in a direct negotiation, one to which any general accord among the great powers had to be subordinated, is significant in itself. The United States and Great Britain had neither the strength nor the will at that particular moment, in which their banks were most exposed to the risks of the German crisis, to impose an authentically multilateral negotiation and force the French to come to terms with others’ points of view. It was a completely different situation from that during the Dawes Plan negotiation, which had been not only or even mostly the fruit of the goodwill of Streseman and Briand, but rather of the pressure applied by American bankers when they were the only ones both willing and able to furnish the necessary funds for Germany’s reparations payments. It was clear that France and Germany, left to themselves, would not have reached an accord, given how hard it was to do so even with outside pressure. In these conditions, the Italian interventions at the following London Conference and at the twelfth assembly of the League of Nations were those of a spectator aware of the gravity of the moment but unable to play any constructive role in the action. The ever more evident paralysis enveloping Hoover’s administration made Italy even more impotent in its aspiration to be the faithful spokesperson for American policy on the Continent.128 In his awareness of the gravity of the moment, Grandi had no choice but to grip the Hoover moratorium even more tightly, as a sign of the American commitment that in reality was already becoming less certain – as he himself noted. In diplomatic language, he wrote deploring

126 127 128

Sic! He must have meant to say Italy and France. ADG, V, D. Grandi, Relazione al Capo del Governo, p. 88. ADG, V, D. Grandi, Discorso alla Conferenza di Londra per l’applicazione della moratoria Hoover, London, July 20, 1931, p. 135.

6. Economic Collaboration between the United States and Italy 255 the fact that the French-American negotiations over applying the moratorium had weakened its beneficial effects.129 Stimson and Mellon needed an outcome from the London Conference that could at least lay the foundations for suspending Germany’s foreign debts, including the private ones. Otherwise, the ongoing crisis might undermine not only the current financial health of the banks, but also any future ability to fulfill their obligations; this would have consequences of the utmost seriousness for their American and English creditors. Grandi’s strategy in this case not only led him to exclude the possibility of subjecting any financial aid to Germany to political conditions (though he refrained in any case from openly criticizing the French position), but also to express the essence of the American position at the London Conference and afterwards: It is necessary to recognize that the burdens weighing on Germany from reparations must be adjusted in such a way as to calm the fears regarding Germany’s ability to fulfill its foreign commercial obligations, as well as any diffidence among depositors in the international sector to whom Germany might turn for aid for the necessities of her economic life. The Italian Government declares in this moment its readiness, within the limits of its ability, to do its part in this sacrifice as it has in others.

Italy, as represented by Grandi, adhered not only to the goals but also to the interpretation of the crisis guiding the Hoover administration. While he expressed his conviction that the crisis had characteristics that were intertwined – that is, both dependent on the European political situations and on its financial difficulties – he linked the solution for overcoming them to the problem of confidence, “that simultaneously indispensable and imponderable factor.”130 It is facile to observe that Hoover was preaching to the economic actors and the American public and that, if only they would have faith in the health of their own economic institutions, everything would be fine – while Grandi affirmed that European peace and prosperity depended on restabilizing faith in international relations. What they had not grasped, or could not allow themselves to admit, was that by now the mechanisms of production and international exchange that had been restored during the 1920s were definitively broken. This had already created results that also affected politics, as the growing instability of the German situation attested most extremely and dangerously. The very lack of progress at the London Conference was further proof of the insufficient nature of those leaders’ analysis. The commission that would be the only 129 130

Ibid. Ibid., p. 136.

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concrete result of the conference would eventually decide what the United States and Great Britain had hoped it would: to freeze German debts, including private debts, with the result of avoiding formal insolvency. But the facts remained. That decision, which constituted acceptance of the Layton-Wiggin report ordered by the Bank of Basel, on whose recommendations the London Conference had been called, represented the moment of de facto insolvency for Germany. The formality of the decision aided only American and (especially) British banks in avoiding insolvency with regard to their own creditors. There were immediate and ever more dramatic consequences. Despite the loans from the Federal Reserve Bank of New York and the Banque de France, on September 21 the Bank of England was forced to abandon the gold exchange standard; all the countries whose central banks were linked to the pound sterling, starting with the ones in Scandinavia, followed their decision soon after. This was the first and most important crumbling of the great edifice constructed during the 1920s through the international cooperation of the central banks under the guidance of Benjamin Strong and Montagu Norman. It ignited a process that gradually led to the devaluation of almost all currencies and finally to the dramatic decision by Roosevelt to take the dollar itself off the gold standard. At an early point, the abandonment of the fixed rate by the currencies that made up the sterling zone functioned as a subsidy of their nations’ exports; but once the other currencies, as was inevitable, adapted, there was a general shrinking of the volume of exchange given the lack of any assured means of exchange. As a consequence, the economic interdependence at the core of the capitalist world, reinforced in previous years, now suffered two harsh blows: on the one hand commercial exchange, already hard hit by the Smoot-Hawley Act, and the retaliatory measures of other countries, were decimated; on the other hand, the monetary collaboration linking Italy and Germany to the major capitalist countries disappeared almost entirely. Under these circumstances,, the analysis founded on the restoration of confidence or “faith” that recurred in the various statements of Hoover, Mussolini, and Grandi was revealed in all its limitations. The insufficient and hidebound laissez-faire analysis of the epoch was matched by the type of remedy proposed by the United States and Italy (excepting only the question of the cancellation of war debt along with reparations), all totally inadequate to the real gravity of the situation. Only a few days after the pound sterling was taken off the gold standard, Grandi invoked not only actual disarmament but also the abolition of economic armaments at the League of Nations. He saw the raising of customs

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barriers as a major threat to peace, intimately linked to the political and military insecurity into which Europe was descending.131 Though Grandi’s specific point was well taken, even at the end of Grandi’s meetings with Hoover and Stimson in Washington from November 16 to19, their joint statement repeated their shared conviction that . . . the restoration of confidence within each Nation will definitively occur only through the reinforcement of international financial stability and effective faith that extends among all the Nations.132

By this point, such words were mere whistles in the storm, but Grandi would still repeat them at the Lausanne Conference.133

7. grandi’s visit to washington Overall it can be said that Grandi’s visit to Washington produced a paradoxical result. For a decade, Fascist politics had made constant reference to American power. Initially, as directed by Benito Mussolini, Fascist conduct had reflected the need to stabilize the regime with more than nationalist claims, cementing consensus and financial aid from abroad. This foreign support had been solicited with particular vigor from those who had the greatest resources and the fewest immediate claims for political or territorial redress. In a later period, as has been observed,134 the regime could permit itself a foreign policy linked more to grand issues than to specific claims. The policy of this period may be characterized as both revisionist, regarding the French interpretation of the Treaty of Versailles, and prudent or even conservative, inasmuch as it singled out the United States and Great Britain as the decisive powers in determining the world’s equilibrium. Dino Grandi, as foreign minister, gave a complete and coherent shape to a policy of friendship based on the evaluation of strength that Mussolini had made the central element of his diplomacy and pursued ever since the days of the March on Rome. Grandi’s visit was the most salient act of this period, during which Italy’s convergence with the Hoover administration’s orientation was more or less total. As Hoover strove laboriously to participate in world politics, the two nations were bolstered 131

132

133 134

ADG, V, D. Grandi, Discorso alla XII Assemblea della Società delle Nazioni, Geneva, September 7, 1931, p. 146. ADG, VI, Comunicato congiunto al termine degli incontri Hoover-Grandi, Washington, D.C., November 19, 1931, p. 8. ADG, VII, VII, pp. 98ff., Dino Grandi to Ramsay MacDonald, Lausanne, June 27, 1932. Di Nolfo, pp. 253ff.

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in their harmony by virtual unanimity from their publics, founded on a decade of appreciative evaluations of the Fascist regime made by the members of the American governing class. The outcome of Grandi’s visit was therefore no improvisation; it was the moment of harvest for all the seeds of popularity the regime had long been sowing with its careful attentions to the United States. Indeed, their planting had been theorized as the central act of Italian foreign policy, together with Grandi, at the Palazzo Chigi meeting long before. But how was this growth concretely realized? Grandi synthesized his goals for the visit thus: I have stated [. . .] a few simple truths: (1) that I came to America without a hidden agenda; (2) that Italy asks nothing from America, but offers her loyal cooperation in solving today’s great international problems; (3) that Italy is doing fine on her own and has no need of anything; (4) that I was not in America to propagandize for any political doctrine; (5) that American wealth makes no difference to me; (6) that Italy is a friend to France, and Laval’s visit had been noted in Italy with cordial sympathy.135

It is difficult to say if these lines served more to summarize Grandi’s real approach during his visit or to reassure Mussolini about his proudly Fascist attitude in staying detached from the American experience. It was undoubtedly important that at that moment Italy had no favors to ask or any specific cause to plead136 – a refrain continually repeated throughout his visit, especially in his meeting with Hoover and during a breakfast offered in his honor by Thomas Lamont of the House of Morgan, attended by the principal exponents of the New York financial community.137 The Italian message was to underscore that, despite the crisis, the Italy of 1925 had passed and had no further need to ask for the cancellation of debts, to plead for new credits, or to explain the indispensable need for support to

135

136

137

ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, Relazione inviata del Ministro degli Esteri al Capo del Governo italiano il 2 dicembre 1931, p. 94. ADG, VI, p. 6, D. Grandi, Dichiarazione ai giornalisti all’arrivo a New York, New York, November 16, 1931: “I have not come to America with a selfish nationalist agenda, but only to offer the Italian contribution to the general work of international cooperation.” ADG, VI, pp. 68–69: “Minister Grandi, interviewed the same day by several American journalists regarding his meeting with Morgan, Lamont, and other representatives of American finance declared that his conversations ‘were interesting and useful’ on the topic of “the problems of financial reconstruction of the world and the means to exit the present depression suffered by the Nations.’ Asked ‘if the news arriving from Europe claiming that he was planning to ask for loans’ was true, Grandi gave a strong denial, affirming that ‘Italy has no need of loans because our financial policy is based on sound and stable foundations.’ [. . .]”

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stabilize its currency. Grandi had not forgotten the real power imbalance between the two countries; indeed, the support of the United States was more important than ever (to him personally as well as to the regime), but the support no longer had to arrive in concrete and immediate aid packages. Rather, it had become a matter of presenting Italy as one of the protagonists of world politics, which, without unduly exaggerating its role, sustained positions that could encourage the United States to a greater engagement in European politics and reinforce the ability of the Hoover administration to keep moving in this direction. Grandi had to avoid several (fairly obvious) traps in his path to bring his visit to a successful close. When all was said and done, he reported to Mussolini that Italy’s adversaries had painted my trip to America as a double scheme, first to profit by my diplomatic mission to propagandize for Fascism, and second to slander France’s reputation.138

We have already seen how Grandi was not only aware that too-strident polemical tones were unacceptable in the public discourse of the Anglophone powers with whom he intended to cultivate a privileged relationship. He also knew that any payoff of the politics of reconciliation of which Italy had made itself a spokesperson had to pass through an entente with France. He had succeeded in opening up the topics closest to his heart with Laval, which he had to do in homage to the ideology of his regime, but Grandi had no intention of creating an open polemic with him, especially knowing that the eyes of the informed American public opinion were focused on them. Still, he could not completely renounce the chance to underscore the contrast between Italian and French foreign policy. For every theme he mentioned, from disarmament to international debt to European security, he exploited the French position without explicitly criticizing it. He needed to make only friendly explicit statements in order to mitigate the harshness of his disagreement on each of these topics. An example was his statement after the first meeting with Hoover: [. . .] We followed President Laval’s visit to Washington with the most cordial sympathy. In this visit, Italy saw an encouraging sign of continuing work for general cooperation, essential to the maintenance of peace and to the restoration of prosperity.139

138 139

ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, p. 94. ADG, VI, D. Grandi, Dichiarazione dopo l’incontro con il Presidente Hoover, Washington, D.C., November 16, 1931, p. 7.

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Sympathy, cooperation, peace, prosperity: these were the words and concepts by which the foreign minister intended to characterize his visit, without betraying any formal bitterness toward the French president or the council of ministers. Even better, newspapers such as the Detroit Free Press made the opportune comparison for him, likening Laval to a grubby salesman looking only to turn a profit for his country while describing Grandi as a worldly and wise leader who would not ask for any special treatment for his country that did not take the rest of the world into account and whose proposals were good in a broad sense for peace and disarmament.140 In this way, while Grandi lauded Laval, the American press obliged him by highlighting his breadth of vision as contrasted with the presumed narrow-mindedness of the French. Just as delicate was the question of Italo-American anti-Fascism. This is not to say that it presented a problem in terms of its size as a movement,141 despite the notable dimensions of the protests organized in New York for the arrival of the Fascist delegation (during its sojourn, the police and the mainstream press successfully kept protesters almost completely isolated). The problem was rather one of not succumbing to any provocations. It is likely that the Italian consul generak in New York had received severe orders to keep the local Fascist sympathizers under tight discipline, given their lack of diplomacy and political tact in other situations. As for Grandi himself, not only did he avoid any mention of the regime that, after all, he was there to represent, unless it was to emphasize its pacifism, but he even allowed himself the luxury of asking for clemency for an anti-Fascist arrested during one of the demonstrations.142 Above all, Grandi could count on the antipathy that the anti-Fascists, mostly Socialists or anarchists as they were, elicited among the American governing class. It is utterly plausible that Hoover, in his first remarks during the meetings with Grandi, had indeed characterized them in the following words: They do not exist for us Americans, and neither should they exist for you. You can be certain that I hope you will not accord any importance to this minor detail.

After all, the executions of Nicola Sacco and Bartolomeo Vanzetti had taken place only a few years before. Beyond the problems posed by 140 141 142

Detroit Free Press, November 18, 1931. Dadà, “Contributo metodologico”; Diggins, pp. 123ff. ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, p. 95. “In the first meeting, Hoover told me right away of his regret on having learned that several anti-Fascists had tried to disturb my visit when it was such a pleasing event for him and for the American nation.” Also see Diggins, p. 125.

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anti-Fascists, Grandi, like any Italian politician visiting the United States, had to deal very cautiously with the Italian-American community. The American press would only pay attention if something unfortunate were to happen on one of these occasions. Grandi’s approach was simply to publicly repeat the invitation to become good American citizens as the most effective means for serving one’s place of origin. The positive outcome of this choice, from the point of view of the Fascist regime, would be revealed at the time of the war in Ethiopia.143 Grandi explored several themes of international politics during his meetings with Hoover and Stimson, and then in his peregrination of the centers of the American governing class (from the Council on Foreign Relations to the Foreign Policy Association, from the Overseas Writers’ Club to the New York Times). In so doing, he created a sort of ideological contract with his listeners rather than giving rise to any discussions with immediate policy goals. He paid homage to all the central myths and aphorisms of American capitalism, but also of those sectors of American public opinion that made a habit of paying attention to international relations. It may appear comic that he would explain to that gathering of bankers, military suppliers, industrialists, and merchants that was the Council on Foreign Relations that . . . there is no longer any merit to the opinion that international relations only affect the few – such as bankers, military suppliers, industrialists, and merchants – or that they therefore constitute an exclusive interest group of the so-called capitalist class.144

He was, in reality, catering to the desire of that oligarchy not to appear as such, but also to its aspiration to play an educational role in relation to wider public opinion, which had to be carefully guided to acceptance of their country’s imperializing role, and to be comfortable with the inevitably more explicit expressions of that role to come.145 When he declared that stabilization and reconciliation, goals that still characterized the thinking of such groups, were inspired by the conviction, which he shared, that there was no other path to effectively defeating Bolshevist class warfare, Grandi was sounding the refrain of the common anthem linking 143

144

145

ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, p. 101; ADG, VI, pp. 34–41, D. Grandi, Discorso agli Italo-americani in Filadelfia, Philadelphia, November 20, 1931. ADG, VI, D. Grandi, La fiducia nel domani [Faith in tomorrow – trans.] – Discorso al Council on Foreign Relations, New York, November 23, 1931. ADG, VI, D. Grandi, Disarmo e giustizia internazionale – Discorso alla Foreign Policy Association, New York, November 26, 1931, pp. 70ff.

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his audience to the regime he represented. Anti-Communism had been the motive for their pro-Fascist sympathy since the days of the March on Rome. Their encouragement of social hatred, in the guise of internationalism, is no less dangerous to real collaboration between peoples than it is to cooperation between the classes within each nation.146

Nor was Grandi ashamed to carry the discourse into less trodden paths for Fascist ideology: having paid ritual homage to Fascist nationalism using a quotation from Alexander Hamilton,147 he went on to declare his hopes for peace, to be realized through the growth of an international ethics as defined by Elihu Root.148 He cited Root and not Wilson, because the Council was a prevalently Republican group, as was the administration hosting him, and perhaps also because Wilson was still a name forbidden to pass the lips of a Fascist minister, even one who did not hesitate to invoke “new diplomacy”149 and the force of public opinion as the foundation of peace among peoples. These statements were more than just empty political rhetoric, however, because Grandi was backed not only by the popularity of his regime in the United States, but also by a few solid facts: the financial collaboration throughout the 1920s, the London naval conference, the Italian embrace of the Hoover moratorium, and above all the fundamentally constructive policy toward Germany that not even the polemics over the Alto Adige, or South Tyrol, and the customs union had been able to reverse. And Grandi was careful not to apply ideology to any of the political problems of the moment. He used it, rather, to assert a convergence of principle constituting a solid base for agreement on the two themes of greatest priority: disarmament and the Depression. We have already examined how he was able to produce agreement on disarmament between his nation, unable to compete in an arms race, and the United States, so powerful in armaments that they were very happy to consolidate the balance of power as it stood at that moment. As for economic questions, Grandi did not miss the chance to praise Hoover’s courage in proposing the moratorium; and he advocated principles – currency stabilization, free trade, financial cooperation, aid to Germany – that were guaranteed to align with the conventional 146 147 148 149

ADG, VI, D. Grandi, La fiducia nel domani, p. 45. Ibid., p. 46. Ibid., p. 51. ADG, VI, D. Grand, Commento alla dichiarazione congiunta al termine degli incontri Hoover-Grandi, p. 10.

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wisdom of the Republican governing class. All his American interlocutors, from the journalists to Hoover himself, who directed a particularly biting remark toward the French, agreed that if only Europe would imitate the foreign policy of Fascist Italy, things would be much better. Grandi was probably justified in claiming in his report to Mussolini that . . . today in America Italy enjoys, among the governing class as among the common people, the greatest height of prestige and of political and moral authority it has ever attained.150

Still, what good was all this popularity among the American masses, this benevolence from the governing class, if the United States could not or would not actually take action and make its presence felt in Europe, when the crisis made them most necessary? Grandi’s mission, and in general his entire foreign policy toward the United States, found great success in terms of building consent and obtaining support, particularly within those restricted circles where Stimson and Hoover could directly be present and influential. Many years later, Grandi quipped that “Stimson kept me alive for three years.”151 But Grandi’s deeper goal, one that he really did not have the power to translate into fact, was to convince Americans of all walks of life of the urgency of their renewed commitment to Europe. At a key moment in their meetings, Hoover told Grandi that his government did intend to “go further, much further,” than the moratorium proposal that had been hollowed out by French objections. The United States were willing to enter into discussions over a general cancellation of debts and reparations, but they could not overstep those bounds – thus Hoover’s pleasure, according to Stimson, in being able to use Grandi “as a foil to the French.”152 At this point, Stimson recounted: The president then gave a summary of the attitude of the American man on the street. For a hundred and fifty years we had kept out of Europe; then in 1917 we had been dragged in a great war. We had spent forty billions of dollars in the war, and we had added ten billions more in the shape of loans after the war. [. . .] And yet Europe was in a worse condition than she was before the war. This, he said, led to despair as to Europe and European affairs on the part of the ordinary American citizen, and now he just wanted to keep out of the whole business. This was the general attitude of the American public, and he did not see how the United States could take the leadership in any direction.153 150 151 152 153

ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, p. 102. D. Grandi, Interview. YUL-HLS, Diary, October 5, 1931. YUL-HLS, Memorandum by Stimson of conversations between Hoover and Grandi, November 18, 1931.

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In return for any further commitment to European politics, the United States would require disarmament and the cancellation of reparations corresponding to any debts cancelled. France was not willing to take this step unless it received commitments to political, and possibly military, aid in return. Stimson would probably have been happy to make such concessions, but neither Hoover nor any other elected official could dare to offend voters’ wishes in such a way. The result was the stalemate reflected in Hoover’s remarks to Grandi. In any case, Hoover lacked that acute and direct perception of the danger that a radical political upheaval in Europe – and especially in Germany – really represented. Ferrell notes that Hoover became fully aware of the dramatic effects of the financial crisis in Germany only after a meeting with his ambassador to Berlin, Frederick M. Sackett, in May 1931. Even then, he only thought of offering help in financial terms; nor could it have been otherwise as long as he remained ignorant of the political dangers inherent in a crisis of the Weimar Republic. Perhaps the fact that Germany’s political crisis encouraged a turn to the right made Hoover and the American governing class less alert to the threat it represented. There is no doubt, moreover, that the experience with Fascist Italy had reassured Americans about such movements. Italian Fascism had been able to keep the most subversive elements of its movement under control, had not allowed excesses that might have repulsed the Western capitalist world’s sense of civic decorum, and above all had shown itself adroit in finding and keeping to its proper place in that world’s hierarchy. All this created a significant precedent that served to soothe American fears to the point that it had to be the foreign minister of Fascist Italy who reminded Hoover of the greater implications of the German situation. To Hoover’s explanations justifying persistent isolationism in American society, Grandi responded: We do not know how long Europe will be able to wait, or whether in the meantime some huge crisis, for example in Germany, will compromise the results of Europe’s long and patient work toward political and economic restoration. A crisis in Germany would have immediate effects on all of Eastern Europe, from the Baltic to the Aegean. And the United States, because of its world power, would not be able, even if it tried, to ignore its world destiny.

Grandi reminded Hoover of the words spoken by Theodore Roosevelt on this topic in 1911: As long as Great Britain is capable of defending, not only in theory but also in fact, the balance of power in Europe, everything will go well; but if it should become unable to fulfill this task, the United States will be at least temporarily obligated to

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intervene to reestablish that equilibrium, directing its efforts indiscriminately against every country or group of countries who threaten it. Indeed, because of our strength and our geographic position we are becoming ever more the [guarantors of] the balance of power of the whole world.

Although Grandi was expressing a position that was clearly in opposition to the French stance, in terms of disarmament and international debts, he did not speak generally “against any hegemony in Europe” but insisted on the specific dangers of the German situation. He agreed with Hoover on the necessity of a constructive policy – that is, one that would not allow France to force Germany “to sign [the Treaty of Versailles] all over again.” According to Grandi, Germany has, whether in good faith or bad, committed huge financial errors, but that is no reason to force the German people into desperation.

He recommended that the United States follow a policy of support for Chancellor Brüning in line with what it had already promised during his visit to Berlin. Grandi, though fearing the rise of the radical right, believed – along with the majority of the bourgeoisie of that time – that the best way to avoid this eventuality was to bring the Right into an alliance with the Center, which remained its main political point of reference.154 Such a policy required not only an American financial intervention in favor of the German banks that risked dragging their American creditors into crisis with them, but a more organic strategy on the part of the United States in dealing with the European situation in its entirety. It was no coincidence that Grandi invoked that work of restoration (and it was interesting too that he chose that word rather than the “reconstruction” more commonly spoken of) in which the United States had participated during the 1920s. It was just on this point that Grandi’s mission failed – and could do nothing else but fail. Weighed in total, beyond the financial bind created by the crisis as well as by isolationism, the profound and deeply rooted incomprehension of the threat represented by the rise of Fascist regimes throughout the world sealed that failure. In a certain sense, the fact that it was the foreign minister of an already-consolidated Fascist government to recommend a policy of intervention and reconciliation increased the ideological confusion, without managing however to remove the obstacles blocking the path he advocated. Grandi could not secure any 154

ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, pp. 97–98; on the GrandiBrüning meeting, see ADG, V, D. Grandi, Appunto riassuntivo delle conversazioni avute col Cancelliere Bruening in occasione della visita a Berlino, October 25–26, 1931, pp. 42ff.

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concrete assurances about an interventionist policy in Europe under such circumstances; even though Stimson seemed to concur with him, there was nothing feasible to be done on the part of the United States. At the same time, Grandi’s very success among the members of the governing class and the press served to reinforce their belief that Fascist regimes were not automatically a threat to peace. The eloquence he employed both publicly and privately in recommending disarmament, the cancellation of “tragic accountability” from the war, and reconciliation between France and Germany was not sufficient to rouse the American action he hoped for, but it was sufficient to reassure his audience that Mussolini’s regime had enduring pacifist intentions. They could not comprehend that even Italian Fascism’s peacefulness was merely transitory. Lacking a structural analysis of the nature of that regime and of the political effects of the worldwide economic crisis, the American governing class and American public opinion were prisoners to the judgments their inherited values and assumptions suggested to them. It would be several years before the danger posed by Hitler’s militarization, in alliance with the Italian and Japanese dictatorships, would finally sink in and break the spell of class solidarity that the very popularity of Mussolini’s regime had helped to cement.

8. the lausanne conference Neither Grandi nor his American interlocutors could be unaware that the next international meeting regarded the intricate financial controversies that continued to block any joint initiative to deal with the economic crisis. And yet from this point of view, Grandi’s visit was virtually useless. It is not that Italy and the United States could have bilaterally created definitive solutions; in that sense, it was Laval’s visit that had been far more seriously ineffective. Still, the United States and Italy had been collaborating ever since the London naval conference in a shared political perspective of European pacification. Stimson had repaid the Italian efforts on his behalf at several crucial junctures (e.g., helping Italy avoid isolation during that very conference). For better or worse, Grandi’s trip to Washington had confirmed the extreme loyalty and mutual confidence between the two governments. Under the circumstances, it would have been logical to do as they had in the past and agree on some points of common conduct in the coming months regarding disarmament and especially the economic crisis. If no plan of action or even detailed discussion of those topics emerged from the Washington conversations, it was not due to any lack of faith or to any disagreements, but was simply because the

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United States was less and less capable of exerting its leadership. After the di facto failure of Hoover’s moratorium proposal, the president found himself mired in domestic difficulties and had been forced to retreat. As he told Grandi, You tell me that Italy is ready to cancel reparations if debts are cancelled. I know. The Government of the United States responds to Europe: “Cancel the reparations and we will cancel the debts.” This is already a new step forward for America. But we cannot go further. And since France did not want to hear of canceling reparations, we had to answer, “Well, then you are on your own. You try to reorganize the finance and economy of Europe. Europe will have to realize that this policy will bring it more disadvantages than advantages.”155

Hoover’s words recalled the Chinese proverb suggesting that he who sits by the river and waits will sooner or later see the corpse of his enemy float by. But he was honestly trying to explain the impotence of a president who no longer had a popular mandate domestically, who faced an imminent election, and who could no longer even perform in his own country those actions he recommended to the Europeans. At the earlier London Conference in the summer of 1931, the American delegation had been mostly concerned with confirming that block on the private debts of German banks that had failed to stop the crisis of the pound sterling or the wave of failures that had overflowed into the American banking system as well. The following six months saw a worsening of the German political crisis: Brüning fell from power, and in a last-gasp effort to save the Weimar Republic, he was substituted by the nationalist von Papen, who by then had the Nazis waiting in the foyer – and continuing indecision by the French over the question of reparations. The Lausanne Conference, which was supposed to resolve these issues, was postponed from January to June. In the meantime, a commission of experts, nominated by the International Bank of Basel,156 concluded that . . . the German problem that has so strongly influenced the financial paralysis affecting the whole world demands an action that only Governments can undertake [. . .]. Action is urgent due to the global character of the problem. We must avoid the disastrous consequences of the period of postponement accorded to Germany, which expires February 22, 1932. The damages deriving from Germany’s ruin

155 156

ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, p. 97. ADG, VII, VII, La conferenza di Losanna, p. 94; responding to the German request to suspend reparations payments, the International Bank of Basel – created by the Young Plan – nominated an international commission of experts with the task of drafting the preparatory report for the Lausanne Conference.

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would be such that all the world would be overcome and no currency would survive . . .157

Despite the seriousness of the situation, Hoover had to recuse himself, at least temporarily. On January 25 he announced, through his ambassador in Paris, that “Europe will have to solve the problem of its debts without the intervention of the United States.” Aside from Hoover’s impotence, the Lausanne Conference marked a positive moment of thawing in the relations among the European states and, in particular, between France and Germany. Herriot, after a few negative statements on the eve of the conference, went ahead with reconciliation and accepted an accord calling for the virtual cancellation of reparations,158 with the sole conditions of an analogous acceptance of the cancellation of debts by the United States and the convocation of a world economic conference in London the following year with the clear goal of involving the United States. The London Conference was to be a global attempt to restructure the world economy founded on the familiar concepts of debt cancellation, currency stabilization, and free trade. Although Herriot and the radical and socialist forces supporting him had always leaned toward an agreement for the cancellation of reparations, it is notable that the French government conceded to the nationalist von Papen (with the National Socialists hot on his heels) that which had been denied to his predecessors, the men who might actually have defended the political and economic equilibrium of the Weimar Republic. Just so did France parade its stubborn rigidity before the less authoritarian and revanchist forces in Germany, only to become ever more docile in the face of Germany’s subsequent aggressions. Herriot and MacDonald, after having reached an agreement, invited Italy and Germany to join them in an advisory pact that committed the signing powers to 1) make every effort to resolve in the same spirit as the accords of Lausanne the problems of the current moment and those that may emerge consulting each other in absolute candidness on every question that may involve the European regime; 2) work in Geneva to solve the problem of disarmament in an equitable and favorable way for all the Powers; 3) cooperate for the success of the world economic conference.159

These were little more than pious recommendations, although they reflected a whisper of the collaborative spirit that had emerged at 157 158 159

Ibid., pp. 94–95. E. Herriot, Jadis-D’une guerre à l’autre 1914–1936, Paris: 1952, pp. 307–334. ADG, VII, VII, La conferenza di Losanna, p. 97.

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Lausanne. The weak point distinguishing these accords from, for example, those of Locarno consisted in the fact that they were based exclusively on the French turnaround – the radical Herriot had temporarily taken the place of Laval – while the German government, with the rise of the nationalists to direct power, limited itself to graciously accepting the concessions other countries were willing to make. Above all, the Lausanne accords were gutted by the nonparticipation of the United States. In December, when the U.S. Congress passed a resolution that no foreign debt to the United States should be cancelled or reduced, the Lausanne Agreement was effectively a dead letter. In this way, the entire question of debts and reparations returned to the drawing board. Technically, this meant that the Young Plan was still in force, but in practice Germany refused to make any further payments. Other countries, starting with Great Britain, did make symbolic or partial payments upon the expiration of the moratorium until the time when the U.S. Congress decided to refuse such forms of payment. The final attempt of Hoover to prolong the moratorium had also failed – worth reexamining in light of its comparison with Roosevelt’s economic policy. It this way the whole question of intergovernmental debt was resolved outside the legal bounds of international economic relations, a further sign of the disintegration of international order, caused by a crisis that was no longer only financial.

9. the significance of grandi’s policies And as for Italy? Renzo de Felice has argued that the Lausanne Conference was, if not the cause, then at least the emblematic occasion for the defenestration of Dino Grandi from Palazzo Chigi. In this he retraces, in attenuated form, the judgment of Leonardo Vitetti, one of the most ambitious and “promising” Fascist diplomats of the time, who, in a report to Rome from July 1932, wrote: The Lausanne conference closed with Italy’s politics in the red. Considering its results from any point of view shows that they were prejudicial against us. The Lausanne conference marked: 1) The liberation of Germany from its financial obligations toward the Allies, without liberating the Allies from their obligations toward the United States, or Italy and France from their obligations toward England; 2) An Anglo-French rapprochement in the form of a Loyalty Pact that even if it does not have the character attributed to it by Herriot, still represents on the part of Great Britain the agreement that the best procedure for solving the

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problems of European politics is to start with a preliminary agreement between England and France; 3) A reinforcement of the position of Germany, which, liberated from the burden of reparations, will be able from now on to dedicate itself freely to its foreign policy goals, of which at least two – rearmament and the absorption of Austria – are in open contrast with our own interests.160

These judgments reflect the author’s evident desire to ingratiate himself to Mussolini, criticizing his foreign minister on the eve of his liquidation. But there was also an authentic incomprehension of Grandi’s policy, typical not only of the rougher sectors of the Fascist Party (and in growing measure of Mussolini himself), but also of ample sectors of the “career diplomats,” traditionally nationalist and sometimes opportunistic. The recent foreign policy of Italy had been favorable to European reconciliation under the auspices of the United States and Great Britain and founded on disarmament and the cancellation of intergovernmental debts. It had found its natural headquarters in Geneva. According to the career diplomats, this was essentially a gigantic stratagem for forcing France to make concrete territorial concessions in the traditional quarrels between the two states. Grandi’s role as the head of the class for disarmament and international cooperation; his continuous pursuit of a preliminary understanding with the United States and, where possible, with Great Britain; his sensitivity to the moods of public opinion, especially the Anglophone public, and to the medium and small European powers only made sense inasmuch as they could be shown to be quickly bringing about real success for Italian nationalist ambitions. “The ‘nothing for nothing,’ the obsession with avoiding ‘empty hands,’ [mani nette, the slogan by Count Corti expressing the desire to avoid becoming a colonial power at the Berlin Conference of 1884–1885, and which ever since had been a bugaboo of the disappointed Italian nationalists – trans.] the will to expansion,” of which Giorgio Rumi has written,161 were not in reality exclusively characteristic of the fiery Fascist spirits of the early movement but expressed the well-rooted tradition of a large part of the Italian upper classes, to which the diplomats of Palazzo Chigi fully belonged. The humiliations of Schanzer and other liberal politicians, which certainly contributed to the formulation of the famous remark by Mussolini at Territet, did not only rankle with the squadristi, nor is it any accident 160

161

L. Vitetti, Relazione sulla politica estera italiana inviata a Roma da L. Vitetti, July 1932, in R. De Felice, Mussolini il Duce. Gli anni del consenso 1929–1936, Torino: 1974, Appendice 5, p. 838. G. Rumi, Alle origini della politica estera fascista (1919–1923), Bari: 1968, pp. 263ff.

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that Count Corti’s polemic about mani nette emerged after the Risorgimento. Seen in this light, Vitetti’s criticisms of the results of the Lausanne Conference, and indirectly of Grandi’s policies in general, given their coherence, were to some extent well-founded. To what end had three years of work in favor of disarmament gone, years of moderation in the polemic with Germany, years of courting the editors of the Times and the New York Times (and even the Gazette de Lausanne, the Daily Herald, the Dagens Nybeter) if France was not only not isolated but able to flaunt before both Germany and Italy the fait accompli of a bilateral agreement with Ramsay MacDonald? What instruments of influence were left to Italy in dealing with Germany if it became threatening again and obtained recognition for its wish to stop paying reparations, without its weakest creditors having obtained any such recognition or forgiveness of their debts to Great Britain and the United States? De Felice himself remained stuck in this interpretation when he focused on Grandi’s African ambitions and policy of blackmail toward France, to the exclusion of all Grandi’s other efforts:162 Even if there are not any in-depth monographs on this period, it is easy to see that all Grandi’s positions were in these years aimed at a single objective: to reach an agreement with Paris that would cover the whole range of questions between the two countries (and therefore would include also the normalization of ItaloYugoslav relations) and thus putting France in a difficult position in every case and with all possible means, undermining her continental hegemony and at the same time making of Italy a peaceful and responsible great power that could plan a policy that would be not only the alternative to France’s but more modern, more in line that is with the necessities of the difficult political and economic moment that Europe was going through and with the aspirations of both the other States and vast sectors of international public opinion.163

In this way a certain interpretation of the Fascist regime is protected from critique. It is posited that ideology and politics had more importance than class relations and power imbalances, more importance than the material and moral interests of the social coalition flanking the regime, and, in terms of international relations, more importance than the objectives that would have been pursued by those nations and those classes most interested in defending a certain social order, including in Italy. According to this argument, until 1929 Mussolini did not conduct a true foreign policy, trusting in the immobility of the international situation and

162 163

De Felice, p. 377. Ibid., p. 381.

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worrying only about the internal consolidation of his regime.164 Did the problem of imperialism exist only in terms of Italy’s pursuit of imperial status, or also as an ambition that Mussolini had but perhaps postponed? De Felice never asks what international order the regime came to power in the context of and consolidated itself in. Nor does he question if a foreign policy aimed at the consolidation of the regime required only a few grandiloquent gestures to satisfy the Blackshirts or actually presumed a precise choice of alliance within international capitalism; to wit, the pursuit of concrete material support, indispensable for the stabilization of the regime in the mid-1920s, and requiring a compatible orientation in foreign policy, especially regarding the crucial questions of the reconstruction of Europe and specifically of Germany. De Felice asserts that, on the international level, there were two alignments (though it might be better to speak of viewpoints) regarding Italian Fascism: on the one hand the Democrats and Social Democrats who nurtured hostility toward Mussolini, and on the other those realists who saw Fascism’s anti-Communism as a positive characteristic even as they pointed out Fascism’s peculiarities. But which of these two alignments prevailed in the 1920s? Who were the realists and what interests did they represent? Only “numerous English conservatives,” as De Felice implies, or perhaps also those who actually held the reins of the two major capitalist governments (Ramsay MacDonald, who should have been a leader in the first group, did not disdain collaboration with the Fascist government on many occasions as we have seen)? And if they underscored the peculiar and specifically Italian nature of the Fascist phenomenon, with motivations that were frequently veiled racism, did they not still maintain international interests for which the Fascist regime’s anti-Communist and stabilizing influence were clearly useful? We know a great deal, perhaps too much, about every last one of Mussolini’s aggressive expostulations throughout the 1920s – from Territet to Corfu, from his irredentism to the Danubian revisionism. Have we not perhaps failed to learn something more about the politics that Italy did not control or invent but was subjected to? Usually the economic weakness of the country, its lack of raw materials and liquid capital, were invoked by the Fascist government to justify expansionism. If we agree that these conditions were real, we must examine the network of external support and solidarity allowing Fascist Italy to survive. As others before him did, De Felice too continued to focus on the foreign policy determined by Mussolini; but it

164

Ibid., p. 323.

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may be more productive to investigate the external factors conditioning Italian conduct in various phases of the regime’s history. During the three years in which Grandi filled the post of foreign minister, the evident preoccupation of De Felice was to show how his policies were compatible with an interpretation claiming the determinative priority of Fascist ideology over the regime’s supporting interest groups. If in the first phase Mussolini was still conditioned by those groups, his policies “did not assume even in the years immediately following 1929 a character altogether [emphasis mine] more aggressive or directly imperialist.” It is not an easy task to demonstrate how Mussolini’s policies as carried out by Grandi from 1929 to 1932 were not “altogether . . . aggressive or directly imperialist.” De Felice identified the main sources of inspiration for Grandi as Alfredo Oriani and Machiavelli, applicable to any political situation. The analysis of his politics, as argued above, was based on his African ambitions – which were relevant, and to which he did refer even in conversation with those hostile to such plans, such as Hoover and Stimson.165 There is not even a doubt that his policies had the goal of forcing France into negotiations, although De Felice claimed that it was “the sole objective” of all his initiatives. Especially in the final period of Grandi’s tenure, his efforts to reach an accord with France to guarantee Italy some opportunities in Africa became frenetic to the point of conducting conversations with Herriot and the undersecretary of foreign affairs Paganon without Mussolini’s authorization, in the desperate hope (as De Felice rightly observed166) of extracting a preliminary commitment that might save his job.167 All this is surely true. But it is another thing to claim that an accord with France is not “the sole” but only one of the main objectives of Grandi’s policy. It is hardly plausible that he would have mounted a complex and

165

166 167

ADG, V, D. Grandi, Appunti sui colloqui col Segreatario di Stato agli Esteri degli Stati Uniti H. Stimson, Rome, July 11 and 12, 1931, p. 40; ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, p. 95, where Grandi reports that he told Hoover: “There is a final Italian problem that is essentially a problem of survival. We will end up suffocating one of these days. We need the world to address this issue as well.” On the Danubian revisionism of Mussolini, H. J. Burgwyn, Il revisionismo fascista, La sfida di Mussolini alle grandi potenze nei Balcani e sul Danubio 1925–1933, Milan: 1979. Credit for rechanneling the debate to the crucial point that Italy was dependent on conditions abroad goes to G. Santomassimo, “Il fascismo degli anni ’30,” in Studi storici vol. XVI, no. I. De Felice, p. 401. ADG, VII, D. Grandi, Appunti sul interview con M. Paganon, Sottosegretario di Stato francese agli Affari esteri e fiduciario personale di Herriot (presenti i Ministri plenipotenziari A. Rosso e G. Rocco), Geneva, July 8, 1932, pp. 148ff.

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organic architecture of policy from disarmament to the financial restructuring of the whole world, from courting Great Britain to making himself the spokesperson for American interests in all quarters, only in order to obtain the go-ahead from France to try a colonial adventure in Ethiopia and gain the mandate for Cameroon. The interpretation has the advantage for its advocates that it replaces Grandi and his policy within the presumed major Fascist current of nationalism above all else – though still not quite rising to the level of being “not altogether . . . aggressive and directly imperialist.” In this way the three years during which Grandi – and not only Grandi, but Mussolini, it is important to remember – conducted Italian foreign policy remain compatible with the image of a regime that disregarded the special interests and class loyalties that had brought it to power and instead prioritized its own ideological autonomy. But in reality Grandi’s policies – and it would become clear that they were different from Mussolini’s, if not so much in immediate terms then certainly in intentions for the future – were at the same time more ambitious and more idealized. It is worth returning to the topic of the Lausanne Conference on this point. Grandi, in fact, with some reason, refused to consider that conference as his personal Caporetto [referring to the 1917 Italian defeat that came to mean a terrible rout in popular culture – trans.]. The evaluation of the Italian role on that occasion varies depending on the goals one chooses to emphasize. Vitetti’s negative judgment, even in its opportunism, was based on the idea that the goal of Grandi’s foreign policy was to force France to negotiate on colonial territory issues, or to continue to hold Germany for ransom to the original commitments of the Treaty of Versailles. This was not the case. Grandi actually proposed first of all the erasure (or, as Mussolini put it, the elimination of the “tragic accountability”168) of every financial remainder from the First World War, whether debts or reparations. From this point of view, it makes no sense to criticize the results of the Lausanne Conference as having cancelled reparations but not debts, forcing Italy to renounce its traditional position that reparations and debts were indivisibly linked. The annulment of reparations on the part of debtor nations constituted an ulterior form of pressure on the creditor (which in the meeting of Hoover and Grandi, and probably Laval as well, had been left open as a likely outcome), to the point that that annulment was explicitly made on the condition that war debts were also annulled. Never, in fact, were reparations and war debt so intimately 168

ADG, VII, D. Grandi, Il diritto di vita dell’Italia. Discorso al Senato del Regno, Rome, June 3, 1932, p. 165.

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linked as at Lausanne. The factor that created the failure – not of Italian policy but of the policy of all the European countries that participated in the conference – was the continual refusal of the American Congress to accept debt remission. This refusal was made despite the fact that the progress on the part of the European countries was not so much a financial concession as much as a policy reversal on the German question that finally concurred with the traditional position of the Americans on European reconstruction. The decisions made at Lausanne were furthermore ratified by the Italian cabinet of ministers (and therefore also by Mussolini himself).169 “The decisions of Lausanne,” ran its statement, “reaffirm the compensation between reparation and debts and represent the decisive step on the path toward their final cancellation according to Italian proposals.” These were pious illusions, but they were not Grandi’s alone. Undoubtedly the procedure that gave rise to the subsequent four-way advisory pact (which was a direct accord between Herriot and MacDonald) placed Italy in a difficult situation, but it is also true that it served to confirm its status as one of the four European great powers. It also put into practice, even if only formally, the policy of reconciliation that Italy had been pursuing in every international conference of the past three years. Grandi worked to make his conversations with the German representatives result in their pressure on their government to adhere to the pact (“Germany and Italy should not, in my opinion, be too picky,” wrote Grandi to the ambassador in Berlin, “about the fact that the British Government addressed Paris in this matter before turning to Rome and Berlin. MacDonald obviously understood the importance of ensuring a positive response from Herriot, remembering that Herriot had opposed the advisory project offered by von Papen simply because it originated with Germany.”)170 There is more. The Italian contributions at Lausanne, summarized in a letter Grandi sent to the British prime minister and president of the conference, Ramsay MacDonald, was tantamount to an organic presentation of the classical solutions of international capitalism to the crisis (with the coherence as well as the defects typical of such an approach).171 The cancellation of the financial obligations of the war is not and should not be an end in itself, but the premise and condition for the rebirth of confidence and the 169 170

171

ADG, VII, La conferenza di Losanna, note no. 14, pp. 117–118. ADG, VII, tel. n. 745, Dino Grandi all’Ambasciatore d’Italia a Berlino, Rome, July 17, 1932, p. 115. ADG, VII, Dino Grandi to Ramsay MacDonald, Lausanne, June 27, 1932, pp. 98ff.

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renewal of normal economic and financial relations among the various countries. It is indeed my conviction that this is the final goal of the Conference. To that end, the Italian delegation is of the opinion that the monetary reorganization on a stable basis of the currency of the various countries is the necessary and most effective condition for the renewal of European trade, while any financial assistance that disregards the monetary problem or the need to create a stable capacity for foreign payments would do nothing but prolong and finally worsen the situation.172

It is unsurprising that a delegation made up, besides Grandi, of the Finance Minister Mosconi, Alberto Beneduce, and Alberto Pirelli would hold such opinions. Equally relevant is a congratulatory telegram arriving from Thomas Lamont, senior partner of the Morgan Bank, who expressed his pleasure “for the happy result of Lausanne and for the effective work you personally carried out at the conference.”173 It was completely natural that the more progressive sectors of Italian capitalism, as represented by Beneduce and Pirelli as well as by the man who for more than a decade had carried out the plan for capitalist stabilization in Europe, would identify with such policies. In a certain sense, these names evoked the past, the era of the mid-1920s when classical economics appeared to be the best tool for guaranteeing capitalist expansion without any foreseeable limits of time or space. The representation of those concepts in June 1932 indicated the very incomprehension of the real nature of the crisis that characterized Herbert Hoover as well. These were remedies that did not envision any substantial changes in individual economies, beyond the traditional deflationary squeeze connected to monetary stabilization, but they showed the will to return to that interdependence at the global level that remained a primary interest of the strongest economies, in particular that of the United States. In conclusion, the failure of Grandi’s policies at Lausanne was not to be found in the cancellation of reparations and the advisory pact among the major European powers, decisions completely in line with his position on European reconciliation and capitalist recovery, but rather in the fact that he found himself by that point in the unpleasant position of preaching capitalist orthodoxy to those who – starting with the Hoover administration and the German Reich – were prey to its contradictions and on the verge of abandoning it entirely. One year earlier, after the meetings in Paris and London, when for the first time the dramatic consequences of the crisis were wreaking havoc on international relations, Dino Grandi

172 173

Ibid., p. 100. ADG, Thomas W. Lamont to Dino Grandi, undated.

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had, perhaps out of the habitual desire to please his “Duce” and tell him unwelcome news in the most palatable way, written the following: While the conference work went on and the dreadful specter of the economic crisis and growing misery seemed to weigh on all spirits, I could not help but think proudly of my country: without indigence, ordered, tranquil, happy, with its major industries active, with its streets where the people walk happily without experience of the evils other peoples are suffering, even those who seem more rich or powerful, sure of themselves and of their future.174

He did not realize that in just this paradoxical situation lay the deep causes that would prevent the escape from the “closed economies” that only a year later he would call “an ever greater social danger and an ever more serious threat to the stability of international relations.”175 The stubbornness of the defense of the international order founded at Locarno and by the Dawes Plan even in the face of the destructive effects of the economic crisis reveals the true underlying motivations of Italian foreign policy in those years. As stated above, this was both more ambitious and more idealistic than the simple nationalist Machiavellian maneuvers that De Felice attributed to Grandi. His was an ongoing attempt to secure the basic goals chosen by Mussolini in the decade after his rise to power – in collaboration with such men as Volpi, Stringher, Pirelli, and Beneduce – and to defend those choices even in the face of ever harsher impediments brought on by the crisis. The key to this policy, as well as the reasons for its failure, may perhaps be found in the most intense speech given by Grandi during his tenure, to the Grand Council of Fascism on October 2, 1930. With this speech Grandi had to justify his policy to men whose ideological orientation was diametrically opposed to such initiatives. He posed the problem in provocative terms: What on earth has been happening to our foreign policy in this past year? What can it mean, this talk of pacifism, disarmament, locarnism, league-ism, europeanism [. . .]? [emphasis in original] [. . .] Have we not always, we Fascists, maintained that democratic peace and disarmament are a lie, that Fascism has but one path, and that is to resolutely and forcefully arm ourselves to face any eventuality and to solve our own national problems by ourselves?176

Grandi offered the predictable explanations, instructing his colleagues on the distinction between ideology and interests of state in foreign policy; 174

175 176

ADG, V, D. Grandi, Relazione del Ministro degli Affari Esteri sui lavori del onvegno di Parigi e della Conferenza di Londra, 18–24 July 1931, Rome, July 27, 1931, p. 92. ADG, VII, Dino Grandi to Ramsay MacDonald, Lausanne, June 27, 1932, p. 101. ADG, D, Grandi, Relazione al Gran Consiglio del Fascismo, Rome, October 2, 1930, p. 284.

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on the victory represented by the Locarno Pact; on the usefulness of the politics of disarmament for a “poor power” such as Italy; on the necessity to revise the habit of polemics regarding the League of Nations that had been characteristic of the post-Wilsonian era; even on the natural propensity of Italy for a policy of power equilibrium on the Continent. But at the root of all these issues was one basic calculation: the current balance of power in the world, which Grandi described at the beginning of his speech. The war had turned America into the “richest and most powerful” nation in the world, and despite the effects of the economic crisis it was approaching a new engagement in the politics of Europe and the rest of the world, abandoning the isolationism that had become damaging even to itself. “What should the Italian approach be in the face of this American attitude?” Grandi asked. In his judgment, it was necessary to learn the “sad lesson of 1919”: If we lost a great portion of the fruits of victory, it was largely due to the fact that other Nations were able, and knew how, to conquer the sympathy and the comprehension of the American governing class, arbiter in that moment of the destiny of the world, and to direct it toward solutions that were contrary to our rights and to our international interests.

What should the Italian approach be now, in 1930? By posing the problem, we solve it. We must become the avant-garde Nation in the movement for recovery of the collaboration between America and Europe . . . If it is true, as it is true, that Italy is preparing to once more present the whole world with those same national problems that the peace conference did not solve, or solved in a way that was partial or even contrary to our rights and our national interests, it is indispensable from this moment to begin to construct in the American spirit that sympathy and that comprehension that ten years ago we lacked entirely [. . .].177

This is anything but the nationalism of Oriani! Whatever the ideological roots of this way of thinking, its clear motivation was the profound awareness and acceptance of the fundamental subalternity of the county whose interests Grandi defended. The frustrated ambitions of Italy would not be realized by its policies in the Danubian basin, which Grandi did at times conduct with daring nonchalance; nor would it suffice to exert pressure on France (those who insist on putting this issue at the center of their historiographical arguments are, apart from all else, forgetting that French consent would not have been enough for Italy to realize its colonial dreams in Africa anyway, as the Ethiopian war proved). It was necessary to 177

Ibid., p. 261.

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learn the lesson of Versailles as it had been taught to bourgeois opinion at the time. Orlando and Sonnino were defeated, above all, because they had not understood the changed power relations in the world after the Great War. They had been unable to orient themselves in the Wilsonian universe. Not only did Grandi want to avoid repeating that error, but he believed that Italy, which had not been tangled up in the mortal controversy dividing France and Germany, was the most fit to fill the role of “avantgarde nation” favoring the United States’ assumption of its full hegemony in Europe. He affirmed: I sincerely believe that no European nation today is more capable than Italy of stabilizing an understanding with the United States of America on the political, spiritual, moral, and ideological levels for a concordant and common activity in confronting the great problems agitating the world.178

To this end, the millions of emigrants were a help, as long as they were motivated to act as American citizens who, as such, could exert influence in favor of their country of origin. What would be especially important was . . . the frank sympathy that Americans have shown during these past few years for all that is new, fresh, and vital about the Fascist regime’s work in our country . . .

In this way Grandi reconnected himself to Mussolini’s policy, which had not only been strengthened by the popularity he had been able to conquer for the regime in the United States and in the rest of the world, but had also paid a healthy attention to the interests and vulnerabilities of the United States so that he had been able to exploit them for the regime’s consolidation. Naturally, at the moment when the foreign minister proposed a policy, and especially if it were a policy that was not all about glory and conquest but rather required submission to the dominance of another country in the name of ideals that were extraneous to Fascist culture, he could not do so in superlative terms. Italy not only had to encourage the United States into a new engagement with European politics, but it had to be “the avant-garde nation” in this sense. Given this logic, Great Britain itself was not stronger than Italy because of its empire, but because of what would be called in another era its “special relationship” with the United States. Grandi proposed to skip over this prior commitment, although he was sharp enough to understand that it would have been a serious error to try to break up the two Anglophone powers too quickly, especially since America’s 178

Ibid., p. 262. See also Burgwyn, pp. 208–234.

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relationship with Great Britain was actually one of its reasons for caring about European intervention. Grandi realized, therefore, that a policy of friendship with the United States meant an equally close relationship with Great Britain (so that it was not a rival to be defeated but, as mentioned above, an old maiden aunt whose inheritance was to be coveted). In what way, then, was this ambitious goal to be reached? American sympathies for the regime and the pressures exerted by ItaloAmericans could certainly facilitate some successes – as happened during the negotiations for war debt consolidation – but they were not in themselves sufficient to make Italy the ultimate interpreter of American policy in Europe. What counted most of all was . . . the commonality of ideas that has been recently revealed between the Italian and American politics of how to imagine peace and how to concretely realize it . . .179

The choice of Locarno as the foundation of Italian politics was significant in showing off the status of Italy as a guarantor power flanking Great Britain and also served as an ongoing reminder of the postwar point when American influence had been at its height and the American design for stabilizing Europe had been strongest. Italian willingness to support disarmament was not only in its interest as a poor “great power” but also served Hoover’s needs if he was going to convince Americans to renew U.S. commitments in European politics. The moratorium on war debt payments, monetary stabilization, and liberalization of trade were not only helpful to Italy as a debtor nation that needed to boost exports even with a relatively strong currency still tied to the gold standard, but also conformed to the traditional objectives of a great nation aware of its own potential for dominance, objectives the United States would abandon only temporarily under the worst blows of the economic crisis. Grandi understood that not only the ends but also the means of such a policy had to conform to American expectations. He paid careful attention to public opinion, he pursued consensus among the medium and small powers, he showed sensitivity to the emotional and moral components of mass consent regarding international issues, and he flattered the educational self-image of American elites who wished to provide guidance to a mass public not yet entirely ready to accept American responsibility abroad. This practice of “new diplomacy,” with its habits of direct and informal exchanges of opinion among the representatives of foreign policy,

179

Ibid.

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was not a mere expedient for Grandi, as De Felice himself agreed,180 but formed a policy suited to “a great power both pacificist and responsible, leading the way to a policy that would not only be an alternative to the French approach, but altogether more modern,” and which would oblige Stimson to affirm, when he would gladly have avoided doing so, that Mussolini “was in those years, in his foreign policy, a sound and useful leader, no more aggressive in his nationalism than many a democratic statesman.”181 As for Grandi, if he was not prey to the pettiness and lack of imagination of many nationalists – Fascist or otherwise – of his era, obsessed by colonial ambitions and insistent on “nothing for nothing,” it is still true that the young foreign minister, ex-squadrista from the Po Valley, interlocutor of important members of the Italian industrial class, was not the man his party rivals tried to paint him as. His archenemy Italo Balbo tried to portray him, at the moment of his disgrace,182 as an authentic champion of world peace or at least a man who had allowed himself to be dazzled by the lofty ideals of the MacDonalds, Stimsons, and Herriots of the world. But Grandi’s efforts were more realistically aimed at finding the proper role for his country, proportional to its potential, on the team that in those years appeared to be the clear winner. He was joined in these efforts by those moderate sectors of the regime to which he had allied himself at the time of his replacement of Finzi as undersecretary of the interior after the Matteotti affair, when he had formed a solid friendship with Luigi Federzoni and had been served well by the lessons of Contarini. Grandi had chosen to reflect the aspirations of the most evolved and cosmopolitan members of Italy’s industrial and financial class. His policy during his three years’ tenure at Palazzo Chigi was a continuation of the work of men such as Alberto Pirelli in the years of negotiating war debt and reparations and Giuseppe Volpi di Misurata in his work on loans and credit, as well as Bonaldo Stringher and Alberto Beneduce, who aided such efforts; these men had all brought positive results to the regime and to Italian industry and had helped consolidate the regime financially and socially by securing its place in the network of Western capitalism. With these solid interests at his back, Grandi had then put to the test his own nose for politics and 180 181 182

De Felice, p. 381. Stimson and Bundy, pp. 269–270. I. Balbo, “Disarmo ginevrino,” in Il Popolo d’Italia, July 31, 1932. Despite these apparently dramatic turns of events, the successive policy would be characterized by D’Amoja as “an old policy made new.” F. D’Amoja, Declino e prima crisi dell’Europa di Versailles. Studio sulla diplomazia italiana ed europea (1931–1933), Milano: 1967.

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the ambition of a provincial in pursuit of wider fame and fortune – at a level probably no less fierce than Mussolini’s own. His model had not been Oriani or Ramsay MacDonald. Upon his return from the United States, Grandi wrote to Mussolini that “Italy is going through a period very similar to that of 1848–1860, the Cavourian period of the Kingdom’s history”: At the Congress of Paris in 1856 no one heard Cavour speak of the Italian question and for that he was harshly attacked by the reactionaries of old Torino. But he had prepared himself in that way to lead Europe into an unavoidable acceptance of Italian unity in name of those liberal ideas that inspired that century. And Europe did follow him for the next decade. The foreign policy of a State consists in fact in making the interests of its own nation coincide with the shared interests of other nations in the name of a great ideology of peace.183

The United States had the dominant force to incarnate such values and was “indispensable to us if we are to affirm in the coming years the fundamental issues of Italian survival.” For that reason, every individual aspiration had to be subordinated for the moment to the determinative power of America and would be successful only inasmuch as it was correctly justified in ideological language Americans could understand and appreciate. Sometimes a failed policy throws an intense light upon future developments. We have seen how the Leffingwell Plan highlighted the permanent interest of the United States in capitalist stabilization based on an ever more united collaboration of the European states, twenty years before the launch of the Marshall Plan. There is no doubt that the policy conducted by Grandi from 1929 to 1932, even if it did not reach its goals, prefigured the privileged relationship (which could not be anything other than one of subordination, given the hierarchy of forces arrayed) Italy would create with the United States in the following generation. At that later time, the ideology and political goals of the United States would be the model for a constant effort of engagement on the part of the entire mainstream Italian governing class. It is important to note that the policy Grandi perfected had given expression, already in those years, to the conviction in expert quarters of Italian capitalism that the American influence on Europe would sooner or later become decisive. A similar belief was latent even in the policies of Mussolini himself, or at least in his concrete choices, until the Depression dissolved the political and economic links holding the Western nations together. De Felice, who did not fully understand all this in his 183

ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, p. 103.

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effort to prove the regime’s total autonomy from capitalism and therefore, in the international sphere, from the principal capitalist power, still correctly underlined the fact that Grandi was convinced Fascism was only transitory.184 He tried to ally his state with the strongest power, according to the logic of the governing classes of a country whose subordinate status they understood and accepted, and who used that relationship to consolidate their own internal position. The institutional order of the regime was secondary with respect to such hierarchies of power and was beneficial only to the extent that it served to consolidate them. Dino Grandi expressed those interests and values that could help cement the alliance when he spoke to the representatives of the American governing class at the Council on Foreign Relations: consolidation of class relations, expansion of a stronger capitalism fed by the solidarity and positions of power it sheltered, firm opposition to Bolshevism and any form of anticapitalist subversion. Everything else was secondary; Dino Grandi certainly would not have hesitated even well before July 25, 1943, to scrap any aspects of the Fascist regime and its more ideological extremes if they proved incompatible. Why, then, did the effort fail in those years? Because it was founded on a basic assumption that would reveal itself to be false. Grandi told the Grand Council of Fascism that The economic crisis has manifested itself with more gravity and violence, especially in the United States, with all the character and symptoms of a sudden and mysterious epidemic previously unknown to history. Its cycle of abundance and famine is of Biblical proportions. It certainly gives one pause to think that the richest and most powerful Nation in the world, the one that has revealed the characteristic signs of the dominating race of the twentieth century [emphasis mine], was the first to be attacked by the virulent disease, and that from rich and happy America this illness of poverty and misery that we call the “economic crisis” is spreading rapidly to the other continents. It is however very probable that the United States, after having been the first to suffer, will also be the first to recover. It is equally probable that the economic crisis will constitute the determining factor in a new political direction for the United States. The symptoms of this transformation in American politics are for that matter already visible.185

Not only did he believe that the Depression would not accentuate American isolationism, he thought it would accelerate the process of

184 185

De Felice, p. 377. ADG, III, D. Grandi, Relazione al Gran Consiglio del Fascismo, Rome, October 2, 1930, p. 259.

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overcoming it, which was already in action. This was Grandi’s interpretation of the Kellogg-Briand Pact – not a statement of principle, but a concrete guarantee of reengagement. He attributed great importance to the American presence at the Washington Naval Conference, and to the collaboration growing between their two countries. He concluded: Are we therefore on the verge of the effective return of the United States to a politics of collaboration with Europe? I believe so.

Probably it was not so much his political judgment that failed Grandi in this situation as his understanding of the economic crisis and its effects on international statesmanship. Hoover and Stimson were actually both convinced that American power could not rest on its laurels but would have to find ways and means to grow in the world. In a certain sense the effects of the economic crisis, when they began to show after the failure of Credit-Anstalt, reinforced this belief; but it would founder on the rocks of the growing obstacles in world events. Both American men, along with Grandi and the great majority of the governing class holding the reins of the Western economies in the years after the First World War, failed to appreciate the nature of the crisis and continued to prescribe the traditional remedies their background suggested. But, beyond that, they failed to understand one important fact that Roosevelt and his collaborators did fully grasp: that the restoration of the American and worldwide economy required a political and psychological break with the past. That break made possible the entire building of mass consent for a policy of restructuring and redistribution without which the means of production and property would not have survived intact. Breaking from the past meant discarding those elements of economic interdependence – the gold standard, free trade, liberalization of goods and capital – that Hoover, Stimson, Grandi, Lamont, and countless others continued to invoke based on their experience of the 1920s. Hoover, for example, had cursed the bankers and then proceeded to imitate their logic and point of view with only the minor adjustment of a greater sensitivity to the reactions of the electorate. The net result was that his administration tried the path of reengagement in Europe but was forced from it despite the proof of its necessity provided by the destructive effects of the crisis in central Europe when the domestic situation – including the weakening of the president himself – blocked further progress. While the international conferences offered Grandi the gratifying appearance of collaboration between the United States and Italy, they did not produce real results – either in disarmament

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or war debt – and the crisis went on uprooting one by one the pillars of economic interdependence built by the international collaboration led by the Anglo-Americans throughout the 1920s. The war of protectionist tariffs; the bank failures in the United States, Great Britain, and Germany; the impossibility of agreement on cancelling war debt and reparations; the abandonment of the gold standard by the Bank of England: these losses left the field open to the different approaches of the individual national economies and encouraged them to accentuate their autonomy and put all their efforts into rearmament as the irreplaceable motor of production in every state. Under these circumstances, the fundamental premise of Grandi’s policy as carried out from 1929 to 1932 with Mussolini’s authorization finally crumbled. The United States not only did not renew its European ties under the stimulus of the crisis, but the crisis actually transformed political and ideological isolationism – which economic actors and even the American government had largely bypassed during the 1920s – into an isolationism that was concrete and economic, and would oblige Roosevelt to renounce even in formal terms the role of guarantor of the economic system of interdependence and therefore also of international relations. As the conferences went on without producing results, and as the United States failed to effectively break the stalemate between France and Germany, Grandi lost his main partner. As discussed above, the paradox of Grandi’s visit to the United States was that it testified to the success of his effort to become the favorite interlocutor of the United States just at the moment when that status served no further purpose, since its leaders were not capable of making their presence count in the matters that most concerned Fascist foreign policy. In other words, the major point of strength of Italian policy in those years had now failed: its structural basis. Italy lost the support that was supposed to be guaranteed it by its tie to the strongest power and guide of Western capitalism. Grandi, and that wing of the regime and the governing class he represented, had not been mistaken in their valuation of the balance of power. But, due to their mistaken valuation of the nature of the crisis, they had not seen that the power of the United States was still only virtual and would not be mobilized in their favor in those conditions. Mussolini, who had also known how to distinguish which power would best help him consolidate his regime in the course of the 1920s, had allowed his foreign minister to pursue this relationship despite its contradictions with the ideology and inclinations of parts of his movement. Now he had to face the consequences. But he had also kept his habitual cunning, and reserved an alternative escape route.

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When Mussolini saw which way the new winds were blowing, he changed course. Strengthened by the growth of mass consent, stability, and monolithic power his regime had conquered during the previous phase, Mussolini now turned to capturing the possibilities offered by the new circumstances and the economic crisis itself. For its part, the United States, having contributed to the consolidation of that regime, now had to stand by and witness the change in orientation that would lead in the space of a few years to Italy’s emergence among the ranks of its enemies.

chapter 4 Roosevelt and Fascist Italy, from the London Economic Conference to the Italo-Ethiopian War (1933–1936)

1. foreign policy during the roosevelt administration The sudden ejection of Grandi from Palazzo Chigi in the “changing of the guard” of summer 1932, followed by the defeat of Herbert Hoover in the American presidential election in November of the same year, marked a turning point also in the relations between Fascist Italy and the United States. During the three previous years, an ambitious if unfruitful collaboration had been built between the two countries, no matter that such cooperation had a different meaning from each one’s point of view. According to Grandi, the collaboration with the United States, for that brief period, had been one of the central elements of Italian foreign policy. His hope was a renewal of American commitment to European politics, with the expectation that America’s best allies would gain power and prestige in the process.1 For Hoover and Stimson, the Italian support in that endeavor had not been as important. Italy was a very useful pawn in a larger game the president and the secretary of state were playing in order to conquer an eventual position of leadership for the United States in Europe. That required the relations among all the European states to follow a path that would reinforce interventionists in America. The Fascist government was not powerful enough to guarantee that result by itself; but certainly its amiable position as Grandi articulated its policy to them and to the American public had helped Hoover’s administration.

1

DDI, VII, 2, 102, Benito Mussolini to Vittorio Emanuele III.

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In reality, this game had failed even before the players were replaced. Grandi was not liquidated as a result of the Lausanne Conference and not even exclusively for his deviance from Mussolini’s wishes – although that deviance was ever more accentuated, as Roberto Cantalupo has shown.2 Nor did Hoover lose the election because his moratorium on war debts and his disarmament proposals had ended badly. Deeper events, linked to the political and economic earthquake of the crisis, had rendered the attempt at European reconciliation obsolete. And the reversal in Italo-American relations was not a consequence of decisions made by their successors; Mussolini and Roosevelt had to contend with the changed conditions shaping international relations they found waiting for them in 1932. Lloyd C. Gardner dedicated a study of Roosevelt’s economic foreign policy to emphasizing all the elements of continuity in his internationalism, comparing them with the findings of William Appleman Williams on Roosevelt’s predecessor. These reevaluations had a clear polemical agenda against the apologetic historiography on the subject of the New Deal.3 The most fervid admirers of Roosevelt’s innovations were not able to deny that the orientation of the then-governor of New York, as he presented it during his election campaign, was not far removed from the conventional wisdom Herbert Hoover also championed. Both Schlesinger and Freidel – the two definitive biographers of Roosevelt – found evidence in his campaign speeches of strong insistence on balancing the budget, showing great prudence in public spending, and little if any of that reforming spirit that would characterize the famous hundred days of his presidency as well as several later phases of his administration.4 Roosevelt was equally attached to the Wilsonian tradition of expansionism and internationalism. He had after all begun his career as undersecretary of the Navy in Wilson’s first administration and, as a vice presidential candidate for the Democratic Party in 1920 had defended Wilson’s foreign policy. He was certainly 2

3

4

R. Cantalupo, Fu la Spagna. Ambasciata presso Franco. Febrraio-aprile 1937, Milano: 1948, pp. 42ff.; cited also in R. De Felice, Mussolini il Duce, Torino: 1974, p. 394: “Mussolini said that Grandi had done everything wrong, in three years, everything: he had allowed himself to be entrapped by the League of Nations, he had practiced a pacifist policy, he had been super pro-democrat and super pro-Geneva, he had compromised the ambitions of the new generation, he had made England and France his bedmates, and since they were the men of the situation he had left Italy pregnant with their disarmament baby.” W. A. Williams, Storia degli Stati Uniti, Bari: 1973 (originally published as The Contours of American History, 1961). A. M. Schlesinger Jr., L’età di Roosevelt, Bologna: 1957 (originally The Age of Roosevelt; volume I entitled The Crisis of the Old Order: 1919–1933); F. Freidel, Franklin D. Roosevelt, Boston: 1973.

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aware that some of Wilson’s essential policy points were inappropriate in 1932. Whatever his personal leanings, however, he had no choice but to strongly oppose any American rapprochement with the League of Nations. William Randolph Hearst had made his endorsement of Roosevelt conditional on that point, and Roosevelt needed his support at the Democratic Convention in order to secure the nomination for president. Nor could Roosevelt make any specific promises regarding European political engagement. And yet his entire foreign policy in the course of the 1930s was characterized by a cautious, sometimes tortuous progress toward an international role proportional to America’s growing strength as a great power. One can certainly identify clues pointing toward his intention in this regard among his associates. It is very likely that Cordell Hull, despite their difficulties, was chosen and retained as secretary of state not only because Roosevelt needed southern Democrats’ support, but also and especially because they shared essentially the same vision of foreign policy. Hull was known for his obsession – as Guido Jung, among others, called it – with the idea that commerce was the solution to all international ills.5 But during the Ethiopian crisis, it would become clear just how much he also partook of that democratic-liberal moralism and the search for collective action that were also essential elements of the Wilsonian legacy. Norman Davis, who was variously employed by Roosevelt during his early years for the disarmament negotiations and for financial talks in Europe, was a living link between Roosevelt and the New York banking world, made up primarily of Republicans who pursued politics as members of the Council on Foreign Relations and advocated throughout all those years for European reconstruction.6 Nor could his childhood friend William Phillips, first undersecretary of state and then ambassador to Rome, be called an isolationist.7 The labels of isolationist or nationalist also could not correctly be applied to men such as Rexford Tugwell and Raymond Moley, who, in their role as planners and members of Roosevelt’s brain trust, dedicated to the formulation of domestic reform proposals, were certainly more reluctant than the State Department was to take on foreign policy commitments that might imperil their primary goals.8 5

6 7

8

ASMAE-AAP, bk. 4 Stati Uniti 1933, fol. Debiti e riparazioni – sf. Missione agli U.S.A., tel. n. 174, Guido Jung to Benito Mussolini, Washington, D.C., May 3, 1933. L. A. Shoup and W. Minter, Imperial Brain Trust, New York: 1977, pp. 11–28. M. C. Kellett, William Phillips and Italo-American Relations, 1936–1940: A Case Study of the New Diplomacy, unpublished thesis, Princeton University, 1957. R. Moley, The First New Deal, New York: 1966, pp. 39 and 42–43; R. G. Tugwell, The Brains Trust, New York: 1968.

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The orientation of Roosevelt’s collaborators was symptomatic, although it cannot be forgotten that, never so much as in his case, the president became his own secretary of state. It is therefore necessary to examine his foreign policy choices on a case-by-case basis as he was confronted by the problems brought on by the Depression even before his inauguration. Gardner, who argues that Roosevelt was consistent in his internationalism – whether in regard to his original ideological formation or to his predecessor’s record – does not see a deeper significance in his first choices at the world economic conference in London, an event that has become the main historiographical evidence for an isolationist slant in Roosevelt’s pragmatism.9 It is important, however, to distinguish between the president’s theoretical preferences and his concrete choices as they were dictated in the political possibilities of the moment. Like Hoover, he identified himself with the basic principles of Wilson’s vision of American economic expansion: monetary stability, free trade, and free movement of capital (with very little insistence, of a strictly political kind, on the repayment of the infamous war debts). Much of the confusion pertaining to Roosevelt’s politics and conduct, before and after the London Conference, was created by his tendency to call on those principles even in those moments when he was defending decisions he called temporary or contingent, and which therefore had quite different significance.10 The conflict that arose between Roosevelt and Hoover over war debts was typical in this sense: contemporaries and historians alike have spilled oceans of ink over this issue.11 Hoover wanted to commit his successor to several elements of continuity with his own policy in order to guarantee the United States’ global responsibility in financial matters. The December 15, 1932, deadline for payments on war debts offered Hoover, while he was still in the White House, the occasion for asking the president-elect to cooperate in a decision to extend the moratorium on payments. It would have been a very important signal of the entering administration’s willingness to act as guarantor of the remains of the international economic system.12 The equivocation began because Roosevelt signaled his willingness in principle but then did not follow up with any actual shared 9 10 11

12

See for example H. Feis, 1933: Characters in Crisis, Boston: 1966. Moley, p. 430. See Moley, pp. 21–36; H. Hoover, The Memoirs of Herbert Hoover, vol. 3, New York: 1952, pp. 183–191; Feis, 1933, pp. 15–86; R. H. Ferrell, American Enterprise in the Great Depression, New York: 1957, pp. 235–238. Hoover, pp. 183–191.

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declaration on the topic.13 But he did not intend to assume any responsibilities to Hoover on this or any other topic, because he was afraid of being used as a political tool by the outgoing president.14 More than any principles on the topic, which he may actually have shared with Hoover, more important for Roosevelt was to cement his relationship with Congress and the public in a moment of terrible crisis. Unemployment was rising, the banking crisis was about to worsen, and Hoover’s unpopularity for his politicies and for the social class he represented was at its apex. In these circumstances, even (and in some ways especially) where his views did not differ much from Hoover’s, it was necessary for Roosevelt to establish in the most dramatic and clear way that he was not an insider of those hated circles of Washington and New York that many blamed for creating the Depression – that he instead represented change and a new path for his country. Nothing could have been more politically damaging for Roosevelt than to address the American people for the first time as their president by saying that he was cooperating with Herbert Hoover in exempting some European countries from their debts to the United States. They wanted to hear the opposite – that he had gone immediately to work solving their own most vital and immediate problems. This political necessity weighed on all of Roosevelt’s foreign and financial policy decisions, especially in the first months of his mandate. Even after his inauguration, the question of war debt continued to be a source of confusion about Roosevelt’s true politics. He invited the main governments participating in the coming London Conference to send representatives to Washington for preparatory talks with the new administration.15 In the course of the spring of 1933, there was a rapid succession of visits from Ramsay MacDonald, Herriot, and Guido Jung, who had at one time been financial attaché at the Italian embassy in Washington and had just been named finance minister by Mussolini. To each of them Roosevelt gave the impression that he was basically willing to drastically cut the already reduced commitments to repayment these countries had made when they consolidated their debts.16 During all these months Roosevelt insisted, however, together with his main adviser of the moment, Raymond Moley, on the necessity of negotiating this matter separately from any other question. He even extracted from MacDonald the promise – which 13 14 15 16

Feis, 1933, pp. 80–91. Moley, p. 35. Moley, pp. 395ff. ASMAE-AAP bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni sf. Missione agli U.S.A., Conversazione Jung-Warburg, Washington, D.C., May 4, 1933.

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was not actually fully honored – that such questions would be kept off the agenda of the coming conference.17 This somewhat artificial stance had the goal of avoiding any formal public statements by the American government on debt cancellation, although Roosevelt, for example to Guido Jung, did justify himself by emphasizing that, unlike his predecessor, he did not want to use the debt issue for leverage in any other matter.18 In this way Roosevelt chose the path of, in effect, forcing his debtors into default, which he evidently thought preferable to a controversy with his own Congress and domestic public opinion. In this way, and without regard to his own preferences, he broke with the orthodox concept of international economic relations and also dropped the leadership responsibility of the United States that Hoover had worked to make him assume. Roosevelt conformed to the best Wilsonian tradition in his treatment of customs barriers. And if the nomination of Cordell Hull had a more than tactical purpose, it was surely to emphasize the new administration’s determination to fight the protectionist policies so drastically strengthened by the Smoot-Hawley Act of 1930.19 Once more, in the course of the bilateral talks in Washington preceding the London Conference, the interlocutors of the various delegations were lectured by the president and especially by the secretary of state on the necessity of a collective effort to break the protectionist spiral. At the end of his first meeting with Hull, Jung telegraphed to Mussolini: Secretary of State gave me the impression that he maintains that tariff reform will be the cure for all ills.20

Again meeting with Jung, Roosevelt insisted on the proposal for a tariffs truce already put forward by Norman Davis in the preparatory committee for the conference, but in such terms as to make Jung suspect that it was merely a strategic maneuver for the benefit of Congress.21 In any case, Roosevelt had committed himself with his secretary of state to introduce a bill to Congress giving the executive ample powers to negotiate agreements 17 18

19

20

21

Ferrell, pp. 259–260. ASMAE-AAP, bk. 14, Stati Uniti 1933, fol. Debiti e riparazioni sf. Missione agli U.S.A., G. Jung, Dettagli sul mio incontro con il presidente Roosevelt, Washington, D.C., May 4, 1933. J. W. Pratt, “Cordell Hull,” in R. H. Ferrell and S. F. Bemis, eds., The American Secretaries of State and their Diplomacy, vol. 12, New York: 1964, pp. 1–11. ASMAE-AAP, bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni, sf. Missione agli U.S.A., tel. 174/1, Guido Jung to Benito Mussolini. ASMAE-AAP, bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni, sf. Missione agli U.S.A., tel. 174/1, Guido Jung to Benito Mussolini.

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for 50 percent reductions of customs tariffs. Only when the delegation had already arrived in London did Roosevelt telegraph Hull that he had decided not to present the necessary bill to Congress.22 The two Houses were meeting in special session to debate and approve the entire formidable group of laws introduced by Roosevelt in the course of the oftreferenced first hundred days, with the goal of resolving the unemployment crisis and restructuring industry and agriculture. He tried to console his secretary of state by writing that he would be able to negotiate the preliminary agreements with individual states; these would then be submitted to Congress during another special session convened for that purpose.23 This was clearly a dodge, given that the American delegation in London was now in the position of being unable to negotiate on two of the major questions of international economics: war debt and customs barriers. It is true that the following year would see the passage of the Reciprocal Tariff Act.24 Nonetheless, at the crucial moment (or at least at the moment the participants thought was crucial) at the London Conference, once again the president had given priority to his own domestic economic battles, in comparison with which products for export were a minor issue. But it was on monetary policy that Roosevelt made his most dramatic choice, bringing Ramsay MacDonald to question whether the man bombarding the London Conference he presided over with messages from Washington could be the same person he had met in that city.25 Again in this case, Roosevelt’s ultimate decisions stood in contradiction of his initial statements. His official position during his electoral campaign and during the period when Great Britain abandoned the gold standard had always been the traditional one according to which currency stabilization and a collective return to the gold standard constituted the fundamental condition for international economic relations to return to normal. But in the course of the month of April, the United States had also de facto abandoned the gold standard, adopting a practice of day-by-day defense of the currency similar to the one Giuseppe Volpi had so chocked the Morgan Bank partners with before the definitive stabilization of the lira in December 1927.26 Raymond Moley described the event in his memoirs with the following words: 22 23 24 25 26

Feis, 1933, p. 175. Ibid. L. C. Gardner, Economic Aspects of New Deal Diplomacy, Boston: 1964, pp. 15–24. Feis, 1933, p. 240. G. G. Migone, “Aspetti internazionli della stabilizzazione della lira: il Piano Leffingwell,” in Problemi di storia nei rapporti tra Italia e Stati Uniti, Torino: 1971, pp. 88ff.

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One morning in April, Will Woodin entered [and the president greeted him] by saying that he had taken the country off the gold standard. A smile came to the pixy-like face of Woodin and he replied, “What? Again?” This fairly well expresses the difficulty of fixing with exactness the date when the United States abandoned the gold standard.27

Probably in this case Moley was right to state that the decision was taken not on the basis of Roosevelt’s sympathies for the monetary theories of Keynes and George F. Warren – according to which prices could be regulated through ongoing modifications to gold’s value – but rather on the basis of the formidable political pressure in favor of inflationary policy that the Depression had encouraged in wide sectors of both Congress and the rest of the country.28 The agricultural sector, the old populist movement still strongly present in both parties, the pressure from the Hearst-owned press, and above all the reality of the Depression were more decisive than any theory of Warren’s or Keynes’s. Naturally, the international consequences of this decision made on the eve of the London Conference were not slow in coming: Germany and Great Britain had already turned in this direction. France, Italy, and all the countries that had defended their currencies’ rate in relation to gold now had to deal with the pressing problems brought on by variable exchange rates. This had not been the decision of any ordinary industrialized country, but rather of the principal creditor nation of the world with the most important production system even in the contexts of the Depression – a nation that had for a decade or more made the return to the gold exchange standard after the war one of the pillars of its policy. Together with the acceptance of Senator Thomas’s amendment, which gave the president ample power to conduct inflationary policies, this decision signaled that the United States had made a significant change under the guidance of Roosevelt. America had chosen to privilege a politics of price stimulus and recovery of production and employment over any further support of the instruments that up until 1931 had structured the entire international monetary system.29 In the bilateral meetings conducted in Washington, Roosevelt did not hide the fact that his primary concern was for prices, especially agricultural prices. His exchange with Jung on the topic was exemplary: 27 28 29

Moley, p. 298. Feis, 1933, p. 120. Ibid., pp. 126–130.

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The president considers it necessary to take shared action to raise world prices; it is indispensable to relieve the burdens on landowners in debt. I said that Italy would favor an improvement in price levels but does not believe monetary instruments or temporary controls would fulfill this goal. Italy instead believes that, as the various nations compete to devalue their currencies and engage in customs wars, there can be no other result than a further reduction in prices. A rise in prices can only be achieved through a rise in demand – that is, in buying power or through a reduction in supply by lessening production.30

Obviously, the balance of power remained favorable to the United States, but on monetary matters the roles of the two countries had been reversed over the past five years. It was now the Italian finance minister preaching the virtues of the gold standard and reacting with alarm to any hint that the president of the United States intended to manipulate exchange rates to modify price levels. Roosevelt explained to Jung, as he had to the representatives of other countries concerned, that abandoning the gold standard was only a temporary measure and that the U.S. government still favored monetary stabilization and the return to the gold standard. He was also willing to put his plans on paper (he had done so with other declarations), and he and Jung formulated a statement at the end of their meetings: A truce in the field of tariffs and other obstacles to international trade is essential if the Conference is to undertake its labors with any hope of success. We are in agreement that a fixed measure of exchange values must be reestablished in the world and we believe that this measure must be gold. The entire problem of raising world prices and restoring the opportunity to work to the men and women who today wish to work and can find no employment is a unit. It must be attacked as a unit. Along with the measures which must be taken to restore normal conditions in the financial and monetary field, and stability in international exchanges, must go hand in hand with measures for removing the obstacles to the flow of international commerce.31

The joint statement offered space for the stimulus Roosevelt was carrying out, but its wording was unequivocal on the monetary issue. But it certainly had not been Jung’s insistence that produced this result. Even after he had rejected a proposal for temporary stabilization prepared in the monetary commission of the conference by the American delegation 30

31

ASMAE-AAP, bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni, sf. Missione agli U.S.A., tel. 174, Guido Jung to Benito Mussolini, Washington, D.C., May 3, 1933, p. 3. ASMAE-AAP, bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni, sf. Missione agli U.S.A, relaz. 6, all. Joint Statement by President Roosevelt and the Finance Minister of Italy, Signor Guido Jung, May 6, 1933. English text online at The American Presidency Project, http://www.presidency.ucsb.edu/ws/index.php?pid=14635.

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together with the monetary experts of the gold standard countries, Roosevelt told Moley as he was leaving for London that he was willing to approve a stabilization accord, as long as it allowed the dollar to fluctuate within a wide-enough margin to avoid endangering the slow rise in prices that had already begun.32 Moley rushed precipitously to London to communicate the latest opinions of the president and, with difficulty, managed to persuade the gold standard countries to issue a joint statement with the most innocuous wording possible. In that statement, the gold standard countries announced their desire to remain on the gold standard, and the others (particularly the United States and Great Britain) confirmed their desire to return to it. The statement only committed those countries with paper currency to limiting exchange rate speculation, through the cooperation of their central banks, which were tasked “in due course” with restabilizing the gold standard overall.33 The drafted statement, according to the American delegates, was the minimum that would satisfy the gold standard countries’ representatives. When Moley intervened to delete some extensive interpretations of the central banks’ commitments that the French delegation had tried to introduce, Moley reported that Guido Jung protested, “You are breaking my heart,” to which Moley replied, “That is because you have a heart of gold.”34 The statement was a simple reassertion of the objective Roosevelt had repeatedly claimed of returning to the gold standard; but it provoked an explosive message from Roosevelt that famously forced the conference’s failure. Some have underscored how Roosevelt’s message was based on a misunderstanding because he was fulminating about a proposal for temporary stabilization that was not included in the actual joint statement.35 But the accuracy of the content is not the pertinent point; it is, rather, the political significance that matters. Roosevelt took advantage of the occasion to openly polemicize against what he called the “old fetishes of so-called international bankers.” He affirmed that, rather than a stability in foreign exchange that would be “temporary and . . . artificial,” desired only by a few large countries, he preferred to put the American economic recovery first: Let me be frank in saying that the United States seeks the kind of a dollar which a generation hence will have the same purchasing and debt paying power as the 32 33 34 35

Moley, p. 440. Ibid., p. 441. Ibid., p. 458. Ibid., pp. 462ff.

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dollar value we hope to attain in the near future. That objective means more to the good of other nations than a fixed ration for a month or two in terms of the pound or franc.36

Roosevelt was obviously not arguing against the specific – and anyway nonexistent – proposal of temporary stabilization. Perhaps he did not even support the substitution of gold with an international currency advocated by Keynes (though Keynes did show satisfaction with Roosevelt’s stance), as Moley hypothesized.37 Roosevelt was signaling in the most dramatic way that his primary concern regarding the international responsibilities of the United States was the internal recovery of his own country. In the second place, he had also taken the opportunity to oppose American capitalism, not in itself but in the form of that restricted elite of capitalists – international bankers – that were by this point its riskiest aspect. In his characteristically pragmatic, not to say contradictory, fashion, Roosevelt thus affirmed his desire to break with a certain capitalist culture. He made ample concessions to the inflationary pressures present in the country’s economy at the same time as he publicly reaffirmed the eventual goal of returning to “permanent stabilization,” balanced budgets, and free markets. He never questioned capitalism yet worked to transform it by achieving reforms in reverse gear (as Gardner put it38), and thereby responded to and contained potentially subversive pressures. In the same way, he never abandoned the basic Wilsonian recipe for an integrated world capitalism in which America’s natural hegemony would be able to fully develop. And still he was clearly aware that this approach required tortuous turns and measures that could temporarily act in contradiction to each other, in order to respond to various political pressures he found irresistible as they came in turn. His success was possible, as has been said often, because alongside the underlying firmness in his goals, he showed pragmatism, willingness to experiment, and a sincere aversion to that dogmatism – more cultural than political – of the Republican governing class that had preceded him in the White House throughout the 1920s. Arthur Ochs, owner of the New York Times, once told Dino Grandi that Herbert Hoover was a very good president, but that he was also an engineer; and like all engineers, he had only one solution to every problem.39 Roosevelt,

36 37 38 39

Ibid., p. 464. Ibid., p. 465. Gardner, Economic Aspects, p. 19. ADG, Dino Grandi, Appunti sulla mia missione negli S.U., Relazione inviata dal Ministro degli Esteri al Capo del governo italiano, December 2, 1931.

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on the other hand, was the opposite of an engineer. He was capable in any moment of making use of the most disparate and even contradictory tools to reach a goal. Nonetheless, he was forced to subordinate any effort to renew American international engagement to the recovery of his own economy. To meet the challenge of the Depression within a capitalistic framework, it was necessary to sacrifice the existing political equilibrium as well as the ties of commercial interdependence. In so doing, world peace would also be sacrificed.

2. roosevelt and italian fascism What effect did Roosevelt’s policy have on relations with Fascist Italy and the reactionary dictatorships in general (Hitler was by now in power and the militaristic sections of the Japanese governing class were on the rise from the momentum of conquering Manchuria)? In his memoirs, Cordell Hull finally gave vent to the bitterness he had felt over the role he had been forced to play at the London Conference, reflecting in the process a point of view largely present throughout the historiography on Roosevelt, even in the favorable interpretations:40 I believed then, and do still, that the collapse of the London Economic Conference had two tragic results. First, it greatly retarded the logical economic recovery of all nations. Secondly, it played into the hands of such dictator nations as Germany, Japan, and Italy. At that very time this trio was intently watching the course of action of the peace-seeking nations. At London the bitterest recrimination occurred among the United States, Britain, and France. The dictator nations occupied firstrow seats at a spectacular battle. From then on they could proceed hopefully: on the military side, to rearm in comparative safety; on the economic side, to build their self-sufficiency walls in preparation for war. The conference was the first, and really the last, opportunity to check these movements toward conflict.41

There is no doubt that at the London Conference, and on Roosevelt’s initiative, the tendency of the existing economic system toward fragmentation was definitively sanctioned. Showcased from that moment forward were the unwillingness and incapacity of the major world powers, starting with the United States, to take the initiative in reversing that tendency; the momentum toward autarchy based on the arms industry; and the decrease in the flow of commerce, with what little remained taking the ever-clearer

40

41

William E. Leuchtenburg, Franklin D. Roosevelt and the New Deal (New York: Harper & Row, 1963), p. 602; Moley, p. 495. C. Hull, Memoirs, vol. I, pp. 268–269.

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pattern of being conducted between soon-to-be military allies. Hjalmar Schacht, the central banker who so egregiously served Hitler’s cause, could rightly say that in London Roosevelt had followed a favorite dictum of Hitler and Mussolini: “Take your economic fate in your own hands.”42 It would nonetheless be a serious mistake to assume that these developments were caused by one decision of Roosevelt’s, or any other individual, during the London Conference. It is a typical trope of a certain kind of historiography to attribute determinative power for major structural changes to one specific person in one place and time. Rather, this was a historical process resulting from decades of ideological and political consolidation. Otherwise we reduce the results of a certain way of living, of thinking, and of organizing production, interpersonal relations, and the interactions of states to an individual’s errant and fleeting choice. The influences to which Roosevelt was responding in his dramatic message to London had been forming over some time. They were the profound consequences of the Depression on the largest economy in the world, and of the way in which that crisis spread from the United States to Europe and especially to Germany. Hoover had tried to confront the crisis using traditional remedies, on both the domestic and international level. But in the economic conferences of 1932, it was already clear that the United States had abdicated the effort Hoover had initiated with his moratorium proposal. Roosevelt was simply the man who recognized that failure and, without renouncing the fundamental aspirations of acting as the most powerful country in the world, he chose to commit fully to internal reconstruction. The price of that commitment was the temporary abandonment of the leadership role in an international capitalist community, with all the consequences of that absence – consequences that were all the more dire after the National Socialists took power in Germany, the European economy with the greatest potential. Kindleberger had reason to argue that the world economic (and political) situation was aggravated by the lack of American leadership, since the United States was the only country with the ability to act as the “lender of last resort.”43 Still, it is important to note, as Kindleberger apparently did not, that that path had effectively been tried, even if not in a completely unified and consistent manner, by the American financial and governing elite in the 1920s. Moreover, the crisis that led to the Depression was set off by internal distortions in the economy of America itself, so that the potential lender 42 43

Leuchtenburg, pp. 202–203, as cited in Moley, p. 495. Kindleberger, The Great Depression, p. 30.

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of last resort was forced to put its own house in order, leaving few if any resources, or willpower, for intervention elsewhere during the most acute moments of the crisis.44 The turn relations with Italy took after Roosevelt’s arrival in office is indicative of the power of the circumstances produced by the Depression over any individual political choices or ideological inclinations. Aspects of the discussions between Roosevelt and Jung revealed the weakening of the interdependent relationship constructed over the previous decade, also crucial to the stabilization of the Fascist regime. Although Roosevelt did not greatly change his rhetoric in favor of the interdependent monetary system supported by the gold standard as a principle, the United States had abandoned the very gold standard it had so assiduously guided Italy toward. Now Italy, despite negotiations between Jung and James Warburg for a further reduction in the war debt, was approaching the possibility of default.45 Moreover, Italy had just begun to respond to the tariff war unleashed by the United States. The Italian Fascist economy had benefited from American bond issues, whose repayment was now uncertain in the general wave of public and private defaults caused by the crisis in Germany. Aside from any shared points of view between Roosevelt and Jung regarding the gold standard, of which there were in any case not many, the United States no longer had any real power to influence the decisions of a regime it had itself helped to consolidate in obedience to class interests and an expansionist foreign policy that the crisis had forced it to abandon.46 Two years later, a report by Augusto Rosso, Italian ambassador in Washington, offered a synthesis of the gradual breakdown in ItaloAmerican relations. It was not through an explicit and conscious choice by either party, but a lack of convergent interests. These were the years, from 1933 to 1935, when the American effort initiated by Hoover and Stimson to construct a policy of European engagement weakened while, in the same period, first the economic and then the political autonomy of Fascist Italy grew to a point that Fascist foreign policy could turn in a new direction. A previously only embryonic and sporadic aspect of that foreign policy now came to the fore. Rarely has an ambassador’s report been so 44

45

46

P. Ciocca, “L’economia italiana nel contesto internazionale,” in Ciocca, ed., L’economia italiana nel periodo fascista, Bologna: 1976, p. 26. ASMAE-AAP, bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni sf. Missione agli U.S.A., Conversazione Jung-Warburg, New York, May 7, 1933. ASMAE-AAP, bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni sf Missione agli U.S.A., Conversazione Jung-Roosevelt, Washington, D.C., May 5, 1933.

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lucid and explicit as Rosso’s in its self-criticism and political analysis regarding a regime’s conduct of the relationship with another country. In Rosso’s report to Galeazzo Ciano, minister of propaganda but also Mussolini’s son-in-law, the nostalgia of this former right-hand man of Dino Grandi for the pro-American policy of the previous period shines through.47 The usual rhetoric was there, and was not empty, but it had been reduced to the minimum: “There is no need to tell you that we are serene and sure of the future of the great undertaking willed by il Duce and that our hearts beat in unison with those of the nation.” This was the summer of 1935, just before the attack on Ethiopia. Rosso affirmed, in a completely unusual manner for him, that As unpleasant as it is, especially for the Ambassador in Washington, I cannot do less than honestly recognize that the American attitude toward Italy and toward Fascism is today less favorable than it was, for example, in 1933.

He was trying to bring to Ciano’s attention the fundamental reasons that had created that situation, probably to avoid any illusions in Rome – and especially on the part of a recently appointed minister – that the matter could be fixed by any propagandistic effort, which might actually be controversial and counterproductive.48 With his usual clarity,49 Rosso explained that the trade policy of restricting imports of merchandise and exports of currency, ever more evident given the war economy the regime was preparing, had run up against the free market monomania of Cordell

47

48

49

ACS-MCP, bk. 2, fol. 8 Rosso Augusto, Augusto Rosso to Galeazzi Ciano, Washington, D.C., July 19, 1935. In fact, in the course of the report he included among the elements that had created tension in the relations between the ambassador and the State Department the propaganda initiative among Italo-American students that the regime had been carrying out through the consulates. Concerning Rosso’s personality it is worth reporting the judgment of Sir Ronald Lindsay, in one of the annual reports British ambassadors generally compiled regarding their local colleagues. Before coming to Washington, Rosso had served as head of the delegation to the League of Nations from the Italian Foreign Affairs Ministry. He was well known and much appreciated by his British counterparts in Geneva for his serenity and simplicity, his openness and good common sense. These qualities, according to Lindsay, made him well adapted in an Anglo-Saxon setting. Though Rosso criticized Mussolini for not marrying (sic), he himself appeared to be an inveterate bachelor. He was a tireless worker – a good thing since the communities of Italo-Americans in New York, in Chicago, and throughout the United States obliged him to be continually on call and to deal with such thankless tasks as presented him by the typical Sicilian ex-Mafiosi who made up those communities. (PRO-FO 371/18761, Sir Ronald Lindsay to Sir John Simon, Washington, D.C., April 14, 1934.) Beyond the clear racist tone present in these observations, they do show clearly how Rosso succeeded in favorably representing the Fascist regime abroad.

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Hull. Initially, Hull had asked for a statement on this matter from Mussolini, declaring his own willingness to conclude the first of the mostfavored-nation treaties with Italy as foreseen by the Reciprocal Tariff Act of 1934.50 Not only was there no Italian response forthcoming, given the obvious incompatibility with their new commerce policy, but an attempt also failed to create a practical trade agreement even though it had originally been proposed by Italy, again due to evident lack of political will in Rome. In these circumstances it was not surprising, according to Rosso, that the United States now intended to abrogate that part of its current commerce treaty relating to most-favored-nation status. The ambassador was, however, disregarding the fact that the Depression, and the consequently dramatic choices Roosevelt had made during the London Conference, had produced such serious failures that Fascist foreign policy had been primed to change paths and become aggressively activist. The same problem emerged even more clearly in terms of disarmament. We have seen how, in the earlier phase, Hoover’s initiatives had found a loyal partner in Fascist Italy. Now, Roosevelt had launched “with much pomp and circumstance” a project to limit arms production and trade. The project would receive an honorable burial between committee and subcommittee in the by-now moribund conference. Nonetheless, at its first appearance, “it was fought openly by two delegations: the Italian and the English,” precisely those two nations that at other times the United States would have been able to count on for their strongest support. Rosso concluded: At this point I want to make it very clear that it is not my intention to criticize our opposition to the American project. On the contrary, as I understand the problem, I am sincerely convinced of the necessity to combat it. My intention is merely to ascertain that, regarding a question very dear to our Government (and I can tell you personally dear to President Roosevelt as well), we have taken the initiative in opposing the American plan.51

In other words, once again Rosso did not question the choices being made in Rome, but asked to be made fully capable of managing them in the least painful manner. As he affirmed: In conclusion, I wanted to demonstrate to you how, in these past twelve months, whether due to the fatal force of things or our action or omission, in several of the major questions faced by this Government we have assumed an attitude antithetical

50

51

B. Migone and A. Ferrero (first and second secretaries to the Italian embassy in Washington at the time), interview with the author, Zermatt, August 20, 1978. Rosso, Rapporto.

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to the American one. I do so in order to explain the diminished cordiality in our relations. . . . And since I am writing to you personally and confidentially, I will not hide from you that when I was in Rome last summer I gained the impression of a general disinterest in all things American, almost as if the United States had been excluded from our sphere of activity. I am obviously not speaking of the greater path of American foreign policy, which I know il Duce always concerns himself with, just as I know you always do. I am speaking of the technical and ordinary administrative details. This impression was reinforced in the past twelve months, which is discouraging, because if it is true that Roosevelt’s administration has been gradually alienated from European affairs, the fact remains that we still have important interests in this country (both material and ideal), and the systematic loss of interest in the “practical” concerning this country will end up making it ever more difficult to defend our interests here.

Once again, this old-school ambassador repeated that he was not criticizing, indeed he accepted, the political orientation of the government and the regime, even regarding those questions that would soon become life or death. It is difficult to believe that Grandi’s old collaborator – that loyal interpreter of the Anglophone democracies, that faithful advocate of the politics of European pacification and steadfast contact with the United States – had not grasped that the wind was blowing in a new direction that would soon become a hurricane in which the United States would play a decisive role. He was less likely than almost anyone else to underestimate American power. Nonetheless, he was and wanted to remain a follower of orders, even when the patriotic inspirations he had himself been motivated by, threatened to produce ever more contradictory results. In the end, Mussolini had been happily inspired (from his own point of view) when he had sent Dino Grandi to represent him in London and Augusto Rosso, Grandi’s main collaborator, to Washington just at the moment when Mussolini wanted to change his policy regarding those two great nations that had been the regime’s main points of reference up until that moment. The two men became useful instruments in the leader’s new policy, for their technical expertise, familiarity with the two nations, and personal credibility in the service of a fundamentally hostile politics. They made that hostility seem softer, less intelligible, and therefore less vulnerable – even despite the fact that Mussolini did not use them as fully as he might have, as Rosso’s report shows. There were other, more important elements than the services rendered by two well-chosen ambassadors that allowed Mussolini to stretch his game a bit longer. Indeed, while the structural ties were stretching thin, the new administration had not in any way ended the current of ideological

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sympathy running between Italy and both this administration and the precedent Republican one. Maurizio Vaudagna’s studies have traced this renewed current of sympathy among the leaders of the two states to several similarities in the responses they formulated to the problems created by the Depression.52 He concluded that the New Deal and the Fascist economic policy, under the label of corporativism, shared a common pursuit of new paths within the capitalist system of production, such as to create a new and stronger role of the state. Perhaps forcing the issue a bit, Guido Jung claimed at the end of his sojourn in the United States that In the attitude of President Roosevelt regarding the domestic problems of the United States there appears the basic Fascist concept “everything in the state, everything for the state, nothing outside the state.”53

Roosevelt himself wrote in a letter to Ambassador Long (who for his part certainly had no need to be further encouraged in his enthusiasm for Fascism) of July 1933, that Mussolini . . . is really interested in what we are doing and I am much interested and deeply impressed by what he has accomplished and by his evidenced honest purpose of restoring Italy and seeking to prevent general European trouble.54

Perhaps even more significantly, one of the principal theorists and executors of the reforms of the New Deal, Rexford Tugwell, after a visit to Italy in October 1934, wrote that I find Italy doing many of the things which seem to me necessary. The good people here too are worried about the budget etc. Mussolini certainly has the same people opposed to him as FDR has. But he has the press controlled so that they cannot scream lies at him daily. And he has a compact and disciplined nation although it lacks resources.55

52

53

54

55

M. Vaudagna, “Il corporativismo nel giudizio dei diplomatici americani a Roma, 1930–1935,” in Studi storici no. 3 (1975); idem, “New Deal e coroporativismo nelle riviste politche ed economiche italiane,” in G. Spini, G. G. Migone, and M. Teodori, eds., Italia e Stati Uniti dalla grande guerra a oggi, Venice: 1976; idem, “The New Deal and Corporativism in Italy,” in Radical History Review, vol. IV nn. 2–3 (Spring–Summer 1977). ASMAE-AAP, bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni sf. Missione agli U.S.A., Guido Jung, Impressioni generali, Rome, May 7, 1933. Cited in Vaudagna, “The New Deal,” p. 6. Original English text in “F.D.R.: His Personal Letters: 1928–1945,” Volume 3 of F.D.R.: His Personal Letters, Elliott Roosevelt, ed., New York: Duell, Sloan & Pearce, 1950, p. 352. Rexford Tugwell Papers, Box 14, folder Diary 1934, October 20, 1934, no. 2, FDR Presidential Library, Hyde Park, New York, cited in Vaudagna, “The New Deal,” pp. 6 and 30 (no. 10).

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These quotations cannot be used, like some Republicans of the era did, to demonstrate how the men of the New Deal were Fascists (although a few of Tugwell’s statements are truly extraordinary). Vaudagna justly noted, along with analogies and parallelisms, the real differences between the two countries. These were not only on the level of the resources used in each country’s reconstruction project, but also of the role played by the social forces internal to those processes and, in the case of the United States, of the constitutional guarantees that characterized them.56 Yet, it is important to note how, in the moment when the American ability to condition the Italian economy and Fascist regime had been drastically reduced, the ideological sympathies between the two nations and the resulting image of Fascist Italy in American public opinion not only continued to be positive, but found new motivations to be so.57 In so doing, Americans let down their guard in the face of the new and more menacing totalitarian state that had emerged in Europe, which also slowed their reaction time to Mussolini’s change in foreign policy. These delays would be made manifest when Mussolini began the war against Ethiopia.Indeed, the argument is even more complicated. As Rosso wrote in the above cited report: When he came to power, Roosevelt presented the New Deal to the country, which had a “revolutionary” background and in some of its aspects imitated the program of Fascism. Taking note of the obvious analogies, our press hurried to portray Roosevelt as a disciple of Mussolini, which in that moment may have seemed fully justified. I have had the sensation since then, however, that it is not opportune for us to insist upon this theme, because my familiarity with the American mentality warned me that the word “fascism” would end up as a weapon in the opposition’s hands.

As Vaudagna has documented in his studies, the accusation of fascism hurled ever more frequently at Roosevelt by his adversaries, starting with Herbert Hoover and his liberal individualism, forced Roosevelt to distance himself strongly from the doctrine. In America, wrote Rosso, “the word ‘democracy’ always retains that same fetishistic power that it had for the pharmacist Homais in Madame Bovary.” The ambassador concluded: The fact is that for essentially electoral reasons, the two American political parties, Democrat and Republican, have been polemicizing for the past two years over the word fascism, each trying to attach that label to the other in a negative sense. That 56

57

Vaudagna, “New Deal and corporativismo,” pp. 130–134; idem, “The New Deal and Corporativism,” pp. 20–27. Vaudagna, “Il corporativism nel giudizio,” pp. 220ff.; J. P Diggins, Mussolini and Fascism: The View from America, Princeton: 1972, pp. 362–374.

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could have no result for us but a damaging one, without leaving us any way to repair the situation since it is completely beyond our control.

Still, those positive judgments and analogies from an earlier phase did contribute to root in large parts of the population the belief that Italian Fascism was at the very least something very different from German National Socialism. Even if the American government was finally forced to clarify its own distance, especially after the war began against Ethiopia, initially public opinion saw its long-held clichés about the goodness of Fascism confirmed, even from this new point of view. Perhaps most importantly of all, these assessments of Italian Fascism led Roosevelt’s administration to believe until the very last moment that Mussolini could be used as a moderating influence on Hitler, or at least that the United States would be able to convince him to divorce his destiny from his more aggressive German colleague. As early as March 1933, Walter Lippmann posed the crucial question: Will Mussolini . . . throw in his lot with Herr Hitler, form a coalition of fascist nations in Central Europe, and demand territorial revision at the risk of war? Or will he use the great influence which he now exercises to promote a policy of moderate and pacific pressure designed to maintain peace by the constructive solution of the chief territorial questions?58

The response by Lippmann and others up until the Ethiopian war was that the latter would be true.59 He believed that “a competent diplomacy in Europe and in the United States can . . . find a way, with the help of Italy, to preserve the peace . . .”60 There is a great deal of evidence that Roosevelt did not limit his interest in Mussolini’s Italy to the sphere of social relations and state theory. Until the Ethiopian war, the president continued to consider Mussolini a possible peacemaker, or at least an example of a different political reality than Nazi Germany. Indeed, in the period from Grandi’s dismissal to the conference at Stresa, Mussolini did not brusquely abandon his previous conduct, but continued to play the role of a man searching for a peaceful solution to European tensions.61 In particular, he continued the collaboration with

58

59 60 61

New York Herald Tribune, March 16, 1933; Interpretations, 1933–1935, 322, quoted in L. Jordan, America’s Mussolini: The United States and Italy, 1919–1936, unpublished thesis, University of Virginia, 1972, p. 312. Ibid. Ibid. R. Grispo, “Il patto a quattro-La questione austriaca-Il fronte di Stresa,” in various authors, La politica estera italiana dal 1914 al 1943, Rome: 1964, pp. 118–158.

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the United States in the context of the World Disarmament Conference.62 He also made himself appreciated for the Four-Power Pact and for his mobilization against the Anschluss.63 It thus happened that Roosevelt could tell a foreign visitor in the autumn of 1934, Despite certain manifestations which may be interpreted as bellicose I believe that among European statesmen, Mussolini is the one with the clearest vision of the situation and who works hardest and with perfect sincerity for the maintenance of the peace.

Rosso recounted the episode, noting also that “the president would however indulge himself in one of his habitual ventings of antipathy for Nazi politics.”64 Roosevelt had already written in a similar vein to his ambassador in Rome, Breckinridge Long, who was himself a fervent admirer of Mussolini as well as a personal friend and donor of the president of the United States.65 It was clear that among New Dealers there was a diffuse tendency to think that Roosevelt and that “admirable Italian gentleman” (as the president himself called him at one point)66 would be able to work effectively together, or at least in parallel, to confront the Depression and the problem of peace of Europe. As Nicholas Murray Butler, president of Columbia University and an old admirer of Mussolini and supporter of Roosevelt, wrote to Margherita Sarfatti at the end of 1933, Therefore, it is, that of the first-rate powers, intellectually and morally speaking, there are at the moment only two – Italy and the United States – which are in possession of a leadership which is outstanding and internationally recognized.67

For several years Roosevelt felt an affinity for the Fascist dictator, whom he saw as very distinct from Hitler, and for many years he hoped they

62

63 64

65 66 67

The archive of Norman Davis contains numerous messages concerning his relations with the Italian delegates, and more generally concerning relations with Italy. LC-NHD, bk. 47, fol. Pell, Robert, Revision of confidential memorandum for Mr. Luce, New York, December 15, 1934; Conversation between Messrs. Luce, Goldsborough and Ingersoll, New York, 18 December 1934; LC-NHD, bk. 12, fol. Misc. telegrams, Rome, January 5, 1934. Diggins, p. 323. ASMAE-AAP, bk. 20, Stati Uniti 1934, fol. Rapporti politici, posizione 1 bis, sf. 1, tel. 322, Augusto Rosso to Benito Mussolini, Washington, D.C., October 17, 1934. Diggins, p. 279. Ibid. BLCU-NMB, fol. Sarfatti Margherita, Nicholas Murray Butler to Margherita Sarfatti, New York, December 8, 1933.

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would meet in person68 – initially for the same reasons that had led Hoover and Stimson to pursue a dialogue in hopes of European peace, and after the Ethiopian war with the intent of separating Mussolini from Hitler. At the end of 1936, Roosevelt stated that he still wanted to meet Mussolini and went so far as to propose a place (Malaga). Suvich, then ambassador in Washington, felt that the meeting was not imminent (the Spanish Civil War had begun) but that the proposal meant that Roosevelt had not let go of the idea. Indeed, he would not give up the idea completely until right before the war began.69 This way of reasoning missed a fundamental factor that changed the significance of every action of mediation and “moderated revisionism” in Europe. When Hoover, Stimson, and Grandi tried and failed at European pacification, Germany had not changed its regime. At that time one could still imagine that concessions, of territory or of another kind, would serve to stop the process of political radicalization in Germany, save the Weimar Republic, and secure the moderate leadership of Chancellor Brüning. From the moment that Hitler assumed the chancellorship, there could be no more doubts regarding what kind of political forces would come to the fore in Germany, in a spiral of escalating concessions and aggressions.70 For this reason, Mussolini’s initiatives, which gave rise to the Four-Power Pact, also took on a different significance from his earlier policies. And yet that very first meeting between Roosevelt and a Fascist representative (Guido Jung) had raised clear red flags about that very problem. The German question offered the occasion for their liveliest exchange: The discussion on Germany and on the new path of Germany politics was lengthy and on my part I had to adopt a great deal of tact in speaking of the problem. President Roosevelt seemed very poorly disposed and prejudiced against Germany and very worried by the danger that, according to him, Hitler’s regime represented for both European and world peace. I reminded him that the German government has such important internal problems to deal with that it is unimaginable that Germany could feel capable of provoking any foreign conflict again for many years. Nonetheless the principal problem for the German government is to reconstruct the spiritual unity and regenerate the morale of Germany. 68 69

70

Diggins, p. 280. ASMAE-AAP, bk. 27, SU 1936, fol. Rapporti politici sf. 6, Campagna elettorale e presidenziale. A. L. Rowse correctly argued that the regime change in Germany created a line of demarcation beyond which subsequent concessions to Germany assumed the character of encouragement for aggressive foreign policy rather than the previous character of a correction of the iniquities in the Treaty of Versailles. See A. L. Rowse, Appeasement: A Study in Political Decline, 1933–1939, New York: 1961.

3. War in Ethiopia. Challenges the Principle of Collective Security 309 [. . .] President Roosevelt told me that the world could not be satisfied and tranquil with a Germany who would abstain from making war for five years or so, only as long as it took until she were again capable of doing it.71

This lucid perception of the impending danger did not create the corresponding capacity to act on its consequences, in terms of either Germany or Italy. Yet, more than a decade of collaboration based on a real convergence of interests would not be erased in the space of a few days. The Ethiopian war, and the role played in it by the United States, would provide another proof of this

3. war in ethiopia. challenges the principle of collective security The Great Depression had eliminated the ability of the United States to determine the political stabilization of Europe through financial and commercial interdependence. In this context, the concept of collective security, originally promoted most energetically by the American secretary of state Henry Stimson, had also suffered since the United States no longer promoted or supported the efforts of the League of Nations, for example when Japan attacked Manchuria. Furthermore, the cultural sympathy between some New Dealers – those most wedded to a program of internal reforms that required ending deflationist policies, with the resulting international consequences – and Mussolini’s Italy had consolidated the continuing favorable judgment of Fascism in America. This was true even if the terrain for agreement had moved from economic interests to the rather weaker ground of ideological pursuit of a third way, as an alternative to capitalism and Soviet Socialism, to confront the crisis. When Mussolini attacked Abyssinia, he introduced into this context the first decisive rupture between the two countries in the interwar years.72 But before this rupture reached its dramatic peak in American public opinion (accompanied by a slower and more contradictory turn among elites), it was the very invasion73 that marked a high level of collaboration 71

72 73

ASMAE-AAP, bk. 14, Stati Uniti 1933, fol. Debiti e riparazioni – sf. Missione agli U.S.A., Guido Jung, Dettagli sul mio incontro col Presidente Roosevelt, Washington, D.C., May 4, 1933. Diggins, pp. 277ff. A. Del Boca, Gli Italiani in Africa orientale, vol. II, Bari: 1979; G. W. Baer, The Coming of the Italian-Ethiopian War, Cambridge, MA: Harvard 1967; R. Mori, Mussolini and the Conquest of Ethiopia, Florence: 1978. A. E. Highley, The Actions of the State Members of the League of Nations in Applications of Sanctions against Italy 1935–1936, Genoa: 1938;

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between the two countries. It can actually be argued that the treatment reserved for Mussolini in such a decisive moment for him was, along with the stabilization of the lira, the culmination of a policy of collaboration that he had planned since the first moments of his assumption of power. Americans were divided into a complex array of positions on the issue of Mussolini’s African enterprise.74 And yet very few of them had a real sense of how high the stakes were. If the Spanish Civil War has been called the dress rehearsal for Second World War (even if Great Britain and France had not yet aligned themselves decisively), the Ethiopian war was the practice run for the politics of the future Axis coalition and created the necessary conditions for cementing such an alliance. Given that the Japanese conquest of Manchuria had had a more marginal significance in the maturation of a crisis destined to have its epicenter in Europe, it was Mussolini’s attack on Abyssinia that constituted the first important attempt by the Fascist dictatorships to test the great powers’ determination to hold onto the world order of the first postwar period. The Abyssinian war offered a formidable occasion for the champions of the principle of collective security sanctioned by the Covenant of the League of Nations. The violation of the League’s charter could not have been more flagrant: one member of the League had been attacked without provocation (the incident at Ual-Ual, or Welwel as it was often called in English, even at the time not sufficed to hide that fact) by another member of the League. What was more, the attacker was not as formidable as its aggressiveness would seem to suggest, although it should not be forgotten

74

P. Bartholin, Aspects économiques des sanctions prises contre l’Italie, Paris: 1937; L. J. Cibot, L’Ethiopie et la Société des Nations, Paris: 1939; A. Cohen, La Société des Nations devant le conflit italo-éthiopien (Décembre 1934–Octobre 1935), Geneva: 1960; E. L. Leroux, Le conflit italo-éthiopien devant la SDN, Paris: 1937; G. Salvemini, Prelude to World War II, London: 1953; A. Berio, “L’affare etiopico,” in Rivista di studi politici internazionali, XXV (April–June 1958): 181–219. On the attitude of the United States regarding the Ethiopian war, see H. Wilson Jr., For Want of a Nail: The Failure of the League of Nations in Ethiopia, New York: 1959; H. B. Braddick, “A New Look at American Policy During the Italo-Ethiopian Crisis, 1935–1936,” in Journal of Modern History XXXIV (March 1962): 64–73; R. A. Friedlander, “New Light on the Anglo-American Reaction to the Ethiopian War, 1935–1936,” in Mid-America XLV (April 1963): 115–125; R. Manzoni, “Le leggi di neutralità degli Stati Uniti d’America (1793–1941)”, in Rivista di studi politici internazionali XXIII (January–March 1956): 28–70; H. Hiett, “Public Opinion and the Italo-Ethiopian Dispute,” Geneva Special Studies, vol. 7 no. 1 (Feb. 1936); J. Norman, “Influence of Pro-Fascist Propaganda on American Neutrality, 1935– 1936,” Essays in History and International Relations in Honor of George Hubbard Blakeslee, Worcester, MA: 1949. On the intertwining of neutrality policy, sanctions, and the Ethiopian war, see H. Feis, Three International Episodes, New York: 1966; R. A. Divine, The Illusion of Neutrality, Chicago 1962; J. E. Wiltz, In Search of Peace, Baton Rouge: 1963.

3. War in Ethiopia. Challenges the Principle of Collective Security 311 that Italy’s status after participating in the victory of WWI was higher at that time than it would later be. Even if the regime’s internal consensus was strong, and reinforced in the face of the half measures adopted by the League of Nations as sanctions, the military and economic vulnerability of Mussolini was completely obvious. Despite this, Mussolini’s undertaking was not an isolated incident because already for some years the countries left unsatisfied by the Treaty of Versailles had begun to reveal their intentions to modify its conditions. Japan had occupied Manchuria, making a puppet state there. Most notably, after Hitler came to power, Germany had in rapid succession quit the World Disarmament Conference and the League of Nations (October 14 and 24, 1934), then formally denounced the articles of the Treaty of Versailles that required disarmament, reintroducing obligatory military service and creating thirty-six army divisions. There was no doubt at all that the Depression, with its corrosive effects on the international economic system, had served as the turning point for an explosion of revisionist tendencies. These tendencies were being expressed in unilateral coups by totalitarian regimes consolidated by an aggressive ideology toward other states. Even if there were as yet no unified front among these regimes (in July 1934 Mussolini had actually mobilized his own troops against the threat of Anschluss, annexation of Austria by Germany, that would take place four years later ), these states shared ideological, structural and behavioral characteristics that made their containment a problem as a group. If a state can be forced to desist from its stated goals by means other than warfare, it can be said that that state is gravely vulnerable. The potential coalition of nations against Mussolini’s aggression was very strong, and Mussolini himself was vulnerable. Great Britain, France, the Soviet Union and the other League of Nations members had military, and especially naval, power capable of crushing Italy in an open conflict.75 But Mussolini was also vulnerable because it could have been equally effective to wield 75

P. Pieri and G. Rochat, Pietro Badoglio, Turin: 1974; R. Mori, p. 140. Mori wrote: “Badoglio, who already in mid-August had, as we have seen, declared most explicitly that the Italian armed forces were not capable of success against England, at the end of September after a series of meetings with Great Power leaders re-emphasized the impossibility of a positive result in the case of war against England. ‘In conclusion,’ he admonished, ‘and to use precise terms required by the gravity of the situation, the conflict would bring us to a true catastrophe.’ After this conclusion, Badoglio, availing himself of the shared opinion of the State leaders, allowed himself to discourage Mussolini even at the price of adulatory tones from any armed conflict with Great Britain. ‘Your Excellency,’ he wrote, ‘has done enormous good for our country. You have brought worldwide honor to

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other measures against him if only those governments had willed it. The success of the Fascist military was clearly dependent on the ability of the Italian army to solve the problem of communications and transport (the Ethiopian war was the first large-scale motorized war). That offered the powers that wished it a few clear opportunities to thwart the Italian invasion. First of all, Great Britain had control of the straits (Suez and, eventually, Gibraltar) that the troop carriers would have to pass through to arrive at the theater of war. Secondly, because of the long distances of overland communications, the invading army needed a sizable refueling capability as well as other raw materials beyond the normal national levels. Fifteen years after its founding, the system of international relations conceived by Woodrow Wilson faced a decisive trial whose result would determine every other effort to chip away at the political and territorial order sanctioned at Versailles.76 The events that followed are well known. Although Mussolini’s aims in Ethiopia became more explicit in the course of 1935, Great Britain and France did not make any serious attempt to oppose him preemptively. In particular, the three-way conference at Stresa ended without MacDonald or Laval declaring themselves on the issue,77 while the French prime minister, both in the January accord and in the following meeting, gave to understand that he would not raise any obstacles in the way of Italy, now distracted from those objectives that usually conflicted with French interests and perhaps still open to cooperating against the growing German menace.78 When in September the military aggression became explicit, the pressure of democratic public opinion in the major member nations of the League provided the impulse for the approval of a few sanctions. These included an embargo on the export to Italy of arms, capital, and a few raw materials (but not the vital one, oil) and on imports from Italy. Since it quickly became clear that such measures were not in themselves enough to interrupt Mussolini’s acts of war, it was also proposed to embargo petroleum, which would have paralyzed the transport and supply lines of the Italian army if applied right away to prevent Italy

76

77 78

it. Your Excellency cannot interrupt this grandiose action.’ And he ended with the hope: ‘Your Excellency surely knows that in his inexhaustible resources, of which he has given luminous proof, he will find an honorable solution to the terrible current problem which avoids war with England.’” Mori; FDRL-PSF, bk. Italy: Long, Breckinridge Long to F. D. Roosevelt, Rome, November 29, 1935. Naturally, Mussolini had maintained that even partial sanctions were equivalent to acts of war. Mori, pp. 20–25. Mori, pp. 5–10.

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from stockpiling it. For a few weeks it seemed that the conditions would be right in Geneva for a concerted action under the guidance of Great Britain. In reality, the efforts to define and extend the collective action by the League were paralleled simultaneously by Great Britain and France’s efforts to appease Mussolini. This led to the Hoare-Laval Pact conceding to Italy the de facto control of Ethiopian territory and economy, preserving Ethiopia’s sovereignty only in formal terms. This pact, though swept away by a wave of indignation, especially in British public opinion, forced Hoare to resign from the position of foreign minister, with a destructive effect on the policy painstakingly being constructed at the League of Nations. This led to the total loss of indispensable British leadership, since the British government, worried about its own military preparedness, did nothing more than repudiate Hoare’s initiative without taking any further steps in the direction of collective security. The neutral countries, more willing to accept the discipline of the League, assumed stances of understandable diffidence relative to the great powers. Finally, Hitler’s coup in occupying the Rhineland on March 7, 1936, not only provoked a renewal of the initiative in Geneva, but definitively moved international attention away from Mussolini’s attack. Indeed, international concern for securing Mussolini as an ally against Germany was strengthened. Badoglio’s army had no further obstacles in its way; the Italians entered Addis Ababa on May 5.

4. the role of the united states The role of the United States was significant, even decisive in this whole matter. It should be assessed within the general context of the intense and even passionate debate about American foreign policy and specifically about the best way to insulate America from a European conflagration. As already discussed, the New Deal’s economic policies, and the resulting abandonment of the United States’ role as stabilizer in the international economy, had given new substance to the isolationist ideology of a previous era. Further, the investigation by a congressional commission chaired by the ultraisolationist Senator Nye had revoked all those specters from the First World War, when, according to Nye and his colleagues, the interests of arms dealers and Wall Street financiers had dragged a reluctant public into war against the central empires.79 Above all, the recurrent tensions in the relations among the European states, frequently reported 79

Wiltz, pp. 29ff.

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in overdramatic terms by the isolationist American press, did not move public opinion to favor collaboration with the efforts toward collective security. Rather, they wished to pursue formal juridical mechanisms to sanction and consolidate American noninvolvement in any eventual conflicts. Complicating this pursuit was a power struggle, characteristic of the American system, between executive and legislative (particularly regarding the Senate) powers over foreign policy. Behind the obviously abstract and naive effort to legislate American neutrality hid the will of some members of Congress to keep control of foreign policy conduct within their own hands. That control had been largely evaded in past years, as we have seen, due to the international role successfully played by bankers and experts who as private citizens were not subject to congressional control but who, by virtue of their close connections to the Republican administrations of the 1920s and the interests they represented, had enjoyed ample support from the executive branch. With the Depression, the institution of the New Deal, the crisis of international economic relations, and the sudden unpopularity of high finance, foreign policy had to pass to other hands. Men such as Norman Davis, Paul Warburg, and the governor of the Federal Reserve Bank of New York, George L. Harrison, did provide some continuity in this transition and preserved great influence in many international negotiations. But what happened was a renewal of the traditional conflict between the presidency and the State Department on one side and the most influential members of congressional committees on foreign policy on the other. There was a risk that at any moment this could reignite into the virulence that had characterized the great battle over ratifying the Treaty of Versailles. The development of the Ethiopian crisis acted as a catalyst for prodding Congress into new legislation protecting Unites States neutrality in the event of a multistate conflict. Roosevelt and the State Department, unable to stem the rising tide of neutralism, did attempt to revise the language of the bill in order to preserve their own autonomy of action. At first Roosevelt, on the advice of his State Department advisers, opposed the work of the isolationist senators when, supported by Key Pittman, the chairman of the Foreign Relations Committee and Democratic majority leader, they tried to pass a law forcing the president to cease all arms sales to belligerents, whether allies or enemies, aggressors or defenders.80 But Roosevelt’s attempt to defend his discretionary powers would have to be abandoned. Already in May of 1934 Congress had approved a motion 80

F. L. Israel, Nevada’s Key Pittman, Lincoln, NE: 1963.

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forbidding the sale of arms to Paraguay and Bolivia in their war over the Chaco region. Further, Roosevelt’s pragmatism again came to the fore as he calculated that an embargo would damage Italy more than Ethiopia, which was unable in any case to buy and transport arms from the United States.81 Most of all he realized that in such a delicate phase of his administration, when his domestic agenda was under attack from conservative members of Congress and the Supreme Court itself, he needed to keep the isolationists on his side as much as possible. The isolationists, progressives, and rural populists were overlapping groups. Keeping their support, and using Pittman as a bridge between them and the administration, was one of the most delicate aspects of Roosevelt’s strategy after he had been under the threat throughout 1935 of a party split that could have brought on a defeat as crushing as the one of the Republican Party in 1912.82 In addition, the international situation was so precarious that any delays would be serious; the law on neutrality had to be passed before formal war was declared between Italy and Ethiopia or it would lose all political force. The law therefore passed the Senate on August 24, 1935, with only two votes against, after having passed the House the day before. It stated, “That upon the outbreak or during the progress of war between, or among, two or more foreign states, the President shall proclaim such fact, and it shall thereafter be unlawful to export arms, ammunition, or implements of war . . .”83 The president had been forced to give up his most important discretional powers and had only demanded that the law should expire after six months in the hope that he would be able to revisit the issue when the situation improved. In reality, as Divine observed, a precedent had been set that the president would not be able to roll back.84 California Senator Hiram Johnson, despite knowing that neutrality could not be guaranteed only by legislation, exclaimed, “The joint resolution makes plain the policy of the United States of America to keep out of European controversies, European wars, and European difficulties. So today is the triumph of the so-called ‘isolationists,’ and today marks the downfall . . . of the internationalist . . .”85 Yet, the Ethiopian crisis revealed a whole new array of alignments and coalitions motivated by the question of American

81 82 83

84 85

R. A. Divine, p. 113. Israel, p. 143 Congressional Record, August 23, 1935, p. 14370; ibid., August 24, 1935, list of votes p. 14434, passing of bill p. 14370, “Neutrality Bill” language p. 14365. Divine, p. 113. Congressional Record, August 24, 1935, pp. 14430–14432.

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neutrality; Woodrow Wilson’s old adversary in fighting for the League of Nations had evolved significantly. Up until that moment, the debate on neutrality had not included a specific evaluation of the practical effects of such a stance in the new world of economic and political crisis. The main advocates all had their gazes fixed squarely on the past. In Europe, where more immediate concerns now prevailed, the legislation was interpreted as a dangerous sign that the United States was definitively rejecting any cooperation in collective action. Only in Rome was the American declaration of neutrality welcome, coming as it did just when the country was about to embark on a war of conquest. The secret report compiled annually by the Italian ambassador in Washington on foreign relations with the United States recorded that Without this legal barrier, the worst consequences could have fallen on our country, successive events will confirm. Nonetheless [. . .] the Administration remains firm in its position. The compromise that it had to accept or have forced upon it by the Senate symbolizes the first step toward taking away the President’s ability to use his discretionary powers to declare embargoes in all future world situations.86

The Italian satisfaction with the law goes to show that it did not have the exact effect Roosevelt and his isolationist collaborators might have hoped. On a practical level, however, the arms sales forbidden by the law would not have been a determining factor in any case. Soon enough the situation would demonstrate the truly decisive aspect of relations with the United States pursued by Fascist Italy in this military effort. The economic sanctions passed in Geneva were not sufficient to make Mussolini desist from his plans, even if they exerted a notable pressure on the Italian budget and gold reserves. Such decisions could not squeeze the Italian economy fast enough or hard enough given the long-term control over commerce and exchange the regime had established. The story was different when it came to raw materials – above all oil, that indispensable product for both domestic production and waging long-distance war. The so-called Committee of Eighteen of the League was to meet and decide whether to increase sanctions. A memo circulated by Palazzo Chigi to foreign representatives shows the importance attributed to avoiding an extension of sanctions to cover raw materials and in particular oil. The memo emphasized “the capital importance of any extension of the embargo to cover petroleum, whether for the consequences it would have on the life of the 86

ASMAE-AAP, bk. 27, S.U. 1936, fol. Rapporti politici, pos. 1, sf. 13, Politica estera Americana. Quaderno 49. Stati Uniti-Situazione politica nel 1935. (Relazione del Segretario della R. Ambasciata in Washington, Nob. B. Capomazza).

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civilian population or for the undeniable significance of such an act as a hostile attempt to suffocate the nation.”87 If the League of Nations had adopted the proposal known as 4A, which followed a Canadian suggestion, it would have added to the existing sanctions an embargo on “petroleum and its derivatives, secondary products and residues, iron ore, iron and steel, etc., coal and coke, etc.” In that case, the attitude of the producer states of those materials would have become decisive, especially oil-producing states, which for the most part were not League members – that is, most importantly, the United States of America. It had the resources to completely neutralize the effects of the League’s embargo by meeting all of Italy’s import demand by itself. That decision depended in turn on the willingness of the American government to follow the League’s restrictions, or at least not to make a mockery of them by unleashing an unlimited flow of oil toward Italy and what would come to be called Italian East Africa (Africa Orientale Italiana). More specifically, the Roosevelt administration would play the decisive role by proving the level of its ability and will to block the oil companies from pursuing such a profit.

5. the position of the roosevelt administration At least the State Department and Roosevelt himself were completely aware that the stance assumed by the United States could decisively help or hinder the position of the League of Nations. Various sources confirm that Roosevelt, Hull, and in particular Roosevelt’s more liberal partners such as Secretary of the Interior Harold Ickes and Harry Hopkins were completely hostile to Mussolini’s agenda and favored every attempt to reinforce the will of Great Britain and France in leading the League in an effort for collective security. Their willingness, however, was limited by political considerations. They did not want to sacrifice any popularity in their domestic struggle in the name of a European commitment that promised no certain success, given that the European allies were themselves hesitant in their conduct toward Mussolini. Roosevelt and Hull showed a prudent approach in choosing the most restricted interpretation of the expression “implements of war”; they did not include in that category those crucial raw materials involved in the embargo.88 In other words, the administration required an extension of the current legislation, 87 88

Cited in Mori, p. 175; Leonardo Vitetti, Interview. Harris, p. 54.

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without which they did not feel authorized to forbid the export of those decisive raw materials to belligerents. The president adopted two further measures: Hull communicated to Geneva that the United States did not care to be questioned on their position regarding sanctions, explaining that their willingness to collaborate would depend on their need to avoid all formal entanglements. Secondly, Roosevelt and Hull were determined to prove their independence from Geneva’s institutions, if necessary by beating them to the punch on the timing of any recognition of a state of war. As Harris argued, this served the double purpose of pleasing the pacifists and revisionists who were opposed to any American entanglement in foreign affairs as well as allowing Hull some freedom of maneuver in limiting trade with belligerent nations and thus indirectly cooperating with the League of Nations.89 Throughout October and November, Hull used this limitation in various ways. He repeatedly stated that whoever traded with the belligerents or used their transport systems did so at his own risk. Such declarations from the secretary of state and the president culminated in a press conference on November 15, 1935, at which Cordell Hull declared a moral embargo on several products – petroleum, copper, trucks, tractors, scrap iron, and scrap steel – that by their nature would reinforce the war effort (in particular that of Italy). Hull called any export of these goods exceeding the normal peacetime levels “directly contrary to the policy of this Government as announced in official statements of the President and Secretary of State, as it is also contrary to the general spirit of the recent neutrality act.”90 The administration did not go so far as to impose its own point of view on exporters through an open-ended interpretation of the law (and in particular of the expression “implements of war”), but it could make the moral embargo more effective by intervening in those few cases where a commercial transaction was directly subject to the will of the government. Thus, the Shipping Board Bureau of the Commerce Department could deny authorization for the sale of a decommissioned ship the Italian government wished to purchase as scrap iron, and the Commerce Department could prevent the USS Ulysses from carrying a shipment of oil to Italy because that ship had an expired mortgage. In this action, the secretary of state did his

89 90

Ibid., pp. 74–75. “Statement by the Secretary of State (Hull), November 15, 1935,” U.S. Department of State, Publication 1983, Peace and War: United States Foreign Policy, 1931–1941, Washington, D.C.: 1943, p. 293.

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best to maximize the few legal and politically feasible tools at his disposal. The British ambassador in Washington telegraphed to his foreign minister, Sir Samuel Hoare, in response to a precise request for information on the matter, that it was impossible to predict whether the United States would expand the existing limits on their trade with Italy, but that The only thing which you may count on as certain is the determination of Secretary of State to restrict shipments to normal proportions. Knowing what we do of this persistent character you may feel quite confident that he will do his utmost to effect this. But his powers are very restricted indeed and he is thrown back on extra-legal methods.91

Probably Hull was too zealous for Hoare’s tastes, since Hoare was more concerned with his secret negotiations with Laval to offer Mussolini most of what he was seeking in order to end further conflict. In the meantime, Ambassador Rosso protested energetically against the American actions regarding the Ulysses.92 The federal banks had for some time been keeping tabs on all those banks holding Italian companies’ credit. This however was a form of pressure that did not translate into legislation or even any explicit policy formulation by the federal government. It is nonetheless important to take into account that the financial arena, traditionally anglophile and less conditioned by the profit motive, was much more willing than the export merchants and industrialists to conform to the government’s wishes. From this point of view, the conduct of the Morgan Bank is enlightening. It found itself between the frying pan and the fire as one of the traditional banking agents of the Italian government in New York (even if those ties were loosened by the Depression) as well as a fast friend of both France and Great Britain, to both of whom Morgan was linked by numerous ties, not all of them strictly financial. Not unlike other banks, at the beginning of June, when the debate in the United States over the coming African war was already brewing, the Morgan Bank decided to reduce by 25 percent the amount of short-term credit offered to Italian banks (justifying this choice by the noted reduction in Italian imports) and shorten the duration of those credit terms from one year to ninety days. The partners did not hesitate to communicate to Rome, through their representative Giovanni Fummi, that this proviso was linked to the fact that

91

92

PRO-FO, 371/19218, tel. n. 412, Sir Ronald Lindsay to Sir Samuel Hoare, Washington, December 5, 1935. NA-DS, Memorandum from Green to Dunn, November 18, 1935.

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public opinion in this country regards the African development with little sympathy. This feeling is not unlikely to express itself, almost unconsciously perhaps in diminished eagerness as to Italy on the part of American importers and also for the financing of exporters.93

Only a month later, Thomas W. Lamont, who was significantly in London, approved the cancellation of the ninety-day credit term and the bank’s ability, starting from October 15, to decide as it saw fit when to continue existing credit agreements or create new ones. As was logical for the bank’s representative in Rome, Giovanni Fummi tried to get Lamont to postpone this decision, in the hopes that a rumored peaceful solution to the Ethiopian crisis might come first. But Lamont confirmed the decision, arguing that House of Morgan had to have complete freedom to act expeditiously and that it was in any case a good idea to warn the Italian government of his position.94 Fummi had no choice but to explain to the Italian finance minister, Paolo Thaon di Revel, the attitude of the New York banks regarding Italy, underlining that the particular stance of J.P. Morgan & Co. was at least relatively more favorable. He did not report how convinced the finance minister was by this argument.95 This was a series of decisions that, while managed with the maximum caution, constituted a rupture of the long-term collaboration established by the Morgan Bank as an agent of the Italian government in the widest sense. Naturally, every decision had to be made in such a way as to leave the path open for a future rapprochement. The bank had to offer a more general explanation for its stance regarding Italy: a reevaluation of Italy’s credit rating in America that justified the individual provisions taken in the face of war preparations and influenced by the pressures of the government and the Federal Reserve. When Lamont went to Europe in the summer of 1935, he asked the monetary expert of the bank, Russell Leffingwell, to help him formulate such an evaluation that he could then have Giovanni Fummi show to the Italian authorities.96 Later, after meeting Fummi in Switzerland to better evaluate the Italian situation, Lamont transformed Leffingwell’s letter into a memorandum that then became part of Fummi’s

93

94

95 96

HUGSBA-TWL, 191–194, J.P. Morgan & Co. to Morgan & Cie., for transmission to Giovanni Fummi, New York, June 6, 1935. HUGSBA-TWL, 191–194, Thomas W. Lamont to J.P. Morgan & Co., London, July 11, 1935. HUGSBA-TWL, 191–194, Giovanni Fummi to Thomas W. Lamont, Rome, August 1, 1935. HUGSBA-TWL, bk. 191–194, Russell L. Leffingwell to Thomas W. Lamont, New York, July 12, 1935. All Leffingwell quotations below refer to this citation.

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own prepared notes.97 “Having come here rather recently from New York I can perhaps give you a little idea of the status of Italian credit in the United States of America at the present moment,” wrote Lamont. Every effort, in sum, was made to present these changes in their least binding but also least provocative form. The partners wanted to emphasize that Italy’s preparations for war were gravely damaging its credit rating in the United States. Perhaps one of the objectives of the memorandum was to introduce an element of doubt in Mussolini’s calculations, or at least to make him more amenable to compromise; but it was clear that the partners wanted him to understand that the war would create a situation that would not be resolved through rhetoric aimed at saving face with American public opinion or markets. “The Ethiopian development overshadows in my thought, and everyone’s, the Finance Minister’s planned economy speech,” wrote Leffingwell. And Lamont restated that point in his memorandum by writing that Our newspapers display such foreign news in a way to catch the attention of the whole public. You would hardly dream that Abyssinia – Italy – Mussolini – are the chief topics of conversation in the U.S.A. these days, breakfast and dinner. The feeling is one largely of bewilderment and dismay. People are asking themselves what there can possibly be in Abyssinia worth a prolonged campaign, costly in lives and money.

At the same time, both Leffingwell and Lamont clarified that the imminent war was only the straw that broke the camel’s back. This was made clear in the document presented to Fummi: In a word, Italian Government, banking and commercial credit has been running downhill in London and New York for the last two years – most noticeably in the last twelve months. This loss is due to the receding state of the Italian economy.

Leffingwell, who was one of the main theorists of the strongly deflationist policy of the return to the gold standard of the 1920s, was above all concerned by Italian monetary policy in the new Keynesian climate of the ‘30s with the American abandonment of the gold standard: I am profoundly convinced that the honorable and so far successful effort of the Italian Government to maintain the lira at a fixed price in spite of the depreciation of the dollar and the pound sterling, not to mention other commercially less

97

HUGSBA-TWL, bk. 191–194, Giovanni Fummi to Thomas W. Lamont, London, August 7, 1935, to which is attached a copy of the memorandum “that you wrote while you were in St. Moritz.” All Lamont memorandum quotations below refer to this citation.

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important currencies, is drastically and devastatingly deflationary, and that the supporting measures for canalizing trade and controlling the exchange are also deflationary. It is an evidence of the great mastery of the Duce and of his super political genius that he has been able to maintain the lira stationary against an ebb tide of such overwhelming proportions.

To some extent Leffingwell considered Mussolini’s recessionary policy with poorly disguised admiration, at a time when the orthodoxy he had theorized and helped administer in Europe for more than a decade had been thrown into crisis. However, the rigid logic of the material interests of the economy on which the Leffingwells of the world still staked their fortunes demanded that Italy adapt its economy and above all its currency to the criteria that had at this point been embraced in the dollar and sterling zones. This actually did demonstrate continuity with previous Morgan Bank policy: as in the past, the return to the gold standard had been seen as necessary for inserting the Italian economy into the monetary and commercial system dominated by the dollar; now the ‘30s required a similar adaptability, but in the opposite direction. At this point free trade and monetary cooperation on an international level were necessary, under an Anglo-American leadership that needed to be rebuilt from the ground up after the damage caused by the Depression and its prioritizing of domestic concerns. What worried Leffingwell and Lamont the most were not so much the social effects of such a policy, but above all its effects on trade and finance, and in the final analysis on the weakening of the Italian economy that might ensue, definitively excluding it from international markets. As Leffingwell wrote: Now, exchange control, and the canalization of trade, have grown so that purchases tend to be made only in countries to which sales are made. While these controls have the temporary effect of making the maintenance of the gold value of the lira possible, inevitably they tend to restrict the volume of trade and to restrict the choice of what Italy buys and reduction in the price of what she has to sell.

Lamont pushed the point, in the articulation of the memorandum, underscoring that the reduction in the volume of trade immediately translated into a damage to Italy’s credit, “For you recognize that London and New York bankers get ill news very quickly and heavily diminishing foreign trade is quickly noised abroad as a very unfavorable symptom.” Lamont noted that it was the drastic reduction in trade volume that had been the main sign of the financial crisis that struck Great Britain in September 1931. In fact, affirmed Lamont, several Italian industrialists had recently failed to secure credit in London. The same would occur in

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New York. Short-term credit had been drastically restricted there, including by the Morgan Bank itself. The main worry of the partners is legible between the lines: that Italy’s policies would remove its economy from the control of the interests they represented. But, in order to make their arguments most effective, they endeavored most of all to warn of the negative effects such a policy would produce in the Italian economy itself, regardless of the work any financial and commercial interlocutors Italy chose for herself might try to perform. On this topic Leffingwell claimed: The reason why this fundamental fallacy persisted so long is that it does work after a fashion. It takes a long time for bad economic habits to undermine the health of a loyal and patriotic people like the Italians, blessed with a sunny climate and used to simple living in a fertile and pleasant land.

It seemed that the old myth of Italy as the garden of Europe had been exhumed for the occasion. Naturally this sort of analysis neglected several basic economic and political realities: first of all, it was the Depression and its redirection of political priorities in America that had encouraged a similar conduct on Italy’s part and, more seriously, in Nazi Germany; and secondly, Mussolini had already made political choices that required a new economic order. The partners were trying to undermine those very realities by harking back to old free trade models. In this they ran up against the fact that Mussolini had already calculated that his new orientation would have the cost of a crisis of Italian credit in the New York and London markets, and had concluded that the price was worth it. Even the emotional appeal in Lamont’s memorandum was of little use: In other words, Italy’s best friends in England and America are having the ground out from under their feet. No matter how great their devotion, no matter how much they have admired the Duce, Italian developments have simply deprived their foreign friends of the power to assist her.

Perhaps these observations, accompanied by such intense professions of friendship, were mostly aimed at keeping open the lines of communication in hopes of a future renewal of business in more favorable circumstances. In the meantime, the governmental controls on banks became stronger and stronger. On September 18 one of the vice presidents of City Bank of New York spoke with the State Department’s economic adviser, Herbert Feis, to deny the published rumors that his or any other New York bank was doing “anything out of the normal” in terms of financing exports destined for Italy. Feis was convinced that the goods imported from Italy

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were for the most part being paid for in cash.98 Less than two months later, in the midst of the controversy over exporting raw materials to Italy, the National Association of Credit Men (a professional bankers’ organization) organized in New York a meeting of bankers and exporters in which the former warned the latter that if the United States were to prohibit further exports to belligerent nations, even irrevocable letters of credit held by Italian interests at American banks would not be honored. Many bankers present affirmed that they were already including such a warning clause in their letters of credit for payments of exports to Italy. Nor was this the only sign of disturbance. At the same meeting it was emphasized that, as in other world markets, New York’s total volume of exports to Italy had dropped in the past two months but that exports of cotton, oil, and other raw materials had increased.99 Simultaneously, with little more than symbolic effect, Secretary of the Treasury Henry Morgenthau cancelled his reservation on an Italian ship for his voyage to Europe, setting an example for patriotic Americans to deny Italy even this small amount of financial support. These pressures reached their height on November 22, when the Italian ambassador in Washington, obeying government instructions, went to Hull to deplore the official declarations from American representatives over the past months. He referred in particular to the one made by Hull himself on November 15, calling such actions hardly neutral in their negativity toward Italy, as well as violations of the treaty on commerce and navigation of 1871 between their two countries, which declared “total liberty of commerce and navigation.” He added that any extension of the embargo to include raw materials would constitute “a hostile act” toward Italy. Rosso abstained from mentioning any reprisals, however, believing with good reason that they would have little effect, and might be counterproductive. In fact, he thought it probable that the recent statements by Secretary of the Interior Ickes against exporting oil to Italy and the letter from the Shipping Board advising the ships it controlled in the merchant marine not to carry raw materials to belligerents were already themselves the results of threatened reprisals that had reached the secretary’s ears. Naturally, Rosso, in telegraphing this opinion to Mussolini, was implicitly cautioning Rome to curtail its rhetoric.

98

99

NA-DS, Memorandum of the Undersecretary of State [William Phelps], Washington, D.C., September 18, 1935. PRO-FO, 371/19214, Sir Ronald Lindsay to Sir Samuel Hoare, Washington, D.C., November 7, 1935.

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The lengthy memorandum dictated by the secretary of state at the meeting’s close elicited Roosevelt’s congratulations (“You did a splendid job in making our position clear and, at the same time, pointing out the very untenable position in which Italy has deliberately placed herself,” he wrote) and gives the impression that the visit of the Italian ambassador was the opportunity for the secretary of state to give vent to some strong feelings. Although the meeting appears to have been the strongest instance of American pressure exerted on Italy, it also revealed the sense of embarrassment and impotence in the Roosevelt administration at not being able to force measures to limit the essential strategic exports to Italy and end its African adventure. Even in the heat of a meeting that according to a witness brought the Italian ambassador to abandon “the calm serenity of manner that generally characterizes him,” Hull was careful to maintain the cardinal points of the ideology the Roosevelt administration had to respect: in particular the impartial character of any restrictive measure visited on the belligerents, and the United States’ total independence from any decisions made in Geneva. The insistence and vivacity with which Hull, in this and other occasions, insisted on the latter point led Rosso to conclude that he might be protesting too much and the opposite might be true. Hull had rebuked the Italian representative for the missed war debt payments; called it “truly surprising” to claim that the American unwillingness to offer an unlimited supply of war materials was a hostile act; and asked in conclusion why Italy was not willing to sit down and resolve this question peacefully, reminding him that Hull and the president themselves had almost begged Mussolini not to start a new war, with no result other than to be importuned with requests for further supplies from a government in the midst of a war “ad libitum”. The secretary of state did not fail to mention, with evident pleasure, the content of this meeting to Rosso’s British colleague, Sir Ronald Lindsay, saying that “he had not spared his words to the Italian Government.”100 The meeting between Hull and Rosso ended the phase in which the Roosevelt administration tried hardest to contribute to a collective action restricting Mussolini. The natural internationalist inclination of Hull and 100

ASMAE-AAW, Augusto Rosso to Benito Mussolini, Washington, D.C., November 26, 1935; FDRL-PSF, Franklin D. Roosevelt to Cordell Hull, Palm Springs, November 27, 1935; Joseph C. Green to J. Pierrepont Moffat, Washington, D.C., November 25, 1935; Augusto Rosso to Benito Mussolini, Washington, D.C., November 27, 1935 in “Collana di testi diplomatici” n. 7, Augusto Rosso, Roma: 1979, p. 48; PRO-FO, 371/1922, tel. segreto n. 1331, Sir Ronald Lindsay to Sir Samuel Hoare, Washington, D.C., December 10, 1935, pp. 1–2.

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Roosevelt, both old disciples of Woodrow Wilson, had been elicited by the sense that Geneva was finally going to act effectively under British leadership as well as by the data from the Commerce Department showing that American exports to Italy were objectively a large contribution to Italy’s ability to wage war. This responsibility weighed heavily on the shoulders of Washington’s leaders.

6. italo-american trade and the oil question It is impossible to make an exact calculation of the Italian demand for oil in the period of the Ethiopian war, but the following figures on total oil imports offer a useful, initial overview. Period 1933 1934 1935 (Jan.–June) 1935 (July–Sept.)

Tonnage 1,738,000 1,856,000 1,012,000 531,000

Source: PRO-CAB 245/257, Memorandum by Petroleum Department of the Board of Trade, London, 27 November 1935, p. 4.

Remember in considering the data for 1934 that about 600,000 tons should be added because the figure in the chart does not include the oil that had not yet cleared customs or the oil left over from the previous period. Further, these figures do not include the amount of oil imported directly by Italian East Africa. Taking into account that the real amount of oil imports for 1934 was about 2,500,000 tons, and extrapolating from the data for the period July–September 1935 to the later months, the total annual demand for oil in 1935 was a minimum of 2,700,000 tons. But this is a minimum estimate that does not take into account the increase in demand due to the war, which was presumably an exponential rise. As a matter of fact, the oil companies themselves made the more generous estimation of an annual Italian demand of 3,800,000 tons, based on a daily demand of 8,000 tons.101 The crucial aspect of the sanctions’ possible effectiveness, with or without the cooperation of the United States, was the supply sources. Where

101

PRO-CAB, 245/257, Memorandum by the Oil Companies. Oil Sanctions and Italy, London, December 1935, p. 3.

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did Italy get those 2.5 million tons of oil it needed in the two previous years, and where could it find that same amount (actually more, due to the war) in 1935 and 1936? This table, furnished by the Petroleum Department of the Board of Trade (of the British Foreign Commerce Ministry), answers the first question: Exporting Nation (by percentage)

1933

1934

1935*

1935**

Romania Soviet Union Iran United States of America Dutch Indies Other countries

35.2 29.6 9.8 9.0 7.5 8.9

34.1 21.7 11.6 11.2 8.2 12.9

40.6 21.7 15.0 7.1 10.7 10.6

59.1 20.0 3.2 8.5 19.2 (*)

Sources: PRO-CAB, 245/257, Memorandum by Petroleum Department, p. 4; PRO-CAB, 245/257, Memorandum by the Oil Companies. Oil Sanctions and Italy, London, December 1935, p. 1 * These figures are for January–June, inclusive. ** August–November 15: data furnished by the British Petroleum companies. (*) Venezuela accounted for 12.4 percent in this number.

The expert subcommittee nominated by the League of Nations made a different set of calculations for 1934: Romania Soviet Union Iran United States of America Latin America Other countries

32.2 27.8 10.3 6.4 17.4 5.9

Source: H. Feis, Seen from E.A.: Three International Episodes, New York: 1947, p. 309.

The only substantive difference between the two calculations had to do with the proportion represented by Latin America, primarily Venezuela. In the figures from the Board of Trade, it was estimated to be around 12 percent, included under “Other countries,” whereas the League of Nations experts attributed 17.4 percent of Italy’s total imports to it in 1934. The Board of Trade attributed 10.7 percent to the Dutch Indies in the same period, while the experts in Geneva put the amount at about 5.9 percent in “Other countries.” These discrepancies are not sufficient

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to modify the most important conclusions suggested by comparing the last three columns of each table, however. The following data regarding exports to Italian East Africa further accentuate them: Provenance

1934

August–November 15, 1935

Romania Soviet Union Venezuela Iran and Dutch Indies United States of America Other Total

_ 24.5 – 41.4 7.8 26.3 100.0

14.6 5.9 – 16.7 26.9 35.9 100.0

Source: PRO-CAB, 245/257, Memorandum by the Oil Companies. Oil Sanctions and Italy, London, December 1935, p. 2.

When Hull and Rosso had their meeting, at a moment when in Geneva the extension of the embargos to oil was being seriously considered, Italy had already begun revising its import strategy for raw materials. First of all there was a drop in imports from those countries that appeared most hostile to Mussolini’s Ethiopian project and were most committed to the sanctions already in place. The imports from the Soviet Union, while remaining consistent, diminished notably starting in 1934. The same was true for Iran, which marked its total dependence on British imperial policy. Imports from the United States, however, grew proportionally starting in the autumn of 1935.102 This impression is strengthened by observing the data regarding the imports directly to the theater of war, which throw into greater relief the political influence on the overall configuration of Italian imports. Romania not only remained the principal source but increased its overall share during the period considered. The relatively modest amount of Italian demand satisfied by American oil became greater, which one can tell was destined to serve military needs by disaggregating the various subproducts. According to the League of Nations data, in the period 1932–1934, Italy imported from America 14.9 percent of its crude oil, 9.4 percent of its diesel, 3.5 percent of its gasoline, and a whopping 48.3 percent of its total lubricant demand.103 102

103

In his first parliamentary speech as foreign minister, in the House of Commons on February 24, 1936, Eden stated that Italy’s oil imports from the United States had gone from 6.3 percent in the period January–September 1934, to 17.8 percent in October– December 1935 (Earl of Avon, The Memoirs of Anthony Eden, Earl of Avon, vol. 1: Facing the Dictators, 1923–1938, Cambridge, MA: 1962, p. 357). H. Feis, Seen from E.A.: Three International Episodes, p. 306.

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Turning to the total American figures for raw material exports to Italy, the effect of the Ethiopian war and the League of Nations sanctions becomes very clear. But the data on raw materials only make sense in the context of the overall commercial relationship between Italy and America. The failure of the United States to participate in the sanctions had a strong effect even on their early phase, which aimed to limit purchases of Italian imports (and which were, obviously, closely tied to the problem of Italy’s access to raw materials, inasmuch as they provided the hard currency necessary to do business with suppliers who, as was the case with American oil companies, dealt in cash in order to avoid tax-based governmental sanctions as well as to be more sure of a client that was obviously in precarious financial straits and therefore not a good credit risk).104 Indeed, the United States and Germany, which were not members of the League of Nations, were responsible for the purchase of 23 percent of Italy’s exports in 1934. The United States by itself made the following transactions:

1933 1934

Italian Imports (percentage of total)

Italian Exports (percentage of total)

15.0% 12.5%

8.7% 7.4%

Source: Feis, Seen from E.A., p. 304.

If we extend the comparison to the years affected by the Ethiopian war, the result is significant: American Commerce with Italy (in millions of dollars of that year)

1934 1935 1936

Italian Imports

Italian Exports

276 4,558 771

213 218 224

Source: Feis, Seen from E.A., p. 304.

Disaggregating these numbers by month makes the connection to the war even more evident:

104

PRO-CAB, 245/257, Memorandum by Petroleum Department of the Board of Trade, London, November 27, 1935, p. 5.

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American exports to Italy (in thousands of dollars) October 1934 November 1934 December 1934 January 1935

6,226 8,445 4,821 6,257

October 1935 November 1935 December 1935 January 1936

6,529 9,125 7,944 5,420

October 1934 November 1934 December 1934 January 1935

2,943 4,179 5,207 2,424

October 1935 November 1935 December 1935 January 1936

4,401 6,108 4,740 3,170

August 1934 September 1934 October 1934 November 1934 December 1934 January 1935

11 29 45 18 4 20

American imports from Italy (in thousands of dollars)

Exports to Italian East Africa August 1935 1,704 September 1935 508 October 1935 363 November 1935 590 December 1935 374 January 1936 22

Source: Feis, Seen from E.A., p. 306.

It is clear that the overall amounts of trade between the two countries, especially Italian imports, were dramatically influenced by the war, reaching an apex in the final months of 1935. The figures for Italian East Africa are notable to the extent that they demonstrate how the war transformed a fundamentally nonexistent trade in that region into a fevered trade – or rather, import – situation that can only be explained in terms of the war. The table that follows, instead, specifically illustrates Italian imports of raw materials and machinery from the United States. These figures also show an effect from the war, including the effects of extending sanctions. As the table shows, all raw materials and products except cotton underwent a very strong increase (hovering around 100%) from 1934 to 1935, without however nearing the levels of 1928, before the Depression. The only exception is machinery and transport vehicles, which deserve a short and separate explanation. A large part of the controversies in this era swirled around raw materials, and especially oil. The available figures indicate that purchases of trucks from Ford and General Motors were of great importance for what was the first motorized war of substantive size and which played out almost exclusively through communication and supply lines. If we add to the figures in the table the fact that the exports of such products to Italian East Africa had gone from a value of $172,706

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in the first ten months of 1934 to the enormous amount of $2,961,681 in the first ten months of 1935,105 there can be no other possible conclusion than that the motorization of the Italian war effort was largely guaranteed (to be more precise would require the data on other available vehicles, but the sum of purchases still constitutes clear evidence) by the import of American vehicles.106 American Exports to Italy (in dollars)

1928 Aug. Sept. Oct. Total 1934 Aug. Sept. Oct. Total 1935 Aug. Sept. Oct. Total

Refined Copper

Vehicles and Machinery

0

1,512,072 1,662,619 1,024,669 4,199,360

338,338 267,479 604,465 1,210,282

477,435 580,830 382,857 1,441,122

224,564 220,994 179,458 625,016

329,077 303,675 188,237 820,989

549,613 460,861 426,153 1,436,627

656,355 624,287 1.087,942 2,368,584

370,712 479,135 463,817 1,313,664

764,988 454,468 534,094 1,753,550

1,011,360 1,059,203 832,514 2,903,077

Cotton

Oil

2,819,021 6,944,953 8,928,786 18,692,760

1,185,278 1,487,134 1,987,212 4,659,624

1,512,529 2,079,999 3,740,755 7,333,283 1,528,740 2,026,395 2,602,443 6,157,578

Scrap Iron

Source: CFR, Information for Members, attached to Council on Foreign Relations, Conference on American Neutrality Policy, New York, November 13, 1935.

The data specifically on oil are equally revealing. Beyond the figures recorded in the table of the Council, it may be observed that, according to data from the Department of Commerce and cited by Herbert Feis, when Hull received Rosso’s visit he already knew that exports of oil to Italy and Italian Africa for the month of October had reached a sum of $1,084,000 dollars, while in that same month in 1934 they had only been about a third of that ($382,857). In the following months, the situation would become even more acute. Given that the monthly average of all petroleum exports to Italy between 1932 and 1934 had been $480,000, there was an extraordinary growth in imports due to the war even if one discounts the usual 105

106

NA-DS, 711.00111 Armament Control/662, Charles W. Yost, office chief, Office of Arms and Munitions Control to the Federal Motor Truck Company, Washington, D.C., December 23, 1935. See also B. Migone and A. Ferrero.

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seasonal increase of 10 percent.107 In November 1935, it was $1,684,000; December, $1935, 2,674,000; and in the last three months of 1935 it reached the stunning total of $5,442,000. This is in comparison to a total for the entire year of 1934 of $6,062,000.108 Herbert Feis, at that time the economic adviser to the State Department, observed: “Included in our shipments during the last three months of 1935 was $828,000 sent directly to Italian East Africa – that is, directly supplied for the use of the Italian Army and Navy and Merchant Marine.”109 This progression of data regarding American oil exports clearly demonstrates that, starting in the month of October, the Italian government had begun to modify its choice of suppliers in preparation for imminent sanctions from the League of Nations, especially depending on American oil to provision the expedition corps in African territory. The total amount indicates the significant, even determinative, weight of American oil in the Italian war effort. The reasoning of the British petroleum companies as set out in a memorandum for the cabinet was even bolder in coming to this conclusion.110 According to that memorandum, the United States produced around 400,000 tons of crude per day. Even if the major oil companies were willing to respect the moral embargo proclaimed by the Roosevelt administration, the minor companies and producers were completely uncontrollable in this way; their production alone amounted to 80,000 tons of crude per day (60% of world demand).111 Their conclusion: the normal Italian demand was 8,000 tons per day, so that, even without supplies from Romania and the Soviet Union, and allowing for an exceptionally large demand from Italy in wartime, Italy would be able to obtain all the oil it wanted simply by turning to the wildcat American oil companies. The evaluation by the British oil companies should be taken with a grain of salt, given their own interests in discouraging the extension of sanctions and above all in preventing sanctions without the complete participation of the United States. In the first case they would loose, together with the whole sector, the profits from trade with Italy, but in the second they would actually be forced, probably for good, to give up the positions reached within the Italian market to their American competitors lying in wait. And yet their reasoning is convincing. As they showed, what counted 107 108 109 110 111

Feis, Seen from E.A., p. 307. Ibid., p. 307–308. Ibid., p. 307. PRO-CAB, 245/257, Memorandum by the Oil Companies, pp. 2–3. Harris, p. 88.

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333

was not the total amount of oil imports from the United States to Italy, as these were relatively limited numbers even if they were rising rapidly. What was important was the elasticity of supply, especially outside the normal channels of the major oil companies, that might be influenced by the embargo. In this regard only if the figures cited in the memorandum were wildly falsified would it in any way change the basic truth they reveal. And in truth, even the assumption that the major oil companies would respect the embargo was not a given. The administration itself never offered a precise definition of what was meant by normal peacetime levels of business. The most natural application of such a principle would use the data from 1934 as a baseline, but the lack of an official definition was in and of itself a loophole for anyone with less than sincere intentions. Another expedient available to the major oil companies, which extracted much of their oil outside of American territory, was to do business through a foreign branch while the headquarters continued to appear to obey the embargo. There was an episode that, although it turned out to be unfounded, showed how much the administration and Roosevelt himself were aware of this danger. At a certain point a rumor began to circulate that Standard Oil had created a branch in Switzerland in order to trade conveniently with Italy without any regulation and without contradicting the moral embargo within the United States.112 Immediately, Roosevelt wrote to Hull: Please ask the Standard Oil of New York, Standard Oil of California if this is true, and why the Standard Oil Company of Switzerland has been organized. If it is for the facilitating of exports of oil from this country to Italy, I strongly recommend that you tell the story to the Press. F.D.R.113

On these instructions, the State Department contacted the presidents of the three companies of Standard Oil (Socony Vacuum Oil Company, which had taken the place of Standard Oil of New York; Standard Oil Company of New Jersey; and Standard Oil Company of California), which denied the existence of the company in question. The State Department charged its official in Berne, Hugh Wilson, with further investigating the matter on the scene.114

112 113

114

FDRL-OF, 663, Robert P. Skinner to Cordell Hull, Istanbul, November 21, 1935. FDRL-OF, 233 A, Franklin D. Roosevelt to Cordell Hull, Warm Springs, Georgia, November 23, 1935. FDRL-OF, 663, Cordell Hull to Franklin D. Roosevelt, Washington, D.C., November 27, 1935.

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Aside from the fact that this was a false alarm, the episode demonstrates how easily the major oil companies could have exploited various loopholes and how rudimentary the implements of regulation at the administration’s disposal. The very words of the president offer more indirect proof of the disproportionate resources of the oil multinationals: he spoke of “facilitating of exports . . . from this country.” That meant that, if Standard Oil had exported the oil from the United States to Switzerland, and from there to Italy, it would violate the moral embargo proclaimed by the Roosevelt administration. And if instead this same operation had been made not with oil from American wells but from Standard Oil wells in other parts of the world? In that case, according to the president’s words, there could be no objections. Did the moral embargo, or a future more strict embargo, apply only to oil extracted in the United States or to all oil under American control? The first case would be mere farce; the second would mean securing the cooperation of the authorities in the countries of extraction in a major undertaking to support sanctions. Also, in the latter case, the embargo would only be effective if it were of general application, which would mean that the United States and League member nations would work together, starting with Venezuela, where 60 percent of the oil was controlled by American interests, the other 40 percent by British companies.115 There was even a further possibility for subterfuge on the part of the major companies. They could have exported oil to a country that was not part of the League of Nations and that did not intend to participate in the sanctions (the memorandum of the British companies gave the express example of Japan), which would in turn be able to export it to Italy, as long as the necessary means and funds could be found to deal with the greater costs this lengthy itinerary would induce. Although the moral embargo proclaimed by the United States would not be sufficient to block the flow of the oil Mussolini needed for domestic demand as well as for the war, it seemed that the major oil-producing nations were willing to respect an eventual embargo declared by the League of Nations. On November 29, immediately after the Committee of Eighteen decided to postpone any declaration, the League’s secretarygeneral, Avenol (who was perhaps more than any other qualified to make such a statement), expressed some precise positions. The enforcement of an embargo on oil by the Soviet Union, Romania (of utmost importance for the percentage of Italy’s imports it represented), Iraq, India, and Finland was taken for granted by Avenol, because those countries had already 115

PRO-CAB 245/257, Memorandum by the Oil Companies, p. 3.

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announced their acceptance of Proposal 4A, including oil even if the opinion of the Petroleum Department of the British Board of Trade should be taken into account: that,116 Romania ought to be compensated in some way for its participation as Italy represented so much of Romania’s commercial income. Great Britain affirmed its willingness, so the Netherlands and Iran could be expected to adapt themselves to its wishes. The position of Venezuela was more in doubt because Italian influence was strong there, even though, as seen, the British and American oil companies controlled extraction.117 Given that, of the most important producing countries, Romania, in addition to being favorable to the embargo, was also in close contact with the American government118 and the Venezuelan government could also be influenced by the Americans, it was clear that the United States’ attitude regarding an eventual oil embargo declared by the League of Nations would have a decisive effect. Finally, the British were also considering another possibility, which was eventually judged impractical: instead of embargoing oil, preventing its transport; that is, creating a blockade on oil tankers.119 In synthesis, an oil embargo would have effectively forced Mussolini, if not to surrender, at least to move quickly to negotiation from a weakened position. Confirmation is to be found not only in Mussolini’s violent reaction to the proposals – he went so far as to threaten war against Great Britain, according to the beloved account of Sir Samuel Hoare and Lord Lothian120 – but also in the evaluation of the British Board of Trade,121 according to which Italy had at its disposal the ability to stockpile a maximum of three extra months of oil under normal circumstances even if it added to its own Agip reservoirs those it might requisition from British and American companies. Still, the United States’ moral embargo would not be sufficient to reach this objective. The loopholes it offered, the attitude of the smaller exporters, the maneuverability of the major companies, and American extraction capabilities all were such as to allow 116 117

118

119 120

121

PRO-CAB, 245/257, Memorandum by Petroleum Department, p. 2. NA-DS, 765/2812, tel. n. 625, Prentiss Gilbert to Cordell Hull, Geneva, November 29, 1935, p. 4. NA-DS, 711.00111 Armament Control/514, Cordell Hull, Memorandum of Conversation between Secretary Hull and the Rumanian Minister, Mr. Charles A. Davila, Washington, D.C., November 29, 1935. PRO-CAB 245/257, Memorandum by the Oil Companies, p. 6. See CFR, Study Group Reports, The Most Honorable the Marques of Lothian, American Neutrality and European Peace, Digest of Dinner Discussion, New York, January 20, 1936. PRO-CAB, Memorandum by Petroleum Department, p. 6.

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Italian supply despite the embargo. This impotence was clear from the ongoing increases in American exports even after the proclamation of the moral embargo. In the absence of an explicit American adherence to a League of Nations embargo, the participation of other states such as Venezuela and perhaps Romania would be a dead letter. The oil embargo could have been a decisive weapon, but only if it had been universally enforced. Reversing the terms underscores the situation. The cited figures show clearly that, while there might be some minimal residual doubt of the effectiveness of an embargo on oil that included the United States, there can be no doubt that an embargo executed only by League member nations could only be ineffective. Finally, the timing also sealed its fate. If Geneva’s offensive in November had brought on a total blockage of oil exports supported also by the United States, it could have had a serious if not determinative effect. A block in February – when talks were renewed on the issue – would be less certain, even with U.S. participation, since in the meantime Italy had been able to stockpile conspicuous supplies as well as modify its list of suppliers. Therefore, one may conclude that the crucial factors were, first, the failure of the Roosevelt administration to obtain legislation supporting the embargo in October and, second, the administration’s inability to interpret the legislation that did pass – and in particular that expression “implements of war” in a manner that would allow for the same result. The numbers show as well that the so-called moral embargo had little effect other than perhaps to encourage the powers in Geneva to extend the embargo to cover oil and other raw materials. The insistence with which Ambassador Rosso indicated on November 27 that it was by then a matter only of avoiding a partial embargo of the exports exceeding normal peacetime trade levels tends to prove that such a limit provoked considerably minor worries in Rome.122

7. the debate on the embargo of raw materials If the verbal statements, moral pressure, and few administrative measures that were within the prerogatives of the governments were largely insufficient to produce practical results, what possibility remained at the end of November for going further? How could Roosevelt and Hull encourage Geneva to extend economic sanctions to include oil? What assurances 122

Augusto Rosso to Benito Mussolini, Washington, D.C., November 27, 1935, in Collana di testi diplomatici, n. 7, Augusto Rosso, Rome: 1979, pp. 46–48.

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could they offer that the United States would support such measures in concrete ways? After the meeting between Hull and Rosso, Rome had had to take note of the mood in Washington, as shown in a long message sent from Ambassador Long to Roosevelt with the clear intent of going over the heads of the officials at the State Department.123 In it, Long, without diverging for an instant from his usually amiable reception of every Italian mood and signal, expressed his opinion with great clarity. In synthesis, his argument was as follows: (1) Mussolini cannot do without oil (on this topic he supplied interesting information – that Italy had reached the end of its reserves as well as its own sources) and a total embargo would stop its ships. (2) Therefore, he would be forced to go to war in Europe, because he would never accept such a humiliating reversal. (3) “We are not members of the League and have no obligation in that respect, but if we take the action which serves as a predicate for League action, then we will be morally responsible for precipitating the European war, and we will suffer the consequences of it.” (4) Therefore, “I implore you to direct the policy of the American Government along the lines of strict neutrality.” Regarding the more specific question of Mussolini’s attitude toward the United States, Long said that he would consider an oil embargo by the United States a hostile act: His reasons are three-fold: first, it is a violation of the treaty; second, it is a breach of what he considers neutrality; third, it will make possible the action at Geneva which Great Britain desires to effectuate by emplacing a general embargo, and he views our action in that connection as being in coordination with (if not in collaboration with) the power opposing him. As a consequence of his reasoning the United States will be placed in the same position that the other principal Governments at Geneva will be in, and he will treat us accordingly.

Long’s message was an interesting essay on the reasoning that continued to hold sway in the halls of what would soon become the Allied governments. Practically right up until the invasion of Czechoslovakia, they continued to react to the aggressions of Mussolini and Hitler by considering the dictators’ desires not as an element to contradict or influence, but as an unchangeable feature of the situation that had to be respected in order to “salvage the peace.” In truth, Long was ignoring two important factors. First, Roosevelt was not politically capable of doing any more than he was already doing or allowing Hull to do, in the absence of an initiative from Geneva. Otherwise, America’s early action, which 123

FDRL-PSF, fol. Italy: Long, Breckenridge Long to Franklin D. Roosevelt, Rome, November 29, 1935.

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at the time of the declaration of war could be presented as the spirit of independence from Geneva, would look excessively zealous. In the second place, Great Britain itself was wavering, even though it was to that nation that the isolationists and even Long attributed the influence that led the United States to lean in favor of sanctions. The exchange between Foreign Secretary Sir Samuel Hoare and the British ambassador in Washington, Sir Ronald Lindsay, looks especially significant in this context. They wrote in the days immediately following the League of Nations’ committee’s decision to postpone the decision on extending the embargo to oil. The American ambassador in London, Bingham, let Hoare know (although he blamed Laval for the postponement) that his government was none too happy with this development.124 Afterwards Hull took the opportunity to solicit a favorable decision from Geneva on the extension of the sanctions to raw materials and especially oil, letting Sir Ronald know that the more Geneva defended the principle of collective security, the more the American government would be able to offer solidarity of action.125 At the same time, however, it was clear to Lindsay that the secretary of state was already stepping past the boundaries of the legislation Congress had passed for the administration; nor was Hull able to predict when or if they might vote him wider powers. In a meeting between Lindsay and the secretary of state on December 7, Hull went so far as to say that: . . . he could not understand why Geneva should hesitate for a moment. Here were Nations assembled to do what they could in the cause of peace. Were they to “lie down and die” without making an effort at the first difficulty? In his opinion “they should sweep right ahead at once.” If it became clear that outside Powers by their action or inaction were defeating the League then it would also be clear that “they were crucifying peace.”126

Although Lindsay betrayed a growing irritation toward those “many Governments” who “incited to bravery” even though they themselves were “remote from danger,”127 he also repeatedly expressed his conviction that the Roosevelt administration should propose to respect an embargo declared by Geneva and that the Congress would end up accepting the 124

125

126

127

PRO-FO, 371/19165 tel. n. 1009, Sir Samuel Hoare to Sir Ronald Lindsay, London, November 28, 1935. PRO-FO, 371/19219, tel. n. 424, Sir Ronald Lindsay to Sir Samuel Hoare, Washington, D.C., December 8, 1935. PRO-FO 371/19219, tel. 422, Sir Ronald Lindsay to Sir Samuel Hoare, Washington, D.C., December 7, 1935. PRO-FO, 371/19219, tel. n. 424.

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initiative. Lindsay went so far as to suggest to Hull, during an informal conversation, that the Congress would be able with a simple resolution to add oil to the products already under embargo, debating afterward at their leisure as to the act of neutrality that should replace the one currently in force. Hull, who did not seem at all put off by the suggestion, underscored nevertheless that it would likely be a disastrous scandal were anyone to know that he was discussing a legislative issue that was the sole jurisdiction of the U.S. Congress with the British ambassador.128 Lindsay would have been more prudent, indeed, if he had read an earlier message from Sir Samuel Hoare more carefully. On November 30, Hoare had sent a long telegram in which he outlined his government’s policy on the oil question. After blaming the dillydallying at Geneva on the French, Hoare expressed fears that had a familiar ring, echoing quite faithfully the worries Long had communicated to Roosevelt: There are, however, two other considerations that we must take into careful account. In the first place, there is an accumulation of reports tending to show that the imposition of an oil embargo may drive Signor Mussolini into a desperate act. This contingency cannot be ignored. It is, therefore, necessary for us to clear up the position with the other members of the League and to make it as certain as we can that if such an attack were made upon Great Britain, it would be resisted by the full forces of other members. [. . .] These discussions must take some little time and the fact that they will be taking place must on no account be misinterpreted as evidence that we are weakening in our general policy.

To this argument, which appears to have been little more than the intentional acceptance of the propaganda issuing from Palazzo Chigi, Hoare added another that revealed more clearly the true nature of his policy: Secondly, there is an accumulation of evidence that Signor Mussolini is beginning to realize the full difficulties of this position and the advisability of making terms. [. . .] I am also inclined to think that, in view of Signor Mussolini’s disposition, the actual imposition of an oil embargo would in present circumstances make him more rather than less intransigent. On this account I would welcome a breathing space for these negotiations.129

Aside from any tactical errors by the French or British, and any cunning maneuvers of Fascist diplomacy, there was a basic political fact: the refusal

128

129

PRO-FO, 371/19122, tel. 1331, Sir Ronald Lindsay to Sir Samuel Hoare, December 10, 1935. PRO-FO, 371/19165, tel. 369, Sir Samuel Hoare to Sir Ronald Lindsay, November 30, 1935.

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by those governments (and by ample sectors of the governing classes, particularly the American one) to conduct a policy that would defeat Mussolini, at the cost of his liquidation. The key here is to recognize that his liquidation would indeed be a cost for those governments: that is why they found practically any concession preferable. The Hoare-Laval Pact would demonstrate this, and was already in the air when the foreign secretary wrote the message to Lindsay; in the final analysis, these statesmen were working toward Mussolini’s political triumph. As Rowse noted in his interesting memoir entitled The Appeasers (the title reveals the focus of the book on those British politicians who pursued the policy of appeasement, attempting to placate fascist dictators through concessions), Sir John Simon – the foreign secretary previous to Hoare – explicitly confirmed this when, confronted with a proposal to act drastically against Italy, he said, “We couldn’t do that: it would mean that Mussolin would fall!” Rowse commented: “That was what was at the back of their minds – the anti-Red theme that confused their minds when they should have been thinking in terms of their country’s interests and safety.”130 While Rowse did grasp the true roots of that policy, he remained prisoner of the political and historiographical judgments that considered it a tragic error rather than the logical consequence of a class-based worldview shared by all the leaders involved. This inclination was also present in American society; but this is a topic we shall return to later. When Geneva’s engines seized up, largely due to French threats since it was more fearful than ever of Germany’s future initiatives, Mussolini used the opportunity to postpone as well the meeting scheduled for November 29. When, furthermore, the Hoare-Laval Pact became known, it made the position of Roosevelt and Hull untenable as well. The American government could only send cautious signals in favor to Geneva even with the temporary support of major isolationists such as William Borah131 for moral pressures to reduce trade with belligerent nations.132 Many isolationists, in the Congress and in the press, were motivated by memories of 130 131 132

Rowse, p. 26. Harris, p. 90. On the basic orientation of the senator there can be few doubts. He had already declared himself in agreement with the poet and fervent admirer of Mussolini, Ezra Pound, in saying that Roosevelt’s policy was the result of “orders from London,” while his colleague in the Senate and fellow isolationist Arthur Vandenberg telegraphed him that Mussolini’s aggression should not in any case be considered a violation of the Kellogg-Briand treaty (LC-WEB, bk. 16, William E. Borah to Ezra Pound, Boise, Idaho, October 30, 1935; LC-WEB, bk. 16 Arthur H. Vandenberg to William Borah, Grand Rapids, MI, November 2, 1935).

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the First World War, when it had been precisely the defense of free trade with belligerents that had been one of the determining factors in America’s entry into the war. They could accept the formal equidistance of a policy aimed at reducing this kind of trade, without overanalyzing just what kind of trade it was or in what direction it was effectively targeted. It was an entirely different affair for the administration to find itself in the position of advocating restrictive measures that were every day more clearly revealed in their real nature by the press and even eventually by the protests of Italians and Italo-Americans, while the League of Nations itself failed to actually take the action championed by the president. The indignation roused by the Hoare-Laval Pact in America as well did not galvanize a reaction against Italy, but instead was a harsh blow to the little existent goodwill there had been for negotiating an end to Mussolini’s war in Africa. Sir Ronald Lindsay provided the most eloquent description of the situation in the United States when the pact became public knowledge. Of the “most serious and responsible” journalists, he said, their condemnation of proposal is unanimous, complete and unequivocal, and even those who have been most friendly such as the New York Times and Christian Science Monitor are only a little behind the others. His Majesty ‘s Government and the French Government are blamed for an “iniquitous bargain”. Plan must bankrupt collective system and act as incitation of other ambitious states. It is a vindication of the Italian Government’s aggression and represents such terms as might have been exacted after victory. It is “an international disgrace”, “immoderate and impossible”, “a staggering defeat for the League of Nations”. [. . .] On the reason for this sudden change all the usual nonsense is written (e.g. some Imperialistic aims revealed as soon elections are safely over, or reluctance of a Conservative government to see a Fascist government brought down). [. . .] It is everywhere taken for granted that there is no more any question of an oil embargo. I expect the Administration’s policy of limiting export to normal proportions will be allowed to lapse but I am unable to forecast what Congress will do in regard to neutrality legislation.133

If Sir Ronald had taken the “nonsense” more seriously, he might have found himself in a less embarrassing situation with the administration he had been exhorting to new measures against exports until the last possible moment. Behind the scenes of this latest flood of isolationist sentiment and resentment, those interests and persons hostile to any policy of opposition 133

PRO-FO, 371/19171, tel. 447, Sir Ronald Lindsay to Sir Samuel Hoare, Washington, D.C., December 17, 1935.

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to Italian imperialism could continue to operate freely. In the final phase of the debate on the Ethiopia war – on the occasion of the renewal of the neutrality legislation – these forces showed themselves with renewed vigor. The new tendency was promptly noted by Ambassador Rosso, who summarized the new situation in this way: This wave of criticisms against the States Department was certainly encouraged by the postponement of the decision in Geneva on the extension of the sanctions, and it has been manifested with such energy that I felt justified in telling Your Excellency that the situation has shifted significantly in our favor. I meant by that to refer more to public opinion than to the position of the Government (which has also changed to a certain extent with the adoption of the criteria of normal trade levels); the public has been angered by the embarrassing position the American Government finds itself in thanks to its rush to “run ahead of the League.” And he added significantly: We must count especially on the power of this popular sentiment to exert its influence over the Senators and Representatives who will meet in Washington at the beginning of January.134

Rosso saw in the events of those days the confirmation of his prediction from back in June listing all the reasons why America’s close cooperation with Great Britain and the League of Nations was unlikely.135

8. the neutrality act of 1936 Under these conditions, the deadline for renewing the neutrality legislation by the end of February became the last chance to extend the embargo.136 With his characteristic political pragmatism, Roosevelt anticipated the necessity for a compromise with the isolationists (in particular Senator Nye). The bill approved by the president was presented simultaneously in both Houses of Congress, by Senator Pittman and Representative McReynolds. It confirmed an embargo on arms and munitions, extended to cover loans or credit to the belligerents and accompanied by the

134

135 136

Augusto Rosso to Benito Mussolini, Washington, D.C., 27 November 1935, in Collana di testi diplomatici, n. 7, p. 45. NA-IR, bk. 430, Augusto Rosso to Benito Mussolini, Washington, D.C., June 25, 1935. Green wrote that he, Judge Moore (one of the assistant secretaries), and Hackworth (the legal counsel of the State Department) were working hard on a new version of the neutrality law. It was difficult work; he reported that at that moment he had reached the point of nausea trying to reconcile the opposing forces of what the White House wanted and what could actually have a chance of passing the Senate. HUHL-JPM, Joseph C. Green to J. Pierrepont Moffat, Washington, D.C., November 25, 1935.

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presidential power to impose restrictive quotas on exports to all belligerents. Parties who conducted trade did so “at their own risk.”137 In return, Roosevelt renounced any battles of priority between the legislative branch and his own prerogatives, accepting that the measures he was authorized to take would be formally “impartial” – that is, directed toward both belligerents. At first it seemed that the president’s tactic had secured success (although it did elicit McReynolds’s disappointment, who as majority leader of the president’s party had hoped for a stronger affirmation of presidential powers). Even Senator Nye indicated his satisfaction with the bill presented by the administration. Nonetheless, in the hearings that took place in the Foreign Relations and Affairs Committees of each House, there was the usual conflict between those who supported presidential powers and those who wanted to restrain him. A third position finally appeared in this debate and was victorious:138 the bill sponsored by Senator Thomas that simply extended the existing legislation and added a provision forbidding loans to the belligerent countries. In Thomas’s solution, the U.S. government would have had to definitively give up any effort to deprive Fascist Italy of the products it needed at that time. The bill, thus amended, ended up gaining nearly unanimous approval, since with only a few exceptions the isolationists were pleased to be able to deny the president the ability to manipulate trade in the service of foreign policy and the president himself wanted to avoid setting a dangerous precedent by signing legislation that increased the Congress’s control over his actions. Melvin J. Mass, representative from Minnesota, was almost the only voice of dissent: While for a time we may escape involvement in foreign wars, the ultimate outcome will be that a few powerful, militaristic nations, unchecked by anything, will gradually create a situation of world-wide conquest, and the time will come when we alone will be left in the way of their complete world dominance. As surely as we take this attitude of smug indifference now, we ourselves will then become the object of attack and invasion.139

When he signed this legislation, Roosevelt accepted the negation of the only powers that could have effectively stopped the trade from which Italy was benefiting. Although he announced that it should continue, the sterility of the moral embargo was so exposed by this neutrality episode that even State Department officials who were most in favor of an

137 138 139

New York Times, January 4, 1936, p. 1. Divine, pp. 152–156. Congressional Record, February 17, 1936, p. 2246, cited in Divine, p. 157.

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interventionist policy, such as Hull and Green, had advised that it be thrown out.140 The American refusal to intervene encouraged – and was, perhaps, decisive in – the decision of the League of Nations in the following month of March to give up the effort to extend the sanctions to include oil. By that time, Mussolini’s troops were marching toward Addis Ababa. It is debatable whether a different decision by the Americans in February might have changed the whole course of the Ethiopian war. Although there are reliable sources that testify to the effect that an oil embargo could have had in November 1935 (in 1938 Mussolini told Hitler that “if the League of Nations had followed Eden’s advice in the Abyssinian dispute . . . and had extended economic sanctions to oil, I would have had to withdraw from Abyssinia within a week”141), it is possible that by February and March the military undertaking and the stockpiling of oil reserves had advanced to the point that they would only have slowed, but not stopped, the final outcome. That those reserves were so abundant was due to the sizable acquisitions Italy had made in the United States in the months previous to the neutrality debate. Thanks to Ford and General Motors, Mussolini had a complete transportation fleet ready to go. The mobilization orchestrated by the Italian ambassador in Washington over the neutrality debate and the possibility of embargo seems to show that its outcome was hardly insignificant to the Italian government.

9. the solidifying of political factions The congressional debate and its public echoes had the effect of revealing those forces, personalities, and interest groups that had militated from the beginning against any policies that might damage the Fascist regime, forcing them out into the open and obliging them to publicly state their position. Which factors and alliances produced the pro-Mussolini camp? American historians who have tried to articulate the reasons that led the American government to allow Mussolini to provision his military adventure through United States’ exports tend to privilege the isolationists in their analyses. The isolationist group was particularly strong in the Senate and enjoyed a great deal of power over Roosevelt for its ability to hold his domestic reforms hostage. Feis, Harris, and to some extent Divine all concur with the general interpretation of most American historiography 140 141

Divine, pp. 157–158. P. Schmidt, in R. H. C. Steed, ed., Hitler’s Interpreter, New York: Macmillan, 1951, p. 60.

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that the difficulties and resulting sluggishness of American foreign policy in the 1930s in arriving at a more militant approach to confronting the Fascist dictatorships was due, if not exclusively then at least decisively, to popular isolationism in American public opinion.142 The pacifist sentiments of a majority of Americans were, according to this argument, stoked by politicians in Congress from the midwestern farmlands that were the heartland of populism. They used this inflammatory rhetoric to block Roosevelt and his white Anglo-Saxon Protestant governing elite from successfully implementing the farseeing and acute internationalist policy natural to that world of finance, university culture, and East Coast cosmopolitanism. A careful analysis of the relations between the United States and Italy in the course of the 1930s, starting from the Ethiopian war, offers a very different picture. First of all, the isolationists were not the compact monolithic group they have been portrayed as. Divine’s own account of the itinerary of the second Neutrality Act clarifies just how the divisions among the isolationists blocked the approval of a law that, while remaining equally rigid in its formal impartiality, would have allowed the president to drastically reduce trade with Italy in the sectors most crucial to the war effort.143 That bill had been specifically drafted to meet the demands of the group of isolationist senators headed by Senator Nye, especially including Key Pittman from Nevada.144 This aspect of Roosevelt’s mediations had reached its goal. But that did not stop Hiram Johnson and William Borah (who had earlier declared himself satisfied with the administration’s position against war-related trade, at least in the form of the bland moral embargo), who were the two historical leaders of the isolationist wing of the Senate, from playing leading roles in forcing the Congress to deny Roosevelt any power in the limitation of trade. Notably, Ambassador Rosso had frequent secret communications with Senator Borah, as well as being in close touch with the isolationist press (especially Hearst’s many newspapers, through his contact with the editor, Arthur Brisbane, who had been so receptive to the attentions showered on him by the Italian embassy).145 Another columnist who had close relations with 142 143 144 145

O. Barté, Gli Stati Uniti nel secolo XX, Milan: 1978, pp. 248ff. Divine, p. 147. F. L. Israel, Nevada’s Key Pittman, Lincoln, NE: 1963, p. 169. B. Migone and A. Ferrero. On the contacts between Brisbane and the Fascists see ASMAEAAP, bk. 43, Stati Uniti 1937, posizione 58, onoranze ed onorificenze, fol. 2, Brisbane Arthur: condoglianze del Duce, Galeazzo Ciano to Fulvio Suvich, Rome, December 26, 1936: “I beg leave Y. E. to extend to the family of Arthur Brisbane my most sincere condolences for the loss of the distinguished journalist, sincere friend of our country.”

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the embassy,146 Frank Simmonds, made significant anti-British arguments against an American embargo on raw materials. There was not, therefore, one clear isolationist faction that defeated Roosevelt’s policy, but rather several traditional isolationist spokesmen flanked by a variety of individuals and interest groups focused on other issues, all of whom used typical isolationist rhetoric to activate a public opinion trained to respond. Exporters, headed by the New York Chamber of Commerce, the Wall Street Journal, and Ambassador Rosso – to name a few – had little in common with “isolationism,” but they exploited isolationist arguments when it suited them, such as the ideal of neutrality toward both belligerents and the danger of any form of collaboration with the League of Nations. More than an isolationist faction – limited and, in any case, divided at the crucial moment – those who wanted America to join in bolstering collective security found themselves opposed by the public’s fear of another war, a fear that was ably exploited to produce majority support for an isolationist position. Exactly who were these able exploiters of Americans’ fears? Rosso’s reports reveal their identities clearly. He too referred to an “isolationist current” and an “internationalist current” in Congress. But he also clarified how, behind these two generalizing labels, at which most historians have stopped, there were instead different groups, interests, and men with little in common with generic isolationism as an ideology. Instead, for specific reasons, they were interested in impeding an American intervention against Mussolini. Among these groups who were potential allies of current Italian interests, Rosso placed Italo-Americans in the first rank – or rather, “the Italo-American vote,” that is to say naturalized and politicized Italo-Americans. Nonetheless, Rosso added: There exist [. . .] other factors that could be made use of, with more direct effects such as: 1st – Catholic reactions against the Anglophile propaganda of Protestant churches [. . .]. This reaction is already under way, and I will naturally work to encourage it in all ways; 2nd – The possibility of creating worries among the American public about the danger of English domination, based on their control over the League of Nations; 3rd: – The suspicious attitude among Naval circles toward British naval policy. It is obviously in our interest to raise these issues and encourage their discussion by the public in such a way as to influence members of Congress.147 146

147

A. Rossi-Longhi (Councillor and Rosso’s deputy at the Italian embassy in Washington), interview with the author, Rome, December 17, 1966. ASMAE-AAP, bk. 271, Stati Uniti 1936, fol. Rapporti politici, posizione 1, sf. 2, Legge sulla neutralità Americana, from the Foreign Ministry to the Embassies in Paris, London,

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It was true that American Catholics constituted an important base for Ambassador Rosso as he prepared a campaign opposed to intervention against Italy. Precisely because the Protestant churches and their communities, as well as African-American organizations, were the most important militant forces in the anti-Fascist struggle,148 the Catholic hierarchy with few exceptions (such as the archbishops of Chicago149 and Baltimore150) reacted by defending the Italian government.151 The Catholic press was particularly motivated to defend what had been characterized as the silence of Pius XI about the war. Father William B. Smith, in an unpublished thesis for Catholic University of America, summarized the press coverage thus: It would seem that the majority of writers on the Ethiopian war in American Catholic periodicals stayed away from any consideration of religious motives or justification of the event. If such was suggested, moral principles were usually brought forth to answer opposition to the war. This is not to say that Catholics in America favored the war. Many did not, and said so, but most said nothing. There was still a certain feeling of identification with the Italians because of the number of Catholics in Italy, and also, no doubt, because the Pope was not considered to have spoken so definitively as to allow for no doubt on the question. [. . .] [S]ome did defend the silence of the Holy Father, while others denied it, and a few proposed justification for Italy’s invasion.152

In truth, Smith’s conclusions, which carry the imprimatur of Cardinal Patrick O’Boyle, diverged in part from some of the very documentation he provided.153 From his evidence, one can see that only the Catholic Worker, linked to the Catholic union movement, took an editorial stance of total condemnation of Fascist aggression,154 whereas other periodicals more representative of the Church in the United States (such as America, a Jesuit publication; Commonweal; and The Catholic World) and the great majority of diocesan papers were committed to offering justifications for Mussolini’s war and above all to strenuously defending the papal position.

148 149

150 151 152 153 154

Berlin and the Italian delegation in Geneva, November 15, 1935, which forwarded: tel. Augusto Rosso to Benito Mussolini, Washington, D.C., November 9, 1935. Diggins, pp. 301, 307–312. W. B. Smith, The Attitude of American Catholics toward Italian Fascism between the Two World Wars, unpublished thesis, Catholic University, Washington, D.C., 1969, p. 218. Ibid., p. 219. Diggins, pp. 299–301. Smith, pp. 222–223. Ibid., pp. 119–223. “Christian Nations Invite Ruin for Christendom,” in Catholic Worker III (September 1935): 1–6; F. L. Burke, “Italy Invades Ethiopia,” in Catholic Worker III (October 1935): 1–6.

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Such rhetoric offered Rosso ample room for action among American Catholics, even without resorting to such extremists as Father Coughlin, Roosevelt’s fearsome adversary and supporter of American abstention in the matter of the Ethiopian dispute, who could have further provoked the administration.155 Rosso clearly grasped that the sympathies of American Catholics were due, apart from to the attitude of Pius XI and other exponents of the Italian Church hierarchy, to the ethnic makeup of their own church. It was mostly composed of the Irish, easily led to favor a policy that was presented above all as anti-English, as indicated by Rosso’s telegram to Mussolini. In this context, Rosso deemed it of great importance to develop influence in the Irish community by expanding his contacts among Irish publications such as the Gaelic American and the Irish Times, which published an article titled “Mr. Hull Has Declared War on Italy.” Nor did he hesitate to contact such activist organizations as the one for the independence of the Irish Republic, obviously motivated by hatred for Great Britain. Rosso knew how to make this kind of support pay off: . . . the Irish vote represents a strong group for the Democrats, and Mr. Farley, head of the Democratic Party and himself Irish, ought to be particularly sensitive to their influence.156

Farley, who held a strategic position in evaluating the electoral effects of Roosevelt’s policies, was already favorable, having been impressed by the Fascist agricultural land reclamation projects he had witnessed during a trip to Italy two years earlier.157 Rosso’s observation regarding the attitude of the American Navy was also linked to the rivalry between it and the British Navy that had not been overcome by the London Naval Conference.158 From the Italian point of view, the goal was not to identify those forces that were a priori isolationist, but rather those that, for specific reasons relevant to the issue at hand, would support an isolationist position or 155

156

157

158

Smith, pp. 204–205; C. H. Tull, Father Coughin and the New Deal, Syracuse, NY: 1965, p. 102; Diggins, pp. 182ff. NA-IR, T-586.430, Augusto Rosso to Benito Mussolini, Washington, D.C., December 27, 1935. FDRL-OPF 309, James Farley to Franklin D. Roosevelt, Washington, D.C., December 8, 1933, also cited in Diggins, p. 280. Farley was not the “head” of the Democratic Party, since each political party in the United States is headed by the presidential candidates named at party conventions, but as the president of the party’s national committee (as well as serving as the Postmaster General), he was the main administrator of the president’s electoral fortunes. B. Migone and A. Ferrero.

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would deploy isolationist arguments to avoid their government’s active intervention in this matter. In other words, this was a small-scale repetition of the same process that had resulted in the defeat of the ratification of the peace treaties of 1919. At that time, too, the ideologically pure isolationists had actually been a minority among those who opposed Woodrow Wilson. It had been a coalition of social, ethnic, and political groups who for complex reasons and diverse motives had converged around the Senate’s refusal of the peace treaties and especially of the League of Nations. In 1919 as in 1935–1936, anti-British feeling played an important, though by no means exclusive, role in cementing heterogeneous forces around a single political profile.

10. italian-americans and the ethiopian war To return to the role played by Italian-Americans in these developments, there is one particular source on this topic that must be examined, both for its circumstantial character and the vantage point of its author. Joseph C. Green, in charge of the Office of Arms and Munitions Control, enforced the enforcement of the neutrality acts. All the protests, pressures, suggestions, and other mail sent to the U.S. government concerning the war in Ethiopia arrived on his desk. His judgment was quite clear; in one of his long and detailed missives to a colleague, he summarized the course of events: The reason for the defeat of the bill [presented by Pittman and McReynolds on behalf of the administration] has never been thoroughly understood by the public. I say reason [emphasis in original] advisedly. There was only one. The various criticisms directed against the bill on grounds of law and policy had no real effect. The bill would have passed had it not been for the highly organized and highly effective opposition of the Italian-Americans. Fascist organizations all over the country had their members write five form letters each – one to the President, one to the Secretary of State, and one to each of their two senators and to their Representative of Congress. I handled over 10,000 such letters during the month of January. These letters were supplemented by the public appearance of Fascist representatives before the Committees and by intensive lobbying in the Senate and House Office buildings. Senators and Representatives – particularly the latter – from Massachusetts, Rhode Island, New York, Connecticut, New Jersey, Pennsylvania, Maryland, West Virginia, Ohio, Michigan and California trembled openly in their boots. The Italian-Americans are such a highly organized minority that Representatives facing election in November did not dare to vote for a neutrality bill which met with their displeasure. Many of them were perfectly frank in their discussions with me in regard the situation with which they were confronted. One man from Connecticut, who was in principle strongly in favor of the bill, asked

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me how he could possibly vote for it in view of the fact that he had 40,000 Italians in his district. The crisis came on February 7. McReynolds went to Pittman and told him that he could not proceed with the [administration’s] bill. Pittman and McReynolds came up to the White House and jointly told the President the same thing. After a conference between the President, the Secretary [of State], Judge Moore [Assistant Secretary at the State Department], Pittman and McReynolds, the bill was dropped and Pittman hastily drafted the substitute which was eventually passed. [. . .] The Administration unsuccessfully attempted to make it clear to the public that it had not changed its attitude, but that Congress had refused to follow its lead. [. . .] The Italian-Americans gave us a fine object lesson in the use of political pressure by an organized minority.159

The lesson Green referred to concerned the opportunities offered by the American constitutional and electoral system for minorities to exert political influence. The Italian-Americans were not alone in having access to legally defined spaces from which to influence politics, starting with congressional hearings The presidential elections, founded on a two-way winner-takes-all electoral college, acted as a multiplier of the votes they mustered, since any changed vote represents the gain (and loss) of two votes between the two major candidates. In the electoral college system, a minority group that can show its organizational strength and that identifies itself as a single-issue interest group can force each candidate to court its vote by taking a clear stand on that issue as an almost irresistible form of political conditioning on elected representatives. Green did not know, although he intuited, that the Italo-American capacity to promptly mobilize and achieve goals was not spontaneous. The State Department, through an investigation by its chief special agent in New York, made a notable effort to find proof that the propaganda emanating from the Italo-American community was really the fruit of organizing by the consulates.160 Several similar incidents in previous months had led to the dismissal of the Italian vice-consul in Detroit, and this gave the State Department hope that it might be able to repeat the exposure and the request for expulsion.161 A few cases had been raised before the newly sitting Committee on Un-American Activities in the 159

160

161

HUHL-JPM, Joseph C. Green to J. Pierrepont Moffat, Washington, D.C., April 22, 1936, pp. 10–12. NA-DS, 711.00111 Armament Control/680, R. C. Bannerman, memorandum for Mr. Green, Washington, D.C., January 6, 1936; H. Kisey to R. C. Bannerman, Washington, D.C., January 3, 1936. ACS-MCP, bk. 2, fol. 8, Rosso Augusto, Augusto Rosso to Galeazzo Ciano, Washington, D.C., July 19, 1935.

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House of Representatives. The special agent of New York affirmed that the organizers of a meeting he had investigated clearly had close ties with the consulate of New York, though they were American citizens. He was not able to prove that their activity had been directly incited by the consulate. The investigative officer in Washington could only reassure his superiors that they would continue their efforts to find proof of a tangible relationship between the consulate and the American Friends of Italy, the committee used for antisanction propaganda, in the hope that they would drop their guard and show less caution in protecting the illusion of the New York consul’s noninvolvement.162 This hope came to naught, since Rosso and his collaborators were evidently aware of the gravity of any proven involvement by Italian authorities. While it is probable, if not certain, that the consulates suggested and helped organize the activities of these prominent Italo-Americans, this was not the decisive aspect of the Italian contribution to the Italo-American campaign anyway. The real link was strictly political and had been decided years earlier. The most important role of Italian-Americans was their electoral power, which they used to the fullest extent possible in the American system. The choice to naturalize, that is to take on American citizenship, was a natural path for immigrants; one might even say it was obligatory. American citizenship was prized because it guaranteed not only stability and permanent residence in the United States and the possibility of bringing over more relatives, but also the promise of upward mobility. As a citizen, the immigrant became part of the nation, participating in American political life and, within limits, organizing collectively and choosing and influencing a party (for most immigrants this was the Democratic Party) and its elected officials. But the Italian government often acted contrarily to this process, both before and after the Fascist seizure of power. Italian rhetoric about the adventures and suffering of the emigrant, rather than translating into living conditions that might lead him to remain in the mother country in order to spare him those pains, favored activities aimed at maintaining the emigrant’s links to the mother country: Italian schools, support for emigrants’ organizations, Italian language publications, congresses of emigrants’ representatives, legislation that maintained the right to vote in Italy even after taking foreign citizenship, and bank branches to make it convenient to send remittances back to Italy – a source of income the government relied upon for its balance of payments. This network gave rise to 162

Bannerman, Memorandum.

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public and private structures dedicated to nurturing the links between the emigrant and his land of origin, which were sometimes counterproductive for the government, and more often for the emigrant. In the specific case of the United States, every impediment introduced in the process of naturalization was not only damaging to the emigrant, but meant that he wielded less political influence that might favor the Italian government. The characteristics of the Fascist regime were such as to exacerbate the already-present tendency of the Commissariato Generale dell’ Emigrazione – the organization responsible for relations with Italian expatriate communities – to cultivate islands of so-called italianità abroad. The nationalist rhetoric that had already been a part of post-Risorgimento and Liberal Italy was now substituted by the very extreme version of the Fascist regime, which made foreign policy one of its main ideological touchstones.163 Further, the Fascist Party itself aspired to expand beyond Italian borders, with its fasci all’estero (Fascist bands abroad).164 Every time this nationalism became too explicit, it irritated the more delicate sensitivities of American public opinion. The United States, with its composite and complex citizenship, could not permit its ethnic groups to refuse to assimilate by remaining subject to foreign influence. Exemplary in this regard was the reaction of Secretary of State Charles Evans Hughes in 1923, when the American press reported that a law had been passed by the Fascist deputy Casertano in the Italian Parliament giving American citizens of Italian origin the continuing right to vote in their country of origin.165 Americans reacted similarly to stories of Italian emigrants who, on returning to Italy, were harassed by Italian military authorities as deserters even if they were citizens of another nation.166 The fear of subversives, frequently linked to ethnic and racial prejudice, had been a leitmotiv of the repressive and reactionary politics of the immediate postwar period, dramatically illustrated by the trial of Sacco and Vanzetti. Moreover, the Fascist regime, though prevalently judged as reflecting a positive restoration of law and order, was not completely exempt from the risk of falling into Americans’ general category of subversives, or at least of foreigners whose ways were too alien from mainstream of American custom. For that reason, nothing (or almost nothing) could be more damaging to the positive image Fascism had worked so hard to cultivate 163 164 165

166

Rumi, cit. Bertello, cit. ASMAE-AAP, bk. 159 8, Stati Uniti 1923, fol. 7361, tel. 96, Gelasio Caetani to Benito Mussolini, March 14, 1928. Dino Grandi, interview.

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in the United States than the suspicion that it wished to export its politics to America, even if that suspicion were provoked by little more than some ridiculous and innocuous wearing of black shirts. Even a little intemperance or excess show of zeal, in this context, could have compromised the whole effort of the Italian government to negotiate positive deals on war debt and future credits, not to mention the question of restrictions and quotas on immigration. The Italian embassy in Washington was always extremely aware of the danger and careful in its dealings with the foreign ministry to avoid the more extreme pro-Fascist factions of the Italo-American community gaining the upper hand and damaging the work of the Italian government concerning topics the diplomats rightly judged more important. There was an ulterior motive that pushed first Gelasio Caetani and de Martino167 and later Augusto Rosso to adopt a strict intolerance toward the organization of the Fascist Party in the United States. Had it succeeded in consolidating itself, it could have been a menace or at least a source of constant bother for the embassies.168 Given these choices, the central authorities of the Fascist state never had any real hesitation, despite some interruptions in the completion of their agenda. The Fascist organization in the United States was dissolved twice (definitively in 1931) with Mussolini’s consent and by explicit initiative of Dino Grandi, first when he was undersecretary and then when he became minister of foreign affairs. In September 1928, Grandi, then undersecretary of foreign affairs, wrote to Ambassador de Martino that the action of the Fascist League of North America was “more damaging than useful to the Regime’s cause,” although at that moment “no one is planning to suppress it.” What was necessary was to establish its absolute dependence on the diplomatic and consular authorities. Just as within the borders of the Kingdom the Prefects are the supreme authority not only of the State but also of the Regime, so and for even more important reasons is it true that Ambassadors, Ministers, and Consuls are the supreme authority of the State and of the Regime in foreign lands.169

Paradoxically, this exact principle, indispensable for assuring that the Fascist League would not commit any idiocies to damage the relations between Fascist Italy and the United States, was an unacceptable concept 167 168 169

Ibid. Bertello, cit. ASMAE-AAW, bk. 173, fol. Fasci, 26 September 1928, Rome, Dino Grandi to Giacomo de Martino, September 26, 1928.

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to the American authorities. The Fascists in the United States were to be tolerated inasmuch as they constituted free associations of American citizens. American authorities had no interest in whether or not those people damaged relations between the two countries, as long as they committed no crimes. On the other hand, any ambassadorial or consular diplomat who intervened with American Fascists, according to the principle declared by Grandi, created an intolerable situation to American law, which did not allow any foreign representative to exercise legal control over American citizens or their organizations. Obviously, this impasse could be resolved only by dissolving the Fascist League in America. But one year later, following a public scandal concerning the Fascists, de Martino found himself having to reassure Stimson of his determination to dissolve the League again,170 with the approval of Mussolini and under pressure from Morgan Bank (whose partners were as always solicitous of Fascist Italy’s good reputation).171 After a few more months, even the secretary of the Fascist Party, Augusto Turati, had become convinced of the same necessity.172 Grandi, by that time foreign minister, and fully occupied in developing a special relationship with the United States, was more than agreeable. Only Piero Parini, the director general of Italians Abroad, pathetically continued to flood the desks of Mussolini and Grandi with memos singing the praises of the Fascist leagues and their obedience to the diplomatic and consular authorities.173 The attempt to enfranchise emigrants in Italy was blocked by Mussolini, who had sensibly been buttonholed by Gelasio Caetani. Also stymied were attempts to send representatives from Italo-American communities to congresses of emigrants being organized in Italy.174 In recompense, the traditional organizations of the Italo-American communities were reinforced: mostly English-speaking, with vaguely liberal and Masonic origins, such as the Order of the Sons of Italy. In the 1930s, an organization was 170

171

172

173

174

NA-DS, 811.00F/84, Conversation between Henry Stimson and Giacomo de Martino, November 19, 1929. HUGSBA-TWL, bk. 190, fol. 29, tel. 1867, Giovanni Fummi to Thomas W. Lamont, Rome, December 24, 1929. ASMAE-ASG, bk. 1, 1930, fol. 11, sf. 16 Italiani all’estero e scuola, Augusto Turati e Dino Grandi, Rome, August 23, 1930. Turati wrote: “My opinion on the matter is clear and cruel: Fascist leagues abroad must be abolished.” ASMAE-ASG, bk. 1, 1930, fol. 11, sf. 16, Italiani all estero e scuola, Piero Parini, Appunti per S.E. il Ministro, October 6, 1930. ASMAE-AAP, bk. 1598, Stati Uniti 1923, fol. 7361, tel. 96, Gelasio Caetani to Benito Mussolini, March 14, 1923. To Caetani’s remonstrances, Mussolini’s note in the margins responds, “Telegraph that nothing will be done.”

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founded to unite Italo-Americans born in the United States and who had therefore been citizens since birth. Great attention was paid to controlling Italian-language publications in America, including by Mussolini himself, as always highly sensitive to issues of the press and propaganda. Special care was taken with those notable Italo-Americans who had reached high ranks in society and wealth (this was the case with Amedeo P. Giannini,175 founder of the Bank of Italy, and later of the Bank of America in California; also the Villa brothers, major importers in New York) and with those who used their wealth to influence American politics. Among these the most relevant example was Generoso “Gene” Pope, owner of the most important Italian-language daily, Progresso Italo-Americano (and later also of the Corriere d’America, founded by Luigi Barzini), and an important New York businessman as well as the biggest spokesperson for his ethnic community in the Democratic Party machine of New York. The director of the Agenzia Stefani, Manlio Morgagni, described Pope at that time in the following way in his report to the head of Mussolini’s press office: I will not permit myself to offer my entire opinion of this gentleman and his political action in New York’s financial circles because I lacked, first of all, the essential details; but if pressed, I would not hesitate to compare him to certain other powerful men in the cities of America with the difference, however, that he does his work without [. . .] the use of an automatic pistol.176

Pope was actually a very useful man for the regime. He had less influence at the national level under Republican presidents, but when Roosevelt, whom he had supported from the beginning, became president, Pope was in the right position to make himself heard at the White House. 175

176

A man such as Giannini was capable of getting an audience at virtually any level of society. Following a letter in which Giannini reported the remonstrances of Ettore Patrizi, owner of L’Italia and of La Voce del Popolo in San Francisco, the two most important Italian-language dailies outside New York, Roosevelt wrote personally to his secretary, Marvin MacIntyre, instructing him to contact Giannini and explain that there was no connection between the American action against trade with belligerent nations and the initiatives of the League of Nations. He wanted Giannini told that only those exports above the normal level of past years was targeted and that the American law was meant to discourage the export of goods that might serve as war supplies and munitions. The indirect and prudent way in which Giannini – a pro-Fascist but more importantly a newcomer to America’s elite governing class – made his opinion known to the president is remarkable. FDRL-OF, 547-A, F. D. Roosevelt, Memo for Max; Amedeo P. Giannini to Marvin H. MacIntyre, New York, November 25, 1925; telex Ettore Patrizi to A. P. Giannini; Marvin H. MacIntyre to Amedeo P. Giannini, Warm Springs, Georgia, December 3, 1935. ACS-FAS, Manlio Morgagni, fol. Relazione per il capo dell’ufficio stampa del Capo del Governo, December 23, 1932.

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This was a kind of political conduct that hardly bothered to veil its ideological agenda, only avoiding as much as possible any direct confrontations with American authorities, but going so far under Grandi as to openly advocate the necessity for all Italian immigrants to be naturalized (in a speech in Philadelphia in 1931, which provoked angry reactions from the highest military authorities in Rome).177 So was Green correct in identifying the pressure of the Italo-Americans as the real reason for the defeat of any further attempt to limit exports to Italy for its war effort? There is no completely decisive proof in this matter, although Green had very good evidence. It is necessary to distinguish between the main cause and the specific reason for the defeat of the bill in Congress and the policy of controlling exports not named in the first Neutrality Act. Green seems to have interpreted the pressure of ItaloAmericans rightly: it was determinative in that it was the straw that broke the camel’s back. At this point it is useful to mention that the crisis among Roosevelt’s men in Congress began in the House of Representatives, where the majority party had stronger numbers but where the electoral college system rendered the representatives more vulnerable to the pressures of organized minorities in small constituencies. It is also important to note Green’s observation that “Pittman loyally defended the Administration’s bill until the pressure of the Italian-Americans made it necessary to throw it overboard.”178 Above all, what is striking is the succession of events narrated by Green. Although we cannot exclude the possibility that other pressures existed that had more weight, it is certain that there was some causal relationship between the lightning-fast organization of the ItaloAmerican campaign orchestrated by Pope and his associates, and the emergency meeting that killed the bill in Congress.

11. the opposition of exporters All this does not mean that Roosevelt’s defeat was due only to ItaloAmerican lobbying. There were other very powerful factors with more long-term presence within American society and even within his own administration. Since the declaration of the moral embargo, but in particular during the battle over the renewal of the Neutrality Act, a body of opposition grew in the business community that fought any form of 177 178

Dino Grandi, interview. HUHL-PM, Joseph C. Green to J. Pierrepont Moffat, Washington, D.C., April 22, 1936, p. 14.

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reduction of exports to Italy. In first place, the parties directly interested in export trade mobilized promptly. At the time of the moral embargo, Charles Sherrill, president of the Chamber of Commerce of New York State, wrote a letter to Roosevelt in which he articulated what would become the main argument of businessmen in this debate: . . . exporters and merchants on our eastern seaboard are now more interested in the freedom of the seas for American ships than at any time since the World War.179

Another way that exporters’ opposition manifested itself was in the storm of requests for clarification that rained down upon the State Department, which found itself in the difficult situation of managing a policy that was indeed quite vague, particularly in terms of its application to specific cases. In general, the attitude in the business press toward the moral embargo was negative, although in a few cases there was some willingness shown to share responsibility for national security.180 Roosevelt’s lobbying did not elicit great political opposition campaigns because it was easier to simply ignore it and go about business as usual, accepting the invitation of the Italian embassy’s trade adviser to profit from the favorable opportunities presented by the sanctions applied by other countries to take over a larger share of trade with Italy.181 The oil companies and automobile industry in particular did not initially lobby against the Neutrality Act through their publications and professional associations, instead fighting a private battle to defend their profits from the lucrative wartime trade with Italy. A few examples illustrate the multiplicity of methods used in this battle and the variety of attitudes with which these groups managed relations with government authorities. On November 22, Pyke Johnson of the National Automobile Chamber of Commerce telephoned Joseph Green, head of the Office of Arms and Munitions Control of the State Department. Mr. Johnson told the official that numerous automobile makers had recently considered large-volume sales to the Italian government and Italian customers. American groups would want to know, before signing such contracts, if they would be “frowned upon” by the American government. For his part, Green noted 179 180

181

Cited in Divine, p. 131. Ibid. See also “Impartial Neutrality,” in Barron’s XV (October 14, 1935): 1; “What Price Neutrality,” in Magazine of Wall Street LVII (October 26, 1935): 6; “Neutrality,” in Export Trade and Shipper XXXII (November 25, 1935): 6; “Neutrality,” in American Exporter CXVIII (January 1936): 40–41; “For Honest Neutrality, Not Favoritism,” in Business Week (November 30, 1935): 40. Harris, p. 79; New York Times, October 9, 1935.

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that such products, although not subject to the embargo, were on the list of products whose sale to belligerents had been specifically advised against by the secretary of state in his declaration on November 15. Probably the function of these kinds of contacts was to underscore formal deference to the government at the same time that business went on as usual behind the scenes. Otherwise there is no plausible explanation for the statistical data cited earlier showing a vertiginous rise in sales of just those vehicles used by the Italian army for the Ethiopian campaign.182 In other cases, the methods were less oblique and did constitute lobbying or political pressure. Henry A. Hassan Jr., representing the oil company Sinclair’s European business, had a conversation with the U.S. ambassador in Paris, Jesse Isidor Straus. He showed no scruples in pleading the case for the opportunity represented by the United States’ entry into the Italian oil market, with the goal of conquering a profitable portion of the market that was not for war aims. Evidently Mr. Hassan was not very worried that this perspective would be contradictory with the principles of Roosevelt’s moral embargo, which in its most accepted interpretation discouraged exceeding previous levels of trade, although it is true that his reference to Italian demand in peacetime indicated some remaining ambiguity in the moral embargo and its interpretations. Mr. Hassan was more concerned however with explaining at some length to Ambassador Straus – who did not give him any encouragement – that Italy’s imports of petroleum from the Soviet Union were in rapid diminution and that also those from Romania were destined to diminish due to the end of the clearinghouse between the two countries. Apparently Sir John Cadman, president of the Anglo-Persian Petroleum Company, had confided to him that his company had recently concluded a lucrative contract with Italy and that American oil companies needed to catch this train before it left the station. Despite the reserved demeanor of the ambassador, his interlocutor insisted that the restrictive attitude of the administration would be made to look ridiculous compared with the clearly ambiguous attitude of the British.183 The impression left by Mr. Hassan was not invalidated by the courteous, formal assurances that on other occasions were offered by the heads of the American oil companies in their correspondence with the

182

183

NA-DS, 711.00111 Armament Control/494, Joseph C. Green, Memorandum for the Secretary of State, Washington, D.C., November 22, 1935. NA-DS, 711.00111 Armament Control/621, Jesse Isidor Straus to Cordell Hull, Paris, November 22, 1935.

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State Department.184 As Herbert Feis, the economic adviser to the State Department at the time and certainly no anticapitalist subversive, observed, “The record proves that profitable trade will cease only under command;”185 nor is there any doubt that those who made use of that trade were ready to use every tool at their disposal (which was no small amount) to discourage the imposition of such a command. The numerous complaints created by such a possibility became an actual political campaign by the capitalist sector (with the exception of the New York Times, the Jewish community of Wall Street, and those financiers most closely linked to Great Britain; the House of Morgan, to which we will return, kept a low profile in this matter) when it came to debating the proposals that would have given the government the power to take strong measures in a new Neutrality Act in February 1936. A well-known authority on international law, John Bassett Moore, had a leading role in articulating the main arguments: it was a matter of demonstrating that the neutrality called for by all parties did not consist in limiting measures, but rather, on the contrary, in the uncompromising defense of the freedom of the seas and, therefore, of American trade. He joined with Senators Johnson, Connally, and Borah in this argument. Borah had asserted: I only want protection for the American citizen in what we say in our law is a legitimate business. [. . .] I do not consider that neutrality is synonymous with cowardice.186

Together with those periodicals of the exporters’ associations such as Export Trade and Shipper and American Exporter, the Commercial and Financial Chronicle, usually fairly representative of the general mood of Wall Street, was among those whose voices were repeatedly raised in support of the curious assertion that the “humiliating” legislation under consideration by Congress constituted “the denial of legitimate war profits to American business, industry, and finance, on the specious theory that war as such is morally wrong and no neutral should profit by it.” The wave of criticism was enlarged in a decisive manner by the majority of the informational dailies in the wake of the moral embargo declaration, so Ambassador Rosso could report with satisfaction that: 184

185 186

See for example NA-DS, 711.00111 Armament Control/650 W. C. Tegle, president of the Standard Oil Company of New York, to R. Walton Moore, assistant secretary of the State Department, New York, December 9, 1935. Feis, Seen from E.A., p. 308. Cited in Divine, p. 148.

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It is precisely in opposition to these administrative pressures that a large part of the press has recently risen up – including several newspapers which have always been hostile to the African undertaking – to protest against what the New York Tribune defined as a moral embargo enforced through a system of administrative blackmail. So too did the Chicago Daily News declare Roosevelt’s policy illegal when he presumes to interpret the will of Congress arbitrarily and in an abuse of his powers. Also the Chicago Tribune, the Washington Daily News, the Philadelphia Ledger and to a certain extent even the Italophobic Washington Post, which observed that to block the export of oil the president would have to ask Congress for the authority to include it in the list of embargoed products.187

What surely cut the business sector to the quick was the emergence of a strategy that, in the name of collective security, interfered with the free market. At this point, the mechanism kicked in that linked Roosevelt’s attempts to limit trade with Italy to an overall policy of government regulation of private property and interests; a policy the business world looked upon with less favor than ever by the end of the president’s first term. In other words, their opposition to the New Deal, with all its implications for the relationship between the government and private industry, ended up nurturing and becoming equivalent to their opposition to Roosevelt’s attempt to curb trade with Italy. There was more. Thirteen years of excellent relations between the lions of American industry, finance and the Fascist regime had made their mark: thirteen years of paeans to Mussolini as the prototype of capitalist rationality in a country with innumerable difficulties; thirteen years of justifications for the free hand the regime had taken with institutional traditions and limits taken for granted in a country such as the United States. All those lucrative deals, those solid images, that weak inclination to pass democraticliberal judgment (not to mention those thinly veiled out-and-out authoritarian sympathies) made it extremely difficult to suddenly change course. They served instead to suggest the use of great caution in any political choices that might bring about a break of the capitalist world into two camps, pitting the democratic countries against the totalitarian ones.

12. american diplomats and appeasement It is particularly interesting to examine the attitudes of the career diplomats involved in these events, not only because they were experts in 187

Commercial and Financial Chronicle article cited in Divine, p. 149; Augusto Rosso to Benito Mussolini, Washington, D.C., November 27, 1935, in Collana di testi diplomatici n. 7, Augusto Rosso, Rome: 1979.

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international relations – and therefore also relations with Italy – but also because they provide a sample of a social group that was simultaneously restricted and exemplary. After the First World War, there had been a major effort to build an American diplomatic corps following the traditional European model, in order to break with the previous American model of awarding diplomatic posts in a spoils system by the political party currently in power. During the interwar years, the cases of career diplomats successfully achieving the highest ambassadorial posts were still relatively rare, but they had begun to dominate the higher ranks of the State Department’s bureaucracy. They were a fairly homogeneous group, tightly knit through both friendship and social provenance. With very few exceptions they were all white Anglo-Saxon Protestant men, and above all their families were not merely well-off but specifically part of the restricted circle of the most visible economic and social elite. The majority were from New England, with a few Southerners and midwesterners sprinkled in.188 Naturally, both the older model of men from the world of finance and the new career men interpreted the events they participated in through the lens of their own class background and assumptions. Further, the nature of their duties was such as to put them into contact almost exclusively with the elite governing classes of the countries that hosted them and the even more restricted group of those who habitually frequented the world of foreign diplomats and international relations. These would include their counterparts in career diplomatic service who populated the foreign ministries, a few government officials, financial and industrial leaders, and the so-called high society that in that era in Europe was still made up mostly of aristocratic families. Inevitably, the American diplomats, with rare exceptions, found themselves more at ease with the leaders of the conservative political parties than with those of the socialist parties and movements or with intellectuals of varying radical ideas. This unilateral understanding of the host country, typical of the diplomats of that era, was particularly accentuated among the Americans, especially in their relations with the “Old World.” They were, therefore, more vulnerable to the fascination exerted by the worldly and urbane milieus they entered, and despite being representatives of the most powerful country in the world, they frequently suffered a certain sense of intimidation and inferiority in these circles and were needy in their search for recognition and legitimation. 188

Franklin L. Ford, “Three Observers in Berlin: Rumbold, Dodd, and Fracois-Poncet,” and William W. Kaufman, “Two American Ambassadors: Bullitt and Kennedy,” in Gordon A. Craig and Felix Gilbert, eds., The Diplomats 1919–1939, Princeton: 1953.

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American diplomats who were charged with Italian relations in the interwar years offer an interesting confirmation of this profile. This is not to repeat the old cliché (which was not actually unfounded) that the Roman nobility, prevalently pro-Fascist, exerted a powerful attraction on the naive American envoys. The documentation to trace accurate portraits of the American ambassadors and their relations with the Fascist regime exists and does not merely consist of official correspondence, but also of their diaries and personal correspondence.189 The first three ambassadors – Child, Fletcher, and Garrett – all conducted relations of close collaboration with the Fascist regime. This was of course in conformity with the orders of their government, though occasionally these men went further than those directives, expressing their enthusiasm for the regime in the propagandistic press. The Roosevelt administration was initially represented in Rome by Breckenridge Long, a horse breeder from Virginia and major donor to Roosevelt’s election campaign who exemplified the way that economic and social conservatism could coexist with an isolationist outlook in foreign relations.190 From the very beginning of his mission, Long was enamored of the Fascist regime and served for years as an untiring advocate for it, even though, unlike Child, who was a journalist as well as an ambassador, Long only used State Department channels of communication in addition to maintaining a close correspondence directly with Roosevelt. He did not stand out for his attitude in the context of the political and ideological tone of the New Deal years; but when his pro-Fascist zeal brought him to overidentify with Mussolini’s ambitions in Ethiopia, Roosevelt’s entourage did express some concerns. A few of his colleagues at the State Department also offered ironic comment on his enthusiasm and the ingenuousness with which he served as Mussolini’s spokesman to the U.S. government. Roosevelt’s right-hand man, Louis Howe, wrote to him in October 1935 that the ambassador in Rome had been “hypnotized” by Mussolini and was sending five or six telegrams a day that were hard to distinguish from pure Fascist propaganda. He had also apparently given a particularly indiscreet interview.191 189

190

191

Child’s memoirs are cited above; there are also fragments of Fletcher’s diary in the Library of Congress; the diaries of Long, at the Library of Congress, and of Phillips, at the Houghton Library at Harvard University, offer copious detail on their entire tenures as American representatives in Rome. J. F. Watts, The Public Life of Breckinridge Long, 1916–1944, unpublished thesis, Ann Arbor, MI: 1964. FDRL-PSF, Louis M. Howe to Franklin D. Roosevelt, October 18, 1935; cited also in Harris, p. 71.

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Long was an indefatigable asserter of strict American neutrality that excluded every form of limitation of trade with Italy as well as any collaboration with the League of Nations.192 In truth, his attitude toward the Ethiopian war was completely in line with that of the most conservative circles of French and English politics that produced the Hoare-Laval accord. On several occasions, in his meetings with Mussolini, he too tried offering solutions along the same lines.193 What is significant here is that Howe’s criticism did not stop him from remaining serenely at his post throughout the war in Ethiopia, right until the end of the first Roosevelt administration. His successor was a more nuanced and interesting figure. William Phillips was for many years, under various guises, at the very center of American policy regarding Italy. He served twice as undersecretary of state: at the time of Fascism’s seizure of power, when the austere figure of Charles Evans Hughes dominated the State Department, and later from Roosevelt’s election until the end of the Ethiopian war, when he was sent to take Long’s place in Rome, where he served until war between the two countries was declared. Unlike Long, Phillips was no diplomatic dilettante. He was, rather, one of the first career diplomats to rise to the highest posts of American foreign policy. Especially during his service as undersecretary of state under Roosevelt, Phillips found himself wielding considerable power and influence. He had the double advantage of being in charge of the management of the entire bureaucracy of the State Department (given that Hull, coming as he did from the Senate, had neither experience nor interest in that aspect) and having the ear of the president, who was a childhood friend. The two men were alike in class background and social status, although they did not agree in their politics. Phillips was a conservative, quite distant from the reformist ideology and stridently democratic outlook of many New Dealers. As a professional diplomat, however, he was always cautious in taking any autonomous position, remaining constantly sensitive to the wishes of his superiors. This double aspect – a social position that was reflected in his political orientation, but at the same time his ambition to fulfill the role of impartial executor of government policy – also showed through in his analysis of Fascism in Italy. He

192

193

Excellent evidence of Long’s position in this regard are the reports, headed “Dear Chief,” he lovingly sent directly to Roosevelt. In addition to those already cited, see the following dispatches: FDRL-PSF, Italy-Long, Breckinridge Long to Franklin D. Roosevelt, Rome, October 30, 1935; November 8, 1935. Watts, pp. 79ff.

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shared the attitude of his social set toward the rise and development of the regime; at the time of the debate over an oil embargo, he took advantage of the opportunity to declare himself more explicitly than his usual bureaucratic reserve allowed in a memorandum to the secretary of state Cordell Hull. He wrote that: (1) Only the major oil companies would respect any embargo, while the 150 smaller enterprises would follow their own path. (2) The American government could not predict what kind of sanctions Geneva might declare. (3) “The question is whether the United States should undertake to penalize American trade before we have any knowledge as to the real situation resulting from the action of the League” [. . .] (4) “I do not like the idea of putting the President in the position of making an appeal to the oil industries of the country, which is not respected by the smaller companies and therefore not effective. [. . .]” (5) “In brief I believe that it will be wiser to await the result of the League in this case rather than to act somewhat precipitously now. It may even be wiser to await action by our Congress in order that the Government may be in position to exercise real restraint upon the export of raw materials. . . .”194 Facts would prove Phillips’s bureaucratic prudence well-founded, since the League of Nations did not decide to extend sanctions to cover raw materials, the smaller oil companies (and perhaps even the major ones) did not respect the moral embargo, and the Roosevelt administration did indeed find itself in an embarrassing position for having anticipated Geneva. And yet there is no doubt that Phillips was opposing an action by the president that would have increased the American commitment to anti-Fascism, nor can it be ignored that he placed importance on the penalization of American interests that might be involved. Nonetheless, the Ethiopian war certainly increased his critical attitude regarding Mussolini’s foreign policy195 Although in the next episode involving the recognition of his conquest, Phillips did advise taking a conciliatory stance toward Mussolini,196 and hoped until the very end to convince Mussolini to stay out of the world war while he was serving as ambassador in Rome.197 194

195 196

197

FDRL-PSF, fol. Italy-Phillips, William Phillips to Cordell Hull, Washington, D.C., November 14, 1935. Divine, pp. 101–102. NA-IR, bk. Stati Uniti 1936, fol. 1291, Fluvio Suvich to Benito Mussolini. According to Suvich, Phillips advised conciliation because he wanted to leave the door open for his own transfer to Rome. In reality Phillips’s position was in line with his overall vision for relations with Fascist Italy. HUHL-WP, W. Phillips, Diary.

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It could be objected that it is only right for ambassadors to maintain an attitude of openness, if not outright sympathy, toward the government hosting them. Apart from the fact that the diplomats considered here, with the possible exception of Phillips, went well beyond mere openness, the truth was that their attitude was quite representative of the general orientation of most career diplomats. Hugh Gibson, who represented the United States at the disarmament talks in Geneva in the 1930s, projected a similar accommodating attitude.198 The same was true of J. Pierrepont Moffat, who was in charge of the Western Europe section of the State Department until the eve of the Ethiopian war. Moffat’s own letter to the ex-secretary of state Henry Stimson (who was, one can see, of a different opinion) reveals the arguments made by diplomats at the time of the Ethiopian crisis against the interventionist tendencies of the president and the current secretary. These men hesitated to take a line of open opposition to the Fascist dictatorships until events left them no other choice. Moffat wrote to Stimson that his worst fear was what an Italy victorious in its aggression would do next. But, apart from that outcome, his other worry was the consequence of Italy suffering a severe defeat, which might be almost as bad.199 The rest of his letter made it clear that he thought the latter possibility more worrisome than the former. Disregarding Stimson’s arguments in favor of collective security200 and his sensible observations regarding the fragility of the Stresa Front (which he called an old-fashioned accord whose weaknesses had long since become obvious), Moffat argued that Italy had to stay strong because it was the only power capable of impeding Germany’s dominance over central Europe. He expressed the fear that, unless Geneva played its cards extraordinarily well, an Italian crisis would bring the inevitable day of German aggression closer. Stimson, or anyone else, could have responded that precisely in light of this danger it was necessary to take exemplary action against Italian aggression in order to have it serve as a warning to Germany and Japan. Moffat added that he was also concerned that since the Hoare-Laval Pact was rejected and Eden had triumphed, 198

199 200

The Italian ambassador in Rio de Janeiro reported the “favorable sentiments toward Italy and the fascist regime” held by Gibson, who boasted that he “had become close to il Duce during his travels to Rome, when he was a delegate to Geneva.” ASMAE-AAP, bk. 27, Stati Uniti 1936, fol. Rapporti politici posizione 1, sf. 3 Ambasciatore Americano a Rio de Janeiro, Policastro a Delegazione Italiana Ginevra, Roma, January 28, 1936. HUHL-JPM, J. Pierrepont Moffat to Henry l. Stimson, Sydney, January 14, 1936. HUHL-JPM, Henry L. Stimson to J. Pierrepont Moffat, New York City, December 5, 1935.

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British policy – and the League of Nations policy – could only end up one way, and that was in provoking the fall of Mussolini, which Moffat feared would clear the way for a Communist revolution to penetrate into the heart of Western Europe.201 The fact that the Soviet Union, in the person of Foreign Minister Maxim Litvinov, maintained a hardline policy against the dictatorship further concerned Moffat. Russia showed no interest in the principle of collective security until it looked likely to help deal a lethal blow to Fascism, he pointed out. This was no coincidence; it was because Fascism had been the dedicated adversary of Communism for fourteen years. Here in crude terms was the dilemma of a large part of the Western governing classes in the late 1930s – and not the much-maligned American isolationists and populists. The Fascist dictatorships were aggressive, they rejected the Treaty of Versailles, they could threaten the interests of some and the empires of others. Many grasped the threat represented by Nazi Germany, but only the most attentive observers of the international situation.202 And yet for a large part of the governing classes, which had applauded Mussolini’s seizure of power and had not opposed the rise of Japan’s or Germany’s authoritarian leaders, intervention against them even in the event of a flagrant violation of the peace still constituted an unnatural act against their worldview and their class identity. Despite the fact that the 1929 crisis and the consequent destruction of the financial and monetary interdependence of the industrialized world had undermined the basis for their political unity, a solidarity born of the similar economic and social structures of their otherwise differing political and institutional regimes continued to shape their thinking. The dilemma became urgent in the face of the Communist (more than merely Soviet) threat. The central fact at the heart of the fears of men such as Moffat were not the horrors of Stalin’s totalitarianism, at that time still little known and rarely debated, but the idea of Communism as a global subversive force that would destroy the order and social structure of every country, starting with the United States. If this had been true already after the First World War, as Arno Mayer showed,203 the Depression and especially its 201

202

203

Moffat, letter to Stimson. Moffat’s attitude is even more significant in light of the fact that he was no ordinary bureaucrat, but was considered one of the most brilliant diplomats of the middle to high ranks and, above all, had for some years directed the European affairs office of the State Department. A. A. Offner, American Appeasement: United States Foreign Policy and Germany 1933–1938, Cambridge: 1969. Mayer, Politics and Diplomacy of Peacemaking.

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specific manifestation in the United States had further intensified those fears, which had been calmed to some extent during the course of the 1920s. It should not be forgotten that at the same time as the debates on the Neutrality Acts and the threat of Fascist aggression, the workers’ struggles that would lead to the creation of a militant union such as the CIO were well under way. The success of Roosevelt’s reform experiment was not at all assured, and to many it seemed like a gateway to Bolshevism. Moffat referred to the Hoare-Laval accord with a hint of nostalgia. As an attentive observer of the international situation, the moralistic pacifism of the American masses was alien to him, as was their scandalized reaction to what they perceived as the cynicism and double-dealing of the European leaders. Moffat, just like all the conservatives of France and England, wanted to resolve the dilemma before them through a policy of appeasement that would preempt Mussolini’s military victory but would not crush him. In this light, the continual postponement of the extension of sanctions and the parallel search for a conciliatory proposal that would satisfy Mussolini were not far different from American conduct and reasoning on the situation, although the motivations behind those actions might have differed. If the Americans could maintain that the indecision and ambiguity of the French and British made it impossible for them to initiate any more collaborative policy toward Geneva, the reverse was also true: the British and French press never tired of commenting that any extension of sanctions would have no effect unless the United States cooperated fully in enforcing them. Each side had provided the other with an alibi. One might object that in the case of the United States, the popular isolationist sentiment played a determinative role in this outcome, while in Europe the repugnance at the thought of conflict with Mussolini was more evident. But as has been argued above, the role of isolationism has been exaggerated in previous accounts. Instead it was the manipulation of pacifist feelings among Americans by groups who were clearly and openly concerned with defending their own interests that, added to the class solidarity and philo-Fascist leanings of such part of the governing class, concentrated in the State Department,, as well as the pressure of ItalianAmerican voters, added up to the American line of conduct. Both the historiography and the body of memoirs concerning the origins of the Second World War show full awareness of the lateness with which the future Allies reacted to the rearmament and aggression of the Fascist dictatorships. The Munich Pact has been singled out as the most significant moment in the politics of appeasement, and it has been argued that this strategy is based on a tactical error, however fundamental: the

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failure to understand that only a firm reaction involving the use of force would have been capable of stopping the expanding aggression, and therefore could have prevented the outbreak of Second World War.204 This interpretation completely fails to identify the roots of the politics of appeasement. It criticizes the failure to react to Fascist aggression, but it never investigates the beliefs of those who should have been acting more firmly from the very moment these dictatorships arose and gave every indication of the future direction of their foreign policy, especially after the Depression had removed the economic obstacles to their decisions. The complacence and, in Italy’s case, the open support of the future aggressors, should suggest rather that appeasement was not just a tactical error, the illusion that one could calm the tiger by giving it human flesh. Appeasement is better understood as the extreme final attempt to save the collaborative relationship built on common interests (in the case of Fascist Italy) and later, more prevalently, on a shared aversion to Communism as the greater threat to the social order underpinning all these nations and ultimately the international structure as well. If this is the true interpretation, the lateness with which the Western powers awoke to the real menace of the Fascist forces is not to be blamed on obdurate American isolationists or the tactical errors, based on mistaken calculations, of British and French politicians. The so-called Cliveden “set,” Neville Chamberlain, the Times of London, Laval, Flandin, Bonnet, American oilmen, Generoso Pope, Randolph Hearst, Lamont, Moffat, and so on ad infinitum, were not naive tacticians who did not know how to show firmness in the face of clear danger. They behaved in a way that was perfectly logical and predictable in the light of a different danger they saw as the greater threat. In other words, the powerful and wealthy tried to defend, to the very end, their own unity at the international level; they finally gave way only in the face of the massive pressure of their populations, which were converted from their pacifism to a willingness to fight by the piling up of Fascist aggressions. The Abyssinian conflict was important because it served as the first occasion in which that tragic dilemma of the Western governing classes was clearly revealed, and clearly failed to live up to the occasion.

13. the morgan bank and appeasement The argument deserves to be treated in even more depth than is possible in the confines of this work. To understand the reluctance to conduct a real 204

See especially Earl of Avon, pp. 134–159.

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anti-Fascist policy in the second half of the 1930s it would be necessary not only to examine each separate episode (starting with the Abyssinian war) that led to the outbreak of world war, but also to make a full class-based analysis of the forces, interests, and alignments that dragged their feet for so long before taking action against the danger presented by the Fascist regimes. Several individual moments appear particularly significant: the stance of the Morgan Bank during and after the conflict in Ethiopia stands out for its probative value. It was the most politically well-informed and sophisticated institution in that segment of American capitalists with strong ties to France and Great Britain. We have seen how J.P. Morgan, Jr. and his partners represented that sector of American finance that, while promoting the leadership role the United States due to the size and strength of its production system, always tried to assure a peaceful and smooth transition of power from the British. More than any others, they were the ones who felt the consequences of the Depression and the decline of investment banking as the default guides of American political economy.205 Yet even during Roosevelt’s administration, they did not change their basic orientation. This included the special relationship with Fascist Italy and the insertion of that relationship into the context of the British conservatives’ vision of foreign policy for Europe, until it was seriously damaged by Mussolini’s campaign for autarchy and by the general American withdrawal from its guiding role in the world economy. In the course of the war in Ethiopia there was no doubting the opinion of the bankers. In a letter to Lord Robert Cecil, Lamont made his fundamental position completely clear at the very height of the crisis.206 Yet later on, many partners of the Morgan Bank were counted among the supporters – and probably the major donors – of Wendell Wilkie, whose Republican presidential campaign represented an important, if belated, moment of mobilization against the Axis powers. They were not men whose financial interests alienated them from the interplay of international politics; nor were they investors looking East for new opportunities. They were not even exponents of that famous isolationist populism that for so long (although this was partially the fault of historians who should have known better) was held responsible for the lateness of the United States’ anti-Fascist awakening. Nor were they

205 206

Vincent P. Carosso, Investment Banking in America. A History, Cambridge: 1970. HUGSBA-TWL, Thomas W. Lamont to Lord Robert Cecil, New York, November 29, 1935.

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among those, such as Charles Lindbergh and Joseph Kennedy, who proclaimed “America First!” until the very last moment, claiming that the United States had to reject every tie that might bind it to the Allied and anti-Fascist cause. The Morgan partners were, no more and no less, the representatives of that part of American finance best equipped to understand European developments and most motivated to make America’s weight felt by aligning it with the major democratic powers of Europe in their moment of need. Naturally this discussion must be understood in the context of the war in Ethiopia and the phase immediately following it. As mentioned above, in the summer of 1935, when the news of Fascism’s aggression against Ethiopia was growing worse by the day, the Morgan Bank adhered to the credit restrictions on Italy that the Federal Reserve Bank of New York had requested of American banks. We saw how Lamont, as advised by Leffingwell, explained to the regime’s officials the reasons (which were hardly unique to the bank) they were perplexed by the African undertaking. Like the Morgan Bank, the entire commercial and exchange apparatus of the New York financial market lost confidence in the regime and ended up downgrading its credit status. Although the memorandum given to the Italian authorities through Giovanni Fummi was articulated as a way to keep dialogue with the regime open, its significance was clearly as a moment of rupture. The problem of the sanctions, especially the issue of an oil embargo, had a more unsettling influence on Lamont, who ended up opposing the idea entirely. Lamont was certainly the most authoritative partner, second only to the titular partner, and the most influential in terms of strictly political issues, especially those regarding Europe and Italy. In the letter previously cited to Lord Robert Cecil, the British delegate to Geneva, Lamont had written that many Americans approved the idea of neutrality and forbidding the sale of war supplies to belligerents. While the current law fortunately worked against Italy as it was supposed to, it certainly could not be called neutrality since it was the opposite. And because it was the opposite of neutrality, the American people were against it. What if conflict arose between Great Britain and Italy, and the United States had to stop exports to Great Britain? While many liked the idea of limiting exports to Italy, many others found it senseless to refuse to sell them oil while Great Britain and France went ahead and continued doing so. Why should Americans stand on principle when no one else recognized the principle?207 207

HUGSBA-TWL, Thomas W. Lamont to Lord Robert Cecil.

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Lamont’s declaration is fairly clear as soon as one deciphers who “people,” “many,” and “many others” refer to. Of course, Giovanni Fummi, as a good patriot, had telegraphed to the partners that the sanctions were encouraging a great sense of national unity in favor of Mussolini. He reported that forty-four million Italians were determined to stick it out, and even those who had previously been less enthusiastic about the African expedition now joined the unanimous chorus in favor of Mussolini’s objective.208 He warned too of the ability of the Italian population to give up not only their comforts and luxuries, but even basic needs in order to cancel out the effect of the sanctions. He concluded the telegram (which would be dutifully sent on to Minister of Finance Paolo Thaon di Revel) with an appeal to the sense of duty of every person in a position of influence. Italy should be offered understanding and the chance to satisfy its needs; no one should fool himself that Italy would change its perspective because of sanctions.209 Fummi, that humble but extremely useful man, despite his nearly two decades of collaboration and the achievement of a high position in the world of Italian finance (Fummi was for many years on the boards of directors of Fiat and Pirelli, both before and after the Second World War), was forced to address the powerful partners with the title of “Mr.,” while they showed the arrogance of colonizers by continuing to familiarly call him Nino. Fummi reminded the partners of their obligations at a moment in which – it should not be forgotten – the consensus built by the regime and collective enthusiasm in Italy were at an all-time high. It is difficult to ascertain what the effect of such a clear and surprising opinion was, especially coming from a man who had never been anything but a loyal defender of the Bank’s interests. This kind of communication, which served as a vessel for concrete and personal ties as well as class and financial interests that survived the first fractures as they began to appear and divide these two camps, is primary evidence of the motivations sustaining a policy of appeasement for so long. 208

209

AGF, fol. Pre War Correspondence, sf. S. E. Sen. Dott. Paolo Thaon di Revel, tel. 2694, Giovanni Fummi to J.P. Morgan & Co., Rome, November 21, 1935. It is notable that the police were in possession of the code used by Fummi, and that he, since the summer of the previous year, had chosen to transmit copies of all his telegrams to the minister of finance, in order to avoid misunderstandings or translation errors. See AGF, fol. Pre War Correspondence, sf. Capo del Governo, Giovanni Fummi to Guido Jung, Tome, June 25, 1934; June 27, 1934; Giovanni Fummi to Benito Mussolini, Rome, June 27, 1934. This should not however make it seem that Fummi’s patriotic tones were insincere; they were coherent with his entire history of conduct in his reports to the Morgan Bank, inspired by his profound conviction that they were in the interest of his country as he saw it.

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Returning to Lamont and the issue of sanctions, it is possible to measure the considerable effect of the war on his thinking. When it was all over, he wrote in his diary during a visit to London in June 1936, going back over the points that had been most important: 2 points I cannot understand – why with the whole composition of the League changed and weakened, England for a minute thought that sufficient collective action could be secured to become effective vs. Italy. With USA, Japan, and Germany out, with Austria new, with Italy opposing, how could Sanctions work unless it were made short, sharp and quick military enforcement? 2nd – why the British Foreign Office should have turned its foreign policy over completely to the people day by day – viz. Peace Ballot etc.? Again, how can British ever forgive themselves for losing the Abyssinian Emperor his Kingdom by rejecting the Hoare-Laval proposals and not submitting them to him?210

Considering Lamont’s earlier position, this is not simply a case of hindsight being twenty-twenty. Rather, his references to the alignments among nations (which implicitly indicate how Lamont believed in 1936 that only an anti-Soviet alliance could be feasible) and especially his seeming support of the Hoare-Laval Pact appear extraordinarily significant. That pact served as a litmus test in identifying who supported reacting to the Fascist regimes’ aggressions through concessions, in the name of a not-yet-exhausted solidarity among capitalist nations – or at least antiCommunist ones. Nor is it accidental that the diary points to the close political and society ties linking Lamont to the Cliveden set (Cliveden was the residence of the Astor family, the owners of the Times), Stanley Baldwin, Neville Chamberlain, Halifax and Lothian, and Dawson – in sum, to all the builders of the policy that would culminate with the Munich Pact. This way of thinking, so common in the American governing class, found a strong echo in the forces dominating British politics until the outbreak of war against Germany. At least in 1936, for the House of Morgan being pro-British meant being linked to that environment, in continuity with the relations that had been created with Mussolini’s Italy in the preceding decade. Lamont and his partners dealt with those in power, and in 1936 Winston Churchill was still far from holding the office from which he would lead wartime Britain. After Italy’s victory in the war, the Morgan Bank would continue its prudent conduct, while remaining within the bounds of the prevalent 210

HUGSBA-TWL, bk. 173, fol. 8, Diary, June 2, 1936. The peace ballot was an informal referendum through which the great majority of the British people had expressed their support for intervention, rejecting every aggression, using means based on the principle of collective security.

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Anglo-American policy vision. Once again it was Giovanni Fummi who took the initiative to solicit renewed financial commitment from the Bank. In a certain sense, Fummi’s authority was reinforced because the sanctions had had disastrous results (even if nobody of that environment discussed what might have happened if they had been applied uniformly and decisively and had included oil). At the end of March 1936, Lamont was considering a trip to Rome but feared that it might be interpreted as a sign of willingness to reopen talks for new funding for Italy. Fummi telegraphed him that his presence in Rome would indeed be taken in that sense, and Lamont decided not to make the voyage.211 Fummi took the opportunity of Lamont’s request for advice to send him a long letter arguing in favor of a renewed Morgan Bank commitment to Italy that presented a portrait of the political and economic conditions in Italy after the victory in Ethiopia. Fummi affirmed that there were those in Italy who saw American capital as a tool for making profit in Ethiopia and looked especially to American oil and mining companies. More in general, while relations with Great Britain remained cool, many Italians placed their hope in New York’s financial markets and hoped for a currency stabilization. If world economy must in the end, though slowly, revert to the old system of interchange of goods, services and capital, we may see the leading Powers, in their own interest in order to benefit general world conditions, anxious to assist countries like Germany and Italy in their need. When the time comes, it is possible that the value of the Lira will have to move in unison with the devaluated sterling and dollar. . . .212

Fummi seemed to discern the beginning of a return to the conditions of the 1920s. Nonetheless, his prudent realism made him add that “There is a strong tendency to lead the country into a state of independent economy,” although he immediately added that in Italy’s case it was unlikely to prove possible, because it would require a too-drastic reduction of imports from abroad. Fummi made an effort to predict future development in Italian politics in which the need for capital, including for Ethiopia, would bring Mussolini to again embrace free trade and international monetary cooperation as he had when these were the reigning conditions of political economy and foreign affairs before the Depression. According to Fummi, 211

212

HUGSBA-TWL, bk. 191, fol. 5, tel. 80098, Giovanni Fummi to Thomas W. Lamont, Rome, March 29, 1936. HUGSBA-TWL, bk. 191, fol. 5, Giovanni Fummi to Thomas W. Lamont, Paris, March 27, 1936.

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that would depend to a great extent on the willingness of the United States and Great Britain to leave behind an “insular” attitude and take on the responsibility of leadership. It is probable, if not certain, that Fummi was motivated in this by the minister of finance, who was interested in creating his own communication channels with the Americans. A symptom of this was referred to in passing in his letter as he mentioned that he would not be surprised if the Bank were asked to convert a government bond on the New York market. After a few months, Fummi took up the discussion again with a new message, in which he emphasized the great power of Mussolini deriving from the political unity of the country and denied the rumors of a friendship treaty with Germany.213 Fummi made a special point of consulting the partners about the interest shown by other banks in the Italian situation. Several large New York banks, among them Chase National Bank and National City Bank, were returning to offering normal terms to Italian banks of three months for short-term credit. Clarence Dillon, president of Dillon, Reed & Co., and other American bankers had already been to Rome investigating investment opportunities in Ethiopia. In particular, Mussolini had given an interview to several American journalists on just this topic. Fummi busied himself in putting together a cautiously favorable picture of the Italian economy’s health, observing that while it was not easy or filled with immediate opportunities, the brief duration of the Abyssinian campaign had created moral and material benefits, as well as the promise of future gains, and had made Italians take a newly optimistic view. Fummi made no specific proposals for investment but implicitly renewed his invitation to the Bank to at least show the same interest shown by other American banks, to whose competition he was naturally sensitive. The reaction of the partners, particularly Lamont, who continued to follow the Italian situation closely, was multifaceted. As seen above, Lamont decided not to travel to Rome anytime in 1936, partially on Fummi’s own advice. While Lamont was in London, he had the chance to speak candidly to Dino Grandi during an intimate breakfast at the Italian embassy in Grosvenor Square: the Italians had to put aside every thought of American loans for a long time to come, despite the fact that Breckinridge Long, the ambassador in Rome, had in his usual pro-Fascist zeal told Suvich that those funding channels would soon reopen if Italy would just renegotiate its war debt. At the end of the year, Lamont wrote a 213

HUGSBA-TWL, bk. 191, fol. 5, Giovanni Fummi a J.P. Morgan & Co., St. Moritz, July 29, 1936.

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letter to Fummi, probably meant as a response to all of Fummi’s correspondence, which better explained the partners’ reasoning in continuing to refuse his invitations for the time being. It is not a question merely of the Italian economy or of the resources that might be available for meeting promptly any such banking credits as they were opened, I accept without question your confident and even optimistic analysis and prophecies on the status of the Italian economy. But it so happens that after the heavy losses that we have been obliged to take as a result of the depression in America of recent years, we are averse to Continental investments at the present time. The American community, as you know from your recent visit, is exceedingly uneasy about the whole situation in Europe. It fears an early outbreak of war, and while I believe you and I believe such an outcome is not imminent, nevertheless, until there is a better spirit shown among the nations of Europe, most Americans will hold off from financial commitments there. [. . .] But until the strength of the Italian economy has been more fully demonstrated than it has today, and until the political situation in Europe has become less threatening than it is today, we are, as I say, not planning to make commitments over there.214

This did not however mean that the Bank intended to give up cordial relations with Fascist Italy. After all, the letter still concluded with the sentiment that this was not the final word on the subject. Lamont had taken care, during his private conversation with Grandi, to advise that every effort be made to reestablish good relations with Great Britain and a prompt return to Geneva to re-create an atmosphere of cooperation.215 In a later conversation with Grandi, with Churchill and Neville Chamberlain also present, the ambassador reported that Lamont proved himself “a convinced anti-sanctionist” and had emphasized that a gradual improvement in American public opinion toward Italy, after the military victory, suggested that the moment was favorable for starting trade negotiations again.216 In reality, it was the Italian government that was not willing to begin such negotiations, which were conditioned by Cordell Hull’s demand for a most-favored-nation clause, while the Italians would not abandon the criteria of “compensated trade.” This divergence was not merely technical: while the Americans wanted to favor the return of commercial relations in 214

215 216

HUGSBA-TWL, Thomas W. Lamont to Giovanni Fummi, New York, December 15, 1936. This letter was never actually ever sent, probably because Lamont’s son, Thomas S., himself also a partner, had already answered Fummi; but the text remains useful for analyzing the bank’s reasoning. HUGSBA-TWL, bk. 173, fol. 8, T. W. Lamont, Diary, June 2, 1936. ASMAE-AAP, bk. 28, Stati Uniti 1936, posizione 1–35, fol. Dichiariazioni bancarie Lamont, tel. 8388, Dino Grandi to Benito Mussolini, June 19, 1936.

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a free trade context, Mussolini did not intend to give up the mechanisms of control and autarchy he had instituted, even at the cost of sacrificing a higher volume of trade.217 It should have been obvious to Lamont, but he did not wish to accept that Mussolini had definitively changed tracks. Grandi reported another relevant conversation in this regard, in which J. P. Morgan himself, during a visit to London, expressed his interest in projects investing in the newly conquered Ethiopia.218 Although Ambassador Rosso probably had good reason to advise caution from his observation point in Washington – “During the entire Italo-Ethiopian conflict the Morgan banking group, to which Lamont belongs, has been a clear advocate of the Anglophile and therefore anti-Italian faction” – there is no doubt that, while not being ready to get down to the concrete details of funding, the House of Morgan was interested in reopening a political dialogue (as shown by the reference to trade relations and the attitude toward sanctions that would have made it easier to restart financial projects with Italy).219 The following year Lamont did go to Rome, and met with Mussolini while there. It is likely that the Spanish Civil War, by then under way, increased the Bank’s worries about maintaining peace in Europe, but on the other hand it also underscored the necessity to restore relations among the anti-Communist countries. The meeting between Mussolini and the American banker took place on April 16, 1937, and marked a phase of renewed cordiality. Mussolini seems to have done his best to woo his guest, sounding all the notes he might be happiest to hear, with his usual ability to please his foreign visitors. Mussolini gave profuse assurances of his good will and especially emphasized his desire to restore Italy’s positive image in British and American public opinion. He asked Lamont’s advice regarding the best manner to attain these goals, and Lamont committed to write a memorandum for him on the topic. One of the reasons behind Mussolini’s success in this kind of meeting was his ability to overcome his image as truculent and demanding with a great show of humble requests

217

218 219

ASMAE-AAP, bk. 28, Stati Uniti 1936, posizione 1–35, fol. Dichiarazioni bancarie Lamont, tel. 390, Augusto Rosso to Benito Mussolini, Washington, D.C., June 26, 1936; and HUGSBA-TWL, Giovanni Fummi to J.P. Morgan & Co., St. Moritz, July 29, 1936, in which he reported that he had met Lamont in London and they had discussed the question of a trade agreement between Italy and the United States, the possibility of which Fummi had duly informed the responsible parties. He said, though, that it was clear the time was not ripe, though he thought it could be before long. D. Grandi, Interview. See Rosso telegram cited above.

13. The Morgan Bank and Appeasement

377

for help and advice from his guests, who could not help but feel gratified no matter how shrewd or powerful they were.220 For his part, Lamont advised the dictator to make a direct statement to the American public, correcting for them the image of a “man of war” that was prevalent at that time. Lamont suggested the points to make in such a statement, with the goal of simply making public the kind of attitude Mussolini showed in private interviews such as their own. Diplomatically, the banker explained to the dictator that giving an interview himself on the Italian situation was not advisable, because it would have been assumed that the negotiator of Italy’s loans was not objective in the matter. The content of the memorandum Lamont prepared does not reveal Mussolini’s own motivations, though it does offer a faithful reflection of Mussolini’s statements during their meeting, but it provides a clear summary of the politics Lamont hoped Italy would follow. Its fundamental argument was that peace must be pursued through the development of international economic cooperation, above all trade. Lamont wanted Mussolini to repeat his own historical interpretation of free trade as the foundation of peace, offering as his main proof the relations among the European states from the Congress of Vienna to the Franco-Prussian War. Lamont even wanted Mussolini to call upon Anglo-American leadership toward this goal, although he articulated this appeal in prudent language, noting that in 1930 and after it had been American and Great Britain to raise customs tariffs and it would now be logical to expect them to be first to move in the opposite direction of lowering them. Those two nations with the largest world trade were also the most interested in making that world peaceful, both economically and politically.221 Although he acknowledged the original American responsibility for protectionism, it was perplexing that Lamont could expect Mussolini, in 1937, to publicly appeal for Anglo-Saxon leadership, which he had not even done during the period when he implicitly recognized it and adapted his foreign policy to it. He finished with a stern admonition that no magic formula would cure the ills of the world; progress depended on the daily efforts of the common man. National prosperity was always the result 220

221

For a reconstruction of the Mussolini-Lamont meeting, see HUGSBA-TWL, T. W. Lamont, Diary, April 16–17, 1936; AGF, bk. Pre War Correspondence, fol. Capo del Governo, Giovanni Fummi to Benito Mussolini, Rome, April 20, 1937; Thomas W. Lamont to Giovanni Fummi, Rome, April 19, 1937; T. W. Lamont, Memorandum for Giovanni Fummi, Points for consideration in any public presentation of views as bearing upon American public opinion, Rome, April 20, 1937. Lamont, Memorandum, p. 2.

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of nothing other than hard work, a simple life, and a bit of savings, year after year. The memorandum was an extraordinary example of disconnection from reality. The relation between its text and the actual events of the time – not only the Ethiopian war, by then concluded, but the Spanish Civil War, the remilitarization of Germany, the brutal reality of the increasing alliance between the two Fascist dictatorships – suggests the interpretation of the document as a provocation, or at least a form of verification inspired by skepticism. Could Lamont really have intended to try once more to influence the Fascist government, even knowing that by then there was no real hope left? Despite its professions of friendship, the Bank had shown itself unwilling to risk any more of its money in Italy. And yet any expression of distrust in this sense was totally lacking from even the most private documents; and the judgment of the Hoare-Laval Pact and the very fact that Lamont went personally to see Mussolini at such a time are eloquent counterindications. It does not even seem that the Morgan partners can be accused of blindness, ignorance, and stupidity, as the British appeasers have been, for similar behavior. These men’s judgments, conduct, and level of comprehension rise above such categories; but their goals and values in this context allowed them to see and not to see, to understand and yet to fool themselves, to react and yet to passively accept the unfolding of events. The developments between American bankers and Fascism in this phase are only comprehensible in the light of their will, dominant among the governing classes of Britain and the United States (not to mention the French, who merit their own and far-more-piercing consideration), to try any means to preserve a partnership with the Fascist dictatorship. Despite their ideological differences, which had not stopped them from doing very good business in the past, they were more unwilling to contemplate the alliance with the Soviet Union that Litvinov had been calling for in Geneva for years in order to cement an anti-Fascist front. The political and financial dialogues with Italian authorities, the pressing appeals of Giovanni Fummi, the financial activity of other bankers, the very attempt by Lamont to turn back the clock to the 1920s – these were the background to the desperate effort by Roosevelt and the State Department, prolonged until the very last moment before war was declared in Europe, to separate Mussolini from Hitler. These would have seemed reasonable attempts if they had not added to the problem of delay and obstructionism that prevented the necessary awareness of the global menace the Fascist regimes represented, tragically worsening the situation in which eventually they would need to be fought with every means available.

14. The Origins of American Opposition to the Dictatorships 379

14. the origins of american opposition to the dictatorships Even within the ranks of the American governing class there were those who understood the nature of the coming problem earlier than the rest (as discussed above, there had only been restricted groups in the United States, mostly of ethnic minorities, many of Marxist or anarchist leanings, that had been anti-Fascist from the beginning). It was still a weak and hesitant position, but it grew quickly during the Ethiopian crisis. Stimson was perhaps the first of the American statesmen to be lucidly aware of the true nature of the conflict that was building. His experience in trying, as secretary of state, to organize a collective resistance to the Japanese attack on Manchuria surely had a clarifying effect on his analysis of the situation with Italy and Germany. It helped convince him that it was indeed necessary to use all available means to combat their aggressive acts. He had to account for other forces and opinions in this, starting with his own president, but the Stimson Doctrine named for him in 1932 was to refuse recognition to territorial changes executed through force. In the course of the war in Ethiopia, he was taken by a nearly ideological fervor, quite rare for a man of his experience, when it seemed that the League of Nations might still take decisive action and apply strict sanctions. He wrote to Moffat, who he knew thought otherwise, that the more he thought about it the more convinced he became that collective action was the only solution to the modern problems created by the forces of democracy and industrialization. He thought the new vitality shown by the League of Nations was having a positive effect on American public opinion and that, despite the obstacles encountered by the White House in its efforts for the Neutrality Act the previous summer, the time was nearly upon them when the U.S. government would be able to offer support to the League in its embargo against Italy. Stimson also responded to Moffat’s – though it was not only his – argument that Italy was doing nothing more than following in the footsteps of others by pursuing empire, saying that Italy had no moral justification for violating the commitments it had agreed to by legal treaty. It had been unlucky perhaps to choose the precise moment when the rest of the world awoke to the need to reject imperial aggression. But this was no excuse; it was like a criminal arguing for his innocence because he had committed his crime when the police were patrolling more carefully than usual.222

222

HUHL-JPM, Henry L. Stimson to J. Pierrepont Moffat, December 5, 1935, p. 2; William L. Langer, Explorations in Crisis, Cambridge, MA: 1969.

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This genre of argument was a typical example of what George Kennan, in his famous essay on American foreign policy, condemned as most deviant.223 Foreign policy should rest on a solid base of the needs of the American state without conceding anything to legalism or moralism, according to the theory behind the Marshall Plan and the policy of containment of the 1940s. Stimson’s words in justification of his ideological bias and his obviously excessive optimism regarding the principle of collective security had a vacuous and abstract odor about them. The crucial point about them, however, is that this appeal to the old Wilsonian liberalism – and that is what it was – represented the most effective, perhaps the only, compass the American governing class could steer by in the turbulent international politics of the 1930s. Stimson was certainly no reformist or progressive idealist. He shared the usual attitude of his friends and peers in his restricted social caste, and of the financial interests linked to them, regarding Fascist Italy. His working relationship with that country’s representatives was collaborative, in particular with Dino Grandi, with whom he enjoyed what seems to have been the closest relationship between any two statesmen of the two nations. Still, the Wilsonian categories, as moralistic and legalistically formalist as they were, furnished the surest point of reference, since Mussolini, for whom Stimson had not hidden his admiration in the past, faced him with the flagrant manner in which the dictator now violated those rules for international cohabitation. In his reference to the Roosevelt administration, with which he substantially agreed, Stimson forgot that many things had changed in the four years since he had been able, as secretary of state, to declare his willingness to collaborate with the League of Nations. The Depression and its effects on the needs of the domestic economy had negative consequences for international cooperation. Stimson’s own attempt to convince the League to act against Japan’s aggression had added to the difficulties ranged against Roosevelt’s willingness to make the kind of explicit declaration Stimson now asked of him. In reality, the greatest distinguishing characteristic between Stimson and the president or his other advisers was the condition they labored under in the nature of their positions. Harris stated that political sympathies on the Houston, the ship that carried the president at the moment of the outbreak of armed conflict between Italy and Ethiopia, were all

223

G. F. Kennan, American Diplomacy, 1900–1950, Chicago: 1951.

14. The Origins of American Opposition to the Dictatorships 381 directed toward Ethiopia. According to Harry Hopkins, Roosevelt signaled aloud his approval for each favorable mention of Ethiopia as he read through his briefings.224 Especially during the first phase of the conflict, Roosevelt did not stop at such verbal expressions of his state of mind. He went so far as to tell the State Department, although they persuaded him otherwise, that he intended to publicize the names of American citizens making use of belligerents’ ships, and the cargo of all the ships that brought goods to Italy or Ethiopia.225 Yet, these would have been not only fairly severe measures, but also obviously biased ones, given the nature of the commercial flows between the United States and the two belligerents. Roosevelt also briefly contemplated the possibility of interpreting the expression “implements of war” in the first Neutrality Act to its broadest extent, but was again dissuaded by the State Department. Roosevelt and Cordell Hull shared their opinions on the matter, but Roosevelt confined himself to encourage and supported Hull’s declarations in this period. The position of the secretary of state was concisely and faithfully summarized by his closest collaborator during the Ethiopian crisis, Joseph C. Green. He explained that Italy had, in cold blood, begun a campaign of conquest that flagrantly violated the terms of treaties it had signed. In so doing, Italy threatened world peace. The League of Nations, notwithstanding the hidden agenda of any of its member nations, was trying to pressure Italy to desist from its plan of conquest and to protect world peace. The American government could not, even if it wanted to, discriminate among belligerents or cooperate with the League of Nations. However, within those limits it should do what it could not to stand in the way of collective action by other powers to restore the peace. In his actions, the secretary was completely autonomous; no requests had been made to him from Great Britain or the League, or from any other quarter. If his choices overlapped with the actions of the League to some extent, Moffat would note that he had always acted first. He was extremely sensitive to the criticisms in the press that he was working with the League and found it necessary to remind them of the complete political independence of this government. The president was actually even more inclined than the secretary to take initiatives that would align American policy with the League of Nations; he had repeatedly proposed to blacklist those people 224 225

Harris, p. 56. Divine, p. 127; Harris, ibid.

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and businesses that exported to Italy, and it had been Hull and Green who had dissuaded him.226 Cordell Hull has been criticized both politically and historiographically for his monotonous insistence on free trade as the magic bullet for all the world’s ills, even when it was clearly necessary to consider other measures; for his frequently vacuous and inconsistent moralism; and for the weakness he showed at any conflict of opinions, not least the one in which he found himself mired with several members of the Senate, when he should have defended the administration’s point of view regarding the Neutrality Act. But the truth is that one can discern the outlines of Wilsonian liberalism in his conduct, just as in the reactions of Stimson. What counted was not the somewhat doctrinaire – especially in Stimson’s case – devotion to the principle and instruments of collective security, but the somewhat nebulous perception of the fact that the foreign policy of the Fascist dictatorships would come to radically affect the priorities of the Western democracies. While the social and ideological biases remained in these men, they saw more clearly than others that a concrete and immediate threat was forming that would require confrontation. Although neither they nor Roosevelt had any strong anti-Fascist feelings, their Wilsonian legacy at least pricked their consciences at the scandalous violation of international law and the principle of the peaceful cohabitation of peoples. If the New Dealers most in favor of top-down reform were particularly susceptible to the siren call of Fascist corporativism, for other New Dealers of a more militant democratic faith (such as Harold Ickes, Harry Hopkins, Morgenthau, and Eleanor Roosevelt herself) the aggressive acts of the Fascist regimes, and especially Mussolini’s against Ethiopia, served as a confirmation for their distrust of the reactionary character of those regimes. A few U.S. representatives abroad had similar reactions, despite the prevalent climate of the State Department. In truth, there were only two of real importance, and they were separated by strategy in the course of the 1930s. They were George Messersmith, minister to Austria in Vienna, and William E. Dodd, ambassador in Berlin. Both men were linked to the liberal tradition of Jefferson – Dodd, a university professor rather than career diplomat, had actually written a biography of Jefferson – and both conducted a foreign policy strongly inspired by Wilson. Dodd, as was natural, saw the developments in Mussolini’s politics, especially as 226

HUHL-JPM, Joseph C. Green to J. Pierrepont Moffat, Washington, D.C., April 22, 1935, p. 9.

14. The Origins of American Opposition to the Dictatorships 383 regarded Ethiopia, in light of their echoes in Berlin. As early as July 1935 Dodd confided in his diary,227 but also to Roosevelt,228 that Mussolini’s Ethiopian adventure delighted the Nazi leaders for its negative effects on the so-called Stresa Front as well as because it made Mussolini incapable of continuing to guarantee Austria’s security from the Anschluss.229 A short time later, he arrived at the following conclusion, which would be proven absolutely correct: One thing is certain here: the early defeat or forced withdrawal of Italy from Ethiopia would be considered a serious set-back for German autocratic-military procedure. If Italy succeeds, it is the common feeling that the two dictatorships would unite upon a policy of aggression.230

Dodd, consistent with such a conclusion, showered the State Department and representatives of American foreign policy with requests to take the initiative in sanctions against Mussolini, whose success in his view depended in a life-or-death manner on the League of Nations. He later advocated a total embargo on American exports of oil to Italy, arguing for the warning it would serve to Germany, another nation dependent on importing that resource.231 He had telegraphed the State Department back in August that “The only chance of more democracy in the world depends upon a blockade of warring Italy.”232 The State Department did not receive with enthusiasm Dodd’s dark predictions, urgent appeals for a more vigorously anti-Fascist policy, and continual warnings of the true intentions of Berlin’s leaders. More than once Moffat expressed his lack of respect for a man he considered a smalltown ideologue incapable of really understanding the situation in Berlin. As for the undersecretary of state, William Phillips, his main concern appeared to be the unimpressive standard of hospitality and quality of living 227

228 229 230

231

232

“Three Observers in Berlin: Rumbold, Dodd, and Francois-Poncet,” in Gordon Craig and Felix Gilbert, eds., The Diplomats, 1919–1939; Robert Dallek, “Beyond Traditions: The Diplomatic Careers of William E. Dodd and George S. Messersmith, 1933–1938,” in The South Atlantic Quarterly, LXVI, pp. 233–244; William E. Dodd Jr. and Martha Dodd, eds., Ambassador Dodd’s Diary, New York: 1941; Martha Dodd, Through Embassy Eyes, New York: 1939. Ambassador Dodd’s Diary, pp. 252–259. FDRL-PSF, William E. Dodd to Franklin D. Roosevelt, Berlin, July 29, 1935. Robert Dallek, Democrat and Diplomat: The Life of William E. Dodd, New York: Oxford University Press, 1968, p. 269. LC-WED, bk. 47, fol. 1935-R, William E. Dodd to Franklin D. Roosevelt, Berlin, October 31, 1935. NA-DS, 765.84/916, William E. Dodd to Cordell Hull, Berlin, August 22, 1935. Also quoted in Dallek, p. 267.

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at the ambassador’s residence, complaining “. . . what in the world is the use of having an ambassador who refuses to speak to the government to which he is accredited?” As Dallek justly observed, in normal circumstances Phillips would have been right. But Dodd’s reluctance to speak to Nazi officials was not due only to his moral repugnance for them, but from the well-founded conviction that he could learn most about the situation in Berlin in these decidedly abnormal circumstances through the skills of his own cultivation and spirit of observation.233 William Dodd was surely not as gifted with diplomatic professionalism and bureaucratic zeal as his critics, but unlike them he had the culture and the political orientation necessary to understand just what direction European politics were heading in in the middle of the 1930s. His reports, which have only been excerpted here in brief for relevant evidence, were the fruit of an organic comprehension of the present and future nature of the dictatorships. The insufferable attitude of the State Department bureaucrats, which vented itself in futile or merely technical criticisms, also had political origins. In hindsight, the affirmations of Dodd and Messersmith, like those of Stimson, appear banal. In the Washington of 1935, however, as in the conservative parties of Britain and France of the same period, they were cries in the wilderness. The conventional wisdom among the Western governing classes was that articulated by Moffat and Phillips, since it was the one most easily reconciled to their own material interests and political biases, even where actual dictatorships could not take power. The isolation of men such as Dodd, and the criticisms they suffered for their anti-fascism, demonstrate perhaps more than any other evidence what the atmosphere was among the American governing elites. Until the very eve of the outbreak of war, what Offner called “American appeasement” was still their clear preference, an attitude that is far more explanatory than any argument about generic isolationism, the limits of American politics in the face of Mussolini’s attack on Ethiopia, or the reluctance to align with an anti-Fascist front. Isolationism served merely as a mask hiding multiple interests of a totally different nature. It was certainly no accident that Roosevelt himself had great respect for Dodd and willingly lent him an ear.234 At this point it would be customary to attempt a synthesis of Roosevelt’s overall way of thinking and extremely complex personality. But it is probably more useful to try instead to understand the way in which he 233 234

Dallek, p. 271. Dallek, pp. 273–276.

14. The Origins of American Opposition to the Dictatorships 385 reacted to the political constraints on his action. For that purpose, neither the work of Harris nor of Feis satisfies. It may be true that Roosevelt was a hidden internationalist in the Wilsonian sense. In the course of the 1930s, indeed starting with the very Ethiopian crisis, he did make a perceptible and continuous, if cautious, effort to lead the nation toward a greater antiFascist commitment in world politics. But what is not plausible is the claim that isolationism continued to be the most important point of reference in this period, as if that opposition were the only reason he would not push further. It is certainly true that, in the moment in which his administration suffered a violent attack from those conservative and capitalist circles that would not accept the true nature of his economic policy, there did appear to be an immediate threat that the party might break from its populist wing and lose the support of that part of the electorate. It is possible that certain sectors of that opposition felt favorably toward Fascism, or were even open supporters of Mussolini. Since that wing was also isolationist, or at least interested in exploiting any underestimation on the president’s part of the pacifist and isolationist sentiments of the country, that threat did weigh heavily on his foreign policy. For example, in his letters “from inside the Roosevelt Administration,” in the fall of 1935 and spring of 1936, Joseph Green continually referred to the weakness of the administration, which reached its height at the beginning of the winter, obliging the State Department to pay careful attention to the political and electoral effects of every move they made. Especially sensitive were any choices that could be interpreted as collaboration with the League of Nations or as opposition to Mussolini’s campaign for foreign conquest. He wrote that political tactics had invaded the department to an unprecedented extent. What effect would it have on the administration and on the party and on the election campaign? These were the only questions he found them asking regarding almost every decision.235 Such tactical and electoral constraints – Roosevelt could not afford to forget that 1936 was a presidential election year – were a precise limit he could not violate in his policy of cautious support of the hesitant attempts of the League to suffocate Italian imperialism. In both cases in which the administration was faced with a choice that offered an opportunity to deal a blow to Mussolini at his most vulnerable point – his need to import strategic resources – but which carried a political risk, Roosevelt

235

HUHL-JPM, Joseph C. Green to J. Pierrepont Moffat, Washington, D.C., April 22, 1936, p. 8.

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did not yield to temptation. He gave up the idea of a broad interpretation of the first Neutrality Act (yet he was not the type to be intimidated or influenced by the bureaucratic caution of the State Department, which was however quite conspicuous, as Green reported), and he resigned himself graciously to the approval of the law in 1936 that definitively closed the door to limiting exports of materials Italy would need for its war effort. Nor should one believe that he was thinking only of the isolationist senators at these moments: in the second case, they themselves were divided and the campaign by Italian-Americans was probably the more decisive factor. Green described the fatal effect of such interventions on the members of Congress who would stand for reelection in November. It cannot be forgotten that among those undergoing an electoral test that fall was the president himself. Still, the weight of a more than decade-long tradition of Mussolini and his regime’s popularity must also be taken into consideration. That popularity was not weakened in the radical transition of the political climate after the introduction of the New Deal. Its policy makers, in their pursuit of a third way to solve the ills of the Depression, had taken the place of the Wall Street bankers as the main American interlocutors of Mussolini. It was not easy to overturn the consolidated positive image of the regime, an image that had been publicized for years to the American people by American travelers of every stripe upon their return from Italy and by uninterrupted coverage in the press, which frequently held up the regime as a positive example of administrative effectiveness and social order. As much as Roosevelt might have been opposed by American capitalist circles during this period, it did not appear to mean that they were without structural influence or that the reluctance of those factions to tolerate open conflict with the Fascist regime did not reach him. The weakening of the financially interdependent relationship between the two countries may have reinforced support for autarchy through rearmament in Italy, but it also gave a new strength to the neo-Wilsonian ideas of Stimson, Roosevelt, and that minority that from the very beginning had had the insight to oppose the aggression of the Fascist dictatorships. The difference between those factions of the British Conservative Party that took that position, in a softer tone than their memoirs would frequently have readers believe,236 and the American politicians who shared it is that the former

236

HUHL-JPM, Joseph C. Green to J. Pierrepont Moffat, Washington, D.C., April 22, 1936, p. 8.

14. The Origins of American Opposition to the Dictatorships 387 were excluded and subordinated in government circles until events proved appeasement a failed course. The latter, however, were government officials, even if they had many constraints on their actions. And yet, those who were destined to lead the Allied countries during the war – from Churchill to Roosevelt, from Eden to Hull – were unable to stop the social interests they represented from unceasing efforts to reconstitute the international unity that had led them to accept the Fascist dictatorships in the first place. The politics of appeasement characterizing the European theater since the Ethiopian crisis had its roots in the preceding phase, when the first Fascist dictatorship had been able in complete legitimacy to join the assembly of capitalist governments collaborating in global financial and monetary policy under the guidance of the United States. It was not therefore an error, as further shown by the reactions to Mussolini’s African undertaking, but rather the expression of a residual solidarity among those who did not want to risk a confrontation that would divide this assembly and reinforce the strength of a coalition of class adversaries under the leadership of Moscow. The Molotov-Ribbentrop Pact was the only development that finally broke this fantasy. The anti-Fascist minorities within the elite classes may have been served by their political and ideological loyalty to the legacy of the most progressive liberal tradition. But what was decisive in their eventual victory was the fact that they recognized the new reality emerging from the Depression’s economic crisis, with the destruction of the old global financial system founded on the gold standard. In this sense it can be argued that the Depression may have created some of the conflicts of the interwar era with the birth and consolidation of the autarchic economies of fascism, but it also gave life to their antidote in the form of the alliance that, with the contribution of the Soviet Union, may not have been capable of stopping the war but was in the end able to win it. For his part, Mussolini had harvested the best fruits of his long political strategy, in the Ethiopian war and in relation to the United States. But the season was about to change. While Lamont continued to give the Fascist regime good advice, the man from Morgan Bank who had done so much for the consolidation of the regime in the 1920s now expressed himself to Dino Grandi in a different way in a conversation in London on June 2, 1936: I told him American public shocked by Mussolini aggression. [. . .] I knew reports had reached him that USA was very antagonistic to England. True, we had our little scraps, but make no mistake – if England were up against it with her back to the

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wall, I believe that something would rise in the American people that would lead to come to aid of Britain.237

Mussolini would have done well to heed the banker’s warning – but who knows if, in his concern to avoid the dictator’s ire, Ambassador Grandi ever reported the conversation to him.

237

HUGSBA-TWL, bk. 173, fol. 8, T. H. Lamont, Diary, June 2, 1936.

Conclusion

The roots of U.S. foreign policy between the two world wars can be found in Wilson’s internationalist program, as much of it remained operative in the 1920s. They are also in the social reaction – classist, xenophobic, and violent – of the immediate postwar period. The extraordinary expansion of the American production system and consequent abundance of capital resulted from the war economy that had satisfied the needs of the entire Entente alliance. The first forms of economic planning then gave new power to heavy industry and above all to investment banking. Finally, the ruthless repression of the militant workers’ movement, accompanied by an ongoing integration of organized labor, created the conditions of an economic expansion that in peacetime had to flow outside national borders. Further, a victory in which the United States had played a decisive role, both economic and military, while it remained relatively unharmed (to the point of becoming for the first time in its history a creditor nation), had overturned the hierarchy of power relations among the nations. Still, the domestic defeat of the Wilsonian program as well as the isolationist impulse (to use Selig Adlar’s catchword, once more) of large sections of the electorate, forced subsequent American administrations to avoid those forms of engagement being forged in new institutions (first among them the League of Nations), permanent political commitments, and any political or military presence in Europe. And yet, as William Appleman Williams was the first to rightly emphasize, there has not been enough attention paid to the Wilsonian objectives that were not abandoned and were important and perhaps even essential. Those financial sectors linked to the Republican Party that had ridden the anti-Wilsonian reaction to victory would not give up the goal of 389

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Conclusion

expansion that remained a thrust of the American economy as it had developed by that time. It was instead necessary to pursue it in different ways that would not inflame the same emotions and resentments that they had themselves helped nurture while pursuing the defeat of the Democratic party. To that end, it was not enough to control the markets and raw materials in developing countries. The industrialized nations that had suffered the worst damages from the war had to be fully reconstructed. The economic and industrial rebirth of Europe was necessary for the nation that in fact if not intention was becoming the new world hegemon, because only in that context would it find an outlet for the overabundance of goods and capital that were the consequence also of the force with which social order had been reimposed after the war. That disproportion between supply and demand that may also have decisively contributed to the subsequent crash and the Depression was at the beginning of the decade dealt with in a plan to reconstruct the European economy. To realize that goal, injections of capital would not suffice, and in any case were not available in the existing conditions. In the first place, the political conflicts dividing Europe, with France as the main agitator demanding the guarantee of its security through a punitive peace against Germany, would have to be resolved. The American governing class was aware that the keystone of European recovery would be the industrialized area of greatest economic potential – that is to say Germany. But only if the Europeans changed their policies would American investors feel ready to risk a sufficient amount of their capital. The condition for the rebirth of European capitalism was social as well as political pacification, secured through class discipline, public order, and productivity. The Dawes Plan and the Treaty of Locarno – both of which marked a change in European political relations and sealed the process of social pacification – seemed for a brief period to have fulfilled these conditions. The policy was clearly articulated by Frank B. Kellogg, the American ambassador in London and future secretary of state, as he wrote in 1924 that Europe was beginning to rest on more solid foundations. The fact that Germany had returned to the gold exchange standard and that the British sterling was returning to stability were very good signs. Nothing could be better for the United States, in his view, than that all of Europe should return to the anchor of the gold standard. The acceptance of the Dawes Plan had had a tremendous influence on the British currency. Naturally, the world would look toward the United States for a good deal of financing, and if the Americans were wise they

Conclusion

391

would be able to assume a leadership role in this commerce in capital. Kellogg did not suggest that they should ignore their own domestic market in favor of foreign investments, but it was a sector that, wisely managed, could actually become an incentive to American exports.1 The design was traced in a sure hand and pursued with notable unity by government officials, bankers, and important industrial leaders such as Judge Gary, president of U.S. Steel, to whom the Kellogg comments were addressed in a letter. There were limited but precise differences of opinion and interest between the bankers and the industrialists, which were visible within the government as well in the tension between the secretary of the treasury, Mellon, and the commerce secretary, Hoover. While the bankers were convinced that the most important conditions for American dominance consisted of controlling the international monetary system and making enough capital available to satisfy external demand over the middle term, Hoover favored more direct methods, in which the financial strength of the United States would be put to use in conquering immediate advantages for American exports and the control of foreign markets. This disagreement was resolved in favor of the bankers because of their direct contacts abroad as a result of their intermediary function in international relations. How could an external force move the reconstruction of the European economy forward, given how much it depended on the complex internal situations of each single nation? Since the U.S. Congress and the national mood it represented would not at that time allow more direct forms of political intervention (such as the pact among the former war allies that French statesmen, especially Briand, pursued like a mirage for more than a decade), it was necessary to use the financial instrument provided by American bankers – in particular the Morgan Bank. The bankers acted as policy makers, directly carrying a fairly Wilsonian set of economic objectives to the Europeans. In this undertaking, Great Britain served as the major ally and allowed a peaceful changing of the guard in the leadership of global capitalism. The immediate goal was the return to the gold exchange standard. This made the availability of American capital conditional on deflationary policies, social restoration in domestic politics, and cooperation in international relations as necessary conditions of the gold exchange standard. These efforts foreshadowed the later period of the Marshall Plan and the foundation of the new international monetary system of the post–Second World War years. The collaboration between 1

MHS-FBK, bk. 9, Frank B. Kellogg to Elbert H. Gary, London, October 12, 1924.

392

Conclusion

the central banks led by Strong and Norman, the experts’ commissions that created the Dawes and Young Plans, and the Leffingwell Plan were all expressions of this political will. The reason for the particular American interest in Mussolini’s Italy derived directly from the nature of the plan for European reconstruction. There were of course also cultural and ideological reasons that an authoritarian and potentially antagonistic regime was accepted and largely defended by the governing classes of a country founded on a liberal history, but in this case concrete interests meant more than theory and rhetoric. Mussolini’s regime represented above all that very social stabilization American investors longed for, and in a country that beforehand had been among Americans’ negative models for development. What were considered degenerated forms of a democratic parliamentary regime, quite foreign in several aspects from the American constitutional experience, were willingly sacrificed in return for the benefits of an energetic restoration of social order that gave American capitalists a stable and secure interlocutor who could be decisive and take action efficiently regarding any deals that might be negotiated. Furthermore, Italian foreign policy, though it had no choice but to express the Fascist ideology and nationalism from time to time, at least until the Depression appeared benign enough to reassure the State Department and the Wall Street bankers that it would help create and preserve European equilibrium. Actually it was more than benign, because while Mussolini led Italy into conflict with France, he also headed toward a rapprochement with Great Britain. This in turn excluded any support for a punitive peace against Weimar Germany and made Italy a favorite in the United States’ plans for European reconstruction as it unfolded in the 1920s. The way in which the two countries reached an accord on Italy’s war debt (a watershed moment not only for the debtor nations, but also for those Americans who wished to pursue external expansion but had to overcome the reluctance of their fellow citizens); the process of stabilizing the lira, in which Mussolini asserted only as much autonomy as it took to play the role asked of him with even greater vigor; the investment policy that made Italy, after Germany, the second-largest outlet for American investment between 1925 and 1929 – these were all confirmations of Italian docility in cementing its relationship with the United States in this period. Since Mussolini could not overcome the subordinate role his country’s need for external resources placed him in, he opportunistically pursued links with the strongest and least demanding partner, with no territorial claims so that he could simultaneously bolster his international standing and his popularity among nationalists in the home arena.

Conclusion

393

The effects of the Depression originating in the United States were not immediately felt in international relations. Hoover’s presidency, with Stimson at his side, was actually marked by the ambition to construct a renewed engagement and commitment of the United States abroad, especially in Europe. If the secretary of state was mostly motivated by his support for the principle of collective security, put harshly to the test over Japan’s occupation of Manchuria, Hoover instead hoped to use the need for an international response to the debt payment problems created by the financial crisis to relaunch an American economic plan on a global scale. He thought that some partial early successes in disarmament negotiations could give him the political capital (especially with American voters, who greatly favored disarmament) to barter war debt and reparations payments. This was the thought behind the so-called Hoover moratorium, which he believed would help restore some order to the Weimar Republic’s ever-worsening situation. Instead, Germany was caught between a particularly virulent form of the Depression’s financial crisis and the growth of the National Socialist movement, worsened by the impoverishment of the lower middle and working classes and the humiliations deriving from French foreign policy, while the patrons of heavy industry favored choice of rearmament on the part of National Socialists as a road to maintaining their own social dominance and international prestige. Just as Hoover’s economic policies were a throwback to the era before the crash, so too his hopes for foreign politics rested on the old recipes of the 1920s, which simply could not suffice to confront a European crisis that had become far more serious when the political and economic distress of the postwar acquired a social base in these movements. While American politics ran aground on the shoals of French security policy, they found a friendlier port than ever in Rome. The short tenure of Dino Grandi at the head of Italian foreign policy was not as significant for its concrete results as for the way it represented the final logic of Mussolini’s earlier choices, carrying them to an extreme “il Duce” himself may not have imagined. If Mussolini had accepted subordination to American politics with good graces and also embraced the role of mediator he could take up in Europe along with Great Britain, Grandi traced a policy line explicitly based on the dominance of Anglo-American power, European pacification, the strength of the League of Nations, disarmament, and financial cooperation – all with the possible fringe benefit of win a favorable agreement in the conflict with France and Britain over the division of African colonial territories. In this way Grandi foreshadowed a

394

Conclusion

policy that could only be developed after the Second World War, with the full and active presence of the United States in Europe. Both Hoover’s and Grandi’s policy aims were, therefore, based on extremely fragile premises that would be undermined by the ongoing development of the Depression. The United States would be forced to fall back on its own domestic concerns, forcing Franklin Roosevelt to renounce any international leadership role (abandoning the gold standard on the eve of the London international economic conference) in order to salvage the American economic system through a series of daring economic and social reforms. In this way Italian foreign policy found itself deprived of its principal point of reference in a country protected to some extent from the economic crisis by the delay with which its effects reached an economy that had already suffered earlier forms of stagnation. In the meantime, the definitive rise of Hitler’s regime radically changed the international situation, rendering void any European accord and becoming an irresistible force of attraction for Mussolini, while the British and finally even the French still insistently pursued reconciliation. Fascist foreign policy was left to its own original ideological devices, no longer conditioned by a system of commercial and monetary interdependence. It began the search for an external outlet to relieve the political effects of internal economic pressures through a rejuvenation of the aggressive nationalism kept in shadow until that point. In 1935 once again, as in 1922, the reactions of the Western democracies to the Fascist policy assumed a paradigmatic value. Italian aggression in Ethiopia was the first flagrant violation of the Charter of the League of Nations by a European great power. The Fascist dictatorship put the commitment of the great powers to collective security to the test, and they failed. If the first Fascist seizure of power had elicited consent and even approval from the Western democracies, in the form of the governing classes of those countries who viewed Communism as a greater threat but above all valued the social and political stabilization of Italy, the Ethiopian war struck at the imperial interests of Great Britain and created a dangerous precedent in a world already witnessing the developments of Japanese militarism and of Nazism. The fact that Italy was the weakest of the three Fascist powers made the crisis more significant, because it was clear that tolerating its act of aggression would be an invitation to the other dictatorships to commit even more serious acts with impunity. Indeed, the pattern by which, first, Great Britain and France approved the venture and then, after a short retreat, forced by the reactions of popular opinion, followed a policy of appeasement and finally resigned themselves to

Conclusion

395

accepting the conquest was destined to repeat itself in the face of Hitler’s imminent abuses of power. Although the United States was not directly involved, since it was not a League member, the Ethiopian war became an important test of its determination in opposing Fascist armed expansion. In particular, the question of the oil embargo that appeared – and perhaps really was – vital to the effectiveness of any act by the League of Nations to stop Mussolini’s war of conquest posed in stark terms the question of anti-fascism in America. In the United States, as in France and Great Britain, the difficulty of explaining why no retaliatory acts could gather full support leads to a key historical problem. In the case of the United States, the responsibility has usually been attributed to so-called isolationism, understood as an agglomerate of mostly pacifist and populist rural groups who intended to oppose at all costs any American involvement in foreign affairs. This interpretation, which by implication relieves the strongest social ranks of America of any blame, has also been perpetuated by revisionist historians in justification of the American response and in condemnation of the social classes profiled in the isolationist ideology. The analysis of the coalition of forces that derailed even the cautious proposals of the Roosevelt administration – linked to the internationalist tradition of Woodrow Wilson, but mostly concerned with resisting the virulent attacks being leveled at it for its New Deal reforms – offers a more accurate view of the real reasons behind American abstinence from opposition to Mussolini and from anything but a very late response to the worsening of the European situation as it descended into war. In this way it becomes possible to formulate a better hypothesis about the isolationist phenomenon than the one above, which has also served to bolster the myth of American exceptionalism. The coalition that defeated Roosevelt’s and Hull’s attempt to apply at least a partial embargo on oil and other raw materials necessary to the Italian war effort was actually of diverse composition and was not easily identified with isolationism as an ideology. The Italo-American community may have played a determining role in the concluding phase of the debate, led by its prominent figures, who were by no means agrarian populists or faithful isolationists. Economic and commercial interests also played an obviously relevant role in opposing an embargo they predicted would damage their business. Even the financial sectors most closely linked to Great Britain were hesitant and, like the career diplomats in the State Department, opposed any policy that might create such a defeat for Mussolini that a power vacuum would open up in Italy and

396

Conclusion

allow “subversive elements” to gain the upper hand. These were the same interests that constituted the constellation of forces that determined American acceptance of the Fascist regime at its origin. That is to say, it was not only the isolationism of the provincial American masses driving a few key senators in Congress that explains American conduct toward Italy in this period; a major convergence of interests, predominantly linked to the traditional elite of American society, created the initial American version of appeasement. It was these same groups in France and Great Britain that drove those countries’ practices of such appeasement – countries that had no tradition of isolationism to muddy the waters. It seems, then, that although the argument deserves further documentation, the policy of neutrality regarding the Ethiopian war was determined by the initiative of minorities and powerful interests that exploited the rhetoric of pacifism and the sincere sentiments of Americans favoring peace in order to secure public opinion’s support of a passive response to the growing threat. Appeasement, as it was practiced by the governing classes, could be explained by their original reaction to the rise of the Fascist regime when it began to threaten the peace – a reaction that, it has been shown by this study, had unequivocal class roots. This leads to a final observation. The politics of appeasement has always been identified as a particularly British and French action just before the outbreak of the Second World War, extended in some limited cases to apply also to American attitudes at that time. But this interpretation completely fails to explain the roots of appeasement. It is usually put down to some kind of error of judgment, as if the concessions to the dictators were simply the result of an ingenuous belief, nourished by a bad conscience concerning the Carthaginian peace treaty of Versailles, that their appetites would be satisfied and they would stop. But the question should really be if this was not an extreme final attempt to salvage the unity among the capitalist forces that, as much as they were ideologically divergent, were linked by the fear of Soviet-led subversion, the fear that had led to much of the approval for Mussolini’s seizure of power in the first place. If so, the next question becomes whether that particular concern was not an element of continuity in the politics of the United States and its allies right through to the period following the Second World War.

Index

This index is limited to names of persons and or firms, but does not include subjects. Surnames are omitted in rare cases when impossible to find. Prefixes (de, De, von, van) are indicated and indexed by initial letter. Middle names are indicated extensively or by capital letter according to usage. (Francesca Somenzari) Abrahams, Paul Philip: 35 Abrate, Mario: 179 Acerbo, Giacomo: 44, 56 Adams, John: 66 Adler, Selig: 48, 198 Agnelli, Giovanni, sr.: 169 Alberti, Mario: xxxi, 79, 107, 109, 110, 113, 114, 115, 123, 143, 167, 168, 181 Alexander, Philip: xliv Anchieri, Ettore: 72 Anderson, Arthur M.: 156, 157 Angelone, Romolo: 146 Ara, Angelo: 28 Arendt, Hannah: xviii, xxvi Arone di San Valentino, Pietro: 64, 65 Auld, George P.: 35 Azzolini, Gaetano: 243 Badaloni, Luigi: xli Baer, George W.: 309 Baget-Bozzo, Gianni: xxxiii Bailey, Thomas A.: 30 Bairati, Piero: xxii, xlii Balbo, Italo: 66, 281 Baldwin, Stanley: 25, 211, 372 Balfour, Arthur James: 239, 243 Bannerman, Robert C.: 350, 351 Barié, Ottavio: 28, 345

Barnes, R.J.: xli Barros, James: 71, 75, 76 Bartholin, Pierre: 310 Baruch, Bernard: 3 Barzini, Luigi: 355 Bava, Felice: 66 Bell, Price: 220 Bemis, Samuel F.: 292 Benda, Julien: xv Beneduce, Alberto: xxx, xxxi, 120, 123, 143, 156, 157, 168, 181, 188, 276, 277, 281 Berger, Meyer: 67, 135 Berio, Alberto: 310 Bernsten, Oluf: 155, 156 Bernstein, Irving: 8, 9, 10, 13, 32, 84 Berutti, John M.: 47, 89, 94, 95, 105, 135, 140 Berselli, Aldo: 36 Bertelli, Carlo F.: 63 Bertello, Luciana: xliii, 85, 352, 353 Berthelot, Philippe: 244, 250 Biddle , Francis: xix Blair, William M.: 114, 158, 160 Bloch, Marc: xi, xii, xiii, xxxix Blum, Léon: 224 Bolitho, William: 59

397

398

Index

Bonar, Andrew: 239, 243 Bonin Longare, Lelio: 115 Bonnet, Georges: 368 Borah, William E.: x, 133, 139, 201, 224, 232, 340, 345, 359 Bosworth, Richard J.B.: 36 Boyle, Andrew: 171 Braddick, Henderson B.: 310 Brandes, Joseph: 34 Brega, Gian Piero: xli, xliii Briand, Aristide: 26, 49, 99, 177, 201, 202, 205, 212, 215, 216, 217, 218, 219, 222, 248, 253, 254, 284, 340, 391 Brisbane, Arthur: 63, 64, 67, 345 Brüning, Heinrich: 225, 228, 235, 241, 246, 247, 251, 265, 267, 308 Bullitt, William: 361 Bundy, McGeorge: 218, 281 Burgwyn, H. James: 273, 279 Burke, F.L.: 347 Burton, Lee F.: 131 Bush, George W.: xxxiv Buti, Gino: 79 Butler, Nicholas Murray: x, 45, 94, 307 Cadman, John: 358 Caetani, Gelasio: ix, xxx, xli, 53, 55, 56, 57, 59, 60, 61, 63, 64, 65, 66, 68, 69, 70, 71, 78, 79, 80, 81, 82, 83, 84, 87, 90, 97, 98, 99, 100, 101, 107, 352, 353, 354 Caillaux, Joseph: 100, 116, 118, 127, 137 Callaway, John: xxxviii Calzini, Loris: xliii Calvino, Italo: xx Cantalupo, Roberto: 288 Cantuti Castelvetri, Lamberto: xli Capomazza, Benedetto: 316 Carli, Guido: xli Carosso, Vincent P.: 91, 369 Carr, Edward Hallett: xii Carr, Wilbur J.: x, 55 Carter, John B.: 36 Casertano, Antonio: 352 Castronovo, Valerio: xli, 142, 143, 147, 179, 190 Cavour, Camillo Benso di: 118, 282 Chabod, Federico: 33, 34 Chamberlain, Austen: 26 Chamberlain, Neville: 368, 372, 375 Chandler, Lester V.: 35, 170

Chatelain, Roberto: 116 Child, Dick: 37, 38, 39, 40, 45, 46, 47, 55, 74, 362 Child, Richard W.: xxi, 32, 33, 34, 37, 38, 39, 40, 42, 46, 57 Chilton, William E.: 140 Churchill, Winston: xxiii, xxiv, 40, 372, 375, 387 Ciano, Costanzo: 62 Ciano, Galeazzo: 301, 345, 350 Cibot, Léon J.: 310 Ciccolari Micaldi, Sergio: xlii Cicero, Marcus Tullius: xxxiv Ciocca, Pierluigi : 179, 300 Clark, Stephen V.O.: xli, 35 Clay, Henry: 171 Clayton, Sedgwick C.: 39 Clemenceau, Georges: 17, 49, 99, 193, 222, 251 Cohen, Armand: 310 Cohen, John S.: 179 Connally, Tom: 359 Contarini, Salvatore: 62, 77, 78, 79, 80, 81, 82, 116, 208, 281 Conte, Pino: xlii Coolidge, Calvin: x, 4, 19, 74, 75, 76, 88, 97, 99, 101, 109, 113, 121, 122, 123, 124, 130, 131, 133, 136, 137, 138, 140, 196, 200, 210 Coppola, Francesco: 30 Corcoran, Thomas: xix Corey, Lewis: 91 Cortesi, Arnaldo: 64 Cortesi, Salvatore: 59, 64, 65 Corti, Luigi: 270, 271 Coselschi, Eugenio: 62 Cowles, John: 140 Cox, James M.: 125 Crahan, Eric: xliii Craig, Gordon A.: 361, 383 Crisp, Charles: 131 Croce Benedetto: xii, xiv Crow, Jim: xix Curzon, George: 69, 77, 80, 81 Dadà, Adriana: 48, 260 Daeschner, Emile: 117, 126 Dallek, Robert: xxv, 383, 384 Damiani, Claudia: 47 D’Amoja, Fulvio: 281 Davila, Charles: 335

Index Davis, Norman H.: x, 125, 289, 292, 307, 314 Dawes, Charles G.: xxviii, 17, 25, 26, 27, 34, 35, 46, 86, 88, 91, 95, 97, 98, 101, 103, 115, 116, 126, 194, 195, 196, 204, 206, 207, 227, 233, 239, 250, 254, 277, 390, 392 Dawson, Geoffrey: 372 Deakin, Frederick William Dampier: xxix de Bosis, Lauro: i Debs, Eugene: 4 DeConde, Alexander: 47 Degler, Carl N.: 242 De Felice, Renzo: 36, 40, 142, 172, 181, 269, 270, 271, 272, 273, 277, 281, 282, 283, 288 de Gaulle, Charles: xviii de Grazia, Victoria: xliv Del Boca, Angelo: 309 De Martino, Giacomo: 94, 101, 102, 103, 104, 105, 107, 108, 109, 110, 111, 113, 114, 115, 116, 118, 122, 129, 130, 138, 139, 152, 153, 353, 354 De Santi, Louis A.: 47 De Stefani, Alberto: ix, 60, 76, 79, 90, 93, 97, 100, 104, 109, 110, 114, 141, 142 De Stefani, Pietro: xli De Visscher, Charles: 72 Diderot, Denis: xiii Diggins, John: xxii, xxxviii, 36, 47, 50, 57, 60, 61, 62, 64, 65, 66, 67, 84, 85, 93, 94, 131, 260, 305, 307, 308, 309, 347, 348 Dillon, Clarence: 160, 374 Di Nolfo, Ennio: 36, 203, 209, 257 Di Silvestro, John: 53, 61 Divine, Robert A.: 310, 315, 343, 344, 345, 357, 359, 360, 364, 381 Dodd, Martha: 383 Dodd, William: x, xxv, xxvi, 361, 382, 383, 384 Dodd, William, jr.: 383 Dos Passos, John: xxii, 6, 7, 50 Dowling: xxxvii Dunbar Kajetan: 59, 61 Dunn, James Clement: xli, 319 Duroselle, Jean-Battiste: 1, 2, 41 Eakins, David W.: 242 Eden, Anthony: 328, 344, 365, 387 Edge, Walter Evans: 132 Einzig, Paul: 35 Eisenhower, Dwight D.: xvi

399

Elia, Paola: xlii Ellwood, David: xliii Engels, Friedrich: xxii Erba, Achille: xlii Facta, Luigi: 95, 96 Fagiuoli, Vincenzo: xli Farinacci, Roberto: 51 Farley, James A.: 348 Falco, Giancarlo: 182 Fasano-Guarino, Elena: 36 Fausold, Martin L.: 242 Federzoni, Luigi: 116, 281 Feis, Herbert: 13, 14, 20, 34, 290, 291, 293, 294, 310, 323, 327, 328, 329, 330, 331, 332, 344, 359, 385 Feltrinelli, Inge: xliii Fenwick, Millicent: xix Ferrell, Robert: 194, 195, 197, 200, 202, 218, 232, 233, 234, 240, 241, 244, 249, 264 Ferrero Andrea: xli, 302, 331, 345, 348 Fini, Marco: xli, 147 Finzi, Aldo: 281 Fiorenti, Concetta: xlii Flandin, Pierre-Etienne: 368 Fleming, Denna Frank: 30 Fletcher, Henry P.: x, 55, 61, 101, 111, 115, 118, 139, 140, 362 (Ambassador) Foa, Vittorio: 181, 190 Foner, Eric: xxxiv Forbes, Harris: 144, 158 Ford, Henry: 8, 9, 169 Ford, Franklin L.: 361 Fordney, Joseph: 21 Foschini, Antonio: 72 Francis I: xvii Franck, Louis: 182, 188, 189 François-Poncet, André: 361, 383 Freidel, Franklin: 288 Friedlander, Robert A.: 310 Friedman, Milton: 192 Fummi, Giovanni: ix, xxxi, 93, 114, 115, 119, 121, 130, 133, 134, 152, 154, 155, 156, 157, 159, 160, 161, 162, 164, 167, 174, 178, 181, 319, 320, 321, 354, 370, 371, 373, 374, 375, 376, 377, 378 Fummi, Luisa: xli Galasso, Giuseppe: xii Gandi, Vera: xlii

400

Index

Garavello, Daniela: xlii Gardner, Lloyd C.: 34, 288, 290, 293, 297 Garrett, John: 362 Gary, Elbert H: 391 Gemelli, Agostino: xvii Gershenovitz, Debbie: xliii Giannini, Amedeo P.: 355 Gibson, Hugh: 216, 221, 228, 234, 235, 236, 237, 365 Gidoni, Domenico: 33 Gilbert, Felix: 361, 383 Gilbert, Prentiss: 335 Gini, Corrado: 117 Giolitti, Giovanni: xxiii, 30, 32, 33, 34, 35, 95, 96, 97 Glad, Betty: 86 Glore, Charles: 157, 158, 162 Goldsborough, Laird: 307 Gompers, Samuel: 13 Graham, Ronald: 69 Gramsci, Antonio: xxii, xli Grandi, Dino: viii, ix, xxxi, xxxii, xli, 47, 51, 53, 67, 77, 78, 80, 96, 100, 104, 107, 115, 116, 117, 121, 122, 139, 169, 202, 203, 205, 206, 207, 208, 209, 210, 211, 212, 213, 214, 215, 216, 217, 218, 219, 220, 222, 223, 224, 225, 226, 227, 228, 229, 230, 231, 232, 233, 234, 235, 236, 237, 238, 242, 243, 244, 245, 246, 247, 248, 249, 251, 252, 253, 254, 255, 256, 257, 258, 259, 260, 261, 262, 263, 264, 265, 266, 267, 269, 270, 271, 272, 273, 274, 275, 276, 277, 278, 279, 280, 281, 282, 283, 284, 285, 287, 288, 297, 301, 303, 306, 308, 312, 352, 353, 354, 356, 374, 375, 376, 380, 387, 388, 393, 394 Green, Joseph C.: 325, 342, 344, 349, 350, 356, 357, 358, 381, 382, 385, 386 Grew, Joseph C.: x, 55, 114, 115 Grifone, Pietro: 181 Grispo, Renato: 306 Gualerni, Gualberto: 172, 181, 190, 193 Guariglia, Raffaele: 203 Guarna, Luigi: xliv, xlvii Gunther, Franklin M.: 38, 45 Hackworth, Green H.: 342 Halifax [Charles Wood]: 372 Hambro, Everard: 118, 188 Hamilton, Alexander: 262 Hanna, Edward Joseph: 130

Harding, Warren: xxvii, 19, 45, 83, 87, 88, 94, 97, 196, 200 Harris, Brice, jr.: xxxiii Harris, Charles R.S.: 195, 317, 318, 332, 340, 344, 357, 362, 380, 381, 385 Harrison, George L.: x, 160, 189, 314 Harrison, Leland: 101 Harvey, George: 45 Hassan, Henry, Jr: 358 Hawley, Ellis W.: 242 Hawley, Willis: 193, 256, 292 Hearst, William Randolph: 56, 62, 63, 64, 130, 289, 294, 345, 368 Heflin, Thomas: 139 Held, Heinrich: 174, 204 Henderson, Arthur: 222, 224, 252, 253 Herriot, Edouard: 224, 235, 250, 268, 269, 273, 275, 281, 291 Hersey, John: xiv, xv Hiett, Helen: 310 Highley, Albert E.: 309 Hilb, Horace: xxxviii Hitler, Adolf: xv, xxv, xxix, xxxiii, 36, 238, 246, 251, 266, 298, 299, 306, 307, 308, 311, 313, 337, 344, 378, 394, 395 Hoare, Samuel: 313, 319, 324, 325, 335, 338, 339, 340, 341, 363, 365, 367, 372, 378 Hoepke, Klaus-Peter: 36 Hoover, Herbert: viii, xxx, xl, 14, 17, 19, 20, 22, 34, 97, 98, 100, 107, 113, 121, 122, 123, 124, 125, 126, 127, 128, 131, 132, 133, 134, 136, 138, 169, 192, 193, 194, 197, 199, 200, 201, 202, 203, 209, 211, 212, 214, 217, 219, 221, 222, 223, 226, 227, 228, 229, 231, 232, 233, 234, 235, 237, 238, 239, 240, 241, 242, 243, 244, 245, 247, 249, 250, 252, 254, 255, 256, 257, 258, 259, 260, 261, 262, 263, 264, 265, 267, 268, 269, 273, 274, 276, 280, 284, 287, 288, 290, 291, 292, 297, 299, 300, 302, 305, 308, 391, 393, 394 Hopkins, Harry: 317, 381, 382 Howard, Hubert: xli Howard, Lelia: xli Howe, Louis: 362, 363 Howell, Robert B.: 139 Hoyt, Edwin P.: 91 Hubbard, George: 310 Hudson, Manley: 72

Index Hughes, Charles Evans: x, xxv, 17, 20, 33, 34, 37, 38, 39, 42, 45, 46, 55, 69, 70, 74, 75, 76, 86, 89, 95, 97, 98, 101, 104, 223, 352, 363 Hughes, Stuart H.: xiii, xiv, xxxiv Hull, Cordell: x, xv, 140, 289, 292, 293, 298, 302, 317, 318, 319, 324, 325, 328, 331, 333, 335, 336, 337, 338, 339, 340, 344, 348, 358, 363, 364, 375, 381, 382, 383, 387, 395 Humphrey, Hubert: xix Hurley, Patrick Jay: 131 Ickes, Harold: 317, 324, 382 Incisa, Agnese: xliv Ingersoll, Ralph: 307 Israel, Fred L: : 314, 315, 345 Jacobson, Jon: 86 James-James, John A.: 41 Jefferson, Thomas: 49, 382 Jervolino, Domenico: v John XXIII: xvi, xvii Johnson, Claudius O.: 232 Johnson, Hiram: 139, 315, 345, 359 Johnson, Lyndon: xix, xxxiii Johnson, Pike: 357 Jones, Jesse: 140 Jordan, Laylon: 306 Joslin, Theodore Goldsmith: 240, 241 Jung, Guido: xxx, 58, 59, 79, 80, 81, 82, 97, 98, 107, 168, 289, 291, 292, 294, 295, 296, 300, 304, 308, 309, 371 Kadradic, Catherine: 71 Kahn, Otto: 98 Kaufman, William: 361 Kellett, Morris C.: 45, 289 Kellogg, Frank B.: x, 101, 103, 104, 105, 111, 113, 114, 115, 123, 128, 130, 131, 135, 138, 139, 140, 200, 201, 202, 212, 222, 284, 340, 390, 391 Kennan, George: 380 Kennedy, Bobby: xxxiii Kennedy, John F.: xviii, xix, 361 Kennedy, Joseph: 370 Kerr, Philip Henry [Lothian]: 335, 372 Keynes, John M.: 15, 193, 294, 297 Kindleberger, Charles: xxviii, 34, 192, 193, 201, 299 Kinsey, Hall: 350

401

Knowlton, Evelyne: xli Kuznets, Simon: 10 LaFeber, Walter: xxvi Lamont, Thomas W.: x, xxiv, xxvi, xxxi, xxxiv, xli, 22, 49, 60, 61, 64, 75, 76, 91, 92, 93, 94, 99, 106, 108, 109, 111, 113, 114, 115, 119, 121, 122, 123, 124, 125, 126, 127, 128, 130, 135, 139, 153, 154, 155, 156, 157, 158, 159, 160, 162, 164, 167, 174, 176, 178, 251, 258, 276, 284, 320, 321, 322, 323, 354, 368, 369, 370, 371, 372, 373, 374, 375, 376, 377, 378, 387, 388 Lamont, Thomas S.: 375 Langer, William L: xxxvii, 379 Lanza, Aldo: xlii Larson, Erik: xxv Lasturel, Piere: 71 Laval, Pierre: 230, 232, 233, 234, 235, 250, 251, 252, 253, 258, 259, 260, 266, 269, 274, 312, 313, 319, 338, 340, 341, 363, 365, 367, 368, 372, 378 Layton, Walter: 256 Lazzati, Giuseppe: xvii Leffingwell, Russell: xxvii, 22, 35, 92, 122, 153, 175, 176, 177, 208, 282, 293, 320, 321, 322, 323, 370, 392 Leffler, Melvin P.: xxvi, 35 Lenin, Nikolaj: 6, 7 Lenzini, Giacomo: xliii Leopold, Richard W.: 45 Leroux, Eugène-Louis: 310 Leuchtenburg, William E.: 6, 7, 50, 298, 299 Lewis, Cleona: 2, 35, 146, 147, 147, 166 Lewis, William A.: 193 Lindbergh, Charles: 370 Lindsay, Ronald: 301, 319, 324, 325, 338, 339, 340, 341 Link, Arthur S.: 28 Link, William: 35, 86 Lippmann, Walter: xx, xxiii, xli, 58, 59, 60, 61, 123, 242, 306 Littlefield, Walter: 67 Litvinov, Maxim: 233, 237, 366, 378 Lloyd, George: 17, 29, 211 Long, Breckinridge: 304, 307, 312, 337, 338, 339, 362, 363, 374 Lonne, Karl-Egon: 36 Lorini, Sandra: xxxviii Lovestone, Jay: 13 Lowry, Ned: 45

402

Index

Luce, Henry : 307 Luther King, Martin; xxxiii Lytton-Cobbold, David: xli, 250 MacDonald, Ramsay: 202, 211, 212, 215, 216, 217, 218, 219, 224, 234, 235, 257, 268, 271, 272, 275, 277, 281, 282, 291, 293, 312 Machiavelli, Niccolò: 273 MacIntyre, Marvin: 355 MacLean, Alexander A.: 117 Maier, Charles: xxvi, xxviii, xxxviii, xlii Mamatey, Victor S.: 28 Manzoni, Gaetano: 213, 215, 244, 250 Manzoni, Raimondo: 310 Maritain, Jacques: xviii Marshall, George: xxi, 176, 282, 380, 391 Marshall Field and Co.: 157,158, 162, 163 Martelli, Manfredi: xxvi Marucco, Dora: xlii Marx, Karl: xxii Mass, Melvin: 343 Matsudaira, Kota: 237 Matteotti, Giacomo: vii, xxii, 46, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 107, 142, 185, 207 Matthews, Herbert: 67, 68 Mattioli, Raffaele: xxii May, Ernest R.: xii, xiv, xx, xxxvii Mayer, Arno J.: 14, 28, 29, 366 Mazuzan, George: 242 McChesney Martin, William: xix, xli McCormick, Anne O’Hare: 67 McCormick, Nancy Cox: 65 McCormick, Robert R.: 61, 67, 68 McCumber, Porter: 21 McGarrah, Gates: 158, 159 McGuire, Constantine: 117 McReynolds, Sam: 342, 343, 349, 350 Mellon, Andrew: 17, 20, 23, 56, 75, 86, 89, 95, 98, 101, 102, 103, 105, 109, 110, 111, 113, 115, 120, 121, 124, 127, 128, 131, 132, 133, 134, 135, 137, 138, 140, 143, 152, 153, 169, 170, 175, 200, 241, 250, 255, 391 Messersmith, George S.: xxv, xxvi, 382, 383, 384 Meyer, Richard H.: 35, 170, 173 Migone, Bartolomeo, Jr.: xliii Migone, Bartolomeo,: xli, xliii, 302, 331, 345, 348

Migone, Gian Giacomo: i, iii, iv, xxiii, xxvii, xxx, xxxv, xlv, xlvi, xlvii, 31, 33, 35, 36, 39, 45, 47, 49, 84, 85, 143, 174, 175, 176, 178, 179, 293, 304 Migone, Sebastiano: xxxiv Migone, Thi Sao: xv Miller, Charles: 90 Miller, James Edward: xliii Mills, Ogden: 241 Milza, Pierre: 36 Minter, William: 289 Mitchell Palmer, A.: 5 Modigliani, Franco: xxvii Moffat, Pierrepont J.: x, xxv, 325, 342, 350, 356, 365, 366, 367, 368, 379, 381, 382, 383, 384, 385, 386 Moley, Raymond: 289, 290, 291, 293, 294, 296, 297, 298, 299 Molotov, Vjaceslav M.: 387 Moltoni, Pia: xliii Moore, John B.: 359 Moore R. Walton: 342, 350 Moreau, Emile: xxviii, 173, 186, 188 Morgagni, Manlio: 65, 355 Morgan Grenfell & Co.: 156, 188 Morgan Bank/J.P. Morgan & Co.: vii, viii, xxiv, xxvi, xxvii, xli, xlv, 5, 15, 20, 22, 24, 25, 27, 49, 52, 60, 64, 67, 75, 90, 91, 92, 93, 94, 98, 99, 105, 106, 108, 113, 114, 115, 117, 119, 120, 121, 122, 123, 124, 125, 127, 130, 132, 133, 136, 137, 138, 139, 140, 141, 143, 144, 150, 151, 152, 153, 154, 155, 156, 157, 158, 159, 160, 161, 162, 163, 164, 167, 169, 170, 171, 172, 175, 176, 177, 178, 179, 183, 184, 185, 186, 188, 189, 196, 208, 258, 276, 293, 319, 320, 322, 323, 354, 359, 369, 370, 371, 372, 373, 374, 376, 378, 387, 391 Morgan, John Pierpont, Jr: xxxi, 24, 92, 94, 99, 121, 122, 124, 153, 176, 183, 184, 185, 258, 376 Morgan, Thomas B.: 65 Morgenthau, Henry: 324, 382 Mori, Giorgio: xli, 32 Mori, Renato: xli, 309, 311, 312, 317 Morrow, Dwight: ix, xxx, 49, 91, 92, 114, 119, 122, 124, 125, 126, 127, 130, 132, 133, 134, 135, 138, 139, 140, 169, 172, 217 Mortara, Giorgio : 117 Mosca, Rodolfo: 28 Moscati, Ruggero: 77, 78, 245

Index Mosconi, Antonio: 243, 276 Muggeridge, Malcolm: xiv Mussolini, Benito: i, vii, viii, xiii, xxi, xxii, xxiii, xxiv, xxv, xxvi, xxix, xxx, xxxi, xxxii, xxxiv, xxxv, xl, 30, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 80, 81, 82, 83, 84, 85, 89, 90, 92, 93, 94, 96, 97, 98, 99, 100, 102, 103, 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114, 115, 116, 117, 118, 127, 129, 130, 132, 133, 134, 136, 137, 139, 142, 143, 153, 168, 172, 173, 174, 175, 177, 178, 179, 180, 181, 182, 184, 185, 186, 188, 189, 190, 191, 202, 203, 204, 205, 206, 207, 208, 209, 210, 213, 215, 216, 217, 219, 220, 221, 226, 237, 242, 243, 246, 247, 253, 256, 257, 258, 259, 263, 266, 270, 271, 272, 273, 274, 275, 277, 279, 281, 282, 285, 286, 287, 288, 289, 291, 292, 295, 299, 301, 302, 303, 304, 305, 306, 307, 308, 309, 310, 311, 312, 313, 316, 317, 319, 321, 322, 323, 324, 325, 328, 334, 335, 336, 337, 339, 340, 341, 342, 344, 346, 347, 348, 352, 353, 354, 355, 360, 362, 363, 364, 366, 367, 369, 371, 372, 373, 374, 375, 376, 377, 378, 380, 382, 383, 384, 385, 386, 387, 388, 392, 393, 394, 395, 396 Nadolny, Rudolf: 236 Nazzaro, Pellegrino: 31, 48 Nicastro: xxxvii Nicoglou, Stephan: 72 Nicolson, Harold: 49, 91, 172 Niemeyer, Otto: 168 Nitti, Francesco S.: 32, 35 Nixon, Richard: xxxiii, 242 Norman, John: 310 Norman, Montagu: xxxi, 27, 170, 171, 172, 182, 183, 184, 185, 186, 187, 188, 189, 190, 204, 256, 392 Norris, George: 139 Novacovics: 182 Nye, Gerald: xxviii, 313, 342, 343, 345 Obama, Barack: xviii O’Boyle, Patrick: 347

403

Ochs, Arthur: 297 Offner, Arnold A.: xxv, 366, 384 Olivetti, Gino: 62 Olney, Richard: 131 Oriani, Alfredo: 273, 278, 282 Origo, Donata: xliii Origo, Iris: xx, xli Orlando, Vittorio Emanuele: 28, 29, 30, 279 Pace, Luigi: 154, 155, 156, 158, 159, 160, 162 Paganoni, Marco : 273 Paine, Tom: 49 Palermi, Raul: 116 Paolucci Barone, Giacomo: 58 Parini, Piero: 354 Parrini, Carl: xxvi, 14, 15, 21, 23, 34, 98, 123, 197 Pascucci, Francesco: xli Passerin d’Entrèves, Ettore: xvii, xxiii, xxxvii, 33 Patrizi, Ettore: 355 Paul VI: xvii Paul- Boncourt, Joseph: 236 Pavani, Giampaolo: xlii Pell, Robert: 307 Pennachio, Mario: 58 Petersen, Jens: 36 Phelps, William C.: 35, 45, 324 Piaf, Edith: xi Pieri, Piero: 311 Pinzani, Carlo: 36 Pirelli, Alberto: ix, xxx, xxxi, 49, 98, 100, 106, 107, 115, 117, 120, 121, 123, 126, 128, 129, 130, 136, 137, 139, 147, 148, 150, 168, 169, 181, 204, 276, 277, 281, 371 Pirelli, Giovanni Battista: 106, 168 Pirelli, Leopoldo: xli Pittman, Key Denson: 314, 315, 342, 345, 349, 350, 356 Pius XII: xvi Phillips, John: xxxviii Phillips, Williams: x, xxv, xli, 45, 74, 75, 76, 289, 362, 363, 364, 365, 383, 384 Podestà, Luigi: 153 Poincaré, Raymond: 50, 68, 69, 70, 77, 80, 93, 99, 142, 173, 251 Policastro: 365 Pope, Generoso: 355, 356, 368 Pound, Ezra: 340

404

Index

Pratt, Julius W.: 292 Prodi, Romano: xviii Quazza, Guido: xli, 1 Radosh, Ronald: 13 Raffalovich, George: 62, 163 Rava, Luigi: 62 Rainey, William: 139 Reed, James: 138, 139, 140, 160, 374 Riassetto: xlii Ribbentrop, Joachim : 387 Ricci, Rolando: 95 Robert, Cecil: 75, 76, 369, 370 Rocco, Alfredo: 273 Rochat, Giorgio: 311 Rockefeller, John D., jr.: 9 Romano Avezzana, Camillo: 70 Romano, Sergio: 118, 164, 190 Romasco, Albert U.: 242 Romero, Federico: xlii Roosevelt, Eleanor: xix, 382 Roosevelt, Elliot: 304 Roosevelt, Franklin Delano: viii, x, xviii, xxv, xxvi, xxxii, xxxvii, xl, 1, 11, 41, 193, 242, 256, 269, 284, 285, 287, 288, 289, 290, 291, 292, 293, 294, 295, 296, 297, 298, 299, 300, 301, 302, 303, 304, 305, 306, 307, 308, 309, 310, 312, 314, 315, 316, 317, 318, 319, 320, 321, 322, 323, 324, 325, 326, 328, 330, 332, 333, 334, 336, 337, 338, 339, 340, 342, 343, 344, 345, 346, 348, 350, 352, 354, 355, 356, 357, 358, 360, 362, 363, 364, 366, 367, 368, 369, 370, 372, 374, 376, 378, 380, 381, 382, 383, 384, 385, 386, 387, 388, 394, 395 Roosevelt, Theodore: 41, 47, 264 Root, Elihu: 200, 262 Rosen, Elliott A.: 242 Rossi-Longhi, Alberto: xli, 346 Rosso, Augusto: xxx, 53, 54, 65, 74, 75, 76, 112, 113, 273, 300, 301, 302, 303, 305, 307, 319, 324, 325, 328, 331, 336, 337, 342, 345, 346, 347, 348, 350, 351, 353, 359, 360, 376 Rothbard, Murray: 242 Rovere, Bruno: 145, 148, 149 Rowe, Jim, jr.: xix Rowse, Alfred Leslie: 308, 340 Rumbold, Horace: 361, 383 Rumi, Giorgio: xvii, 30, 270, 352

Sacco, Nicola: 260, 352 Sackett, Frederick M.: 264 Salvemini, Gaetano: xii, xiii, xiv, xxxix, 30, 52, 64, 67, 68, 84, 310 Santarelli, Enzo: 85 Santomassimo, Gianpasquale: 273 Sapelli, Giulio: xxxviii Sarfatti, Margherita: 307 Sarti, Roland: 179 Schacht, Hjalmar: 182, 299 Schanzer, Carlo: 77, 80, 95, 210 Schiff, Mortimer: 66, 160 Schlesinger, Arthur, jr.: 2, 3, 5, 11, 242, 288 Schlotterbeck, Karl T.: 2 Schmidt, Hjalmar: 189 Schmidt, Paul : 344 Schmitz, David: xxv, xxvi Schuker, Stephen: xxvi, xliii, 35, 50 Shumate, Richard: 62 Schwartz, Ann J.: 192 Scialoia, Vittorio: 72 Sciuto, Stefano: xv Seldes, George: 62 Sherman, John: 3 Sherrill, Charles: 357 Shoup, Lawrence H.: 289 Siepmann, Harry: 188 Sihanouk, Norodom (King of Cambodia): xvii Simmonds, Frank: 346 Simon, John: 234, 236, 301, 340 Sinclair, Harry F.: 358 Skinner, Robert: 333 Smith, Frank: xliii Smith, William B.: 36, 130, 347, 348 Smoot, Reed: 110, 123, 127, 128, 129, 130, 131, 193, 256, 292 Somenzari, Francesca: xliii Sonnino, Sidney: 29, 30, 279 Soule, George: 6 Southard, Frank A. jr.: 35 Spini, Giorgio: xlii, 35, 36, 304 Springer, Arthur H.: 140 Sraffa, Piero: xxii, 179 Staley, Eugene: 35 Stammati, Gaetano: 35 Steed, R.H.C.: 344 Stevenson, Adlai: xix Stimson, Henry L.: viii, x, xxxii, 194, 199, 200, 201, 202, 203, 209, 216, 217, 218, 219, 220, 223, 224, 225, 226, 227, 228, 229, 231, 232, 233, 234, 235, 237, 238, 241, 247, 248, 249, 250, 252, 253, 255,

Index 257, 261, 263, 264, 266, 273, 281, 284, 287, 300, 308, 309, 354, 365, 366, 379, 380, 382, 384, 386, 393 Storaci, Marina : 182 Straus, Jesse I.: 358 Stresemann, Gustav: 26 Stringher, Bonaldo: xxx, 33, 58, 93, 111, 141, 153, 168, 173, 178, 179, 181, 182, 183, 186, 187, 188, 277, 281 Strong, Benjamin: x, xxvi, 21, 22, 27, 35, 160, 170, 172, 174, 175, 177, 178, 179, 181, 183, 186, 187, 188, 189, 190, 193, 251, 256, 392 Sturzo, Luigi: 32 Suvich, Fulvio: 308, 345, 364, 374 Taft, William H.: 20 Tambor, Molly: i, iii, xliii Tardieu, André: 207, 212, 215, 217, 219, 232, 234, 235 Tardio, Lois: xliv Tasca, Angelo: 179 Taylor, Alan John Percivale: xxi Tellini, Enrico: 71, 72 Teodori, Massimo: 35, 36, 304 Thaon di Revel, Paolo: 320, 371 Thomas, Elbert D.: 294, 343 Tirabassi, Maddalena: xlii Toniolo, Giuseppe: 179 Toscano, Mario: 29 Tranfaglia, Nicola: xli, 192 Tugwell, Rexford: xxxii, 289, 304, 305 Tull, Charles H.: 348 Turati, Augusto: 354 Tyrrell, William: 74, 76 Valente, Benedetto: xli Valeri, Nino: 30 Vandenberg, Arthur: 340 Van Meter, Robert H., jr: 35 Vanzetti, Bartolomeo: 260, 352 Vaudagna, Maurizio: xxxii, xxxviii, xl, xlii, 304, 305 Ventry, Lance T.: 28 Venturi, Franco: xiii Venturini, Nadia: xlii, xliii, xliv Vertone, Saverio: xiii Viacava, Anna: xliv Villa (brothers) : 355 Villari, Lucio: 179 Vissering, Gerard: 182

405

Vitetti, Leonardo: xli, 117, 269, 270, 271, 274, 317 Vittorio Emanuele III: 46, 83, 287 Vivanti, Corrado: 36 Vivarelli, Roberto: 28 Volpi, Giuseppe: vii, ix, xxiv, xxx, xxxi, 93, 114, 117, 118, 119, 120, 121, 123, 125, 126, 127, 128, 129, 130, 134, 135, 136, 141, 142, 143, 144, 147, 152, 153, 154, 155, 157, 158, 159, 160, 161, 162, 163, 164, 165, 167, 168, 170, 173, 174, 175, 177, 178, 179, 180, 183, 190, 204, 277, 281 Vonnegut, Kurt: xiii, xv von Papen, Franz: 235, 267, 268, 275 von Schubert, Karl: 245 von Wiegand, Verner: 63 Warburg, James: 291, 300 Warburg, Paul M.: 16, 119, 314 Ward, Pierce: 157, 158, 162 Warren, George: 294 Washington, George: 66 Washington, Sammi: xxxviii Watts, James F.: 362, 363 Webster, Richard A.: 32 Weinstein, James: 5, 242 Weintraub David: 10 Wheeler, Post : 74, 75 Whitney, George: 162, 163 Wicker, Elmus R.: 35 Wiggin, Albert: 159, 256 Wilkie, Wendell: 369 Williams, William Appleman: xxvi, 34, 242, 288, 389 Wilson, Garrard: 178 Wilson, Hugh: 333 Wilson, Joan Hoff: 123, 193, 194, 197, 240, 242, 310 Wilson, Woodrow: xviii, xxvii, 1, 2, 3, 5, 11, 14, 17, 18, 22, 24, 28, 29, 30, 31, 32, 34, 41, 45, 72, 86, 89, 92, 94, 96, 98, 139, 175, 195, 197, 200, 216, 242, 262, 288, 289, 290, 312, 316, 326, 349, 382, 389, 395 Wiltz, John E.: 310, 313 Winston, Garrard B.: 102, 103, 109, 120, 121, 153 Woodin, Will: 294 Wright, Quincy: 72 Young, Owen D.: xxviii, 17, 88, 126, 194, 227, 239, 243, 251, 267, 269, 392