The difficulties went far beyond those of personalities, however. The world econ- omy had become so intertwined by the early 20th century that a major manu- facturing and food-exporting nation such as the United States found it nearly impossible to remain uninvolved in a conflict on the scale of the Great War. At the root of the problem lay the fact that by control of the sea, Britain could pur- chase vast supplies from the United States and thus could transfer its manpower from agriculture and industry to the war front while maintaining a flow of food and manufactured goods from overseas. At the beginning of the war, the United States owed more to Europe than Europe owed to the United States, which was, in effect, a net debtor. British and French bankers and investment houses held outstanding investments equivalent to about a billion dollars in American firms and institutions. By simply cashing in these amounts, the British and French had ample resources to begin buying munitions and transport equipment without asking for additional credit.
As American industry geared up to produce the ordered items, employment picked up, and American business began to thrive as a consequence of the new flow of exports. Although Bryan had asked that no loans be made to the bel- ligerent nations, no loans were necessary to meet the requirements of British and French purchasing agents from August 1914 through August 1915. Through the simple process of international trade filtered by the blockades of the two major belligerents and the difference in their effectiveness, the United States had become an economic ally of Britain and France, regardless of Wilson’s policies and Bryan’s protestations.
Britain could enforce a blockade against Germany through its control of the sea, with mines and with surface ships channeling trade through British ports. But if Germany sought to blockade Britain through the use of the submarine, the demands of that technology required submarines to sink a large number
of blockade-running ships in order to effectively interdict the trade. A few of the German U-boat captains seemed quite careless of human life, although the majority apparently tried to honor the traditions of the sea by ensuring the safety of passengers and crew of the vessels they sank. The British press, however, portrayed them all as ruthless pirates, and a few episodes such as the attacks on the Falaba, the Gulflight, and the Lusitania sustained that impression. American acceptance of the British style of blockade and anger at the German method using the submarine meant that although the United States remained neutral in a technical or legal sense, its resources had flowed disproportionately to the Allies, hardly a neutral economic stand.
The impersonal forces of technology and the geographic structure of the British blockade created a situation that made it nearly impossible for the United States to be neutral in economic terms. The injunction to be neutral in thought as well as action reflected a deeply felt American tradition and attitude, but it had little effect in stopping the natural flow of commerce. The British govern- ment understood the strength of its position. On August 4, 1915, it sent a note to the United States explaining that its blockade operated in full conformity with extant international law. If any problems came up, the British stated, they would agree to submit cases of confiscation to arbitration. Of course, very few problems did arise, since American companies, for the most part, did not attempt to sell goods to Germany, and most had no ethical problem as they tried to supply the large demand for goods in Britain and France.
The commercial involvement of the United States evolved. By September 1915, it became clear that the Allies had come close to exhausting the financial resources available for purchase of U.S. goods and that either short-term loans or long-term financing would be required if American companies continued to supply goods and food. Lansing and his advisers realized that to cut off European orders would cause a major recession in the United States, with factories laying off newly hired workers and farm prices plummeting. Furthermore, the loan ban that had been established by Bryan had had little or no effect in preventing purchases, and the “pecuniary interest” that Bryan had originally feared in 1914 had by now become well established in supporting continued trade. On Septem- ber 6, Lansing recommended to Wilson that the banks be notified that the U.S. government no longer believed it inconsistent with the spirit of neutrality for Americans to make loans to belligerents. Quietly, in this fashion, Bryan’s policy vanished, and on September 25 a consortium of bankers made the first loan of $500 million to Britain and France. Over the next 18 months, American institu- tions made loans of more than $2 billion to the Allies. In the spirit of impartiality, loans could also be made to Germany and Austria-Hungary, but since the trade to those countries amounted to a mere trickle, the Central Powers borrowed less than $20 million in 1915 and 1916.
ARABIC
AND SUSSEX
German submarine captains, however, continued to attack merchant ships through the summer of 1915, usually warning the crews to evacuate, but not always. The policy varied with the personality and character of the submarine captain and with the particular situation. For example, on August 19, 1915, Captain Rudolf Schneider of U-24 sank without warning a British steamer, Arabic, bound from
Liverpool to New York City. Although most of the 433 passengers and crew were rescued, two Americans were among the 44 dead. Schneider claimed that the steamer took an evasive zigzagging course and that he interpreted that action as an attempt to ram, but few believed the claim. The ship sank in 10 minutes.
World outrage mounted again, and this time the kaiser issued explicit orders that not only should a liner be fully warned before being sunk, but that the submarine captain must observe that both crew and passengers safely boarded lifeboats before sinking the ship. Orders went to Count von Ber- nstorff, the German ambassador in Washington, to give assurances to the U.S. government, and he did so September 1 in a statement that Americans interpreted as the “Arabic Pledge.” “Liners will not be sunk by our submarines without warning and without safety of the lives of non-combatants, provided that the liners do not try to escape or offer resistance.”4 Backing off from
attacking liners, German submarine commanders found themselves restricted to attacking freighters or warships. As a result of the changed submarine tac- tics, from the late summer of 1915 until early 1917, German-American rela- tions gradually improved.
On February 21, 1916, Germany advised the U.S. government that armed merchantmen were to be treated as cruisers beginning March 1. This action came in response to British use of Q ships in large numbers, to the use of neutral flags by British merchant ships, and to the open arming of merchant vessels.
Realizing that Americans traveling on an armed merchant ship could easily be killed by either side, and that such an event could draw the United States into the conflict, in early March 1916, members of Congress introduced congres- sional resolutions designed to preserve neutrality. The resolutions came in direct response to the German announcement that their submarines would sink armed merchantmen as warships. The resolutions openly challenged Wilson’s policies. Again, Wilson reacted firmly, believing that no one, including ambassadors, secre- taries of state, and legislators, should infringe on his ability to set foreign policy. Member of Congress Jeff McLemore of Texas introduced a resolution requesting that the president warn Americans not to travel on armed vessels. Senator Thomas P. Gore of Oklahoma introduced a separate bill that would deny passports to Americans traveling on armed vessels and demanded Allied respect for non-contraband trade with the Central Powers.
Following the votes closely, and seeing them as congressional challenges to his prerogatives as president, Wilson called on his party regulars to have both resolutions stopped. The Gore and McLemore measures, although they failed, showed strong public and congressional opinion that Wilson’s policies could put the United States in a position to be drawn into the war.
Improved relations between the United States and Germany were threatened in the period March 24–May 4, 1916, over one more U-boat attack. On March 24, 1916, a German U-boat torpedoed Sussex, a French cross-channel passenger ship, and several Americans aboard were injured. The United States regarded the attack as a violation of the Arabic Pledge, but Germany claimed the submarine captain mistook Sussex for a minelayer. In fact, U-boat captain Herbert Pust- kuchen of U-29 acted wantonly, simply ignoring the orders about warnings, and he sank several other ships on his March cruise with no regard for the safety of passengers or crew. Wilson dismissed the minelayer story, and, on April 18, 1916, in response to the sinking of Sussex, Secretary of State Robert Lansing sug-
gested to Wilson that the United States should break diplomatic relations with Germany.
Instead, Wilson sent an ultimatum that unless Germany abandoned its method of submarine warfare, the United States would sever diplomatic relations. The next day, Wilson explained to Congress his decision to issue an ultimatum to Germany in response to the Sussex sinking, stating that “unless the Imperial Ger- man Government should now immediately declare and effect an abandonment of its present methods of warfare against passenger and freight carrying vessels this Government can have no choice but to sever diplomatic relations with the Government of the German Empire altogether.”5
On May 4, 1916, Germany agreed to the U.S. demands issued after the Sussex sinking but imposed a counter-condition that the United States compel the Allies to respect the rules of international law with regard to shipping, in reference to mines, continuous voyage blockade, and rules of contraband. Traditionally, food had never been regarded as contraband, and shortages were affecting Germany. Wilson accepted the German response as a pledge but refused to accept the counter-condition. This so-called Sussex Pledge remained in effect, and German U-boat captains generally refrained from sinking passenger ships or American merchant ships over the next months. However, the pledge continued to leave the decision as to war in German hands, because, if Germany openly moved to violate the pledge, the United States had almost committed itself to entering the war against Germany. So from mid-1916 onward, in this sense, Germany held the power to keep America in or out of the war.