A debt the British paid - and one they didn't

US Zionists wanted to link WW II loans to the UK's policy in Mandatory Palestine.

churchill 298.88 (photo credit: Associated Press)
churchill 298.88
(photo credit: Associated Press)
Its cities battered by German V-rockets and its economy exhausted by five years of war, England was in dire straits in the autumn of 1945. So many homes had been destroyed or damaged that many families had to be housed in asbestos huts - dubbed "hutments" - that the government purchased from the US. Strict wartime food rationing continued, and housewives still waited long hours in line for a bag of potatoes or a few apples. Shoes were so scarce that Londoners sometimes waited in line to obtain the right to wait in line to buy them. The rule of thumb was "if you saw a queue, you got in it," even if you didn't know what it was for. Desperate to secure American financial assistance, the British government sent a delegation to the US in late 1945 to negotiate the terms of a massive loan. The team was headed by the famous economist John Maynard Keynes. The urgency of its mission was underlined by England's ongoing coal shortage and that year's unusually harsh winter - the worst of the century - which would be followed in the spring by severe flooding. President Harry Truman and his administration were sympathetic but cautious in their approach to the British request. In his memoirs, Truman recalls he agreed that England's situation was "serious" but believed Keynes's descriptions of the British economic situation - he called it "a financial Dunkirk" - were exaggerated. When the British asked for a 50-year, interest-free loan of $5 billion to $6b., the Americans hesitated. Protracted negotiations ensued. That's where American Zionists came in. Late 1945 and early 1946 were periods of mounting turmoil and anxiety for world Jewry. Hundreds of thousands of Holocaust survivors languished in displaced persons camps in Europe, prevented from traveling to Palestine by the same British immigration restrictions that had doomed millions of Hitler's victims. The Labor Party, after winning Britain's July 1945 elections, had brushed aside the pro-Zionist promises in its campaign platform and was maintaining the pre-war White Paper limits on Jewish immigration. That drove the Hagana to join the armed revolt that the Irgun Zvai Leumi and Stern Group had launched against the British occupation authorities. The British, in turn, responded with increasingly severe police actions intended to deter Palestine Jewry from supporting the rebels. As a result, American Jewish criticism of British policies reached new heights and ranged across the political and religious spectrum. The Labor Zionist journal Furrows called British police actions "Gestapo tactics." Henry Monsky, leader of the American Jewish Conference, an alliance of most major Jewish groups, said England's arrest and deportation of would-be immigrants was "patterned on the Nazi practice." In a striking example of how British actions were radicalizing American Jews, the annual convention of the Central Conference of American Rabbis - the Reform rabbinical association, which was still officially non-Zionist - would denounce the "Black Sabbath" arrests of Jewish Agency leaders the following year as "Gestapo acts" and "a deliberate desecration of the Jewish Sabbath... a wanton violation of religious freedom [and] a reversion to the barbaric practices of ancient Syria and Rome." By the autumn of 1945, Jewish anger at the British was beginning to focus on the loan request. The British ambassador in Washington, Lord Halifax, reported to London that Republican Senator Robert Taft of Ohio, who had close ties to Zionist leaders, was working to link the loan to changes in Britain's Palestine policy. Congressman Emanuel Celler of Brooklyn declared at a Jewish rally in Washington that the US should withhold economic aid "unless Great Britain gives us assurance that she will live up to treaty pledges and platform promises concerning Palestine." Celler, joined by other prominent congressmen, was addressing a crowd of between 600 and 1,000, many of them rabbis, who had taken part in a "Zion March" through the nation's capital. It was strikingly similar to the only Jewish demonstration in Washington during the Holocaust - a march by 400 rabbis just before Yom Kippur in 1943, organized by the maverick Jewish activists known as the Bergson Group. Now, two years later, veterans of that 1943 rally organized another march, but with similar results: They, too, were refused a meeting with the president, but were warmly received by members of Congress. IN THE MONTHS to follow, Celler labored to convince his congressional colleagues that the US should take aim at what he called England's "pocket nerves." He tried to stimulate opposition by raising questions not only about British policy in Palestine but also the terms of the loan and Britain's ability to repay it. "I don't place my opposition to the loan on the narrow grounds of British perfidy and failure to keep her promises to the Jews," Celler declared. "There are numerous other reasons for opposition." In a series of speeches, press conference and articles, Celler questioned the proposed interest rate, which would be lower than what American war veterans were paying, and the loose wording concerning how the money might be used - the "escape clauses, weasel words and abracadabra," as he put it. Celler's efforts received an important boost when the activists who organized the Zion March established the Political Action Committee for Palestine (PACP) and launched an intensive lobbying effort on Capitol Hill against the loan. Their leader was Rabbi Baruch Korff, a feisty Bergson Group veteran from Boston. Ultimately 177 congressmen endorsed the PACP's statement opposing the loan, and PACP advertisements, headlined "Kill that loan! - lest you forsake your conscience," were placed in numerous newspapers. As the Anglo-American loan talks continued into the spring, additional rumblings of discontent were heard from Congress, the business community and even some administration officials. John Snyder, director of the US Office of War Mobilization and Reconversion, pointed with concern to England's failure to repay funds it had borrowed from the US during World War I. Others were alarmed by the fact that the British had a new and untried leadership, and especially by the Labor government's intention to implement socialist economic policies. Time magazine reported that some on Capitol Hill were "squawking" that a loan to England would prompt similar requests from other countries. A Gallup poll found that the American public opposed the loan by a two-to-one margin. In March 1946, the British and American negotiators reached agreement on the terms of a 60-year, $3.75-billion loan, at 2 percent interest. The repayment schedule would begin with a five-year grace period, thus effectively lowering the rate of interest to 1.6%. President Truman threw his full political weight behind the loan and sent it on to Congress, where his party enjoyed comfortable majorities in both houses. Enter Abba Hillel Silver. A dynamic and outspoken rabbi from Cleveland, Silver had recently been elevated to the top leadership ranks of American Zionism. His rise reflected the increasingly militant mood among American Jews as a result of Britain's harsh Palestine policy and the horrors of the Holocaust. But the old guard, represented by American Jewish Congress leader Rabbi Stephen Wise, did not easily give way. In an attempt to preserve unity, the conservative Wise and the activist Silver were made co-chairs of the American Zionist Emergency Council, the umbrella for all major US Zionist groups. The power-sharing arrangement was doomed from the start. Wise, a fervent Democrat, placed a premium on his personal relationships with officials of the Roosevelt and Truman administrations. Silver, who was close to Republican Sen. Taft, favored public protests and pressure on Washington to bring about a more pro-Zionist policy. Wise counseled caution and backstairs diplomacy. Silver's approach gained ground in the Jewish community as the Palestine controversy intensified during the spring of 1946. An Anglo-American Committee of Inquiry recommended the admission of 100,000 refugees to Palestine, but the British refused to implement that proposal and the Truman administration declined to intervene. Meanwhile, the mufti of Jerusalem escaped from house arrest in France, seemingly with the tacit approval of the French and British authorities. And British foreign minister Ernest Bevin sparked international outrage by charging that Americans favored the immigration of Jewish refugees to Palestine "because they do not want too many of them in New York." On the heels of Bevin's remark, Silver publicly announced his opposition to the British loan. England's "shocking record of broken pledges" regarding Palestine proved the US could not afford "to make a loan to a government whose pledged word seems to be worthless," Silver declared at a Zionist rally in Madison Square Garden on June 11. His speech inspired an avalanche of anti-loan letters and telegrams to Congress from Jews across the country. Wise, speaking at the same rally, appeared to edge closer to Silver's position, asserting that if the British failed to admit the 100,000, "no promise of England is to be trusted." Even Congressman Sol Bloom, chairman of the House Foreign Affairs Committee, who had been known as a dutiful follower of the administration's line on the Mideast, expressed "vehement opposition" to the loan in private meetings with British and State Department officials. The New York Times reported that congressional leaders "feared serious defections in the Democratic Party's ranks" when the loan came up for a vote because of Bevin's anti-Jewish statement. It appeared that the Jewish community and the Truman administration were on a collision course. Then events took an unexpected turn. FEARING THAT American Jews would be blamed for postwar suffering in Britain if the funds were denied, Wise suddenly announced his support for the loan. "Noisy Jewish disapproval of the loan" would make it appear as if "we [have] become Jews resident in America rather than American Jews," he wrote. He was anxious that it not appear as if Jews "decide Anglo-American and world affairs on the basis of Palestine." Wise had breached the wall of Jewish opposition to the loan, and others quickly followed suit. The American Jewish Committee mobilized 26 public figures to endorse the loan, and AJC president Joseph Proskauer cabled Congressman Bloom that "Palestine should not be a factor in fixing the attitude most beneficial to America." The Jewish War Veterans announced it did not oppose the loan since, despite Britain's "unjust and illegal" actions in Palestine, "we are not opposed to any measure which will help promote world peace and international cooperation." A Jewish congressman from New York, Arthur Klein, said that although he had received "many hundreds of letters" from constituents opposing the loan, he would support it because "we must put the interests of our country above partisan politics or self-interest." Most significantly, Bloom was persuaded to reverse his position by Wise. He announced he would vote "as an American and not as a Jew." At the urging of presidential adviser David Niles, Bloom read aloud Wise's endorsement at the House Foreign Affairs Committee hearings on the loan in early July. By the final day of the hearings, supporters of the loan were increasingly confident that they had enough votes for passage. A front-page article in The New York Times reported that "the most clear-cut factor in the shift of attitude was believed to have been the statement read in the House yesterday from Rabbi Stephen S. Wise ..." Nonetheless, the administration, worried that weekend absenteeism might impact the Saturday vote, continued its "strenuous efforts" on behalf of the loan. It even arranged for an airplane to be "held ready to return 10 members who went to Manila for the Philippine Independence ceremonies," Speaker of the House Sam Rayburn reported. In the end, the vote was much closer than the administration would have liked. Congressman Celler's amendment blocking the loan was defeated by just 108 to 89. The final vote to approve the loan was 219 in favor, 155 against. Truman's strong support for the bill, public sympathy for Britain as America's wartime ally and fears that a British financial collapse would lead to a communist takeover in England were sufficient to overcome congressional anger about Palestine and other concerns. But just barely. Silver publicly blamed Wise for the failure of the anti-loan effort. Prior to his intervention, "passage of the loan was definitely in doubt," Silver asserted. "Enough of our friends had rallied to our side, in addition to those who were opposed to the loan on other grounds, to make the postponement of [approval] very likely," but then Wise "came forth as the champion of the loan in the name of Americanism, [which] demoralized and scattered our friends in Congress." Silver was convinced that a united American Jewish front would have forced a delay of "six to eight weeks," and generated enough pressure on the British to force concessions on Palestine. YET EVEN IN defeat, the Zionist campaign against the loan played a part in shaping US policy on Palestine. Many in the Jewish community were already uneasy over the Truman administration's partial support for the April 1946 report of the Anglo-American Committee on Palestine, because although it recommended the immigration of 100,000 refugees, it rejected the idea of Jewish statehood. In July, just as the loan battle was peaking, American and British representatives composed the Morrison-Grady Plan, which would have restricted Palestine's Jews to a small autonomous province under British rule. Leaks of the plan generated a storm of Jewish criticism, which the president did not escape. "It is about time that Mr. Truman ceased to be the tail to the kite of the worst elements in the Colonial Office and the State Department," said Louis Newman, a prominent Reform rabbi in New York City, who articulated a growing perception in the community. Truman, who had intended to endorse Morrison-Grady, entered a July 30 cabinet meeting carrying "a sheaf of telegrams about four inches thick from various Jewish people" angry about US policy on Palestine, agriculture secretary Henry Wallace noted in his diary. Wallace and others warned Truman that Jewish anger over Palestine could result in significant Democratic losses in the upcoming congressional and mayoral elections, especially in New York, if he backed Morrison-Grady. An exasperated Truman exploded: "Jesus Christ couldn't please them when he was here on earth, so how could anyone expect that I would have any luck?" Wallace added: "Truman said he had no use for [the Jews] and didn't care what happened to them." But Truman did care about the political implications for his party. Smarting from the recent waves of Jewish criticism, he not only backed off Morrison-Grady, but went further. On the eve of Yom Kippur - not coincidentally just a few weeks before the elections - Truman issued a statement which, despite its tenuous wording, was universally reported as US support for creation of a sovereign Jewish state. "The Yom Kippur statement marked a watershed in the political and diplomatic struggle for the Jewish state," Prof. Michael J. Cohen of Bar-Ilan University writes in Truman and Israel. "The British saw in the statement a demonstration of Jewish political power and gave up their quest for an Anglo-American consensus on Palestine." That perception, in turn, contributed to the British decision to leave Palestine. THE LOAN controversy also claimed its share of casualties. John Maynard Keynes already had a heart condition, and the strain of the long months of negotiating the terms of the loan took its toll. Five weeks after the talks concluded, he suffered a fatal heart attack. The Political Action Committee for Palestine did not escape unscathed. Even before the congressional vote, the US Bureau of Internal Revenue (as it was known in those days) revoked the committee's tax-exempt status on the grounds that its campaign against the loan demonstrated it was a "political or pressure group," rather than a "charitable or educational organization." Stephen Wise, too, became a casualty of the loan struggle, although his wounds were mostly self-inflicted. Wise knew his support for the loan would anger many Jews. "Zionistically I took my life in my hands," he wrote to a colleague. His fears were not misplaced. A stinging column by the prominent Zionist journalist Carl Alpert accused Wise of "betraying his people by endorsing the British loan." The Detroit Jewish Chronicle called his attacks on Silver "the bleatings of a frustrated old man," while the Yiddish daily Morgen Zhurnal denounced him as a "prima donna." By the beginning of 1947, Wise was finished as a Zionist leader. Most of the Jewish community had embraced the positions and tactics of his activist rivals. Reluctantly recognizing that his views no longer represented the movement he had led for so long, Wise resigned from the co-chairmanship of the American Zionist Emergency Council and his other Zionist posts. He may have won the loan battle, but Wise lost the Zionist war. As for Abba Hillel Silver, Emanuel Celler and the other opponents of the loan - in retrospect, were they right to claim that the British were untrustworthy? Yes and no, one might say. On the one hand, the British kept their promise to repay the money they borrowed. They defied the doubters and, at the end of 2006, finished paying back every cent of the loan plus interest. But as for their promise, in the Balfour Declaration, to facilitate the establishment of a Jewish national home in Palestine - that was one debt they never fully paid. The writer is director of The David S. Wyman Institute for Holocaust Studies, www.WymanInstitute.org. The research for this article was made possible in part by the Wyman Institute's David Brodetzky Memorial Research Initiative.