Not Just Another Recession
Why the Global Economy May Never Be the Same
SPEAKING at Geneva on September 20, Mr. Anthony Eden, the British Foreign Secretary, said: "At present the aggregate tonnage of the principal types of warships actually building for the Royal Navy exceeds 450,000 tons. I take no account in this figure of the ships already launched this year, nor of a further 55,000 tons which Parliament has sanctioned and which will shortly be put in hand. The last three naval programs partly completed or in actual execution in the United Kingdom at the present time represent a total expenditure of £130,000,000. Naval personnel is being extended at a rate without precedent in our country in time of peace."
Impressive as these figures are, they do not adequately reveal the magnitude of the effort which Britain is now making to restore and consolidate her sea power. Tables published in the Navy Estimates for 1937 show the following combatant and auxiliary units as under construction during the current fiscal year: 5 battleships, 21 cruisers, 5 aircraft carriers, 49 destroyers, 19 submarines, 3 depot ships, 24 escort, mine-sweeping and patrol vessels, 3 gunboats, 17 motor torpedo-boats, and 2 surveying ships -- a total of 148 vessels. Nor is this the whole story. A new program is to be introduced to Parliament next March, and while its details are not yet officially revealed, well-informed observers predict three to five battleships, seven cruisers, and a generous quota of destroyer, submarine, and other light tonnage. The personnel of the Navy, which has jumped from 98,000 to 112,000 in the last few years, will be further increased to an approximate total of 125,000 officers and men.
What is the purpose of this gigantic scheme of naval rearmament? That it has been undertaken for reasons of defense, and not for aggression, is self-evident to all foreign onlookers save the wilfully blind or the victims of propaganda from the dictatorial countries. But behind every arms plan there must be, or should be, a definite strategical objective. In this case it is not difficult to perceive. When Sir Samuel Hoare, the late First Lord of the Admiralty, introduced this year's navy budget, he spoke of a "two hemisphere fleet" as the goal in view. This can only mean that Britain intends to become strong enough to be capable of holding her own simultaneously in European waters and in the Far East. Having regard to the present balance of power in the world, that is a big order. But if the British Commonwealth is to survive it must be fulfilled.
For Britain the potential danger zones are the North Sea, the Mediterranean, and the Western Pacific, and in the absence of a general movement towards appeasement those zones must continue to be carefully watched. It goes without saying that an Anglo-German accord would simplify Britain's defense problems to an incalculable extent. Relieved of anxiety in northern waters, she would be able to concentrate sufficient force in the Mediterranean to defend her line of communications there, while retaining a margin of strength to oppose a strong front to aggression in the Far East. But whether that happy state of affairs will ever come to pass remains to be seen. Not the least valuable feature of the Rome-Berlin axis to its two engineers is the possibility it offers for one to create a naval diversion to relieve the other. Even when her present program is completed, Britain could hardly muster overwhelming force in the North Sea and the Mediterranean at one and the same time, and even were she able to do this it would leave her virtually defenseless in the Pacific. On the other hand, it is scarcely conceivable that she would be fighting singlehanded a coalition of Powers, and in the existing system of international grouping those Powers on whom she might reckon for support are excellently placed for intervening in the Mediterranean and the Far East.
Despite the fact that no thoughtful Briton can be satisfied with this grouping, actualities must be faced. For the present, Britain, France and Russia are bound to consider the prospect of joint defensive action against Germany, Italy and Japan in the event of a new world conflagration. And that a local war involving two of the Great Powers would inevitably develop into a world war is almost the only point on which the political pundits are in complete agreement. Let us, therefore, consider the strategical situation that would arise if these rival three-Power blocs came into collision.
Britain already is strong enough at sea to deal faithfully with the German Navy and to spare a powerful detachment for Mediterranean service. Thus aided, the French Navy should be fully competent to settle accounts with Italy, whose naval power is vested mainly in weapons -- fast and light surface craft, submarines and airplanes -- which are difficult to coordinate strategically or tactically and may prove less formidable than they look on paper. No flights of rhetoric from Rome can conceal the fact that Italy is in a bad strategical position. The prerequisite condition of her retention of Abyssinia is unrestricted use of the Suez Canal, and not merely of the Canal itself but of its approaches as well. In other words, she must be sufficiently strong to command both the Eastern Mediterranean and the Red Sea. That she could never do in face of an Anglo-French coalition. Nor is that all. Notwithstanding the manful efforts she is making to become self-supporting, Italy is still largely dependent on imported supplies. Even under the half-hearted system of sanctions applied in 1935-36 she was beginning to feel the pinch. An effective naval blockade would speedily produce far more painful results.
Italian spokesmen are fond of reminding the world that the strength of their air force would more than compensate for weakness at sea. During the trouble with Britain two years ago they threatened to make Malta untenable, and they still believe -- though not entirely with justice -- that this threat was responsible for the temporary withdrawal of the British Mediterranean fleet to Alexandria. What they overlook is the fact that Malta is not of absolutely crucial importance to the British Navy. There are other British bases in the Mediterranean, actual and prospective, from which the fleet could operate very comfortably, bases out of reach of the Italian heavy bombers but ideally situated for dominating the only two passages out of the Mediterranean basin. Furthermore, air raiding is a two-edged weapon, and certainly the last with which Italy, if she were wise, would threaten her neighbors. With the possible exception of Japan, no country is more vulnerable to this method of warfare.
And last but not least, while freedom of movement in the Mediterranean is indispensable to Italy in wartime, the same is not entirely true of Britain. If the latter were compelled to evacuate the Mediterranean for the time being she would be seriously inconvenienced, but no more. She could still reach India and the Far East by way of the Cape of Good Hope, at the cost of longer voyages and a temporary shortage of certain supplies. During the 1935-36 crisis over Abyssinia a number of British ships bound to and from the East were, in fact, re-routed via the Cape, and it is a safe assumption that plans for diverting the whole of this traffic have been prepared. In passing, attention may be directed to the far-reaching schemes of harbor and dock development which are now actually proceeding at Cape Town and Durban, not to mention other ports along the east and west coasts of Africa. Improvisation and "muddling through" may be the customary British practice in land warfare, but in conserving its vital lines of communication -- in this case the sea routes -- no Power exhibits greater prescience. As we shall see later, this traditional policy is being actively pursued at the present time.
Naval staffs are not in the habit of broadcasting their war plans, but the strategy to be pursued by Britain in the event of war with Italy seems fairly obvious. Britain imports every week of the year over a million tons of food and raw materials, and it is widely assumed that a very high proportion of these supplies derive from the Mediterranean. In normal times, it is true, 20.1 percent of her aggregate imports pass through the Strait of Gibraltar, but only 11.4 percent come from sources inside the Mediterranean itself, the remainder having traversed the Suez Canal. It will be seen, therefore, that the closing of the Mediterranean commercial highway would deprive Britain of little more than one-ninth of her total oversea supplies, for the cargoes coming from places east of Suez could, if necessary, be sent round the Cape. Furthermore, of the 11.4 percent originating in the Mediterranean, only a very small proportion represents food. The bulk consists of cotton, minerals, and chemicals, and for many of these commodities there are alternative non-Mediterranean sources of supply. It is, then, no more than the simple truth to assert that were the use of the Mediterranean route to be denied to British merchant shipping, Britain herself might be inconvenienced but would certainly not be crippled.
In the writer's opinion, it is more than possible that in the event of war the British naval staff would promptly declare the entire Mediterranean "out of bounds" to merchant shipping -- with the possible exception of tankers, for which strong convoy escorts might be provided; would re-route the Indian and Far East trade via the Cape; and would concentrate on the task of maintaining strategic control of the Gibraltar-Suez route by the employment of naval and air forces. With the elimination of merchant shipping from the immediate war zone, the task of the British armed forces would be immeasurably simplified. Possessing well-defended bases at Gibraltar, Malta, Alexandria and Cyprus, they should be in a position not merely to offer a strong resistance to Italian aggression, but to deliver heavy counter-blows, the nature of which need not be specified. Against a possible German diversion in the North Sea must be set the virtual certainty that France would be an active ally of Britain in the Mediterranean. Since these considerations must be equally patent to Signor Mussolini, one may be permitted to doubt whether his future plans really include an unprovoked attack on Britain, an attack which would indubitably array against him the united strength of the whole Commonwealth.
As long as the Anglo-German naval agreement of 1935 remains in force -- and it is expressly stated in the documentary exchange that it is to be a permanent arrangement -- the total German combatant tonnage will not exceed 35 percent of that of the British Commonwealth. It is true that two factors join to give Germany a somewhat higher relative strength than the ratio indicates: first, because her fleet is of absolutely modern construction and will contain none of the over-age tonnage with which the British fleet is, and will continue to be, burdened; secondly, because Germany can count on massing the whole of her fleet in the North Sea and (or) the Baltic, whereas Britain must always maintain powerful squadrons in the Mediterranean and the Far East, and can never hope to have more than half her Navy available for service in home waters. This notwithstanding, the German Navy is not likely to become a serious menace while the 1935 agreement endures. Recent suggestions from Rome that Germany contemplates a revision of the pact in the near future are probably a case of the wish fathering the thought.
There is no doubt that the one "depressed area" in the field of British strategy is the Far East. Here her weakness is as palpable as the impossibility of remedying it at an early date is plain. When the Washington Five-Power Agreement was signed in 1922 the British and American naval experts were under no illusion as to its strategical consequences. They were fully aware that the keys of the Western Pacific had been presented to Japan as a free gift, but no doubt they hoped that she would not abuse the gift. As a safeguard against this contingency the Nine-Power Treaty was concurrently negotiated. Recent events in China are calculated to shake the faith of the most confirmed idealist in the value of parchment safeguards.
British interests in the Far East greatly exceed those of any other Western Power, not excluding the United States. Apart from "real estate," represented by Hong Kong, Britain has enormous capital investments in China, the loss of which would deal her a staggering blow. Then there are her possessions in Malaya and Borneo, whose natural wealth is considerable. Australia, a vast and thinly peopled continent, contains enough territory to satisfy the most rapacious of the "have not" Powers. All these interests and properties must be defended in the last analysis by the British Navy, for in no case are the local defense forces adequate to withstand attack by an aggressor of first-class rank.
Previous to the completion of the new naval base at Singapore, Britain's strategic position in the Western Pacific was critical. Nowhere in that area was there a single dock to take modern battleships; yet without docking facilities a fleet is for all practical purposes immobilized. Today, or at any rate in the very near future, three of the largest warships can be docked simultaneously at Singapore. The next step is to provide ships to fill the docks. For the time being no capital ships can be spared from European waters, but as the naval program matures new battleships will come forward to relieve the older units, which may then be available for service in the Pacific. According to unofficial news published in London, the five modernized battleships of the Queen Elizabeth class will eventually be stationed at Singapore, which is then expected to supersede Hong Kong as headquarters of the Pacific Fleet. With the battleships will be one heavy and one light cruiser squadron, several airplane carriers, and an appropriate force of destroyers and submarines. If the Pacific Fleet is organized on these lines its strength will be equivalent to that of the present Mediterranean Fleet. Should war become imminent it would no doubt be reinforced by the Australian and New Zealand squadrons, comprising two heavy and three light cruisers, all modern. The projected Pacific Fleet will thus be a formidable organism, and one that will enable Britain, for the first time since the World War, to provide fairly adequate protection for her vast interests in that ocean.
It is true that the projected fleet will be markedly inferior to the Japanese Navy, but it should be strong enough to practise the defensive strategy which the situation calls for. As long as this fleet remained "in being" -- that is to say, intact and mobile -- Japan would be unlikely to embark on any large-scale oversea expedition against British territory in the Pacific. In all probability, therefore, the appearance of the new fleet at Singapore will automatically banish the potential Japanese menace to Malaya and Australia, as well as to the Dutch East Indies. As regards the latter, the maintenance of the status quo is a no less vital matter to Britain than to Holland herself, and in the event of a Far Eastern conflict it is practically certain that the British forces would have the support of the modest but very efficient Netherlands squadron. The Achilles heel of the British Commonwealth in the Far East is Hong Kong. It is much to be doubted whether this position could be held against a heavy Japanese attack, and many British strategists question the wisdom of attempting to do so. As they justly point out, the ultimate fate of Hong Kong would be determined by the outcome of the war -- a war, be it noted, in which economic forces would weigh hardly less heavily than armaments.
A word must be said about Russia as a possible participant in a Far Eastern war. Even if we discount the stories of an immense fleet of Soviet submarines at Vladivostok, it is clear that Russia is in a position to make things very unpleasant for Japan. The existence of many hundreds of bombing airplanes in and around Vladivostok is not mere rumor but proven fact, and most if not all of Japan's industrial centers lie within their striking range. Whether air power is capable of forcing a decision in war is still an open question, but it is a reasonable assumption that repeated heavy raids on her teeming cities would compel Japan to take such counteraction as would gravely weaken her forces in other areas. Russia is the only Power which could strike directly, and in the very first days of war, at Japan's vital communications with the Asiatic mainland. It seems certain, therefore, that until the Soviet aëro-naval forces based on Vladivostok had been destroyed or reduced to relative impotence, Japan would not be at liberty to engage herself deeply elsewhere. We may go still further and assume that war with Russia would so heavily tax Japan's military resources that she would have no margin left for an expedition against Hong Kong, to say nothing of remoter British territories. Her fleet, too, would be so much occupied in guarding essential lines of communication that it would have few opportunities for aggressive operations. These considerations suggest that although Japan is the predominant naval Power in the Western Pacific, her command of the sea would not necessarily be absolute in the event of war with Britain and Russia.
Nor can the possibility of American intervention be wholly ignored, though its treatment in this study must be regarded as academic. That an Anglo-American coalition would prove fatal to Japan is a proposition hardly likely to be disputed. Without dangerously denuding her Atlantic seaboard the United States could muster in the Pacific a fleet approximately equal in combatant power to the entire Japanese Navy, while the adhesion of a British battle fleet of five capital ships and their auxiliaries would give the combined force a decisive superiority. Nor is Japan today so inaccessible to the direct pressure of naval force as was the case up to a few years ago. Since 1934 the United States has been unobtrusively building, as it were, a strategical bridge between Hawaii and the Philippines, and at the same time surveying an alternative route to Japanese waters from the Aleutian Islands. Such stepping stones as Midway Island, Wake Island, Guam, and Dutch Harbor are regaining all the importance they possessed prior to the Washington Treaty of 1922. Moreover, it is still on the cards that the United States may decide to revive the pre-treaty plan of converting Guam into a major naval base. This will largely depend on what policy Washington elects to follow when the independence of the Philippines is an accomplished fact. If the United States should then undertake to guarantee the integrity of the islands, the creation of a big naval base at Guam would appear to be an inescapable necessity.
Having thus briefly reviewed the field of naval strategy as it appears to British observers, a rather more detailed account of Great Britain's current program of rearmament at sea may be appended. To the expert eye two facts are immediately apparent. First, the whole program is actuated by a definite conception of strategy based on the defense needs of the Commonwealth as a whole, and not -- as in the case of the prewar naval expansion movement -- directed to the establishment of supremacy in one single area, such as the North Sea. Secondly, every one of the scores of new ships now being built has been planned to develop maximum efficiency. At no time in the long and chequered history of the British Navy has so much care been devoted by its constructors to the seaworthiness, floatability and fighting power of individual ships. The vessels now on the stocks are designed from the keel upwards to face and survive ordeal by battle, however devoutly their builders hope that the supreme test will never come.
The five battleships laid down in 1937 are uniform in type, with a standard displacement of 35,000 tons. This means that when ready for sea their weight will exceed 38,000 tons. On paper their armament of 14-inch guns may compare ill with the heavier weapons of contemporary foreign units, but the new 14-inch gun is a rapid-fire, hard-hitting weapon which can engage effectively at all practicable ranges. By adopting it in preference to a heavier caliber the designers have saved about 30 percent in total weight. Part of this economy has been devoted to speed, but most of it to protection. For obvious reasons one must not particularize, but it is permissible to say that the new British battleships will be as hard to sink as any now afloat or building -- and perhaps harder. In the next group of five ships, probably to be laid down in 1938-39, guns of 16-inch caliber may be mounted. Concurrently with this new construction a great program of modernization is under way. Five older battleships and three battle cruisers have been practically rebuilt at an average cost in excess of £2,000,000, and a whole fleet of cruisers is undergoing the same process. The intention is to have ready by the year 1941 a force of not less than 25 capital ships, sufficient to provide squadrons for the Atlantic, the Mediterranean, and the Far East.
Of special significance is the Navy's intensive development of its air force. At the present time five airplane carriers -- one of 22,000 tons, the others of 23,000 tons -- are building, to accommodate a total of 350 planes. Older carriers, such as the Furious, Courageous, and Glorious, are being modernized. Eventually the Navy will possess ten effective carriers housing well over 500 planes. Now that the Fleet Air Arm has been freed from the hampering effect of dual control, the task of coördinating sea and air power has become simpler. There is reason to hope that in a few years the British naval air service will be the second strongest in existence, outnumbered only by that of the United States.
As recently as 1933 the British Commonwealth had only 15 cruisers of postwar design completed. By 1941-42 there will be 60 of these ships in service, besides 10 older cruisers modernized and rearmed. This force of 70 units is regarded as a minimum which must be increased in the event of a marked revival of cruiser building abroad. A feature of the reconstruction program is the conversion of seven old cruisers into anti-aircraft ships by arming them exclusively with high-angle guns. Further, a number of the sloops now building (known as "escort vessels") are to mount only high-angle guns. In the same connection all new capital ships and cruisers, as well as all modernized ships, are being equipped with very powerful batteries of long-range anti-aircraft guns and multiple machine guns.
Up to and including 1935, the annual program never included more than nine destroyers, these boats averaging 1,350 tons. In the last two programs provision has been made for a total of 40 destroyers, averaging 1,730 tons. Further, the yearly quota of submarines has risen from three to seven. Escort vessels, patrol gunboats, minesweepers and auxiliaries of every type are also being built in large numbers.
One of the surprising features of this great naval rearmament movement is the speed and smoothness of its progress. It was inaugurated at a time when, as the result of years of depression, the shipbuilding and armaments industries were at a low ebb and carrying on with a skeleton staff of technicians and skilled workers. In these conditions it seemed impossible that Britain's new fighting fleet could be built and equipped without inordinate delay, and even then only at the cost of dislocating other branches of national industry. Nevertheless, the impossible has been achieved. In place of delay, warships of every type are being built far more rapidly than was previously the case, and today the program as a whole is well ahead of schedule. Nor has there been any serious dislocation of other industries apart from mercantile shipbuilding, the cost of which has risen sharply as the result of the Navy's priority demands on steel supplies and the skilled labor market. Once again a sudden emergency has revealed the immense economic and industrial resources at the command of Britain, and not less the national genius for mobilizing those resources and exploiting them to the full when the need arises.
It has already been stated that the personnel of the Navy has in recent years been increased from 98,000 to 112,000 and will be further enlarged to 125,000. Despite the counter-attraction of the Air Force, which in all countries seems to make a special appeal to youth, recruiting for the Navy continues to be brisk. In the current year the Navy's manpower potential has been reinforced by the institution of a supplementary reserve of officers drawn from the yachting community. This reserve has already reached a strength of 1,000. Further, the Admiralty recently undertook the training of merchant service officers in war defense duties, and schools for this purpose have been opened at all the principal ports. There the officers are taught how to defend their ships against attack by surface raiders, submarines, aircraft and mines. Large stocks of efficient guns are held by the Admiralty in readiness for mounting on board British liners and cargo vessels in the event of war. In consequence of these measures British shipping today is much less vulnerable to attack than it was at the beginning of the World War. It is known, too, that detailed plans have been prepared by the Admiralty for the protection of shipping in war. The machinery for introducing convoy on all the important routes has been set up, and is ready to be put in motion by a stroke of the pen. Although the writer does not share the optimistic view that submarines are no longer a serious menace, he has reason to know that the offensive powers of this weapon have been circumscribed by recent advances in anti-submarine tactics. To what extent aircraft constitute a menace to merchant shipping it is impossible to decide. The British naval view is that merchantmen will have little to fear from air attack while they are at sea, particularly if they carry one or two high-angle guns. On approaching port they would be escorted by naval vessels mounting strong anti-aircraft batteries, as well as by fighter planes from shore bases. The worst danger to merchant ships is likely to come when they are loading or unloading in docks which are within range of hostile bombers. The problem of defending them in these conditions is, however, one for the British Air Force, and hardly concerns the Navy.
As the British Navy is now entirely an oil-burning organism, and only seven percent of Britain's oil supplies is produced at home, it follows that an uninterrupted flow of oil from overseas is an essential condition of national security. The naval authorities, possessing knowledge withheld from the public, are confident that adequate supplies will be forthcoming. Meanwhile, very large reserves of the precious fuel are being accumulated within Great Britain and at all oversea bases of strategical importance. It is believed that the Commonwealth is already stocked with oil sufficient for a war of twelve months' duration. If by that time the Navy had found it impossible to maintain the requisite volume of imports into the country, the oil problem would be overshadowed by the larger one of obtaining the best peace terms.
Although the task of surveying and modernizing the British Navy's world-wide lines of communication had been undertaken long before the Mediterranean crisis of 1935-36, that event led to the process being speeded up considerably. In particular, the threat to the commercial route through the Mediterranean encouraged the development of harbor and dock facilities along the eastern and western coasts of Africa. Mention has been made of the great scheme of port development now being carried out at Cape Town. Nearby is the naval base of Simonstown, which the Union Government places at the disposal of the British Navy. This station is also being brought up to date. But if the Mediterranean route is liable to become too dangerous for merchant shipping in wartime, Britain has not the least intention of resigning its strategic control to other hands. It was announced in Parliament on November 3 that the defenses of Malta are being rapidly improved. Both Admiralty and Air Ministry have an eye on Cyprus, the development of which as a first-class aëro-naval base appears to be assured. Further, unless Anglo-Italian tension is sensibly eased during the next twelve months, the dispatch of heavy reinforcements to the Mediterranean naval and air formations and military garrisons is practically certain to take place. All this activity expresses the British people's firm resolve not to be hustled out of a sea where freedom of movement is of great importance to the security of the Commonwealth as a whole.
In conclusion it may be affirmed that Britain can face the future with calmness and confidence. Though much remains to be done, the most serious gaps in her defenses are now filled. As the rearmament program approaches maturity her powers of defense and counter-attack, already formidable in Europe, will be projected further afield, and knowledge of this fact is quite likely to have a sobering effect on those foreign states whose sabre-rattling propensities have been encouraged by the apparent growth of pacifism among the British peoples. It is gratifying to be able to record, not as a sentimental flourish but as simple truth, that British opinion sees in the growing naval power of the United States an additional and complementary guarantee of world peace.