2

Peace at Its Zenith 1922–1931

Mr. Baldwin’s Arrival — Fall of Lloyd George — The Revival of Protection — The First Socialist Government in Britain — Mr. Baldwin’s Victory — I Become Chancellor of the Exchequer — War Debts and Reparations — Steady Progress at Home for All Classes — Hindenburg Elected President of Germany — The Conference at Locarno — Austen Chamberlain’s Achievement — Peace at Its Zenith — A Tranquil Europe — Revival of German Prosperity — The General Election of 1929 — My Differences with Mr. Baldwin — India — The Economic Blizzard — A Fine Hope Dies — Unemployment — Fall of Mr. MacDonald’s Second Administration — My Political Exile from Office Begins —The British Financial Convulsion — The General Election of 1931.

DURING THE YEAR 1922, a new leader arose in Britain. Mr. Stanley Baldwin had been unknown or unnoticed in the world drama and played a modest part in domestic affairs. He had been Financial Secretary to the Treasury during the war and was at this time President of the Board of Trade. He became the ruling force in British politics from October, 1922, when he ousted Mr. Lloyd George, until May, 1937, when, loaded with honours and enshrined in public esteem, he laid down his heavy task and retired in dignity and silence to his Worcestershire home. My relations with this statesman are a definite part of the tale I have to tell. Our differences at times were serious, but in all these years and later I never had an unpleasant personal interview or contact with him, and at no time did I feel we could not talk together in good faith and understanding as man to man.

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The party stresses which the Irish Settlement had created inside Mr. Lloyd George’s Coalition were growing with the approach of an inevitable general election. The issue arose whether we should go to the country as a Coalition Government or break up beforehand. It seemed more in accordance with the public interest and the decencies of British politics that parties and ministers who had come through so much together and borne a mass of joint responsibilities should present themselves unitedly to the nation. In order to make this easy for the Conservatives, who were by far the larger and stronger party, the Prime Minister and I had written earlier in the year offering to resign our offices, and give our support from a private station to a new Government to be formed by Mr. Austen Chamberlain. The Conservative leaders, having considered this letter, replied firmly that they would not accept that sacrifice from us and that we must all stand or fall together. This chivalrous attitude was not endorsed by their followers in the party, which now felt itself strong enough to resume undivided power in the State.

By an overwhelming vote the Conservative Party determined to break with Lloyd George and end the National Coalition Government. The Prime Minister resigned that same afternoon. In the morning, we had been friends and colleagues of all these people. By nightfall, they were our party foes, intent on driving us from public life. With the solitary and unexpected exception of Lord Curzon, all the prominent Conservatives who had fought the war with us, and the majority of all the Ministers, adhered to Lloyd George. Those included Arthur Balfour, Austen Chamberlain, Robert Home, and Lord Birkenhead, the four ablest figures in the Conservative Party. At the crucial moment I was prostrated by a severe operation for appendicitis, and in the morning when I recovered consciousness I learned that the Lloyd George Government had resigned, and that I had lost not only my appendix but my office as Secretary of State for the Dominions and Colonies, in which I conceived myself to have had some parliamentary and administrative success. Mr. Bonar Law, who had left us a year before for serious reasons of health, reluctantly became Prime Minister. He formed a Government of what one might call “The Second Eleven.” Mr. Baldwin, the outstanding figure, was Chancellor of the Exchequer. The Prime Minister asked the King for a dissolution. The people wanted a change. Mr. Bonar Law, with Mr. Baldwin at his side, and Lord Beaver-brook as his principal stimulant and mentor, gained a majority of 120, with all the expectation of a five-year tenure of power. Early in the year 1923, Mr. Bonar Law resigned the Premiership and retired to die of his fell affliction. Mr. Baldwin succeeded him as Prime Minister, and Lord Curzon reconciled himself to the office of Foreign Secretary in the new Administration.

Thus began that period of fourteen years which may well be called “The Baldwin-MacDonald Régime.” During all that time Mr. Baldwin was always, in fact if not in form, either at the head of the Government or leader of the Opposition, and as Mr. MacDonald never obtained an independent majority, Mr. Baldwin, whether in office or opposition, was the ruling political figure in Britain. At first in alternation but eventually in political brotherhood, these two statesmen governed the country. Nominally the representatives of opposing parties, of contrary doctrines, of antagonistic interests, they proved in fact to be more nearly akin in outlook, temperament, and method than any other two men who had been Prime Ministers since that office was known to the Constitution. Curiously enough, the sympathies of each extended far into the territory of the other. Ramsay MacDonald nursed many of the sentiments of the old Tory. Stanley Baldwin, apart from a manufacturer’s ingrained approval of protection, was by disposition a truer representative of mild Socialism than many to be found in the Labour ranks.

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Mr. Baldwin was by no means dazzled by his suddenly acquired political eminence. “Give me your prayers,” he said, when congratulations were offered. He was, however, soon disquieted by the fear that Mr. Lloyd George would rally, upon the cry of protection, the numerous dissentient Conservative leaders who had gone out of office with the War Cabinet, and thus split the Government majority and even challenge the party leadership. He therefore resolved, in the autumn of 1923, to forestall his rivals by raising the protectionist issue himself. He made a speech at Plymouth on October 25, which could only have the effect of bringing the newly elected Parliament to an untimely end. He protested his innocence of any such design; but to accept this would be to underrate his profound knowledge of British party politics. Parliament was accordingly on his advice dissolved in October, and a second general election was held within barely a twelvemonth.

The Liberal Party, rallying round the standard of free trade, to which I also adhered, gained a balancing position at the polls, and, though in a minority, might well have taken office had Mr. Asquith wished to do so. In view of his disinclination, Mr. Ramsay MacDonald, at the head of little more than two-fifths of the House, became the first Socialist Prime Minister of Great Britain, and lived in office for a year by the sufferance and on the quarrels of the two older parties. The nation was extremely restive under minority Socialist rule, and the political weather became so favourable that the two Oppositions – Liberal and Conservative – picked an occasion to defeat the Socialist Government on a major issue. There was another general election – the third in less than two years. The Conservatives were returned by a majority of 222 over all other parties combined.¹ At the beginning of this election Mr. Baldwin’s position was very weak, and he made no particular contribution to the result. He had, however, previously maintained himself as party leader, and as the results were declared, it became certain he would become again Prime Minister. He retired to his home to form his second Administration.

At this time I stood fairly high in Tory popularity. At the Westminster by-election six months before I proved my hold upon Conservative forces. Although I stood as a Liberal, great numbers of Tories worked and voted for me. In charge of each of my thirty-four committee rooms was a Conservative M.P. defying his leader Mr. Baldwin and the party machine. This was unprecedented. I was defeated only by forty-three votes out of twenty thousand cast. At the general election I was returned for Epping by a ten thousand majority, but as a “Constitutionalist.” I would not at that time adopt the name “Conservative.” I had had some friendly contacts with Mr. Baldwin in the interval; but I did not think he would survive to be Prime Minister. Now on the morrow of his victory, I had no idea how he felt towards me. I was surprised, and the Conservative Party dumbfounded, when he invited me to become Chancellor of the Exchequer, the office which my father had once held. A year later, with the approval of my constituents, not having been pressed personally in any way, I formally rejoined the Conservative Party and the Carlton Club, which I had left twenty years before.

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My first question at the Treasury of an international character was our American debt. At the end of the war, the European Allies owed the United States about ten thousand million dollars, of which four thousand million were owed by Britain. On the other hand, we were owed by the other Allies, principally by Russia, seven thousand million dollars. In 1920, Britain had proposed an all-round cancellation of war debts. This involved, on paper at least, a sacrifice by us of about seven hundred and fifty million pounds sterling. As the value of money has halved since then, the figures could in fact be doubled. No settlement was reached. On August 1, 1922, in Mr. Lloyd George’s day, the Balfour Note had declared that Great Britain would collect no more from her debtors, Ally or former enemy, than the United States collected from her. This was a worthy statement. In December of 1922, a British delegation, under Government, visited Washington; and as the result Britain agreed to pay the whole of her war debt to the United States at a rate of interest reduced from five to three and one-half per cent, irrespective of receipts from her debtors.

This agreement caused deep concern in many instructed quarters, and to no one more than the Prime Minister himself. It imposed upon Great Britain, much impoverished by the war in which, as she was to do once again, she had fought from the first day to the last, the payment of thirty-five millions sterling a year for sixty-two years. The basis of this agreement was considered, not only in this island, but by many disinterested financial authorities in America, to be a severe and improvident condition for both borrower and lender. “They hired the money, didn’t they?” said President Coolidge. This laconic statement was true, but not exhaustive. Payments between countries which take the form of the transfer of goods and services, or still more of their fruitful exchange, are not only just but beneficial. Payments which are only the arbitrary, artificial transmission across the exchange of such very large sums as arise in war finance cannot fail to derange the whole process of world economy. This is equally true whether the payments are exacted from an ally who shared the victory and bore much of the brunt or from a defeated enemy nation. The enforcement of the Baldwin-Coolidge debt settlement is a recognisable factor in the economic collapse which was presently to overwhelm the world, to prevent its recovery and inflame its hatreds.

The service of the American debt was particularly difficult to render to a country which had newly raised its tariffs to even higher limits, and had already buried in its vaults nearly all the gold yet dug up. Similar but lighter settlements were imposed upon the other European Allies. The first result was that everyone put the screw on Germany. I was in full accord with the policy of the Balfour Note of 1922, and had argued for it at the time; and when I became Chancellor of the Exchequer I reiterated it, and acted accordingly. I thought that if Great Britain were thus made not only the debtor, but the debt-collector of the United States, the unwisdom of the debt collection would become apparent at Washington. However, no such reaction followed. Indeed the argument was resented. The United States continued to insist upon its annual repayments from Great Britain.

It, therefore, fell to me to make settlements with all our Allies which, added to the German payments which we had already scaled down, would enable us to produce the thirty-five millions annually for the American Treasury. Severest pressure was put upon Germany, and a vexatious régime of international control of German internal affairs was imposed. The United States received from England three payments in full, and these were extorted from Germany by indemnities on the modified Dawes scale.

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For almost five years I lived next door to Mr. Baldwin at Number 11 Downing Street, and nearly every morning on my way through his house to the Treasury, I looked in upon him for a few minutes’ chat in the Cabinet Room. As I was one of his leading colleagues, I take my share of responsibility for all that happened. These five years were marked by very considerable recovery at home. This was a capable, sedate Government during a period in which marked improvement and recovery were gradually effected year by year. There was nothing sensational or controversial to boast about on the platforms, but measured by every test, economic and financial, the mass of the people were definitely better off, and the state of the nation and of the world was easier and more fertile by the end of our term than at its beginning. Here is a modest, but a solid claim.

It was in Europe that the distinction of the Administration was achieved.

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Hindenburg now rose to power in Germany. At the end of February, 1925, Friedrich Ebert, leader of the pre-war German Social-Democrat Party, and first President of the German Republic after the defeat, died. A new President had to be chosen. AllGermans had long been brought up under paternal despotism, tempered by far-reaching customs of free speech and parliamentary opposition. Defeat had brought them on its scaly wings democratic forms and liberties in an extreme degree. But the nation was rent and bewildered by all it had gone through, and many parties and groups contended for precedence and office. Out of the turmoil emerged a strong desire to turn to old Field-Marshal von Hindenburg, who was dwelling in dignified retirement. Hindenburg was faithful to the exiled Emperor, and favoured a restoration of the imperial monarchy “on the English model.” This, of course, was much the most sensible though least fashionable thing to do. When he was besought to stand as a candidate for the Presidency under the Weimar Constitution, he was profoundly disturbed. “Leave me in peace,” he said again and again.

However, the pressure was continuous, and only Grand-Admiral von Tirpitz at last was found capable of persuading him to abandon both his scruples and his inclinations at the call of Duty, which he had always obeyed. Hindenburg’s opponents were Marx of the Catholic Centre and Thaelmann the Communist. On Sunday, April 26, all Germany voted. The result was unexpectedly close:

Hindenburg, who towered above his opponents by being illustrious, reluctant, and disinterested, was elected by less than a million majority, and with no absolute majority on the total poll. He rebuked his son Oskar for waking him at seven to tell him the news: “Why did you want to wake me up an hour earlier? It would still have been true at eight.” And with this he went to sleep again till his usual calling-time.

In France the election of Hindenburg was at first viewed as a renewal of the German challenge. In England there was an easier reaction. Always wishing as I did to see Germany recover her honour and self-respect, and to let war-bitterness die, I was not at all distressed by the news. “He is a very sensible old man,” said Lloyd George to me when we next met; and so indeed he proved as long as his faculties remained. Even some of his most bitter opponents were forced to admit, “Better a Zero than a Nero.” ² However, he was seventy-seven, and his term of office was to be seven years. Few expected him to be returned again. He did his best to be impartial between the various parties, and certainly his tenure of the Presidency gave a sober strength and comfort to Germany without menace to her neighbours.

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Meanwhile, in February, 1925, the German Government had addressed itself to M. Herriot, then French Premier. Their memorandum stated that Germany was willing to declare her acceptance of a pact by virtue of which the Powers interested in the Rhine, above all England, France, Italy, and Germany, would enter into a solemn obligation for a lengthy period towards the Government of the United States, as trustees, not to wage war against a contracting state. Furthermore, a pact expressly guaranteeing the existing territorial status on the Rhine would be acceptable to Germany. This was a remarkable event. The French Government undertook to consult their allies. Mr. Austen Chamberlain made the news public in the House of Commons on March 5. Parliamentary crises in France and Germany delayed the process of negotiation, but after consultation between London and Paris a formal Note was handed to Herr Stresemann, the German Minister, by the French Ambassador in Berlin on June 16,1925. The Note declared that no agreement could be reached unless as a prior condition Germany entered the League of Nations. There could be no suggestion in any proposed agreement of a modification of the conditions of the Peace Treaty. Belgium must be included among the contracting Powers; and finally the natural complement of a Rhineland Pact would be a Franco-German Arbitration Treaty.

The British attitude was debated in the House of Commons on June 24. Mr. Chamberlain explained that British commitments under the Pact would be limited to the West. France would probably define her special relationships with Poland and Czechoslovakia; but Great Britain would not assume any obligations other than those specified in the Covenant of the League. The British Dominions were not enthusiastic about a Western Pact. General Smuts was anxious to avoid regional arrangements. The Canadians were lukewarm, and only New Zealand was unconditionally prepared to accept the view of the British Government. Nevertheless, we persevered. To me the aim of ending the thousand-year strife between France and Germany seemed a supreme object. If we could only weave Gaul and Teuton so closely together economically, socially, and morally as to prevent the occasion of new quarrels, and make old antagonisms die in the realisation of mutual prosperity and interdependence, Europe would rise again. It seemed to me that the supreme interest of the British people in Europe lay in the assuagement of the Franco-German feud, and that they had no other interests comparable or contrary to that. This is still my view today.

Mr. Austen Chamberlain, as Foreign Secretary, had an outlook which was respected by all parties, and the whole Cabinet was united in his support. In July, the Germans replied to the French Note, accepting the linking-up of a Western Pact with the entry of Germany into the League of Nations, but stating the prior need for agreement upon general disarmament. M. Briand came to England and prolonged discussions were held upon the Western Pact and its surroundings. In August the French, with the full agreement of Great Britain, replied officially to Germany. Germany must enter the League without reservations as the first and indispensable step. The German Government accepted this stipulation. This meant that the conditions of the Treaties were to continue in force unless or until modified by mutual arrangement, and that no specific pledge for a reduction of Allied armaments had been obtained. Further demands by the Germans, put forward under intense nationalistic pressure and excitement, for the eradication from the Peace Treaty of the “war guilt” clause, for keeping open the issue of Alsace-Lorraine, and for the immediate evacuation of Cologne by Allied troops, were not pressed by the German Government, and would not have been conceded by the Allies.

On this basis the Conference at Locarno was formally opened on October 4. By the waters of this calm lake the delegates of Britain, France, Germany, Belgium, and Italy assembled. The Conference achieved: first, the Treaty of Mutual Guarantee between the five Powers; secondly, arbitration treaties between Germany and France, Germany and Belgium, Germany and Poland, Germany and Czechoslovakia. Thirdly, special agreements between France and Poland, and France and Czechoslovakia, by which France undertook to afford them assistance if a breakdown of the Western Pact were followed by an unprovoked resort to arms. Thus did the Western European Democracies agree to keep the peace among themselves in all circumstances, and to stand united against any one of their number who broke the contract and marched in aggression upon a brother land. As between France and Germany, Great Britain became solemnly pledged to come to the aid of whichever of the other two states was. the object of unprovoked aggression. This far-reaching military commitment was accepted by Parliament and endorsed warmly by the nation. The histories may be searched in vain for a parallel to such an under-taking.

The question whether there was any obligation on the part of France or Britain to disarm, or to disarm to any particular level, was not affected. I had been brought into these matters as Chancellor of the Exchequer at an early stage. My own view about this two-way guarantee was that, while France remained armed and Germany disarmed, Germany could not attack her; and that, on the other hand, France would never attack Germany if that automatically involved Britain becoming Germany’s ally. Thus, although the proposal seemed dangerous in theory – pledging us in fact to take part on one side or the other in any Franco-German war that might arise – there was little likelihood of such a disaster ever coming to pass; and this was the best means of preventing it. I was therefore always equally opposed to the disarmament of France and to the rearmament of Germany, because of the much greater danger this immediately brought on Great Britain. On the other hand, Britain and the League of Nations, which Germany joined as part of the agreement, offered a real protection to the German people. Thus there was a balance created in which Britain, whose major interest was the cessation of the quarrel between Germany and France, was to a large extent umpire and arbiter. One hoped that this equilibrium might have lasted twenty years, during which the Allied armaments would gradually and naturally have dwindled under the influence of a long peace, growing confidence, and financial burdens. It was evident that danger would arise if ever Germany became more or less equal with France, still more if she became stronger than France. But all this seemed excluded by solemn treaty obligations.

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The Pact of Locarno was concerned only with peace in the West, and it was hoped that what was called “An Eastern Locarno” might be its successor. We should have been very glad if the danger of some future war between Germany and Russia could have been controlled in the same spirit and by similar measures as the possibility of war between Germany and France. Even the Germany of Stresemann was, however, disinclined to close the door on German claims in the East, or to accept the territorial treaty position about Poland, Danzig, the Corridor, and Upper Silesia. Soviet Russia brooded in her isolation behind the cordon sanitaire of anti-Bolshevik states. Although our efforts were continued, no progress was made in the East. I did not at any time close my mind to an attempt to give Germany greater satisfaction on her eastern frontier. But no opportunity arose during these brief years of hope.

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There were great rejoicings about the treaty which emerged at the end of 1925 from the Conference at Locarno. Mr. Baldwin was the first to sign it at the Foreign Office. The Foreign Secretary, having no official residence, asked me to lend my dining-room at Number 11 Downing Street for his intimate friendly luncheon with Herr Stresemann. We all met together in great amity, and thought what a wonderful future would await Europe if its greatest nations became truly united and felt themselves secure. After this memorable instrument had received the cordial assent of Parliament, Sir Austen Chamberlain received the Garter and the Nobel Peace Prize. His achievement was the high-water mark of Europe’s restoration, and it inaugurated three years of peace and recovery. Although old antagonisms were but sleeping, and the drumbeat of new levies was already heard, we were justified in hoping that the ground thus solidly gained would open the road to a further forward march.

At the end of the second Baldwin Administration, the state of Europe was tranquil, as it had not been for twenty years, and was not to be for at least another twenty. A friendly feeling existed towards Germany following upon our Treaty of Locarno, and the evacuation of the Rhineland by the French Army and Allied contingents at a much earlier date than had been prescribed at Versailles. The new Germany took her place in the truncated League of Nations. Under the genial influence of American and British loans Germany was reviving rapidly. Her new ocean liners gained the Blue Riband of the Atlantic. Her trade advanced by leaps and bounds, and internal prosperity ripened. France and her system of alliances also seemed secure in Europe. The disarmament clauses of the Treaty of Versailles were not openly violated. The German Navy was non-existent. The German air force was prohibited and still unborn. There were many influences in Germany strongly opposed, if only on grounds of prudence, to the idea of war, and the German High Command could not believe that the Allies would allow them to rearm. On the other hand, there lay before us what I later called the “economic blizzard.” Knowledge of this was confined to rare financial circles, and these were cowed into silence by what they foresaw.

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The general election of May, 1929, showed that the “swing of the pendulum” and the normal desire for change were powerful factors with the British electorate. The Socialists had a small majority over the Conservatives in the new House of Commons. The Liberals, with about sixty seats, held the balance, and it was plain that under Mr. Lloyd George’s leadership they would, at the outset at least, be hostile to the Conservatives. Mr. Baldwin and I were in full agreement that we should not seek to hold office in a minority or on precarious Liberal support. Accordingly, although there were some differences of opinion in the Cabinet and the party about the course to be taken, Mr. Baldwin tendered his resignation to the King. We all went down to Windsor in a special train to give up our seals and offices; and on June 7, Mr. Ramsay MacDonald became for the second time Prime Minister at the head of a minority Government depending upon Liberal votes.

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The Socialist Prime Minister wished his new Labour Government to distinguish itself by large concessions to Egypt, by a far-reaching constitutional change in India, and by a renewed effort for world, or at any rate British, disarmament. These were aims in which he could count upon Liberal aid, and for which he therefore commanded a parliamentary majority. Here began my differences with Mr. Baldwin, and thereafter the relationship in which we had worked since he chose me for Chancellor of the Exchequer five years before became sensibly altered. We still, of course, remained in easy personal contact, but we knew we did not mean the same thing. My idea was that the Conservative Opposition should strongly confront the Labour Government on all great imperial and national issues, should identify itself with the majesty of Britain as under Lord Beaconsfield and Lord Salisbury, and should not hesitate to face controversy, even though that might not immediately evoke a response from the nation. So far as I could see, Mr. Baldwin felt that the times were too far gone for any robust assertion of British imperial greatness, and that the hope of the Conservative Party lay in accommodation with Liberal and Labour forces, and in adroit, well-timed manoeuvres to detach powerful moods of public opinion and large blocks of voters from them. He certainly was very successful. He was the greatest party manager the Conservatives had ever had. He fought, as their leader, five general elections, of which he won three. History alone can judge these general issues.

It was on India that our definite breach occurred. The Prime Minister, strongly supported and even spurred by the Conservative Viceroy, Lord Irwin, afterwards Lord Halifax, pressed forward with his plan of Indian self-government. A portentous conference was held in London, of which Mr. Gandhi, lately released from commodious internment, was the central figure. There is no need to follow in these pages the details of the controversy which occupied the sessions of 1929 and 1930. On the release of Mr. Gandhi in order that he might become the envoy of Nationalist India to the London Conference, I reached the breaking-point in my relations with Mr. Baldwin. He seemed quite content with these developments, was in general accord with the Prime Minister and the Viceroy, and led the Conservative Opposition decidedly along this path. I felt sure we should lose India in the final result and that measureless disasters would come upon the Indian peoples. I therefore after a while resigned from the Shadow Cabinet upon this issue. On January 27, 1931, I wrote to Mr. Baldwin:

Now that our divergence of view upon Indian policy has become public, I feel that I ought not any longer to attend the meetings of your Business Committee, to which you have hitherto so kindly invited me. I need scarcely add that I will give you whatever aid is in my power in opposing the Socialist Government in the House of Commons, and I shall do my utmost to secure their defeat at the general election.

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The year 1929 reached almost the end of its third quarter under the promise and appearance of increasing prosperity, particularly in the United States. Extraordinary optimism sustained an orgy of speculation. Books were written to prove that economic crisis was a phase which expanding business organisation and science had at last mastered. “We are apparently finished and done with economic cycles as we have known them,” said the President of the New York Stock Exchange in September. But in October a sudden and violent tempest swept over Wall Street. The intervention of the most powerful agencies failed to stem the tide of panic sales. A group of leading banks constituted a milliard-dollar pool to maintain and stabilise the market. All was vain.

The whole wealth so swiftly gathered in the paper values of previous years vanished. The prosperity of millions of American homes had grown upon a gigantic structure of inflated credit, now suddenly proved phantom. Apart from the nationwide speculation in shares which even the most famous banks had encouraged by easy loans, a vast system of purchase by instalment of houses, furniture, cars, and numberless kinds of household conveniences and indulgences had grown up. All now fell together. The mighty production plants were thrown into confusion and paralysis. But yesterday, there had been the urgent question of parking the motor-cars in which thousands of artisans and craftsmen were beginning to travel to their daily work. Today the grievous pangs of falling wages and rising unemployment afflicted the whole community, engaged till this moment in the most active creation of all kinds of desirable articles for the enjoyment of millions. The American banking system was far less concentrated and solidly based than the British. Twenty thousand local banks suspended payment. The means of exchange of goods and services between man and man was smitten to the ground; and the crash on Wall Street reverberated in modest and rich households alike.

It should not, however, be supposed that the fair vision of far greater wealth and comfort ever more widely shared, which had entranced the people of the United States, had nothing behind it but delusion and market frenzy. Never before had such immense quantities of goods of all kinds been produced, shared, and exchanged in any society. There is in fact no limit to the benefits which human beings may bestow upon one another by the highest exertion of their diligence and skill. This splendid manifestation had been shattered and cast down by vain imaginative processes and greed of gain which far outstripped the great achievement itself. In the wake of the collapse of the stock market came, during the years between 1929 and 1932, an unrelenting fall in prices and consequent cuts in production causing widespread unemployment.

The consequences of this dislocation of economic life became world-wide. A general contraction of trade in the face of unemployment and declining production followed. Tariff restrictions were imposed to protect the home markets. The general crisis brought with it acute monetary difficulties, and paralysed internal credit. This spread ruin and unemployment far and wide throughout the globe. Mr. MacDonald’s Government, with all their promises behind them, saw unemployment during 1930 and 1931 bound up in their faces from one million to nearly three millions. It was said that in the United States ten million persons were without work. The entire banking system of the great Republic was thrown into confusion and temporary collapse. Consequential disasters fell upon Germany and other European countries. However, nobody starved in the English-speaking world.

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It is always difficult for an administration or party which is founded upon attacking capital to preserve the confidence and credit so important to the highly artificial economy of an island like Britain. Mr. MacDonald’s Labour-Socialist Government were utterly unable to cope with the problems which confronted them. They could not command the party discipline or produce the vigour necessary even to balance the budget. In such conditions a Government, already in a minority and deprived of all financial confidence, could not survive.

The failure of the Labour Party to face this tempest, the sudden collapse of British financial credit, and the break-up of the Liberal Party, with its unwholesome balancing power, led to a national coalition. It seemed that only a Government of all parties was capable of coping with the crisis. Mr. MacDonald and his Chancellor of the Exchequer, on a strong patriotic emotion, attempted to carry the mass of the Labour Party into this combination. Mr. Baldwin, always content that others should have the function so long as he retained the power, was willing to serve under Mr. MacDonald. It was an attitude which, though deserving respect, did not correspond to the facts. Mr. Lloyd George was still recovering from an operation – serious at his age; and Sir John Simon led the bulk of the Liberals into the all-party combination.

I was not invited to take part in the Coalition Government. I was politically severed from Mr. Baldwin about India. I was an opponent of the policy of Mr. MacDonald’s Labour Government. Like many others, I had felt the need of a national concentration. But I was neither surprised nor unhappy when I was left out of it. Indeed, I remained painting at Cannes while the political crisis lasted. What I should have done if I had been asked to join, I cannot tell. It is superfluous to discuss doubtful temptations that have never existed. Certainly during the summer I had talked to MacDonald about a national administration, and he had shown some interest. But I was awkwardly placed in the political scene. I had had fifteen years of Cabinet office, and was now busy with my Life of Marlborough. Political dramas are very exciting at the time to those engaged in the clatter and whirlpool of politics, but I can truthfully affirm that I never felt resentment, still less pain, at being so decisively discarded in a moment of national stress. There was, however, an inconvenience. For all these years since 1905 I had sat on one or the other of the Front Benches, and always had the advantage of speaking from the box on which you can put your notes, and pretend with more or less success to be making it up as you go along. New I had to find with some difficulty a seat below the Gangway on the Government side, where I had to hold my notes in my hand whenever I spoke, and take my chance in debate with other well-known ex-Cabinet Ministers. However, from time to time I got called.

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The formation of the new Government did not end the financial crisis, and I returned from abroad to find everything unsettled in the advent of an inevitable general election. The verdict of the electorate was worthy of the British nation. A National Government had been formed under Mr. Ramsay MacDonald, founder of the Labour-Socialist Party. They proposed to the people a programme of severe austerity and sacrifice. It was an earlier version of “Blood, sweat, toil, and tears,” without the stimulus or the requirements of war and mortal peril. The sternest economy must be practised. Everyone would have his wages, salary, or income reduced. The mass of the people were asked to vote for a régime of self-denial. They responded as they always do when caught in the heroic temper. Although contrary to their declarations, the Government abandoned the gold standard, and although Mr. Baldwin was obliged to suspend, as it proved for ever, those very payments on the American debt which he had forced on the Bonar Law Cabinet of 1923, confidence and credit were restored. There was an overwhelming majority for the new Administration. Mr. MacDonald as Prime Minister was only followed by seven or eight members of his own party; but barely a hundred of his Labour opponents and former followers were returned to Parliament. His health and powers were failing fast, and he reigned in increasing decrepitude at the summit of the British system for nearly four fateful years. And very soon in these four years came Hitler.