MELLON VS. CHURCHILL

When two political giants wrangled over the little matter of a few billion dollars.

If an army marches on its stomach, a country at war marches on a mountain of money. As World War I ground on, Britain sought aid from America. When a British delegation arrived in “top hats and frock coats, looking every bit the way Americans pictured English diplomats,” it returned to Britain with $3 billion, just some of the money the American government and private banks loaned out for the war effort. After the war, as first-time author Eicher chronicles, the job of collecting the debt went to Andrew Mellon, secretary of the treasury, while Winston Churchill, then finance minister, argued vehemently that the U.S. should write off the debt. The relations between the two men, Eicher writes, were chilly, and seldom did they come to terms on that or any other matter. Eicher’s narrative winds into repetitive territory as Mellon dunned Churchill for years—and for years Churchill evaded the bill. Eicher does not adequately address the implications that alternate paths might have yielded: If Germany had not been saddled with an enormous war debt and reparations (which, to its credit, it tried valiantly to pay), would Hitler have been able to rise to power? In that light, Churchill’s proposed alternate strategy might have changed world history: “We should declare publicly,” he said, “that we are perfectly ready to wipe out every European debt owing to us if the United States will accord us a similar release.” Instead, Mellon, though with some misgivings, continued to press for repayment, and Britain and other allies defaulted. Indeed, Eicher notes, to this day those debts “remain outstanding on the books of the U.S. Treasury.”

Of some interest to students of the historical interplay between geopolitics and international finance.