DID MACMILLAN LIE OVER SUEZ?
Diane Kunz thinks that
the Chancellor's misleading information during the Suez crisis may have paid off
DURING the Suez crisis of 1956, when Britain last confronted a Middle Eastern ruler, then as now Western nations initially looked to economic sanctions to force their Middle Eastern antagonist, Gamel Abdel Nasser, to back down. When financial measures proved futile Britain, together with France and Israel, opted for armed intervention. Yet just one week after the Israeli attack, early in the morning of 6 November, 1956, the Cabinet met and decided to accept the United Nations ceasefire: the quest for a military solution to the Suez crisis had failed. Historians still debate the reasons for this decision, a task complicated by the continued censoring of crucial documents on both sides of the Atlantic.
Yet it is now clear that erroneous in- formation played an important role m convincing Ministers to bow to the United Nations edict.
Accounts by or about the Prime Minis- ter, Anthony Eden, the Foreign Secretary, Selwyn Lloyd, and the Lord Privy Seal and Leader of the House of Commons, R. A. Butler, all give the Chancellor of the Exchequer, Harold Macmillan, the credit for triggering the decision to accede to the ceasefire by his announcement of a drastic fall in British gold and dollar reserves. Alistair Home, Macmillan's authorised biographer, takes the same view, stating in Volume I of his work that 'it was Macmil- lan who decided the issue' when he told the Cabinet that Britain's gold reserves tad fallen by £100 million over the past week — or by one eighth of their remaining total. (P.440, emphasis in original). According to Horne and Macmillan's own memoirs, Macmillan then told the Cabinet that he had learned from telephone calls with New York and Washington that sterling was being dumped in New York, that the Federal Reserve Bank of New York, which held the foreign exchange for the Amer- ican government, had participated in this action and that the United States would block a British borrowing from the Inter- national Monetary Fund until Britain had accepted the ceasefire (Riding the Storm, P. 164).
All very persuasive, particularly to a weakened Prime Minister and to a Cabinet shaken by the events of the past week, most notably the vituperative American reaction to the Anglo-French-Israeli inva- sion and the United Nations condemna- tion. What Cabinet Ministers could not have known was that most of what Macmil- lan said was completely untrue.
The astounding drop in British reserves of £100 million ($280 million) clearly stop- ped Ministers in their tracks and played a crucial role in convincing them that they must bow to American pressure and accept the ceasefire. For example, in his memoirs Eden says that 'a run on the,pound, at a speed which threatened disaster to our whole economic position, had developed in the world's financial markets' which pre- sented a worse danger to Britain than did Soviet threats [p.622]. In his biography of Rab Butler, Anthony Howard states that the Cabinet accepted the bitter pill of a ceasefire after Macmillan announced the loss of $270 million [p. 237]. But in truth the position of the reserves was very different. Macmillan was told on 7 Novem- ber, the day following the crucial Cabinet meeting, that the loss of reserves for the first week of November was $85 million (£31.7 million) or one third of what Mac- millan had proclaimed the previous day. It was not until 16 November that the loss of reserves for the month reached $200 mil- lion.
The Chancellor's allegation of heavy selling of sterling in New York by the Federal Reserve Bank of New York and private investors was equally untrue. American government sterling reserves stood at £26 million on 31 December 1956, having declined by the inconsequential amount of £4 million since 30 September 1956. Bank of England and Federal Re- serve documents first indicate heavy New York sales of sterling on 20 and 21 Novem- ber. Even then, the location of sales is not indicative of the identity of the sellers.
Macmillan's assertion that the Eisenhower administration would not allow Britain to borrow from the IMF until it accepted the ceasefire constituted his one accurate pronouncement. The administra- tion realised the strong impact financial pressure would have on its allies; on 1 November Secretary of State John Foster Dulles told his brother Allen, head of the Central Intelligence Agency, that Britain and France would quickly feel the econo- mic heat. The President and his colleagues clearly intended to keep the heat up until the Eden government accepted the cease- fire; blocking an IMF loan was part of that strategy. But Macmillan pointed his col- leagues in the wrong direction. The Chan- cellor assumed that the ceasefire would serve as a fig-leaf to protect a continued British-French presence in Egypt. Instead American officials insisted that the inva- sion force genuinely withdraw — they had meant precisely what they said. While Macmillan prided himself on his American heritage and his ability to understand Washington, in truth, since the Suez crisis began, he had called the American shots wrong. Now the Chancellor believed that all would be well once the British and French agreed to the ceasefire. It would take four more weeks and a genuine run on the British reserves for Macmillan and his colleagues to learn otherwise.
The interesting questions are: did Mac- millan knowingly make false statements to the Cabinet and if so, why? It seems obvious that Macmillan knew he was mis- leading the Cabinet when he told his colleagues that £100 million in reserves had been lost in one week. The one alternative explanation, that Macmillan confused dol- lars with pounds, does not hold water. The Chancellor was a shrewd man, conversant with financial information. Surely on a vital question of national security he would have made certain of his figures before making such a critical pronouncement.
What then motivated Macmillan's ac- tions? Macmillan knew that an approach based on financial information would be effective. Ministers were aware that the pound had been under intermittent press- ure since 1945 and grasped the continuing importance of sterling to Britain's global position. Furthermore, Macmillan un- doubtedly discerned that his mis- statements would not be discovered. As Chancellor, he had primary responsibility for Britain's finances. Of his colleagues only two could have challenged his state- ments. Butler, who spent four years as Chancellor of the Exchequer, had both the background and the American contacts to question Macmillan. However, having long disliked the idea of a military solution to the Suez imbroglio, he had not motivation to do so. Theoretically Eden might have rallied the Cabinet to his side. But weakened by illness and by the catastrophe he now faced, the Prime Minister shied away from battling his most able opponent, particularly on the latter's home turf.
Macmillan, always a gambler, had risked a great deal on his belief that the approach he took on 6 November would be the winning one, both for his country and for himself. It would seem that the bet paid off handsomely.
Diane Kunz, an assistant professor at Yale, is the author of the forthcoming The Economic Diplomacy of the Suez Crisis.
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