The United States and Fascist Italy

The Rise of American Finance in Europe

Originally published in Italian in 1980, Gli Stati Uniti e il fascismo. Alle

origini dell’egemonia americana in Italia is regarded today as a crucial
text on the relationship between the United States and Italy during the
interwar years. Aside from the addition of two new prefaces – one by the
author and one by the book’s translator, Molly Tambor – the original
text has remained unchanged, so that Anglophone readers now have the
opportunity to engage with this classic work.
By analyzing the enduring relationship between the United States –
especially its financial establishment – and Fascist Italy up until
Mussolini’s conquest of Ethiopia in 1935, this book provides answers
to some key questions about the interconnectedness of America’s rise to
hegemonic global financial power in the twentieth century and its sup-
port of Italian Fascism during this time.

Gian Giacomo Migone was Professor of History of Euroatlantic

Relations at the University of Torino, Italy. He is the author of
Problemi di storia nei rapporti tra Italia e Stati Uniti (1971) and
Banchieri Americani e Mussolini (1979), as well as of numerous essays
concerning Euro-Atlantic relations before, during, and after the Cold
War. In 1989 he was Lauro de Bosis Lecturer of Italian Civilization at
Harvard University. A member of the Italian Senate from 1992 to 2001,
he chaired its Foreign Relations Committee for seven years, as well as
the Advisory Board of the United Nations System Staff College and the
Civilian Affairs Committee of the NATO Parliamentary Assembly. He is
the founder and first editor of L’ Indice dei libri del mese, an Italian
cultural monthly.
Molly Tambor is Assistant Professor of European History at Long Island
University Post. She is the author of The Lost Wave: Women and
Democracy in Postwar Italy (2014).
The United States and Fascist Italy
The Rise of American Finance in Europe

GIAN GIACOMO MIGONE

Università degli studi di Torino

Translated by

MOLLY TAMBOR
Long Island University
 32 Avenue of the Americas, New York, ny 10013-2473, usa

Cambridge University Press is part of the University of Cambridge.

It furthers the University’s mission by disseminating knowledge in the pursuit of
education, learning, and research at the highest international levels of excellence.

www.cambridge.org
Information on this title: www.cambridge.org/9781107002456
The translation of this work has been funded by SEPS
Segretariato Europeo Per Le Pubblicazioni Scientifiche

Via Val d’Aposa 7 – 40123 Bologna – Italy

seps@seps.it – www.seps.it
© Gian Giacomo Migone 1980, 2015
This publication is in copyright. Subject to statutory exception
and to the provisions of relevant collective licensing agreements,
no reproduction of any part may take place without the written
permission of Cambridge University Press.
First published in Italian as Gli Stati Uniti e il fascismo. Alle origini dell’egemonia americana
in Italia by Feltrinelli Editore 1980
First English edition 2015
Printed in the United States of America
A catalog record for this publication is available from the British Library.
Library of Congress Cataloging in Publication Data
Migone, Gian Giacomo.
[Stati Uniti e il fascismo. English]
The United States and fascist Italy : the rise of American finance in Europe / Gian Giacomo
Migone ; translated by Molly Tambor.
pages cm
isbn 978-1-107-00245-6 (hardback)
1. United States – Foreign relations – Italy. 2. Italy – Foreign relations – United
States. 3. Fascism – Italy – History. 4. United States – Foreign economic relations – 20th
century. I. Title.
e183.8.i8m5413 2015
327.73045–dc23
2015002698
isbn 978-1-107-00245-6 Hardback
Cambridge University Press has no responsibility for the persistence or accuracy of
urls for external or third-party Internet Web sites referred to in this publication
and does not guarantee that any content on such Web sites is, or will remain,
accurate or appropriate.
Cover: Il Becco Giallo, 1928
Every discourse on power is implicitly a discourse on what is
outside that power; that is, a discourse on a different and
alternative power.
Domenico Jervolino
 Contents

Abbreviations page ix
Preface to the English Edition: “Je ne regrette rien” xi
Preface to the Italian Edition: Sources, words, and debts xxxvii
Translator’s Preface xlv

Introduction: The Origins of American Hegemony in Europe 1

American Economic Power after the First World War 1
Class Conflict in the United States 4
The Defeat of the American Working Class 9
American Expansion in Europe 13
American Policy for European Stabilization 22
1 The United States and the Rise of Fascism in Italy 28
United States’ Policy and the Isolation of Italy before Fascism 28
American Reactions to the Rise of Fascism 36
The Matteotti Crisis and the Manipulation of the Press 50
American Reactions to Mussolini’s Early Foreign Policy 68
The Shaping of Italian Foreign Policy 77
Mussolini’s Policy toward the United States 82
2 United States Economic Policy toward Italy 86
The Question of War Debt 86
The Role of the House of Morgan 90
Italian War Debt: Background 94
The Start of Negotiations 105
The Volpi Mission 117
Explaining the Accord 131
American Investments in Italy 141
The Morgan Bank and Investments 150

vii
viii Contents

American Investments in Europe 165

The Stabilization of the Lira 170
3 The United States and Italy Confront the Great Depression 192
The Economic Crisis and International Relations 192
Hoover and Stimson’s Foreign Policy 199
Italian Foreign Policy from Mussolini to Grandi 202
The London Naval Conference 210
The World Disarmament Conference 222
Economic Collaboration between the United States and Italy
in the Face of the Crisis 239
Grandi’s Visit to Washington 257
The Lausanne Conference 266
The Significance of Grandi’s Policies 269
4 Roosevelt and Fascist Italy, from the London Economic
Conference to the Italo-Ethiopian War (1933–1936) 287
Foreign Policy during the Roosevelt Administration 287
Roosevelt and Italian Fascism 298
War in Ethiopia Challenges the Principle of Collective Security 309
The Role of the United States 313
The Position of the Roosevelt Administration 317
Italo-American Trade and the Oil Question 326
The Debate on the Embargo of Raw Materials 336
The Neutrality Act of 1936 342
The Solidifying of Political Factions 344
Italian-Americans and the Ethiopian War 349
The Opposition of Exporters 356
American Diplomats and Appeasement 360
The Morgan Bank and Appeasement 368
The Origins of American Opposition to the Dictatorships 379
Conclusion 389

Index 397
 Abbreviations

AADS Alberto de’ Stefani Archive

AALP Alberto Pirelli Archive
AC-DM Dwight Morrow Archive, Amherst College
AC-GC Gelasio Caetani Papers, Archivio Caetani
ACS-FAS Agenzia Stefani Papers, Archivio Centrale dello Stato
ACS-GVM Giuseppe Volpi di Misurata Papers, Archivio Centrale
dello Stato
ACS-MCP Ministry of Popular Culture Papers, Archivio Centrale
dello Stato
ADG Dino Grandi Archive (many of the papers in this
archive are collected in drafts for a subsequently
published volume; the pertinent section is indicated in
Roman numerals)
AGF Giovanni Fummi Archive
AMAE Archives du Ministère des Affaires Etrangères, Paris
ASMAE-AAW Political Affairs Archive, Archivo Storico del Ministero
degli Affari Esteri, Rome
ASMAE-AG Archive of the Cabinet, Archivio Storico del Ministero
degli Affari Esteri, Rome
ASMAE-ASG Archive of the Secretary General, Archivio Storico del
Ministero degli Affari Esteri, Rome
BE Bank of England Archive
BIAG General Archive of the Banca d’Italia
BIAGSRE General Archive of the Banca d’Italia, Foreign
Relations Section
BIAGUS General Archive of the Banca d’Italia, Research Office

ix
x List of Abbreviations

BLCU-GLH George L. Harrison Archive, Butler Library, Columbia

University
BLCU-NMB Nicholas Murray Butler Archive, Butler Library,
Columbia University
CFR Council on Foreign Relations Archive, New York
DDI Italian Diplomatic Documents
FDRL-OF Official Files, Franklin D. Roosevelt Library
FDRL-PSF President’s Secretary Files, Franklin D. Roosevelt
Library
FRBNY Federal Reserve Bank of New York Archive
FRBNY-BS Benjamin Strong Archive, Federal Reserve Bank of
New York
FRUS-DP Foreign Relations of the United States, Diplomatic
Papers
HUGSBA-TWL Thomas W. Lamont Archive, Graduate School of
Business Administration, Harvard University
HUHL-JCG Joseph C. Grew Archive, Houghton Library, Harvard
University
HUHL-JPM J. Pierrepoint Moffatt Archive, Houghton Library,
Harvard University
HUHL-WP William Phillips Archive, Houghton Library, Harvard
University
LC-CC Calvin Coolidge Presidential Papers, Library of
Congress
LC-CEH Charles Evans Hughes Archive, Library of Congress
LC-CH Cordell Hull Archive, Library of Congress
LC-HPF Henry P. Fletcher Archive, Library of Congress
LC-NHD Norman H. Davis Archive, Library of Congress
LC-WEB William E. Borah Archive, Library of Congress
LC-WED William E. Dodd Archive, Library of Congress
LC-WJC Wilbur J. Carr Archive, Library of Congress
MHS-FBK Frank B. Kellogg Archive, Minnesota Historical Society
NA-DS Department of State Archive, National Archives
NA-IR Italian Records, National Archives
PRO-CAB Cabinet Archive, Public Records Office, London
PRO-FO Foreign Office Archive, Public Records Office, London
YUL-HLS Henry L. Stimson Archive, Yale University Library
 Preface to the English Edition: “Je ne regrette rien”

1. what history?
I started out with the best of intentions. Since my book was written in
Italian thirty-five years ago, the idea was to sweep the dust off it with a
preface that provided the reader with a meticulous update of further
contributions as well as reactions and comments to it by other scholars
and a levelheaded discussion of the corrections they inspired. I am not
going to do so, with a few exceptions as I go along. To be honest, I do not
think anything has been added that would lead me to change my basic
interpretations more or less as they were formulated a long time ago. Like
Edith Piaf, “Je ne regrette rien.” So revise the text, no. But explain the point
of view from which it was written and why I believe it remains relevant
today, yes. In so doing it is also my intent to lead my new readers into a
universe of human reactions and a pantheon that will seem remote and
even exotic to most of them, but perhaps worth a visit.
Any historian should live up to Marc Bloch’s memento: she or he “. . . is
like the ogre of the fable. Where he can feel the scent of human flesh, there
is his prey.”1 But the ogre itself is not devoid of human frailty, even if
it sometimes pretends the opposite is the case. The choice of prey and how
it sees it, plays with it, and devours it is deeply affected by its humanity.
Any historiographical exploration should go beyond the written word of
the person who reconstructs the past and ask what affected that particular
interpretation or school of thought, while questioning its relevance to
ongoing discussion.

1
M. Bloch, Apologia della storia o Mestiere dello storico, Torino: 1969, p. 35.

xi
xii Preface to the English Edition

I believe Benedetto Croce was right when he wrote that “All true
history is contemporary history.”2 Whatever the object and chronology
of the research, its relevance will be measured by contemporary stand-
ards. Also, any author could and should bring to his or her scholarship,
however documented and aseptic its formulations, the imprint of culture,
life, personal experience, and accumulated convictions as affected by the
contemporary events that surround and imbue his or her research and
writing. While Gaetano Salvemini liked to disagree with Croce, especially
on political issues and attitudes, in this respect he tread a similar path,
only going one step further. On many occasions he pointed out that he
did not believe in objectivity, but rather in what he called intellectual
honesty. Better if the convictions of the historian, even prejudices possi-
bly reflected in his or her scholarship, were clearly stated. According to
Salvemini, as well as to Marc Bloch, writing history requires a hypothesis
in order to select the questions relevant to set a course and interrogate
a constant flood of documents; growing at a rate all the more impressive
the more recent the events to be reconstructed, I should add. What
Salvemini called intellectual honesty was the duty to adapt or even
change or abandon any such initial hypothesis in the face of evidence
that contradicted it. Historical facts do exist. Sometimes it is the benefit of
hindsight – a legitimate though not always indispensable tool of any
historian – that establishes a set of facts, rather than the detailed inter-
pretation of documents regarding episodes not always relevant. As
E. H. Carr would claim, writing history is like describing, reproducing,
even photographing a range of mountains. The mountains are there, but
the perspective, the angle, the lens, and the objective are the photogra-
pher’s choice.3
Guided by this conception of our trade, I remember a critical comment
of my American mentor, Ernest May: “I see what you mean. But what
mostly stimulates me is more like the curiosity of the scientist who wants to
understand and describe the characteristics and movements of the object of
his or her attention.” I could not, and would not, deny this need, never-
theless recognizing that it did not and does not represent my primary
motivation in the choice of the objects of my research. Otherwise, I still
feel, rather than a historian, I might as well have tried to become a botanist
or an entomologist.

2
“Ogni vera storia è storia contemporanea,” in G. Galasso, ed., Teoria e storia della
storiografia, Milano: 1989.
3
E. H. Carr, What Is History? London: 1965, pp. 7–30.
 Preface to the English Edition xiii

Another one of my American teachers, H. Stuart Hughes, used to say

that, as a scholar of intellectual history, he always felt that the most
productive attitude was a sort of gradually growing love–hate relationship
with the author whose texts he was analyzing. I was to discover similar
feelings reconstructing the strategies and machinations of my Morgan
bankers or appraised Mussolini’s acute understanding of his need for
moderation in order to satisfy their requirement of stabilization of the
European scene in the 1920s. I hated them because, in the process of
stabilizing capitalist Europe, they also contributed to consolidating the
Fascist regime in Italy, but I could not help feeling waves of admiration for
their strategic capacity to act as surrogates, substitutes (or could it have
been usurpers?), of an otherwise isolationist American diplomacy, while
turning it into moneta sonante, solid coin, as an almost secondary purpose.
Every scholar has his or her own means of reconciling the apparently
conflicting needs for passion and detachment. But it is in the choice of the
object of inquiry, rather than in subsequent writing, that the historian
legitimately shows his or her colors – whether guided by passions or
even, affected by a personal perception of past events that stems from a
vision held as a contemporary human being. Because, without passion there
is no scholarship. As Saverio Vertone, my friend and colleague in the
Italian Senate, used to say, “Our mind is like a vessel, more or less well
equipped with sails; but without the winds of passion, it goes nowhere!” In
Bloch’s Feudal Society, as well as in Salvemini’s reconstruction of social
conflicts in late thirteenth-century Florence (not only in Mussolini
diplomatico and throughout his abundant, obviously militant writings),
this passion is not hard to recognize, in the choice of subject, the man, the
times he lived in, and the culture he was imbued with – even the militant’s
motivation behind the impeccable scholarship.4 And what about another
great historian, Franco Venturi? It is no coincidence that he chose to write
his first book, La jeunesse de Diderot, as a young anti-Fascist exile in France,
followed by a pathbreaking study of Russian populism researched while
experiencing the Stalinist Soviet Union as a cultural attaché in Moscow, only
to then settle down in Torino to work on his five-volume study of
Italian eighteenth-century illuminism, significantly dedicated to all those
who have tried to reform his and their country, at any stage of its history.5

4
M. Bloch, Feudal Society, 2 volumes, New York: 1989; G. Salvemini, Magnati e popolani in
Firenze dal 1280 al 1295, Firenze: 1899; Mussolini diplomatico, Bari: 1952.
5
F. Venturi, Jeunesse de Diderot (de 1713 à 1753), Paris: 1939; Il populismo russo,
2 volumes, Torino: 1952; Settecento riformatore, 5 volumes, Torino: 1970–1990.
xiv Preface to the English Edition

These examples and many others bear out Croce’s and Salvemini’s
call for an all-encompassing contemporary history that does not
substitute, but indeed requires, the scholarly detachment, mixed with
curiosity – in itself a passion – that other scholars such as May expected
from their graduate students, perhaps nurtured by the mix of empathy
and antipathy Stuart Hughes discreetly tried to convey to us as we were
dealing sometimes too single-mindedly with our favorite heroes or
villains.
When advising a student or a junior colleague in the choice of the
subject of a thesis or a book, the first question ought to be “Where does
your interest, if not passion, lead you?” followed by “What is the silence
you feel needs to be broken? You are going to spend a lot of time and
energy that you do not want to waste!” Erudition for its own sake,
quantity at the expense of quality, particularly tempting in the case of
contemporary history, with so many new documentary sources readily
available, should obviously be avoided, though what we might call the
“academic system” is slanted in the opposite direction. No historian
should ever forget that final, vitriolic remark that concluded an otherwise
laudatory review by Malcolm Muggeridge of an exquisitely researched
and written monograph (I quote from memory): “But do we really need
to know so much about so little?” The choice of an object of research
responds to a need to break a silence, the silence of history, often favored
if not dictated by the convenience of a public, even political, silence. Of
course it can also be caused by lack of available documentation or simply
because a given object has been temporarily put to rest by previous
scholarship, the possible results discounted as too obvious to be worth
further investigation, or by a prevailing methodological fashion that
causes the profession to look elsewhere. But there frequently also can
be (I say this from my own experience) a silence dictated by expediency,
whether social, academic, or blatantly political – conscious or, more
often, unconscious. Expediency is by definition varied or multifaceted,
inspired by a prevailing ideology or balance of power; the outcome of a
war or its possible effects on another war still being waged; or, indeed, the
silence of the defeated, who may consider it necessary to remain silent.
For many years after the Second World War, any suffering endured by
the defeated Germans, especially if cruelly inflicted by the victors, was
considered off limits, for opposite but converging reasons, by scholars
both German and of “victorious” nationality. It took Kurt Vonnegut to
break that deafening silence over Dresden and another writer, John
Hersey, to do so in the case of Hiroshima, but for years their example
 Preface to the English Edition xv

was not followed by scholarly authors.6 And, to pick a different example,

even today, how much do we know of the anti-Semitism of the upper classes,
even in democratic countries, before they saw fit to react against Hitler’s
aggression? Ethically speaking, it is what Julien Benda called la trahison des
clercs, the treason of the intellectuals who remain conveniently silent.
Breaking this silence or what can be defined as the existing state of the art is
an essential factor not only of scholarship, but in any public debate and can,
perhaps, be extended to any field of human knowledge, often surprisingly
subservient to fads or fashion. Many colleagues (Stefano Sciuto, a distin-
guished physicist, and indeed my daughter, Thi-Sao Migone, a biomedical
scientist) have taught me that even the harder sciences are likewise affected. In
our case, a legitimate question, by no means the only or decisive one, is “What
piece of historical investigation, no matter how far distant in the past, can be
relevant to the public debate as I see it?” This leads me back to my own
motivations in embarking on thirteen years of research and how I was
affected by it.

2. growing up with history on my mind

Where, indeed, was public motivation for young Italians coming of age
in the 1950s, who in their childhood had experienced war on their own
territory, with recent memories of foreign occupations, and who lived with
the pain and satisfaction of reconstruction? They had to seek it in the
more vital part of the Risorgimento and, subsequently, in the most con-
spicuous popular resistance movement against German occupation in
Europe and the remnants of the Fascist regime. In the foundations of a
democratic Republic, as against a Monarchy that first surrendered to
Fascism but also ensured the continuity of an opportunistic ruling class;
indeed in a Constitution of which many of us were and still are proud.
Many others, even a majority of the middle and upper classes, were
nostalgic of the recent past that, until and throughout the war, had assured
their social status, strenuously trying to forget its end in defeat and
national humiliation. Their main concern was that stability and social
order should not be questioned. Even today, sixty years later, I feel at
times that we are not free from this syndrome. Therefore the Church,
the United States, and the Christian Democratic Party were expedient
resources, even at the cost of prolonged national subalternity. Present

6
K. Vonnegut, Slaughterhouse-Five or The Children’s Crusade, New York: 1969; J. Hersey,
Hiroshima, New York: 1946.
xvi Preface to the English Edition

governments still find it convenient to blame unpopular measures on

some superior authority. When I arrived at the University of Rome as a
student in 1959, it was still a stronghold of neo- and crypto-Fascists. As the
capital city, with its concentration of bureaucracy, Rome was the part
of the country that had most benefited from the Fascist regime. This was
not typical of the rest of Italy, but the reality I came up against in the late
1950s. Although the majority of the student body did not take part in
varsity politics, the Fascists and a dissident pro-Nazi splinter group held
the democratically elected majority of the student parliament, while all the
others – the Christian Democrats, the Socialists, the Communists, and the
conservative Liberali, not to be confused with American liberals – could
only hope for the recurrent feuds within the extreme right, in order to find
some breathing space.
Fortunately, the faculty was more varied than the politically motivated
element of the student body. Of course there were tensions even within the
anti-Fascist minority (the country as a whole was politically controlled by
centrist coalitions led by the Christian Democratic Party); between those,
like myself, who had demonstrated against the invasion of Hungary and
the supporters of a Communist party – the Partito Comunista Italiano
(PCI) – that waited twelve more years, until the subsequent invasion of
Czechoslovakia, to renounce its allegiance to Moscow. But all in all, as we
moved in and around the monumental marble buildings of the University
of Rome, a constant reminder of a past that would not go away, it was
from that past that we wanted to distance ourselves. If not to Moscow
and to its local representatives, where did we look? Those of us who were
politically aware and socially privileged – almost all those who could
pursue a university degree in the 1950s and early 1960s in Italy were at
least middle class – thought we did our duty as citizens by voting for the first
time for one of the so-called democratic parties, the Christian Democrats
and their allies. Yet the Church of Pius XII, even Eisenhower’s America,
could hardly stir up the passion of Italians in their early twenties. The
physical reconstruction of the country led by the Christian Democratic
Party, while providing a majority of Italians with bread and reasonable
hope for more, was nonetheless offensive to the natural and artistic beauty
of the country and obviously tainted by corruption. What attracted me
and many young Catholics were not the endlessly scheming Christian
Democrats in power but the gust of fresh air produced by the election of
John XXIII – Papa Giovanni, as we called him.
As I moved from Rome to the Catholic University of Milan, attracted
by its campus, full of freewheeling, freethinking leftwing Catholics, I
 Preface to the English Edition xvii

happily joined a political and cultural circle committed to the Catholic

trade union (Cisl) I was later to join, to a variety of socially active groups
and intellectually relevant periodicals, and more rarely to the left wing of
the Christian Democratic Party. In the background were the reformist
papacy of John XXIII and the Archbishop of Milan, Giovanni Battista
Montini, who would become Pope John’s successor. There were also
Ettore Passerin d’Entrèves, professor of history and my future Italian
mentor, who would teach me to disagree without attempting to veto
divergent interpretations of past and present, and, indeed, Giuseppe
Lazzati, charismatic editor of the local Catholic daily L’Italia (soon I
was to write its foreign policy editorials), a distinguished scholar of early
Christian literature, and former Resistance leader who also was one of the
founding fathers of the Italian constitution. They all acted as progressively
inspired, protective divinities of a different future. Yet, the hierarchically
structured university had been conceived by its founder, the Franciscan
psychologist Agostino Gemelli, to shield a future Catholic ruling class
from the gradually all-encompassing Fascist state. To achieve this end,
according to the order enforced by Padre Gemelli, the university had to be
at least as authoritarian as the surrounding Fascist regime.7
Fifteen years after the fall of Fascism, this philosophy still translated
itself into a sort of unctuous and strongly hierarchical fundamentalism.
The scene was set for a silent but radical rebellion on the part of the
students, especially those more exposed to these rulings while living in
one of the residential colleges. No wonder that it later became one of
the focal points of the 1968 student upheaval. The king of Cambodia,
Norodom Sihanouk, used to say that one of his sons came home from the
Sorbonne a confirmed Communist, whereas the other, a student of the
University of Beijing, became a staunch supporter of Western capitalism.
In our case it could not be either. What we were up against was a peculiar
form of authoritarian Catholicism, in stark contrast even to the aggiorna-
mento forespoken by Pope John, not so different from the inspiration
currently offered by Pope Francis. The rebellious mood in the Catholic
University took the form of a new demand for separation between Church
and State, a growing unease when faced with the political capital accumu-
lated by the Christian Democratic Party, and an equally growing resent-
ment against the trappings of the Cold War as such, rather than the total
allegiance to one or the other camp imposed upon and required by the

7
This is the conclusion that can be reached from reading Giorgio Rumi and other historians
of this institution. See Storia dell’Università Cattolica del Sacro Cuore, vol. I, Milano: 2007.
xviii Preface to the English Edition

previous generation. Though some of us produced a prudently dissident

Catholic periodical, Relazioni Sociali, others the more radical Questitalia
(“la sinistra del Cardinale,” the Cardinal’s left, the latter would call us),
major sources of our political culture were Il Mondo and L’Espresso, lay
publications with a distinctly anticlerical slant, as well as the French daily
Le Monde. We were more-or-less observant Catholics but resented any-
thing that smacked of pure hierarchical authority within our own world.
We believed in democracy and greater social justice, federalism, and a
united Europe, with Third World sympathies, as an alternative to flat-out
Western allegiance with American and indeed Soviet interference in the
Italian political process. We hated nationalism as a remnant of Fascism
but wanted self-government. Some of us were more realistically driven, like
Romano Prodi, future prime minister; others socially committed to
the Catholic trade unions and even, like myself, looking out for a long-
term political perspective on the left with no concessions to the dominant
political parties (the Christian Democratic Party and the PCI). We were all
for the so-called opening to the left that included the reformist Socialist
Party (PSI) in the government, but only the boldest among us were ready to
vote for it – prudent progressives, sons and daughters (very few daughters)
of the tranquillized 1950s who rarely demonstrated in the streets and did
not even think of occupying public buildings (this was a few years before
the fatal 1968), passionate readers of Hannah Arendt’s antitotalitarian
analysis and Jacques Maritain’s firm distinction between religion and
political engagement however religiously motivated. The politically less
committed were a silent majority who had their future professions in
mind. But most of us were inspired by Pope John and John F. Kennedy.
The fact that Kennedy was to be the first Catholic who could become
president of the United States was also relevant to our feelings.
Kennedy was also the second president of the United States, after
Woodrow Wilson, to become an icon in the most remote villages of rural
and mountainous Italy, even making inroads in the Communist strong-
holds of Tuscany and Aemilia. But to me and my moderately rebellious
friends he was something more: a new hope within that Western world that
was our habitat, more as a fact than by choice the lesser of two evils in the
context of a Cold War that seemed tailor-made to split Europe and our
own country, while keeping it subservient. Wilson, Franklin D. Roosevelt,
and, to some extent, Kennedy (as later Barack Obama) spoke a language
that was better understood in Europe than in their own country
(“Un Européen” Charles de Gaulle called Kennedy at his death) as I was
about to find out, in the years spent in Cambridge, Massachusetts, as a
 Preface to the English Edition xix

graduate student in history. These presidents did not reject forms of

American exceptionalism but in different ways projected it beyond recur-
rent European and indeed American nationalism, to outline a new world
order. First and foremost, they represented values and institutions in
stark contrast to the Soviet system and domination of Eastern Europe.
For a while Kennedy made us forget the brutal power game played by the
United States in Italy and many other countries, the McCarthy years, the
frustrated hope for détente, even the halfhearted, failed invasion of Cuba.
The Kennedy years, to me and many others at the time, were defined
by the New Frontier, Peace Corps, Alliance for Progress, and Atlantic
Partnership – even opening to the left in Italy as the White House accepted
this change despite a reluctant State Department and an equally reluctant
majority of the ruling Christian Democratic Party. “Kennedy has captured
your imagination” was the disconsolate comment of Millicent Fenwick, a
fervent Republican friend of the elder generation. Even after having over-
come my crush for the New Frontier, I had embarked on a lifelong love
affair with the institutions of a country that at the time I only knew from
hearsay. An ideal pick for the Harkness Foundation – which was offering
an American advanced education to “future leaders” (an expression we,
the happy few, in a somewhat self-derogatory manner, recognized as an
exemplary Americanism) in our respective countries – the beneficiaries
were progressively inspired, but anti- or at least safely non-Communists.
Perhaps by no coincidence, the Harkness program was subsequently
limited to students from the Commonwealth, as it had originally been,
when an increasing amount of Fellows came back to Europe as radical
critics of the Vietnam War and U.S. foreign policy.
In 1964 expectations were still high. On the spur of the Dallas murder,
a tragedy for all of us, Lyndon Johnson’s Great Society meant the return
of the New Deal commitment to social welfare which, as educated
Europeans, we missed in the United States. In Washington I was privileged
enough to meet William McChesney Martin, a longtime chair of the Federal
Reserve, and the Bohlens (old family friends of my parents), as well as
Francis Biddle, Jim Rowe Jr., Thomas Corcoran (“Tommy the Cork”),
and other New Dealers, including Hubert Humphrey. They were mostly
friends of Adlai Stevenson and Eleanor Roosevelt, who, in spite of grief for
Kennedy’s death, felt more at home with the new president. Those of us who
ventured to the Deep South, at some personal risk, with a New York or, even
worse, Massachusetts license plate saw with their own eyes that Black
America was on the move and that, in spite of recurring atrocities, sweeping
civil rights legislation would eliminate Jim Crow from that part of the world,
xx Preface to the English Edition

though racial problems remained unsolved. In the footsteps of Italo Calvino,

our Roman smugness led us to believe that racism was exclusively American
or South African, not having yet experimented with the consequences of
immigration from the South in our own countries. The atmosphere at
Harvard seemed to me consistently liberal, open-minded, and receptive to
young people’s independent thought. All in all American institutions had
resisted the onslaught of Communism in a manner consistent with the values
of the Founding Fathers, guidelines for a federalist dream of a peaceful
Europe that I shared with my friends at home.

3. how this book came to be

It all started at a graduate seminar in 1965 on U.S. foreign policy in the
1920s – a seminar about nothing, according to then-prevailing historio-
graphic wisdom, dominated by the concept of an all-encompassing iso-
lationism – which was in itself further proof of Ernest May’s
perceptiveness. Only later would I find some antidotes of this orthodoxy
in the writings of historians that were not mainstream at the time. I was
curious about American reactions to the advent of Fascism in my country. I
became even more curious when I found out that those reactions, both in
the media and in available diplomatic correspondence, were positive, with
very few qualifications and exceptions, once ascertained that the coup
d’état did not lead to further disorder, but to stability. This challenged
my perception of liberal democracy and its relationship to similar values in
other countries. A confirmed Wilsonian, I had not yet discovered the
darker sides of American interventionism. Why, then, would the introduc-
tion of a dictatorship in one of Europe’s bigger countries, a former ally in a
victorious world war, be good news to the New York Times as well as to
the State Department? This, for me, was the big question my teachers did
not answer but considered well worth pursuing. My initial paper was more
descriptive than explanatory, but, after strong encouragement from
authoritative and diverse sources, even contemporary witnesses (Walter
Lippmann and Iris Origo, among others),8 it grew into my Italian thesis, a
set of articles, and, after thirteen years of research, the book that has now
been translated into English. The answer to the initial question required

8
“The subject is of great importance and interest, and I hope you will pursue it to the end,”
Walter Lippmann wrote to me, February 25, 1965. For continuity between Wilsonism and
subsequent republican policies, See V. Gandhi, “I limiti dell’ internationalismo
Wilsoniano”, in Comunità, xxxv, n-83, pp.96–152.
 Preface to the English Edition xxi

understanding events, interests, and culture on both sides of the Atlantic,

even if the inquiry, in both its initial and subsequent forms, was conducted
from the point of view of what I came to define as the hegemonic power.
This was a definition that could not be taken for granted for that early
phase of expansion of American financial interests in Europe (the subtitle
of the Italian edition – The Origins of American Hegemony in Europe –
has even recently been subject to criticism). Yet subsequent American
leadership in Western Europe, the Marshall Plan, and indeed the vision
of an integrated Europe in which Germany no longer was a potential threat
to its neighbors, I perceived, was not only the outcome of a victorious
war and a necessity dictated by the containment of the Soviet Union. It had
deeper roots, mainly financial, in a previous period and was subsequently
sanctioned by the Bretton Woods agreements. Nonetheless, the way
Mussolini handled American views and interests, while reconciling them
to the material as well as the rhetorical needs of his regime, could not be
ignored. I have always found it ludicrous to claim, as some American
diplomatic historians have, that U.S. foreign policy can be studied regard-
less of sources and comprehension of other countries concerned. Perhaps
this is the historiographic reflection of a cultural unipolarism that explains
some of the least successful American endeavors abroad.
But for that first question, concerning the swift and enduring approval
of the Mussolini coup, with a naiveté at the time totally unencumbered by
any Marxist culture, I had no simple reply. My initial preoccupation was
to avoid the generic pitfall of so-called diplomatic history, still rampant
in Italy and elsewhere: an exclusive focus on diplomatic documents, what
A. J. P. Taylor would define as “what a clerk writes to another clerk.” I
realized from the very beginning that American diplomats reporting from
Rome, though consistently more than positive, indeed enthusiastic, about
the budding Fascist regime, were only a part of the explanation. Focusing
mainly on the press led me to the right path. The editorials of the New
York Times, rather than the Boston Evening Transcript – of course to be
compared to many other sources – gave me the temperature of those in
command rather than the obvious silliness of an ambassador. His name
was Richard Washburn Child, future editor of the Saturday Evening Post,
biographer, and staunch propagandist of Mussolini, flattered out of his
mind by a prescient visit, in itself significant, by the dictator and deeply
affected by a high-flying Roman aristocracy most ambassadors liked to
socialize with. After all, newspapers had editors and owners, not devoid
of interests and relationships beyond journalism, who liked to travel,
accustomed to formulating a point of view toward any international
xxii Preface to the English Edition

development of a dimension that could not be ignored, in spite of the

isolationist mood prevailing on the other side of the Atlantic. I gradually
discovered that the American ambassador and his successors were not
individual tenors but part of a chorus. And that chorus, with very few
politically marginal discordant views – as proved by John Diggins’s accu-
rate exploration of printed sources9 – only briefly ceased to sing after the
murder of Giacomo Matteotti, a Social Democrat who turned out to be
Mussolini’s bravest opponent in Parliament, which shook the regime in the
mid-1920s. The music resumed until and beyond the invasion of Abyssinia
in the mid-1930s.
This clearly required a set of explanations not immediately available
to a curious graduate student. That liberal naiveté perhaps served me well.
When I paid a visit to Raffaele Mattioli,10 his question was “Are you a
Marxist?” My answer was clearly in the negative, but also that, by reading
documents produced by central banks and investment bankers rather
than Marx and Engels, maybe I was about to become one. This answer
seemed to satisfy the old man, who then helped me gain further access
to otherwise-sealed banking archives. As of today I would put it the way
my senior pupil, Piero Bairati, did: “Marxism is like my old car. I use it
whenever I need it.”
It was easy to find out that the key to American consensus regarding
Fascism in Italy was the need for stability, stability at all costs, in Italy as
well as in Europe as a whole, then and not only then. But what kind of
stability? Confronted by a coup d’état of the extreme right, the first and
only question asked by the papers and by the conventional wisdom they
both reflected and guided was whether the March on Rome was a further
chapter of the political instability, recurring violence, and, above all, social
and industrial strife that had marked the Italian scene since the end of
the war and that echoed in American minds as the Red Scare described by
John Dos Passos. This was a natural preoccupation, also nourished by
minor inconveniences that had been faced by even the well-endowed
American tourist. The future slogan of Fascism making itself salonfähig,
fit for good society from abroad, was already lurking around the corner:
“Now the trains run on time!”

9
J.P. Diggins, Mussolini and Fascism: The View from America, Princeton: 1972; “Flirtation
with Fascism: American Pragmatic Liberals and Mussolini’s Italy,” American Historical
Review 71, no. 2 (1966), 487–506; “Mussolini and America: Hero-Worship, Charisma
and the ‘Vulgar Talent,’” Historian 26, no. 4 (1967), 559–585.
10
A culturally influential banker with a close relationship to Piero Sraffa, the Cambridge
University economist, and first editor of Antonio Gramsci’s writings.
 Preface to the English Edition xxiii

All in all, the prevailing view of the American establishment (with the
notable exception of Walter Lippmann and very few others) was similar to
the one that brought their Italian counterparts to encourage the Fascist
movement to take power. Preceding events in Italy, even if observed from
a safe distance, had hardly been reassuring: endemic labor unrest, with
the Bolshevik revolution in the background, and political instability caused
by the introduction of a proportional electoral system dominated by the
two structured parties. The Socialists and the Catholic Popolari, roughly
representative of a social and democratic majority if allied, should not be
allowed access to power. The only test to which Mussolini was submitted
by the most influential opinion abroad (reactions of the conservative
press in France and Britain were pretty similar), as well as at home, was
the capacity to reestablish law and order, a reassuring context for sound
business. A test he could pass with flying colors since, as a matter of fact,
after the failure of the occupation of major factories in 1921, most of
the violence and lawlessness had been produced by the movement of
which he was the undisputed head. Also, according to prevailing opinion
in the formerly allied countries, stability was worth the price of some
bombastic but substantially innocuous nationalistic rhetoric for internal
consumption.
A further question: why this double standard? Why was a government
seized by a show of force, unopposed by those legally in power, with a
prime minister who, under a parliamentary constitution, received the sup-
port from a parliament under threat acceptable in Rome but not, according
to prevailing standards, in Washington, Paris, or London? For two simple
reasons, I was gradually to understand. Forces that represented the con-
tinuity of power in Italian government and society, traditional interlocutors
of any other government, whether democratic or authoritarian – king,
armed forces and public administration, business, Church and Free
Masonry, with the former Liberali as their representatives in Parliament –
had after all permitted if not publicly supported the coup d’état.11
Furthermore, all too often the assumption was that Italy could not be
kept to the standards of more-advanced countries. Italians should be
ruled with a firm hand. Or, as Winston Churchill politely put it, during a
subsequent visit to Italy (January 1927):
Different nations have different ways of doing the same thing. Expressions and
words sometimes lead to errors. Values and formulations attributed to words often

11
Among others, see: G.G. Migone, “Giolitti e l’avvento del fascismo”, pp. 45–91, in
E. Passerin d’ Entrèves, L’eta giolittiana e le origini del fascismo, Torino: 1963.
xxiv Preface to the English Edition

have a different meaning from country to country. No political issue can be judged
outside its atmosphere and context. Had I been Italian I am sure I would have been
with you from beginning to end in your victorious struggle against the beastly
appetites and passions of Leninism. But in Britain we have not yet had to face this
danger in the same poisonous form. We have our peculiar way of doing things, but
I do not have the least doubt that, in our struggle, we shall be able to strangle
Communism.12

So much for the difference between democracy and dictatorship – a

matter of words. According to the words of Churchill who, more and
before anybody else, successfully inspired and led the war against the
regime he had endorsed less than twenty years before. No wonder the
British did not want his previous correspondence with Mussolini to fall
into the wrong hands. For the same reasons, previously coddled dictators,
once defeated, are better dead than defendants in a court of justice.
Likewise, in 1945 Giuseppe Volpi di Misurata, after having been tortured
by the Germans, was about to face a trial for his Fascist antecedents and
personal gains. From a clinic, he wrote a letter to Thomas Lamont, the
senior partner of J.P. Morgan, asking for testimony in his favor. Lamont
who, in close association with Volpi – at the time minister of finance, had
negotiated all the loans and coached Mussolini’s Italy through the settle-
ment of the war debt and the stabilization of the currency – conveniently
wrote Volpi off with a note on his letter stating that he thought better
than to answer it.13 I found it all the more paradoxical that Italian anti-
Fascists who had faced exile or long prison terms, and in many cases led the
resistance movement against German occupation, should find themselves
in the position of representing a vanquished state – which was a fact – but
be expected to take individual responsibility for all the misdemeanors they
had fought, in the face of victors who, up to and beyond the Abyssinian
War, had been friendly and even supportive of the regime in Italy. Juvenile
moralism on my part? Probably so, with a bit of hurt national pride.
What struck me, reading Churchill’s words for the first time – so similar
to statements of American office holders and opinion leaders – was the
implicit condescension in the double standard, but also the transparent
fear of any threat from the left, long before the Cold War, at the root of
so many acts of appeasement toward authoritarian regimes at the other
extreme of the political spectrum. Even on the part of Churchill to whom,

12
“Corriere della Sera,” January 21, 1927 (my translation, since the original text is in Italian
as published by the Italian press).
13
HUGSBA-TWL, Giuseppe Volpi di Misurata to Thomas W. Lamont.
 Preface to the English Edition xxv

more than to any other single statesman, all Europeans owe so much, in
terms of individual and collective freedom.

4. the heart of the matter

Even at that time I was able to understand that the leaders of any large
country with an important economy could not ignore their peers, regard-
less of the nature of their governments. Yet it did take the Roosevelt
administration, after seventeen years, to establish diplomatic relations
with the Soviet Union, whereas in October 1922 the secretary of state,
Charles Evans Hughes, wasted no time in sending the formal, traditional
message of greetings to Mussolini as the politically self-appointed prime
minister of Italy. Why this difference?
In going through reams of personal papers produced by diplomats
during the Roosevelt administration, such as those of William Phillips
and J. Pierrepont Moffat, I remember being struck by the isolation and
ridicule suffered by William Dodd and George S. Messersmith. As docu-
mented by Robert Dallek, and more recently in literary form by Erik
Larson,14 Dodd (ambassador to Germany, a historian by profession) and
Messersmith (at first consul general in Berlin and subsequently minister in
Vienna until the Anschluss) were ostracized for their lucid but “prema-
ture” analysis of the Nazi regime and where it would lead. These observa-
tions sat in stark contrast to the thinly veiled anti-Semitism of a privileged
diplomatic and social ruling class, both in Europe and in the United States,
and in politically diverse governments. Until Roosevelt’s Quarantine
Speech (October 1937) any consistently critical attitude against the dicta-
torships the future allies would find themselves at war with was consid-
ered, to say the least, unprofessional and out of order by most career
diplomats on both sides of the Atlantic. According to many of his col-
leagues, Dodd was a naive amateur, and even the secretary of state himself,
Cordell Hull, was all too often written off as a doctrinaire and old-
fashioned Southern Wilsonian. As Arnold Offner pointed out, the roots
of appeasement were by no means confined to the European side of the
Atlantic.15 David Schmitz, without taking the trouble to quote me or
any other author or document in a language other than English, has

14
R. Dallek, Democrat and Diplomat: The Life of William E. Dodd, New York: 1968;
E. Larson, The Garden of Beasts: Love, Terror and an American Family in Hitler’s Berlin,
New York: 2011.
15
A. A. Offner, American Appeasement: United States Foreign Policy and Germany, 1933–
1938, Cambridge, MA: 1969.
xxvi Preface to the English Edition

confirmed my analysis in this regard and rightly linked the American

attitude toward the Fascist dictatorship to a subsequent trend in the history
of U.S. foreign policy.16 Even FDR would call a convenient dictator “an
s.o.b., but our s.o.b.” And on at least one occasion he called Mussolini
“that admirable Italian gentleman” but was otherwise far more receptive
to any critical analysis of European dictatorships than were the professio-
nal diplomats in the State Department, before and during his administra-
tion. Unfortunately, there were never any Dodds or Messersmiths posted
in Rome!17
During the 1920s, congeniality toward the Fascist regime was stretched
to the point of quickly awakening the hope of finding in the upcoming
Italian leadership an important European partner as well as a financial
client. If this potential was written between the lines of the editorials in
the mainstream press, it was obvious to the researcher who would delve
into the papers of the Morgan Bank, its senior partner Thomas Lamont,
and, subsequently, the main central banks, beginning with the crucial
Federal Bank of New York to which the system delegated its foreign
policies (its chairman, Benjamin Strong, also happened to be linked to
the House of Morgan). This is because, in spite of the era’s prevailing
historiographical orthodoxy – the varied arguments of William Appleman
Williams, Walter La Feber, Carl Parrini, Stephen Schuker and Melvyn
Leffler, as well as Charles S. Maier, were important exceptions – there
was an American foreign policy, even in the isolationist 1920s. It was not
only executed and discreetly supported by the government and its official
diplomacy, but it was in fact taken over by the bankers who were filling
a vacuum of power as justified by the small government, laissez faire
ideology dominating the “Republican Twenties.” Even at first glance
these sources opened up new venues of interpretation of the quest for
European stability, as pursued in New York and Washington, of which
Mussolini’s new Italy paradoxically became, if not a protagonist, a highly
relevant recipient.
All this amounted to a significant culture shock for me, a naive liberal,
selectively pro-American Italian, fortunately also imbued with an antito-
talitarian Hannah Arendt point of view. Yet I was reluctant to substitute

16
D. F. Schmitz, The United States and Right-Wing Dictatorships, New York: 2006. see p.48 of
this book. Also see M. Martelli, Mussolini e l’America. Le relazioni italoìstatunitensi dal 1922
al 1941, Milano: 2006. C. Damiani, Mussolini e gli Stati Uniti (1922–1935), Bologna: 1980;
R. Quartararo, I rapporti italo-americani durante il fascismo, Napoli: 1999.
17
D. F. Schmitz, The United States and Fascist Italy, 1922–1940, Chapel Hill and London:
1988, pp. 135–190.
 Preface to the English Edition xxvii

my ideological glasses with another pair that seemed more suitable for my
discoveries. There was another way out. The varied origins of the papers I
was looking at led me to believe that it was necessary to bridge the gaps
separating political, diplomatic, and cultural history from economic and
even social sources. After all, reality past and present or, more specifically,
power as it was structured, did not obey the laws of academic special-
ization. While diplomatic historians rarely bothered to look at documents
and facts produced outside government, or consider statistical, political,
and electoral constraints, even if relevant to the object of their investiga-
tions, economic historians mostly extracted from the past case studies to
prove or disprove their economic theories, as I found out in a (to me)
disappointing seminar on the monetary policies of the 1920s organized by
Franco Modigliani at MIT. It was as if someone, in describing a baseball
game, concentrated on the batting while ignoring the innings or vice versa.
What private and central bankers tried to do in the 1920s, before being
put back in their places by the Wall Street crash and the New Deal, was
highly political, in a sense an impoverished substitute for the foreign policy
pursued by the Wilson administration in the previous decade, no longer
palatable to an isolationist public. Since the Republican administrations
could not and would not explicitly respond to the new challenges of an
increasingly hegemonic U.S. economy emerging from First World War as a
socially stabilized creditor nation with an expanding industry, the bankers
could and would do so. Or, as I put it in 1971, a foreign policy was
. . . directly pursued by the bankers who had an interest in promoting loans and
investments in Europe. In this framework the House of Morgan had an undisputed
leadership role. Subsequently the Federal Reserve Bank of New York, at first in
partnership, then substituting the Bank of England, promoted international
monetary cooperation. The actors of these policies were all firmly convinced that
European reconstruction was tightly linked to monetary stabilization. According to
dogmatic thinking prevailing at the time, stabilization could only rest on a general
return to gold.18

Russell Leffingwell – a former assistant secretary of the treasury in the

Harding administration and the monetary expert among the Morgan
partners – produced a plan that would see stabilization and the return
to the gold exchange standard of the currencies of France, Belgium, and
Italy. Though this did not happen, except in Italy, due to the opposition

18
G. G. Migone, “Aspetti internazionali della stabilizzazione della lira: il piano Leffingwell”,
Problemi di storia nei rapporti tra Italia e Stati Uniti, Torino: 1971, p. 43.
xxviii Preface to the English Edition

of the Banque de France, the plan outlined a strategy supported by the

United Kingdom, Germany, and Italy.19 Its intent was very political, both
in means and in ends. The earnings and commissions of the private
bankers, who orchestrated the planning and to a great extent carried it
out, almost came as an afterthought of the geopolitical power game they
were playing. This was not a sordid money game the Nye Committee or
any street-corner Marxist might imagine, nor only money for the sake of
money, but money as a condition and consequence of access to power as
such and, whenever necessary, the exercise of political power. It meant
no more wars on the European continent. Stability was not only mone-
tary, but also had to be social and military. Already after that world
war, the reconstruction of a socially stabilized Europe, beyond Bolshevik
urgings, was a natural field of expansion for redundant capital, of which
there was plenty in the America of the 1920s. This was consistent with the
kind of picture subsequently painted by Charles Maier’s Recasting
Bourgeois Europe, which I defended in a lively discussion with Charles
Kindleberger – one of the rare economic historians interested in the
political outcome of finance – who accused both of us of reducing history
to a bankers’ conspiracy. Of course neither of us thought it was.20 While
the whole policy had an obviously class-oriented slant, the exalted role
of the bankers on the American side was a consequence of the strictures
of American isolationism: there was a vacuum of political power in
contrast with the potentially enhanced role of the United States in
European affairs. Somebody had to fill that vacuum. The rest of it was
pretty much aboveboard, albeit conservative, diplomacy. A constructive
attitude toward Germany during the 1920s was a reasonable if belated
litmus test of cooperation to this end, on which the special relationship
with the United Kingdom was founded, with révanchiste France cast in
the role of the troublemaker. In all honesty, it was a policy that produced
the Locarno treaty and the neutralization of war debt and reparations as
factors of financial instability, through the Dawes and the Young plans.
It was also the only important attempt to prop up the Weimar Republic
as an alternative to what was to come, before it was swept away by the
subsequent financial tsunami and the rise of the Third Reich. Yet, too
little too late, with the American government conspicuously absent,
thereafter.

19
Emile Moreau, Souvenirs d’un governeur de la Banque de France. Histoire de la stabilisa-
tion du Franc (1926–1928), Paris: 1954.
20
Charles S. Maier, Recasting Bourgeois Europe, Cambridge, MA: 1975.
 Preface to the English Edition xxix

5. the tail wagging the dog

It was not difficult to understand how nicely Benito Mussolini’s needs
fitted into this framework. To explore them was to discover a Mussolini
very different from the one of the subservient and indeed brutal friendship
with Hitler of the final years of Fascism.21 Even his first instructions to
the embassy in Washington, a few days after having taken power, showed
an acute understanding of the interests and sensitivities, strengths and
weaknesses of his future American interlocutors, as well as an uncanny
capacity of the professional journalist, that he also was, to manipulate
them through flattery. The messages sent to the United States emphasized,
first and foremost, Mussolini’s personal capacity to reestablish law and
order, respect for existing relationships and treaties, and honoring debts in
order to reestablish a normal flow of capital and commerce (particularly
important from and to the United States). He carefully avoided sore sub-
jects such as racist American immigration laws and any conflict with
Germany, the pivot of belated American efforts to stabilize Europe.
But why was the United States so crucial in Mussolini’s foreign policy to
make all these efforts worthwhile, from the very beginning up until the
Abyssinian War? The answer that gradually emerged from my research
was more complex than originally expected. Not only badly needed finan-
cial resources were at stake, but also the consolidation of the regime that
to a large extent depended on international acceptance and recognition,
both political and financial. The means and resources of the new govern-
ment were submitted to an acid test. Even a biased researcher could not
ignore the succession of facts provided by the dictator, all obviously
inspired by an understanding of American strength. All this was poten-
tially hegemonic, but still confined to the realm of finance, which was the
object of desire in Mussolini’s effort to consolidate the regime. In the
twenties he had the obvious advantage of an administration in
Washington with no territorial or colonial claims and with a clear mandate
to stay clear of any direct involvement of the American government
or Wilsonian ambition to arbitrate European disputes, with the notable
exception of discouraging any conflict with Weimar Germany. Therefore,
any outlet of nationalist tension – after all one of the motors of the Fascist
quest for power – should be moderated, in order not to destabilize Europe
and antagonize American opinion. Such a policy, I came to understand,

21
F. W. D. Deakin, The Brutal Friendship: Mussolini, Hitler and the Fall of Fascism, London
and New York: 1962.
xxx Preface to the English Edition

was particularly Mussolinian from the very beginning and could only
be developed by choosing the right representatives of Italian policy and
finding the right interlocutors on the other side of the Atlantic; while most
of his followers, Italian nationalists also embedded in the professional
diplomatic ranks, were still stuck with their anti-Wilsonian feelings –
“La Vittoria Tradita!” – a remnant of the frustrations of the Paris Peace
Conference.
If the anti-Socialist brutality of the movement had been essential for
establishing a minority leadership in power, subsequently all the resources
of the ruling class had to be used in order to consolidate it, both in Italy
and abroad. To this end, the best and the brightest were at hand. Prince
Gelasio Caetani, a distinguished war veteran and mining engineer who had
spent years in the Colorado mines, was the ideal person to épater les
bourgeois of Washington while also being able to speak to the feelings of
the ordinary American. His appointment as ambassador in Washington
was a small, early masterpiece, when telephones, air transport, and com-
puters had not yet deflated the function of diplomacy, especially in distant
capitals.22 Caetani’s second-in-command was the same Augusto Rosso
who, as ambassador, would become the master organizer of the Italian-
American vote, when it was needed, to avoid American sanctions against
the conquest of Abyssinia. It was the Volpis, the Pirellis, the Stringhers, the
Beneduces, the Jungs – all important protagonists of public and private
finance, well before the advent of Fascism – that Mussolini sent to
Washington to clear the path, by reaching a debt settlement the French
had refused to face, for an impressive series of public and private loans
on the American market.
To truly succeed, however, something more than the financial resources
of a leading bank was needed. It was the political savvy and the corre-
sponding network of connections which also came with the Morgan
partners that coached their Fascist counterparts, all too ready to learn,
through the pitfalls of Washington politics and, even more important,
the selected kind of information (not propaganda!) to be conveyed to the
American public through a supposedly neutral mainstream press. At the
right moment, Dwight Morrow, another Morgan partner, was trotted out
to overcome Herbert Hoover’s resistance to a lenient debt settlement by
dangling the Italian-American vote in front of his presidential ambitions.

22
G. G. Migone, Il regime fascista e le comunità italo-americane: la missione di Gelasio
Caetani (1922–1925), in Migone, Problemi di storia nei rapporti tra Italia e Stati Uniti,
Torino: 1971, p. 25.
 Preface to the English Edition xxxi

But it was up to Lamont himself, the senior partner of J.P. Morgan & Co.
as well as its main strategist for Europe, to issue a stern warning to their
Italian client, when it became necessary, not to trespass the sacred rule
that excluded any friction with Germany such as indulging in polemics
over South Tyrol, the main bone of contention between Italian and
German nationalists.23
The final plum, from Mussolini’s as well as from J.P. Morgan & Co.’s
point of view, was the stabilization and the return of the lira to the gold
exchange standard. J. P. Morgan, Jr., personally swept aside the half-
hearted resistance of Montagu Norman, the legendary governor of the
Bank of England. Before giving in, and after having lucidly assessed
American superior strength, Norman apologized to Morgan for being
“too liberal” in his reluctance to believe in the required autonomy of the
Banca d’Italia in its dealings with the Fascist government.24 Here again
political expediency, as formulated by American bankers recognized as
new hegemons by Norman, triumphed even over financial dogma.
Meanwhile, parliaments, indeed governments, were unaware of what
was going on, or chose to look away, while ignoring the broader
political issue. The stabilization of the lira, which took place in 1927,
became the international stabilization of the regime, right up to its defeat
by those who had, to a large extent, consolidated it. Was this a lack of
strategic thinking? It can be so stated without the risk of any anachron-
ism. After all, the ultraorthodox Montagu Norman correctly sensed the
nature of the Italian government as the weak spot of the whole scheme.
But he had to bow to the superior strength of American finance even in
the 1920s.
In fact, Mussolini was not the only political Fascist to keep relations
with the United States running for more than a decade. Dino Grandi, the
undersecretary of state and subsequently foreign minister, described
himself to me during an eight-hour interview as “quel pizzico di politica,”
of political flair that the war debt delegation required. Volpi, the minister
of finance who headed it, was himself a businessman recruited by
Mussolini: more obviously so, Pirelli, Beneduce, and Alberti. Yet, by no
coincidence, he was convinced that the Fascisti, once in power, had to
rely heavily on the support, the skills as well as the international

23
HUGBA-TWL, bk. 190, fol. 19, Thomas W. Lamont to Giovanni Fummi, New York,
March 4, 1926.
24
BE, bk. Italy, sec. 62, Montagu Norman to J. P. Morgan, Jr., London, November 19, 1926.
xxxii Preface to the English Edition

credibility of the traditional establishment. Grandi was also a quick

learner. After having become, at age 34, the youngest foreign minister
in the history of Italy, he remained, till the bitter end, the staunchest ally
of the United States in European affairs, whether it be disarmament,
finance, or ending the war. Indeed, it was he who took a leading role in
bringing down the regime on July 25, 1943. He developed a personal
relationship with his American counterpart, Henry Stimson, that lasted
long beyond the economic crisis and the breakup of economic interde-
pendence as sanctioned by the outcome of the London Conference of
1933. But it was the Abyssinian War that, somewhat surprisingly,
became the crowning event, but also the turning point, in the relationship
between the United States and Fascist Italy. This is not to say that
Roosevelt had any Fascist sympathies – quite the opposite. The economic
engineering of the 1930s that favored some mutual intellectual interests
between some New Dealers and Italian technocrats – notably Rexford
Tugwell, and the founders of IRI, the Banca Nazionale del Lavoro in
Italy – never spilled over into the political realm, as analyzed by Maurizio
Vaudagna’s study.25 But Roosevelt, who should be considered a closet
Wilsonian, given his political origins and cosmopolitan breeding, also
had an all too obvious sense of political expediency. When it got to the
point of deciding whether the U.S. government was going to conform to
the League of Nations’ sanctions that deprived Mussolini of the oil and
trucks he absolutely needed for his belated colonial adventure, Roosevelt
confined his policy to “moral sanctions.” In the context of a crucial
election year, 1936, with not only the president’s future but with many
Democratic members of Congress on the firingline, it was politically
expedient to be on the side of the formidable coalition of interests that
favored the breaking of sanctions on the part of the American govern-
ment and giving Mussolini what he needed to win what was to be the last
classical colonial war. For disparate reasons, not only the industries
directly concerned (oil and transport) but also such diverse forces as the
Catholic Church, dominated by Irish-American hierarchy, and the U.S.
Navy a constant rival of the British, were in favor of giving Mussolini
what was not his due in terms of international law and organization,
ironically to a large extent conceived in the United States. But the final
and probably decisive push came from the concert of Italian-American
organizations, strongly pro-Fascist and carefully but discreetly organized

25
M. Vaudagna, Corporativismo e New Deal. Integrazione e conflitto sociale negli Stati
Uniti (1933–1941), Torino: 1981.
 Preface to the English Edition xxxiii

by the Italian embassy and consulates, which bombarded with thousands

upon thousands of letters the relevant members of Congress eager to
be reelected. At that point, the reluctant president caved in to domestic
realities. Meanwhile, Adolf Hitler was watching closely what was to
become the first major act of appeasement by the democracies. If even
the militarily shaky Italians would not be stopped, what could the
German government achieve, with its rapidly growing military might?26

6. as of today
Of course it was not only research that pushed me further left of center
at the time. Many things happened in Italy and elsewhere in the late ’60s.
Martin Luther King Jr. and Bobby Kennedy were assassinated. The
Vietnam War made me feel like most midwestern students who filled
Washington streets during the moratoriums starting in 1969: latecomers
radicalized by Lyndon Johnson’s surges and Richard Nixon’s homicidal
bombings in hot pursuit of a “decent interval” that never materialized.
During those summers I could and did walk straight out of the National
Archives to join the demonstrations taking place on Pennsylvania Avenue
or the sit-downs between the FBI and the Department of Justice. In those
same years I was deeply committed to the student and working-class
movements, particularly intense in Torino, where I earned my living.
The PCI would not fully represent these movements, convinced as it was,
perhaps rightly so, that any attempt to violate the Cold War rules – the
conventio ad excludendum of the left from the Italian government – if not
in the form of a coalition with the Christian Democratic Party, would lead
to a Santiago scenario. Some of that came anyhow in the diluted shape of
bombs and terrorism, first black then red, conveniently stabilizing the
status quo ante, the Christian Democrats with lesser allies remaining in
power, without support from the PCI, and Italy confirmed as a sort of
Bulgaria of NATO (to use Gianni Baget-Bozzo’s flippant definition), with
some Middle Eastern infidelities, but with an enduring commitment to
European federalism that I totally shared.
All this in an effort to reconcile detached scholarship, applied to the
reconstruction of a not-so-distant past with present militancy. Yet, as I
read through the translation of the Introduction of this volume, as it stands
in the English edition, I cannot but notice that it is the expression of a

26
B. Harris, Jr., The United States and the Italo-Ethiopian Crisis, Redwood City, CA: 1964.
xxxiv Preface to the English Edition

prevailing political atmosphere different from when I wrote the rest of

the book somewhat later. By 1980, the upheaval of the 1970s had failed
and it was time to return to a less loaded choice of words if not to diverse
perspectives. I said I would not use the word imperialism to describe
American foreign policy, not noticing that, in writing the Introduction,
I had done so. During the George W. Bush administration, that word
became fashionable once more – briefly so, but in an appreciative sense.
A militant viewpoint is similar to intense illumination: the object it hits is
unsparingly exposed and adds clairvoyance to those who take advantage
of it, but the risk is that, outside its range, the dark appears even darker.
Here the love–hate relationship advocated by H. Stuart Hughes is indis-
pensable. To be adequately understood, to become a part of the greater
knowledge of the past, even Mussolini’s and Thomas Lamont’s tactics
have to be considered objects of grudging admiration.
But what can the story I am telling in English for the first time mean to
those who read it a good thirty years from the time it was published in
Italy, almost fifty from when first it was planned. To borrow the answer my
son Sebastiano, a painter, invariably gives when somebody asks for an
interpretation of what he has painted: the picture is as you see it, what you
want it to be – no more, no less. This is ultimately true, also in the case of
this and other books. With an effort, in this preface, to reconstruct what
motivated the painter, with an equally determined effort to keep it clear of
any conscious manipulation (of the unconscious by definition I cannot be
called to account for). Any contemporary reader of this book will find a
certain amount of déjà vu in the present, though historical analogies are to
be taken con le pinze, with great circumspection, particularly now that
anachronisms have become part of the daily bread we are served. There are
in the sequence of events described elements I might signal to the attention
of those who read or look at the picture I have tried to paint – or at least
further questions suggested by today’s problems and challenges.
Conspiracies, both real and supposed or even invented, have always
existed. Some raise important moral and judicial issues, but the ogre-
historian, as well as the periclean statesman, is more interested in the
consequences of ascertained facts. As Cicero said, “Cui prodest, scelus,”
though not necessarily “is fecit.” He who benefits from an act is not
automatically its author, Cicero not withstanding. What always counts,
in the reconstruction of the past, in order to understand the present, is the
sequence of events. Eric Foner said in a recent debate that surprises occur in
history though he might agree they are preceded by vestiges difficult,
sometimes impossible, to perceive by contemporaries lacking the benefit
 Preface to the English Edition xxxv

of hindsight. What is it that leads democratic governments to accept,

indeed support, autocratic governments, even to the point of having to
wage war against them in a not-so-distant future? Is this still happening?
What role do those permanently in power, without a democratic mandate,
play? Do they tolerate democratic governments only in as far as they
provide the desirable stability? In the case of Italy, is there any analogy in
the quest, on the part of established Italian interests, of regimes as different
as Mussolini’s and more contemporary ones, that have in common the
leadership of a vir novus dicendi peritus, a single individual, unencum-
bered by the past, with means of communication with the populace, as a
safeguard against forces alien to those interests? Or is there an inherent and
persistent weakness in the body politic of Italy, the contrast between an
industrialized North and a less developed South, that makes it more
vulnerable than other Western countries to such occurrences? Indeed, is
it a political and social laboratory, ominous for the future of us all? Can it
all be ascribed to the lack of institutional tradition of a country, heir to
ancient civilizations, with a relatively recent nationhood, but still strug-
gling to achieve self-government in the face of external pressures? Is there a
void of political power, in both cases, on both sides of the Atlantic, that
favors such developments? Does such a void more easily occur at the end of
wars, whether hot or cold, that makes governments less relevant and
requires new forms of global governance not to be easily found? Do
moneyed interests take advantage of such a void of power in order to
acquire greater political power? What role does the culture of elites,
translated into conventional wisdom, play in translating vested interest
into policies? What, indeed, are the limitations of democratic, institutional
power, confronted by an enduring, complex power structure governed by
the hubris of greed? Und so weiter.

G. G. M.
Katokoufounissi, August 2014
 Preface to the Italian Edition: Sources, words,
and debts

This book is one of the results of research I conducted for years and
which became both the vehicle for and the product of my formation. To
briefly explain its origins allows me to define its nature and intent, and
also to thank, most sincerely and directly, those who encouraged and
facilitated it.
The beginning was accidental. In the autumn of 1964 I attended, at
Harvard University, one of the seminars that Ernest May annually dedi-
cated to a period of U.S. foreign policy. That year the subject he had chosen
was the 1920s, and, perhaps due to my nationality, it fell to me to write a
paper on the attitudes of the Republican administration and the American
press toward the rise of Fascism. I discovered that the reactions were
not those that, with my point of view of the time, I had expected from
the nation formed by its inheritance of a great liberal revolution toward
the birth of the first Fascist state. My curiosity was naturally awakened. I
was encouraged to pursue this question by May and William Langer, as
well as by several Italian friends, foremost Ettore Passerin d’ Entrèves, the
mentor who convinced me to turn the paper into a thesis at the Catholic
University of Milano.
As a first step I began a consultation, which was to last for years, of
the endless but extremely well-ordered diplomatic papers at the
National Archives in Washington (where I received invaluable help from
Mrs. Dowling and Mrs. Nicastro, who, not without a certain severity,
presided over the section of the archives where I worked most) and the
numerous private collections housed in various American libraries (among
which were most importantly the Franklin D. Roosevelt Library and the

xxxvii
xxxviii Preface to the Italian Edition

Library of Congress, where I was extended the assistance of Horace

Hilb and the friendship of Sammy Washington, both of whom helped me
view many daily newspapers of the era). John Phillips and John Callaway
were also of great assistance in this treasure hunt across the United States.
Nonetheless, the collected judgments and reactions of diplomats and
journalists were not sufficiently illuminating to allow me to understand the
motivations, not only cultural and ideological (which Diggins had already
dealt with very well, if perhaps with excessive indulgence) but political
and material, that generated them. Even without many resources to guide
me, I realized quickly that the specific question of the American stance
toward Fascism was inextricable from a double set of other problems that
demanded more dimension and complexity from the work than I had
imagined. First of all, American policy toward any single European coun-
try cannot be taken out of the context of the overall relations between
Europe and America. There was no policy of stabilization toward Italy per
se, but instead, as Charles Maier has argued, a policy of European stabi-
lization within which Italy’s situation was only one aspect. There was no
policy of American neutrality with regard to the Italian occupation of
Ethiopia, but rather the more general question of America’s stance with
regard to the various conflicts and crises (among which was Ethiopia)
that led to the Second World War. And so on. In this larger context I had
to reconstruct a web of material and political connections, as well as the
ideological, propagandistic, and cultural exchanges, which extended far
beyond diplomatic relations, between the two countries. This meant con-
sidering the world of business, cultural institutions, emigration, tourism,
and significant individuals from the two countries in question. It was this
multiplicity of connections that became the pivot point around which the
research revolved, although I was forced at times to make choices that may
now appear reductive. I am sorry to have deprived readers of several
“pearls” I discovered, especially in terms of the opinions of American
businessmen concerning the regime; these constitute the ideological back-
ground of important relations, but the choice was justified by the work
already completed by Diggins on the same matter. I am more sorry not to
have treated all those forms of influence, indirect but weighty, that the
culture of American industry exerted on Italian society, including during
the Fascist period and especially with regard to businessmen, above all
in the organization of labor. Again in this case I am partially justified by
the work other scholars – such as Giulio Sapelli, Maurizio Vaudagna,
and Sandra Lorini – have already done on the topic. In the framework I
set for myself it was necessary, at least in this phase, to limit the field of
 Preface to the Italian Edition xxxix

investigation to those consciously and willfully built relationships, in an

effort to reconstruct them on the basis of the documents themselves. It
was also necessary to analyze who were the protagonists in this narrative;
what interests, opinions, and sentiments motivated them; and which polit-
ical faction and social class they belonged to (even though a social history
of the governing classes still needs to be written). The teachings of many
historians (from Bloch to Salvemini) who have theorized or practiced
this concrete method have been powerfully in my mind. At this point it is
worth the trouble to explain the methodology a bit further. If we exclude
a few intuitive insights from contemporaries who themselves lived the
history I try to reconstruct here (again, Gaetano Salvemini comes immedi-
ately to mind, but also Antonio Gramsci, who commented on this topic
that one understands a dependent country by studying its metropole’s
policy toward it), until very recently conventional wisdom held that the
United States (and its major allies) had little or nothing to do with Fascist
Italy until the moment when they came to defeat it militarily. Or there was
the argument, which crystallized during the war, that the history between
the two nations was one not of conflict but of reciprocal diffidence going
back to the origins of a regime totally hostile to liberal democracy – in
the name of which, to a great extent, both world wars were fought. It
happened, in this way, that many members of Italian anti-Fascism – after
suffering prison, exile, and political and social ostracism during the twenty
years of the regime – chose (or felt constrained to choose) to represent
their country as completely defeated by men they chose (or felt constrained
to choose) to represent as victors, when the truth was that those men and
that country had been collaborators for years. That version of history, so
freighted with political and idealistic significance, and still so relevant to
contemporary politics, cannot be revised through prejudices or ideological
affirmations. I had to inductively reconstruct the judgments, relationships,
attitudes, and decisions of that time using hard evidence; I had to analyze
that overabundance of sources whose existence is the blessing and the
curse of the contemporary historian. While theory may be necessary, it
could not be my bread and butter, at least not in that phase of the research;
theorizing had to be saved for a later work, or indeed to become the task
of others. I even imposed a basic limit on my terminology, for example,
avoiding the vocabulary of imperialism, in order not to enter into theoret-
ical controversies. The problem of theory must be confronted eventually,
but it cannot create shortcuts in the primary task of careful analysis of
the evidence. Nonetheless, in the context of the study of the relationship
between Italy and the ascendant great power, I realized that I had to make
xl Preface to the Italian Edition

a further choice: to focus my attention first of all upon the material aspect
of those relations, particularly on the financial. Again, this was not a case
of a priori judgment (it was perhaps my good fortune at the beginning of
this research that I was not yet even capable of making such a judgment);
rather it was an acquisition made through the inductive nature of the
analysis required by the sources. Even to one who was not an economist
by training or profession, it was quickly clear that many of the opinions
and political designs of the period were rooted in the need for the expan-
sion of American finance and business, which had grown enormously in
the course of the First World War. Corresponding to this necessity was
Fascist Italy’s need to secure funding and, above all, support for its
own policy of internal stabilization in the context of the global system
being created in those years under the guidance of American bankers
and officials (men whose guidance was constrained, however, by the
prudence dictated by the political climate in the wake of the failure to
ratify the Treaty of Versailles).
Similarly, there was no way to offer a comprehensive interpretation
of the economic crisis in the context of this research. And yet the specific
attempts of Hoover and his Italian interlocutors to confront the crisis –
without abandoning the continuity of action recommended to them by
their experience of the 1920s – suggested some important conclusions to
be made about the effects of the Great Depression on international rela-
tions. The specific case of Italy and the United States present a very
telling example. Maurizio Vaudagna has dedicated serious study to the
similar problems and behaviors that developed in a later period, during the
Roosevelt administration and the time of Fascist corporativism (without,
however, losing sight of the fundamental differences separating those two
worlds). For my own purposes it was important to re-create the focal
points of a relationship that was headed toward dissolution, especially as
a result of the rise of National Socialism in Germany, and the change of
Mussolini’s foreign policy orientation once all the material conditions
were met. At the same time, the question of oil – which illustrates the
always-vital problem of the supply of raw materials – brought to light
not only the ongoing influence of an existing positive image of Fascist
Italy, but also the presence of interests, ethnic bonds, and biases that
together nourished that political and historiographical constellation gen-
erally labeled isolationism and which is too often relegated to the status
of a mere rhetorical flourish of American agrarian populism.
This investigative framework required a further set of documentary
sources, not as easily consulted, and a further round of advice,
 Preface to the Italian Edition xli

encouragement, and comment. Walter Lippmann pushed me to explore a

trail he had previously blazed as a contemporary critic of those events I
was called to re-create. William McChesney Martin was able to confirm,
from a different vantage point, the importance of that financial aspect on
which I was focused, and to authorize my access, with the help of Stephen
V. O. Clarke and Evelyne Knowlton, to the archives of the Federal Reserve
Bank of New York. He also suggested that I study more fully the papers
of Thomas W. Lamont at the Baker Library of Harvard University, which
illustrate the central role of the Morgan Bank in American life – not only
economic life – and in relations with Fascist Italy. His colleagues Lord
Cobbold and Guido Carli (with their junior colleagues Barnes, Cantuti,
Badaloni, Pascucci, and Valente) allowed me to enlarge my research to
the archives of the Bank of England and the Banca d’Italia. But documents
do not suffice. We must also exchange ideas and information among
friends and colleagues. Renato Mori not only facilitated my research in
the archives of the Ministero degli esteri, which he directed at that time, but
initiated me in the intricacies of Fascist foreign policy, which I could not
make the principal object or expertise of my study, though I had no choice
but to reckon with it. I owe Giorgio Mori (who was the first to introduce
the themes at the center of this book into Italian historiography) and
Valerio Castronuovo for similar aid in the terrain of Fascist political
economy. Friends such as Guido Quazza, Nicola Tranfaglia, Marco Fini,
and Gian Piero Brega guided me, encouraged me, and often urged me on in
the most difficult phase of my work. Protagonists of the events narrated
in this work gave me information and commented on my ideas. This is
most true of Dino Grandi, but also of William Phillips, James Clement
Dunn, Alberto Rossi-Longhi, Leonardo Vitetti, Andrea Ferrero, Vincenzo
Fagiuoli, and Bartolomeo Migone, Sr. I am grateful to Leopoldo Pirelli,
Pietro de’ Stefani, and Luisa Fummi for letting me consult their fathers’
archives, as I am to Hubert and Lelia Howard, who allowed me access to
the papers of Gelasio Caetani. It would be difficult to list all the things
Iris Origo has tried to teach me about writing. I hope she will not think that
she completely wasted her time.
I will spare readers the details of the various phases this book has gone
through, even after my research was done. It is enough here to note that it
lays no claim to comprehensive and organic coverage of American policy
toward Italy. Rather, I have tried to concentrate my attention on a few
fundamental focal points, keeping in mind that which has already been
and will in the future be published on the topic. For example, it has seemed
opportune to delve into the particulars of the attempts to consolidate war
xlii Preface to the Italian Edition

debts, until now an untouched topic, rather than to go into detail about
the stabilization of the lira, which I have written about elsewhere.
In general I have tried to avoid abstract terminology, generic labels, or
overly specific jargon. In some cases I have not succeeded. So I would like
to specify that I use the names Italy, France, and so on only in order to
indicate a continual political behavior by the governments of the state in
question. Like many other students of the history of international foreign
relations, I have had to fall back on the expression “public opinion,”
especially in the case of the United States and Great Britain. It could require
an entire volume to define this phrase – and there have been those who
have tried to do so – but I am forced, for various reasons, to limit myself
to the clarification that by public opinion I mean those sectors of the
public that, through newspapers and other media, receive information
and occasionally express opinions about the foreign policy of their coun-
try. More easily understood, for its universal definition, is the expression
“ruling class” [originally classe dirigente in Italian – trans.]. In my usage,
this indicates those who occupy positions of power such that they are
able to guide or influence those choices that determine the political, eco-
nomic, and social life of their country. With regard to the concept of
isolationism, one may claim that the entire book – but particularly the
Introduction, Chapter 4, and the Conclusion – is dedicated to clarifying its
meaning. Last, I have used the term “hegemony,” which appears even in
the book’s title, to indicate a relationship of dependence, which, as defined
by Charles Maier, is consented to, at least by that governing class that is
dependent. The search for the origins of that hegemony, which reaches its
fullest form after the Second World War, is the subject of this book.
Even though we may be pushed in a thousand ways to work individu-
ally, some of us struggle to fight this private war with the support of those
contexts and communities to which we nonetheless belong. Thus, the
ordinary dedication of my colleagues in the Comitato di storia americana
(first among them its founder Giorgio Spini) was of great help to me in the
course of this research, as were the many informal conversations with my
friends (two in particular, Dora Marucco and Achille Erba) in the Facolta’
di scienze politiche in Turin. They helped me appreciate the stimulus
of other disciplines, methodologies, and ways of thinking. Finally, Piero
Bairati, Maurizio Vaudagna, Aldo Lanza, Nadia Venturini, Giampaolo
Pavani, Vera Gandi, Federico Romero, Sergio Ciccolari Micaldi, Paola
Elia, Maddalena Tirabassi, and Pino Conte shared with me the intense
work and rewards that went along with this research. My gratitude to
Concetta Fiorenti, Daniela Garavello, and Signora Riassetto, who dealt
 Preface to the Italian Edition xliii

with some of the most unpleasant aspects of the project. Pia Moltoni
prepared the index, and Loris Calzini contributed decisively to the correc-
tion of the text.
Contrary to the mostly Anglo-Saxon tradition, I believe it worthwhile
to exclude one’s private sentiments from this kind of preface. The dispro-
portion between one’s own debts in this sphere and that which can be
expressed by a simple thanks on paper is too obvious. Still, I would like to
make an exception, or rather two: this book is dedicated to my father
Bartolomeo and to my son Bartolomeo. In a certain sense, they represent
what made it possible and what may follow from it.

G. G. M.
Torino, August 1979

post script
For some mysterious reason, when I wrote this Introduction to the
Italian edition, I omitted to acknowledge some of my most relevant debts
of gratitude. I seize this occasion to make amends. Without Luciana
Bertello’s capacity to organize a constantly growing archive, now open
to other scholars at the Fondazione Einaudi of Torino, I would probably
have lost my way. Also, without the support of Inge Feltrinelli as well as
Gian Piero Brega’s and Giacomo Lenzini’s guidance at Feltrinelli Editore,
this book would not have seen light in its present form.
This also goes for the version in the English language, identical to the
Italian except for the Preface. Had not Frank Smith decided so, with
Eric Crahan and, last but not least, Debbie Gershenowitz following in
his footsteps, this book would not be in the hands of the reader. Had they
not found a person with the specific competence and scholarly clout of
Molly Tambor, with whom I am happy to have established a “colleague to
colleague” relationship, it might have been “lost in translation.” In addi-
tion, there is the varied support for the project I received from colleagues
such as Giuseppe Berta, David Ellwood, Giovanni Levi, James Miller,
Nadia Venturini, and, at an earlier stage, Stephen Schuker. I also want to
thank Francesca Somenzari, who prepared the index.
To reread oneself after thirty-five years it quite an ordeal. Most of it
seems obvious, at the risk of being obsolete, the better part unachievable
with waning forces at one’s disposal. Be that as it may, this state of mind
is also reflected in the time and energy I had to muster in writing the new
part, the Preface to the present edition. In so doing, I am grateful to Donata
xliv Preface to the Italian Edition

Origo, who once more tried to improve my faltering English; to Debbie,

who also edited this part; and to Vicky DeGrazia, Nadia Venturini, and
Luigi Guarna, who gave me sound advice, some of which I did not follow,
thus absolving them and everybody else from responsibility for the
shortcomings of the final product. I am also grateful for the impeccably
professional support offered by Philip Alexander as project manager and
by Lois Tardio as copy editor of the final version of this book. Finally, I
owe the credit to my wife, Anna Viacava, if I have been at all successful in
sorting out the electronic as well as emotional obstacles the text has
encountered on its way.
This English as well as the original edition is and remains dedicated to
Bartolomeo, my father, and to Bartolomeo, my eldest son, who shared it all
in different ways. So did Mason Hammond to whom remains my loving
memory. I gratefully acknowledge the financial support of the Department
of History, University of Torino, SEPS of Bologna, as well as the self-
contained wisdom with which Agnese Incisa has supported the whole
enterprise.

Katokoufounissi, August 2014

 Translator’s Preface

Gli Stati Uniti e il fascismo. Alle origini dell’egemonia americana in Italia

was originally published in Italian in 1980 and has since become a fairly
definitive text on the topic of the international relations between Italy and
the United States in the interwar years – and by extension an economic and
political history of Europe and the United States in the same period. It
contains some powerful and surprising arguments about the Fascist regime
and how it was supported and stabilized in the international arena as well
as discussion of the true origins of America’s rise to hegemonic global
power in the twentieth century. Cambridge University Press has agreed to
translate and publish it in English as a way of introducing Anglophone
readers to a “classic,” and I have had the privilege and the challenge of
serving as the translator.
The classic status of the book, its familiarity to so many Italian scholars,
and its potential usefulness to English-language readers have both
humbled and spurred me on in this effort. The book bases itself very
extensively on primary archival sources, many from diplomacy and inter-
national relations, but also and perhaps more significantly on economic
and financial records, particularly a fascinating collection of letters and
reports exchanged among the partners and employees of the J.P. Morgan
banking house. As I worked through the text, I came to believe that
this combination of source bases and therefore of historical disciplines
constituted perhaps Gian Giacomo Migone’s most important contribu-
tion. The book is not based on a simplistic Marxist argument that
economic interest drives historical change and conflict, but rather on the
insight that economics is a political, and cultural, exchange and that
politicians – and citizens – who abandon official intervention and partic-
ipation leave the financiers and bankers and businesspeople to conduct

xlv
xlvi Translator’s Preface

American foreign relations themselves. By the late 1930s, American poli-

ticians had little room left to maneuver in the face of the rising Fascist
threat and, as Migone argues, few reasons not to approach the problem
with the same combination of economic instruments and social and ideo-
logical formative motivations that they had been operating with since the
end of the First World War.
It is not a complaint or excuse, but an experience of translators so
common as to have become a cliché: tradurre è tradire, to translate is to
betray. In this case the difficulty had a further layer, in that our goal was
not translating only the meaning of a different language, but the language
of a different time, in the life of the author and in the norms of our
discipline. In choosing to translate the original text rather than to issue a
new edition in English, the decision was made on the side of staying as
faithful as possible to its vocabulary and forms of expression, but I have
made some attempts to neutralize or update terms that either never carried
the same connotations in English or no longer do in either language.
Readers should note in particular the translation choices made regarding
a few key terms.
In the case of the word hegemony, which could hardly be avoided
because it is in the book’s original title, I have used it when the context
was truly the Gramscian theoretical sense but in many other places have
instead translated it as “dominance” when that seemed to fulfill the neces-
sary meaning and the more theoretical term might have brought along too
much political baggage. In the original text, Migone made use of the term
classe dirigente; in English today the Marxist “ruling class” is just too
blunt an instrument for the diverse coalition of elite families, groups, and
interests that controlled a great deal of the decision-making power in
distinct but overlapping arenas of business and industry, finance, and
government and international relations. The author is actually quite care-
ful in distinguishing these differing spheres and how they interacted; so I
have variously rendered the original as “governing classes,” “elites,” or
even “business leaders” and so on according to context. However, what
may have been lost in that decision is the author’s clear sense that there was
a unifying class background and identity among these various historical
actors that did have causal significance. I hope I have not obscured that
argument. As a corollary, terminology such as classe operaia, movimento
operaio, and so on has usually been rendered according to context as either
“workers” or “organized labor,” as opposed to “working class” or even
the extreme “proletariat” to reflect the fact that the American labor move-
ment generally was not and is not discussed in terminology as influenced
 Translator’s Preface xlvii

by Marxism as has been the case in Europe. In Chapter 1, I have perhaps

been over-literal in using restorationism in connection with the conserva-
tism and/or the reactionary nature of Fascism; but it is my sense that this
was meant in the original text as historically specific vocabulary, and I
chose to retain it. The capitalization of the word Fascism was also my
choice, when it refers to the specific Italian regime in power from 1922 to
1943 that called itself by this name; I left it uncapitalized when the meaning
referred to the political science category of generic fascism that may apply
to more than one regime or movement in more than one historical period. I
have left a very few words, such as squadristi, the paramilitary enforcers
known also as Blackshirts, in the original Italian, adding a short trans-
lator’s note at the moment of their first usage to explain the term but
believing, again, that certain terms are close to being the proper names of
historically specific groups, events, and actors in any language. Finally, the
retrieval of the original words of the English-language sources has been
solved in a dual way: I would like to thank the two research assistants,
Luigi Guarna in Italy and Grace Delmolino in the United States, who
tracked down as many relevant quotations as they could. Where this was
no longer possible, author and translator have collaborated to paraphrase
rather than translate and risk misappropriations.
Despite the classic relevance of the book to explaining the period it takes
as its explicit topic, I believe it has a new relevance that also makes its
translation important as today’s Europe becomes ever more enmeshed in
the ongoing fallout from another frightening economic crisis and the
effects of globalization. Today’s America cannot be allowed to disregard
the fact that its global economic involvement will inevitably carry political
and social effects, and again raise the issue of intervention in Europe and
the rest of the world. Is the rise of reactionary authoritarian political
movements still a possible outcome of such circumstances? Neither schol-
ars nor the more general public should ignore the question. While most
professional historians scorn the saying that those who ignore history are
doomed to repeat it, certainly no one would deny that it is our job to
discern causality. It is no coincidence that Italy was a bellwether and test
case in the 1920s and 1930s; it has a long history as a “laboratory of
politics,” and today this is still true. As an object of study and historical
argument, the book combines both “classic” and immediate relevance.
I wish to thank Cambridge University Press for this opportunity to
spend a long time immersed in an important historical investigation. My
immense gratitude goes to Gian Giacomo Migone for so generously col-
laborating with me and sharing his thoughts and suggestions – and
xlviii Translator’s Preface

corrections! It can be so hard for writers to restrain their natural posses-

siveness and protectiveness of their own prose, but he encouraged this
junior scholar to exercise my own historical judgment, with grace and
generosity. I learned a great deal in getting to know this book; I have been
provoked to new thoughts on the history of Fascism in Italy and the history
of the United States of America in Europe; my hope is that I have made it
possible for all his new readers to have that experience too.

Molly Tambor
New York, February 2013
 introduction

The Origins of American Hegemony in Europe*

1. american economic power after the first world war

Let us focus on the great turning point in global power relations that the
First World War accelerated. The American GNP was $33 billion in 1914,
$45 billion in 1916, and $61 billion in 1918, and reached $72 billion in
1920. In other words, the national product had doubled from the effect of
wartime production. The Industrial Revolution, as is known, had reached
the United States later than it had the most industrialized countries of
Europe. And yet the process of growth, which the war gave a decisive
push, was of such proportions that when the crash occurred in 1929, the
United States national product was greater than those of Great Britain,
Germany, France, Canada, Japan, and seventeen other states put together.
Equally important was the degree to which the American commercial and
financial relationship with the rest of the world had changed. American
gold reserves at the start of the war, in August 1914, were worth $1.887
billion; at the moment of the signing of the armistice in November 1918
they were $3.079 billion; and at the end of 1925 they had reached a total of
$4.547 billion. This, according to the calculations of the American finance
authorities, equaled almost exactly half of all global gold reserves, esti-
mated to total $9,407,61,000.1 This extraordinary growth in gold reserves
is only one indication of the progress of commerce during the war. In the

* This introduction, in slightly different form, was previously published in Guido Quazza,
ed., Riforme e rivoluzione nel mondo contemporanea (Torino: Einaudi, 1977) and in
Rivista di storia contemporanea no. 4 (1974).
1
See for example J. B. Duroselle, From Wilson to Roosevelt: Foreign Policy of the United
States, 1913–1945, New York and Evanston, IL: 1963, p. 133.

1
2 The Origins of American Hegemony in Europe

course of the war – calculating from the second half of 1914 until the end
of 1919 – the United States exported products worth a total of 31.9 billion
lire (Lit). This means that the annual average of exports during the war was
more than double the amount in 1913, already fairly elevated compared to
previous years. Imports in the same period reached Lit 15.2 billion, for a
Lit 16.7 billion favorable difference in the balance of trade. These figures
are all the more remarkable given that a considerable portion of the
imports was made up of agricultural products or raw materials from
American-owned plantations or mines in Latin America and Canada.
But the data that most directly illustrate the change in the financial position
of the United States are those regarding investments and loans. Indeed, the
war had transformed the United States from a traditionally debtor nation
into a creditor. On July 1, 1914, the privately held foreign debt, not
counting loans, touched $3.688 billion, whereas on December 31, 1919,
the balance was $2.971 billion in credit. If to these figures, which are only
privately held credits, investments, and property, we add the government
loans offered by the United States in the course of the war, the credit
balance toward the rest of the world had become $12.562 billion.2
Among the principle debtors were the great powers from before the war.
Great Britain owed the American Treasury $4.3 billion, France $3.4
billion, and Italy $1.6 billion.3
These figures precisely demonstrate the different role that the United
States had assumed after the First World War. And yet it is not enough to
note only the quantitative dimension of the phenomenon. At the same
time, the American productive sector had undergone an important trans-
formation, both cause and consequence of its extraordinary growth.
Traditional progressive historiography in America highlights the way
that the demands of the wartime economy had made Washington the
center of the American economy for the first time. With the creation of
the War Industries Board, the War Finance Corporation, and the many
institutions aimed at planning war production and distribution, the
American economy is supposed to have overcome the old free market
models and to have begun to test the reform opportunities offered by a
more planned economy. In this model the government is no longer a
passive witness to the market interests shown by private actors. Arthur
Schlesinger Jr. argues that the war had forced Wilson to abandon his plans

2
See C. Lewis, with the collaboration of K. T. Schlotterbeck, America’s Stake in International
Investments, Washington, D.C., 1938, pp. 450 passim.
3
Duroselle, From Wilson, p. 133.
 1. American Economic Power after the First World War 3

for a “new freedom,” the slogan with which he had rationally and con-
sistently reaffirmed a full-fledged free enterprise model of government as
having the function only to suppress, using antitrust laws, those forms of
production that broke the rules of the market. If the financier Bernard
Baruch was able to state that the war had demonstrated how the economy
could be aimed at responding to national goals rather than those deter-
mined by whoever had purchasing power, we can see that those years
represent a first trial of the statist reform of the 1930s.4 Although this type
of analysis is certainly not unfounded, it lacks a fundamental element: the
attitude of large-scale industry regarding its presumed loss of authority. It
is no accident that a large share of the men who had rushed to Washington
to direct the new centralized economy for the symbolic salary of a dollar a
month came from the executive boards of the great financial houses of
Wall Street and of major American industries. The creation of coordinat-
ing agencies, if not of a true planned economy, turned out to be a transitory
phenomenon swept away by the Republican return of the 1920s, only to
bloom again during the New Deal. What instead had permanent conse-
quences was the process of rationalization and further concentration in
sectors of production that were in some way reflected by those planning
agencies. The great majority of the men who served in these agencies
returned to directing their own industries having encouraged their further
development and, above all – this being the prime element of novelty –
having discovered that the state could become a formidable force for the
consolidation and expansion of private economic power. The promoters of
state economic intervention proclaimed a victory that the Sherman
Antitrust Act did not apply to its directives. But was it really a victory of
state dirigisme inflicted on the Calvinistic liberalism of Wilson? Or did
private interests, having taken control of the economic levers of the state,
get rid of this law, which, as compatible ideologically as it was with a
capitalist market system, might have caused consternation if some irre-
sponsible politician tried to brandish it? The concentration of production
during wartime afterwards allowed a whole class of bosses, unscrupulous
yet all told rather provincial, to reach a new level of awareness not only of
the service the state could render, but also of the new role that the
American economy was called to play on the world stage, of the oppor-
tunities that resulted from this role, and of the new demands for business
and labor organization that accompanied it. These were the years that saw
the birth of the government economic agencies and a whole series of new

4
See A. M. Schlesinger Jr., The Crisis of the Old Order, Boston: 1957, pp. 37–41.
4 The Origins of American Hegemony in Europe

employers’ organizations that tried to coordinate capitalist power but also

to win new forms of its articulation, intervention, and pressure on the
organs of government.

2. class conflict in the united states

Possibly the most important result of this discovery of the federal govern-
ment as a subject of economic policy on the part of American employers
was the integrating and subordinating role that it could play with regard to
the workers’ movement. Even in the moments when, with the Coolidge
administration, the federal government was once again forcefully pro-
claimed to be totally passive, this role would not be abandoned. It would
then reemerge with maximum force during the Second World War. This is
a central issue inasmuch as the defeat of the American working class was
one of the indispensable conditions for the later expansion of American
capital abroad; and it heavily mortgaged the possibilities for struggle in
Europe in the 1920s. It was precisely the state of war that allowed the
government to promote a period of interclass collaboration and of repres-
sion, in cases where that collaboration failed. This formula may seem
obvious, but it must not be forgotten, since it had powerful effects on the
later events of the American class relationship and indeed on the entire
structure of working-class organization. The war thus provided the usual
interest of the executive in demanding military discipline at production
workplaces, along with the ulterior moral blackmail that working in the
factory was a privilege compared to having to fight in the trenches. Every
form of conflict or insubordination was denounced as giving aid to the
enemy. Adding to this repressive mechanism, common to all wartime, was
the bourgeois panic resulting from the Bolshevik revolution. This fear
reached its height in March 1919, when the Third International was
founded and, at the same time, insurrection in Bavaria and Hungary
seemed to threaten the expansion of revolution to other countries. The
war had provided the Justice Department with the occasion and the excuse
for a frontal attack on the only American unions that were actually anti-
capitalist. Both the Socialist Party and the Industrial Workers of the
World – which on the eve of the First World War were sizable organiza-
tions – were decimated. By the end of the war, the Socialist Party had gone
from five thousand to three thousand locals in the entire United States.
Eugene Debs, leader of the Wobblies (as the revolutionary unionists of the
IWW were called), was in prison with many of his comrades, convicted of
sabotaging the war effort. There were two main weapons in the fight
 2. Class Conflict in the United States 5

against these organizations: beyond direct repression: the dismantling of

the war industry and reconversion to peacetime production offered ample
occasion to destroy the painstaking work of union organization in the past
years.5
The great centers of industrial power had, then, in these cases also been
able to make use of the executive’s services to directly intervene in social
conflicts. Although the great personalities of finance and industry had not
let themselves get carried away by the anti-Bolshevik fanaticism of the
time, they were perfectly capable of benefiting from its effects even as they
distanced themselves from political or ideological involvement. The repres-
sion of every radical tendency of the workers’ movement, and particularly
of any autonomy for it, was a necessary condition for making feasible the
collaborative schemes they advocated.
But the men who rendered these services also had to answer to their own
constituents, who were immersed in the climate of fanaticism that the war
had unleashed against the forces of the Left. They could not maintain the
aristocratic reserve of a Rockefeller or of the associates of the House of
Morgan in the face of provincial America’s zealous demonstrations;
indeed, they were forced to make themselves its spokespeople.
A. Mitchell Palmer, Woodrow Wilson’s attorney general, assessed in this
way the situation in 1919:
Like a prairie-fire, the blaze of revolution was sweeping over every American
institution of law and order a year ago. It was eating its way into the homes of
the American workman, its sharp tongues of revolutionary heat were licking the
altars of the churches, leaping into the belfry of the school bell, crawling into the
sacred corners of American homes, seeking to replace marriage vows with libertine
laws, burning up the foundations of society.6

What events had elicited such judgments, which, even as they exploited
emotions still needed to have some kind of basis in fact? In effect, the
frontal attack on Socialist and trade unionist organizations that had taken
place during the war had not been enough to completely suffocate the
fighting spirit in the working class. There were too many objective forces
feeding it in the year immediately following the end of the war. Although
the rate of population growth had been notable (the United States had gone
from 91,972,000 inhabitants in 1910 to 105,711,000 in 1920), more than
three-quarters of this growth was from births, whereas immigration had

5
See J. Weinstein, The Disease of Socialism in America, 1912–1925, New York: 1967,
pp. 231ff.
6
Cited in Schlesinger Jr., The Crisis, pp. 42–43.
6 The Origins of American Hegemony in Europe

slowed considerably during the war. In 1918, the vertical drop nearly
anticipated the same effects that the restrictive laws of 1921 and 1924
would have. It follows that the workforce had grown substantially more
slowly than the population as a whole. In the face of the enormous
expansion of wartime production, unemployment had gone down, and
the infrequent turnover of the workforce had allowed for more stable ties
among workers; all these were favorable conditions for collective organ-
ization. Furthermore, the disproportion between the visible growth of
production and profits and the workers’ standard of living, particularly
in some sectors, was a continual stimulus to working-class protest. In the
spring of 1919, inflationary pressure began to be felt; prices rose until, at
the end of 1920, they were 105 percent greater than before the war.7 If this
fact contributed to the gradual isolation of the working-class struggle, it is
also clear that it served to increase those struggles, as bit by bit the working
class felt the bite of inflation on their pay. Meanwhile, the Bolshevik
revolution had served not only to frighten the middle class, but had also
enormously encouraged the workers, to the point that the mere mention of
Lenin’s name was enough to electrify any meeting.8 Even the old craft
unions, based on a tradition and a membership that tended to the corpo-
rative, underwent an evident radicalization. Union leaders modeled
themselves not after the Bolsheviks, but rather more after the style of the
Nottingham program with which British Labour had requested the nation-
alization of basic industries. Nonetheless, their old cooperative habits were
shaken by a new ideological current that, while certainly not the revolu-
tionary inferno of Palmer’s rants, did upset the traditional pragmatism and
tactical caution of Anglo-American trade unionism.9
Starting in January 1919, a general strike in Seattle that lasted five
days – a very unusual event in the United States – created a state of high
tension throughout the country. The city’s mayor led a repression that
successfully mobilized the middle class against the strikers, sufficient to
defeat them but not to reassure public opinion, which was encouraged
by the great majority of newspapers to believe that the nation was on the
cusp of revolution. This atmosphere was intensified by a series of
attempted assassinations directed at such personages as the mayor of
Seattle and Palmer himself. Thus began a true strategy of tension [this is

7
See G. Soule, Prosperity Decade: From War to Depression: 1917–1929, New York: 1947,
pp. 81–95.
8
See the testimony of John Dos Passos reported by W. E. Leuchtenburg, The Perils of
Prosperity, 1914–1932, Chicago: 1957, p. 71.
9
Ibid., p. 71.
 2. Class Conflict in the United States 7

a literal translation of an Italian concept, where repression, or the lack of

it, on the part of a public authority serves the purpose of finding con-
sensus in manipulating public opinion through fear, so that the people
will in turn demand a stronger state – trans.] on the part of the state,
which, throughout the rest of the year, was intertwined with workers’
protests. The assassination attempts were generally attributed to “the
reds,” and only the most “responsible” sectors of the employing class
restrained themselves by blaming them on anarchists. When, immedi-
ately following the first wave of attacks, the Boston police went on
multiple strikes – a form of protest that, despite being extraneous to
the workers’ movement, deeply unnerved conventional wisdom for its
effects on public safety – the repercussions were visible among the
steelworkers of U.S. Steel and coalminers. All these strike efforts had
some common characteristics: they were moments of great popular
mobilization and participation; they either bypassed union leadership
completely or did so at crucial moments; they were harshly repressed by
both the total intransigence of the employers and the liberal use of police
force (there were 20 deaths in Gary, Indiana); and, except for a raise
in miners’ salaries, they did not lead to substantial results. All this
transpired in a situation in which the organized workers’ movement,
especially but not exclusively in its most radical forms, had sustained a
continuous attack throughout the course of the war. John Dos Passos
wrote in the spring of 1919:
Any spring is a time of overturn, but then Lenin was alive, the Seattle general strike
had seemed the beginning of the flood instead of the beginning of the ebb . . .10

The sum of tensions of that terrible year set the scene for a defeat that
the subsequent repressive operations of Palmer, the divisions that split the
Socialist Party in three factions, and, finally, the deflation of 1920–1921
definitively consolidated. The ideological fuel of wartime, inflation, the
protests that lacked political leadership and were therefore easy instru-
ments for the propaganda of the opposition, the terrorist attacks, and the
repression were bad enough. These ingredients then combined with defla-
tion and an unemployment rate bolstered by a temporary increase in
immigration, and together they resulted in an effective strategy that
employers ably exploited even if they had not themselves explicitly under-
stood the links among them.

10
Quoted in William E. Leuchtenburg, The Perils of Prosperity, 1914–1932, 2nd ed.,
Chicago: University of Chicago Press, 1993, p. 69.
8 The Origins of American Hegemony in Europe

After the defeat of 1919 began a long period of social calm interrupted
only by the financial crisis. This peace was disturbed by a few important
protests such as the railway strike of 1922, the great miners’ strike in
Pittsburgh in 1925, and the miners’ strikes such as those in Colorado
that marked the definitive sunset by the end of the 1920s of the
International Workers of the World. These protests, while occasionally
very large, were sporadic and ended for the most part in defeat. Counting
the average annual number of work stoppages between 1916 and 1921 as
a base of 100, from 1922 to 1925 the average fell to 34 and 43, respec-
tively; and from 1926 to 1930 it went all the way down to 18 and 11. A
further measure of the crisis in organized labor is the drop in membership
in labor unions in the same period, a phenomenon that hit the industrial
unions – among them some of the most activist – harder than the more
corporative ones linked to artisan crafts, which not only held steady but
actually grew significantly in some cases.11
It would be mistaken to believe that the flood of union busting belonged
only to 1919–1920, the culminating period of the confrontation. An
unyielding response to every form of workers’ activism had characterized
the entire process of industrialization, even if the intervention of the federal
government as such occurred only upon the growth of the direct role of the
state in the economy marked by First World War. In the 1920s the repres-
sion continued, in the same vein begun in 1919, with the violent crackdown
of the police on strikers but also through the consolidation of permanent
forms of repression that became for a long time a fixed characteristic of
American society. These included discrimination against union organizers;
the so-called “yellow dog” contract, in which the worker agreed at the
moment of hiring not to join any unions; and the indiscriminate use by the
courts of sentences that, with specious arguments but creating substantial
precedent, made strikes illegal and ordered the arrest of strike leaders. There
was widespread and sometimes violent use of scabs. Finally, a few of the
biggest corporations, such as Ford, pioneered the systematic construction
of company unions. American employers refined these tools and put
them to use throughout the 1920s. These initiatives were coordinated and
adjusted at the national level by the employers’ associations, whose perhaps
most important campaign – known as the American Plan and created
in the significant year of 1919 – was aimed at destroying the so-called

11
See I. Bernstein, The Lean Years: A History of the American Worker, 1920–1933,
Baltimore: 1966, p. 86.
 3. The Defeat of the American Working Class 9

closed shops, in which unions were able to control hiring in contexts

favorable to their own interests.

3. the defeat of the american working class

Still, the defeat of organized labor was not due exclusively to the unscru-
pulous use of coercion on the part of the state and private employers. The
other factor in this defeat came from the unions’ politics of ongoing
involvement – in a subordinate role – in schemes of collaboration and
co-management. This was not merely a matter of generic factors such as
the “individualistic social climate” that, according to Irving Bernstein,
prioritized hierarchy and social mobility over the communitarian or solid-
aristic values promoted by organized labor (it is difficult to ascertain
whether that attitude was cause or consequence of the defeat of the work-
ing class). Rather, it is important to remember that the specific politics
promoted by significant sectors of the propertied class led John
D. Rockefeller Jr. to advocate the doctrine of Employee Representation
Plans (known as the Rockefeller Plan) and the idea of industrial democ-
racy, which included a limited but significant effort at co-management and
created important ties between the trade unions and Taylorism. At the
same time some of the most intransigent employers, such as Ford, tended
more and more to intervene in every aspect of their workers’ lives accord-
ing to the growing idea of personnel management. Trade unions certainly
suffered from this two-front assault – both repression and co-management.
In the course of the 1920s, certain characteristics of this assault were
further emphasized: the allegiance to a politics of profitability and produc-
tivity inherent in Taylorism was reinforced by the wartime climate in
which industrial workers were seen as privileged, the divisions among
professional trade unions grew as their jurisdictions became further sepa-
rated, and the unions themselves promoted financial and insurance activity
over ideological and political activism. These were all natural develop-
ments, but they were notably intensified by the particular origins and
character of American syndicalism.12
A purely theoretical explanation of the development of American syn-
dicalism is totally insufficient to account for its specific features. The
weakness of unionism cannot be explained away simply by the repressive
mechanisms enforced by employers or by ascribing a philosophy of mod-
eration to union leadership. To understand the way that conditions

12
See Bernstein, The Lean Years, pp. 91ff.
10 The Origins of American Hegemony in Europe

stabilized to produce this weakness, it is absolutely necessary to incorpo-

rate an analysis of the economic developments of this period. A long period
of expansion had begun after the 1920–1921 recession and was interrup-
ted only by the Great Depression. According to the calculations of Simon
Kuznets based on the contemporary value of the dollar, the GNP grew 43.7
percent from 1919 to 1929, at an average annual increment of 6.2 percent.
But the principal aspect of those years is the growth of productivity, which
in the industrial manufacturing sector grew 72 percent by worker per hour
in the same period.13 This growth came mostly from technological advan-
ces, but also from corporate restructuring and a new organization of labor
that intensified the rhythms and output of the workforce. It should be
noted that the rate of real wage increases did not follow the rate of profit
increases. Beyond the reasons given above for this phenomenon, we must
also consider the rise of unemployment. Even though immigration was
forcibly limited, the flow of manpower from country to city, the ongoing
entry of women into the workforce, and the above-mentioned advances in
technology all diminished the negotiating power of workers so that even in
a period of overall economic expansion, unemployment in vast sectors of
the working class exerted a continual downward pressure on wages. It may
not be a coincidence that during this period no government statistics
existed; according to Weintraub, the unemployment rate wavered between
10 percent and 13 percent among eligible workers between 1924 and
1929.14 Despite all these limits on economic development, there is no
doubt that, as Bernstein observes, it was strong enough to quiet worker
hostility so that collaborative initiatives continued, and the ideology of co-
management between workers’ organizations and employers was consoli-
dated. Even if real wages did not match profit growth, class imbalance
increased, and the concentration of wealth and power among elites grew to
an impressive degree, still the relative improvement in the economic sit-
uation did make itself felt among the masses – both with respect to the past
and with respect to the rest of the world, the latter being a consideration
with real weight in a nation of immigrants. In the course of the war it was
the federal government that took a series of initiatives to respond to
workers’ demands by imposing such regulations as the eight-hour work-
day in more sectors and an increase in salary levels. In the 1920s, the
government returned to a more lethargic attitude, but, in the meantime, the

13
See S. Kuznets, National Income and Its Composition: 1919–1938, New York: 1941.
14
D. Weintraub, Unemployment and Increasing Productivity in Technological Trends and
National Policy, Washington, D.C.: 1937, p. 75.
 3. The Defeat of the American Working Class 11

ground had been prepared for a laissez-faire capitalist expansion strong

enough to maintain and encourage the support for co-management within
the trade union movement. In American historiography, perhaps because
some historians have too often focused on the individual towering figures
of capitalism rather than on the overall statistics of American economics,
or perhaps because they were not able to look beyond the short-term
economic policy to discover the true measure of continuity in this binary
of repression and integration – present in the Democratic reformist admin-
istration of Wilson as well as in successive Republican administrations –
there are those who sustain a “parenthesis” interpretation whereby the
politics of favoring capitalist interests and punishing the working classes
are exclusively a Republican choice, a moment of greed and corruption
sandwiched between the grand seasons of reform represented by
Woodrow Wilson and Franklin Roosevelt. Nonetheless, the most notable
aspect of this period is that, despite the different economic policies of the
Wilson administration and the successive Republican administrations,
there remained substantial continuity in the government’s and employers’
approach. The trade union movement had no alternative but to be increas-
ingly absorbed into this model. Even Franklin Roosevelt had to come to
terms with the demands of work discipline for productivity, which a new
war again dramatized, even after the working classes had been his
principal ally in a process of sweeping away the capitalist politics of the
preceding epoch.
An important element of the continuity between Wilson and his succes-
sors was the full awareness that, in order for the United States to play the
global role the economic system called it to, it was necessary not to block or
slow down the increase of productivity. In this context it becomes clear
that the process of normalization of this specific relationship between
capital and workforce unleashed on workplaces immediately after the
war – and stabilized in the following years – was a fundamental basis for
the expansion of American capital in the global system. This is why it is
impossible to agree with Schlesinger and other liberal historians who
dismiss the repressive aspects of the Wilson administration as an aberra-
tion due to war hysteria or to Wilson’s serious illness in the final phase of
his presidency without attempting to reconcile these actions with the
reformist ideals that informed his foreign policy and his belief that the
state could play a reforming role in the economy.15 In reality, had produc-
tion been slowed by workforce activism, one of the critical ingredients for

15
See Schlesinger, The Crisis, p. 45.
12 The Origins of American Hegemony in Europe

wartime expansion of production would have been missing. By the time

the Second World War was over, some goals had been achieved: in spite of
the efforts of the CIO, there was almost no class-based or radical organ-
ization in the factories, and the moderate orientation of union leadership
was consolidated as a given. In 1919, as we have seen, the situation was
different. In those far more fluid circumstances, a test of strength was
unavoidable. Although the demands of wartime allowed the state to act
as a steamroller in the production sector, working-class combativeness as it
emerged in 1919 made it clear that no equilibrium had yet been reached. It
follows that the head-on class battle in that period did not conflict with
Wilsonian reformism, but instead represented a natural prerequisite for
further expansion of the economy and for more ambitious plans outside
the United States. It is no coincidence that the sole meaningful concession
to the unions in this period was the legislation to restrict immigration. The
usual historiographical interpretation of the two immigration laws paints
them as an expression of the isolationist spirit dominating the United States
at the time, emphasizing the racist character evidenced by their discrim-
ination among applications according to country of provenance. This is all
true, just as it is true that the ideology of war and the fear of Bolshevism
aided repression in the postwar era; yet neither claim touches the root of
the problem. Restricting immigration contributed to lowering unemploy-
ment and, therefore, increased the inflexibility of the workforce, and yet
American employers, who were certainly used to having their own way,
had no choice but to accept. It may be true, as we have seen, that even
without the escape valve of immigration there was really no great danger of
mass unemployment with its accompanying pressures. It is also true that
Congress, more responsive to the isolationist mood of the country, could
not ignore constituents’ opinions on this rather inflammatory issue.
Nonetheless, it is significant that the only important concession made to
unions was so full of compensations at the strategic level. Indeed, immi-
gration restriction might have offered greater negotiating power to the
unions, but it also helped to isolate them. The isolation of the working class
is a key characteristic in the most advanced industrial countries of the
twentieth century – one of the principal conditions for enclosing the
production sector in a corporative structure so that national working-class
interests are subordinated to the common interest of profitable relationships
with the rest of the world. Even without claiming that the American ruling
elite was explicitly conscious of this interest – American hegemony was still
in its earliest days at this time – it was clear that in the struggle of the
American working class both the question of its own power to resist future
 4. American Expansion in Europe 13

repression and the question of other industrialized nations’ class and pro-
duction relations were at stake. Therefore, every measure that contributed
not only to its defeat but also to its isolation – and the block on immigration
was a step in this direction – was actually a victory for international business
over any potentially internationalist working-class movement.
The nationalism of American union leaders, particularly strong in men
such as Gompers, was further strengthened by the immigration law
debates in the same way that the hiring of blacks as strikebreakers had
intensified racial conflict in the lower classes.16 It was at precisely this same
time that the AFL took on an international political role dictated by the
State Department – a role it has never since dropped, and which has led it
to sponsor anti-Communist and anti-internationalist policies in the
European syndicalist movement and in developing nations.17

4. american expansion in europe

There were, then, several fundamental conditions for the expansion of
American capitalism beyond national borders: from the overabundance of
liquid capital to a subordinated working class in the process of rapid
integration with the general goals of an economy that it could not and
would not control. To what point did there exist the entrepreneurial
mentality capable of these new tasks?
Herbert Feis, who in that era lent his efforts as economic adviser to the
State Department, interpreted the state of mind of the American ruling elite
in these words:
For most Americans our participation in the First World War was an arousing
experience. It was the first time that their lives and thoughts were touched by events
abroad; the first time they made real contact with foreign peoples; while for many
bankers and business men it was the first time they made money out of foreign
business. The country was swept with an exciting sense of greatness, at playing so
decisive a part in the world’s affairs. This did not fade out when the war ended. We
had won the war. We were ready in our sprouting confidence to take on the next
jobs; to clean up the rubble of the war and get the world going again. Europe would
be put on its feet. American energy, shrewdness, honesty, skill – and above all else –
American dollars, bring the world back to “normalcy.”18

16
On Gompers’ ideology and American syndicalism of the period, see Bernstein, The Lean
Years, pp. 91–101.
17
R. Radosh, American Labor and United States Foreign Policy: The Cold War in the
Unions from Gompers to Lovestone, New York: 1969.
18
H. Feis, 1919–1932: The Diplomacy of the Dollar, New York: 1966, p. 3.
14 The Origins of American Hegemony in Europe

Feis’s description is a fairly accurate expression of the intertwining of

interests and ideals, of vocation to communitarian responsibility and will
to power, typical of all hegemonic designs. We have become accustomed to
the image of Wilson, with his Fourteen Points, as a prophet of humani-
tarianism, generous if a bit ingenuous, who spoke in the name of supra-
nationalism and democracy against the petty nationalisms that had caused
the war. Strange as it may seem, it was only in the late 1960s that American
historians – until then apparently totally immune to Marxist influence –
began to question the facile dualist image of an internationalist Wilson
bravely taking on the isolationism that reimposed itself after the signing of
the Treaty of Versailles and that led Congress to refuse to ratify the League
of Nations.19 Nor is the opposing oversimplification true, that Wilson’s
political program was a simple propagandistic disguise of American cap-
italism’s interests in profit and domination. Empire always has an idealized
projection of its will to power. It is indeed one of the signs of a power on the
rise, when an imperial project has the capacity to build wide consent for
those very objectives that increase its own direct power. Wilson was
perfectly aware that the “Bolshevik poison,” as he called it, had the
character of a global protest; the idealistic message it contained had to be
contrasted to an equally attractive “new world order.” As opposed to
more modest men such as Hoover, who saw the Bolshevik revolution as
merely a challenge to vested interests, Wilson realized that it would require
the ruling elite of the capitalist world to defend and redefine themselves in
ideological terms.20
As always, the problem was to create a project that reconciled American
interests within a larger plan, so as to elicit consent beyond the rational and
enlightened sectors of the ruling elite – of those who, in victory as in defeat,
had been shaken to the core by the costs of the war and the precedent of the
Russian Revolution. As Carl P. Parrini has shown, already by 1916 the
leading voices of American political and economic opinion were convinced
that worldwide trade regulation and finance reform were necessary if the
United States were to increase its export sales of the goods and services it
was producing in ever greater quantities. When they spoke of the “Open
Door” policy, borrowing the old term used by the British to force China to
grant trade concessions, it was with the understanding that American

19
A. J. Mayer, Politics and Diplomacy of Peacemaking: Containment and Counterrevolution at
Versailles, 1918–1919, New York: 1967; on the economic aspects, of particular importance is
C. P. Parrini, Heir to Empire: United States Economic Diplomacy, 1916–1923, Pittsburgh:
1969.
20
Parrini, Heir to Empire, p. 253.
 4. American Expansion in Europe 15

businessmen were by rights free to conquer every market they had the
wherewithal to reach. According to Parrini, this would require that they
(1) resolve by compromise interest-group conflicts at home between bankers and
manufacturers, importers and exporters, industry and agriculture; (2) build an
international commercial system which would allow American business to topple
and replace British business interests as the managing component of the world
economy; (3) create new institutional means of performing the politically stabiliz-
ing task which Great Britain alone had performed before 1914.21

To this list I would add the need to forge a relationship with their own
working class that prevented organized workers from obtaining a sub-
stantial redistribution of profits within American society and stopped them
from building any international networks that might be a resource for
strengthening their autonomy.
At war’s end, these objectives were no longer merely a potential strategy
awaiting the ripening of events as being hammered out in debates by the
National Foreign Trade Council. We have already seen to what extent
wartime conditions had reinforced the conditions necessary for their
implementation. With the growth of the production system and the avail-
ability of American capital, it was becoming urgent to solve certain prob-
lems. All the latest innovations of the production system targeted export. If
those newly opened foreign markets were not maintained and enlarged,
including through the introduction of different products now that the war
was over and demand would change, America risked not only a cut in
national income but also a dangerous imbalance, in the near future, of
supply and demand. Capital, too, needed external market outlets. Without
wage, fiscal, or public spending policy, for which as yet no political or
economic precedents existed (we cannot forget that, even into the 1920s,
an associate of the Morgan Bank felt it necessary to warn his colleague not
to advertise their reading of Keynes for fear it would discredit them), the
overabundance of capital would encourage speculation and itself imbal-
ance supply and demand. Indeed, that is precisely what happened by the
end of the decade, even despite the considerable flow of capital abroad that
did occur. Further, there remained the problem of shoring up and even-
tually enlarging the previously existing foreign markets in which American
goods and funds were already important players. It became immediately
evident that no halfhearted economic measures could suffice in the postwar
period. At every level the interdependence of the global market was more

21
Ibid., p. 127.
16 The Origins of American Hegemony in Europe

visible; further, it seemed clear that the recovery of the world economy
depended on the reconstruction of Europe.
America’s successful establishment of hegemony in the heart of the
industrialized Old World was not only political and strategic wishful
thinking. Beyond any such long-range aims was the fact that every eco-
nomic problem, even the most seemingly distant, was directly related to the
reconstruction of Europe. Take for example Latin America. If Europe were
unable to import raw materials from Latin America, those countries in turn
would be unable to import products from the United States and would be
generally weakened in their domestic economies, with the consequence
that American investments in those economies would fail to pay off. Other
links to the European situation were far more obvious: only the capitalist
reconstruction of Europe would provide the necessary means to pay for
American imports, and only in the context of such a reconstruction would
American capital find profitable gains. As Paul M. Warburg said to a
convention of bankers in New York in 1921:
If I were to translate America’s position with regard to the economic problems into
plain business language, I should say: we are substantial creditors to the Old World
Corporation, which is our best client and which is facing great financial difficulties.
Is it our interest to let this corporation go into insolvency and disintegration, or
shall we encourage and further a reorganization?22

The rhetorical nature of the question was clear. Moreover, implicit in

the very form of the question was the fact that an affirmative answer to the
second option would require the creation of a hegemonic relationship to
the Old World, since, when a supplier rescues his main client, the funds he
lends transform a relationship of equal trade into one of dependency. This
inherent intent certainly also corresponds to the list of criteria above. It
would serve a tangible and immediate interest of the American economy,
but also respond to the need of the European economy to reconstruct itself;
and it would stabilize social conflicts so as to forestall the revolutionary
wave from Russia that threatened to swamp at least all the defeated
nations. And yet this plan quickly hit obstacles, mostly political ones.
Crucially, the most important factor for the economic recovery of
Europe was the reconstruction of Germany. The European country with
the greatest industrial potential was also the one that had most suffered
from the war. The German middle classes had first weathered the threat of
revolution and then been decimated, with the working class, by galloping

22
Quoted in ibid., p. 124.
 4. American Expansion in Europe 17

inflation. Without the reconstruction of Germany and its industrial sector,

no European recovery was conceivable. This was the realistic and concrete
basis for Wilson’s magnanimous attitude toward the defeated power: far
from a pure and simple hypocrisy, as sectors of opinion in Europe had it,
this was an important example of how to express a material interest as a
universal value, easily understood and initially admired by many others.
Nonetheless, Wilson confronted a serious obstacle, as is well known, in the
political opposition from Great Britain and, even more strongly, France.
These victorious powers needed to appease public opinion and supposedly
protect their future military security by imposing onerous reparations to
make Germany’s recovery impossible and exclude it from its previous
prominent position in international commerce. This policy, culminating
in the disastrous occupation of the Ruhr, ended only when first Great
Britain and then France realized that their economic destinies were inti-
mately linked to those of Germany and that they could not do without
American financial support. For the Americans, the attitude a nation took
toward Germany became a political litmus test; even in 1925–1926,
American financiers were demanding that the Italian government exhibit
a “constructive” attitude toward Germany as one of their conditions for
the loans and economic as well as political aid they provided to the Fascist
regime. On this as on other fundamental points of American foreign
economic policy, there was near perfect continuity between Wilson and
his Republican successors. It was this principle that Wilson advocated in
his debates with Clemenceau and Lloyd George in Versailles; and it was
still this principle that American bankers insisted the British and French
accept with the Dawes and Young Plans. The seemingly dramatic rift
between Wilson and the Republicans over the League of Nations was
nothing more than secondary; the effective presence of the United States
in European affairs was a given and had only to be defined in its particulars
and protagonists.
Public opinion was for the most part isolationist; this had its effect on
the Senate, such that it would not ratify any formal pledges of alliance or
any institutionalization of such ties – which was just what the League of
Nations was meant to do. The most influential men of the Republican
Party, those who would dominate the government in the following admin-
istrations – Hughes, Mellon, Hoover – were just as aware as Wilson of the
necessity of a growing and permanent commitment in Europe, as were
those commerce and finance sectors that they represented. They opposed
the League of Nations partly for political opportunism, playing up to
prevailing isolationist sentiment – they knew well that the peace treaty
18 The Origins of American Hegemony in Europe

would be the downfall of the Wilson administration and the Democrats in

the next election – and partly out of a true conviction that institutionalized
alliances would weaken the United States; but they never for a moment
questioned the economic role the United States would play in Europe.
This substantial agreement on the goals of the highest government
officials during the First World War and the 1920s did remove all diffi-
culties from the path of the United States toward this new leadership role.
True, all the necessary conditions for this role were in place: a production
system of the right proportions; the ongoing availability of capital, sup-
ported by policies that taxed the highest incomes lightly; and low salaries.
The balance created between repression and integration of the working
classes had, as shown above, resulted in a sufficiently docile workforce.
Ongoing growth, combined with weak opposition from workers, effec-
tively constituted the ideal conditions for America’s foreign economic role.
Although the nature of this role, obvious enough even before America’s
intervention began, had been formulated in clear political and idealistic
terms by Woodrow Wilson, though painful conflicts of interest lasted
longer among government insiders; and this undermined the consistency
of the United States’ efforts in playing its hand abroad. A hegemonic
project needs internal coherence of the forces promoting it in order to
achieve consistent action outside the metropole; neither simple force nor a
clear formulation of goals will suffice. Several other conditions are neces-
sary: an objective understanding of the external circumstances in which
one intends to intervene; a reciprocally reinforcing relationship between
one’s economic and governing agents; a web of infrastructure – whether of
banks or government offices – to promote one’s actions; and, finally, a
social and political establishment willing to make, and require of others,
certain sacrifices so that further pressure to be exercised toward reluctant
former allies may be judicious and efficient.
From this point of view, the relatively sudden change in the United
States’ position with respect to the rest of the world created notable
problems. One example is the role of the state; as shown above, there
was not wide divergence at this level over foreign objectives, and the
isolationists had a more or less marginalized voice. Nonetheless, the reality
of the larger public that they reflected – far removed from the concerns and
objectives of the executive levels of finance and manufacturing – did carry
some weight. Such people were not interested in, and above all not ready
for, the new role their country was about to undertake. Lacking concrete
political direction, the way this public opinion expressed itself was purely
ideological. Beyond opposing the League of Nations, which, as was stated
 4. American Expansion in Europe 19

above, some politicians did even though they had no doubts about
America’s hegemonic calling overall, this type of public pressure put the
brakes on any external actions of the American government as such.
United States official representatives therefore became the advocates of
an absurd distinction between the economic sphere, in which the American
presence was legitimate and aligned with the general values of the nation,
and the political sphere, from which the United States must remain com-
pletely absent. This obviously did not mean that Americans conducted no
politics abroad; rather it meant that businessmen and bankers directly
conducted their own foreign politics, without the mediation or resources
of the representatives of the government. For this reason, the American
government insisted for a long time that economic conferences between
nations were the arena of businessmen and bankers rather than govern-
ment officials. Further, those officials were absent from various more
strictly political centers, beginning with the Council of the League of
Nations, where current crises, territorial disputes, and other political
topics were debated. This did not substantially impair the bargaining
power of the United States or impede it from weighing in on the affairs
of Europe and its most important political controversies. It did mean,
however, that the United States deprived itself of a range of pressuring
devices that might have served their goals.
Some American officials were forced to fall back on the most curious
pretenses and hairsplitting in order to steer clear of isolationist criticism
from those members of Congress who, perhaps precisely because they had
no ability to change the course of events, took every opportunity to rail
against apparent violations of the isolationist creed. Even if this did not
materially affect the general trend toward opening new markets and new
avenues of influence in the world, there was a real lack of that common
interest and consensus among public opinion, government officials, and
wielders of economic power that is characteristic of a mature hegemonic
policy.
There was not even clear consent on the role of government, particu-
larly that of the State Department and the Department of Commerce, in
foreign economic policy making. Particularly vexing was the question of
whether these departments could approve private loans, their most
broadly consequential activity. The Republican administrations of
Harding, Coolidge, and Hoover confronted this same problem; despite
their declarations to the contrary, this proves the argument that the United
States was building a hegemonic identity that made any purely passive
government relationship to the market an obsolete option. We have
20 The Origins of American Hegemony in Europe

evidence from Feis that even this fear of being accused of imperialism or of
“dollar diplomacy,” in the phrase coined in the Taft administration, made
a certain prudence necessary during these administrations. The secretary of
state limited himself to asking bankers to preemptively submit their loan
proposals to the State Department and to identifying a few cases in which
the department would veto the authorization of such loans.23
In reality, the only vetoes to take effect were against those countries
whose war debts had not been discharged or negotiated, or those whose
governments the United States did not diplomatically recognize (which
was a euphemism for the Soviet Union). The prohibition on loans for
rearmament was merely a propagandistic sop to isolationist opinion. The
dispute that really mattered, pitting Hughes and Mellon against Hoover,
was between manufacturing and finance. Hoover, representing industrial
interests, was more favorably inclined toward governmental participation
in loan vetting than was Hughes. He was opposed to an indiscriminate
flow of loans whose approvals were due to the greed of bankers to make
their commissions on any transaction and not to their concern with the
future solvency of the client. This point needs clarification: the majority of
foreign loans were awarded by single banks or bank consortiums, which
then issued bonds on the American market. Accordingly, though the
reputation of the issuing bank may have been at stake, the actual risk as
to the client’s solvency was acquired directly by the individual buyer of the
bonds. Given this insulation from loss, only the most circumspect banks,
such as the House of Morgan, bothered to act prudently; and this practice
quite unintentionally resulted in some nasty surprises, particularly after the
crash and particularly for smaller investors who had entered the market
attracted by the high interest rates. Hoover’s reservations were well
founded in this sense, although his position stemmed from deeper concerns
than the merely moralistic. Indeed, the manufacturing industry, and espe-
cially the National Foreign Trade Council that represented it in foreign
commerce matters, pressed through Hoover for the articulation of a credit
policy to be closely tied to the expansionist needs of American industry in
world markets. For a long time, American employers’ associations had
studied Great Britain’s history of financial and commercial empire build-
ing. They had come to the justified conclusion that a large part of British
commercial development was due to the relationship in which British
banks had funded commercial endeavors. When a British bank issued a
loan for a railroad in Argentina, it required that the raw materials for its

23
Feis, 1919–1932, pp. 18ff.
 4. American Expansion in Europe 21

building be purchased in Great Britain, that the technical consultants be

British, and that they, in turn, initiate a practice by which replacement
parts and all other supplementary materials be imported from the home-
land. American industrialists lobbied bankers to add the same conditions
to their services, and the government to promote and regulate the system.
Bankers, after a few minimally fruitful attempts, concluded that such a
clause would reduce their potential clientele. In the end, argued Benjamin
Strong (head of the Federal Reserve Bank of New York) in their name, such
restrictions were counterproductive, for banks and for foreign com-
merce.24 Indeed, the total volume of American exports was linked to the
free flow of capital, which allowed debtors to reconstruct their economies
and, in the final analysis, to buy American exports. According to the
bankers’ thinking, the success of British exports was not due to a clause
in their loan contracts, but rather to a long and effortful cultivation of the
relationship between banks and exporters. The exporters’ request was, it’s
true, an oversimplification of the situation; more well-founded was their
other proposal, also imitating the British case, to create more numerous
branches of American banks abroad. This would contribute to that specific
capillary collaboration between credit and exports that was characteristic
of successful imperial practice, in such countries as those of Latin America.
The manufacturing industry, however, suffered from internal differences.
Whereas several of the strongest sectors were capable of championing free
trade, large swathes of midsize and small industry feared foreign competi-
tion and pressured Congress to protect them in 1922 when it debated a
new law on import customs, the Fordney-McCumber Act. Great Britain
and France found an easy target in that law’s proposed high tariffs, point-
ing out the hypocrisy of the United States’ free trade moralism toward
them in tandem with such high protectionist barriers for itself. In truth, the
Fordney-McCumber Act, while fixing high tariffs in compliance with the
pressures from medium and small industry, also reflected a fundamental
necessity of the American expansionist strategy. In order to expand their
markets, Americans set themselves two main goals: with regard to indus-
trialized nations – in particular Europe – they claimed the status of most
favored nation in order to enjoy all the benefits offered between states,
affirming their readiness to sign trade treaties at any time with nations that
offered such a relationship; with regard to nonindustrialized nations, they
pursued an open-door policy.25 Such goals were in no way trivial because,

24
Parrini, Heir to Empire, p. 188.
25
Ibid., p. 238.
22 The Origins of American Hegemony in Europe

were they to succeed, it would mean that the European powers had
renounced every form of imperial preference in their colonies and spheres
of influence, whereas the status of most favored nation would have created
a free trade zone among all the most developed nations – a zone that would
in the long run encourage the prevailing interest of the strongest industrial
power. Given this significance, such a strategy had more than formal
continuity with the free trade program of Woodrow Wilson. Clearly
these goals were not short-term ones, and the new customs law had the
main objective of providing the government with strong tools of influence
in the “right” direction, since, starting from a level of high tariffs, the
government had ample ability to concede exemptions for reciprocal favors.

5. american policy for european stabilization

The viewpoint of the bankers, which finally prevailed, differed significantly
from that of the government. It was true that they too had a particular
interest in this situation – to loan money and profit from commissions and
interest. Many were therefore unconcerned with the productivity of the
actual loan and were even willing to take on risks lightly since it was
investors who would be liable for them. Hoover and the industrialists he
represented during his term as secretary of commerce were correct in their
judgment against bankers for this. But the great banking establishments,
starting with the legendary House of Morgan, were in reality the only
American institutions with a long familiarity in foreign relations and in
particular with Europe. The banking class had long studied, and admired,
the way in which the British had played their role in the world; bankers
were, in consequence, the most ready to inherit their position. Men such as
Strong, Lamont, and Leffingwell had nothing in common with the isola-
tionists, but neither did they share the simplistic drive of the manufacturers
who believed they could easily translate their current strength into external
domination. This did not make them any less decisive in their quest for
those results they knew the American economy was capable of. On the
contrary, they thought quite justifiably that the destiny of European cap-
italism was linked to their ability to smoothly take over its previous
hegemonic position – and to do so without causing ulterior inter-imperial
conflicts. For this reason, beyond any self-interest in the matter, they would
not commit themselves to any one single recipe for success. For example,
the construction of branches abroad helped to create a hegemonic system,
but that was not an end in itself: the opening of a branch only made sense
inasmuch as, in that precise moment, new business opportunities were
 5. American Policy for European Stabilization 23

opening there. Further, again notwithstanding their own interests, they

would never have made the mistake of fooling themselves that they could
conquer a dominating commercial presence throughout the world merely
by extrapolating from the preceding imperialist experience the single
expedient of conditioning their loans with trade requirements, especially
in the European context. The lesson to be learned was far more complex. In
relations with the other economic and political forces in America, the
bankers were concerned above all about balancing the outsized level of
the goals – which they otherwise shared – and the prices each was willing to
pay to reach such goals. In fact, they criticized the new high tariff levels in
that, as many bankers of the time reasoned, they protected many industries
that had no need of protection and excluded American farmers and indus-
trialists from foreign markets that would be ready to buy their products. It
was impossible to establish free trade without being open to the ultimate
consequences of that credo, just as it was impossible to effectively combat
the preferential British system or the double tariff system of France and
sustain the United States’ own preferential regimes in Central America.
Perhaps they did not realize, as Parrini argues, that American industry had
to protect itself from a flood of discount-priced European products until
the subject currencies had stabilized. It is more likely that many industries
did realize it and that precisely for this reason they obstinately pursued a
general return to the gold standard.
Above all, they were convinced that in order to reach the most ambi-
tious goals, it was impossible to accelerate on every path at the same time.
An example is the attitude of the finance sector toward the problem of war
debt when Secretary of the Treasury Mellon, responding to those who
claimed total repayment, asserted that it was in the national interest of the
United States to
think of the financial reorganization of Europe along the same general lines as the
reorganization of some large industrial corporation heavily involved after some
severe depression. We have become, whether we like it or not, the most important
creditor of Europe. In this capacity we are like the general creditors of the embar-
rassed corporation. Our money is in and we want it out, but it is impossible to get
more than the debtor can pay. If we insist on too difficult terms, we receive nothing.
We must then settle upon such terms as will give our debtor reasonable opportunity
to live and prosper.26

This was the continual refrain of American finance. The hegemonic

viewpoint is certainly not lacking in these kinds of affirmations; and yet,

26
Cited in ibid., p. 257.
24 The Origins of American Hegemony in Europe

even when in 1924 Great Britain still had not resigned itself to the new
distribution of power, American bankers, especially the House of Morgan,
insisted on avoiding a head-on confrontation. To every intransigent stand
Americans tried to take – be it the doctrinaire internationalism of Wilson,
the pressure of public opinion that all war debts should be called in, or the
impatience of industry to break down European protectionism – the
financiers preferred compromise and mediation. Ever since the Paris
Economic Conference of 1916, Great Britain and France had prepared
precise measures to respond to the inevitable expansion of America; they
worked to reinforce national industries through subventions, technical
assistance, and customs taxes to protect European markets and their
imperial spheres of influence. In the case of Great Britain, this represented
the overturning of a free trade policy that had reigned since 1815 and that
had coincided with the period of greatest splendor of the British Empire. At
the end of the war, a succession of economic conferences culminating in
Genoa were held to create mechanisms to contain the American economic
presence, to curb the importation of American products, and to exclude
American activity in the commerce or finance of those undeveloped areas
subject to British and French rule. Included in this strategy was the parti-
ally successful attempt to build a privileged position by claiming the
market shares that had been Germany’s and by acquiring concessions
and mandates in those parts of the world, starting with Turkey and the
Middle East, that had been under German control or influence.
The English were perfectly aware that nothing could be done to prevent
American competition; yet for a long time they fooled themselves into
believing that they could make use of American capital with no return
other than their interest payments on loans and without allowing that
capital to generate any developments under its own auspices.
Throughout this period, Great Britain continued to seek good relations
with France by supporting a punitive policy against Germany to keep it
economically weak, which also promised the benefit of greater national
security for both Great Britain and France.
With regard to this policy, American financiers, particularly the Federal
Reserve Bank of New York and the House of Morgan, were accused of
weakness by the other less patient sectors of the American economy. In the
face of manufacturing’s insistence on the creation of an alternative foreign
banking system, one closely linked to American commerce, Morgan con-
tinued its traditional relationship with the English, preferring in many
cases to do business through British banks. In the past, this had been the
result of a subordinate status, since both the British production apparatus
 5. American Policy for European Stabilization 25

and its financial resources had been superior to those of the United States.
But the associates at Morgan were convinced that the changed status of
American conditions would eventually pay off without the need to change
this practice.
The reversal on the German question came at the end of 1923, when
even the French had to admit that the occupation of the Ruhr and their
punitive politics had only succeeded in provoking rampant inflation in
Germany, inflation that affected France as well, causing a 25 percent fall in
the value of the franc and posing the risk of worldwide crisis. At this point,
the government of English prime minister Stanley Baldwin finally
requested the intervention of American capital.
American terms dictated that no new economic conference be called;
instead, a commission of experts was nominated to create the Dawes Plan,
which called for a drastic reduction in German reparations payments, the
reorganization of the Reichsbank under Allied supervision, and the
launching of a sizable loan program in which private American capital
would play a dominant role. France and Great Britain had no choice but to
finally resign themselves to the fact that, without the reconstruction of
Germany, the general recovery of the overall European economy was
impossible. From this moment forward, the role of American finance in
Europe underwent a radical change. Key in this change was not only the
use of American capital – the only kind available in sufficient quantity – but
also the fact that the Europeans themselves had requested American inter-
vention, accepting for the first time the underlying political realities. France
had to abandon its intransigent stance, Great Britain could not control and
exploit American money while keeping the Americans subordinated, and
Germany must be reconstructed. From the approval of the Dawes Plan
until the crash, these postulates of American policy dominated Europe.
This was American political success at its fullest, even if, given the stric-
tures imposed by the isolationists, it was American bankers and financiers
who conducted those politics themselves, in their continued pursuit of
equilibrium in Europe. The Locarno Conference, which marked the high
point of concord for European capitalism, was a natural result of the
Dawes Plan – proof of how necessary not only American capital, but
also American political mediation, had become in Europe. The
Americans enjoyed an enormous financial advantage as well as the unique
position of not belonging to any side but their own in European affairs. In
this sense, even the isolationism that kept Americans from officially par-
ticipating in political institutions abroad was an advantage, distancing
them from the riskiest hot-button debates. American financial support, at
26 The Origins of American Hegemony in Europe

least in the short term, did not appear to carry political conditions. From
the point of view of the minor powers, first of all Italy, there did not appear
to be any American intent to dominate in the European balance of power,
which made them more attractive allies than any European nation
competing for great power status. It was more objectively the material
weight and economic vitality of American capital that built control in these
years. Nonetheless, there did exist an American awareness that
U.S. economic success in Europe depended on the general and well-ordered
development of European capitalism. It was necessary, therefore, to con-
tain and to discourage nationalist trends in each country, in order to
prevent any disruption to the process of rationalization and stabilization
carried forward by American capital. In every case, the actions of
American bankers aimed at encouraging the growth of inter-European
ties. These were, indeed, the years of Austen Chamberlain, Stresemann,
and Briand; the Locarno Conference; and the Geneva Protocol. Last but
not least, as we shall see, these were also the years in which the newcomer,
the Italian dictator, played a successful, mediating role in Europe, with
the growing financial support of American capital and the consent of the
U.S. government. Being, with the U.K., the guarantor of the Locarno
treaty, became its political dividend.
It is this political function of American capital in Europe that is a new
historical development; more to the point, it is the element that made the
American presence in Europe more than just financial, but hegemonic.
This turning point of the American financial presence in Europe had
quantifiable results in the sense that, after the passage of the Dawes Plan
and the Locarno Conference, the New York stock market showed enor-
mous growth in European offerings. As the fears of a new conflict among
European powers – particularly acute during the occupation of the Ruhr
and influenced by worries about inflation and social instability – subsided,
confidence in the future stability of European economies rose. The flow of
American finance grew in volume, not only directed toward the principal
European governments, but also as requested by a wide variety of munic-
ipal and local governments and by numerous private companies. Direct
investments grew as well, although they would not constitute a notable
element of the European economy until after the Second World War.
There was one further goal that American financiers pursued with
tenacity since the end of the war that, after the approval of the Dawes
Plan, finally took hold. Several nations of secondary importance had
already returned to the gold standard in previous years, when monetary
stabilization was still the prerogative of the League of Nations Finance
 5. American Policy for European Stabilization 27

Commission, led by the director of the Bank of England. After the Dawes
Plan, Montagu Norman continued to promote stabilization, but it was by
now the Americans, represented by Benjamin Strong, head of the Federal
Reserve Bank of New York, calling the shots. Between 1925 and 1928
came the stabilizations, in rapid succession, of the pound sterling, the
Belgian franc, the Italian lira, the Polish zloty, the French franc, and the
Romanian leu. All of these currencies, only excepting the French franc,
were stabilized with the help of international credit – partially private,
partially furnished by the issuing institutions under the conditions fixed by
Strong and the bankers of the House of Morgan with the concurrence of
the Bank of England.
Various reasons lay behind American finance’s pursuit of the gold
standard. First was their conviction that any liberalization of exchange
rates was not possible as long as there existed the danger that, following a
devaluation of European currencies, cheap European products might flood
the American market. Therefore, in pursuing monetary stabilization, the
bankers were preparing the ground to force American industry into accept-
ing a more courageous politics of exchange. There was also a more
narrowly banking-related reason, which was, however, of heavy conse-
quence. The motivation of a loan issuer is to ensure the return of the loaned
funds, with interest, in a currency that has not lost value in the interim.
Even if the loans were issued in dollars, the devaluation of local currencies
could still increase the risk of insolubility for the debtor nation. From this
basic consideration followed the desire of American bankers for general
conditions of economic and social stability in the debtor nations. The
return to the gold standard, preceded by a deflationary process of variable
intensity, was seen as a guarantee of an overall readjustment of a country’s
economic situation that could in turn offer greater reliability to its cred-
itors. This belief had been reinforced by the inflation and conflicts of the
immediate postwar period. In such conditions, the process of stabilization,
in which American capital played a decisive role, was not merely a mon-
etary operation, but the sealing of a class system into a stable hierarchy. By
the mid-1920s, American capital had obtained, through its own real
power, two prerogatives that truly gave the United States the political
function of a world financial center – in other words, a hegemonic role.
Not only did the Americans now play the role of mediator among the
European states – as witness the Dawes Plan and the Locarno Conference –
but they had become guarantors of the political and social order of the
individual nations whose economies they now influenced with their
capital.
 chapter 1

The United States and the Rise of Fascism in Italy

1. united states’ policy and the isolation

of italy before fascism
In order to understand how the expansion of United States’ foreign policy
translated into specific American policy toward Italy, it is necessary to take
a few steps back.
The Italian government, perhaps more than any other, was affected by
Wilson’s politicking at Versailles.1 As is well known, the president’s plan
for peace encountered serious obstacles in the course of those negotia-
tions.2 It was neither coincidence nor the result of shady machinations
(as Vittorio Emanuele Orlando would suggest many years later in his
memoirs3) that Italy suffered the most from the conflicts between
Wilson, with his Fourteen Points, and each of the other victorious powers
in turn. Wilson enjoyed a position of particular strength, as described

1
On Italian-American relations during and after the First World War, see L. T. Ventry,
“Prospettive delle relazioni italo-americane nell’ultimo anno della prima guerra mondiale,”
in Archivio Storico Italiano, 1971, pp. 103–123; O. Barié, “Wilson e il wilsonismo nella
coscienza politica italiana, 1917–1919,” in Atti del I Congresso Internazionale di Storia
Americana, Italian e Stati Uniti dall’indipendenza ad oggi (1776–1976), Genova: 1978,
pp. 75–89; R. Vivarelli, Il dopoguerra, Napoli: 1967, p. III. The following works also
indirectly treat this question: V. S. Mamatey, The United States and East Central Europe,
1914–1918, Princeton: 1957; A. Ara, L’Austia-Ungheria nella politica americana durante
la prima guerra mondiale, Rome: 1973.
2
See especially A. J. Mayer, Political Origins of the New Diplomacy, 1917–1918,
New Haven: 1959; idem, Politics and Diplomacy of Peacemaking: Containment and
Counterrevolution at Versailles, 1918–1919, London: 1968; and A. Link, Wilson the
Diplomatist: A Look at His Major Foreign Policies, Baltimore: 1957.
3
V. E. Orlando, Memorie, 1915–1919, Rodolfo Mosca, ed., Milano: 1960, pp. 445–469.

28
 1. United States’ Policy and the Isolation of Italy before Fascism 29

previously, thanks to the manufacturing and financial resources of his

country. In addition, he benefited from the political and moral power
conferred by the United States’ decisive role in the war (in spite of its late
entry and small number of troops); by his refusal to be involved in the
secret alliances among the Allied powers; and, above all, by his total
freedom of maneuver.4 The United States had neither territorial nor war
reparations demands to bargain for; rather, it was in its interest to ensure
a new balance of power among the nations and a reconstruction of the
European capitalist economy within them. This concern more than any
other was the United States’ motivation, since it was the best guarantee that
the Soviet revolution would not spread.
Great Britain and France, as well as Italy, weakened by the war and
constrained by very different questions of public opinion and popular
morale because their populaces had borne the direct brunt of the war
effort, repeatedly opposed Wilson’s efforts to put his Fourteen Points
into effect. This was especially true when it came to the treatment of the
defeated powers, especially Germany. Wilson insisted on taking the long
view, which required generosity toward Germany and aid for its economic
reconstruction; this was totally incompatible with the punitive claims
of Lloyd George and Clemençeau. Given their formidable power when
united, it is no surprise that Wilson had success overcoming their resistance
only when it came to deciding the fate of Italy, weakest of the so-called
victorious great powers. Wilson had no real enmity against Italy, but
simply found it was in regard to Italy that he had his only opportunity to
demonstrate his intransigence and stay wedded to principles on which, in
so many other negotiating points, he had to give way to the French and the
English. The negotiating position of Orlando and Sonnino was further
weakened by the fact that their claims were based on one of those very
secret treaty alliances – the so-called Treaty of London [in Italian, known
as the patto di Londra, or London Pact – trans.] – that Wilson strongly
derided and considered illegitimate.5
An unbridgeable gap thus opened between the American president’s
wish to fulfill his program based on national self-determination and the
Italians’ territorial claims on South Tyrol and especially on Istria and in
Dalmatia. Wilsonian moralizing was not the problem here, despite the
vituperative complaints against it by Italy’s liberale governing class [the

4
See Mayer, Politics and Diplomacy.
5
M. Toscano, Il patto di Londra; storia diplomatica dell’intervento italiano (1914–1915),
Bologna: 1934. The text of the treaty is reproduced in an appendix.
30 The United States and the Rise of Fascism in Italy

Italian word is left untranslated in this case to denote its difference from
the English word liberal; it refers to the historical period during which
the Italian state was a constitutional monarchy, established after Italian
unification in 1861 and ended by the Fascist seizure of power in 1922 –
trans.]. The decisive factor was Wilson’s need to present to the Senate and
American public a peace treaty that in some fashion still resembled the
promises he had made on his departure for Versailles.6 Nor could the
Italian representatives obtain the cooperation of their French and British
colleagues, who were more than happy to free themselves from the com-
mitments made in the Treaty of London and relieved to let Wilsonian
rigor exhaust itself outside the range of their own immediate interests.
Meanwhile, Orlando and Sonnino were vulnerable to the pressure of the
frustrated nationalism of much of the Italian bourgeoisie – a nationalism
endorsed by those members of the liberale governing class who, against
Giolitti’s opposition, had decided Italian participation in the war, but
that now threatened to overwhelm them.7 The compromise reached at
Versailles – to set the border at Brenner, sacrificing a good slice of the
German-speaking inhabitants, but to give up the admittedly excessive
aspirations for Dalmatia that had been included in the Treaty of
London – left many Italians disillusioned and frustrated, and in any case
did not completely fulfill Wilsonian principles (since many inhabitants of
the South Tyrol who spoke and considered themselves Germanic were
placed under Italian sovereignty).8
The treaty talks were not the only arena for conflicting aims between the
two countries. In 1921, the U.S. Congress approved the first law to
drastically limit immigration; this was both an economic and a social
blow. Until the outbreak of war, Italy had been able to rely on immigration
to the United States as an escape valve for a large and growing number of
its unemployed and unskilled workforce. Furthermore, emigrants’ remit-
tances had become an important positive factor in Italy’s balance of pay-
ments. But even worse were the political and moral connotations of the

6
See D. Fleming, The United States and the League of Nations, 1918–1920, New York and
London: 1932; T. A. Bailey, Woodrow Wilson and the Lost Peace, New York: 1945; and
idem, Woodrow Wilson and the Great Betrayal, New York: 1945.
7
See especially N. Valeri, Da Giolitti a Mussolni. Momenti della crisi del liberalism, Florence:
1958, pp. 20ff.
8
See G. Salvemini, Mussolini diplomatico, Bari: 1952, pp. 17–33. F. Coppola, La rivoluzione
fascista e la politica mondiale, Rome: 1923, is a good example of the typical nationalist state
of mind. For the Fascist movement’s orientation on foreign policy, see G. Rumi, Alle origini
della politica estera fascista (1919–1923), Bari: 1968.
 1. United States’ Policy and the Isolation of Italy before Fascism 31

law’s limits. The criteria for setting quotas on immigrants from each
country was based on the number of inhabitants from that country of
origin in 1910 and assigned a maximum of 3 percent of that number for
new immigrants. The year 1910 had been chosen to drastically reduce the
number of immigrants from those countries that in recent years had been
responsible for the largest influx; for clearly racist motives, the law struck
most harshly at those nationalities considered undesirable by important
factions of Congress.9 In Italy’s case, the allowable immigration was
reduced to the laughable number of 42,057 annual entries.10 The situation
was made worse in 1924 by a law that took the 1890 census as the new
parameter, allowing the immigration of 2 percent of a country’s residents
in that year and further accentuating the racially discriminatory character
of the quotas, particularly with respect to Italians. Clearly, such legislation,
beyond merely inflicting a serious material loss and a further motive for
social tensions, also aggravated the inferiority complex and the frustrated
nationalism of much of the Italian populace in the immediate postwar
period. There was perhaps no comparison with the passions elicited by
the supposed betrayals at Versailles, but neither was it a meaningless
circumstance in the context of the paranoid suspicions of the time.
It would be excessive, and biased, to claim a direct causal relationship
between these conflicts and the crisis of the liberale regime in Italy, or to
go so far, as some actually have, as to blame the Americans for the rise of
Fascism.11 Still, one may note that in general the international context did
favor the crisis of the constitutional state and the eventual Fascist rise to
power. After all, the incapacity or the impossibility of Wilson’s realization
of his program (so that not his excessive stringency in relation to Italy, but
his lack of such in relation to others, was the main obstacle to the balance
of power he sought) weighed on Europe in the postwar era, prolonging a
state of tension that, in the case of Italy, ended up favoring reactionary
extremists. It is further true that the restrictive immigration laws illustrated
another aspect of Wilson’s difficulties, or rather of the internationalist
program he advocated. The laws were the result of a public opinion still
unprepared and unwilling to take on a commitment to world politics, and
they were also the product of a complex mediation of social relations in

9
P. Nazzaro, “L’Immigrant Quota Act del 1921, la crisi del sistema liberale e l’avvento del
fascismo in Italia,” in Gli Italiani negli Stati Uniti, Florence: 1970.
10
G. G. Migone, I rapport tra gli Stati Uniti e l’Italia all’epoca dell’avvento del fascismo
(ottobre 1922-luglio 1923), unpublished thesis, Università Cattolica del Sacro Cuore,
Milan: 1964–1965, p. 27.
11
Nazzaro, “L’Immigrant Quota Act del 1921.”
32 The United States and the Rise of Fascism in Italy

which, as indicated previously, the working classes had been offered the
blocking of immigration in exchange for their assimilation and subordi-
nation. This widened the gap – and the conflict – between those employed
workers already professionalized, organized, and naturalized and the
various individual groups of newly arrived immigrants. That division of
the working classes along racial lines both illustrated the repressive,
xenophobic, and antidemocratic furor of American politics of the era
and constituted the necessary condition for the expansionist aims of the
American economic elite, favored by a compromise with their working
force.12
The fundamental weaknesses that brought on the crisis of prewar Italy
and prevented restabilization or moderate solutions are actually well
known. If we still want to examine the international aspects of that crisis,
it is not as important to focus on the peace treaty or on Wilson’s role in it,
or even on the American immigration limits, as it is to emphasize the lack
of any international order capable of encouraging Italy to follow a plan for
reconstruction that would have bolstered the constitutional state. The
succession of prime ministers in the three years between the end of the
war and the advent of Fascism could not find foreign interlocutors willing
or able to intervene in the Italian situation. The Italy of the Triple Alliance
had traditionally looked to Berlin, but since the German defeat there was
no one there capable of playing an active external role.13 The same was
true of France and Great Britain, which did not have the economic strength
to intervene in the Italian financial crisis or even to negotiate their own
decisions in such a way as to consider their possible internal effects on the
Italian situation.
Italy could only turn to the United States: government and finance
experts such as Nitti and Giolitti understood this perfectly. Yet there was
no American response, outside of some vague promises of loans that failed
to materialize.14 When the Italian government tried to launch a bond issue

12
See for example I. Bernstein, The Lean Years: A History of the American Worker,
1920–1933, Baltimore: 1966, pp. 91–101.
13
See especially G. Mori, “Banche industria e imperialismo nell‘età giolittiana,’” in Studi
storici no. 3 (1975); R. A. Webster, “L’imperialismo industriale italiano, 1908–1915,” in
Studio sul prefascismo, Torino: 1974.
14
For example, the ambassador to Rome, Richard W. Child, wrote to the State Department
on April 6, 1922: “I am informed by Nitti and by don Sturzo, who are, as Giolitti ages, the
most able and rising personages of Italian politics; that there are great opportunities for
American interests in the reorganization of the metallurgic industry, in contacts for public
works, and before too long, in the development of hydroelectric power throughout the
country. The proposal comes, as you can see, from men whose tolerance toward Germany
 1. United States’ Policy and the Isolation of Italy before Fascism 33

on the American stock market without the necessary endorsement of the

major banks, it was a terrible failure – so damaging that it squelched every
possibility of another attempt for a long time.15 How, then, to explain the
failure to find succor, from this as from any other source? Why could
Giolitti not obtain an audience with the great centers of international
power when he enjoyed immense personal prestige and his work to restore
governmental stability was successful, from the victory over the factory
occupations to the Treaty of Rapallo?16 Why was Giolitti denied that
which would be given to Mussolini, and not so long after?
The temptation is to simply answer that Italian risk was too high for
international markets. Conditions in Italy during this period are well
known; there is no need to summarize them all. It is enough to point out
that the instability, in which some claimed to see evidence of Bolshevik
subversion, was at such high levels as to discourage the intervention of
foreign capital. One may add that foreign investors, especially Americans,
were not only waiting for Italian risk to subside, but also were hoping for a
process of recovery that would guarantee their investments. All this is true
but not sufficiently explanatory. It would have presupposed the existence
of some structure of Western cooperation, already consolidated and led by
an American political and financial cohort perfectly capable of influencing
any individual situation like that of Italy, and of consciously waiting for
the proper conditions for its actions to materialize. But no such structure
or unified consciousness existed in that postwar scene, as discussed pre-
viously. No massive and concerted effort to repair the Italian crisis was
forestalled by fear of revolution, or by the endemic instability of Italian
society, or because someone was waiting for the Blackshirts to seize power.
Above all, as Federico Chabod argued, with the abandonment of the
factory occupations, the momentum of the Socialist and proletarian
offensive slowed precipitously, and the reactionary backlash followed it.

made them the target of criticism; but they are probably above all Italians, and they realize
that Germany is in no state to profit from these opportunities . . .” (NA-DS, 865.60/7,
Rome, Richard Washburn Child to Charles Evans Hughes, April 6, 1922). Nonetheless,
this attempt, like others, found no answering echo in practical events.
15
See BIAG b 12, 1919–1920, f. Nuovo consorzio per l’emissione e il collocamento in
America di Buoni del Tesoro Italiano in Dollari, Annuncio di emissione; Domenico
Gidoni to Bonaldo Stringher, New York, July 26, 1920, with this report by Gidoni: “Il
prestito italiano in dollari negli S.U. d’America,” July 1920; Pro Memoria (unsigned),
January 15, 1921, in which it is affirmed: “The completely meager result of the bond sale
was $9,966,800, compared to the $25,000,000 issued; this was caused by various forms of
apathy, political, monetary, financial, and social . . .”
16
See G. G. Migone, “Giovanni Giolitti and the Rise of Fascism,” in E. Passerin d’Entrèves,
ed., Dal nazionalismo al fascismo, Torino: 1967.
34 The United States and the Rise of Fascism in Italy

Anyone outside of Italy could hardly have prevented what was about to
happen as governmental and parliamentary instability was ongoing.17
On October 31, 1922, commenting on the March on Rome, the New
York Times asserted in an editorial that Giolitti had preempted a
Bolshevik revolution by allowing the revolutionaries to occupy the facto-
ries, at which point they revealed their own incompetence to run them.18
Several days earlier, the U.S. ambassador to Rome, Richard Washburn
Child, had offered the opinion that Giolitti’s shrewdness “had thrown the
Communists into disarray and confusion.”19 Still, it would later become a
commonplace among Mussolini’s many American sympathizers that he
had been the one to save Italy from the Bolshevik menace. Although this
kind of consideration might have had some importance if an American or
international intervention were a real possibility, in this period the power
struggles among the United States, France, and Great Britain were too
far from resolution. Only upon the approval of the Dawes Plan did the
European great powers finally see the necessity of turning to American
bankers, and therefore to the American government. And only upon that
realization did other forms of cooperation become possible: the economic
reconstruction of Germany, with the drastic reduction of demands for
reparations; the agreement to restructure war debts; and the Treaty of
Locarno, which lessened political tension in Western Europe. Only at this
point did Americans begin to show initiative in the extension of private
credit to European economies and in the operations for monetary stabili-
zation on the part of the central banks. A process, therefore, that did not
begin until 1924 and culminated in 1926 – not coincidentally the very year
that the Fascist regime definitively secured power – finally ended just
before the crash that led to the Great Depression.20

17
See F. Chabod, L’Italia contemporanea (1918–1948), Torino: 1961, pp. 61–66.
18
New York Times, October 31, 1922.
19
NA-DS, Records relating to political relations between the United States and Italy, micro-
copy 527, Roll 10, Richard Washburn Child to Charles Evans Hughes, Rome, October 9,
1922.
20
On American foreign economic policy of the period: H. Feis, 1919–1932: The Diplomacy of
the Dollar, New York: 1966; C. Parrini, Heir to Empire: United States Economic Diplomacy,
1916–1923, Pittsburgh: 1969; J. H. Wilson, American Business and Foreign Policy, Boston:
1973; J. Brandes, Herbert Hoover and Economic Diplomacy: Department of Commerce
Policy, 1921–1928, Pittsburgh: 1962; L. Gardner, Economic Aspects of New Deal
Diplomacy, Madison: 1964, pp. 3–24; C. Kindleberger, The World in Depression, 1929–
1939, Berkeley and Los Angeles: 1973, pp. 31–57; W. A. Williams, “The Legend of
Isolationism in the 1920’s,” in Science and Society no. 18 (Winter 1954) (tr. It. in Le frontiere
dell’impero Americano. La cultura dell’ ‘espansione’ nella politica statunitense, Bari: 1978,
 1. United States’ Policy and the Isolation of Italy before Fascism 35

It follows that the bankers and, more generally, the American governing
elite who gave Nitti and Giolitti no hearing were not worrying about
Italian risk, but rather about European risk. Apart from any greater con-
cerns they might have had about the Italian situation in those years, such
men were held back by the general instability of the whole continent – an
instability that, in some cases, remained a problem well after the rise
of Fascism in Italy. Examples abound: the occupation of the Ruhr; the
galloping inflation in Weimar Germany; the corresponding endemic crises
in the French government; the continuing Western attempts to intervene
in Russia and in the Central European insurrections; even the recurrent
offensives of the English working class, which refused to accept defeat
until after the culminating general strike of May 1926. Not only was the
necessary social and economic stability lacking, but any generally accepted
recipe to establish them as well; all the proposals of the time still bore the
pp. 95–124); R. H. Van Meter, Jr., The United States and European Recovery, 1918–1923: A
Study of Public Policy and Private Finance, unpublished thesis, University of Wisconsin, 1971;
M. P. Leffler, “Political Isolationism, Economic Expansionism, or Diplomatic Realism:
American Policy toward Western Europe 1921–1933,” in Perspectives in American History
vol. VIII, 1974. On the financial expansion of the United States in France, Germany, and Italy,
respectively, see C. S. Maier, Recasting Bourgeois Europe, Princeton, N.J: 1975;
S. A. Schuker, The End of French Predominance in Europe: The Financial Crisis and the
Adoption of the Dawes Plan, Chapel Hill: 1924; idem, The Adoption of the Dawes
Plan, 1976; M. P. Leffler, The Struggle for Stability: American Policy toward France,
1921–1933, unpublished thesis, Ohio State University, 1972; W. Link, Die Amerikanische
Stabilisierungspolitik in Deutschland 1921–1932, Dusseldorf: 1970; G. G. Migone, “Aspetti
internazionli della stabilizzazione della lira: il Piano Leffingwell,” in Problemi di storia nei
rapporti tra Italia e Stati Uniti, Torino: 1971; idem, “La stabilizzazione della lira: la finanza
Americana e Mussolini,” in Rivista di storia contemporanea no. 2 (1973); idem, “Gli Stati
Uniti e le prime misure di stabilizzzione della lira (estate 1926),” in G. Spini, G. G. Migone,
and M. Teodori, eds., Italia e America dalla Grande Guerra ad oggi, Venice: 1976; idem,
“Governo, grande stampa e banche americane alla vigilia del discorso di Pesaro,” in Rivista di
storia contemporanea no. 4 (1979); G. Stammati, “La collaborazione finanziaria e monetaria
fra l’Italia e gli Stati Uniti d’America fra il 1918 e il 1967,” in Le relazioni economiche tra
l’Italia e gli Statti Uniti d’America, Rome: 1976, pp. 51–88. On the specifically monetary
aspects of the American policy of stabilization in Europe, see R. H. Meyer, Bankers’
Diplomacy: Monetary Stabilization in the Twenties, New York and London: 1970;
L. V. Chandler, Benjamin Strong Central Banker, Washington, D.C.: 1958; S. V. O. Clarke,
Central Bank Cooperation 1924–1931, New York: 1967; P. P. Abrahams, “American
Bankers and the Economic Tactics of Peace,” in Journal of American History no. 56
(1969); E. R. Wicker, “Federal Reserve Monetary Policy 1922–1933: A Reinterpretation,”
in Journal of Political Economy no. 73 (1965). Finally, on the research and debates of the time,
see C. Lewis, America’s Stake in International Investments, Washington, D.C.: 1938; idem,
The United States and Foreign Investment Problems, Washington, D.C.: 1948, pp. 7–46;
P. Einzig, The Fight for Financial Supremacy, London: 1931; E. Staley, War and the Private
Investor, Garden City, NY: 1935; F. A. Southard, Jr., American Industry in Europe, Boston
and New York: 1931; G. P. Auld, The Dawes Plan and the New Economics, Garden City,
NY: 1927; C. W. Phelps, The Foreign Expansion of American Banks, New York: 1927.
36 The United States and the Rise of Fascism in Italy

stamp of a dated Wilsonian idealism. If to all this we add the reminder

that within the United States the politics of intervention still met with
considerable isolationist opposition, starting with the refusal to ratify the
Treaty of Versailles and the successive defeat of the Democratic Party in
the 1920 presidential elections, it is more than clear how any attempt to
rush into intervention in Italy before the rise of Fascism would have
encountered insuperable obstacles.

2. american reactions to the rise of fascism

In truth, not even the Fascist seizure of power was enough to radically
transform American policy with regard to Italy. Certainly, when Mussolini
came to power there were immediate repercussions for American attitudes
toward Italy. The American political elite showed alacrity in offering a
positive interpretation of the changes brought about by the March on
Rome.21 The evidence from the American press and in archival materials
shows that before the seizure of power, Americans had paid little attention
to the actions of Fascist squadristi or to the early successes of the Fascist

21
On this subject the fundamental text is J. P Diggins, Mussolini and Fascism: The View from
America, Princeton: 1972, pp. 3–262 (tr. It. L’America, Mussolini e il fascismo,
Bari:1972), and the thesis from which it derives (Mussolini’s Italy: The View from
America, University of Southern California, 1964). For a more detailed analysis, see
J. B. Carter, American Reactions to Italian Fascism, 1919–1933, unpublished thesis,
Columbia University, 1954, pp. 1–40. On Catholic opinion, W. B. Smith, The Attitude
of American Catholics toward Italian Fascism between the Two Wars, unpublished
thesis, Catholic University of America, 1962, pp. 56–102. See also G. G. Migone,
“Introduzione,” in G. Spini, G. G. Migone, and M. Teodori, eds., Italia e America dalla
Grande Guerra ad oggi, pp. 23–32, as well as idem, I rapport tra Stati Uniti e Itaia
all’epoca dell’avvento del fascismo, unpublished thesis, Università Cattolica del
S. Cuore, Milano 1964–1965. On other great powers’ opinions, E. Di Nolfo,
“L’opinione pubblica europea e l’ascesa al potere di Mussolini,” in Il Mulino October
1954, pp. 635ff.; on France, P. Milza, L’Italie devant l’opinion francaise (1920–1940),
Paris: 1967 and C. Vivanti, “La stampa francese di fronte al fascismo (luglio 1922–gennaio
1925),” in Rivista storica del socialismo, Jan.–Apr. 1965, pp. 52ff.; on Great Britain,
A. Berselli, L’opinione pubblica inglese e l’avvento del fascismo, Milan: 1971; E. Fasano-
Guarino, “Il ‘Times’ di fronte al fascismo,” in Rivista storica del socialismo, May–Dec.
1965, pp. 165ff.; R. J. B. Bosworth, “The British Press, the Conservatives and Mussolini
(1920–1934),” Journal of Contemporary History no. 2 (1970): 163ff.; on Germany,
K. P. Hoepke, La destra tedesca e il fascismo, Bologna 1971; K. E. Lonne, “Il fascismo
italiano nel giudizio del cattolicesimo politico della Repubblica di Weimar,” in Storia
contemporanea, Dec. 1971, pp. 697ff.; J. Petersen, Hitler e Mussolini. La difficile alleanza,
Bari: 1975, pp. 5–54; R. De Felice, Mussolini il Duce. Gli anni del consenso. 1929–1936,
Torino: 1974, pp. 418–442; on Belgium, C. Pinzani, “Socialdemocrazia belga e fascismo
italiano,” in Movimento operaio e socialista, Jan.–Mar. 1966, pp. 9ff.
 2. American Reactions to the Rise of Fascism 37

movement. But in the moments just prior to the March on Rome there was
substantial apprehension, even among those American observers who
would soon express approval and even enthusiasm for Fascism as a legit-
imate form of government. These apprehensions centered on the question
of what effect an ultranationalist government might have on Italian foreign
policy. On October 9, 1922, Ambassador Child had signaled that the
Fascists might have a dangerous influence from just this point of view.22
In a longer report the following day, after having declared the state of
relations between the United States and Italy satisfactory, Child specified
that the only threat to those relations came from the unpredictable forces
of Fascist nationalism.23 On October 30, after having received just days
earlier a peculiar visit from Mussolini, who was on his way to the Fascist
Congress of Naples – a visit in itself indicative of the importance that
“Il Duce” attributed to relations with the United States, since it came at a
moment when he was overwhelmingly busy with affairs of state – Child
repeated his warning that the Fascist regime would practice a chauvinistic
and reckless foreign policy.24
The comments in the mainstream American press on the eve of the
March were even more weighty, as they focused less on the nature of
Fascism and more on what were called its “excesses.” The Boston
Evening Transcript (a conservative daily typical of New England politics
at that time – which is to say predominantly Republican) made a partic-
ularly scornful analogy between the Fascists and the Ku Klux Klan, saying it
was as unlikely that Italians would continue to accept the former’s excesses
as it had been that Americans would support the latter.25 Similarly, an
editorial in the New York Times, a moderate progressive paper of generi-
cally democratic and internationalist beliefs, expressed worry on October
28 regarding Fascist violence against the laws and against individuals.26
The Christian Science Monitor offered similar comments.27
One is left with the impression that most Americans recognized the
Fascist offensive as a positive drive to restore law and order in the face of

22
R.W. Child, report cited.
23
NA-DS, Record relating to Political Relations between the United States and Italy, micro-
scopy 527, Roll 1, Richard Washburn Child to Charles Evans Hughes, Rome, October 10,
1922.
24
NA-DS, Record relating to Political Relations between the United States and Italy, micro-
scopy 527, Roll 10, Richard Washburn Child to Charles Evans Hughes, Rome, October
30, 1922.
25
The Boston Evening Transcript, October 26, 1922.
26
The New York Times, October 28, 1922.
27
The Christian Science Monitor, September 27, 1922.
38 The United States and the Rise of Fascism in Italy

the threat from the Socialist workers’ movements, but that they wished
to operate with some caution – not only due to the contradictions and
opposing factions that might arise from the violence of the situation before
the regime could install itself with stability, but also because of some
troubling and subversive ambiguities in Fascism’s message that seemed
to threaten more than just the organized working class movement.28 The
alarm expressed on the eve of the March on Rome contained the embryo
of a misinterpretation that would become ever more frequent in the
American reactions following Fascism’s seizure of power. Inasmuch as it
was not Fascism itself, but its excesses, that were condemned, the possi-
bility was retained to distinguish between a “healthy” Fascism and sub-
versive tendencies within it. Ambassador Child again anticipated the kind
of attitude that would develop in the press, predicting that the healthier
elements of the party would prevail since they would not be able to escape
the responsibilities of power. He wrote that they would come to under-
stand the necessity of renouncing the overambitious demands made before
the March on Rome.29
It is easy to understand how, in this logical frame and in response to this
kind of rhetoric, Benito Mussolini came to appear as the guarantor of
the essentially stabilizing and antisubversive character of the regime. In this
same way, the most rambunctious squadristi, those who would become
the “leftists of the regime,” served the important function of legitimating
Mussolini’s role as stabilizing dictator. On November 28, 1922, the
chargé d’affaires at the Rome embassy, Franklin Mott Gunther, wrote
to Secretary of State Hughes that only Mussolini’s personal prestige was
keeping other elements from unpredictable behavior. The American
embassy identified those elements as belonging to the extremist factions
of the party, or even more threateningly, “as those Socialists and
Communists who would pounce at any opportunity.”30 It is not at all
surprising, though somewhat bizarre, that just a few months later the U.S.
embassy would be thrown into great alarm over the rumors that the
Fascists intended to abolish the monarchy, even though Child reported

28
For analogous reactions in the European press and public opinion, see the works cited in
Note 21.
29
NA-DS, Record relating to Political Relations between the United States and Italy, micro-
scopy 527, Roll 10, Richard Washburn Child to Charles Evans Hughes, Rome, November
11, 1922.
30
NA-DS, Record relating to Political Relations between the United States and Italy, micro-
scopy 527, Roll 10, Richard Washburn Child to Charles Evans Hughes, Rome, November
28, 1922.
 2. American Reactions to the Rise of Fascism 39

that Mussolini’s honesty and past record reassured them.31 By June 5,

1923, Child felt capable of declaring any such danger past.32
In a certain sense it was the very rise of Fascism, its seizure of power,
that melted the reserve of the earlier occasion. This was not due only to
opportunism – a less relevant motivation in foreign politics than within
Italy itself – but more because, notoriously, there did not appear to be any
better antidote against subversive elements than a massive dose of power.
Nor did the image of a defeated liberale Italy provoke undue nostalgia or
worry that that power might be too indiscriminate.
As the days passed and Mussolini consolidated his power, the U.S.
newspapers became less and less critical of him. The regime began to
enjoy the benefits of the fait accompli. There were no further criticisms of
the means used to take power, and the regime’s successes were recorded
with growing admiration. The comparisons to the disorder of the past
were numerous. Typical of this change was the position of the same
Christian Science Monitor that only days earlier had chimed in with the
analogy of the Ku Klux Klan:33
Although it would seem unthinkable here in the United States for such an extra-
government body as the Fascisti to exist with powers of initiative and effective
action in a democracy, nevertheless in modern Italy, with a rapidly changing
ministry, and the Nation still feeling her way in administrative government, in
the attempt to unify widely diverse populations, this movement is generally con-
ceded to have been an undisguised blessing; some, indeed, speak of it as a force that
has saved the Nation.

And, even more explicitly:

Finally, Fascismo in Italy is a spiritual movement, born in the patriotic imagination
and loyalties of the Italian temperament, and furnishing a distinct evidence of the
potential power and youthfulness of the Nation.

Here is the refrain of the so-called Italian revolution, according to

which, in that moment, in those historical circumstances, the traditional
standard of democratic judgment did not apply. As I have written else-
where,34 sympathy and approval of Fascism by those who were supposedly

31
NA-DS, Record relating to Political Relations between the United States and Italy, micro-
scopy 527, Roll 10, Richard Washburn Child to Charles Evans Hughes, Rome, June 2,
1922.
32
Ibid., June 5, 1923.
33
Clayton, Sedgwick C. “Fascismo in Italy Stands for Restoring State’s Authority,” The
Christian Science Monitor, October 31, 1922, p. 1.
34
G. G. Migone, op. cit., p. 203.
40 The United States and the Rise of Fascism in Italy

loyal to a liberal constitutionalist tradition was frequently explained away

by calling upon some imagined special Italian character and circumstan-
ces.35 The racist connotations of this justification were only slightly veiled:
what would be inadmissible in a country with a democratic tradition,
especially an Anglo-Saxon one, was downright necessary in Italy’s case,
particularly the Italy of the interwar years. Occasionally this distinction
was made in the name of tolerance. As Child put it:
I have learned to believe ever more firmly that it is a great error to be so sure of one’s
principles as to impose them upon others.36

The Cincinnati Times-Star and the Herald Tribune (a conservative

Republican paper in New York) showed actual enthusiasm as the latter
declared:37
The real strength of the new Ministry lies in the ability and fearlessness of its strong
head and in the honesty and sincerity of its individual members.

The Boston Evening Transcript had explicitly condemned Fascism on

October 26; but only four days later, here was its latest opinion:38
Once in possession of the reins of power, it seems likely that Fascisti leaders will
grows [sic] less dictatorial in their methods, and that, obeying a common law of
politics, they will abandon somewhat the reactionary spirit that has theretofore
committed them to so many acts of violence.

Several of Mussolini’s initial actions began to show fruit in the

American press. In particular, his appointments of government ministers
gave a very good impression. It rapidly became habitual for the press to
note these individual acts of the new regime, still surrounded with mystery
and curiosity in the United States, without much concern for principles.
Addressing those readers who might still entertain scruples, the Transcript
declared under the headline “Mussolini’s Good Start”:39

35
De Felice, op. cit., p. 330, appropriately cites a judgment of Winston Churchill’s that is
worth recording here for its exemplary illustration of this way of thinking: “Different
nations have different ways of doing the same thing . . . Had been an Italian, I am sure that I
should have been with you from start to finish in your victorious struggle against . . .
Leninism. But in Britain we have not yet had to face this danger in the same poisonous
form . . . but I do not have the least doubt that, in our struggle, we shall be able to strangle
communism.” (Corriere della Sera, Jan 21 1927).
36
R. W. Child, “Preface,” in B. Mussolini, My Autobiography, London: 1928.
37
The Literary Digest, vol. 75, November 18, 1922, p. 17.
38
The Boston Evening Transcript, October 30, 1922, p. 14.
39
Ibid., November 1, 1922, section II, p. 2.
 2. American Reactions to the Rise of Fascism 41

Although a dictator and the leader of a successful coup, Signor Mussolini has
shown no disposition to remain indefinitely as a dictator, nor to rely permanently
upon the Fascisti to keep him in office.

His coalition government was proof of this claim, according to an

editorial the following day, which praised the conservative character and
patriotism of the Fascist movement and predicted that it would not show
such folly as to pursue imperialist expansion.40
The qualities attributed to Fascism and to its “duce” were by now
characterized by normalcy – that is to say by the ideology of normalization
that dominated American politics after the war, when a wave of anti-
Wilsonian restorationism swept the country. Mussolini’s energy would
frequently be compared to that of Theodore Roosevelt.41 The essentially
conservative and restorationist character of the Fascist seizure of power
corresponded well with the orientation of the incumbent Republican
administrations during the twenties. Equally reassuring were Mussolini’s
business-oriented proposals and his “frank patriotism,” especially in the
eyes of the industrial and financial interests that also happened to control
a large section of the U.S. press.42
If on the one hand ideological affinities helped guarantee a warm
reception of the Fascist government by the American press – once some
rhetorical fancy footwork had helped them pass over its lack of respect for
democratic institutions – on the other hand there was also the influence of
those goals held by those sectors of the American political and financial
elite that desired European reconstruction and a corollary American
expansion. This point of view was continually presented in the major
New York banking institutions as well as the less isolationist circles of
the Republican administrative caste. Right from the start, East Coast
journalistic opinion attributed particular importance to the stability that
Fascism would bring to Italy’s tormented politics. The Christian Science
Monitor, for example, wrote:
His Government will be obliged to work fast and give tangible evidence of success
if the colossal task which it has assumed is accomplished before the inevitable
reaction sets in. Not for the justification of coercive government, but for the sake of

40
Ibid., November 2, 1922, section II, p. 2.
41
See for example the opinion of John A. James-James in “Watch Italy Grow,” Current
Opinion, vol. LXXXIV (February 1923), p. 142; according to whom Mussolini was
“rather like our own Theodore Roosevelt! Young, ardent, honest, filled with high ideals.”
42
On American nationalism see J. B. Duroselle, From Wilson to Roosevelt: Foreign Policy of
the United States, 1913–1945, New York and Evanston, IL: 1963, chapter 1.
42 The United States and the Rise of Fascism in Italy

the country, the friends of Italy hope for the success of the reconstructive policy of
Benito Mussolini.43

Mussolini’s regime therefore coincided from the beginning with a state

of emergency that justified extraordinary measures and at the same time
demanded a serious commitment to reconstruction. The damage stemmed
not so much from the war itself, already receding into the past, but from
the mismanagement of the preceding governments. Both the American
press and the diplomatic corps shared a harsh judgment of Mussolini’s
predecessors and also of the very political system they had generated. The
ambassadorial reports are full of contemptuous references to the “deca-
dent” Italian democracy, as evidenced by the instability of its governments
and its corruption. The result had been, according to the U.S. embassy, that
the great majority of public opinion now supported Fascism, whose ene-
mies were weak and discredited.44 The comments in the press were gen-
erally of the same tenor.45
Principal American observers did not pay attention to the workers’
movement and its organizations unless it was to condemn their “subver-
sive” goals. Thus, they saw no alternative to Fascism other than the
old stato liberale with all its weaknesses, some of which seemed utterly
intolerable in the light of the American constitutional experience, which
strongly rejected the kind of parliamentary system of which Italy in
1921–1922 was an exaggeratedly dysfunctional exemplar. Particularly
the weakness and instability of the executive, in comparison with the
powerful presidential role in the United States, seemed a grave anomaly
that Mussolini’s strong government – characterized in an embassy report
as “legal” dictatorship – seemed to remediate properly.46
The anti-European sentiments typical of the isolationist era, but also
the preoccupations of those sectors of the American governing class that
did want intervention in Europe, combined to emphasize European insta-
bility and to blame the weaknesses that created it on exactly the kind of
system the old regime in Italy exemplified, and which Mussolini had

43
“The Big Stick in Italy,” The Christian Science Monitor, November 20, 1922, p. 18.
44
NA-DS, Record relating to the relations between the United States and Italy, Richard
Washburn Child to Charles Evans Hughes, Rome, November 11, 1922.
45
See for example The Forum, vol. 69 (February 1923), pp. 1200, 1299 and vol. 70 (March
1923), p. 1306; according to which the preceding regime was nothing but “a feeble
pseudo-democracy,” economically “unhealthy” because of “the old policies of subsidies
and favors for everyone . . . who could swing sufficient influence.”
46
NA-DS, Record relating to the relations between the United States and Italy, Richard
Washburn Child to Charles Evans Hughes, Rome, November 2, 1922.
 2. American Reactions to the Rise of Fascism 43

happily defeated. It is interesting to note how the form of the debate on

Fascism in the United States proposed it as a model of stabilization for all
of Europe, while Mussolini – more prudent in this matter at least – made
sure to specify that he did not see Fascism as an export product. Foreign
Affairs, the well-respected magazine of the Council on Foreign Relations,
explained its choice to publish a debate on Fascism with the observation
that however much some may have wished to criticize Mussolini, he was
the man who now held dictatorial power in Italy. This power seemed
unlikely to slip and was an important factor in European politics as a
whole.47
But the most authoritative newspaper of record in the United States,
after some initial hesitation, had grandly opened the discussion of Fascism
as an international model. In fact, the New York Times clearly took a
positive position toward the Fascist cause. After a few days of reticence,
the first-page headlines read: “An Italy Transformed”; “A Great Wave
of Patriotism Re-unites All Classes Under Mussolini”; “Workmen and
Employers Combine in Sacrifice for the General Good”; “Bolshevism
Stamped Out . . .” The Rome correspondent allowed his political leanings
to show clearly, and the New York editorial staff, responsible for writing
the headlines, did not tone down the favorable stance. The content of the
article revealed the author’s scorn for the defeated regime, as well as his
participatory enthusiasm for the new: “A new set of young men is now in
office . . .”; “Mussolini has torn the veil from the fetish of communism . . .”;
“The spirit of mutual courtesy and toleration exists in relations between
one class and another”; and so on.48 It appeared that the myth of early
Fascism had been swallowed whole and regurgitated for the American
populace in the pages of the most important daily paper of the United
States.
Nor did the press limit itself to expressing mere admiration or simple
approval. As time passed and the solidity of the so-called Fascist “experi-
ment” seemed to gain confirmation, several newspapers continued to
construct a theory of Fascism. A few of these voices were above all
suspicion, given their habitual and uncompromising defense of democracy
in their own country. The New York Times was not only the most impor-
tant but also the most democratic of the major daily newspapers of its
time. When all the others had gone nationalistic and xenophobic, the

47
Foreign Affairs, February 1923.
48
“Italy Transformed; Money, Gems, Work Given to State.” New York Times, January 1,
1923.
44 The United States and the Rise of Fascism in Italy

Times had remained faithful to the Wilsonian tradition. There was no

inherent sympathy for populist isolationism or authoritarian rule that
should have made it vulnerable to becoming Fascism’s dupe. And yet, the
exclamations reported above were not an isolated case. An editorial of
December 19th called Mussolini’s “. . . the most interesting governmental
experiment of the day. He came at the end of a short but exhausting period
in which the people of every country got their fill of ordinary government,
its inefficiencies and cowardices and compromises and stupidities.”49
The American press did not even criticize the electoral majority law
introduced by Mussolini [usually known as the Acerbo Law, it awarded
the party with the largest share of votes two-thirds of the deputy seats. It
was passed in 1923 to assure the Fascist Party a majority in Parliament
in the upcoming elections – trans.], comparing it to the United States’
own Electoral College. Americans obviously did not consider Mussolini
a dictator in the normal sense of the word, even if he was something more
than simply a strong executive power in a democratic system; perhaps
they thought of him as an innovator who had found a third way between
democracy and dictatorship. According to the New York Times, it was
only between this third way and the traditional old European parliamen-
tary system that a choice could be made. That this third way, as it was
imagined, might have some points in common with American presidential
democracy, specifically the power and stability of the executive, only
seemed to make it more attractive. At the point when Mussolini had
already made his speech calling the Parliament a sordid and gray chamber
[on November 16, 1922, Mussolini had addressed the Chamber of
Deputies, saying he could have turned it into a mere encampment for his
men but had chosen to cooperate with already-existing political factions;
the speech was seen as foreshadowing his intentions to make Italy a
one-party state – trans.]. Americans failed to make a fundamental distinc-
tion: the American Congress acted freely and autonomously in its role as
a check on executive power, while Mussolini’s plans promised no such
liberty for the Chamber of Deputies.
The reactions of American officials to Mussolini’s assumption of power
were formal yet courteous, as is usual in the case of governmental change in
an allied country where there is no doubt of the legitimacy of the new
administration. By itself this deserves note if we remember that the U.S.
government waited many years before formally recognizing the Soviet
Union, following a tradition that led it to reject recognition not so much

49
“No Room for Rivals,” The New York Times, December 19, 1922.
 2. American Reactions to the Rise of Fascism 45

on any juridically reasoned basis but rather on grounds of morality and

principle. And yet, despite the fact that Mussolini had created his govern-
ment through a coup – a royally sanctioned one after the fact, to be sure,
but it had still been done through the use of force – the State Department
showed absolutely no doubt that recognition ought to be immediately
conferred.50 Once the apprehensions from just before the March on
Rome had disappeared, the climate in the Republican administration of
Harding was markedly favorable to the new regime, leaving aside a few
uncertainties about Mussolini’s intentions in foreign policy. As already
indicated, from the very first moment of Mussolini’s rise to power
Ambassador Child had become his ardent supporter, in public and in
private. George Harvey, old nemesis of Woodrow Wilson and now ambas-
sador in London, wrote a telegraph calling for Child to show sympathy
and cooperation toward the Fascists in light of their position as the dealers
of the deathblow to Bolshevism in that country. Despite their lack of
experience, he applauded their instincts and thought that guidance and
new responsibilities would cool their ardor.51
Child certainly did not need to be asked twice; but even more prudent
functionaries of the State Department allowed themselves to radiate gen-
eral satisfaction regarding the events in Italy. The undersecretary of state,
William Phillips – unsuspecting of his destiny to occupy the embassy in
Rome at the moment of Pearl Harbor and the Italian declaration of war –
gave repeated signs of sharing Child’s enthusiasm for Mussolini’s govern-
ment.52 As for the extremely authoritative Secretary of State Charles Evans
Hughes (twice Republican candidate for president and later chief justice of

50
Migone, op. cit, p. 126. On the refusal to recognize the Soviet Union, R. W. Leopold, The
Growth of American Foreign Policy, New York: 1964, p. 479.
51
NA-DS, Records relating to the relations between the United States and Italy, microscopy
527, Roll 10, George Harvey to Charles Evans Hughes, London, October 31, 1922.
52
William Phillips wrote in his diary on October 23, 1923, that Dick Child, ambassador in
Italy, and a guest in the White House, had visited that morning. He described Child’s
enthusiasm about Mussolini and noted that Child did not at all agree with Ned Lowry that
the Italians were exhausted from his demands and incapable of following him. Child
thought Mussolini was stronger than ever and told Phillips that the manner in which
Mussolini took power and his relationship to power made him believe from the beginning.
See HUHL-WP, Diary, October 23, 1923. See also the official praise offered by Phillips,
according to State Department etiquette, in several reports by Franklin M. Gunther:
NA-DS, Records relating to the relations between United States and Italy, microscopy
527, Roll 10, William Phelps to Franklin Mott Gunther, Washington, D.C., January 4 and
January 29, 1923. On Phillips’ later attitude toward Fascist Italy, see his autobiography
Ventures in Diplomacy, in truth not very informative; so too his oral history testimony for
the Oral History Project hosted at Butler Library at Columbia University. Richer in
information is the Masters thesis of M. C. Kellett, William Phillips and Italo-American
46 The United States and the Rise of Fascism in Italy

the Supreme Court), he grew in the course of his tenure in the State
Department to hold a clear pro-Fascist leaning, which he expressed at a
banquet for the Italy-American Society at the height of the subsequent
Matteotti Crisis, 1924. Hughes made a public declaration in praise of the
unity, vigor, and determination that Italy’s people and her new leaders
were showing to reach a new level of prosperity in the postwar era. He did
not appear to appreciate that this unity had been achieved because of the
assassination of one of Mussolini’s principal political opponents; a death
the leader, Hughes appraised, was accused of instigating. The accusation
had led the opposition to temporarily withdraw from Parliament in an
act known as the Aventine Secession, in order to demonstrate its rejection
of the Fascist government.
The singular coincidence with the political crisis of the regime, the
cautious but explicit reference to his work of reconstruction, left no
doubt: the secretary of state had given public notice that his government
counted on Mussolini as its interlocutor in the development of an eco-
nomic cooperation that was rapidly maturing (1924 was not only the year
of the Matteotti affair, but also the Dawes Plan, which swept away many
of the obstacles to American capital’s expansion in Europe).
In the meantime Child had not held back in encouraging good relations
between the two governments. Among other things, he had proposed a visit
by the king and queen to the United States, a few months after the king called
Mussolini to form a government.53 Child is interesting not so much for his
role as ambassador as for that of propagandist, because his testimony in
favor of Fascism seems typical of the average American tourist of the era, a
wealthier and more influential type than is today the case.54 In a certain
sense, Child is one of the creators of that early pro-Fascist rhetoric among
Relations, 1936–1940; a Case Study of the New Diplomacy, unpublished thesis, Princeton
University 1957.
53
The secretary of state replied to Child that he was in favor of the visit as long as it was a
courtesy trip and not an official state visit, which since it was a question of monarchs,
would set a precedent requiring much delicacy. See NA-DS, Records relating to internal
affairs of Italy, microscopy 527, Roll 19, Charles Evans Hughes to Richard Washburn
Child, Washington, D.C., June 12, 1923. Child used the occasion to invite Mussolini to an
intimate lunch, at which he obtained his enthusiastic consent, demonstrated in a message
from Mussolini to Vittorio Emanuele III in which he enumerated the political and espe-
cially economic opportunities to be had from such a visit. See DDI, VII, 2, 102. It was
probably the lack of enthusiasm on the part of the king that ended this plan, even without
an explicit American invitation.
54
See especially Child’s introduction, cited above, to the Autobiography of Mussolini, but
also R. W. Child, A Diplomat Looks at Europe, New York: 1925; idem, The Writing on
the Wall, New York: 1929. See also his numerous articles in the most popular American
periodical of the time, the Saturday Evening Post: “Making of Mussolini,” v. CXCVI (June
 2. American Reactions to the Rise of Fascism 47

American observers: he appreciated the youthful and idealistic manner of

the squadristi, an energy many Americans commented on finding pleasing;
he complimented the restored order found even in the little matters that
made tourists’ travels easier; he noted the return to normal productivity that
businessmen transferred to Italy would appreciate; he described the mag-
netic personality of Mussolini by comparing it to Theodore Roosevelt; he
even mentioned the proverbial trains which now ran on time. Child’s
reports and the submissions of American journalists stationed in Italy
echoed the applause of American tourists in Rome’s hotels recorded by
Dino Grandi [later the foreign minister, Grandi was an early supporter
of Mussolini and had been elected to the Chamber of Deputies as one of
the thirty-five Fascist Party members who won seats in 1921 – trans.]; but all
this had consequences beyond the emotional, superficial first impression
they give.55 A crowning example of all this appeared in the magazine The
New Republic, expressing the position of the more radical sectors of main-
stream American politics (that is, those who are still within the range of the
major political parties and who participate in national elections). This was
the only publication of its kind, with a national readership, that after a first
blush of infatuation took an editorial stance against Fascism.56 And yet this
solitary opponent of Mussolini did not hesitate to publish a correspondent’s
article composed entirely of the commonplaces which by then formed the
decisive political judgment of nearly the entire contemporary American
elite: the theme of the reassuring return of productivity and order.
Right from the beginning, most Americans saw and appreciated the
Fascist coup d’état for one particular aspect: the Italian version of a return
to normalcy, a goal supported with great energy in the United States
and advocated by them as a model for all of the turbulent European
countries.57 It is striking how this idea, the return of order, squashed
every other possible concern. One might expect that the destruction of
that constitutional order which was supposed to be the hallmark of the

28, 1924); “What Does Mussolini Mean?” v. CXCVII (July 26, 1924); “Open the Gates,”
v. CXCVII (July 12, 1924); and “Mussolini Now,” V CC (March 24, 1928).
55
Dino Grandi, interview with the author, Taormina: January 3, 1970.
56
Migone, op. cit., pp. 159ff.; Diggins, op. cit., pp. 228–231, 386–387.
57
Migone, “Gli Stati Uniti e l’avvento del fascismo;” see also Diggins, op. cit.; Carter, op. cit.;
L. A. De Santi, United States Relations with Italy under Mussolini, 1922–1941, A study based
on the documents of the Department of State and documents from the captured files of
Mussolini, unpublished thesis, Columbia University, 1952, pp. 30ff.; J. M. Berutti, Italo-
American Diplomatic Relations, 1922–1928, unpublished thesis, Stanford University, 1960,
pp. 5–8; A. DeConde, Half Bitter, Half Sweet. An Excursion into Italian-American History,
New York: 1971, pp. 162–205; C. Damiani, Mussolini e gli Stati Uniti, 1922–1935, Bologna:
1980.
48 The United States and the Rise of Fascism in Italy

liberal democratic order would elicit some reaction in the nation founded
on one of the world’s great liberal revolutions. Instead critiques and
negative evaluations were utterly marginalized, nearly completely confined
to Marxist and extreme factions, often within minority ethnic commu-
nities.58 When such concerns appeared, they were argued away with the
only seemingly thoughtful justification that it would be wrong to judge
the utterly foreign context of Italian politics according to the same
democratic-constitutional categories that applied in a natural way only
in the nations of Anglo-Saxon legal tradition. This editorial and diplomatic
interpretation on the rise of Fascism constitutes significant early evidence
of what would become an American historical tendency: ever more fre-
quent toleration of exceptions to democratic rule, in the name of ever more
imposing American interests. The nearly unanimous consent to Fascism
in the United States provokes serious questions on the nature and the limits
of the American ideology and practice of democracy. At the same time it is
important to observe that that consent was also, if not exclusively, the
product of a specific set of historical values, interests, and mindsets that
characterized the United States of the Twenties.59 The desire for a return
to normalcy, in a larger sense than merely economic productivity, was
particularly strong. As argued above, the need for economic expansion
and therefore for stable and friendly partners, was foremost in the minds of
American elites, particularly financial elites; and was never more than in
this historical period determinative of their political and ideological ori-
entation, as well as that of a larger range of American public opinion. After
the traumatic return of the obligation to engage in European politics
and participate in a world war, after the successive obligation to commit
to the peace negotiations, the resentments of the American public toward
Europe had become an influential factor. Yet equally influential was
the displeasure of economic leaders with this attitude, finding it necessary
to continue looking to Europe. In a certain sense Mussolini’s undertaking
came to signify for Americans a rebuke to those other European govern-
ments who remained in disorder, so that approval of Fascism became
a shared position among both isolationists and those who waited impa-
tiently for the right conditions – the rise of stable and capable partners – to
recommence internationalist politics.

58
A. Dadà, “Contributo metodologico per una storia dell’emigrazione e dell’antifascismo
italiani negli Stati Uniti,” in Annali dell’Istituto di storia della Facoltà di magistero,
University of Florence, 1979; P. Nazzaro, “Il Manifesto dell’Alleanza antifascista del
Nord America,” in Affari Sociali Internazionali vol. II, no. 1–2 (June 1974): 171–185.
59
See especially S. Adler, The Isolationist Impulse.
 2. American Reactions to the Rise of Fascism 49

Indicative in this sense is the comparison with France, where American

efforts (especially American financiers’ efforts) to carry forward a politics of
European engagement were not as straightforward. Dwight Morrow,
banker for Morgan (and a man destined for the highest offices if not for
his premature death, according to his illustrious biographer60), exclaimed
that despots whole purpose was to put into place those reforms which could
not be obtained through democratic means.61 When Mussolini did reform
the Banca d’Italia, it is not hard to imagine the conclusions Morrow and
his fellow banking colleagues involved in monetary stabilization drew as a
consequence. When, on the other hand, the Briand-Peret government of
France refused to join the American plan for stabilization, another
Morgan Bank partner, Thomas W. Lamont, quickly asserted that history
was repeating itself since there was still no one in the government with
sufficient mental clarity, or courage, to carry through a constructive plan.62
When the Italian government, through Alberto Pirelli, gave its approval
for the same plan, Lamont concluded that the entire problem rested in
the absence of any real man from the government and banking world of
France.63 Considering what France and French democracy have meant in
the history of the United States, these comments and unfavorable compar-
isons are striking. One need not invoke the solidarity between Jefferson
and Tom Paine; it is enough to recall how the American intervention in the
First World War was motivated by the enthusiastic call to defend democ-
racy in France against the threat of the Central Empires. Morgan Bank was
in fact the driving force behind the financial and propaganda effort sup-
porting intervention. Given this background the preference for Mussolini’s
Italy was a true about-face, one with deep roots and necessarily motivated
by more than mere opportunism. In more ample sections of the American
populace, there was certainly a notable contrast between the idealistic
motivations that led them to accept the sacrifice of their neutrality in
European conflicts, and the negative results the peace treaties produced
among them. The France of Clemenceau, more than any other country or
any other government, became a symbol of that intransigence that served
to perpetuate the threat of war and to render meaningless America’s
military contribution. Not only that; the state of mind that led an impor-
tant part of the governing elite to align itself with Fascist Italy and distance

60
H. Nicolson, Dwight Morrow, London: 1935, p. 380.
61
Migone, “Aspetti Internazionali”, p. 64.
62
Ibid., p. 77.
63
Ibid., p. 92.
50 The United States and the Rise of Fascism in Italy

itself from France was inspired by more than just the Treaty of Versailles
and Poincaré’s re-occupation of the Ruhr. It was a consequence of the
political changes taking place in the United States after the First World
War: the imposition of social order, at the expense of a more advanced
liberal tradition and the respect of civil rights; the xenophobic campaign
against immigration, and the rejuvenation of isolationism; all of which
were inextricably linked to the wave of repression hitting organized labor
in the postwar. Behind a picture of apparent security and prosperity, the
need for normalcy in the Twenties masked a profound crisis, if not in the
liberal tradition of reform and respect for civil rights themselves, then
in their interpretation.64 It was, therefore, completely logical that French
parliamentary democracy, and for that matter the parliamentary regime
that Fascism had replaced, which had seemed particularly deteriorated,
became an easy target for those who were more and more committed to
social order as a value, and to capitalist rationalism over the guidance and
development of democracy.
Finally it must be added that in this political and ideological situation
a serious political conflict was brewing between those Americans who
favored the expansion of American capital, requiring the economic recon-
struction of a socially stabilized Europe, and large sectors of the French,
protective of their own economy and perfectly willing to use force to
guarantee their territorial and military security against Germany. But
Germany’s recovery, to Americans, was nothing less than the linchpin
for European reconstruction.65 Mussolini, for such Americans, repre-
sented order and rationality; a rationality that seemed in concert with
their economic and political objectives. The source of Mussolini’s personal
popularity abroad is also found in this explanation, bolstered as it was
by that other American predilection, for the man of action.66

3. the matteotti crisis and the manipulation

of the press
Mussolini’s first moves in his campaign to woo the foreign press showed
that he was well aware of the residual doubts that might exist among
influential sectors of the major Western powers. Although the first accounts

64
See for example the testimony of John Dos Passos reported in W. E. Leuchtenburg, The
Perils of Prosperity, 1914–1932, Chicago: 1957, pp. 71ff.
65
Schuker, pp. 232–294.
66
Diggins, Mussolini and Fascism, pp. 58–76.
 3. The Matteotti Crisis and the Manipulation of the Press 51

were reassuring, there was some fear of the extremist nature of the
Fascist movement; not so much of its subversion of the existing constitu-
tional order but of the eventual possibility that this subversive force
would undermine law and order. Only the least informed dreaded that
Mussolini, with his Socialist origins, might transform into an apostle
of social revolution. Rather, there was the concern that the extremist
elements who “inevitably” joined popular mass movements like Fascism
could take hold and reactivate those political and social opponents who
seemed miraculously passive given the conflicts they had produced in
previous years.67 As we have seen, the function of the Fascist “extreme
left,” which would become the Fascism of Farinacci (a significant repre-
sentative of this tendency), was for Mussolini that they provided him,
to American eyes, with a credible role as a moderate, guarantor of the
constructive and essentially conservative character of the Fascist regime.
Mussolini’s declarations and his concrete actions, and those of his min-
isters, were directed toward the establishment of stability, toward the
discipline of the subaltern classes in a system of bourgeois law and order,
toward the continuity of essential state structures, and toward the recov-
ery of free enterprise. They squarely hit their target. Mussolini was not
only the man who saved Italy from chaos and Bolshevism (this myth
would only be reinforced as the years went on), but he was also the man
who assured a legal and relatively bloodless – if not exactly consensual –
seizure and consolidation of power. Thus was assured the interpretation
of the most serious crisis of the regime’s early years: the crisis following
the assassination of Giacomo Matteotti. Despite the fact that American
and foreign journalists could not help but report deeply incriminating aspects
of the affair, the interpretative scheme held fast according to which Mussolini
was the final guarantor of law and order. Indeed, the conviction was strength-
ened that he was the only possible guarantor, seeing that the old political elite
had been irredeemably discredited, as the Aventine Secession proved [during
the crisis, opposition deputies left the chamber and met on the Adventine hill-
trans.]; that the Church and the monarchy did not enjoy the necessary
support from the people, nor the necessary unity in their reciprocal relations
to act as an alternative; and a reawakening of organized labor was,
if anything, the very danger American observers wished most to avoid.

67
Dino Grandi, Interview. Grandi underlines how Mussolini was perfectly aware of the
necessity to demonstrate his capacity to impose discipline in his own ranks. This is the most
important lens through which to interpret the organization of the squadristi into state
militias.
52 The United States and the Rise of Fascism in Italy

The assassination of Matteotti, and what it represented for the relations

between the Fascist regime and the American public and its government,
offer a useful point of entry for analyzing the intense energy Mussolini and
his collaborators dedicated to conquering the American press. Salvemini
noted how Mussolini had made good use of his substantial abilities as a
propagandist and his expertise in the techniques of mass communication
in his role as international diplomat. He wrote of Mussolini: “Outside of
Italy he could not crack heads; he had to win minds.”68
Scanning the ministerial files dedicated to international relations with
the United States, the reader is struck not only by the widespread and
frequent proposals of action with regard to centers of power, newspapers,
and influential individuals who might help shape the regime’s public
image, but also the use of an impressive variety of techniques. People
who were only minor public figures but might have sway in crucial con-
texts were courted with compliments and promises of direct contact with
Mussolini designed to appeal to their desire for greater visibility and
influence; others were offered favors (for foreign journalists, this was
often a tax break on the cost of sending international telegrams). Titles
and honorifics were awarded to citizens of a nation which constitutionally
rejected such distinctions; curiously this rarely alienated the American
individual in question. In more rare but more important cases, direct
pressure might be applied, especially through Morgan Bank, on the owners
of a news organization to produce the desired editorial stance. It is also
striking how much personal and nearly feverish energy Mussolini himself
gave to such problems, which were apparently never too small to merit his
personal attention. Only financial questions, dealing with war debts and
the later stabilization of the lira, occupied him to the same extent when it
came to relations with the United States.
Mussolini’s general objective was evidently to assure that his regime
and his actions were presented in the most favorable light at all times.
More specifically in terms of the United States, the dictator was anxious
that his hold on power appears unshakable and, as much as possible,
based on mass consensus. He well knew that isolated aspects or events
that contrasted too strongly with American ideology might be damaging
to the regime’s popularity; but his main concern was to control the
diffusion of his own image so as to constantly reassure Americans that
they were dealing with an interlocutor capable of controlling the internal
affairs of Italy. He knew his guarantee of stability constituted his single

68
Salvemini, Mussolini diplomatico, p. 384.
 3. The Matteotti Crisis and the Manipulation of the Press 53

most valuable trait in the eyes of American powerbrokers, especially the

financiers who needed to be able to count on favorable future conditions
for their European investments. Conversely, he knew that their confi-
dence and intervention would further shore up the very stability of his
regime so prized by all. This was why Mussolini, in the course of the crisis
created by the resignation of the members of the Partito popolare from
his cabinet [the earliest explicitly Catholic party and the heir to the
second postwar’s dominant party, the Christian Democrats; the
People’s Party was divided over whether to join Mussolini’s coalition
governments or pass over to the opposition – trans.], sent one of his terse
directives to his diplomats:
Press reactions must be carefully monitored, energetically rebutted when they
criticize Fascism which is now the national government. Above all it is necessary
to correct news articles claiming any governmental instability, which is very solid
very popular loved by all and supported by all the youth of Italy.69

Since Ambassador Caetani was on leave in Rome, it was the chargè

d’affaires Augusto Rosso, who would become one of Dino Grandi’s main
collaborators and later the ambassador to Washington during the war
in Ethiopia, who received this order and whose immediate concern was
instead to avoid any sort of public demonstration that might be counter-
productive in the American context.70 In this he differed not at all from his
superior Caetani, who would write regarding the continual pressure from
the ultra-Fascists among the Italo-American community that:
Our good friends must know by now that in the United States there is freedom of
the press (and too much) and that the State Department has no intention or ability
to intervene in the matter.71

It would be mistaken to imagine that men like Caetani and Rosso were
half-hearted, or that they did not serve the regime, as the hotheads would

69
ASMAE-AAW, b. 184, F. Caso Matteotti, Elezioni, Benito Mussolini to Gelasio Caetani,
Rome, July 10, 1923. It reflects the same objectives as the directive emanated upon the
absorption of socialist co-ops by the Fascist movement (AC-CG, b. A-2, f. 2, Benito
Mussolini to Gelasio Caetani, Rome, August 18, 1923) and as that issued in regards to
the support of the regime by the working and rural masses (AC-CG, b. A-2, f. 2 Benito
Mussolini to Gelasio Caetani, Rome, August 11, 1923). See all B.M. to G.C., August 13,
1923, on the national budget and B.M. to G.C. on the political orientation of CGIL, the
national trade union.
70
ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Augusto Rosso to Benito Mussolini,
Washington, D.C., July 18, 1923.
71
ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to John Di Silvestro,
Washington, D.C., June 21, 1924.
54 The United States and the Rise of Fascism in Italy

claim. Nor should we apply to them the argument that has been made
about certain nationalist or career diplomat circles, that they served the
state but not the regime. They did not oppose the identification of the
state and the regime that Mussolini built; but they served it with intelli-
gence and, in the case treated here, with a full consciousness of the context
in which they had been called to act. For them the defense of the Fascist
government was equivalent to the defense of the state, just as the anti-
Fascists who declared themselves in opposition to the regime were rene-
gades who damaged the fatherland in the eyes of the rest of the world. They
gave their government their technical competence, an expertise that led
them to avoid sterile demonstrations in a free press state in favor of less
dramatic but more effective means. They stood up to criticism from more
doctrinaire Fascists and firmly reminded Mussolini that behaving in those
ways that would most build credit in the United States was in the best
interests of his regime at home in Italy as well. Meanwhile Rosso also
moved to reassure Mussolini that he had no reason to worry about his
treatment in the American press:
Outside of a few minor radical papers, the largest and most influential news
organizations of this country have from the beginning shown marked sympathy
for the Italian Fascist movement, in which they see the most effective instrument of
Italian economic recovery through the establishment of law and order, and social
discipline.
This attitude has never changed, and several accomplishments of Your
Excellency’s government (bureaucratic reform, elimination of wasteful government
spending, financial policy, etc.) have given the American press occasion to reaffirm
the their confident good wishes for Fascism’s success.

In such conditions, Rosso concluded, the embassy had rarely seen

reason to intervene.72
One could hardly summarize more clearly the tone of the American
press since the rise of Fascism and the reasons behind its popularity there.
In making Mussolini understand that it would be superfluous or even
counterproductive to interfere in a situation already going so well, Rosso
was confirming that exactly the matter which most concerned “il Duce” –
the impression of the regime’s stability – that most bolstered confidence
in him among Americans. He made this evaluation in summer 1923, but
the regime’s popularity in the United States survived a further and more
difficult challenge as well, in the form of the Matteotti affair, because
yet again in that instance Mussolini would succeed in emerging, to the

72
Rosso to Mussolini, July 18, 1923.
 3. The Matteotti Crisis and the Manipulation of the Press 55

Americans’ eyes, as the true guarantor of that social order that concerned
them above all else.
The American government was not directly involved in the crisis follow-
ing Giacomo Matteotti’s assassination, according to the international
tradition that government official did not comment on one another’s
internal affairs. Nonetheless, the American government was strongly inter-
ested in gaining an accurate picture of what was really happening on the
ground in Italy. In no moment of the crisis did the American Embassy in
Rome acknowledge any doubt that, whatever temporary troubles it
might be experiencing, Mussolini and his regime would survive the oppo-
sition’s attacks. In concise terms, Ambassador Fletcher – who had just
replaced Child upon the latter’s resignation – and his colleagues reasoned
that Matteotti’s assassination was not the work of the regime, much less
of Mussolini himself, but of his most extremist followers; and that the
leader was sincere in his intention to continue governing according
to constitutional norms. In a certain sense the crisis gave Mussolini the
perfect excuse to clean house, liquidating the most seditious and violent
elements of the movement, as Caetani suggested in an interview with the
undersecretary of state, Grew.73 Most of all, Mussolini’s government
would survive (and it was a good thing that it would survive) because,
according to Fletcher, the people did not want to return to the parliamen-
tary incompetence and social disorder that had caused the Fascist revolu-
tion.74 Since there were no possible substitutes for Mussolini within
the Fascist party, he remained the only sure sponsor of that social order
Fletcher described Italians as holding so dear, but which in truth American
elites wanted preserved at all costs.75
The Washington administration offered no difference of opinion. We
have already seen how Hughes chose to express his admiration for the
“indefatigable industry of the . . . [Italian] people and their leaders” at the
very height of the Matteotti crisis.76 Nor would Hughes fail to distribute
to the press the text of a telegram from Fletcher giving assurances that all

73
HUHL-JCG, Conversation, The Italian Ambassador, Don Gelasio Caetani, Washington,
D.C., June 23, 1924.
74
NA_DS, 865.00/325, Henry Prather Fletcher to Charles Evans Hughes, Rome, June 23,
1924.
75
The United States consul in Rome was the most objective observer, although he took care
not to differ from his Ambassador’s analysis. He did, however, show greater courage in
signaling the presence of an ever more visible opposition to the regime. See LC-WJC, Leon
Dominian to Wilbur J. Carr, Rome, June 24, 1924.
76
HUHL-JCG, Grew, Diary, November 10, 1924.
56 The United States and the Rise of Fascism in Italy

of Italy was perfectly in order in the midst of another delicate moment.77

In the meantime the secretary of the treasury, Andrew Mellon, directly
concerned in American finance’s plans for monetary stabilization in
Europe, had also contributed to reinforcing Mussolini’s position. In a
campaign speech on October 10, 1924, Mellon recalled the nefarious
influence of the Socialists in Italy after the war, and, ignoring the present
political crisis, caused precisely by the abuse of political power, concluded
that a strong hand had intervened to restabilize the Italian government,
on the solid basis of government by party and not by compromise. The
Italian government, he declared, had set itself the task of freeing industry
from government regulation and lowering taxes, and that year the budget
was nearly balanced. This observation was relevant in a campaign speech
since, not coincidentally, the policy Mellon set at the treasury was a rigid
defense of laissez-faire economics, and Mussolini was presented as a
principal exemplar of the success of that ideology.78
The reactions of the press to the Matteotti crisis were less uniform
and less prudent than those of the State Department, although they did
not disclaim the fundamental interpretation offered by those officials.
Nonetheless, for the first time since the Fascist seizure of power, a few
of the more politically influential papers voiced serious reservations
concerning the nature of the regime. Particularly the World in New
York, the Boston Herald, the Chicago Evening Post, and the Baltimore
Sun distinguished themselves by harsh judgments centered mainly on
Mussolini’s inability to keep his own movement under control.79 What
is notable here is how the preoccupations did not reach their height in the
days immediately following the crime, but in November, when Mussolini
seemed to vacillate and hinted that he might revoke the Acerbo electoral
law. It was only at that moment, when the American press sensed that
Mussolini was wavering in his determination to secure his regime’s
survival, that even previously friendly newspapers like the New York

77
AC-GC, Gelasio Caetani to Benito Mussolini, Washington, D.C., January 22, 1925. The
moment was delicate because the Hearst organization had just published a report that
described Italy as being in a prerevolutionary situation.
78
ASMAE-AAW, b. 140, f. Italia. Questioni finanziarie economiche, tel. 348/255 Gelasio
Caetani to Benito Mussolini, Washington, D.C., October 31, 1924; ibid., 3 November
1924.
79
ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to Benito Mussolini,
Washington, D.C., June 27, 1924; ASMAE-AG, b. 163, Reparto Generale 42; uccisione
Matteotti, tel. n. 186, Gelasio Caetani to Benito Mussolini, Washington, D.C., June 21,
1924; ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, il R. Console d’Italia in
Baltimore to Gelasio Caetani, Baltimore, MD, November 19, 1924.
 3. The Matteotti Crisis and the Manipulation of the Press 57

Times and the New York Herald qualified their support for the Italian
dictator.80
Despite these doubts, in general the reassuring messages sent by the
embassy were well founded. The hesitations of November 1924 were
quickly overcome when Mussolini proved to have the situation well in
hand in January 1925, and the most influential sectors of the American
press realigned themselves with the diplomats and financiers in the essen-
tial conviction that, notwithstanding the Matteotti “incident” (as it came
to be considered after the fact), only Mussolini was able to guide them to
their ultimate goal: the stabilization of Italian society. This message from
Caetani (but there were others of the same tenor) gives an accurate picture
of the position of the mainstream press:
Excepting a few notoriously antifascist papers like the World in New York, the
American press generally continues to maintain its equanimity regarding the
Matteotti affair. The Times has always published editorials inspired by sympathy
for Your Excellency’s government.
The dominant ideas are that Mussolini and Fascism were betrayed by some
small violent faction, that Mussolini will have the energy to clean house, that the
great majority of Italians maintain complete faith in him. As a whole the press
reaction is fairly quiet, perhaps because it is election season here.81

Particularly useful, from the Fascist point of view, was the publication
of a series of apologetic articles in the most widely read periodical in the
United States at the time, the Saturday Evening Post, two million copies
sold weekly, written by the ex-ambassador and journalist Richard
Washburn Child.82
Still, it was not so much the editorial comments which gave the regime
trouble, since they were rarely truly hostile, as the publication of several
news stories considered false and tendentious by Fascist officials. What

80
Diggins, p. 33; The New York Herald, November 15, 1924; The New York Times,
December 23–24, 1924.
81
ASMAE-AG, b. 163, Reparto generale 42 uccisione Matteotti, te. N. 186, Gelasio Caetani
to Benito Mussolini, Washington, D.C., June 21, 1924; see also ASMAE-AAW, b. 184, f.
Caso Matteotti, Elezioni, tel cif. 26, il R. Console in Boston, Ferrante, to Gelasio Caetani,
Boston, MA, June 26, 1924; ASME-AG, p. 163, Reparto Generale 49: uccisione On.
Matteotti, tel. n. 191, Gelasio Caetani to Benito Mussolini, Washington, D.C., June 27,
1924; ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, tel. cif. 236/191, Gelasio Caetani
to Benito Mussolini, Washington, D.C., June 26, 1924; on the publication of Cesare Rossi’s
memorandum in the New York Times, ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni,
tel. cif. 434/368, Gelasio Caetani to Benito Mussolini, Washington, D.C., December 31,
1924. See also Boston Transcript, June 25, 1924; Springfield Union, June 25 and 27, 1924.
82
ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, tel. 236/191, Gelasio Caetani to Benito
Mussolini, Washington, D.C., June 27, 1924.
58 The United States and the Rise of Fascism in Italy

they, and above all their leader, perceived as dangerous was not any
ideological opposition – which, if it came from socialist-leaning or ethnic
minority communities, actually aided the regime in terms of American
reception, large swathes of whose elite and general public held xenophobic
opinions – but rather any information that, accurate or not, threw doubts
on the stability of the regime. In the face of this danger Mussolini reacted
first with censorship, that is with an embargo on the reports that foreign
journalists sent their papers in the first days immediately following
Matteotti’s disappearance. Mussolini then suspended this extreme remedy
when he realized that it would produce further negative reactions. In
the first place foreign papers, when they received no dispatches from
their Italian correspondents, simply published reports from other foreign
bureaus, which were even more hostile and speculative than those versions
would have been.83 In the second place, the use of censorship was a delicate
question in countries like the United States, where it constituted an attemp-
ted breach of the freedom of the press. Thus the New York Times pub-
lished a fundamentally impartial report under the decidedly less innocuous
headline “ITALIAN PRESS PROTESTS: Opposition Papers Denounce
Mussolini’s Censorship Decree.”84 In the United States, it was more desir-
able that the regime use the less spectacular, but arguably more efficacious
means at its disposal: those separate interventions and pressures that the
embassy and the Roman government itself exerted on the editorial staff
and particularly on the ownership of those newspapers that might cause
any embarrassment for the regime. It is worth examining a few of these
interventions, which paint a useful picture of the extensive and patient
work of Mussolini and reveal the type of American interests that found
themselves aligned with him.
An atypical example was the New York World, since its director Walter
Lippmann had a strong personality which did not offer Mussolini or his
ambassadors opportunities to decisively sway him; even so it is interesting
what a variety and quantity of attempts were made to influence him, even
before the Matteotti crisis became a pressing problem. Guido Jung, future

83
ASMAE-AG, b. 163, Reparto Generale 49: su censura stampa estera, tel. n. 213, Servizio
Stampa, Legazione d’Italia a Vienna a Benito Mussolini, Vienna, June 21, 1924: “Telegram
blockage from Italy due to censorship provoking the spread of exaggerated rumors from
Paris Berlin many questions from newspapers.” Marginal note: “Abolish censorship.
Mussolini.” See also tel. n. 7278, Giacomo Paolucci Barone to the Legazione d’Italia a
Vienna, Rome, June 24, 1924.
84
The New York Times, July 10, 1924. See also on this topic BIAGSRE, Pratiche Varie, b. 64,
anno 1924, Mario Pennachio to Bonaldo Stringher, New York, N.Y., July 11, 1924.
 3. The Matteotti Crisis and the Manipulation of the Press 59

Minister of Finance, wrote to Caetani from Rome in November 1923.

Salvatore Cortesi had just sent him a copy of a series of articles from the
World with the bylines of William Bolitho and Kajetan Dunbar, both quite
hostile to Fascism. Jung wrote:
I am certain that the articles haven’t escaped your attention; having to read them
was one of the least pleasurable tasks of my afternoon. Tomorrow I will give
Cortesi the financial information he requested in order to write a response to
those articles’ claims about the financial policies of Fascism. It seems that Cortesi
was alerted by the military or naval attaché of the local American Embassy, who
wrote to ask if he knew who those World correspondents were. I wanted to let you
know, despite your likely awareness of the issue, because it demonstrates once
again how important it is for us to coordinate our propaganda work. . . . The
overall tone . . . of the articles corresponds perfectly to that presumptuous and
boorish mentality of the true American, which angers me most not for its antifas-
cism but for the anti-Italian prejudice that inspires it.85

What is most striking about this letter is the pattern of events it

implies. The World published some articles that were hostile toward
Fascism. The American Embassy in Rome alerted Salvatore Cortesi, the
notoriously philo-Fascist correspondent of the Associated Press, who
then hastened to refute the articles, with the help of the Fascist official
(though he identified as a nationalist) Jung, who in his turn invited
the Italian ambassador in Washington to take action in the case. The
World’s publication of a negative opinion of Fascism provoked the
collaboration of officials from both governments and the principal
news agency of the American press in the common intent to silence one
of the few voices to dissent from the great chorus of praise raised in
tribute to Mussolini.
The World merited all this attention because it was the only daily
paper with political influence at a national level (it must be remembered
that at this time no American daily paper, not even the New York Times,
had complete local distribution throughout the country) to maintain a
consistently critical stance on the Fascist regime even outside of those
specific moments when an individual event (e.g., the eve of the March
on Rome, the Corfu incident in 1923, or the Matteotti assassination)
caused other papers to raise isolated objections. The World was a paper
read by the governing class, and though its politics were inspired by
Walter Lippmann’s democratic ideals, it was also well enmeshed in the

85
ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Guido Jung to Gelasio Caetani, Rome,
[?] November 1923.
60 The United States and the Rise of Fascism in Italy

interests of Wall Street and reflected the concerns of the Council of

Foreign Relations, of which Lippmann was an important member.86
More than anyone else it was Thomas Lamont who tried repeatedly to
influence Lippmann to diminish the criticisms of Fascism in the New
York World.87 Although these pressures did not succeed in deflecting
Lippmann, he must have had to take them into consideration, especially
in terms of the economic aspects which most interested the partners at
Morgan, who were very powerful in the publishing world. This exchange
of letters between Lamont and Lippmann, just before the Matteotti crisis,
is good evidence of the well-rooted admiration for Mussolini and de’
Stefani’s economic policies among American financial elites; it also attests
to the efforts on behalf of the Fascist government made by Morgan Bank.
And yet the letters also project a certain reciprocal respect between the
two men. Lamont wrote:
Though I know you may not have time to read them, I have sent you copies of the
most recent speech given by Ambassador Caetani [who] makes particular reference
to the great progress the Italian government, under the guide of Mussolini and
his professor-minister of Finance [de’ Stefani], has succeeded in accomplishing,
implementing a financial reform that, naturally, signifies stability, prosperity, and
happiness for the Italian people.88

Lippmann answered in his turn:

I will bring the speech of the Italian ambassador with me to the countryside, and
I promise to read it this weekend, but I hope that the somewhat disconnected
observations I made at his house have not caused him to believe that I fail to
recognize the progress that has been made on the financial front.

Even Lippmann was forced to pay heed to Lamont’s persuasion, dis-

creet as it was, and in order to avoid hypocrisy he fell back on the dubious
distinction between economic and political spheres.89

86
HUGSBA-TWL, b. 190, f. 14, Thomas W. Lamont wrote to Gelasio Caetani, New York,
April 21, 1924, saying that the New York World was an authoritative paper and its editor
was anxious to do things well and to tell the truth. Lamont said he wished to furnish him
with factual information if it were possible.
87
ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to Thomas
W. Lamont, Washington, D.C., April 24, 1924; HUGSBA-TWL, b. 190, f. 14, Thomas
W. Lamont to Walter Lippmann, New York, April 29, 1924; see also Diggins, pp. 24,
50–52.
88
HUGSBA-TWL, b. 190, f. 14, Thomas W. Lamont to Walter Lippmann, New York, April
29, 1924.
89
HUGSBA-TWL, b. 190, f. 14, Walter Lippmann to Thomas W. Lamont, New York, May
2, 1924.
 3. The Matteotti Crisis and the Manipulation of the Press 61

The opinion expressed by the World on the Matteotti affair provoked

new resentments from the regime,90 even though its editorials were
more cautious than in the past.91 Nonetheless there were other articles,
again with Kajetan Dunbar’s byline, containing several inaccuracies
which gave Caetani the chance to send Lippmann a letter of complaint
and correction.92 Nor did Lamont’s ongoing efforts to modify
Lippmann’s position cease, actually intensifying as he prepared for a
trip to Italy.93 The Fascist government joined these efforts, trying the
tactic of personal flattery on Lippmann through those repeated assur-
ances that, as Lamont had said, he was “anxious to do the right thing and
tell the truth.”94
An entirely different species of persuasive tactics were used on the
Chicago Tribune. The greatest daily of the Midwest, owned by Colonel
McCormick, famous for its reactionary and isolationist tendencies, had
initially been favorable toward the Fascist regime, calling it “the most
striking and successful attempt of the middle classes to meet the tide of
revolutionary socialism.”95 But after the assassination of Matteotti, it
had voiced its worries regarding Mussolini’s capacity to keep the Italian
situation under control,96 in strong enough terms to lead Caetani to
classify it in “the same batch” as Il Martello (the newspaper of Italo-
American anarchists) and the New York World.97 In the days

90
ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to John Di Silvestro,
Washington, D.C., June 21, 1924.
91
Probably also as a result of the remonstrations from the Italian embassy, see ASMAE-
AAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to the Director of the “New
York World,” Washington, D.C., December 24, 1924.
92
ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to Benito Mussolini,
Washington, D.C., December 22, 1924; and Gelasio Caetani to Walter Lippmann,
Washington, D.C., December 24, 1924.
93
Diggins, p. 51; LC-HPF, Thomas W. Lamont to Henry P. Fletcher, New York, March 19,
1926; NA-IR 432, Thomas W. Lamont to Giacomo de Martino, New York, January 23,
1929.
94
HUGSBA-TWL, b. 190, f. 14, Thomas W. Lamont to Gelasio Caetani, New York, April
21, 1924; LC-HPF, Thomas W. Lamont to Henry P. Fletcher, New York, March 19,
1926.
95
Chicago Tribune, November 4, 1922, cited in Diggins, p. 31.
96
AC-CG, b. A 2bis, tel. cif. 7191, Benito Mussolini a Gelasio Caetani, Rome, June 22, 1924,
and tel. cif. 231/188, Gelasio Caetani to Benito Mussolini, Washington, D.C., June 24,
1924. Asked by Mussolini, Caetani described the position of the Chicago Tribune by
reminding him of an article which had emphasized the “dangers and weaknesses of a
regime that the paper calls dictatorial.”
97
ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to John Di Silvestro,
Washington, D.C., June 21, 1924.
62 The United States and the Rise of Fascism in Italy

immediately following the crime, Mr. Shumate, the administrative director

of the paper, went to Rome along with George Raffalovich from the
newspaper’s Paris bureau. Through the good offices of Eugenio
Coselschi, a businessman who had contacts in the Ministry of Foreign
Affairs, they met with Salvatore Contarini. They asked the permanent
undersecretary to present them to Costanzo Ciano, Gino Olivetti, and
Senator Rava so that they could invite these leaders (of the navy, major
industry, and the Italian board of tourism, respectively) to contribute
advertising to a special supplement the Tribune planned to dedicate to
Italy.98 They simultaneously made clear that Shumate was putting the
paper at the government’s disposal to influence American public opinion
regarding the regime at that delicate moment, and insisted that the former
had nothing to do with the supplement they were planning. As Raffalovich
wrote, “If we want to enjoy a favorable American opinion, we have to tend
to it in the American fashion.” He added, “We shouldn’t fear the press, but
make use of it.”99
A few months later the owner of the Chicago Tribune approved the
expulsion from Italy of his Rome correspondent, George Seldes, without
any protest. Nor did he publish any of the material Seldes brought back
with him on the Matteotti crime.100 The Chicago Tribune would go on to
become a principal supporter of Italy in the war with Ethiopia, encourag-
ing Mussolini to prioritize the “commercial, evangelical, scientific and
humanitarian purposes” of the venture.
Mussolini has been reading too much and still not enough history. He sees the
territorial profits of pushing in, but, with the breath of Caesars in his nostrils, he has
ignored the fact that the penetration must have prima facie commercial, evangel-
ical, scientific, and humanitarian purposes.101

In other cases more brusque tactics were effective, especially where there
was a previous collaborative relationship that the Matteotti affair might
have damaged. Such was the case with the great chain of papers controlled
by William Randolph Hearst, with whom the regime had long had good
relations, which would resume and continue to be ever more useful during
the war in Ethiopia. In particular the editorial head of the chain, Arthur

98
ASMAE-ASG, b. 175 già 174, n. 4 f. 2: Comm. Eugenio Coselschi, Giorgio Raffalovich,
Eugenio Coselschi to Salvatore Contarini, Rome, July 2, 1924.
99
ASMAE-ASG, b. 175 già 174, n. 4 f. 2: Comm. Eugenio Coselschi, Giorgio Raffalovich,
letter from Giorgio Raffalovich, Rome, July 2, 1924.
100
Diggins, pp. 43–46.
101
“Bombs on Ethiopia,” Chicago Tribune, October 4, 1935.
 3. The Matteotti Crisis and the Manipulation of the Press 63

Brisbane, had been conveniently wooed with the conferral of the title of
commendatore.102
The evening of January 14, 1925, the Hearst paper published a report
sent from Chiasso, with the byline C. F. Bertelli, that described the conflicts
in the Italian parliament, mentioned Fascist terrorism, and declared the
king’s intention to dismiss Mussolini.103 Caetani, following the advice of
Brisbane,104 sent a telegram of polite protest to William Randolph Hearst,
calling upon his constant friendship toward Italy.105 He received in return
a profound apology, in which Hearst said he had already noticed the
publications and told his New York and Paris offices to suppress further
articles in a planned series because he found them partisan and propa-
gandistic. He suggested that Caetani give a direct interview to respond, and
closed by expressing his admiration for the Italian leader, assuring him that
he was confident the Italian people supported Fascism.106
But this had not been enough for Hearst. One of his foremost titles, the
New York American, had already published on January 17 an editorial
discrediting the Bertelli report, warning the American public not to pay
heed to alarmist news about Italy.107 At the same time, Hearst had the
Italian correspondent fired (he had worked for the Corriere della Sera)
and threatened Bertelli with the same fate.108 Finally, as promised,
the Evening Post and the Brooklyn Eagle published an interview with
Caetani, while all the other Hearst papers published an interview
Mussolini gave to the philo-Fascist journalist Verner von Wiegand on
the front page. In a telegram to Brisbane, Hearst revealed the motives
behind his reaction to the Bertelli report. He said he did not believe it was

102
AC-CG, b. A 3, Gelasio Caetani to Benito Mussolini, Washington, D.C., January 22,
1925.
103
AC-CG, b. A 2bis, tel. n. 19/13 Gelasio Caetani to Benito Mussolini, Washington, D.C.,
January 15, 1925.
104
AC-GC, b. A 20/2, Arthur Brisbane to Gelasio Caetani, New York, January 22, 1925.
105
AC-GC, b. A 3, tel. di Gelasio Caetani to William Randolph Hearst, New York,
attachment n. 1 a: Gelasio Caetani to Benito Mussolini, Washington, D.C., January 22,
1925.
106
AC-GC, b. A 3, tel. of William Randolph Hearst to Gelasio Caetani, New York,
attachment n.2 a: Gelasio Caetani to Benito Mussolini, Washington, D.C., January 22,
1925.
107
AC-GC, b. A 2bis, tel. n. 21/15, Gelasio Caetani to Benito Mussolini, Washington, D.C.,
January 17, 1925.
108
AC-GC, b. A 3, tel. William Randolph Hearst to Arthur Brisbane, Los Angeles, CA,
January 17, 1925, attachment n. 3 Gelasio Caetani to Benito Mussolini, Washington,
D.C., January 22, 1925.
64 The United States and the Rise of Fascism in Italy

true, and that it was intensely unpleasant for Italians in the United States
and should not be published if it was unpopular with American readers
[author’s italics].109
The whole episode is an interesting revelation of the way that the
so-called popular American press chose its own news stories. The decisive
factor here was not the ambassador’s protest, nor the regime’s previous
courtship of Hearst and Brisbane, but the fact that the millionaire pub-
lisher considered the news unpopular not only among Italo-American
readers, who were indeed a considerable percentage of his audience, but
among American readers in general, because of the popularity that
Mussolini already enjoyed among them. However the influence of the
ambassador’s intervention should not be altogether discounted, especially
since he was constantly supported in these matters by the Morgan Bank. In
fact, Thomas Lamont organized a lunch at this same time specifically in
order to give Caetani a platform for explaining his version of events to the
editors and commentators of the New York Times, the New York Herald
Tribune, the New York World, the New York Evening World, the New
York Evening Sun, and the New York Evening Post.110
Naturally, the regime dedicated the most attention to the press agencies
who sent reports to those American newspapers without correspondents
stationed in Rome; because of their appearance of neutrality unattached
to any one editorial staff as they were, their reporters had quite a bit of
influence. As shown by Diggins, the head of the Associated Press’ Rome
bureau, Salvatore Cortesi, played a crucial role in the management and
distribution of information about the Fascist regime.111 His son Arnaldo
became the correspondent for the New York Times. Both were fervent
supporters of Mussolini: at the height of the Matteotti crisis, Arone di San
Valentino, head of the press office of the Ministry of Foreign Affairs, called
Salvatore “our excellent friend,”112 while from Washington Caetani char-
acterized Arnaldo’s articles in the New York Times as “truly splendid” just
when the world’s press was offering its harshest critiques of the regime.113

109
Ibid.
110
AC-CG, b. A 3, Gelasio Caetani to Benito Mussolini, Washington, D.C., January 22,
1925.
111
Diggins, p. 44; an earlier treatment is by G. Salvemini, “Firenze,” in L’Italia Libera,
September 16, 1944, reprinted in G. Salvemini, L’Italia vista dall’America,
Enzo Tagliacozzo, ed., Milano: 1969, pp. 571–574.
112
ACS-MCP, b. 105, f. 18 Stampa Estera, Appunto del Capo Ufficio Stampa del Minstero
degli Affari Esteri, Arone di San Valentino, Rome, August 15, 1924.
113
AC-GC, b. A 2bis, tel. di Gelasio Caetani to Benito Mussolini, Washington, D.C.,
January 8, 1925.
 3. The Matteotti Crisis and the Manipulation of the Press 65

Another Associated Press correspondent gave a dramatic description of

how the Roman bureau functioned:
The important fact is that the AP backed up everything pro-Fascist of Salvatore
Cortesi’s to the hilt . . .. The AP in Europe crawls on its belly. The AP says as a basic
maxim that the Government in power must be presumed to be right . . . AP must
never run any chance of being kicked out of any important news center.114

When in August 1924, with Cortesi and his second-in-command absent,

the journalist on duty, a Miss Underwood characterized by Arone as
“philo-fascist,”115 posted news from the opposition press of Communist
demonstrations on the agency feed, she was threatened with expulsion
and by personal order of Mussolini required to formally apologize and
issue a correction.116 Generally, the embassy showed no mercy even with
its friends, inundating them with detailed notes on reports judged insuffi-
ciently favorable toward the regime.117 The United Press International
showed comparable openness to this kind of cooperation under the direc-
tion of its Roman bureau chief, Thomas B. Morgan.118
The New York Times was also the object of continual attention from
Italian authorities. The paper’s attitude toward the regime can only be
described as vacillating, from moment to moment as well as among edito-
rial opinion, chronicle, and commentary. As discussed above, the judg-
ment this most important paper of the United States gave on the March on
Rome had been generally positive, while the subsequent occupation of
Corfu had occasioned its most vehement criticisms.119 Those criticisms

114
Diggins, p. 45. Diggins’ assertion that Winner (the quoted correspondent) was “too severe”
cannot be accepted. In fact, there were numerous examples of the cozy relationship between
the AP and the regime. The complaints of de Martino, in NA-IR 423, Giacomo de Martino
a Benito Mussolini, Washington, D.C., February 3, 1926, cited by Diggins are not con-
clusive because of the extreme susceptibility of the ambassador and his interest in arguing
for the continued existence of Washington bureau of the Stefani Agency. See ACS-FAS:
Manlio Morgagni, b. 1 End of December 1933, Manlio Morgagni, “Relazione per il Capo
dell’Ufficio Stampa del Capo del Governo.” Rome, December 23, 1932.
115
ACS-MCP. B. 105, f. 18 Stampa Estera, Appunto del Capo Ufficio Stampa del Ministero
degli Affari Esteri, Arone di San Valentino, Rome, August 15, 1924.
116
ACS-MCP. B. 105, f. 18 Stampa Estera, tel. n. 9944, Benito Mussolini to Augusto Rosso,
Rome, August 15, 1924; see also tel. n. 270, Augusto Rosso, charge d’affaires of the
Italian embassy, to Benito Mussolini, Washington, D.C., August 12, 1924, found also in
AC-GC, b. A 2bis.
117
See for example ASMAE-AAW, b. 184, f. Caso Matteotti, Elezioni, Gelasio Caetani to
Nancy Cox McCormick, Washington, D.C., December 8, 1924.
118
Diggins, pp. 53n, 56.
119
ASMAE-AAW, b. 152, f. Conflitto Italo-Greco, s.f. Stampa, Augusto Rosso to Benito
Mussolini, Washington, D.C., September 6, 1923.
66 The United States and the Rise of Fascism in Italy

softened, presumably, after Caetani contacted numerous editorial writers

and exerted some pressure on the owners as well through Mortimer Schiff,
partner in Wall Street’s biggest Jewish investment bank, Kuhn, Loeb and
Company.120 Still the editorial critique in the Times grew sharper in the
course of the Matteotti crisis, during which the following appeared in its
pages on December 23, 1924, in reference to threats made by Italo Balbo:
The fact that the same methods of violence which two years ago were employed
against Communists are now invoked against “dissident” Fascisti reveals a rift
within the party itself. It is the inevitable outcome of the dictatorship method, for
which we have a parallel in the present factional struggle in Russia.121

As Diggins observed, the New York Times was the only important
daily to characterize Fascism as a dictatorship in its editorial pages,
contrasting it – at least for a few years – with the ideals of liberty and
democracy.122 What is significant, however, is that the criticism reached
its most bitter extremes at the moment when the general American con-
viction was that Mussolini was about to accept a form of government
based on the principles of representative democracy, and therefore in the
moment in which his power, understood to reside in the stability of
his regime, appeared weakest. Only a few months later the same New
York Times would favorably report on the proclamation of the corpor-
atist state, which had the merit of “stealing thunder from the Left and of
giving power to hitherto unrepresented social units.”123 Once again the
American press purported to find echoes of its own traditions in the
affirmations of Fascism. According to the Times, the Mussolinian con-
cept of state authority
. . . has many points in common with that of the men who inspired our own
Constitution – JOHN ADAMS, HAMILTON, WASHINGTON. The uninformed
will of “the many” is to be “balanced” by the experience and the wisdom of
“the few.”124

However, the same paper would later attack the plan of the regime to
substitute corporatism for political and territorial representation.125

120
ASMAE-AAW, b. 152, f. Conflitto Italo_Greco, s.f. Stampa, Felica Bava to Gelasio
Caetani, New York, N.Y., October 4, 1923, and tel. n. 313, Gelasio Caetani to Benito
Mussolini, Washington, D.C., 10 October 1923; found also in AC-GC, b. A 2bis.
121
“Mussolini at Bay,” New York Times, December 23, 1924.
122
Diggins, p. 31.
123
Ibid., p. 32.
124
“‘Revolution’ in Italy,” New York Times, October 11, 1925.
125
Ibid., December 12, 1925.
 3. The Matteotti Crisis and the Manipulation of the Press 67

Once safely past the shoals of the occupation of Corfu and the Matteotti
crisis, however, the New York Times oscillated less and less in its editorial
comments on Fascism. Outside of some worries raised by the Italo-German
polemics over the South Tyrol or Alto-Adige region, in the course of 1926
the New York daily sympathetically portrayed the ratification of the
agreement on war debt by the U.S. Senate, supported the process of
stabilization of the lira, and went along with the Morgan Bank’s constant
pressure in following the various American bond issues for Italy in great
detail. Finally, the same Wilsonian commitment that had led the journal to
campaign against the occupation of Corfu also motivated it to support the
Geneva politicking of Dino Grandi and the mediating role Mussolini
assumed for himself in European politics. This went on right up until the
moment when the war in Ethiopia forced a definitive rupture.126
The foregoing all occurred on the editorial pages; but the New York
Times of course also consisted of correspondents’ submissions, special
features, and letters and comments from outside contributors and foreign
affairs experts. As stated, the Rome bureau of the Times had a consistently
favorable approach to the regime. In the early years, the paper published
numerous apologias by Walter Littlefield, who like Brisbane was promptly
decorated with an Italian honorific title.127 Similarly, the regime cemented
its friendship with Herbert Matthews by allowing him access, as the
only foreign correspondent so recognized, to reporting from the front
lines in Ethiopia.128 But the most important example was Anne O’Hare
McCormick, who first as a special correspondent and later as the colum-
nist for foreign politics, could claim to be the first, back in 1919, to predict
Mussolini’s dazzling career.129 For much of the regime’s two decades she
defended his foreign policy (including the invasion of Ethiopia, the dis-
patch of “volunteers” to the civil war in Spain, and the Rome-Berlin Axis)
in her column, carrying on what even the understated Diggins called “a
political love affair with an idealized Italy and its noble leader.”130 For his
part, Mussolini received McCormick as if she were, as Salvemini expressed

126
Diggins, p. 32.
127
ASMAE-AAP 1919–1930, b. 1599, Stati Uniti (7362–7369), Walter Littlefield to Benito
Mussolini, New York, December 13, 1924, in the margin Arone wrote: “Walter
Littlefield is not the Editor in chief of the New York Times. He is a contributor and a
committed longtime friend of Italy.” See also Diggins, p. 25.
128
M. Berger, The Story of the New York Times 1851–1951, New York: 1951, pp. 419–421.
129
Ibid., pp. 326–327.
130
Diggins, p. 48.
68 The United States and the Rise of Fascism in Italy

it, “the queen of Sheba paying a visit to the court of King Solomon.”131
Interestingly, both McCormick and Matthews went right on offering
counsel to the Italian people regarding their political choices even after
the fall of Fascism.

4. american reactions to mussolini’s

early foreign policy
A different kind of fear was slower to subside regarding Mussolini’s
foreign policy; because in this field the Italian leader’s behavior was far
less reassuring to Americans right from the very beginning. After the
seizure of power, and with the exception of the Matteotti assassination,
Fascism no longer appeared to be causing internal disorder such as to harm
its external image. In foreign politics, although he maintained a respectful
attitude toward the European and global balance of power until the attack
on Ethiopia, he could not ignore that the Italian middle classes had, in
recent history, been utterly permeated not only by a solid constitutional
ideology, but by heavy doses of nationalistic propaganda. While he usually
chose targets designed to avoid the tender spots of European politics which
might invite the intervention of Great Britain or the United States, from
time to time he was constrained to do some saber rattling to satisfy his
base. An exemplary gesture of this type came when French and Belgian
troops occupied the Ruhr beginning on January 11, 1923. This initiative
by French President Raymond Poincaré was intended to put direct and
brutal pressure on the German government in order to force it to restart
reparations payments. For its part Germany responded with passive resist-
ance in the Ruhr valley and galloping inflation of its currency. It was clear
that this aggression, and its consequences for the German economy (and
following that, the French economy itself, which saw a 20% fall in the
value of the franc), only elicited firm hostility on the part of the British and
angered the Americans, who had accepted Germany’s non-payment of
reparations and who considered the recovery of the German economy
the linchpin of the entire European reconstruction.132
It is worth examining Mussolini’s treatment of this situation in detail,
since it reveals his duplicity, but above all the care he took not to come into
direct conflict with the Anglophone powers. Initially Mussolini supported,

131
G. Salvemini, Mussolini diplomatico, Bari: 1952.
132
AC-GC, b. A 1, f. 1. Te;. N. 37 G.M., Gelasio Caetani to Benito Mussolini, Washington,
D.C., January 7, 1923, found also in ASMAE-AAW, b. 152, f. Crisi Italiana 1919, etc.
 4. American Reactions to Mussolini’s Early Foreign Policy 69

if only rhetorically, Poincaré’s occupation of the Ruhr and the goal of

forcing Germany to honor her reparation obligations.133 He then modified
this attitude in response to American reactions.134 On the very day of
January 11, 1923, Ambassador Caetani telegraphed from Washington:
Italian action supporting France not clearly understood by Americans unaware of
significance. Resentment toward France running high and may reflect on Italy.135

Caetani was seriously concerned and Mussolini, for his part, promptly
reacted to his tone. While he continued to communicate solidarity to
Poincaré privately,136 the dictator pivoted publicly. On January 18 he
ordered Caetani to work on convincing the State Department to “take
moderating action to avoid the serious dangers of the situation.”137
Caetani had already communicated Italy’s solidarity to Hughes, in a rather
forced circumlocution by which he offered Italy’s “technical and politi-
cal”138 assistance as long as only peaceful means were contemplated.139
The ambassador’s initiative proved to be a smart move.140 The secretary of
state, presented with the Italian request, not only could not reprimand the
Italian representative for his government’s pro-French stance, but was also
put on the defensive regarding the old problem of American isolation-
ism.141 He could only respond that the United States had already proposed
its preferred solution to the reparations problem. France had rejected it and
Italy had not commented. Furthermore the United States had no intention
of enforcing the terms of a treaty they had not ratified. At most Hughes
said he was willing to encourage the American ambassador in Paris to take
some action which however could be “neither official nor officious.” He

133
ASMAE-AAW, b. 152, f. Crisi Italiana 1919 etc. tel. n. 112, Benito Mussolini to Gelasio
Caetani, Rome, January 12, 1923.
134
PRO-FO, 371/8704, 848, Sir Ronald Graham ro the Marquess Curzon of Kedleston,
Rome, January 16, 1923.
135
DDI, VII, 1, 335, tel. di Gelasio Caetani to Benito Mussolini, Washington, D.C., January
11, 1923.
136
DDI, VVI, 1, 414.
137
DDI, VII, 1, 371.
138
PRO-FO, 371/8704, 848, Sir Ronald Graham to the Marquess Curzon of Kedleston,
Rome, January 16, 1923.
139
AC-GC, b. A 1, f. 1, tel. n. 19, Gelasio Caetani to Benito Mussolini, Washington, D.C.,
January 12, 1923, and LC-CEH, b. 175, Charles Evans Hughes, “Memorandum of
Interview with the Italian Ambassador,” Washington, D.C., January 19, 1923.
140
AC-GC, b. A 2bis, tel. n. 33, G.M., Gelasio Caetani to Benito Mussolini, Washington,
D.C., January 19, 1923.
141
LC-CEH, b. 175, Charles Evans Hughes, “Memorandum of Interview with the Italian
Ambassador,” Washington, D.C., January 18, 1923; and “Memorandum of Interview
with the Italian Ambassador,” Washington, D.C., January 19, 1923.
70 The United States and the Rise of Fascism in Italy

also observed that France could stand to learn a concrete lesson that
coercive methods between states were hardly profitable. This American
statement ended up causing real trouble for Mussolini from the French
when Poincaré found out that Hughes had been solicited to action by
the Italians. Poincaré lodged a complaint with Romano Avezzana, the
ambassador in Paris, who passed it on to Mussolini on January 25.142 In
Mussolini’s response to Romano Avezzana, he portrayed the result of his
explicit order as merely “a rather generic action on the part of the embassy
in Washington,” making it seem as though Mussolini intended to shift
away any blame or to mislead Avezzana himself.143 Most interesting is
the conclusion of the telegram, in which the goal of the initiative is defined
as “smoothing things over, since he [Caetani] informed me that the
Americans were seriously irritated with France.” Purely altruistic motives,
therefore. In reality, as was logical, it was the Italian image in the United
States that Mussolini cared about smoothing over. Ever the opportunist,
Mussolini had sensed an opportunity in the intemperate action of Poincaré.
He could no more disregard the necessity of safeguarding coal supplies than
could Poincaré, but he well knew that his international reputation as guar-
antor of stability was more important than any participation in French
adventures, especially given Poincaré’s lack of good press in London and
Washington. He made this clear in a telegram sent to Romano Avezzana on
February 1:
It is necessary to remember that, given the attitude of England and the United States
[my italics], Italy must scrupulously avoid sharing any responsibility in the political
and military coercion that France and Belgium have been forced to undertake in the
Ruhr and the Rhine.144

Without explicitly mentioning the United States, Mussolini’s duplici-

tous course in this affair is even more strongly emphasized in another
telegram to Avezzana from the previous day:
I reconfirm that the Royal Government, while not believing it possible to turn away
from France, still desires to absolutely avoid any shared responsibility in these
events.145

Equally significant was Mussolini’s apprehension when Caetani had

to inform him of American irritation. Caetani noted that public opinion

142
DDI, VII, 1, 405.
143
DDI, VII, 1, 414.
144
DDI, VII, 1, 441.
145
DDI, VII, 1, 431.
 4. American Reactions to Mussolini’s Early Foreign Policy 71

judged that Italian support of the French in the War Reparations

Commission contradicted a clear rejection of military occupation of the
Ruhr and the coercive methods it entailed.146 Mussolini answered:
This public opinion must be made aware of the difficulty of our position criticizing
the current state of affairs, that we do not retreat from but take responsibility for
the legitimate safeguarding of our interests, which lie in acting as moderator and
brake on both parties’ contentions.147

In the course of the occupation of the Ruhr, Mussolini revealed his

respect for the hierarchy of the great powers, even if his ambiguous
declarations, perhaps accentuated by his inexperience (at this point he
had been conducting the foreign policy of the nation for little more than
two months), did raise a few eyebrows in London and Washington. In the
end Caetani, who as ambassador had valuable skill in breaking bad news
to his superior, wrote to Mussolini:
The economic considerations [the dependence on coal supplies] the opportunity
to show friendship and moderating influence and the necessity of guarding our
own interests which have already been too often damaged, do not suffice in the
American mind to justify the moral support given to France in an act which puts
global interests in danger [. . .] from the questions posed me by many persons
I deduce that the public still fails to understand the Italian position. In particular
they do not understand how Italy expected to constrain Germany to pay repar-
ations without resorting to coercive measures backed by military force.148

Mussolini’s diplomatic initiatives, late as they were, had eased

Washington’s concerns and perhaps avoided negative press. But the ques-
tion of European peace remained the preeminent interest of the Republican
administration, despite its great caution in taking any position in matters it
considered outside its jurisdiction owing to the isolationism prevalent in
the country.
A few months later, in August 1923, one of Mussolini’s decisions would
raise the problem of the Italian dictator’s role in world peace even more
strongly for the American government, even if it was on a less delicate
issue. The facts are well known.149 On August 27, General Tellini and four

146
DDI, VII, 1, 335 and 398.
147
DDI, VII, 1, 415 tel. from Benito Mussolini to Gelasio Caetani and AC-GC b. A 2, f. 1, tel.
n. 237, Benito Mussolini to Gelasio Caetani, Rome, January 18, 1923.
148
AC-GC, b. A 3, Gelasio Caetani to Benito Mussolini, Allegato “G,” Washington, D.C.,
January 28, 1923.
149
James Barros, The Corfu Incident of 1923, Princeton: 1965; Catherine S. Kadradic,
International Delimitation of Albania, 1921–1925, unpublished thesis, Columbia
University, 1956; Piere Lasturel, L’Affaire Gréco-Italienne de 1923, Paris: 1925;
72 The United States and the Rise of Fascism in Italy

other Italian military men were assassinated; they were members of an

international commission charged with settling the Greek-Albanian
border. On August 29, Mussolini issued an ultimatum, perceived as
humiliating by the Greek government, and two days later he ordered the
bombardment and occupation of the island of Corfu, during which several
civilians were killed by accident as they tried to flee. The Greek government
appealed to the League of Nations, where the great powers tried to avoid
conflict by referring the question to the Conference of Ambassadors
in Paris. The Conference ordered Italy to evacuate Corfu and Greece to
accede to some Italian demands as reparation.
The American press did not focus only on the question of Italian foreign
policy and the danger of Mussolini’s aggression. The Corfu incident was,
in a certain sense, the continuation of hostilities between those who sup-
ported the League of Nations and those who had opposed American
adhesion since 1919 following Woodrow Wilson’s initiative to create it;
the latter continued to insist on a rigid separation of American policy from
all the wicked doings of the Old Country. The virulence of the condemna-
tions of Mussolini in the New York Times had its source in this domestic
conflict. At first the New York daily recognized the gravity of the assassi-
nation of Tellini and his assistants, but it quickly came to portray the
Italian ultimatum as the more dangerous, comparing it to the Austro-
Hungarian demands on Serbia that helped spark the First World War.150
Several days later, in an editorial significantly entitled “Italian Imperialism,”
the Times repeated several anti-British statements made by Mussolini before
the March on Rome, expressed the suspicion that Mussolini wanted to
turn the Adriatic into an Italian lake, and called for the sanction of “interna-
tional opinion and international judgment.”151 Inevitably this analysis
ended up calling into question the very nature of the Fascist regime, stating

Stephan Nicoglou, L’Affair de Corfou et la Société des Nations, Dijon: 1925;

Ettore Anchieri, “L’esordio della Politica Estera Fascista,” Il Politico, anno XX, n. 2
(1955): 211–231; Antonio Foschini, “A trenta anni dall’occupazione di Corfü,” Nuova
Antologia anno 88 fasc. 1836 (December 1948): 401–412; Manley O. Hudson, “How the
League of Nations Met the Corfu Crisis,” World Peace Foundation, VI n. 3 (1923):
176–210; Vittorio Scialoia, “La Società della Nazioni ed il conflitto italo-greco,” Rivista
di Diritto Pubblico e della Pubblica Amministrazione in Italia, serie II anno XVI fasc. I
(January 1924): 69–74; Charles De Visscher, “L’Interprétation du Pacte au lendemain du
différend Italo-Grec,” Revue de Droit International et de Législation Comparée, 3ème Série,
V (1924): 213–230, 377–396; Quincy Wright, “The Neutralization of Corfu,” American
Journal of International Law, 18 n. 1 (1924): 104–108.
150
The New York Times, August 31, 1923.
151
Ibid., September 4, 1923.
 4. American Reactions to Mussolini’s Early Foreign Policy 73

that “Fascismo may be as high-handed as it pleases within the boundaries

of Italy. But it cannot project its arbitrary measures into international
relations” without violating the Covenant of the League of Nations and
activating the sanctions it provided for.152 It was with some embarrassment
in succeeding editorials that the Times tried to downplay the virtual inca-
pacity of Geneva to assert its jurisdiction in the Corfu controversy,153 while
Mussolini was characterized as “the most dangerous kind of autocrat – a
muddle-headed autocrat with an uneasy conscience” who had used force
to attain a goal when the proper result could have been achieved through
tranquil negotiation.154 All the newspapers associated with the Wilsonian
legacy, such as the Boston Herald,155 or who in any case wanted to preserve
the image of the League of Nations in order to leave open the possibility of
some form of political involvement with Europe, expressed similar senti-
ments. The World, while belonging to that political faction which opposed
isolationism, used the episode to remind readers of the justness of its anti-
Fascist opinion.156
The Chicago Tribune headed the opposing faction, those who were
sworn enemies of the League of Nations and all those who, in the United
States, continued to defend the principle of collective security and to call
for a more active role in international politics. Their analysis of Mussolini’s
actions was equally harsh,157 but they did not hide their satisfaction at the
difficulties of Geneva in imposing its will on Italy. The Tribune wrote:
Confronted by a crisis of the first rank, imperiling the peace of Europe, the much
vaunted machinery of the league stalls hopelessly. The supreme council is exposed
for what it is, merely, a shadow cast by the latest concert of the powers, which is no
different in its motive and end, its strength and weakness, than the concerts of the
past. Italy is a member of the league and of the supreme council. [. . .] Yet the Italian
government gives not a moment’s consideration to this, but acts precisely as if there
were no league.158

As the days passed, the campaign conducted by the Chicago Tribune

and other newspapers159 like the New York Herald Tribune160 grew

152
Ibid., September 7, 1923.
153
Ibid., September 10, 1923.
154
Ibid., October 2, 1923.
155
The Boston Herald, September 6, 1923.
156
The New York World, September 3, 1923; Detroit Free Press, September 5, 1923; Saint
Louis Star, September 5, 1923; Saint Louis Times, September 5, 1923.
157
The Chicago Daily Tribune, August 31, 1923.
158
Ibid., September 5, 1923.
159
The Commercial Tribune, September 12, 1923.
160
The New York Herald Tribune, September 10, 1923.
74 The United States and the Rise of Fascism in Italy

harsher, not so much in its criticisms of Mussolini, for whom the papers
showed and would continue to show real sympathy, as against Geneva and
their hated Great Britain.161 The conclusion could be none other than that
already implied in the first editorial the Chicago Tribune dedicated to the
topic:
To enter the league is to enter European politics as it has been and is; to be futile or
to take sides in European politics; to be flaunted or to assume the task of enforcing a
decision framed according to the interests of European governments which pull the
wires working delegates at Geneva.162

The isolationist press had used Mussolini’s actions to refocus their

own polemic, while the New York Times adopted a language regarding
the Fascist regime that it would not use again until the Thirties. But the
upshot was that journalistic rhetoric became so heated that Rosso, who
usually refused to dignify media criticisms with a reply, felt constrained to
request a special fund to mount a new press agency.163
The Coolidge administration, for its part, had been considerably more
passive than the press; completely passive, in fact. The undersecretary of
state William Phillips – who found himself substituting for Hughes during
the height of the crisis – had limited himself to sending President Coolidge
the telegrams he received in order to keep the president up to date.164 In
a letter to Coolidge, Phillips characterized two telegrams he had received
from Ambassador Child euphemistically as “a bit surprising” in that they
showed Child regurgitating in his usual noncritical fashion every tidbit
passed on to him by the Italian Ministry of Foreign Affairs.165
When the permanent undersecretary of the British Foreign Office,
Sir William Tyrrell, dared to propose to the U.S. Charge d’affaires Post
Wheeler that their respective governments might recall their representa-
tives from Rome to penalize the aggressive politics of Mussolini toward
Greece, not only did Phillips telegraph to Wheeler that it would be indec-
orous on the part of his government to take on any independent initiative,
but he referred to Tyrrell’s proposal as a purely personal initiative that

161
“The Knots in the Lion’s Tail,” The Chicago Daily Tribune, September 15, 1923.
162
“The League Is Sunk,” The Chicago Daily Tribune, September 5, 1923.
163
AC-GC, b. A 1, f. 3, tel. n. 283, Augusto Rosso to Benito Mussolini, Washington, D.C.,
September 5, 1923.
164
LC-CC, reel 90, b. 178a, William Phillips to Calvin Coolidge, Washington, D.C., August
31, 1923; September 1, 1923; September 2, 1923; September 3, 1923; September 4, 1923;
September 14, 1923; September 15, 1923.
165
Ibid., September 2, 1923 and September 3, 1923.
 4. American Reactions to Mussolini’s Early Foreign Policy 75

did not represent the point of view of the British government.166 If the
extremely prudent Phillips used such strong language, he must have been
convinced that not only was American intervention inopportune, but that
the British government had no similar intent either.
To the Italian Charge d’affaires Augusto Rosso, who informed him as
to Roman instructions on the issue, Phillips made no comment at all (nor
did Rosso find it necessary to ask for it).167 The papers tried every which
way to get a statement from the State Department, but without success.168
When the Conference of Ambassadors was involved in the issue, Phillips
limited himself to telegraphing the American ambassador in Paris and
asking him to observe the same discretion.169 When, finally, Secretary of
State Hughes returned to Washington, Rosso noted its result in “the fact
that the Washington Post, notoriously the mouthpiece of government
circles, which had at first violently attacked Italian politics, recently
returned to a much more dispassionate tone.”170
The rigid silence maintained by the American government, however, did
not mean that it was indifferent to events. Men like Hughes and Mellon
well knew that the recurrence of the controversy over the League of
Nations and its further loss of stature served to harden polemical attitudes
in the country and made it more difficult than ever to conduct the politics
of rapprochement with Europe they had hoped to encourage within the
financial sector. Even if neither of them would have attempted to reopen
the question of American participation in the Geneva assembly, they knew
that its proven legitimacy would have offered them more room for maneu-
ver. Significant in this regard was the report of the Morgan bank’s Thomas
W. Lamont, in the days before the Corfu incident, to the British delegate
to Geneva Lord Robert Cecil, on his dialogue with Mussolini during a
recent meeting in Rome. Lamont asked if there were a chance Mussolini
might participate in the autumn meeting of the League of Nations.

166
NA-DS, 765.68/26, tel. from William Phillips to Post P. Wheeler, Washington, D.C.,
September 3, 1923, cited in Barros, p. 87.
167
AC-CG, b. A 1, f. 2, tel. n. 279, Augusto Rosso to Benito Mussolini, Washington, D.C.,
September 4, 1923.
168
ASMAE-AAW, b. 152, f. Conflitto Italo-Greco, s.f. Stampa, tel. n. 287, Augusto Rosso to
Benito Mussolini, Washington, D.C., September 10, 1923.
169
LC-CC, reel 90, b. 178a, William Phillips to Calvin Coolidge, Washington, D.C., September
4, 1923. Phillips wrote that he had sent instructions to the embassy in Paris that if the
question arose in the Conference of Ambassadors, they should maintain the maximum
discretion, limiting themselves to reporting back on the proceedings of the Conference.
170
ASMAE-AAW, b. 152, f. Conflitto Italo-Greco, s.f. Stampa, tel. n. 287, Augusto Rosso to
Benito Mussolini, Washington, D.C., September 10, 1923.
76 The United States and the Rise of Fascism in Italy

Mussolini replied that he was satisfied with the invitation and said he
would consider it warmly, but observed that the United States were not
yet members of the League. Lamont answered no, but there was some
momentum in favor of the League in the United States, much stronger than
many American officials might think, and the mere fact that a premier of
his power and stature would commit to attending the next sessions would
have importance in American eyes.
Lamont continued to pursue this same topic with the Minister of
Finance Alberto de’ Stefani.171 Still, Corfu remained an isolated episode
in the opinion of the Fascist regime that was consolidating itself, including
in those sectors of the press that had been most struck in their dedication to
the cause of the League of Nations. Probably they were convinced that the
Fascist regime was rapidly stabilizing (even at the cost of some insobrieties
that were clearly crowd pleasing gestures); that there were no better alter-
natives, and that it would end up following a more prudent path in foreign
policy as in other areas. The haughty refusal of Phillips to any suggestion
of cooperative measures as proposed by Tyrrell, and the intervention of
Hughes with the Washington Post that Rosso supposed he had detected,
certainly supported the interpretation that Washington continued to pur-
sue an isolationist course of rigid neutrality.172 But it was also possible that
they were the signs of a well-rooted conviction that Mussolini’s Italy was
destined to serve as America’s partner in the project of reconstructing
Europe. Both the popularity the regime had won in previous months and
the ever-increasing distaste for France’s domestic and foreign policies
contributed to casting Italy in this role. Either way the passive attitude
displayed by the American government – whether it was a reflection of
isolationism that Coolidge and Phillips felt particularly strongly, or part
of a more subtle plan to cultivate good future relations with Mussolini –
had aided the aggressor and weakened the League. Above all, as Barros
demonstrated,173 the refusal of the United States to participate in any
collective initiative had the effect of discouraging those who wanted to
apply the Covenant’s sanctions against Mussolini, and of offering those
who were reluctant to do so the splendid alibi that without the United
States no sanctions could be effective. In this way the ground had been
prepared for the war in Ethiopia.

171
HUGSBA-TWL, b. 86, f. 22, Thomas W. Lamont to Lord Robert Cecil, New York, May
22, 1923.
172
Barros, p. 87.
173
Ibid., pp. 177, 281, 302–307.
 5. The Shaping of Italian Foreign Policy 77

5. the shaping of italian foreign policy

It must be said that for a few years, the benevolent neutrality of the United
States during the Corfu incident proved an accurate prediction of the
direction of Italian foreign policy. The most important players in the
Republican administrations and on Wall Street saw it as a litmus test of
European politics in terms of each state’s attitude toward the economic
reconstruction of Germany and the choice between Paris and London as
principal point of reference. Although Mussolini’s early policies have been
described as a politics of equidistance – between ex allies and ex enemies,
and between the French and the English174 – in reality his choice of one
side became ever more clear in the course of the Twenties. On the German
question, Mussolini had already placed himself relatively far away from
the French stance of absolute intransigence by positioning himself as
mediator between France and Great Britain on the issue of reparations.
During the occupation of the Ruhr he had coped with a situation made
more difficult by the various government pressures and public opinion
outcries in Great Britain and the United States by transforming his appa-
rent initial support for Poincaré into a virtual alliance with the powers of
the opposite side. His relations with Great Britain – which were important
to the Americans since, apart from the rivalries and resentments that may
have festered between the empire in decline and the one on the rise, Great
Britain was still the main American partner for reconstruction in Germany
and in Europe in general – had certainly followed a tortuous path. The
arrogance and formality of Lord Curzon made the British foreign secretary
the least suitable person to negotiate with Mussolini at the time of his rise
to power, when he was personally insecure and desperately searching for
some successes to legitimize him in the eyes of his citizens.175 What’s more,
the Corfu incident appeared to be a challenge aimed specifically at Great
Britain, the most committed defender of the League’s prestige as well as the

174
R. Moscati, “Il revisionismo fascista – Il periodo Grandi e la nuova fase della politica
estera,” in La politica estera italiana dal 1914 al 1943, Torino: 1963, p. 96.
175
PRO-FO, 371/7660,840, tel. n. 97, Lord Curzon to Foreign Office, Lausanne, December
10, 1922: “From what Contarini said to me yesterday I think it more than likely that
Mussolini having failed with blackmail here may renew attempt in London. He will
certainly be reluctant to return to Rome without some triumph for Italian policy. I told
Contarini that while Foreign Office and Board of Trade would be glad to give any
explanations, question of concession to Italian demands could not be satisfactorily
pursued except by ordinary diplomatic methods or until Lausanne conference is over.
Italians seem wholly incapable of understanding an orderly or gentlemanly diplomacy
and Mussolini only differs from Schanzer in substituting a blunderbuss for a popgun.”
78 The United States and the Rise of Fascism in Italy

traditional hegemon in the eastern Mediterranean. It was thus easy for

France to offer cautious support to Mussolini, in this way thumbing its
nose at Great Britain at the same time that it retained the escape route of
blaming any outcome on the Conference of Ambassadors and not risking
its own reputation in the process.176 Naturally the Quai d’Orsay hoped
in this way to soften Mussolini toward its own positions, particularly
regarding the German question. The obstacles to such an alliance, or
even just a rapprochement, between France and Italy, however, were real
and numerous. Even with strong political will in favor of such an alliance –
and that did not exist – it would have been difficult to consummate. The
many conflicts of interest in the Mediterranean and in Africa; French
irritation at Italian irredentism; and, most of all, what Ruggero Moscati
called the “internal conflict of the regime”177 which had led the French to
offer refuge to many political exiles fleeing Italy were incompatible with a
politics of mutual friendship. The fact was that these tensions and conflicts
with France were actually useful to the Fascist regime as an area in which
to focus the anger of the movement’s most ebullient spirits at a time when
the rest of Mussolini’s foreign policy was guided by the need to proceed
calmly and quietly. As Moscati rightly argued:
Immediately after Corfu Mussolini officially, and with his usual ardor, inaugurated
a “new course” with a legalistic inspiration. This led him to reverse his previous
anti-League position and to initiate a politics of accord with England.

Naturally, “Mussolini the diplomat continued to feel pressured by

suggestions and hints which led him, no longer to contemplate coups,
but to a certain continual restless agitation.”178 But a fundamental choice
had been made and was destined to endure for quite a few years, even to
consolidate further during Dino Grandi’s tenure as Minister of Foreign
Affairs. It would be a mistake to see this as proof of the bureaucracy’s
ability to guide diplomacy without Mussolini’s interference, or of
Contarini’s personal power; still, from the little direct evidence of
Contarini’s thought process during his period of maximum influence it is
clear that the “new course” was in substantial parallel with his own
preferences. For example, far away in Washington, Caetani felt the con-
tinual need to stay informed as to Rome’s policy orientations; he and his

176
Moscati, “Gli esordi della politica estera fascista – Il periodo Contarini – Corfü,” p. 86.
177
Moscati, “Locarno – Il revisionismo fascista – Il periodo Grandi e la nuova fase della
politica estera,” p. 97.
178
Moscati, “Gli esordi della politica estera fascista – Il periodo Contarini- Corfü,” p. 89.
 5. The Shaping of Italian Foreign Policy 79

colleagues in other foreign capitals shared this need since their official
orders were frequently parsimonious and usually limited to specific cases.
Thus when Caetani’s friend and erstwhile colleague as finance attaché at
the embassy, Guido Jung, moved back to Rome to work for the minister of
finance Alberto de’ Stefani, Caetani asked him to stay in touch as an
additional source. It was in this way that when Contarini attended a
meeting on war debt on October 23, 1923, with the banker and repar-
ations expert Mario Alberti and another official, Gino Buti, Jung was able
to inform Caetani that Contarini had expressed himself in unusual detail
on the subject of the government’s foreign policy:
In this and in other occasions I have had rather long conversations with Contarini
on the subject and I believe you will find their content useful [. . .] Contarini claimed
to tell me everything, but naturally given his long familiarity with diplomatic
negotiations it has become second nature for him, and one can never be sure
Contarini is saying exactly what he thinks. Nevertheless, here is what he explicitly
declared:
1) that despite all the Corfus of the world, he cannot conceive of an Italian policy
that is not in accord with England;
2) that the apparent successes of France do not deceive him into believing that
there is any real possibility of their substituting their exclusively self-interested
policy for an economic systematization of the reparations problem;
3) that given the unreliability of English politics, it had never been possible for us
to take a decisive stance toward France, since we do not want to put ourselves in
the position of explicit friction with them unless we can be absolutely sure of
English support. Some advances were made with England in the spring, some
outbursts occurred when the King of England visited and in a few other
moments, but whenever we tried to arrive at a clear commitment, no conclusion
was reached.
4) Although it is a destructive policy, we have no choice but to allow these quarrels
go on, to be judged not as an efficient part of a European collaboration, but in
order to let these adversaries weaken themselves in the process. In this sense
the disruptive action of the French has favored us substantially in Germany,
inasmuch as the question of the Alto Adige has been forgotten even by the
Bavarians who are most closely in contact with the irredentist zone.
5) In sum it seemed to me that our course of action was to allow France to
compromise itself, given the strong unlikelihood of their success. On the
other hand we will collaborate in reconstruction when that becomes possible.
For my part I argued to Contarini that Italy needs German reconstruction for
our own economic interest. As I told him, this need is felt more strongly in the
South, which is largely agricultural and which had, in a Germany with a strong
buying power, one of its best clients. In the North, naturally, they are primarily
concerned with German industry, which in its most recent form no longer
provides any sort of protection for Italian industry but is rather a drag on
every productive capacity.
80 The United States and the Rise of Fascism in Italy

While I am completely in agreement with Contarini, I remain very concerned that

our current practice, in the context of the hard realities which face us, we might lack
the necessary decisiveness and willpower to confront the inevitable risks and might
miss the opportunity to affirm our power at this stage and, worse, in the future.179

The synthesis of Contarini’s political vision, as well as the exchange to

which it gave rise with the future minister of finance, contains an interest-
ing confirmation of the underlying perspective shaping the development
of Italian foreign policy in the Twenties. Mussolini’s government aimed to
consolidate the Fascist regime, and there is no reason to be surprised at
this. Every government of a country so dependent on foreign conditions
must above all consider the effect of its foreign policies on its own internal
stability. This was even more true for Mussolini’s government, which had
overturned the constitutional tradition that still dominated the interna-
tional context in which it moved. The goal of reinforcing the regime was
certainly undermined by the problem of consent, including from those
nationalists who were not necessarily part of the Fascist movement. The
international discrediting of the Italian governments before Fascism con-
stituted a further real problem, one which Dino Grandi illustrated when
he recalled the many days Carlo Schanzer had to spend in London as he
waited to be formally received as Foreign Minister by Lord Curzon.180 The
outcomes of episodes like that of Territet [when Mussolini first met with
Poincaré and Curzon; it was not a grand success for the image of Fascism –
trans.], and especially Corfü, were influenced by this context just as much
as they were by any aggressive Fascist agenda or personal immoderation of
Mussolini’s. At the same time, Mussolini showed himself to be perfectly
aware that the stability of his regime depended on how he positioned
his country in relation to the power struggles going on at the international
level. This was the problem addressed by Contarini and Jung in their
exchange, and in which ambassadors in the major capitals, such as
Caetani, were trying to gain some initiative. It was on this question that
Mussolini, the strongest Italian economic players, the bureaucracy, and the
nationalist circles that were well represented in each of them had to find
common ground. There was little room for doubt: Corfu and Territet, at
that stage, were merely episodes in a very limited context of possible acts
and policies; they could not serve as the basis for a grand foreign policy
platform, at least not in the contemporary international situation (the
global effects of the Great Depression would change some of these

179
AC-GC, A 20/1,Guido Jung to Gelasio Caetani, Rome, October 28, 1923.
180
Dino Grandi, Interview.
 5. The Shaping of Italian Foreign Policy 81

underlying conditions). Especially as long as Curzon directed the Foreign

Office, the British unreliability of which Contarini spoke was unlikely to
allow for any openly antagonistic stance toward France; yet the opposite
position was equally unthinkable. This was true because France’s foreign
policy of the time was so clearly a search for primacy among great powers.
It therefore created conflicts which any Italian government, even a non-
Fascist one, would not have been able to support. But – even more
seriously for Mussolini, who needed to back the winning horse – such an
ambition was foolishly unrealistic on France’s part. Leaving aside the
structural and political reasons that Mussolini could make such a predic-
tion in 1923, the fatal flaw in France’s ambition was just what Contarini
had noted when he said that their policy was “exclusively self-interested.”
The point was that France’s foreign policy was designed to serve the power
and especially the security of France, but took absolutely no account of
offering anything to the other states; a hegemon cannot become such
without offering some consistent benefits to its potential allies. In sum,
Italy had nothing to gain and perhaps much to lose in a Europe dominated
by French power. Following Contarini’s logic, there remained only Great
Britain, although with time it would become clear that the “unreliability”
of which Italians accused the British was in reality the traditional desire of
that nation to reinforce the balance of power on the continent. The Foreign
Office was worried by French aggression and greed and how they pre-
vented the reconstruction of Germany – which Great Britain thought
indispensable – but had absolutely no intention of taking any concrete
anti-French action or of encouraging such action on the part of others. It
was certainly desirable that Rome choose London over Paris, but the
Foreign Office would not be made to choose Rome over Paris, as
Contarini may have wished. The foreign affairs officials, with the help of
Jung, had however correctly ascertained the primary common ground
between Italy and Great Britain: the goal of European reconstruction to
be achieved by the moral and material recovery of Germany. Jung’s
observations on this score were right on the mark, in noting that the
recovery of the German economy would aid Italian agriculture – an
interest that the regime held dear, especially in that period – but also
Italian industry, which was guilty of being shortsighted it if imagined
that the elimination of German competition would compensate, in the
long run, for the loss of such a fundamentally important export market.
The United States, on the other hand, was completely absent from the
Eurocentric and essentially nineteenth-century imagination of Contarini
(or at least from Jung’s portrayal of it). Jung and Caetani were both well
82 The United States and the Rise of Fascism in Italy

aware that the most crucial driving force of a European reconstruction,

beginning with Germany, would be American capital. While Great Britain
focused mainly on maintaining political equilibrium in Europe, the United
States had the financial resources for a vast program of economic recon-
struction, founded on monetary stabilization, that could serve as the basis
for its own productivity expansion. Nonetheless, the program described
by Contarini was not only compatible with but beneficial to the creation
of an American primacy that anyone, like Jung, who was familiar with the
new American reality, would know was one of the undeniable bases of the
new global politics since the end of the First World War.

6. mussolini’s policy toward the united states

There is no lack of evidence that Benito Mussolini understood far better
than his prestigious chief official at the Foreign Office – its secretary
general, Senator Salvatore Contarini – just how important the United
States had become in world politics.
Indeed, there is no doubt that the favorable response in America to
Fascism’s seizure of power awoke an answering attentiveness in Mussolini
toward a country that appeared poised to become the single most powerful
nation in the world. Only two months after the March on Rome, on
January 12, 1923, Benito Mussolini telegraphed Gelasio Caetani with
the following talking points for a banquet given in his honor:
1) Internal order has been completely reestablished in Italy. 2) All the party militias
have been dissolved and the Fascist militia has been absorbed by the State military.
3) The government is not a dictatorship because it has not dissolved the Parliament,
which will confront beginning next February great issues of international impor-
tance, among which will be the conventions of Washington [on naval disarmament
and Eastern politics]. 4) Loyal respect for all treaties and a politics of European
equilibrium. 5) Energetic cuts and stringent savings in the bureaucracy. 6) Income
growth and greater labor productivity: three months since the total cessation of
strikes. 7) Hope that the United States will create greater access for our most
qualified emigrants. 8) Recognition of the debts which will be repaid at the earliest
possibility. 9) Invitation to all Americans to visit Italy and see for themselves that
order and tranquility are complete.181

In the most concise terms, Mussolini demonstrated a complete under-

standing of American reactions to Italian political events, of their concerns
regarding future Italian foreign policy, and of the arguments of political

181
DDI, VII, 1, 341.
 6. Mussolini’s Policy toward the United States 83

economy that would give the best impression to the American business
class. Furthermore, he deftly presented the two most important problems
that would affect the two countries’ relations in the immediate future with
his cautious reference to emigration and his expression of readiness to
repay the war debts, limited by current capability but clearly not meant to
obstruct the further development of cooperation with American capital.
Above all, he took care to emphasize the restoration of order in Italy.
The goals Mussolini had set himself were laid out even more explicitly
several months later in a message to Vittorio Emanuele III, in which he
urged the king to visit the United States:
I consider it my duty to remind Your Majesty that I consider this voyage of the
highest benefit to the Country. Given the economic and financial situation Italy in
which finds herself today there is no doubt that the return of migratory flow into the
United States and cooperation with American capital represent two elements of
vital importance for us. Beyond the economic advantages of an agreement with the
United States it would be of immense benefit to Italy, both directly and because of
the inarguable influence it would have on our relations with other States, who
would value us more highly, and among them none more than England.182

These few lines show the primary importance Mussolini attached to

relations with the United States. This trend of thought was not yet wide-
spread, not even among Italian diplomats who had not actually been
stationed there, and that can only be explained by the special ability of
the dictator to distinguish, at least in the short term, the real disposition
of power and his best approach to it. His reference to the benefits that
Italy would draw from good relations with the United States was prescient
in that it prefigured a Europe in which the preferences and inclinations of
the greatest extra-European power would determine opportunity and
hierarchy, even if he did tend to underestimate the difficulty in getting
the isolationist government of Washington to commit itself in such a
manner. He also saw clearly the special relationship that linked the two
Anglophone powers, which would make Italy’s relations with Washington
an indispensable ingredient for a rapprochement with London, and vice
versa. At the same time he again emphasized the two concrete areas of
dialogue with the American government: immigration and the need for
capital.
Quite soon the facts would show that there was little to be done to affect
immigration policy: the considerable efforts of Ambassador Caetani in this
matter faltered not as a consequence of any political choice of the Harding

182
DDI, VI, 2, 162.
84 The United States and the Rise of Fascism in Italy

administration, but because of the real strength of mass public opinion,

firm in this matter because it was a convenient outlet for the diffuse
isolationist sentiments of the post-Wilsonian period and a guarantee of
higher employment levels for native-born organized labor.183 It is worth
noting that Mussolini, usually prompt to woo the nationalistic sentiments
of his base with theatrical gestures that were either innocuous or of short
duration – or both – in this case was careful not to create or encourage any
demonstrations of resentment. Despite the material and moral damage
inflicted by American immigration policy and its explicit racism, the
Italian government accepted the necessity not to harm any other aspects
of its relationship with the United States in light of the immense conse-
quences it could have for the affirmation and consolidation of the regime.
In recompense the equally attentive Fascist policy toward Italians
already resident in the United States was far more fruitful.184 Gaetano
Salvemini was particularly sensitive in analyzing the condition and the
state of mind of the Italo-American immigrants who, with the only excep-
tion of those who had already committed to an opposition politics, were
naturally moved to sympathize with and often to enthusiastically support
the new Italian regime.185
They saw the Fascist government, and in particular the personality of
Mussolini, as an important redemptive factor given the subordinate posi-
tion in which they found themselves in their host country, with a poor
image that previous Italian government had done little to improve. It must
be emphasized that they felt this way due to the prestige that the Fascist
regime enjoyed among those very Americans who discriminated against
them and whom the more successful Italian immigrants tried to emulate. It
was natural to hope that this greater prestige might somehow reflect on
them. Since the overwhelming majority of Italo-Americans occupied lower
rungs of the American social ladder, this subordination manifested itself
in their judgments regarding their country of origin.186 This would become
even more clear when the events of the Second World War changed the

183
I. Bernstein, The Lean Years. A History of the American Worker. 1920–1923, Baltimore:
1966, pp. 86ff.
184
G.G. Migone, “Il regime fascista e le comunità italo-americane: la missione di Gelasio
Caetani (1922–1925),” pp. 25–41; U. S. Nelli, The Italians in Chicago. 1880–1930, New
York: 1970.
185
G.G. Migone, “A proposito de ‘L’Italia vista dall’America’ di Gaetano Salvemini,”
pp. 95–156; G. Salvemini, “L’attività fascista negli Stati Uniti,” pp. 21–35; Diggins,
pp. 111–143.
186
Migone, “Il regime fascista e le comunità italo-americane.”
 6. Mussolini’s Policy toward the United States 85

attitude of the American elite toward Fascism and Italo-Americans, and

the overwhelming majority of the latter, including many who had been
highly visible pro-Fascists, obediently changed their opinions accordingly.
In this case, the Fascist government was quick to gather the fruits of
the favorable atmosphere by spreading the argument in Italian-American
communities that the regime was identical with the state and that, there-
fore, patriotism for one’s faraway fatherland could only express itself as
support for the regime.187 This line of argument also allowed the Fascists
to paint antifascism as not only subversive, but treasonous; and antifascists
as enemies of the nation. Perhaps even more significant was the decision
not to support, and later to actively suppress, Blackshirt squads in the
United States.188 This helped create a favorable attitude toward the natu-
ralization of Italian immigrants who, as American citizens, would render
important services to the regime, especially during the war in Ethiopia, but
also during the negotiations to consolidate Italy’s war debts.

187
Ibid.
188
E. Santarelli, II, 2nd ed., Rome: 1973, pp. 93–100; Santarelli, “I fasci italiani all’estero.
Note ed appunti” in Studi urbinati, di storia, letteratura, filosofia, XLV, 1971, 1–2,
pp. 1307–1328; Diggins, 108–111; Migone, “Il regime fascista e le comunità italo-
americane” cit.; and especially L. Bertello, I fasci degli Stati Uniti d’America: propaganda
fascista e comunità italiane, unpublished thesis, University of Torino, 1972–1973.
 chapter 2

United States Economic Policy toward Italy

1. the question of war debt

The question of war debt became one of the principal obstacles to the
American expansion into Europe pursued by decisive sectors of the polit-
ical elite – particularly the financial sectors – even after Woodrow Wilson’s
defeat. Many bankers and government officials, like Mellon and Hughes,
would willingly have forgiven war debts in return for the cancellation of
Germany’s reparation payments. Reparations were seriously depressing
Germany’s economy, whose recovery was seen as necessary for a more
general European reconstruction. The financial and commercial opportu-
nities that would open through Europe’s economic growth were far more
important to the United States than the recovery of the loans Americans
had extended to the Allies for the war effort. Never was this more clear
than at the moment when the Dawes Plan1 and the Locarno Pact2 had
created the minimum conditions for a renewed commitment to European
capital.3
Yet government officials, and especially those who were in elected
office, had to reckon with a public whose isolationist sentiments were
still largely echoed by Congress and could still lose them votes in coming
elections. An anonymous American citizen wrote to the Italian ambassa-
dor during one of the key points of the war debt negotiations, telling him

1
W. Link, Die amerikanische Stabilisierungspolitik in Deutschland 1921–32, Düsseldorf:
1970.
2
J. Jacobson, Locarno Diplomacy: Germany and the West, 1925–1929, Princeton: 1972.
3
B. Glad, Charles Evans Hughes and the Illusions of Innocence: A Study in American
Diplomacy. Urbana, IL, and London: 1966.

86
 1. The Question of War Debt 87

that the “Latins” revealed their true colors when announcing to the
American government that they would pay their debts only when they
got good and ready. This action, he wrote, confirmed the image Americans
had of Italians in the United States. He had problems with every Italian he
ever offered credit to, because they had neither honor nor principles.
Italians only had a great talent for whining and begging, and did not
even “know” what honesty was. He contrasted Englishmen, who always
paid their bills, and said Congress did the right thing when it stopped
“mongoloids” of the Italian species from coming to his country.4
While few Americans, and certainly not most members of Congress,
would have expressed themselves in such vulgar terms, this letter exposed
the snarl of resentments, racist impulses, and isolationist beliefs that the
war debts negotiations elicited in the United States. They had been the
driving force behind the defeat of Wilsonian politics and the victory of
President Harding in the 1920 elections. The Republican Party convention
of that year had ended in a compromise that was a de facto victory for the
internationalist finance and manufacturing faction of the party, which was
evident from the makeup of the cabinet of Warren Harding, previously an
insignificant former journalist from Marion, Ohio. Nonetheless, the inter-
ests that had so solidly claimed the key posts of the new administration
knew very well that any too-flagrant violation of the political and ideo-
logical tastes of the masses that comprised their constituency would com-
promise their future ability to favor an expansionist policy. They had to
observe certain elementary rules of prudence in order not to reinflame the
isolationist opposition, whose class and regional roots might pit populist
farmers against the hated big city bankers of New York and Boston and
throw the precarious unity of their party into crisis.
Following these rules of prudence meant avoiding formal choices or
gestures that would be immediately perceptible to Congress and the public.
Not even the most fervent internationalist or Wilsonian in the Republican
administration was willing to support the formal joining of the League of
Nations. Any accord or treaty that might involve the United States in
further European conflicts was vehemently rejected by members of
Congress and the public opinion they represented.
In addition, the U.S. government had to walk softly, making use
wherever possible of experts, bankers, and businessmen in lieu of
politicians and diplomats in the international context. The actions of

4
ASMAE-AAW, bk. 176, fol. Debiti, Anonymous to Gelasio Caetani, Philadelphia,
Pennsylvania, June 6, 1925.
88 United States Economic Policy toward Italy

private citizens as representatives of civil society would not directly involve

the government and could irritate only the most intolerant of isolationists.
These were usually rural populists who saw Wall Street fat cats as
betrayers of a healthy America in the arms of a decadent Europe; in the
1920s, the more widespread public image of the businessman was that of a
people’s hero, whose good sense and respect for the bottom line offered a
sure guiding hand to the government. Thus, the Harding and Coolidge
administrations portrayed various conferences and international initia-
tives in which Americans participated as mere gatherings of experts, not
meetings of government representatives in their official capacity. The
commissions led by General Dawes and Owen D. Young that dealt with
reparations and German reconstruction were an example of this strategy.
On other occasions, such as the Lausanne Peace Conference, which began
meeting at the end of 1922 to settle the situation in the Middle East –
especially the problem of Turkey – the United States sent official represen-
tatives who limited themselves to affirming the principle of the Open Door
policy, reemphasizing the noninvolvement of the United States in any
political or territorial dispute and protecting the interests of a few private
American companies in the region.
In this context, the question of war debt was especially delicate. The
debts were owed by just those formerly allied European countries that
were most likely to attract isolationist ire. Although these were state debts,
during this period of high canonical capitalist ethos, they were seen as
equally binding as private loans. The famous comment of Calvin Coolidge,
when asked about the opportuneness of cancelling war debts, “They hired
the money, didn’t they?” reflects the simplistic but also harsh mindset on
budget questions that prevailed in Congress and outside the restricted
circles of finance. While the president was certainly involved in the plans
of the expansionists, he had to toe the line drawn by his electorate.
In a sense, the delicacy of the theme was decisive, because it was the
point of intersection between the internationalist and expansionist strategy
that reigned in the Harding and Coolidge administrations and the isola-
tionist opinion that dominated outside. A truly explicit confrontation of
ideas on debt between the executive and Congress, expansionists and
isolationists, would have potentially derailed the future success of those
banking houses that had government approval to plan the advance of
American capital into reconstructed European markets.
What was necessary was to pass some formal measures that corre-
sponded to the wishes of the most rigid defenders of the “sanctity” of
debt but at the same time committed Congress to negotiation. The
 1. The Question of War Debt 89

nightmare scenario was represented by the still-vivid memory of the failure

to ratify the Treaty of Versailles; no one wanted to repeat Wilson’s mistakes,
especially in the matter of forcing the Congress to have a stake in the
negotiations of the very accords they would have to approve. Congress
therefore promulgated a law that awarded the power to negotiate debt
consolidation not to the State Department or the Department of the
Treasury but to a special commission consisting of both the heads of these
departments as well as representatives from both houses of Congress.5
But this was not enough to satisfy those who wanted to collect on all
war debts. The executive branch had to accept an order that subordinated
the power of the State Department to extend credit, even from private
sources, to the requirement that loans could go only to governments that
had consolidated their war debt. This was a very unusual decision for a
country in which government controls on private economic activity had
traditionally been mild to nonexistent, and in which at the time laissez-
faire ideology was a cornerstone principal of government. Evidently this
measure had been necessary as a way to exert pressure on European
countries to take their war debt seriously. Without it, Hughes, Mellon,
and their banking cohort risked being caught between the unwillingness of
each individual European state to repay their debts and the ever more
intolerant American public opinion that rejected the idea of negotiating
those obligations. The financiers were more than willing to clear the
balance sheet in order to make economic penetration of European markets
possible, even without the support of public opinion, but for that exact
reason they needed to avoid any direct confrontation. On the debt issue, as
in other cases, they preferred a strategy of conceding in rhetoric and then
proceeding in practice; the Europeans would have to resign themselves to
negotiating with Congress in order to gain access to American capital,
while in return the captains of finance would make sure to guarantee
favorable conditions in the accords thus produced.
Given this situation, it was of utmost importance that each European
government cooperate in this carefully choreographed dance. Mussolini
distinguished himself from the outset in this role. His first orders to his
embassy in Washington, as well as the way he addressed the American
press and the American business community, demonstrated his compre-
hension of the crucial weight of the debt issue in facilitating any future
relationship with American finance.

5
J. M. Berutti, Italo-American Diplomatic Relations, 1922–28, unpublished thesis, Stanford
University, 1960, p. 145.
90 United States Economic Policy toward Italy

Mussolini’s economic program, as it was presented by his first finance

minister, Alberto de’ Stefani, was completely in harmony with the wishes
of private industry in that it followed a laissez faire philosophy of avoiding
any form of state intervention. The constant references to the need for a
stable currency and a balanced budget were sure to find a most favorable
reception among foreign bankers, in particular the Americans. Both
Mussolini and his ambassador in Washington, efficient spokesman and
propagandist Gelasio Caetani, courted them assiduously. The Italians
were acutely conscious that the availability of capital was crucial to the
goal of stabilizing the Italian economy and that the only realistic source of
that capital would be the United States. They were equally aware that
access to that capital would be dependent on a satisfactory resolution of
the war debt issue; yet this was an onerous problem given the scarce
resources in Italian state coffers.
Mussolini therefore recognized from the moment he took power both
the existence and the obligation of war debt, both as a legal and a moral
issue. In other words, he was convinced that the debt must be settled and
that it would be counterproductive to dispute its validity if he wanted to
continue pursuing Fascism’s ambitious financial goals.

2. the role of the house of morgan

In studying the abundant and detailed documentation available on the
issue of war debt, the lasting impression is that the biggest merit of
Mussolini and his staff was to surround themselves with the best counsel
and heed their advice. Among all the possible interlocutors in the banking
world, the Fascist government privileged J.P. Morgan & Co. becoming one
of their principal clients. As agent for its affairs, Italy had hired Kidder,
Peabody & Co.; and Charles Miller, of the First National Bank of New
York, also had excellent contacts in the Italian business world. Still, the
House of Morgan was correctly judged to be best suited for guiding a
foreign government such as that of Italy through the long and complex
path leading to economic success, starting with the key first step of
reaching an accord on war debt. This path was essentially a political
one, even though the issues at stake were financial, as always happens
when the clients are nation-states and not private companies or citizens.
In this case, the complexity of American economic and foreign policy,
expansionist yet rigorously careful not to reawaken latent isolationist
opposition, as well as the particularities of the Italian regime meant
that every discussion, every single move was freighted with unique
 2. The Role of the House of Morgan 91

difficulties that were certainly not going to be resolved like an ordinary

commercial contract. Who better than the partners of the House of
Morgan to carry out a project that combined the traditional order of
financial transaction – credit and loans – and the most delicate political
mediation? The Fascist government, and with it Italy’s major industries,
had to be introduced to the world of American finance in such a way that
a successful debut would ensure a future of access to credit, the return of
the lira to the gold standard, and the inclusion of Italy in the interna-
tional finance community (and of the Bank of Italy in the cooperation
among central banks). The expected reinforcement of the Fascist regime
on both internal and international levels was an additional reminder of
the political connotations of this strategy. Without summarizing at
length the history of the Morgan Bank and how it became the most
prestigious and influential investment bank – a true nodal point linking
fundamental sectors of manufacturing, industry, commerce, and
finance – let it be remembered that in those years, since the financing of
the Dawes Plan, the bank held the role of guiding force in the American
economy. Morgan Bank negotiated nearly all the credit offered to
European governments, municipalities, and major industries in the
name of the banking consortia that issued bonds on the American
financial markets.6 It must be added that the forced abdication of
American officials from a more direct management of financial connec-
tions resulted in the default responsibility of bankers, and especially
those of Morgan Bank, for carrying out initiatives and accords with
European states when they came to terms with the passivity of the
American government. Morgan associates became men of state, as the
business they conducted, the loans they secured, and the interest they
collected served not only their own profits but the larger policies of their
country in relation to foreign representatives of the highest levels. This
direct and individual mode of statecraft by businessmen was anomalous
but made perfect sense in the context of their own prestige and financial
power, as well as the consistency and collegiality with which they carried
out policy initiatives that had been formulated, after all, in their own
offices.7 For example – and simply to mention those associates who had

6
T. W. Lamont, Across World Frontiers, New York: 1951; L. Corey, The House of Morgan,
A Social Biography of the Masters of Money, New York: 1930; E. P. Hoyt, The House of
Morgan, New York: 1966; V. P. Carosso, Investment Banking in America. A History,
Cambridge, MA: 1970.
7
H. Nicolson, Dwight Morrow, New York: 1935, p. 146. “As has already been stated, the
system followed by J. P. Morgan & Co. was a cooperative system. No specific branch
of business was, except in special circumstances, assigned to any individual partner;
92 United States Economic Policy toward Italy

the most direct involvement in the Italian case – Thomas W. Lamont,

who would succeed J. P. Morgan, Jr., as senior partner, was part of the
American delegation to the Versailles conference; Russell Leffingwell
was the undersecretary of the treasury during the Woodrow Wilson
administration; Dwight Morrow later became the ambassador to
Mexico and a member of the Senate.
It is difficult to precisely date the beginning of the privileged relationship
between the Fascist government and the House of Morgan. The first direct
interview that Thomas W. Lamont had with Mussolini on May 16, 1923,
was certainly quite important, since from that moment on a continuous
exchange of information and suggestions flowed back and forth between the
main investment bank of New York and the Fascist regime. There are no
extant minutes of the meeting, but Lamont had made an eight-point outline
in preparation. He began by pointing out how much the Morgan bankers
had always supported Italy and the Italy-American Society and then went on
to warn that the world was watching Italy carefully and that the Italians
would need to protect their good relations with the United States as well as
conduct a policy to encourage private capital to flow toward Italy. Lamont
mixed promises of help and assurances that his colleagues could guarantee
the same debt deal that England, France, and Belgium had received, with
reminders of the need to catch up to other countries that had already moved
forward financially and offers of expert advice. His last point was to ask for
Mussolini’s opinion on the question of the Ruhr.8
The striking thing here is how Lamont offered himself not primarily for
banking services, but for political ones. He offered Mussolini advice before
he offered capital. He was careful to invite the Italian head of state to show
no hurry in the search for loans, both in order to prevent the Italian
government from acting solely from commercial motives that might
favor competition from other banks for Italy’s business and, above all, to
emphasize the uniqueness of the services he was capable of offering:
experience and influence as an insider to U.S. politics. Lamont actually
planned to bring up several political issues that were by no means casual. It
was important to discuss war debt because the willingness of the Italian
government to honor its obligations was a basic condition for obtaining
full credit in the United States, and the question of the Ruhr was a vital test

the responsibility was pooled. The partners would meet Mr. Morgan either in his private
office, or less formally at luncheon, and would discuss together the problems of current
business. It would thus be a mistake to attribute to the wisdom or initiative of any single
partner policies which were in fact the corporate contribution of them all.”
8
HUGSBA-TWL, bk. 190, fol. 13, T. W. Lamont, Mussolini – Rome, May 16, 1923.
 2. The Role of the House of Morgan 93

of the compatibility of Italian foreign policy with the future designs of

American bankers, violently hostile to the policy Poincaré was pursuing at
the time.
It is difficult to define encounters between men of such stature as those
simply as bankers extending their expertise to an ordinary client. The
power Morgan associates held in American society frequently made
them seem to be the true interlocutors of Italian financial policy makers –
capable at every turn of securing reasonable terms for their Italian clients
from American sources, able to influence the press and other means
affecting public opinion toward favorable interpretations of the regime,
and prepared to advise the regime of the best way to avoid raising the
prejudices of Congress or to navigate the particularities of American
preferences and propaganda. Through their representative in Rome,
Giovanni Fummi, who was in continual contact first with de’ Stefani and
later with Volpi and with Bonaldo Stringher (and, when necessary, with
Mussolini himself), or directly by Thomas Lamont’s annual visits to Italy,
Morgan Bank always signaled which attitudes or rhetoric of foreign
relations risked causing negative effects among American decision makers
and in what ways each specific undertaking of the regime could be best
valued.
Lamont frequently made sure to note that aggressive speech regarding
Germany, even if it was packaged for domestic consumption, had bad
effects in the United States, where it was a fundamental condition of
foreign cooperation that the power in question demonstrates the correct
attitude toward Germany.9 On one occasion, he signaled that a campaign
targeted at the Italo-American community in support of the lira – such as
the one Mussolini had been about to launch around the time of the Pesaro
speech [this was an August 1926 speech in which Mussolini announced a
“battle for the lira” that would aim at revaluing the lira at the “quota 90,”
or 90 lira to the English pound sterling – trans.] – would be interpreted in
more influential circles as a sign of the weakness of Italian currency and, in

9
J. P. Diggins, Mussolini and Fascism: The View from America, Princeton: 1972, pp. 49–50,
147–148, 151–154. Thomas W. Lamont was an indefatigable organizer of pro-Fascist
propaganda, through his own public statements (of which he made prudent use, so that
they would not lose their effect) as well as through letters and interviews with journalists
and editors and his activities as president of the Italy-American Society. In 1927 he also took
on the task of creating a press office for the Italian government. Naturally this activity also
allowed him the opportunity of forming a critical view of some aspects and choices of Italian
policies that, in his view, damaged the image of Fascist Italy in the United States and
therefore the credit it secured on American markets.
94 United States Economic Policy toward Italy

the worst-case scenario, as undue government intervention.10 Finally, he

never got tired of reminding the Italians that propaganda, in order to be
well received in the United States, had to be “factual”; that is, it had to be
presented in the form of apparently neutral information and supported by
hard data. The House of Morgan went so far as to manage the most
important cultural activities promoted by the Italian government in the
United States. Lamont himself was president of the Italy-American Society
for some time, and the House of Morgan continued to be its principal
sponsor. Later, J.P. Morgan, Jr., would have an important role, together
with Nicholas Murray Butler, the president of Columbia University and an
enthusiastic supporter of the Fascist regime, in the promotion of the Casa
Italiana, an organization for research and Italian cultural activity that had
its home at the university. Perhaps the most striking commitment of the
Morgan Bank was the creation of an Italian governmental press office,
located in New York, especially dedicated to economic propaganda.11
The services provided by the House of Morgan to the Italian govern-
ment, in sum, were not those usually offered even by the largest banks to
important clients. The way in which the final phase of the war debt
negotiations was handled is the final proof of this peculiarity.

3. italian war debt: background

The forms and timing of the negotiations of Italy’s war debts to the United
States reflect the discrepancy between the demands of American domestic
politics and the concrete developments of the economic and political
organization of Europe, to which were also added the natural financial
impediments on the Italian side.
The Wilson administration, following the wishes of several allies and in
particular Italy, had made the successful effort to avoid allowing the
question of debt and its eventual reduction to be placed on the agenda at
the Versailles peace conference.12 But the argument gained renewed atten-
tion during the presidential election campaign of 1920, in which the
Republican candidate, future president Warren G. Harding, tried to satisfy
the xenophobic wave sweeping the nation by promising to collect on all
outstanding credit. Following up on that campaign promise, in June 1921,

10
ASMAE-AAW, bk. 272, fol. A-32, sf. Finanza italiana, anni 1925–1926, tel. from
Giacomo de Martino to Benito Mussolini, September 25, 1926, p. 11.
11
Diggins, p. 50.
12
Berutti, p. 144.
 3. Italian War Debt: Background 95

Secretary of the Treasury Andrew Mellon asked Congress for the power to
begin negotiations with debtors; in response, he was given the chairman-
ship of a mixed commission with members from both houses as well as the
participation of the secretary of state. Thus, on April 18, 1922, the secre-
tary of state, Charles Evans Hughes, announced the respective debt totals
to each debtor nation and invited these countries to send delegations to
Washington to settle their terms in discussion with the World War Foreign
Debt Commission. The weakness of these initiatives, which gave them only
a preliminary character since their only concrete power was to create a
structure for negotiation, stemmed from the problem that the European
powers were not yet ready to open such negotiations. Until the Genoa
Conference of 1922, the Europeans still tended to believe that they could
do without American capital, or at least manage not to depend on it in their
pursuit of economic reconstruction and stabilization. Given this belief, few
were willing to confront the political commitments that Americans would
demand in return for the financial resources. In fact, the accords that did
follow, for Italy as in other cases, were the direct result of their undeniable
need to gain access to American capital and did not occur until after the
turning point of the Dawes Plan and the Locarno Pact.
The Italian governments preceding the Fascist seizure of power were
hesitant even to formally declare their willingness to recognize their debt,
using arguments already outlined above. Typical of this reluctance was the
message sent by Giovanni Giolitti to his ambassador in Washington on
March 22, 1920:
Public opinion is very opposed to any debt settlement even in favorable terms
because there is the conviction that sums spent for common cause do not count
as actual debts. They do not understand why Italy ought to be the first to make
accords that imply recognition of actual debt. Best strategy is to leave the question
untreated for now.13

On July 26, 1922, the Facta government responded to the Hughes

announcement by declaring its intention to send a delegation to
Washington. In reality, there was internal opposition between the minister
of foreign affairs, Schanzer, who was willing to make the trip, and the
minister of the treasury, Paratore, who argued that the conditions for
beginning negotiation were completely absent.14 But, beyond the budgetary

13
ASMAE-AAW, bk. 14C, fol. Debiti di Guerra, A-21, tel. 6136, Giolitti to Rolandi Ricci,
March 22, 1920.
14
Berutti, p. 147; ASMAE-AAW, bk. 176, fol. Debiti di Guerra, Notes for his Excellency the
Minister (unsigned), February 5, 1925.
96 United States Economic Policy toward Italy

objections of the minister of the treasury, there were solid reasons for which
neither Giolitti nor much less Facta, nor any other Liberale government,
would have been able to officially recognize the war debt, even had they
understood the necessity of doing so in order to obtain the capital they
certainly did know was needed. The popular infatuation with Wilson and
the United States had not lasted long in the press of the disappointment over
the vittoria mutilata [the “mutilated victory,” the Italian expression for the
resentment Italian nationalists felt at the peace terms after First World War –
trans.], for which Wilson was held primarily responsible. The Liberale-era
governments were beholden to the nationalist animosity of the bourgeoisie,
despite this being one of the crucial themes by which Fascism asserted itself.
Only Giolitti had had any success extricating himself from its demands.
Although he confronted the problem of Fiume and signed the Treaty of
Rapallo with Yugoslavia, he could not also at the same time anger the
nationalists and a large part of Italy’s economic elite with the question of
war debt. It is one of the most frequent political paradoxes that only the
person who ultimately personifies a political position has sufficient power to
make a decision contrary to that stance. According to this maxim, it was
only natural that it would take Benito Mussolini to be the first prime minister
to declare his intention to settle the debt and, what was more, to accept each
condition the American government would present in the matter. Dino
Grandi argued that this behavior was due to Mussolini’s weakness for
conformity and respectability, especially in his early days in power.15
Although this is a psychologically plausible observation, the truth is that
this conformist appearance was a political choice, of which Grandi himself
was one of the best examples; and it was at its most visible in Mussolini’s
own behavior only in the early years of the regime, when he had a very
strong need for legitimation, not only in a personal sense, but in a political
one. In other words, having seized power in barely legal fashion, Fascism
had to show that it was capable of running the state in such a way as to
reassure conservative opinion both domestically and abroad. What better
way to pay homage to the sanctity of private property than to commit
oneself to honoring a controversial debt, especially when the creditor
could play a decisive role in the economic destiny of the nation? Nor can
we forget that, along with the will to respect the financial commitments of
the government, Mussolini had advanced, from his very first statements,
requests for American capital and for increased opportunities for
emigration.

15
Dino Grandi, interview with author, Taormina: January 3, 1970.
 3. Italian War Debt: Background 97

This is not to say that the prevarications were over, on the contrary.
What would not be repeated, not even in the internal communiqués of the
Fascist government, were the curt tones used by Giolitti to refuse even the
consideration of the problem. It was not until the autumn of 1924, when
the presidential elections had confirmed Calvin Coolidge’s victory (he had
already served, having as vice president substituted for Harding after his
death in office) and the Dawes Plan had been approved the previous spring,
that the Americans’ invitation appear obligatory. The secretary of state
could not hold off Congress any longer, as those representatives became
more concerned about European issues in the aftermath of the occupation
of the Ruhr. Hughes himself realized that it was not realistic to expect the
Italian government to be ready to open negotiations until after those with
Great Britain were complete and those with France had at least begun. The
secretary of state, while he rejected on principle every Italian excuse for
postponing negotiations, called for the Italian government to at least go on
record officially with the reasons why it would not begin negotiations and
to reaffirm publicly that its own solvency was not in danger.16 His request
was fulfilled in the following month, May 1923, in a speech in Milan given
by Minister of Finance Alberto de’ Stefani and by Ambassador Caetani in
New York.
In reality, the American government too was rather hesitant regarding
the best way to proceed. Adding to the lack of zeal on the part of Hughes
were the discreet pressures exerted by Secretary of Commerce Herbert
Hoover, who, in a meeting with Guido Jung, financial attaché of the
Italian embassy, laid out what would be his position even in the final
phase of negotiation: Italy had an interest in resolving the debt issue as
quickly as possible to clear away the obstacle it presented to the reestab-
lishment of normal economic relations between the two countries, by
paying the capital on the loan, while the interest could be cancelled or at
least deferred.17 Beneath the mask of the friendly opposing counsel,
Hoover hid the more rigid position present in the Coolidge administration
(excepting the president himself, who had to consider the electoral effects
of every side of the issue) against the European states. Hoover was no
isolationist: a serious connoisseur of the American production system, he
too looked forward to an American program of expansion, but he was

16
AC-GC, bk. A-2bis, tel. 107, Gelasio Caetani to Benito Mussolini, Washington, D.C.,
March 20, 1923.
17
ASMAE-AAP, 1919–1930, bk. 1597 Stati Uniti (7358–7360), tel. 133, Gelasio Caetani to
Benito Mussolini, Washington, D.C., April 10, 1923; AC-GC, bk. A 4, tel. 158, Gelasio
Caetani to Benito Mussolini, Washington, D.C., April 20, 1923.
98 United States Economic Policy toward Italy

more inclined than some of his banker and governmental peers to use any
instrument at hand for defending the interests of individually powerful
American business leaders.18
Mellon’s absence from this phase of the discussions was notable. He
was, after all, the president of the commission charged by Congress with
conducting the negotiations for the United States. His position against such
an accord, which he thought intemperate, is more comprehensible in light
of the advice arriving at the Italian embassy from those elements of the
financial sector most interested in relations with the Fascist government. In
December 1923, the banker Otto Kahn, senior partner of Kuhn, Loeb &
Co., had expressed his opinion that the U.S. government had no desire to
pressure debtor states and that it was probable as time went on that Italy
would be able to obtain more favorable conditions, although the
Americans would only want to offer those conditions when they could
be sure that this would guarantee the final resolution of the European
problem. That is, rather than encourage pacification in Europe, they
wanted to ensure its stability.19
This was precisely the crucial point: as long as the conditions were not
sufficiently mature for the stabilization of Europe. Accords for the consol-
idation of Italian debts and those of France remained only ends in them-
selves. They could not alone serve as the measures that would successfully
open the doors of the American financial market. The market was certainly
favorable but needed basic clarification regarding the German question
(especially in the case of France and its attitude toward reparations) in
order to begin the operation of expanding its capital throughout the
Continent. Between the lines of Kahn’s message, it is easy to see how
Hoover’s position – more attentive to commercial than financial condi-
tions – might be different. But his was a minority position. More sympto-
matic was that General Dawes, involved in the negotiations to reorganize
Germany, was very careful to have Secretary Hughes let Alberto Pirelli, the
Italian expert, know that neither France nor Italy should worry at all about
the debt question, on which there was no intention to pressure them.20 The
Morgan Bank associates confirmed this reading of the situation. As
Caetani telegraphed to Mussolini on January 6, 1925:

18
C. Parrini, Heir to Empire: United States Economic Diplomacy, 1916–1923, Pittsburgh:
1969, pp. 189–190; Wilson, American Business, pp. 101–122.
19
AC-GC, bk. A 20 fol. 1. Gelasio Caetani to Guido Jung, Washington, D.C., December 6,
1923.
20
AC-GC, bk. A 20 fol. 2, Alberto Pirelli to Gelasio Caetani, Paris, January 24, 1924.
 3. Italian War Debt: Background 99

Yesterday in speaking with Lamont and Morgan they said that Italy is in a rather
favorable position in terms of the debt question. Not only has no one criticized Italy
for not opening negotiations, but in their opinion it was opportune to wait until no
further arguments were outstanding with France before proceeding.21

Lamont, who followed the debt situation carefully for his Italian client,
had also previously told Caetani that, in his opinion, there was no real
desire in the Coolidge administration to get down to brass tacks.22 In
reality, it was the comparison to France that would become the ongoing
point of reference for Italy, not only regarding the question of war debt,
but in general for relations with the United States. The reasons are clear.
From the American point of view, France had become a negative example
in the course of the postwar era. Starting with Clemenceau’s stubborn
nationalist and anti-German attitude at the Versailles peace conference
and continuing by logical extension in Poincaré’s harsh policies on repar-
ations (culminating in the occupation of the Ruhr), France ended up as an
obstacle and an irritant. Whether from the point of view of the expansion-
ists of the American elite or from that of pacifist and anti-interventionist
public opinion, France appeared reckless for insisting on consolidating the
results of the world war through the use of force in the name of security.
The change caused by Aristide Briand’s influence on French foreign policy,
which the French economic interests most open to Wall Street cooperation
had lined up behind, was never enough to cancel out the negative image
that American elites and public opinion had formed of France from the
Third Republic’s characteristically precarious parliamentary majorities
and endemic government crises. The war debt issue was no exception,
whether due to the scarce political will of Poincaré (accompanied by a few
imprudent statements) or to the minimal American inclination to make
concessions for a power that stood as an obstacle to their desired European
pacification – the condition that would finally allow American capital to
penetrate the Weimar Republic.
This situation offered a magnificent opportunity for the Fascist govern-
ment in Italy. Italian nationalism needed a scapegoat as well (since neither
Great Britain nor the United States could be cast in the role, for evident
reasons that were not only economic), and France fit the bill perfectly.
France was a perfect target, not only for the traditional Mediterranean

21
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2. Debiti dell’Italia verso l’America, A 61, tel.
21, Gelasio Caetani to Benito Mussolini, Washington, D.C., January 6, 1925.
22
HUGSBA-TWL, Thomas W. Lamont to Gelasio Caetani, New York, December 5, 1924;
ASMAE-AAW, Gelasio Caetani to Benito Mussolini, Washington, D.C., December 6, 1924.
100 United States Economic Policy toward Italy

controversies – accentuated by the ideological zeal (which was however

only rhetorical) with which the Fascists waved the banners of Tunisia,
Nice, and Corsica – but also for the role French democracy played in
hosting exiled anti-Fascists.
On the war debt issue, as for that matter on every other occasion,
Mussolini and his collaborators were eager to exceed France, taking its
place in the esteem and consideration of the Anglo-American powers. As
Dino Grandi testified, in every phase of the negotiations, the errors and
inappropriate behavior of the French minister of finance, Caillaux, were
carefully cataloged and scrupulously avoided by his Italian counterparts.23
Perhaps also for this reason, in the course of 1924, not only did Mussolini
avoid any disagreements with his creditors in the most absolute fashion,
but he also tried to respond openly to even the most gentle requests
addressed to Italy by the Americans. There were the previously mentioned
public statements of Mussolini, de’ Stefani, and Caetani, and Mussolini
was concerned not to allow American inquiries for clarification to go
unheeded. The way in which “il Duce” responded to Hoover’s informal
overtures, to which Caetani had shown sensitivity, was revealing: while
inviting the ambassador to wait “to be addressed at least in any official
capacity,” he authorized Caetani in case of necessity to proceed with the
negotiations, giving up the need to wait for the results of the French case.24
Naturally Mussolini was happy to drop the subject when there was no
decisive initiative forthcoming on the part of the secretary of state after
these informal inquiries. Whereas the ambassador in Washington felt the
more immediate pressure of the issue, which would have to be dealt with
sooner or later,25 both Minister of Finance de’ Stefani26 and Alberto
Pirelli27 insisted that more time was necessary, above all to observe the
results of the French negotiations, even if they were convinced (and here

23
Grandi, interview; ACS-GVM, bk. 11, Trattative con Washington, fol. F, Appunti del dr.
Alberto Pirelli intorno ai negoziati di Washington per il consolidamento del debito di
Guerra dell’Italia verso gli Stati Uniti (Notes of Dr. Alberto Pirelli on the Washington
negotiations for consolidation of Italian war debt to the United States). Dictated on board
the Mauritania during the return voyage, November 25–30, 1925. The memoir is also in
AALP.
24
AC-GC bk. A4, Benito Mussolini to Gelasio Caetani, Rome, October 31, 1923.
25
AC-GC bk. A 20 fol. 2, Gelasio Caetani concluded his personal letter to de’ Stefani
agreeing that in the “current climate of hysteria and electoral demagoguery” it was
inopportune to open negotiations, noting nonetheless that “it would be necessary to arrive
at some form of agreement in order not to remain in financial uncertainty and to clear away
the reciprocal mistrust.” Washington, D.C., April 25, 1924.
26
AC-GC, bk. A 20 fol. 2, Alberto de’ Stefani to Gelasio Caetani, Rome, April 7, 1924.
27
AC-GC, bk. A 20 fol. 2, Alberto Pirelli to Gelasio Caetani, Paris, February 21, 1924.
 3. Italian War Debt: Background 101

they agreed with the Washington ambassador) that the consolidation of

the war debt with the United States was an indispensable step on the road
to restabilizing the country’s credit.
Once the electoral period was over, the preparation of de Martino’s
mission, which was to take over from Caetani as ambassador in
Washington, D.C.,28 and above all some signs of impatience from
Andrew Mellon, secretary of the treasury, caused a transformation into
what became the first actual phase of official negotiations. It was signifi-
cant that Andrew Mellon, breaking his silence, discreetly raised the ques-
tion of Italian inertia on the topic of war debt. Mellon, cozy with the
banking community, represented the social sector most favorable toward
the Italian government, but also most influential in the Coolidge admin-
istration. With the presidential election behind them and, especially, after
the approval of the Dawes Plan, he felt that the situation had sufficiently
matured. The way this news emerged – solicited by a false news item by a
French press agency – produced a considerable effect in the Italian govern-
ment.29 On May 2, 1924, Mellon wrote to the secretary of state that he
hoped the Italian government would now advance definitive proposals to
repay its debt to the United States and would not hold back a decision until
the French accords had been made.30 Hughes had spoken to Caetani in a
similar vein during the ambassador’s farewell visit.31
After several further prevarications, the new secretary of state, Frank
Kellogg, who had replaced Hughes in the incoming Coolidge administra-
tion, indicated to Ambassador de Martino that he had no objection to
beginning a concrete negotiation with Secretary of the Treasury Mellon,
giving him to understand that any further postponements would be seen
with disfavor by the Americans. In truth, Kellogg, who had come from the
Senate, was perhaps more sensitive than his predecessor to the sentiments

28
NA-DS, 800.51W89 Italy/18, Henry P Fletcher to Charles Evans Hughes, Washington,
D.C., February 16, 1925.
29
NA-DS, 800.51W89 Italy/19, Henry P. Fletcher to Charles Evans Hughes, Rome, January
28, 1925; NA-DS, 800.51W89 Italy/14, Leland Harrison to Andrew Mellon, Washington,
D.C., January 16, 1925; NA-DS, 800.51W89 Italy/15 tel. 15, Henry P. Fletcher to Charles
Evans Hughes, Rome, January 23, 1925; NA-DS, 800.51W89 Italy/16, Andrew Mellon to
Charles Evans Hughes, Washington, D.C., January 24, 1925; NA-DS, 800.51W89 Italy/
15, tel. 12, Charles Evans Hughes to Henry P. Fletcher, Washington, D.C., January 27,
1925.
30
NA-DS, 800.51W89 Italy/27, Andrew Mellon to Frank Kellogg, Washington, D.C., May
2, 1925.
31
LC-CEH, bk. 175, Memorandum of interview with Italian ambassador (Don Gelasio
Caetani), Washington, D.C., Tuesday February 3, 1925.
102 United States Economic Policy toward Italy

of Congress. The administration wished to appear already hard at work on

negotiations with each of the major debtor nations.
Throughout the month of May, de Martino had three meetings with
Mellon, with the participation of Undersecretary of the Treasury Garrard
Winston (who did not miss the chance to show his sympathy for the Italian
government).32 De Martino, for his part, was in continual telegraphic
contact with Rome and received frequent instructions from Mussolini.33
For the first time, the two governments began to craft an accord, although
the conversations revolved around Italian proposals, while Mellon and
Winston limited themselves to taking notes or raising specific objections. In
the course of these conversations, but especially in the exchange of mes-
sages between Mussolini (who followed every development regarding the
debt in a nearly obsessive manner) and de Martino, the main points for the
following phase of debate were very soon set out.
The single and most important concession made by the Americans was
to explicitly accept the principle of capacity to pay. In other words, it was
already taken for granted that the debt would not only be substantially
reduced but that the debtor nation would have substantial discretion in
repayment. It was actually Mellon himself who asked de Martino to
prepare a study documenting the limits of the Italian government’s
capacity for payments. Only if an agreement included supervisory mech-
anisms on the part of the creditor, however, were inspections or super-
vision allowed – this was the case for Germany’s reparations, for instance –
while the Italians decided against it. Following Mussolini’s instructions, de
Martino excluded this possibility, though his American interlocutors were
surprised to hear that the Italians had contemplated it at all as an accept-
able possibility.
Another point on which the Americans indicated – tacitly, but right
from the outset – that they were willing to compromise was the forgiveness
of interest. Since they had previously indicated that any reduction in the
capital of the loan amount was inopportune (for obvious political and

32
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti d’Italia verso l’America, A, 61–62,
tel. 112, Giacomo de Martino to Benito Mussolini, Washington, D.C., May 13, 1925;
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti d’Italia verso l’America, tel. 742,
Giacomo de Martino to Benito Mussolini, Washington, D.C., May 14, 1925; ASMAE-AG,
bk. 159, Classe 61, titolo 3, fol. 2, Debiti d’Italia verso l’America, A, 61–62, tel. 833,
Giacomo de Martino to Benito Mussolini, Washington, D.C., May 27, 1925; tel. 842, 28
May 1925; tel. 850, May 29, 1925.
33
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti d’Italia verso l’America, A 61–62,
tel. 428, Benito Mussolini to Giacomo de Martino, Rome, May 23, 1925; tel. 515, June 12,
1925; tel. 527, June 13, 1925.
 3. Italian War Debt: Background 103

propagandistic reasons), only a drastic reduction of accumulated and

future interest could make the principle of capacity to pay in any way
meaningful. As a preliminary proposal, the Italian government requested
the total cancellation of interest. In response, Undersecretary Winston
merely observed that this would amount to a 90 percent reduction of the
debt in terms of the projected repayment schedule. In other words, the
American government entered into bargaining on the question of interest,
reserving the right to finalize the numbers at the negotiating table, in
relation to the Italian government’s capacity to pay, but appeared to accept
even major reductions as a possibility.
Probably the most onerous requests on the Italians’ part had to do with
the schedule of payments: a moratorium of ten years followed by a pay-
ment schedule spread out over the next ninety years, with gradually
increasing annual payments. Although Mellon had left open some room
for discussion on this point in their initial meetings, the American govern-
ment – here spoken for primarily by Secretary of State Kellogg – very
quickly showed a rigid opposition to any moratorium.34 The reasons
were obvious. The Republican administration needed above all other
things to demonstrate to public opinion that it was demanding results
and not promises from the European states. These results could of course
be quite modest, but they must be immediate and concrete. That is why the
Americans would not negotiate on the immediate initiation of payments,
even minimal ones. Even the idea of an installment plan, like the sixty-two
years agreed upon with the English, now appeared excessively dilatory.
The only arguments that met total and inflexible rejection from the
Americans, even in the preliminary phases, had to do with the relationship
between reparations and war debt. The problem was this: the Italian
government, according to previous agreements, had certain expectations
of Germany’s remaining war reparations even after reduction had pre-
vailed as the chosen approach after the failure of the Ruhr occupation. The
Italian government intended to subordinate its own payments toward the
debts it owed Great Britain and the United States to the payments it was
entitled to receive as defined by the Dawes Plan. The American opposition
to any linkage of reparations payments and war debt payments was based
on both political and financial considerations: political in that the United

34
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti dell’Italia verso l’America, tel. 928,
Giacomo de Martino to Benito Mussolini, Washington, D.C., June 11, 1925, in which de
Martino wrote: “. . . I could easily see that the Secretary of State is much more rigid than the
Secretary of the Treasury.”
104 United States Economic Policy toward Italy

States, ever since the Versailles conference, had renounced any reparations
from Germany and had criticized its allies for being too demanding in this
regard; financial in that linking payments to the unpredictable compliance
of a third party did not represent a sound investment. The American
political factions most hostile to cooperation with Europeans had
exploited this tendency to link the two issues in sustaining their isolationist
position and had harshly attacked all financial commitments underwritten
by European governments, so that even those people and those factions
who considered the war debts an obstacle to be cleared from the path of
planned expansion had little choice but to go along with the dogma of
separating reparations and debts. These latter participants would admit in
private that such a connection existed in terms of European governments’
ability to make payments, especially in the case of countries that, like Italy,
had difficulty balancing their budgets at the time. Mussolini, for his part,
sensitive as always to the necessity of managing public opinion, quickly
grasped the good sense of helping the Washington government’s spokes-
men avoid making reparations payments a condition of Italian debt
repayment. Nonetheless, he instructed his representatives to make the
facts of the linkage clear to the American negotiators so that they would
not have unrealistically high expectations of Italy’s ability to fulfill its
commitments.35
The Italian government was moreover of the opinion that future nego-
tiations would have to be preceded by the finalization of agreements with
the other debtor nations, which had better capacity to pay (that is, with
Great Britain and France). It was hoped that this would achieve both the
further postponement of the actual start of payments and a favorable
position relative to existing accords; Italy would be able to obtain further
reductions in payment amounts on the basis of its lesser capacity to pay. In
this case too, first Hughes and then Kellogg were fairly inflexible in insist-
ing on the complete separation of each debt situation from the other,
whether because of the evident risk entailed in allowing the reciprocal
procrastination of the various debtors or, mostly, because of the danger
that they would band together and insist on collective bargaining with
their creditors.36 Confirming this stance, the U.S. government rejected

35
AADS, n. 55, Benito Mussolini to Giacomo de Martino, Rome, June 13, 1925.
36
AADS, n. 34, Dino Grandi to Alberto de’ Stefani, Rome, June 2, 1925, transmitting
Giacomo de Martino to Benito Mussolini, May 9, 1925. Kellogg said to de Martino that
“he was aware of the Italian hypothesis that our negotiation ought to follow France’s, but
he could not agree because, according to the American government, there was no inter-
dependence among the various war debts. Every debt regards only the debtor nation and
 4. The Start of Negotiations 105

every attempt on the part of the debtors to place the question of war debt
on the agenda of international conferences, remaining committed to the
provisions of the Versailles conference and, later, of the London
Conference of 1933, even though it was clear that any discussion of
international economic relations could hardly avoid the question.37 In
the end, the Italian government had to accept negotiating without the
comparison of any final accord with France, but this primacy of his
country in American relations probably actually pleased Mussolini.

4. the start of negotiations

On June 15, 1925, Mussolini finally sent a telegram to de Martino author-
izing him to open official negotiations with the World War Foreign Debt
Commission.38 Mussolini did not appear to reach this decision without
some hesitations and concerns. This was indicated not only by the direc-
tion of the preliminary talks, following the careful instructions that he
continually sent to the ambassador in Washington, but also by the unchar-
acteristic “We’ll see!” noted in the margin after he read the telegram de
Martino sent recounting Kellogg’s assurance that Italy would have no
reason to regret the official opening of negotiations.39 Why did
Mussolini finally decide to go ahead and cross the Rubicon? Certainly
the American government’s solicitations had some effect – particularly as
Mellon’s had become ever more urgent.
In this situation, it would have been possible to keep finding reasons to
put off the date, although there was the risk of inciting a public controversy
like the one that had already embittered relations between the United
States and France and had ended up damaging France’s credit on the
American financial market. But there was another, decisive reason not to
delay any longer: the conditions (and the need) for Italy to cement credit
operations in the United States were coming to maturity. The Italian
government had just successfully secured a credit line of $50 million
from the Morgan Bank, but the approval of the American government

the American government.” De Martino answered among other things that “. . . Italy has
an advantage regarding France. But how would it be practical to determine the margin of
this advantage without first knowing the results of the final French agreement? The
indispensable baseline would be lacking.”
37
Berutti, pp. 141ff.
38
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Benito Mussolini to Giacomo de Martino,
tel. 534, Rome, June 15, 1925.
39
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Giacomo de Martino to Benito Mussolini,
tel. 964, Washington, D.C., June 16, 1925.
106 United States Economic Policy toward Italy

had been obtained under the explicit condition that this could only apply in
the case of a private banking credit line. Had it been a government bond
issue, the U.S. government, according to the rules of conduct it had
legislated regarding all countries that had not yet settled their war debts,
“would not be able to refrain from objecting [. . .] unless the Italian govern-
ment had simultaneously made the necessary steps to settle and repay its
debt to the United States Government.”40 Since a loan based on a public
bond issue was exactly what Mussolini planned next, as the first and most
important step in a series of similar operations to fund key municipal
governments and industries, the warning could not have left him indiffer-
ent. There was a disparity in opinions on this issue, present even within the
delegation charged with carrying out the final phase of negotiations with
the United States. Alberto Pirelli, for instance, was much less convinced of
the beneficial results of trying to secure funds on the American market
without strictly linking them to currency stabilization; he thus felt less
urgently about the need to complete any accord with the United States
regarding war debt.41
Pirelli’s views reflected the general hostility among Milanese industri-
alists, as well as nationalists, toward the obligatory nature of the war debt
with Great Britain and the United States. Moreover, he was most con-
cerned with the risks of excessive credit exposure in relation to the greatest
capitalist powers. He felt it could not be financially healthy for Italian
industry, which jealously cultivated protectionist policies in its favor from
the Italian state. Nonetheless, he never expressed himself as openly in
official situations as he had in writing to his father, and his caution reveals
that Mussolini was far from isolated in his choices, which were viewed
with approval by important figures of finance in Italy. Even Pirelli himself
admitted that the loans were necessary to stabilize the currency, and his
reservations did not keep him from participating actively in the negotia-
tions to consolidate Italy’s war debt toward both Anglophone nations.
It must also be noted that Thomas W. Lamont, the Morgan Bank
associate most involved with Italy as a client, had alerted the Italian
government that the propitious moment was at hand.42 His advice was
authoritative in that he had been the one to advise against accepting the

40
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Giacomo de Martino a Benito Mussolini,
tel. 951, Washington, D.C., June 15, 1925.
41
AALP, Posizione scelta: Riparazioni e debiti, fasc. IX, 1925–1926, n. 13300, Alberto
Pirelli to Giovanni Battista Pirelli.
42
ASMAE-AG, Pacco 160, Reparto Generale, Classe 61, sottoclasse 5 fasc. 7, Prestito in
America e in Italia per spese pubbliche in Albania, tel. 1028, New York, June 22, 1925.
 4. The Start of Negotiations 107

offer made by Hoover earlier, during the informal meetings with Caetani
and Jung. At this moment, the Italian domestic situation was favorable for
the launch of a campaign for the international stabilization of the regime –
which would require both the availability of American capital and the legal
fixing of the currency exchange rate – while proceeding hand in hand with
internal repression to establish order. In his telegram giving the go-ahead
for official negotiations, Mussolini had justifiably observed:
The country is completely tranquil, the government solid. The Aventine Secession is
about to end and was in any case ineffective as a force for political opposition. No
strikes. The Holy Year proceeds with maximum calm.43

Apart from the propagandistic intent of such communications, it was

still true that the conditions both abroad and on the financial plane for the
expansion of the regime’s consolidation were coming together, ever more
strongly since the regime had overcome the Matteotti Crisis, a turning
point of its history. A final spur to action came from the fact that the
exchange rate had been suffering; if Mussolini’s insistence that this had no
objective relationship to the real conditions of the country’s economy were
true, then it was more urgent than ever to move forward with currency
stabilization – whose first indispensable step was, precisely, the settling of
war debts.44
The full-scale official negotiations between the Italian government and
the American World War Foreign Debt Commission appointed by the U.S.
Congress had two clear and distinct phases. The first phase was actually an
extension of the preliminary informal talks. It took place in only three
meetings (the first on June 25, the other two in the morning and afternoon
of June 30). The composition of the delegation emphasized the limited
commitment of the Italian government in this phase: Ambassador de
Martino was accompanied, in addition to a few embassy staffers, only by
Mario Alberti, the chief executive of the Credito Italiano bank, who
usually served as second to Alberto Pirelli (of whom he was a pale copy,
according to Dino Grandi).45 Alberti was already in the United States to
secure a loan for public works in Albania from New York banks.46

43
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Benito Mussolini to Giacomo de Martino,
tel. 534, Rome, June 15, 1925.
44
Ibid.
45
Grandi, Interview.
46
ASMAE-AG, pacco 160, Rep. Generale, Classe 61, sottoclasse 5, fol. 7; Prestito in America
e in Italia per opere pubbliche in Albania, Giacomo de Martino to Benito Mussolini,
Washington, D.C., June 15, 1925.
108 United States Economic Policy toward Italy

Mussolini’s telegram to the delegation on the eve of the negotiations’ start

is quite interesting, both because it contains a synthesis of his instructions
and because it shows how central a role the Morgan Bank was assuming in
his analysis (this central role was due to become yet greater in the second
and decisive phase of negotiations):
I maintain that Lamont of the Morgan firm can and will aid us in correctly
predicting what form the major points of our accord should take in order to be
best adapted to American public opinion. To that end, I ask you to keep in frequent
contact with him. You may tell him that Italy needs ten years of moratorium on any
payments, the cancellation of accumulated and ongoing interest, and the repay-
ment of the capital amount only over the space of 90 years starting from an annual
payment corresponding to 0.5 percent of the total sum, gradually increasing in
amounts equal to those set in the English plan of payment. Since the financial
burden resulting from such a settlement could remain the same in various versions
of an accord, it is possible that Lamont’s deep familiarity with the people and issues
involved will enable him to give us useful suggestions.47

In reality, the official instructions from Mussolini to de Martino modi-

fied the platform to communicate with Lamont. In these instructions, two
possibilities were outlined, the first being:
(a) cancellation of all accumulated and future interest; (b) 5-year moratorium on all
payments; (c) payment on the capital in 62 annual payments, increasing according
to the terms of the English settlement and beginning with a first annual payment of
circa $8 million.

The second, differently, requested the cancellation only of accumulated

interest and offered the nearly symbolic payment of one-half percent on the
future interest starting after the eleventh annual payment; the payment of
the capital amount was laid out in the same fashion as in the first proposal.
Mussolini took care to note that
Any modification, however slight, to these proposals must be submitted for eval-
uation by the Ministry of Finance to calculate its repercussions on the Italian
financial situation, without any prejudicing statements on our part.

Above all, Mussolini insisted in his instructions on the necessity of

maintaining the discussion at the level of general principles so that only
the documentation of Italy’s capacity to pay, which was still being pre-
pared, would dictate the details of the final formula in the settlement.48

47
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti dell’Italia verso l’America, tel. 594,
Benito Mussolini to Giacomo de Martino, Rome, June 23, 1925; tel. 596, June 24, 1925.
48
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Benito Mussolini to Giacomo de Martino,
tel. 596, Rome, June 24, 1925.
 4. The Start of Negotiations 109

Although the main points of the settlement remained fixed over time, these
instructions show Mussolini introducing new elements of flexibility
designed to take into account the demands of congressional sentiment
and American public opinion. This flexibility was greatest regarding the
possible length of a moratorium and the various approaches to calculating
interest.
The Italian negotiating position was even more flexible in the proposal
submitted to Mussolini by Mario Alberti, in the time between the first
meeting – which had been entirely dedicated to Alberti’s analysis of the
Italian capacity to pay – and the second, during which the Italian delega-
tion finally began to discuss the specifics of the settlement terms. Alberti’s
plan was the result of his preliminary conversations with Lamont, Mellon,
and especially Undersecretary of the Treasury Garrard Winston. It showed
a clear effort to avoid anything more than generic promises from Italy,
while still mollifying the least informed and most hostile sectors of the
American public. The goal was to declare Italy’s willingness to pay capital
and interest following the terms of the agreement between Great Britain
and the United States, but making the start date and the amount of pay-
ments conditional on a number of benchmarks reached by the Italian
economy – in particular, the balance of payments and the relation between
the gold standard value of the lira and its domestic purchasing power. Even
the last date proposed for the start of payments, independent of such
indices, would be conditional on the absence of any disturbances of the
Italian economic base, to be certified by a commission of both Italian and
American economists.49 This plan, in the months between the first and
second phases of negotiation, was labeled “camouflage,” meaning in this
case that it was designed to make Italian commitment as evanescent as
possible, while masking it in such a way as to allow the Coolidge admin-
istration to portray itself to its constituents as taking a hard line with
debtor nations. De’ Stefani never liked the Alberti plan, since he thought
it is dangerous to recognize any responsibility for compound interest or to
subordinate the payment plan to the creditors’ judgments of the health of
the Italian economy.50 Mussolini, after numerous requests from
Washington, gave instructions to Ambassador de Martino to stick to the
original proposal, but authorized him to introduce a few elements of the

49
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Giacomo de Martino to Benito Mussolini,
tel. 1070, Washington, D.C., June 26, 1925.
50
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, tel. 1087, Giacomo de Martino to Benito
Mussolini, Washington, D.C., June 27, 1925. AADS, n. 80, Alberto de’ Stefani to Benito
Mussolini, Rome, July 11, 1925.
110 United States Economic Policy toward Italy

Alberti plan at the following meeting.51 In truth, Mussolini’s position at

this point was not completely clear, even though he had transmitted the
numerous and stringent objections formulated by his minister of finance,
thus implicitly seconding them.52
Lacking more definitive instructions from Mussolini, and given the
strong opposition of de’ Stefani to the Alberti plan, the prudent burocrat
de Martino tried to play it safe. In the final meeting of the negotiations, he
limited himself to officially presenting the original proposal even though he
knew it was unacceptable from the American point of view. He thus
repeated the request for a ten-year moratorium, the total cancellation of
accumulated and future interest, and a schedule of ninety years for pay-
ment (against the example of the sixty-two set by the British accord). At
this point, the Americans did not relaunch any discussion; Mellon simply
observed that the Italian proposal was unacceptable, and Senator Smoot
added that it had no chance of being ratified by Congress. Both delegations
agreed that it would be better not to publicize the Italian proposal, in order
to avoid any external impression that the negotiations had reached a dead
end. They decided to explain the suspension of talks with the excuse of the
departure for Italy of Mario Alberti, who would have the task of gathering
the documentation of Italy’s capacity to pay, material that was indispen-
sable for the final agreement.53
The disappointment on the American side was real and spontaneous,54
although not so much as to damage their will – especially Mellon’s – to
conclude a settlement both favorable to Italy and defensible to Congress.
This first phase of negotiation turned out, upon closer scrutiny, to have
served Mellon’s interest and that of those forces who desired Italian outlets
for capital investment by creating an atmosphere that was more favorable
toward the Italian government, even on the spiny problem of war debt.
Mellon’s opening speech as president of the World War Foreign Debt
Commission mined this vein considerably, as he remarked that Prime
Minister Mussolini had acted with his customary decisiveness as soon as
he knew that Italy was ready to enter a debt repayment agreement.
Americans had witnessed how Italy emerged from the chaos of war,
restructured its industry, reduced its spending, and balanced its budget.

51
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, tel. 620, Benito Mussolini to Giacomo de
Martino, Rome, June 29, 1925.
52
Ibid., tel. 610, June 27, 1925.
53
De Martino Report; see ASMAE-AAW, bk. 176, fol. debiti, June 26, 1925; bk. 176, June
20, 1925.
54
Ibid.
 4. The Start of Negotiations 111

All this, he said, was through the leadership of one energetic man blessed
with good ideas and the necessary power to carry them out. Americans, said
Mellon, appreciated constructive action.55 He was, in other words, travel-
ling the path by now well blazed by the American press as well as by
American business travelers and diplomats: the portrayal of Mussolini as
cornerstone of the political stabilization and economic recovery of Italy, in a
near-exact imitation of the propaganda distributed by the dictator’s regime.
And yet it was clear, in the case of men such as Mellon and Lamont, that they
were not motivated by disingenuous ideological enthusiasm; they simply
found this image useful for their own goals regarding Italy. They made use of
every occasion to educate the American public in a favorable attitude
toward the acceptance of a generous settlement of Italy’s war debt in order
to clear the ground of any last obstacle to the development of American
financial expansion in Italy. On the Americans’ part, even the fact of the
pause in negotiations was used toward this end: the trip to Italy served to
dramatize the accuracy and care with which the Italian government kept its
accounts and would document its capacity to pay. It also made the initiation
of talks with Belgium and France possible in the meantime, while public
opinion continued to mature positively regarding Italy.56 Utmost care was
taken, including by Secretary of State Kellogg – who had maintained the
least flexible stance in the talks – to avoid any spread of rumors that there
had been a breakdown in the discussions.57 On the Italian side, there was an
obvious similar desire, as demonstrated by the fact that the director of the
Banca d’Italia took it upon himself to inform the managers of regional bank
branches that the inevitable rumors suggesting a rupture were incorrect and
that the negotiations were “proceeding normally.”58
The intervention by Stringher was not motivated by some general or
preventive concern, but by a precise fact: from the beginning of the nego-
tiations until the period just after their interruption, the value of the lira
had taken a dive that greatly alarmed the Italian government. In the

55
ASMAE-AAW, bk. 176, fol. Debiti. Dichiariazione di Andrew Mellon, Press Release of the
Treasury Department, June 25, 1925; ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2,
Debiti dell’Italia verso l’America, tel. 1070, Giacomo de Martino to Benito Mussolini,
Washington, D.C., June 26, 1925.
56
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, tel. 1122, Giacomo de Martino to Benito
Mussolini, Washington, D.C., July 1, 1925.
57
NA-DS, 800.51W89 Italy/36a tel. 81, Frank Kellogg to Henry P. Fletcher, Washington,
D.C., July 1, 1925.
58
BIAGSRE, bk. 15, 1925, fol. 3, Notizie sui cambi e sui mercati, sf: Filiali della Banca,
Bonaldo Stringher alle sedi della Banca d’Italia di Genova, Torino, Milano, Venezia,
Firenze, Napoli, Trieste.
112 United States Economic Policy toward Italy

previous month of May, the exchange rate had remained constant between
117 and 122 lira to the pound sterling. After the middle of June, the value
of the lira had begun to fall sharply, reaching a low of 131 on the day of the
first meeting in Washington, 138 at the moment of the suspension of talks
five days later, and hitting a low of nearly 145 on July 2. Only in the
following days did it begin a slow recovery.59 This development created
serious alarm in Rome. Mussolini followed the exchange rates on this and
later occasions with a febrile attention, probably because he considered
them, rightly or wrongly, one of the few possible concrete manifestations
of public opinion on economic matters to which Italy was still accountable.
Mussolini developed a particular fixation on the idea that the coincidence
between the timing of the negotiations with the United States regarding
war debt and the fall of the lira was proof of a deliberate sabotage of the
policy of monetary stabilization. Given that the settlement of war debt was
a necessary preliminary step in the ongoing consolidation of the govern-
ment and economy, he saw the fall in the value of the lira as an attack
threatening the very survival of the Fascist regime.
The weakness of the lira first spurred Mussolini to exert pressure on the
American government to renounce its refusal to approve loans from
American banks until the country had reached an accord on war debt.
He hoped to secure, as quickly as possible, a large bond sale directed at
monetary stabilization as well as several smaller loans guaranteed by the
Italian government for the cities of Rome and Naples. In a verbal memo
and subsequent telegram, which the embassy was authorized to show the
State Department, the Italian argument underlined the following points:
the renewed weakness of the lira was proof that the possibility of a debt
settlement, and therefore any prospective future disbursements of hard
currency, risked diminishing Italy’s credit if it was not at the same time
reinforced by new loan agreements. Mussolini’s goal in this phase was to
make the Americans understand that he too had a public to satisfy. He
assigned the charge d’affaires, Augusto Rosso (de Martino had returned to
Rome to receive new orders, in preparation for the final phase of negotia-
tions), the task of informing the State Department that
The Minister of Finance is taking intense persuasive action regarding Italian public
opinion [. . .] see article . . . in the major opposition newspaper60 [. . .] which comes
close to pure and simple repudiation [. . .] This article is not the work of extremists,
but reflects the impressions of the middle and industrialist classes. The government

59
BIAGUS, Raccolta Cambi dal 1900 al 1930.
60
Corriere della Sera, August 20, 1925.
 4. The Start of Negotiations 113

is certain to win over these currents but needs widespread and generous coopera-
tion from the American government.61

At the very moment when Mussolini made these somewhat-rare refer-

ences to the phenomenon of public consent for the regime, he had already
been informed of the refusal not only by the always-rigid Kellogg,62 but
also by Mellon, to agree to the concession of the loans in question. They
had followed the formula issued previously by the State Department,
which stated that in the absence of “substantial advances” in the settlement
of war debt, no further public loans could be approved. In American eyes,
the argument was reversed: the conclusion of negotiations would not
damage but rather improve Italian credit because, until the time when
the obstacle of war debt was cleared from the path, the availability of
American capital would remain severely limited.63 The Americans had the
correct analysis here, since any different attitude from the Coolidge admin-
istration would have set off a chain reaction of requests from all the other
debtor nations and inevitably raised the ire of Congress. The banks them-
selves, obviously interested in earning the commissions and interest from
granting credit, were not however willing to put the larger project of stable
expansion in danger with any false move. They knew that the isolationist
fires were still burning in Congress and in some reactionary sectors of
industry – well represented even in Hoover’s future government – and that
these could be won over only on the condition that any expansion be first
preceded by a satisfactory conclusion of the war debt negotiations.
Lamont from the Morgan Bank continued to discreetly inform the Italian
government of his capable analysis of the situation: the interruption in the
negotiations should not cause Mussolini to desist from his chosen course of
action. It was important not to lose focus and go running after credit that
would be available when the time was right, nor would excessive strata-
gems and game playing be productive. Plans like the one proposed by
Alberti were too obscure to provide “stable ground” for a successful
settlement. It was better to stop launching trial balloons in the press, stop
any operations of “camouflage” that might only have the effect of making
Congress suspicious. The partners of the House of Morgan advised both the

61
ASMAE-AG, bk. 159, titolo 3, Classe 61, fol. 2, Debiti, tel. 902, Benito Mussolini to
Augusto Rosso, Washington, D.C., August 25, 1925.
62
ASMAE-AG, bk. 159, titolo 3, Classe 61, fol. 2, Debiti d’Italia verso l’America, tel. 1428,
Giacomo de Martino to Benito Mussolini, Washington, D.C., August 6, 1925; tel. 1429,
August 6, 1925; tel. 1434, August 7, 1925; tel. 1436, August 7, 1925.
63
ASMAE-AG, bk. 159, titolo 3, Classe 61, fol. 2, tel. 1479, Augusto Rosso to Benito
Mussolini, Washington, D.C., August 13, 1925.
114 United States Economic Policy toward Italy

French and the Italian governments to put their cards on the table with the
greatest candor, giving up any attempts to influence the discussions with
feints they would renounce later in the negotiations in any case. Of this
approach the Belgian delegation, led by Theunis, had been a good example.
Positive terms would not fail to result. According to Lamont, the mood in
Washington encouraged his belief that since a debt commission had been
formed, it would push to set favorable terms for Italy’s ability to pay.64
Mussolini once again ended up following the advice of the House of
Morgan. He began by entrusting himself definitively to the care of Lamont,
abandoning the ruse of meeting with his competitors (specifically Chase
Bank), as Alberti had at one point suggested. The decisive factor in this
choice was the ability of the House of Morgan to offer political support. It
acted as a mediator with the American government, and the Fascist regime
absolutely needed such a liaison given its inability to secure credit without
humbling itself before the debt commission. It was probably not a coinci-
dence that Secretary of State Kellogg, the most inflexible gatekeeper of the
United States’ authorization of credit to Italy, at this same time discreetly
informed Ambassador de Martino that only the House of Morgan would
have the capacity to organize and guarantee a bond issue for Italy, thus
demonstrating, as de Martino expressed it, a . . . preference, already known
to the treasury, of this government for the House of Morgan. It is also well
known that the House of Morgan, and in particular Lamont and Morrow,
wield influence over the war debt issue.65 Thus, the following pattern had
been set: the Italian government needed to secure credit on the American
market; the American government made such credit conditional on a war
debt settlement; the House of Morgan was the only bank able to guarantee
the most favorable terms for such a settlement. In choosing a bank to work
with, the Italian government could reach only one conclusion.
After a failed attempt to get the State Department to reconsider its
authorization of bonds for the municipal governments,66 Mussolini was
invited to return to the bargaining table for a debt accord.67 Giuseppe
Volpi di Misurata’s replacement of de’ Stefani at the Ministry of Finance

64
HUGSBA-TWL 190–16, T. W. Lamont to Giovanni Fummi, Washington, D.C., August
19, 1925.
65
ASMAE-AG, bk. 159, titolo 3, Classe 61, fol. 2, tel. 1372, Giacomo de Martino to Benito
Mussolini, Washington, D.C., July 28, 1925.
66
NA-DS, 800.51W89 Italy/48, Joseph C. Grew to Blair and Company, New York,
September 1, 1925.
67
ASMAE-AAW, bk. 173, fol. Debiti, Giacomo de Martino to Benito Mussolini,
Washington, D.C., September 21, 1925.
 4. The Start of Negotiations 115

favored a speedy resolution of the problem of American credit. Product of

the great northern industrial sector, specifically the electrical industry, he
was personally motivated to clear the ground by settling the war debt issue.
In August, the reopening of negotiations urged by Lamont and
Ambassador Fletcher68 was decided at the highest levels. This time the
Italian delegation was led by the new minister of finance and included
Ambassador de Martino, the young undersecretary of foreign affairs Dino
Grandi (who defined himself in this role as “that dash of politics that the
delegation’s recipe called for”69), Ambassador Lelio Bonin Longare, and
Alberto Pirelli and Mario Alberti, the expert negotiators of the Dawes
Commission. Following the delegation to Washington was also the Roman
representative of Morgan Bank, Giovanni Fummi.
The delegation’s composition was a clear indication of Mussolini’s
determination to obtain a positive result. The rumor, recounted by the
American charge d’affaires in Rome, that “il Duce” had ordered the
delegation not to return without the agreement in hand, was probably
not unfounded. Another rumor, that he had encouraged them to be more
flexible, was also likely true.70 He had by this time been giving daily
attention to the contacts and negotiations for months. The recent events
regarding the exchange rate and the requests for bond issues and loans had
clearly convinced him that, in order to consolidate Italy’s credit status –
and therefore the status of his own regime – it was absolutely necessary to
reach an accord. In the aftermath, it would be possible to obtain all the
funds needed on the American financial market and to launch a legislative
standardization of the lira. Nor could he accept that such a “national
mission” end in anything other than success.
The preparations for the final phase of negotiations were proportional
to the victory at stake. All issues of public order were evaluated with great
care, in order that no disturbances could damage the image of Fascist Italy
during the most delicate moments of the talks. The country had to appear
pacified, but without giving any open evidence of excessive repression. In
particular there was concern over the fallout from the recent Fascist looting
of the Grand Orient Masonic Temple; no negative publicity should result
from this in the United States, nor did the regime want it to become a
motive for renewed opposition domestically. The regime successfully

68
NA-DS, 800.51W89 Italy/41, tel. 101, Frank Kellogg to Henry P. Fletcher, Washington, D.C.,
August 19, 1925; tel. 132 Henry P. Fletcher to Frank Kellogg, Rome, August 31, 1925.
69
Dino Grandi, Interview.
70
NA-DS, 800.51W89 Italy/59, Joseph G. Grew to Andrew W. Mellon, Rome, September
12, 1925.
116 United States Economic Policy toward Italy

obtained the collaboration of the main leaders of the very lodge that had
been attacked, all of whom pledged to cooperate with the government;71
Grand Master Raul Palermi himself had already traveled to the United
States in support of the Italian delegation.72
Preparations were also underway regarding the negotiating tactics; they
benefited from a considerable collection of preliminary contacts and dis-
cussions that had clarified the American position and especially identified
the points of greatest resistance, whether individual personalities or the
content of the terms. In the days just before the delegation’s departure, the
experience of the French minister of finance Caillaux was studied with
special attention in order to avoid repeating the mistakes he had made in
his mission to Washington to negotiate terms on French war debt.73 One
fundamental choice was made at this point: it was decided to renounce all
requests that might damage the American Commission’s relations with
Congress. On the eve of the departure, Mussolini called a meeting at
Palazzo Chigi; in attendance were the secretary general of the Ministry of
Foreign Affairs, Salvatore Contarini, as well as all the members of the
delegation (only Grandi was absent). The conclusions arrived at during
this meeting, which were also afterwards approved by the Cabinet, went
well beyond the eventual terms of the accord with regard to the conces-
sions the Italians decided they would be willing to accept. The request for a
moratorium disappeared completely, along with the willingness to pay no
more than $10 million each year in the first decade of payments. It was
decided to abandon the request for a ninety-year payment schedule, set-
tling instead on the magic number of sixty-two years (since that had been
the agreed time in the accord with Great Britain). The interest needed to be
“as low as possible.” The most shocking initial concession, however, was
to give up the review clause – that is, to renounce any formal linkage
between the German payment of reparations fixed by the Dawes Plan
and the Italian payment of war debt. This decision was justified by the
fact that de Martino had already been offered assurances that any future
difficulties in the Italian capacity to pay would be benevolently taken into
consideration and also by the need to avoid any explicit language in the
accord rejecting the possibility of future alterations to its terms. Here too
the defeat of the “great Caillaux” had its effect; the Italians were aware

71
ASMAE-AG, p. 172, fol. 38, Chatelain to Federzoni, tel. 3129, Alexandria, November 6,
1925.
72
ASMAE-AG, pacco 172, fol. 38, Raul Palermi to Benito Mussolini, New York, October
17, 1925.
73
Dino Grandi, Interview.
 5. The Volpi Mission 117

that the French had never mellowed in their insistent habit of putting the
German question at the center of every international negotiation.74
This final meeting concluded not only the objectives for terms, but also a
decisive agreement about tactics: that the delegation needed to behave in a
manner congruent with the needs and viewpoints of their counterparts across
the bargaining table. This predisposition in the delegation’s plans was by no
means a choice made lightly, or inspired by purely propagandistic motives.75
The minister of finance was responsible for a report prepared by a group of
scientific experts (Mortara and Gini stand out from the list of names; the latter
accompanied the delegation to Washington as an expert witness); the sixteen
files it contained analyzed all the aspects of the Italian economy in order to
define the limits of Italy’s capacity to pay. The American commission, for its
part, also possessed several studies of the Italian capacity to pay that all had in
common the singular characteristic of having been prepared, or at least
influenced in their preparation, by Italian or pro-Italian sources. Constantine
McGuire of the Institute of Economics in Washington, an American economist
with ties to the Italian embassy, had been assigned the task of creating a report
in English that was based on essentially the same sources. Another study,
carried out by the Industrial Conference Board, was in reality the product of
information provided by Alberto Pirelli to the vice president of the Bankers
Trust Company, Kent. Nor was the report by the commerce attaché of the
American embassy in Rome, MacLean, free from the same kinds of influence.
Finally, the data provided by the research office of the House of Morgan had
the obvious goal of reinforcing the Italian claims, in order to encourage a
settlement in Italy’s favor. There is no reason to be surprised that all these
reports agreed almost perfectly with the contents of the files presented by the
Italian delegation, whatever their objective scientific value.76

5. the volpi mission

Anyone closely studying the dossier of the preliminary contacts and dis-
cussions would realize that there was a strong basis for a settlement, and
further that more favorable terms than those agreed to in Mussolini’s last
meeting with the delegation were quite likely. In a certain sense, the new
minister of finance and leader of the delegation sent to Washington had

74
AMAE-EU, 1918–1929, vol. 238, tel. 402, l’incaricato d’affari francese, Daeschner, al
Ministero degli affair esteri, Washington, D.C., November 12, 1925.
75
Dino Grandi, interview; Leonardo Vitetti, interview with author, Rome, October 21,
1969; ACS-GVM, bk. 11, Appunti Alberto Pirelli, p. 39.
76
ACS-GVM, bk. 11, p. 37.
118 United States Economic Policy toward Italy

already won his battle during that meeting at Palazzo Chigi – or at least he
had created the conditions there for a victory. Volpi had no intention of
sharing Caillaux’s fate. He had become minister in precisely this period
because of the strong synchronicity between the goals of the regime and
those of the industrial and financial sector from which he came; both
pursued the inclusion of Italy in the international financial community and
were willing to pay the necessary membership dues to their senior sponsor.
As Volpi told Fletcher, during an evening stroll in the hills of Rome, he was
an experienced and successful negotiator. He said that Washington might
have been the most difficult bargaining table he had yet sat down to (though
this is doubtful, since the Fascist regime so badly wanted a successful accord
that they were ready to offer the Americans everything they could want),
and it was certainly the most important, but he had no plans to suffer his first
loss now of all times.77 Volpi was aware that his trip to Washington had
acquired, in the eyes of the regime, the significance of a “‘national’ mission
[. . .] and not, simply, an economic delegation solving a technical problem,”
as Sergio Romano correctly observed:
For Italy, too, the war debt campaign had political and moral implications. For
Fascism it was a “divine judgement” on its international credibility, for the country
a command performance of one of the roles it loved to play, that of the poor nation
paying its debts honestly just as Cavour’s successors had repaid the Rothschilds
and the Hambros.78

Nor were these political and moral implications simply rhetorical, given
the fact that the hoped-for accord constituted an indispensable link in the
chain of events that could lead to full Italian access to American capital
markets, the stabilization of the lira, and the inclusion of the Banca d’Italia
in the cooperative venture of the central banks linked to the gold exchange
standard. It was no casual turn of phrase to define as a “divine judgement”
what was actually the judgement conferred by the officials and bankers of
the nation emerging as the hegemonic power of the capitalist world.79
This interpretation of the situation explains, at least in part, how
Mussolini was moved to reformulate his platform so that it became infin-
itely more reasonable than the strict one proposed by de Martino in the
negotiations’ first phase. The insistence on a moratorium, the total can-
cellation of all interest, the review clause to be demanded at any cost, and
the schedule of ninety years all had very little in common with the orders in
Volpi’s hand when he boarded the Duilio in Naples for the voyage to New

77
LG-HPF, Henry P. Fletcher, Diary, December 20, 1925.
78
S. Romano, Giuseppe Volpi, Milan: 1979, p. 134.
79
Ibid., p. 177.
 5. The Volpi Mission 119

York.80 In addition to dropping the demands the Americans could not

accept, the meeting at Palazzo Chigi had not committed the delegates to
any specific final amount of debt to be recognized, inasmuch as they had
instructions only to keep the interest at the “minimum possible level”
[italics mine]. In fact, Volpi’s strategy was based on exactly this flexibility;
he planned not to “affirm any precise amount of payments to Washington,
but to offer Washington every possible bona fide showing Italy’s capacity
to pay and to ask the experts in Washington to produce a number they
believed Italy could realistically sustain.”81 At bottom, Volpi’s chosen
strategy was intimately in accord with the earlier affirmations of
Warburg and so many other American bankers: if the United States
wanted to prosper from the business they could contract in Europe, they
would have to take responsibility for the economic health of their debtors
and potential clients. In concrete terms, this meant that it would be not
only useless but damaging to require Italy to make payments that could
inhibit its foreign commerce and, in the end, devalue its currency. From
Volpi’s point of view, the same reasoning applied in choosing to entrust the
Americans – the very agents who needed to expand their own economic
activity in Italy – with the task of calculating the amount of payment. Once
the war debt settlement had freed them from the congressional and public
opinion limits to their intervention, their goals and Italy’s best interests
would attain a perfect match and they would be likely to offer the most
flexible terms of payment. This was only as much as the associates from
Morgan Bank had already been suggesting for some time. It was no matter
of camouflage (that is, masking a minimal or nonexistent commitment to
repayment in the hopes of taking it out of the hands of those who might be
hostile), then, but rather a full acceptance of American hegemony and the
dogmas of its politics, that had led Volpi to this juncture. These political
dogmas included the separation of reparations from debt obligation as
well as the goal of economic expansion based on a Germany at the healthy
core of Europe and the intent to require reliable accounting from its
partners. Submitting to these traits, unlike the French who obstinately
refused to conform to the new situation, would bring clear rewards in time.

80
“Tutta l’Italia segue coi suoi voti la missione che è salpata oggi per Washington” (All Italy
sends its hopes along on the mission that set sail for Washington today), Il Giornale
d’Italia, October 23, 1925.
81
Giovanni Fummi, who transmitted this news to Lamont, who in his turn passed it on to
Dwight Morrow, emphasized that he had been informed thus in the utmost secrecy, and
that it might not even constitute a final decision. AC-DM, fol. Lamont, Thomas
W. Lamont to Morrow, New York, October 5, 1925.
120 United States Economic Policy toward Italy

This interpretation of the decisive and radical redefinition of the Italian

approach is confirmed by the final section of the instructions determined at
the Palazzo Chigi meeting, synthesizing the state’s business plan in the New
York financial market:
The Minister of Finance, contemporaneously with the negotiations for the settle-
ment of the war debt, will continue to meet with American bankers to set the terms
for a bond issue of $100 million over thirty years, including the Morgan loan of $50
million; a loan for the city of Rome of $50 million; a loan of circa $20 million for an
equipment trust to the state railways; and a loan of circa $20 million for the
Corporation of Public Works.82

If we add to these instructions the observation that, simultaneously with

the Volpi mission, Alberto Beneduce also left for the United States with the
assignment of pursuing the negotiations for the above-listed loans, the true
nature of Volpi’s mission becomes obvious. Despite Volpi’s insistence that
only Beneduce would carry out the business meetings to secure loans,83
both men were now representatives of the Italian state and Italian industry
in their moment of dire need for funds (in the following months there
would also be loans for Fiat and Pirelli in the offing). That need was the
ultimate motive for the turning point in the war debt negotiations, and the
history of their development – along with the state’s pursuit of the stabi-
lization of the lira and the return to the gold standard – is the proof of
Fascism’s role as spokesman for Italian capitalism. Any reservations
expressed by Pirelli had no chance in the face of this fundamental truth.
Every successful negotiating tactic needs allies on the other side of the
bargaining table. In this case too there was no longer any doubt: the men
designated to negotiate with the Volpi delegation, while officially filling the
role of the government’s spokesmen, were also the men who, whether as the
bankers or the officials conferring authorization, would organize the exten-
sion of credit to Italy once the roadblock of war debt obligations had been
removed. Volpi and his colleagues, duly informed by de Marino’s embassy
telegrams, were easily able to single out Mellon and his second at the treasury,
Garrard Winston, as the most favorable interlocutors on the American com-
mission. Pirelli observed, in his concluding report, that it was only apparently
a contradiction that the treasury should be the most open to Italian needs:
. . . in fact, in the face of a budget with circa 8 billion in revenues and a tax cut under
debate of circa 300 million dollars, the Treasury cared very little about one million

82
ASMAE-AG, bk. 159, titolo 3, Classe 61, fol. 2, Debiti dell’Italia verso l’America,
Riunione a Palazzo Chigi, Rome, October 12, 1925.
83
“Tutta l’Italia segue,” Il Giornale d’Italia, October 23, 1925.
 5. The Volpi Mission 121

more or less in payments from Italy; it was far more concerned to see the Italian
monetary situation, and in general that of all Europe, stabilized and made ready for
the introduction of a great backup of American gold.84

Pirelli had grasped the essential point. The banking sector and the
government officials most representative of it were favorable to a pro-
Italian settlement for exactly this reason. In the case of Mellon and
Winston, this favor was quick to display itself in negotiations. The first
Italian proposal was actually outlined during a secret meeting between
Volpi and Winston,85 and the Italian delegates got into the habit of
informing Mellon of every communication they had, even the most secret
(for example, with Hoover), outside of the official meetings.86
In the world of American finance, the Italian government had by this
time made its choices. In that period as in no other, the associates of the
Morgan Bank became, even more than the bankers of the Fascist govern-
ment, its financial and political counsel – those who could guide it through
the thickets of the American power structure, avoiding congressional and
isolationist pitfalls, to the point that their influence reached even into the
Coolidge administration. Without a doubt, the partners of the House
of Morgan were leaving nothing to chance. According to the testimony
of Giovanni Fummi, the outline of what later became the final settlement of
war debt was created during a meeting he had with Morgan and Lamont,
in the private train compartment of the bank’s president.87 On that
occasion, the two bankers (who took the utmost care to preserve the
informal and indirect character of their intervention) assigned their repre-
sentative in Rome, who had traveled along with the Italian delegation,88 to
inform Volpi of the dimensions of the American commission’s acceptable
terms for the accord. Fummi confirmed that the Italian delegation had
arrived on American soil without a firm sense of the quantitative aspects of
the settlement they should reach. The intention to allow the Americans to
offer their evaluation of the capacity to pay was well and good (and
conformed to the advice Lamont had already given de Martino just before

84
ACS-GVM, bk. 11, p. 18.
85
Ibid., p. 17.
86
Ibid., p. 24. Alberto Pirelli wrote in his report that “It is symptomatic that no communi-
cation with Hoover was undertaken without seeking the advice of Mellon and Winston,
even though Hoover insisted every time to Pirelli that the Treasury should not know about
these contacts and that Pirelli should warn the Treasury explicitly.”
87
Dino Grandi, interview; Giovanni Fummi, interview with the author, November 11, 1969,
Rome.
88
Dino Grandi, Interview.
122 United States Economic Policy toward Italy

the arrival of the Italian delegation89), but it was a political and strategic
tactic, and certainly did not constitute an abdication of the delegation’s
responsibility to agree to specific terms in the name of the Italian govern-
ment. It was then very useful to know what figures the Americans had in
mind or might consider acceptable; in this way it would be possible to play
off those members of the commission who were less flexible against those
who were most favorable to Italy’s interests.
Morgan and Lamont had this kind of familiarity with the individual
members of the commission and could provide this information. Whether
or not they had indeed created the outline of the final agreement,90 it is
indisputable that their role was important and, more importantly for this
argument, demonstrative of the form of relationship developing between a
European government – in this case a Fascist one – and the major invest-
ment bank of the United States. Following their usual procedure, there was
a clear division of labor. Russell Leffingwell, the monetary expert of the
company and former assistant secretary of the treasury, had prepared the
memorandum on the financial and accounting aspects of the settlement.
Dwight Morrow, friend of Coolidge and Hoover, would contribute at a
later time. Thomas Lamont, entrusted with the overall guidance of the
account, also managed the press and public relations, with the consider-
able influence of Morgan Bank behind him. The suggestions he offered in
this vein to Ambassador de Martino served as an educational tract on how
to carry out public relations in the United States. He had asked the
statistical experts in his department to create a report showing Italy’s
economic and financial difficulties at the current moment. Such an analy-
sis, he said, must be carefully prepared so that Italy would subsequently be
able to enter the financial market with favorable credit. His plan was then
to meet with a good number of his friends in the press over the next few
days to discuss the issue with them and offer them some information. He
told de Martino that this was the preferred way to get information to the
public, since any statement, especially issued before the start of negotia-
tions in Washington, might be seen only as propaganda even if it were the
exact same information provided by the press.91
Lamont could have added that any declaration on his part would have
been counterproductive, especially had it become public knowledge that he

89
HUGSBA-TWL, bk. 43, fol. 2, Thomas W. Lamont to Giacomo de Martino, New York,
October 25, 1925.
90
Dino Grandi, Interview.
91
T. W. Lamont to Giacomo de Martino, cit.
 5. The Volpi Mission 123

was at the same time negotiating with Mario Alberti and then with Alberto
Beneduce to put together a package of bonds and loans for Italy that would
become operative only after the accord with Washington was settled. On
the other hand, the journalists and editors who were his interlocutors were
well aware of the political and financial clout of their informant and knew
that his offerings had nothing to do with the kind of propaganda they
would not touch with a ten-foot pole. Lamont worked particularly hard to
cultivate progressive journalists who he knew still harbored reservations
about the regime, such as Walter Lippmann at the New York World.92
The interventions of the Morgan Bank partners did not stop at influenc-
ing the external atmosphere surrounding the negotiations, though that
would become very important at the moment of ratification of the eventual
accord. The more immediate problem was to overcome the residual resist-
ance within the commission, not so much to the fact of an accord as to
accepting terms that would be most favorable from the Italian point of
view – and therefore in line with the bankers’ ultimate goals as well. The
most problematic personality in this sense was clearly Herbert Hoover.
Secretary of State Kellogg, who had seemed fairly negative during the
preliminary phase, did not however exercise determinative influence over
financial decisions. Senator Smoot was certainly reluctant to endorse any
accord that might not be sure to achieve ratification in Congress, but
President Coolidge would turn out to influence him in a decisive manner
right at a crucial point in the negotiations. Pirelli’s astute observation that
“the most resistant elements” were those who conducted negotiations with
their gaze fixed on the American domestic effects.
The real problem was Hoover, the secretary of commerce. As a candi-
date for the presidency, he was even more inclined than the president in
office to be ruled by domestic public opinion. Furthermore, in the micro-
cosm within the American contingent of the war debt commission there
was a larger conflict playing out, informatively reconstructed by Carl
Parrini and Joan Hoff Wilson in their studies, between the banking inter-
ests and the industrialists within the Republican administration.93 Both
groups saw Europe as the necessary future zone of American economic
expansion; both were conscious that American economic power was trans-
forming into world supremacy. The distinction between them was the
tendency of the bankers to assure a painless transition of world economic

92
HUGSBA-TWL, bk. 121, fol. 10, Thomas Lamont to Walter Lippmann, New York,
October 28, 1925.
93
Parrini, Heir to Empire; Wilson, American Business and Foreign Policy 1920–1933.
124 United States Economic Policy toward Italy

leadership from Great Britain to the United States, emphasizing the recon-
struction of Europe founded on the stabilizing force of American capital.
Men like Mellon, Morgan, and Lamont were far more willing to take on
the difficulties and responsibilities presented by the Europeans, because
they were convinced that the economic recovery and social stability of
Europe could only result in long-term benefits and profits for a clearly
hegemonic American economy. In the end, the profits of bankers were
based on the commissions from bond issuance and other financial oper-
ations and services. On the contrary, the group Hoover represented was
more interested in opening, as soon as possible, new markets for its goods
and, where possible, in guaranteeing American investment capital a profit-
able terrain for the acquisition of controlling shares in those foreign
industries that were potential competitors. Hoover was also far less willing
to cooperate financially with Great Britain, whose banking networks he
wished to see supplanted by American commerce. He did not interpret the
conduct of banks, like the House of Morgan, as a long-term strategy to
better support American expansion; instead, he saw in their actions the
rapacious nature of the banker who pockets every commission and interest
that comes his way, whether or not the client using his services will actually
serve the interests of American power and expansion. According to
Hoover, every financial operation ought to be linked to commercial con-
ditions. Every investment ought to bring ulterior benefits in the expansion
not only of capital but also of American products. In terms of the specific
issue of war debt, he did not share the isolationist fervor of some congres-
sional groups who, in their hostility toward the former European allies,
wanted to recoup every last cent of the monies loaned as well as the
compound interest on them; but nor did he want to let go of the ability
to exploit limits and conditions linked to those debts in order to obtain an
advantage in the expansion of American industry. This is, why for Hoover,
the negotiation of the Italian war debt was also a moment of negotiation
between the two conflicting tendencies in the Coolidge administration,
represented in this case in the persons of Mellon and Hoover himself.
For the same reason, the partners at Morgan saw in Hoover their most
important target.
How could Hoover be brought around to their views, and with which
arguments? Dwight Morrow was the Morgan Bank partner with the
closest personal ties to the future president. And yet it was Thomas
W. Lamont who was chosen to approach him, because of his position as
president of the Italy-American Society. Given Hoover’s well-known ambi-
tion to become president, the likelihood was that he would succeed Coolidge
 5. The Volpi Mission 125

in that office during a period when the likely Democratic candidates, Cox
and Davis, were weak and had already been defeated in previous elections.
The Morgan Bank partners decided accordingly to use Hoover’s wishes to
court voters in the Italo-American community, which was becoming an
influential constituency in the 1920s. Lamont described the beginning of
their conversation about the Italian war debt to Morrow, saying that he had
followed Morrow’s advice and explaining how, in his position as president
of the Italy-American Society, many people had approached him with the
request to take some initiative on the war debt question. He had refused,
telling them to trust in the work of the Commission and Herbert Hoover.
Lamont had then recounted how these requests had come from all over the
country; Boston, Philadelphia, and San Francisco each having local chapters
of the society; and that hundreds of thousands of Republican votes were said
to be controlled by the society. He professed not to attach too much
importance to such claims, being totally extraneous to politics – at which
point “our friend” interrupted him to say that there might be more truth in
such assertions than Lamont believed.94
The form and the substance of this minor masterpiece of manipulation
serve to demonstrate that Lamont was in the end no stranger to the more
tactical aspects (to speak euphemistically) of politics. Lamont was careful
to keep both himself and his listener above any suspicion of showing favor
to a foreign power or to any private American interest, pretending to
consider the political weight of Italo-American voters trivial while in
reality he was emphasizing it and presenting himself as its representative.
His implications in this vein, if not quite fraudulent, were certainly a
colossal exaggeration. The membership of the Italy-American Society
was purposefully kept totally separate from the Italo-American commun-
ity at large, because the Italian government used it as a wedge for entering
and influencing the restricted world of the Anglo-Saxon elite, a social
group that really wanted nothing to do with the mass of that ethnic
minority. Lamont thus succeeded in overcoming Hoover’s reservations
toward the differing economic and foreign policy interest group to which
Lamont belonged, even though the country whose debt was in question
was one that Lamont’s bank would see substantial profits from as soon as
the settlement was finalized. Hoover, for his part, played along: he accep-
ted as his due the implied compliment to the incorruptibility of the
Commission, but did not refuse the invitation to become the champion

94
AC-DM, fol. Lamont, Thomas W. Lamont to Dwight Morrow, New York, October 29,
1925.
126 United States Economic Policy toward Italy

of Italo-American interests; on the contrary, he unabashedly affirmed his

awareness of their political clout.
It is of course impossible to measure the precise effects of Lamont and
Morrow’s attempts to exploit their target’s political ambitions. This was not
the only occasion in which Hoover’s presidential ambitions influenced his
behavior at the bargaining table. In a difficult moment, the Italian delegates
had hinted that they might request the intervention of General Dawes and
the industrialist Owen D. Young, two members of the American commis-
sion who would have taken on the role of arbitrators. Pirelli recounted that
this possibility induced Hoover to assume a more malleable attitude, since
he did not want Dawes, his probable rival in the 1928 elections, to be able to
claim the credit for a successful accord.95 Hoover had overestimated the
threat, however, because it was unlikely that the Italians could have con-
vinced those two men to go over the head of the rest of the commission,
whose members they needed to retain as allies and colleagues.
In his meeting with Lamont, Hoover was restrained, repeating only his
well-known theory that the Italians, like any other client, were committed
to repaying the capital, while the interest could be calculated according to
their capacity to pay. (“In the case of Italy he was aware of their particular
difficulties and expressed the hope that they would show themselves will-
ing to repay the capital. On the question of interest, he would accept any
reasonable compromise.”) Hoover’s reaction when Lamont inquired
about the revision clause was, however, far more negative. Hoover was
only willing to offer that the interest rate could be subject to periodic
revision; this question would remain one of the most salient negotiating
points up until the very last moment. Lamont was quick to respond that
this would be a very difficult solution to put into practice, but Hoover
stubbornly kept it alive, reproposing various forms of the issue throughout
the negotiations. Volpi was forced to explicitly reject one of these pro-
posals, in which Hoover had offered a five-year accord with interest rate
revision.96 Hoover’s insistence elicited strong concerns in the Italian dele-
gation, although in the end Lamont would turn out to have correctly read
Hoover’s intentions during their meeting. Lamont wrote to Morrow that
Hoover gave him the impression of intending to do his part to promote a

95
ACS-GVM, bk. 11, cit., p. 25.
96
AMAE-EU, 1918–1929, vol. 238, tel. 402, chargé d’affaires of France, Daeschner, to the
minister of foreign affairs, Washington, D.C., November 12, 1925, in which he maintained
that a project for a provisional accord of five years formulated by Mr. Hoover, who was
also responsible for a similar proposal to the French commission, had been decisively
rejected by Count Volpi.
 5. The Volpi Mission 127

reasonable agreement and they could conclude that the reference to the
Italian vote had worked very (he italicized the word) well.
Whether for this or for other motives, the fact remains that Hoover
would never inquire too deeply into the plans of Mellon and the Morgan
Bank partners for the Italian accord – although he did so in the French
negotiations, which was worrying enough. On November 4, in the midst of
the most intense negotiations, Volpi cabled Mussolini:
Hoover’s attitude is however unpredictable, which is one of the decisive elements in
this situation; and his indiscretion at any moment could create a repetition of the
French situation and make any possible agreement seem very difficult.97

Volpi probably was not informed of the steps taken by Lamont and
Morrow, and as would serve the interest of any good plenipotentiary, he
was certainly overstating the difficulties of his job to his government.
Nonetheless, he had observed the essential contradiction that had not
been overcome, even within the commission itself, and this would emerge
in the final phase of the negotiations. The French embassy, which followed
the negotiations with great attention, communicated to the Quai d’Orsay
that, despite Mussolini’s desire to reach a positive conclusion, the inflexible
opposition of Senator Smoot as well as the more hidden but equally strong
opposition of Mr. Hoover regarding more ample concessions on the part
of the Americans, made such an outcome rather uncertain.98
Again, the French chargé d’affaires was probably exaggerating the
difficulties, refusing to believe that the Italians would succeed where
Caillaux had failed. In reality, up to a certain point the negotiations had
been going smoothly ahead. Mellon had once again taken the opportunity
to write a declaration, later released to the public, that praised the Fascist
regime and the economic leadership of Mussolini.99 The first meetings
were dedicated to a detailed examination of the Italian capacity to pay.
The Italian delegation’s presentation was accompanied by the studies
prepared by the Ministry of Finance, and together they produced a positive
effect. In sum, the documentation showed Italy’s low capacity to pay
caused by the effort to balance the budget, the burden of fiscal obligations

97
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti dell’Italia verso l’America,
Giuseppe Volpi di Misurata to Benito Mussolini, tel. 2401 Washington, D.C.,
November 4, 1925.
98
AMAE-EU, tel. 402, cit.
99
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti dell’Italia verso l’America, tel.
2365, Giuseppe Volpi di Misurata to Benito Mussolini, Washington, D.C., November 3,
1925.
128 United States Economic Policy toward Italy

(naturally no one delved too deeply into the diligence being applied to
paying these), and the costs of reconstruction in reclaimed territories.
There were also more general economic arguments regarding the low
standard of living (without, however, analyzing its political and social
causes) and the excessive passivity of the balance of trade, as well as
technical and financial points such as the difficulty of currency transfers.100
Afterwards, the negotiators were split into two subcommittees: the first
was responsible for further analyzing the capacity to pay, while the second
took on the task of articulating the terms of the settlement. Of course this
latter had, in addition to Volpi and Pirelli, Mellon, Smoot, and Hoover as
permanent members. The Italian approach was to avoid every political or
psychological stumbling block – the French reported that the Italians were
careful, in presenting their proposals, to conform to the Americans’ principles
and point of view101 – and this allowed the rapid formation of a consensus on
the general structure of the accord. The committee agreed on a schedule of
payments similar to the one in the Anglo-American agreement. The morato-
rium was incorporated by a reduction in the first two decades of payments.
In the face of the Americans’ decided opposition to concessions in
commerce and emigration, the Italians did no more than mention their
desirability.102 Pirelli reported:
Naturally both these elements were presented without any polemics, but merely as
part of the Italian diminished capacity to pay.103

Volpi insisted more forcefully, in the absence of a revision clause, for his
protestation to at least be included in the official minutes; but he had to
abandon even this when Mellon finally stated that, if Volpi ever publicly
declared that the accord should be interpreted as only rebus sic stantibus,
he would be forced to deny it explicitly.104 Hoover himself had gone so far
in informal discussions as to assert that the Italians should understand any
future incapacity to pay due to changed financial conditions as legitimate
reason to request a revision of the accord, even though it was absolutely
impossible to put this guarantee in writing.105 The impossibility of obtain

100
ACS-GVM, bk. cit., pp. 37–38.
101
AMAE-EU, tel. 402, cit.
102
Ibid.
103
ACS-GVM, bk. 11, cit., p. 39.
104
AALP, Alberto Pirelli to Giuseppe Volpi di Misurata, Milano, December 3, 1925.
105
Hoover had stated this during his conversation with Lamont: NA-DS, 800.51W89 Italy/
77, Herbert Hoover to Frank B. Kellogg, Washington, D.C., October 29, 1925, with
attachment: Department of Commerce, Memorandum of Debt Settlement between Italy
and the United States. See also ACS-GVM, bk. 11, cit., pp. 45–46.
 5. The Volpi Mission 129

a revision clause, even though it had been accepted in advance in the

delegation’s orders, was the worst and possibly the only setback in the
negotiations from the Italian perspective. Pirelli’s presentation of the numer-
ous arguments against the revision clause, which he portrayed as super-
fluous and even perhaps threatening in the sense that the Americans
might have made use of it to increase their demands in the event of a
clear improvement in the Italian economy, only reinforced the singularity
of this disappointment.
On November 12, de Martino was able to state, in a meeting with his
French counterpart, that only one problem remained unsolved: the calcu-
lation of the total sum to be paid by the Italian government. On this subject
of central importance, things had reached a stalling point. This was
because of Volpi, who, after having been so open in his approach to
offering the Americans all the concessions they could want, now hoped
to play his cards closer to the chest by opening with a much lower offer
than the maximum figures agreed upon during the delegation’s last meet-
ing with Mussolini in Rome.106 After an exchange of offers between the
two delegations, which did not come close to defining the final sum Italy
should repay, Senator Smoot – who was the principal opposition in this
phase – appeared to court a breakdown in the negotiations when he
formulated, as a near ultimatum, a proposal that went further than his
previous offers and named the figure of 606 million dollars at 4.5 percent
interest. At this point, the Italian delegation, according to Pirelli, “suc-
ceeded in communicating the precise sensation that, with the utmost
regrets, the situation was becoming untenable, with the result that the
American Commission was moved to go beyond what it had previously
portrayed as its absolute final limits.”107 Volpi’s strategy here was to
maintain a delicate equilibrium between allowing the Americans to believe
that the Italians were more ready to walk away from the bargaining table
than the Americans were and the truth that the Italians were completely
committed to staying at the table (as his put it, “the accord may be difficult,
but its failure is impossible”).
At the same time, the Italian delegation was exploring every path,
formal and informal, to arrive at the best possible terms. Ambassador
de Martino went to the secretary of state to put his request to him

106
ASMAE-AG, bk. 159, Classe 61, titolo 3, fol. 2, Debiti dell’Italia verso l’America, tel.
2401, Giuseppe Volpi di Misurata to Benito Mussolini, Washington, D.C., November 4,
1925; tel. 2374; tel. 2400.
107
ACS-GVM, bk. 11, cit., p. 16.
130 United States Economic Policy toward Italy

personally.108 Most importantly of all, Dwight Morrow came on the scene

and, as Alberto Pirelli put it, “undertook very effective action with the
utmost discretion.”109 Making use of their close friendship, the Morgan
Bank associate put direct pressure on the president of the United States.110
Coolidge, in his turn, intervened in a resolute manner with Senator Smoot,
probably guaranteeing him the weight of his considerable personal pres-
tige in Smoot’s task of procuring the necessary approval in the Senate.
Coolidge had already made his opinion known with an optimistic decla-
ration from the White House, released at the beginning of the negotiations,
that according to Pirelli “had seemed to many, both Italians and
Americans, somewhat premature.”111 Coolidge would show consistency
in sending a congratulatory message to the president of the Italo-American
Society on the occasion of its banquet in honor of Volpi at the treaty’s
conclusion, in which he expressed “his great satisfaction for the friendly
spirit of compromise and reconciliation on both sides which had charac-
terized the recent negotiations for the settlement of the Italian debt to the
United States and his pleasure that the accord was satisfying to both sides
and as a result demonstrated a spirit of justice toward Italy as well as a
spirit of equity toward the people of the United States.”112
At this point the Italian delegation was still making utmost use of all
possible alliances in American society, conscious as it was that the game
would not be played only at the bargaining table. For this reason, the
Archbishop of San Francisco, Hanna, and the Holy See’s delegate in
Washington became the spokesmen of the Catholic world, which had
already shown its sympathy for Mussolini and Fascist Italy on numerous
occasions.113 Further, within the Commission, which had a bipartisan
makeup following American tradition, the Democrats had “shown them-
selves throughout the negotiations to be notably favorable to a generous
settlement,” perhaps in order to force the Republican administration to
publicly water down its isolationism. They undertook to secure the
endorsement of the Hearst press – all the more meaningful since its

108
NA-DS, 800.51W89 Italy/84, Frank B. Kellogg, Conversation with the Ambassador
(Nobile Giacomo de Martino), Washington, D.C., November 6, 1925.
109
ACS-GVM, bk. 11, cit., p. 20.
110
Giovanni Fummi, Interview.
111
ACS-GVM, bk. 11, cit., p. 20.
112
Ibid., pp. 6–7. The original text is in HUGSBA-TWL, 433, Calvin Coolidge to Thomas
W. Lamont, Washington, D.C., November 21, 1925.
113
On the reactions among Catholics to the Fascist regime, see W. B. Smith, The Attitude of
American Catholics toward Italian Fascism between the Two World Wars, unpublished
thesis, Catholic University of America, 1962.
 6. Explaining the Accord 131

editorial stance was usually fanatically isolationist (although it was also

fervidly pro-Fascist) – as well as the endorsement of the American
Federation of Labor. That sizable union, which had never been particu-
larly anti-Fascist,114 expressed to Coolidge its consent to an accord giving
Italy favorable terms, probably because it saw its interest in protecting an
important export market for American goods, which would have positive
effects on the employment rate in the United States.115
In truth, the stalling point in the negotiations was also due to the internal
contradictions in the American delegation, which was resolved only in a
private meeting between Mellon, Hoover, and Smoot. Contrary to the
suppositions of the French embassy, typical of the uncertain atmosphere
still reigning outside, the disagreements were not strong enough to endanger
the accord itself; they had to do instead with the most opportune form of its
terms. But on this question the division between Mellon and Hoover would
become significant for the whole process. The conflict between the two
major personalities of the commission produced two opposing factions in
the group: Kellogg, Smoot, the Democratic deputy Crisp, and Burton sided
with Hoover, while only the other Democrat, Hurley, and Olney sided with
Andrew Mellon.116 The secretary of the treasury proposed to conclude the
negotiations offering the Italian delegation terms founded on extremely
limited payments on the capital for the first five years, with successive
increases on the same schedule as Great Britain’s settlement specified; in
the meantime, the interest would be very modest in sum but would also
increase with time, from a minimum of 0.25 percent in the first ten years to a
maximum of 2 percent in the final seven years. Hoover’s proposal differed in
one important point: the first ten years of payments would include no
interest, but the later amounts would be calculated on the basis of two
elements: (1) the effects of a tax increase on the internal stability of Italy,
and (2) the effects of currency transfers on the stability of the lira.

6. explaining the accord

The proposals represented two different concepts not only of the relations
between Italy and the United States, but more generally of the proper road

114
Diggins, pp. 169–172.
115
ACS-GVM, bk. 11, cit., pp. 18–19.
116
“This last draft [the definitive one] won out only because Mellon, with his authority and
showing great tact, convinced the Commission to authorize him to submit two proposals for
the Italian delegation to choose between, thus giving the Italian delegation the chance to weigh
in against Hoover’s proposal and in favor of the definitive settlement.” Ibid., pp. 24–25.
132 United States Economic Policy toward Italy

for American capital penetration in Europe. Mellon argued that the

absence of a definitive accord would damage Italy’s credit rating. In a
later meeting with Dwight Morrow, he explained in a detailed and con-
vincing manner his reasons for taking a strong interest in Italy’s credit. The
two chatted for five or ten minutes one evening when Morrow dined at
Senator Edge’s house and Mellon was there, and Mellon said that, regard-
ing the congressional ratification, he would prefer it if the Italians accepted
Hoover’s proposal since it did not deal with the problem of interest rates.
But on the issue of Italy and its good credit, he was certain that it would be
disadvantageous not to finalize a deal. A conditional accord would leave
open doubts that would plague anyone who might in the future lend to
Italy. He seemed to imagine some future American cabinet member who
would try to meddle in Italy’s internal fiscal affairs, perhaps attempting to
substitute the regular obligation with some contingent request by the
United States. He showed great esteem for Italy’s future and the compe-
tence of its representatives in the negotiations. His only doubt was the
problem of who could succeed Mussolini without causing difficulties.117
In other words, what concerned Mellon was not, naturally, the sover-
eignty of the Italian people or their government, but the eventual obstacles
that a temporary solution to the war debt question might produce to a
normal credit relationship between Italy and all those, banks and bond
investors, who might wish to become Italy’s lenders. An accord that left
open the future possibility of revisions based on unpredictable developments
in the economic situation would introduce an element of uncertainty in the
Italian payment system that would disturb American bankers as well.
Mellon spoke accurately for the banking interests that stood behind him;
their intent was to cut all the red tape remaining in their path since the end of
the First World War and slow the development of new financial relations
between the United States and Europe. Since these were the interests dom-
inating the American economy, especially in terms of planning the American
expansion into other markets, it would be wrong to believe that Mellon (and
the partners of Morgan Bank he used, not coincidentally, as a channel of
informal communication to the financial policy makers of the Fascist
regime) represented a mere sectarian interest trying to preserve future com-
missions and fees for bankers. This vision of a stabilizing and expansionist
plan toward Europe was based on an awareness of the by now dominant
weight of the American production system and, therefore, American capital.
What distinguished this vision from that of men like Hoover, closer to the

117
AC-DM, Dwight Morrow, Memorandum, Washington, D.C., November 12, 1925, p. 4.
 6. Explaining the Accord 133

interests of the exporters and the manufacturers, was a greater understand-

ing of the growing hegemony of America, of which bankers had a better
overview from their Wall Street vantage point. This greater understanding
also led to a lesser desire for immediate control of conditions, structures of
dependency, and forms of extortion. They thought that a stabilized Europe,
linked to a monetary system in which they would have an ever more
dominant role, would best serve the long-term interests of American capital-
ism, not the rigid subordination of loans to commercial concessions, the
immediate construction of its own banking network to compete with Great
Britain’s, or the use of the war debt as a coercive instrument. Mellon and the
House of Morgan had faith in Mussolini because he guaranteed precisely
that social stability and cooperative attitude toward their plans for system-
atizing the international economy in order to secure the best conditions for
American expansion that they needed for long-term success. The continuous
concern of men like Mellon for Mussolini’s health and succession derived
from the fear that, without his leadership, social tensions could reemerge
either in the form of Bolshevik subversives or ultranationalist and anti-
capitalist Fascists and endanger the stability they needed.
Hoover too, however, had been consistent in his proposals. They also
presented some advantages for Italy, from a strictly economic point of
view, since the ten-year deferral of interest payments meant that, among
other things, from the sixth to the tenth year (that is, after a very short time)
the Italian government would have saved $2,500,000, as Morrow
observed. In fact, in a memorandum criticizing the final accord, prepared
by Senator Borah’s office, it was correctly noted that it could be of great
benefit to the debtor to have a deferral of payments. With the passing of
time, the probability increased that some new circumstance would develop
to prevent the payment of the planned installments.118 But this economic
advantage had a political price that the Italian delegation had not missed.
The disagreement between Hoover and Mellon had been resolved with the
wise decision to allow the Italians to choose between the two alternatives.
Indeed, Hoover was careful to ask Morrow to intercede on his behalf to
encourage the Italians to choose his proposal.119 Morrow, who had helped
push the negotiations forward through his meetings with Coolidge, and
who was if anything more inclined to favor Mellon’s proposal, for obvious
reasons, avoided this action and therefore limited himself to noting the
decision taken when, at seven o’clock in the evening, Fummi came to see him

118
LC-WEB, bk. 542–547, Debt Settlements (unsigned, undated memorandum).
119
AC-DM, D. Morrow; ACS-GVM, bk. 11, p. 24.
134 United States Economic Policy toward Italy

and told him that the Italians were unanimous in their acceptance of
Mellon’s proposal. They had a great faith in their country and a strong
belief that, when the issue came back up in ten years, the Americans would
surely want more than one-eighth of 1 percent, so it would be embarrassing
for Italy’s credit to have to have a debate over its ability to pay. Further, the
Italians, like the French, thought that the entire issue of debt consolidation
had been used by England and the United States (of course, only with the
best motives) for political maneuvering. They resented the continual
demands made on them in return for favorable terms and feared interference
in their foreign policy, or even their domestic affairs, as a price for a good
deal. Morrow thought that this fear was especially directed toward Hoover.
The Italians claimed to respect his own certainty as to his ability to design the
right policies for Europe; but it seemed that the Italians thought Mellon’s
offer was the one more likely to win approval in Italy, because a precise and
definitive solution was considered, in Italy as in France, the necessary con-
dition for reform of the internal financial situation as well.120
Clearly there was no problem in “getting the accord passed” in Italy, at
least not in the sense Morrow had in mind, and the faith in the Italian
economy professed by Fummi was of mostly propaganda value, and in any
case had no decisive influence. Yet things were more or less just as Fummi
described them. Volpi and his colleagues were basically concerned with
Hoover’s ambition – reported to them by his political adversaries – “to
solve the problem of the financial reconstruction of Europe himself once he
became the president of the United States.” Above all, the possibility of an
accord that left the problem of interest unresolved had been considered in
the course of the preliminary discussions that took place before the dele-
gation left for the United States. The Italian government had been and
remained favorable to such an accord only as a last resort or in the case that
payments on the capital were so drastically reduced as to risk a future, less
favorable definition of the interest rates. Since this had not occurred, and
the interest rates in the Mellon proposal were fairly favorable, the Italian
delegation had no doubts about their choice of proposals. In more general
terms, the most important consideration had become the need for a defin-
itive settlement in order to move forward in securing more credit for Italy.
The pursuit of an accord that was compatible with the series of loans
Mussolini and Volpi were negotiating in the United States meant that the
Italians had from the beginning sought an understanding with Mellon and
the bankers more than with Herbert Hoover.121

120
AC-DM, D. Morrow, pp. 2–3.
121
ACS-GVM, bk. 11, pp. 22–23.
 6. Explaining the Accord 135

Since Morrow and Lamont, upon their consultation by telephone, found

no reason to take exception to the delegation’s choice, at the next meeting
the settlement was finalized. The total sum to be repaid amounted to
$2,042,000,000, calculated by taking the original loan amount, subtracting
the payments already made, and adding interest of 4.5 percent until
December 15, 1922, and of 3 percent from then until June 15, 1925.
Following Mellon’s proposal, this sum was to be repaid in sixty-two annual
installments, like the American loan to Great Britain, but with the first five
years of payments to be a minimum of $5 million. In the following ten years,
the interest rate would be one-eighth of 1 percent, increasing each decade by
one quarter of 1 percent, to reach a final rate of 1 percent. Only in the final
seven years would the interest reach the amount of 2 percent.122
This accord was an indubitable financial and political victory for Fascist
Italy and, in particular, for the delegation that had negotiated it. The terms
were substantially better than predicted during the preparatory meeting in
Rome to create the delegation’s orders. In particular, the interest rates and
the amounts of the first five annual payments were more favorable than
planned for (Volpi had been authorized to accept an annual sum of $8
million). Above all, the political success scored by Italy became clear in
comparison with the accords reached between the United States and other
debtor nations. The negotiated payments were equivalent to the cancella-
tion of 80.4 percent of the debt, with an average interest rate of 0.4 percent.
This was not far from the figure in Italy’s initial proposal that had been
rejected by the United States, in which the cancellation of 90 percent of the
debt had been requested. But it was even more significant compared with
the 30 percent remission obtained by Great Britain with an average interest
of 3.3 percent, the 50 percent negotiated just previously by Belgium, and
the 60.3 percent with an average interest rate of 1.6 percent that France
would bargain for in the Mellon-Berger accord the following April 1926.
This result, which would cause some embarrassment for the American
government in its relations with other debtor nations (and especially
Belgium, which had concluded a far less favorable settlement only a few
months earlier),123 was attributable to multiple factors. There is no doubt

122
J. M. Berutti, p. 185.
123
For the comparison of the accords, see LC-WEB, bk. 542–547, Debt Settlements. On the
American embarrassment, see ACS-GVM, bk. 11, p. 11: “It was necessary to overcome the
difficulties created by the verbal assurance the Americans had given the Belgians that no one
would secure more favorable terms than those conceded to them, as well as the American
reluctance to give Italy concessions that might affect the French negotiations when they
restarted.” On the Belgian reaction, NA-DS, 800.51W89 Italy/106, Frank Kellogg,
Conversation with the Belgian Ambassador, Washington, D.C., November 24, 1925.
136 United States Economic Policy toward Italy

that Mussolini showed clarity in his pursuit of the terms when, years
before, he had taken the necessary steps to remove all the obstacles and
possible additional costs to the settlement. Volpi also demonstrated an
impressive negotiating strategy in his care to appear open and frank with
his interlocutors, while at the same time showing the cunning of a Venetian
merchant in guiding the final calculation of the payment amounts. But
most determinative was the will of the United States to make its capital
available to Italy through a prompt and favorable accord. In this sense, the
decisive weight was provided by the financial and political esteem won by
the Fascist regime and specifically by Mussolini himself in American
financial circles as well as in all those areas of public opinion he could
reach through their media networks. Mussolini and the Fascist regime had
this access due to the significant role played by the partners of Morgan
Bank, first as the advisers to the Italian government and then as wielders of
influence in favor of Italy on important figures such as Herbert Hoover, to
convince them to embrace concessions. There is no point in judging their
actions by the standards of abstract constitutional principles or political
ethics. It is obvious that in many cases they went beyond the bounds of the
formal role of a private bank, no matter how illustrious (their caution and
discretion demonstrate that they were perfectly aware of this). They
actively intervened in the negotiations over the war debt, and their role
was obviously not that of private citizens who take orders from the official
representatives of their nation to support their government’s foreign policy
relations. But these formal considerations had little to do with the reality of
the ties between Coolidge’s cabinet and the most important exponents of
American business. The de facto power of these businessmen was further
reinforced by the isolationist tendencies present in Congress and American
public opinion, which did not actually result in the breaking off of the
relationship between the United States and Europe, but instead meant that
the management of that relationship was left to informal channels. These
channels, of course, were dominated by the New York financial establish-
ment and in particular by the House of Morgan. Government officials were
left to fall back on merely distinguishing which of the bankers’ interna-
tional initiatives might raise alarm in Congress and managing their effects
as best they could. All these initiatives had in common the overall goal of
monetary stabilization (as well as political and social stabilization to
facilitate it) in Europe as the precondition for the profitable expansion of
American capital into Europe’s markets. Furthermore, all of the partici-
pants, from Secretary of Commerce Herbert Hoover on down, were aware
that, in the words of Alberto Pirelli,
 6. Explaining the Accord 137

. . . the importance to America of commercial relations with Italy is much greater

than the financial need to charge interest on the war debt.
Italy is a client worth around 300 million dollars a year for America, while
America is a client of Italy’s worth about a quarter of that sum. The situations of
France and Belgium are different in that they export to America about half as much
as they import.124

Even if the American negotiators did not, as is likely, take seriously the
veiled threats of the Italian delegates when they observed that the Soviet Union
had insistently offered Italy the purchase of grain and coal, it did remain in the
American interest to reinforce the capitalist reconstruction of the Italian
economy and to support all those who assumed the responsibility for carrying
out that reconstruction.125 Upon close examination, in regard to the intentions
of the Coolidge administration and its closest allies in the world of finance, the
war debt settlement was meant to open the doors for a closer economic
cooperation that would offer the United States a primary role in the Italian
economy. If the settlement had failed and this objective had not been achieved,
it would not have been only Mussolini and his government that suffered.
But even these considerations do not sufficiently explain the particular
level of favor Italy enjoyed, given that other European countries were also
part of the same American plan for capital expansion. Pirelli may have been
correct in supposing that by the end of negotiations the American commis-
sion was plagued by the worry that they had gone too far in their conces-
sions and might not be able to secure congressional ratification and public
consensus for the accord. One might observe that the effort put forth by
Mellon and the Morgan Bank, and even Coolidge himself, in convincing the
press and the political establishment that the accord was necessary and that
the Italians were honestly committed to honoring the debt even though their
capacity to pay was very limited had made the stakes very high for a
successful settlement. But it was so much more the fear of a failed negotia-
tion and its negative effects that motivated the American commission
members. Certainly, after the failure to negotiate with Caillaux, another
failure, with the Italian delegation, would have had unpleasant effects on
both the domestic and international context. The Coolidge administration
might have been accused of excessive intransigence by the Democratic
opposition still loyal to Wilsonian ideals; and the governments of Europe
might have been moved to join together as a united front of debtor nations
(as the Italian delegates had sometimes intimated would occur).126 But this

124
ACS-GVM, bk. 11, p. 38.
125
Ibid. p. 41.
126
AALP, 13.300, Alberto Pirelli to Giovanni Battista Pirelli.
138 United States Economic Policy toward Italy

was not the main point. Those interests most favorable to the accord, on
both sides, were so strong as to make any rupture in negotiations very
unlikely. It was rather the commitment of the American negotiators in
successfully predisposing the American public and political establishment
to a positive outcome that then forced them to produce the promised out-
come and to be as generous as possible in their terms. In other words, except
for some cold feet at the last minute, the propaganda spread by the com-
mission had done its job too well: the American negotiators had deprived
themselves of their own best argument for resisting the demands of the
Italians by removing any fear that the isolationists would oppose the
settlement.
Still, in his meetings with Mellon and Hoover on the eve of the accord’s
signing, Morrow was struck by the impression of both men that congres-
sional ratification was still in doubt.127 In reality, such last-minute worries
on the part of Coolidge’s cabinet members were revealed to be unfounded.
The press reactions showed that a far more positive atmosphere domi-
nated. The New York Times, in an editorial, declared that the accord with
Italy was a fait accompli that many experienced negotiators believed was
the best feasible solution and criticized those Democratic members of
Congress who, contrary to the recommendation of the Democratic com-
mission members, opposed it. This opposition would not help their party
return to power and made it appear that obstructionism was the only
action the party took.128 For a newspaper usually close to Democratic
Party positions, these were strong criticisms.
In the following months there was a debate in both the Senate and the
House of Representatives whose verbal violence made Ambassador de
Martino’s heart skip a beat more than once, given his unfamiliarity with
constitutional processes and the current political rhetoric of the United
States.129 Knowing what he did about the behind-the-scenes machinations
of the Morgan partners, de Martino was given a particular scare by
Missouri Senator James Reed’s call for an investigative commission to
look into the use of inappropriate private influence on the World War
Foreign Debt Commission, in the course of which Reed made explicit
reference to the role of the House of Morgan.130 Reed, who was sure he

127
AC-DM, D. Morrow, p. 4.
128
New York Times, November 30, 1925.
129
NA-DS, 800.51W89 Italy/110, Frank B. Kellogg, Conversation with the Italian
Ambassador (Nobile Giacomo de Martino), Washington, D.C., December 17, 1925.
130
NA-DS, 800.51W89 Italy/110, Frank B. Kellogg, Conversation with the Italian
Ambassador (Nobile Giacomo de Martino), Washington, D.C., December 17, 1925: The
 6. Explaining the Accord 139

was in the right, and justifiably so, found himself immediately under attack
by the Chicago Daily News, which derided his proposal as “futile and
absurd” and made the prediction – correctly, as it turned out – that it
would be rejected by the Senate Foreign Relations Committeee.131
Events proved Secretary of State Kellogg right in his reassurances to de
Martino that senators’ speeches rarely had any concrete results.132 The
Southern Democrats in the Congress, strongly anti-Catholic and with
almost no Italian constituents, were the main source of opposition, but
their anti-Fascist arguments were discredited by the endorsement of people
such as Senator Heflin from Alabama, a well-known supporter of the Ku
Klux Klan. Even the noted progressives William Borah from Idaho (who
actually was more passive than expected, due to the special attention
lavished on him by Italian public relations personnel133) and Hiram
Johnson of California (old archenemy of Woodrow Wilson) – joined by
the future creator of the Tennessee Valley Authority, George Norris of
Nebraska – were careful not to focus attention on the attempts of the anti-
Fascist minority of the Italo-American community to explain the true
political nature of the Fascist regime, instead preferring to repeat the
same old arguments of isolationism. The persuasive power of those few
men willing to attack the political significance of the accord – like the
Democratic member of the House from Illinois, William Rainey – was
diminished by the congressional habit of privileging invective over political
reasoning. According to Rainey, the accord should have been rejected
because Mussolini “constituted the most cruel, murderous force since the
ambassador seemed very worried by the speeches of Senators Reed, Norris, and Howell.
Kellogg had to reassure him that such speeches were commonplace in the Senate and that it
was natural for there to be opposition, but that in his opinion it would not make a
difference.
131
Chicago Daily News, November 30, 1925.
132
NA-DS, 800.51W89 Italy/110, Frank B. Kellogg, Conversation with the Italian
Ambassador (Nobile Giacomo de Martino), Washington, D.C., December 17, 1925:
He wanted to know what consequences Reed’s motion would have to verify if any foreign
governments, citizens, or business interests had funded or pressured U.S. officials, espe-
cially senators. Kellogg reassured him that he need not worry; nothing like that had
happened. The only direct aid Italy had furnished in the matter was the report it had given
the commission, and the other countries that had gone through the same process had done
the same thing. Evidently Kellogg either did not know or pretended not to know about the
role played by Morrow and Lamont for the House of Morgan behind the scenes of the
negotiations; MHS-FBK, bk. 5, Henry P. Fletcher to Frank B. Kellogg, Rome, April 23,
1926, on the Roman reactions to the American Senate’s debates, wrote that the speeches
against ratification were not as bad as de Martino had feared but were nonetheless not
appreciated in Rome.
133
Dino Grandi, interview; ACS-GVM, relazione Pirelli p. 21; LC-WEB, bk. 542–547,
Settlements.
140 United States Economic Policy toward Italy

days of the invisible council of Ten in medieval Venice.”134 Perhaps the

most effective and well-argued opposition came from the future secretary
of state, Cordell Hull of Tennessee.135 In the meantime, the associates of
Morgan Bank were actually still working behind the scenes, providing
those senators with whom they had close relationships, such as James Reed
of Pennsylvania, with the necessary data to defend the settlement.136
The executive branch, from President Coolidge and Secretary of State
Kellogg on down, also watched over the ratification process and did not
hesitate to defend it publicly and energetically. For example, at the request
of Coolidge, Kellogg met on February 4, 1926, with John H. Cowles,
Grand Commander of the Southern Scottish Rite Society of Mason, to
repeat his previous declaration that the U.S. government could not inter-
cede with the Fascist government in favor of Italian Masonry or criticize
the opposition of American Masonry to the ratification of the accord with
Italy. Without mincing words, Kellogg – who was himself a Mason – told
Cowles that he was only damaging the United States, that the accord
contained all that was obtainable, and that anything more might be
beyond Italy’s ability to pay. If they did not ratify this accord, there
would probably not be another opportunity to negotiate a different
one.137 A few days later, President Coolidge, reacting to a letter from
Mellon,138 publicly declared his conviction that not to ratify the accord
would put the financial position of Italy in danger and also seriously
damage American exports. He vociferously criticized the Democrats, nor-
mally in favor of a generous policy on debt settlement, accusing them of
opposing the ratification to serve their own domestic political agenda.139

134
Congressional Record, 69th Cong., 1st Sess., pp. 1977–2005; also cited in Berutti, p. 188.
135
LC-CH. bk. 10, fol. 22, Cordell Hull to B. F. Yoakun, Washington, D.C., November 20,
1925; to Jesse H. Jones, November 20, 1925; to W. E. Chilton, November 23, 1925. All these
letters demonstrate that Hull conducted a true campaign against the accord, which offended
his free trade beliefs inasmuch as the agreed-upon reductions for Italy’s payments were
justified by the commission in relation to high customs tariffs that slowed Italian commerce.
136
AC-DWM, A. H. Sprigge to Dwight W. Morrow, Washington, D.C., February 16, 1926,
in which it shows that the sender had been assigned by Morrow to bring Senator Reed, a
Republican from Pennsylvania, various letters and documentation relating to the accord
with Italy. In the course of the debate, the senator (who should not be confused with the
Democrat from Missouri of the same name who was a determined enemy of the accord)
distinguished himself for his role in supporting the accord’s ratification.
137
MHS-FBK, bk. 12, Frank B. Kellogg to Henry P. Fletcher, Washington, D.C., February 5,
1926. See also John H. Cowles to Frank B. Kellogg, February 4, 1926, and the attached
letter sent to all members of Congress in which the Masonic leader of the Southern States
denounced the persecution of “Italian brothers.”
138
Berutti, p. 194.
139
Ibid., p. 195.
 7. American Investments in Italy 141

In the end, the House of Representatives split down party lines, so that
the strong Republican majority ensured a favorable vote for the Italian
government. On January 15, 1926, the House ratified the accord with 257
votes in favor and 133 against (including only 17 Republicans). The
Senate’s ratification, which took place on April 21, finally closed the
Italian war debt question for good, with 54 votes in favor and 33 against.

7. american investments in italy

The war debt issue had until this point kept the Italian government from
accessing the New York financial market. Actually, the Bank of Italy, with
the help of Morgan Bank, had obtained some forms of limited credit a few
months before the conclusion of the negotiations. On January 31, 1925,
the Bank of Italy had secured a three-month revolving credit line in the
amount of $5 million, guaranteed by $175 million in Treasury bonds at an
interest rate of 5 percent, with a Morgan Bank commission fee of one
quarter of 1 percent.140 Later, in early summer, this credit line was raised
to $50 million, extended not only to the Bank of Italy but also to the Bank
of Naples and the Bank of Sicily, under the same conditions, underwritten
by the state with a special issuance of Treasury bonds for a total value of
$1,250 million. This revolving credit, by now of large dimensions, had the
purpose of “defending the exchange rate, not artificially constricting it
with the risk of further rebounds,” as Bonaldo Stringher wrote to the then
minister of finance Alberto de’ Stefani.141
Still, the Italian government needed funding in forms other than a line of
credit; it needed a true loan in order to increase the hard currency reserves
in the treasury in the medium to long term. A bond issue on the American
market was necessary to achieve this end. As always in these cases, the
operation’s purpose was not only to make more hard currency available
for a specific expense – in this case, the defense of the lira’s value, in order
to eventually stabilize it definitively – but also to furnish tangible proof of
the confidence a financial market as important as New York had in the
Italian state and economy. In addition, it had the ulterior purpose of laying
the necessary premises for an ongoing series of similar operations for the
benefit of other state and municipal entities, public works consortia, and

140
ACS-GVM, bk. 13, fol. 104, Accordo tra la Banca d’Italia e i SIgg. J.P. Morgan and Co. di
New York, January 31, 1925.
141
ACS-GVM, bk. 13, fol. 104, Bonaldo Stringher to Alberto de’ Stefani, Rome, May 25,
1925, attached to Bonaldo Stringher and to Giuseppe Volpi di Misurata, Rome, August
10, 1925.
142 United States Economic Policy toward Italy

those private industries with the most prestige and competitive potential
on the international level. In raising revenue in this way, the campaign of
social, political, and financial restoration would be consolidated and
would crown the efforts of the Fascist government in the person of
Alberto de’ Stefani, whose strictly canonical orthodoxy had guided the
strictly economic and financial actions up to this point. The fact that
Giuseppe Volpi di Misurata – product of a fundamental part of the
entrepreneurial sector, electrical power, as well as a financial expert close
to the Banca Commerciale – had been appointed his successor is evidence
of Mussolini’s intentions. From the technical point of view, Volpi’s nom-
ination demonstrated that the Fascist economic policy was entering a new
phase, in which the capacity to maneuver and enter into contracts at the
international level would be decisive. From the political point of view, it
showed that private industry would be closely associated with government
planning.142
There was a precise deflationary policy, aimed at helping stabilize the
lira and making possible the return to the gold exchange standard and, at
the same time, tapping into American capital. Both plans, which comple-
mented each other, had the ultimate goal of definitively consolidating the
regime, which, since its successful survival of the Matteotti Crisis, was in
need of the clear support of the business and financial establishment of
Italy. This would be not only an economic consolidation, but would also
mean guaranteeing Italian industry social discipline in its labor force and
high-enough profit margins to compensate for any losses from the regime’s
deflationary policy (such as the reduction in salaries resulting from
deflation).
How to best explain the increasing intimacy between Fascism and
American capital? The following may serve:
It was especially important, from the American point of view, that Mussolini
should not align himself with Poincaré on the question of reparations, but should
participate in the politics that produced the Locarno Pact. As for domestic politics,
if Mussolini did not respect the norms of liberal democracy, there were solid
advantages. He had imposed a social peace through the repression of those

142
V. Castronovo, “La storia economica,” in Storia d’Italia dall’Unità a oggi, vol. 1, Turin:
1975, p. 270. For the opposite argument, R. De Felice, “Lineamenti politici della ‘quota
novanta’ attraverso i documenti di Mussolini e di Volpi,” in Nuovo osservatore 1966, no.
30, who maintains that the policy of deflation, carried out by the government but
essentially following Mussolini’s orders in the period 1926–1927, was really the expres-
sion and the confirmation of the autonomy of the regime from the large private economic
concerns.
 7. American Investments in Italy 143

subversive forces that had previously disturbed production and public order. What
is more, he had formed a government that concentrated power in his own hands
and thus avoided inefficiencies and obstacles from parliamentary politics and
public opinion. He was capable of making the economic and administrative deci-
sions necessary to the American financial establishment’s plans (that is, the return
of European currencies to the gold standard).
Mussolini, for his part, understood ever since the seizure of power that the
regime would need to collaborate with American capital and, more in general,
pursue the inclusion of Italy in the international financial community.
The Italian economy needed foreign capital, and American capital was most
abundant and available. Furthermore, the American government’s foreign policy
orientation was not to be directly involved in European controversies. As a result,
American capital would require fewer limits on Italian sovereignty than a similar
relationship with Great Britain, or above all France.143

The urgency of getting this policy under way had only increased while the
necessary preliminary step of settling the war debt was being dealt with, and
now the stabilization of the lira had to be legislated. Castronovo observed:
The weakening of the lira in the second half of 1925 was caused not only by the
increase in the deficit, due mostly to the costly importation of agricultural goods
and comestibles, but also by a major downward turn in its value in international
markets.144

Whatever the origins of this downturn – anti-Fascist attacks as the

regime claimed or, instead, pressure from Anglo-Saxon finance – the lesson
to draw was the necessity to act in a hurry for a definitive strengthening of
Italy’s still-vulnerable position in international relations. The consequence
was not only the necessity of completing the first step of consolidating the
debt, as discussed above, but also taking the second – loans from the
American market – in a short time frame, as soon as the negotiations in
Washington had been successfully concluded. For this reason, first Mario
Alberti and then Alberto Beneduce, who had traveled to Washington along
with the delegation, went to New York to negotiate with the Morgan Bank
in parallel with the Washington talks. In this way it was possible for the
Italian minister of finance to go straight to New York, as soon as Volpi and
Mellon signaled that the war debt settlement was achieved, where he
formalized a $100 million loan to the Italian state. Through a bond
issue, the earlier revolving credit of $50 million was absorbed into this
loan and the other plans for additional loans were given the green light.

143
G. G. Migone, “La stabilzzazione della lira: la finanza americana e Mussolini,” Rivista di
storia contemporanea no. 2 (1973).
144
Castronovo, p. 271.
144 United States Economic Policy toward Italy

The bond certificate for “$100,000,000 Kingdom of Italy, external loan

sinking fund, 7% gold bonds” set terms that remained essentially the same
for future issuances.145
The bonds for the $100 million loan were sold at 94.5 percent, with an
interest rate of 7.48 percent, redeemable in 1941, and were guaranteed by
a sinking fund, provided by the Italian state, with yearly payments of
$1,500,000. The certificate also contained a statement, authorized by
Minister Volpi, that emphasized state revenue, the purpose of the issue
(“The Italian government has at its disposition sufficient resources and
receipts for its own operating costs, internal and external. It proposed,
therefore, not to utilize any portion of the loan amount for ordinary
spending, but to reserve the entire amount for currency stabilization, in
order to make possible the final steps of the government’s plan for fiscal
and financial policy, of which a completely stable currency constituted a
vital aspect”), and the amount of its internal and foreign debt, with an
explicit reference to the accord made in Washington. It is notable that the
commitment to moving forward with the stabilization of the lira, insisted
upon by the partners of Morgan Bank, was mentioned even in the official
bond documentation, albeit in a somewhat obscure way. The equivocal
statement regarding the renunciation of use of the loan provoked some
arguments with the Morgan Bank, since Volpi would have recourse to the
monies in order to defend the lira in the downturn. The banking consor-
tium that presented the loan was led by J.P. Morgan & Co. and included
nine other of the most important investment banks of the United States.146
Altogether, the loans’ maturities varied from ten to thirty years, with an
average maturity of more than twenty years. Of the twenty-two loans sold
in the American market before the economic crisis, sixteen had an interest
rate set at 7 percent, four at 6.5 percent, and two at 6 percent.
The loans were contracted starting in 1925, with the largest number in
1927, the year of the legal stabilization of the lira. The following table
offers a picture of their chronology and, partially, of their average effective
yield, which allows a calculation of their effective cost for the Italian
economy. It is worth noting that the electric companies, the economic
provenance of Volpi, took precedence. The loan to Edison was concluded
at almost exactly the same time as the government loan.

145
Copies of nearly all the bond certificates are in AGF, fol. Pre-War Correspondence,
including the one cited.
146
First National Bank, New York; The National City Company, New York; Guaranty
Company of New York; Bankers Trust Company, New York; Harris, Forbes & Co.; Lee,
Higginson & Co.; Kidder, Peabody & Co.; Brown Brothers & Co.; Halsey, Stuart & Co. Inc.
 7. American Investments in Italy 145

Effective Yield of Italian Bonds Sold on the United States Market (in
chronological order)

Effective Average Yield

As of
Number Nominal On issuance December 5, Percentage
Year of loans value date 1927 change in yield
1925 2 110,000,000 7.24 7.20 −0.01
1926 5 43,400,000 7.44 7.33 −0.02
1927 11 118,000,000 7.10 7.17 −0.01
1928 5 45,150,000 6.40
Total 316,550,000

Sources: On the period 1925–1927, “Regia Ambasciata d’Italia a Washington,

Ufficio del Consigliere Commerciale,” Riepilogo dei prestiti italiani collocati
pubblicamente negli Stati Uniti dal 1925 al dicembre 1927 (ACS-GVM, bk. 13,
fol. 161: Nuovi prestiti statali). For a summary of the earlier dates and following
years, until 1934, see Bruno Rovere, Le obbligazioni italiane in dollari. L’assieme
delle emissioni estere negli Stati Uniti e il riflesso sul loro andamento della politica
finanziaria fascista, New York: 1935.

Some data from another source allow the reconstruction of a complete

picture of the performance of American credit in Italy over a longer period
(from December 31, 1914, to December 31, 1935) – in the table that follows.
Under the heading “total” are included the aggregate nominal values of the
bonds issued in the United States in dollars. Private loans not issued as public
bonds are included where their values could be identified. Under the heading
“net” are the total nominal values, less the annual sums retired.
These data, in which loans to the Vatican play only a trivial role,
confirm that the years 1925–1928 were absolutely crucial, while any
other loans of substantial amounts were short term and mostly concen-
trated in the war years, with a modest aftereffect continuing into the
postwar period. They also demonstrate that the economic crisis created a
nearly total stoppage of the flow of capital into Italy.
The data indicate (as the commercial councillor of the Italian Embassy
in Washington, Romolo Angelone, underlined), first of all, the reduction in
the cost of credit. For a bond of $100 million issued at 7.48 percent in
1926, the costs would fall to 7.44 percent, in 1927 to 7.10 percent, and
finally in 1928 to about 6.3 percent. Overall, the interest rates varied from
a low of 6 percent to a high of 7.69 percent. As a comparison, in the same
period the interest rates of foreign bonds sold on the New York market
146 United States Economic Policy toward Italy

Indebtedness of Italy to United States, Nominal Value

(in millions of dollars)

Net totals
Year Short term Long term Short term Long term
1915 25.0 − 25.0 −
1917 − − −25.0 −
1920 11.3 − 11.3 −
1923 2.0 − 2.0 −
1924 − 4.0 − 4.0
1925 − 111.0 −11.3 111.6
1926 1.5 38.2 1.5 37.5
1927 − 120.2 − 117.6
1928 4.0 52.4 0.5 11.6
1929 − 8.1 −4.0 1.2
1930 − 10.0 − −6.3
1931 − − − −13.8
1932 − − − −13.8
1933 − − − −13.8
1934 − − − −13.8
1935 − − − −13.8
At the end of 1935 43.8 343.9 − 239.6

Source: C. Lewis, assisted by K. T. Schlottebeck, America’s Stake in International

Investments, Washington, D.C.: 1938, p. 621.

varied from a low of 5.61 percent (the average for Australian bonds) to a
high of 8.09 percent (the average for Czechoslovakian bonds).
There was an improvement in Italian bonds over the period from
December 1925 to December 1927, although the improvement was more
marked for the first bonds, which were better able to be absorbed by investors
in the time calculated.147
Before analyzing the bonds by sector, the aggregate of Italian borrowing
throughout the entire period should be considered; this includes the market
listings from December 5, 1927, the redemption limits, the effective yield,
and the nominal amount of the bond.
Given these figures, it is possible to categorize the various loans on the
basis of the type of borrowing institution. The years analyzed are:
1925–1929

(1) Government bonds 100,000,000

(2) Municipal bonds 60,000,000

147
These figures and analyses are in Riepilogo of the Regia Ambasciata, p. 3. See below, pp.
148–9
 7. American Investments in Italy 147

(3) Public utility bonds 107,250,000

(4) Industrial bonds 51,300,000

Source: C. Lewis, assisted by K. T. Schlottebeck,

America’s Stake in International Investments,
Washington, D.C.: 1938.

From this table, it is clear that the bonds were divided nearly equally
between government bonds (both national and municipal) and bonds for
industry. If this last category is further subdivided into industrial sectors,
the following table results:

(1) Metalworking (automobiles and 24,5000,000

electromechanical industry)
(2) Chemical (rubber and artificial materials) 9,400,000
(3) Hydroelectric 95,250,000
(4) Shipping and transport 14,400,400
(5) Mining 10,000,000

Source: C. Lewis, assisted by K. T. Schlottebeck, America’s Stake in

International Investments, Washington, D.C.: 1938.

Castronovo observed that in 1925 it was again the electrical industry

“just as in the Giolittian period” – although now far more sure of itself
after the failure of reforms aimed at exploiting hydraulic power – that was
“the pathbreaker in plant renewal and mobilization of investment fund-
ing.”148 This linkage was reflected in the amount of monies that the
electrical sector managed to capture for itself on the American market. If
the hydroelectrical industry bonds are added to those of the electrome-
chanical sector, that sector reaches nearly $110,000,000 total, a substan-
tial sum explained not only by the dynamism of the sector but also by the
fact that Giuseppe Volpi di Misurata was the minister of finance and was
thus the leader of negotiations with the American banking investors
involved. The various American business groups founded for the purpose
by the Italian electric companies represented one of many elements of
continuity in the relations between American and Italian business, stretch-
ing beyond the war years.149 Fiat, and probably also Pirelli and Snia, had
recourse to the American market not so much for urgent funding needs as
for the prestige that they derived from having hard currency at their
disposal.150

148
Castronovo, p. 266.
149
M. Fini, Gli americani in Italia, Milano: 1976.
150
Castronovo, p. 433.
 Summary of Italian Bonds Issued Publicly in the United States
December 1925–December 1929
Description Redemption limits

Market value as of
December 5 1927
Year of issuance

Issuing price
Interest rate
Borrower

Maturity
Number

Year
A) Government loans
1 1925 Regio Tesoro 7% 1951 94½ 97½ 1941
B) Municipal loans
1 1927 Città di Roma 6½ 1952 91 90½
58 1937
2 1927 Città di Milano 6½ 1952 92 90½
38 1937

C) Public utilities loans

1 1926 Istituto Pubblica
Utilità 7% 1952 93 94½ 1941
2 1927 Consorzio Credito (A) 7% 1937 96½ 95 (1)
Marittimo (B) 7% 1947 95½ 94 1937
4 1926 Società Unione
Esercizi Elettrici 7% 1956 92½ 98½
38 1936
5 1927 Società El. Lombarda 7% 1952 94 94 1931
6 1927 Società Elettrica Isarco 7% 1952 93½ 91 1937
7 1927 Società Adriatica di
Elettricità 7% 1952 96 94 1932
International Power Securities issuances
8 c) 1925 El. Generale Edison 6½ 1955 93¾ 91¾ 1930
9 d) 1926 Com. Gas Torino 7 1936 100 97¼ 1930
10 e) 1927 El. Generale Edison 7 1957 96,37 95¼ 1932
11 f) 1927 El. Gen. Adamello 7 1952 95,50 94¾ 1931

12 1928– Italian Superpower 6 1963

1929 Corporation
D) Industrial loans
1 1926 Società Fiat 7 1946 93 100½ (1)
2 1926 Società di navigazione
Lloyd Sabaudo 7 1930–41 100–96 98–94 (1)
3 1927 Società Montecatini 7 1937 96,50 99 1932
4 1927 Società Pirelli 7 1952 98 98¼ 1937

5 1928 General Rayon Co. 6 1948

Ltd. (Snia)
6 1928 Terni 6½ 1953
7 1928 Ercole Marelli 6½ 1953
8 1929 Breda 7 1954

(1) Can even be reimbursed immediately

Sources: For the period 1925–1927, “Regia Ambasciata d’Italia a Washington, Ufficio del Consigliere
Commerciale,” Riepilogo dei prestiti italiani collocate pubblicamente negli Stati Uniti dal 1925 al
dicembre 1927 (ACS-GVM, bk. 13, fol. 161: Nuovi prestiti statali). For the following years, Rovere,
pp. 303–306.
 Summary of Italian Bonds Issued Publicly in the United States
December 1925–December 1929
Effective yield Amounts outstanding

As of December 5

Return yield from

December 1 1927
Percent variation
in effective yield

Nominal amount

payments before

Remaining debt
as of December
On date of
Maximum

1 1927
issued
price

issue

1927
100 7,48 7,22 −0,03 100.000.000 3.105.000 96.895.000

100 7,25 7,33 30.000.000 .............. 30.000.000

100 7,19 7,34 30.000.000 .............. 30.000.000
7,22 7,33 +0,01 60.000.000 .............. 60.000.000

105 7,60 7,50 20.000.000 491.000 19.509.000

102½ 7,50 7,68 4.500.000 159.000 4.341.000
102½ 7,40 7,61 7.500.000 88.000 7.412.000

105 7,62½ 7,15 6.000.000 65.000 5.935.000

105 7,50 7,55 6.000.000 95.000 5.905.000
105 7,60 7,82 5.000.000 .............. 5.000.000

102½ 7,35 7,54 5.000.000 5.000.000

107 7,00 7,18 10.000.000 235.000 9.765.000

105 7,00 7,34 5.000.000 100.000 4.900.000
105 7,30 7,35 10.000.000 51.000 9.949.000
105 7,40 7,44 6.000.000 46.000 5.954.000
7,39 7,38 .............. 85.000.000 1.330.000 83.670.000
22.250.000

105 7,69 6,92 10.000.000 292.000 9.708.000

101–104 7–7,45 7,75 2.400.000 .............. 2.400.000

102 7,50 7,05 10.000.000 .............. 10.000.000
105 7,15 7,13 4.000.000 35.000 3.965.000
7,41 7,21 −0,04 26.400.000 327.000 26.073.000

5.400.000
12.000.000
2.500.000
5.000.000
150 United States Economic Policy toward Italy

8. the morgan bank and investments

The succession of bonds issued, the ways the monies were divided, the
sectors thus affected, and the equilibrium between public and private bene-
ficiaries in borrowing together paint a fairly precise picture of the economic
needs of Italian industry and institutions. It remains to be analyzed how this
considerable influx of dollars, concentrated in the few years before the
economic crisis and the worsening of political tensions in Europe, was
regulated and controlled by the bank that played the indispensable role of
intermediary between borrowers and the investing public. The Morgan
Bank had already had an essential part in the war debt negotiations, emerg-
ing as a potent political force. Now, regarding the bond issuances, it was
again the Morgan Bank that, as fiscal agent of the Italian government,
headed the bank consortia backing the great majority of the most important
loans of the period. The most significant of these, from both a qualitative and
political point of view, was the government bond of November 1925.
The Morgan Bank’s services naturally carried a commission, to be paid
regardless of the eventual success of the bond sale and the interest collected
by the investors or the bank itself. When in 1932, by that time in an
unfavorable political climate for investment banks and especially for the
House of Morgan, the Senate Committee on Finance opened an investiga-
tion into the foreign bonds issued and relative profits made by banks, the
House of Morgan submitted the following data to the committee regarding
the Italian bonds:

Borrower Gross Profit Net Profit

Italian government 100,000,000 775,139 759,126
Credit consortium for public works 4,500,000 94,352 7,869
Fiat 10,000,000 133,212 126,234
Pirelli 4,000,000 60,039 44,282

Total 118,500,000 1,062,742 937,511

Source: New York Herald Tribune, February 1, 1932, p. 1.

Assuming the House of Morgan’s figures were accurate, it had issued

foreign bonds through the consortia it headed from the end of the First World
War until 1932 in the total amount of $1,875,578,000, for a net profit of
$10,071,903. The bond deals it had put together for Italy were therefore less
than a tenth of its total profits in the area of foreign bond issues.151

151
New York Herald Tribune, February 1, 1932, p. 1.
 8. The Morgan Bank and Investments 151

This significant figure serves to explain both the attention that the
House of Morgan lavished on Italian affairs and the type of role it had
come to play in those affairs, with all this implied in terms of the relation-
ship with the Fascist regime and the motivation to build a positive image
for the regime in America.
It would nonetheless be a serious error to reduce the entire issue to a
narrow focus on the business interests linking bankers and their most
important clients. It is necessary to examine more closely the relationship
that developed between the Fascist government and the House of Morgan
in order to understand the reasons it became so influential and just what
kinds of services were really performed for the regime.
There were two basic levels of the relationship between the House of
Morgan and its various European government clients: on the one hand,
those inherent to the normal activities conducted between creditor and
borrower; on the other, a form of political and technical advising that the
bank offered to the government-client on the most important financial
questions faced by that state. The relationship with the Fascist regime
was typical in this regard. After the first loan of $50 million, secured before
the Washington accord was complete, the Morgan Bank accompanied
every subsequent step of the Italian government’s financial and monetary
policy with its assiduous advice and influence. Except for those moments in
which a specific bond issue was negotiated, the relationship remained
preponderantly on the political level from that time onward. The business
relationship would seem to give the client the right to such advice, along
with all the support services, resources, and political influence the house
had at its disposal – or so the partners clearly thought, judging by their
Herculean efforts during Italy’s war debt negotiations. Still, the clear
assumption underlying the relationship was the decision on the part of
the Fascist government to accept, if not explicitly endorse, the larger
designs of the House of Morgan for Europe’s economic and financial
future.
Even the strictly business relationship alone demanded constant atten-
tion for its importance and quantitative size. Inevitably, from time to time a
more strictly political question arose in the correspondence regarding the
monetary issue, and equally inevitably, the two began to intertwine.
The specific problem of stabilization emerged in parallel with the issuing
of bonds on the New York market. Morgan Bank insisted on an immediate
stabilization program; there were the prevarications by first this minister,
then that; and there arose between client and banker a state of reciprocal
uneasiness. This unease was not due to any actual disagreement, but
152 United States Economic Policy toward Italy

during this sensitive phase of transition in monetary policy making, any

business problem might add fuel to the fire. And such problems did not fail
to appear.
For example, Fummi had been worried about the repercussions of
dissolving the syndicate that had been formed to launch the Morgan
bond of $100 million on behalf of the Italian government. This syndicate,
after the issuance of the bond, had remained active in order to supervise the
sale of all the bond certificates. On May 8, Fummi had been forced to
inform Volpi that the House of Morgan had decreed the syndicate’s dis-
solution the evening before. This decision must have been precipitated
by the general downturn in bond sales on the New York market, caused
by the general strike in Great Britain and the resulting difficulty “to resell
in the immediate future the remaining sum of bond shares in the syndi-
cate’s possession.” Fummi added, however, that their “friends, along with
two of their closest associates” had acquired all the remaining bond shares,
approximately $7 million worth, with the plan of reselling them as soon as
the market improved. Fummi, who cabled from Paris, characterized the
decision as “a further benefit to our country” and predicted that the
market would soon improve and that the sale would have “a salutary
effect on Italian credit in the United States of America.” Despite the
optimistic tone of the message, it was clear that Fummi was on the
defensive and felt some apprehension about the reaction this news would
elicit in Rome.152 Afterwards, Volpi decided to make the best of a bad
situation. In response to an article in which the Berlin financial weekly
Börsen-Kurier noted the dissolution of the syndicate as a sign that relations
between Italy and the House of Morgan had worsened, the minister
ordered the embassy to deny the report, quoting Mellon’s opinion that
the dissolution was a wise choice and would improve the yields of the bond
“after an initial, unavoidable drop.” Furthermore, the acquisition of the
remaining bond shares on the part of the House of Morgan was to be
understood as “great proof of its respect for the Italian Treasury.”153

152
BIAGSRE, bk. 16, Pratiche Varie, 1925–1927, fol. 3, Prestito di 100 millioni con gli Stati
Uniti, Giovanni Fummi to Giuseppe Volpi di Misurata, Paris, May 8, 1926.
153
ASMAE-AG, bk. 159, titolo 3, classe 6, fol. 2 Debiti dell’Italia verso l’America, Giuseppe
Volpi di Misurata to the Italian Embassy in Berlin, Rome, May 18, 1926. The quote from
Mellon, though plausible in its content, is surprising because in the telegram in which
Ambassador de Martino reported on his meeting with the American secretary of the
treasury, it only mentioned that Mellon agreed to the ambassador’s affirmation that the
dissolution had happened at a critical moment. In addition, that telegram only arrived
the following day, and it seems unlikely from the context that de Martino would have had
 8. The Morgan Bank and Investments 153

These claims to satisfaction belied the real mood in Rome. As soon as he

received the news of the syndicate’s dissolution, Bonaldo Stringher sent to
his representative in New York, Luigi Podestà, for a confirmation of the
downturn in the market for foreign bonds in New York and to ask for
verification of whether this was the true reason behind the decision to
dissolve the syndicate.154 Rome’s concerns were evidently nourished by
the fact that the decision was occurring at the same time as a renewal of
difficulties for the lira. In his telegram to de Martino on May 18, Volpi
wrote that “the decision to dissolve the Morgan syndicate was no doubt
inspired by their friendly sentiments toward Italy, but the speculation
against the Italian lira has reached a critical point.”155 In reality, Volpi
had had serious doubts concerning the friendly character of the partners’
decision. Three days after their decree, Volpi had written to Mussolini:
In the meantime, American finance has clearly expressed its opinion that the
French, Belgian, and Italian situations are untenable and is pushing strongly for
the return to the gold standard of all the European currencies. We cannot exclude
the possibility that the dissolution of the syndicate for our bond was decided by
Morgan at the end of last week in connection with this American viewpoint, in
order to force us to rethink our position. Certainly the loss of four points on the
Morgan bond has cost us some damage.156

It was at this point that the business relationship inevitably became

entwined with the more complex and political issue of monetary stabiliza-
tion. Volpi showed his complete awareness of the enthusiasm with which
the Morgan partners were pursuing the return to the gold standard for
European currencies, and for the lira in particular. His suspicion that they
might have exploited the coincidence in order to launch a further alarm
signal on the precariousness of the lira’s situation was not at all implau-
sible. There is no evidence that directly confirms or denies this interpreta-
tion in the correspondence between Leffingwell and Lamont during this
period. The fact remained that the fall in bond values, however temporary,
coincided curiously with the other economic developments of the moment.
The timing seems even more suspect in light of the total failure to consult

meetings two days in a row with Mellon (ASMAE-AAW, bk. 272, fol. A-32, sottof.
Finanza Italiana, anni 1925–1926, tel. cif. 424/365, Giacomo de Martino to Giuseppe
Volpi di Misurata, Washington, May 19, 1926, p. 1). The affirmation cited by Volpi may
have come instead from Garrard Winston, undersecretary of the treasury.
154
BIAGSRE, bk. 16, Pratiche Varie, 1925–1927, fol. 3, Prestito di 100 millioni con gli Stati
Uniti, Bonaldo Stringher to Luigi Podestà, Rome, May 10, 1926.
155
ASMAE-AG, bk. 159, titolo 3, classe 61, fol. 2, Debiti dell’Italia verso l’America, tel. n.
1706/242, Giuseppe Volpi di Misurata to Giacomo de Martino, Rome, May 18, 1926.
156
Cited letter from Volpi di Misurata to Mussolini, DDI, 7, IV, 310, p. 225.
154 United States Economic Policy toward Italy

with the government in question and the hurried announcement of the

decision like a bolt out of the blue sky. The simultaneous heavy speculation
on the lira “may have given idea here Firm was nervous about Italy and in
consequence dissolved syndicate.”157
Volpi’s concerns went well beyond those of Fummi. The latter was
certainly right to conclude that “there is no doubt [the] sudden dissolution
of [the] syndicate has created misunderstanding.”158 But Volpi never
directly expressed any negative feelings, and in one message he even
recognized that the House of Morgan had acted in the best interests of
Italy and acknowledged the wisdom of the action taken. The bank’s
Roman representative took these views with a grain of salt, however,
knowing that such public statements were dictated by circumstance and
were, at most, Volpi’s attempt to put the situation in the best light.
Fummi feared that these tensions could have negative repercussions on
the privileged position of the Morgan firm with the Italian government.
There were several bankers and bureaucrats in the Ministry of Finance
who, according to Fummi, had never been “entirely cordial” to the idea
that one bank only, even a bank of the stature of J.P. Morgan & Co.,
should have so much influence on Italian financial policy, and might have
taken advantage of the situation.159 The person Fummi most had in mind
would have been Luigi Pace, director general of the treasury.160
There were several other episodes that reinforced Fummi’s fears. For
some time, Pace had been in contact with other American bankers to
investigate the possibility of securing short-term credit. Contrary to what

157
HUGSBA-TWL, bk. 190, fol. 19, tel. n. 30, Giovanni Fummi to Thomas Lamont, Rome,
May 17, 1926: “One must remember however that this came at inopportune moment
immediately after interchange cordial message regarding Marshall Field & Co. operation
which naturally made Count Volpi feel question of dissolving the Syndicate would not
come up for some time whereas dissolution took place two days later. Also at same time
there was heavy foreign speculation in lira. All this may have given idea here Firm was
nervous about Italy and in consequence dissolved syndicate.”
158
Ibid.: “. . . there is no doubt sudden dissolution of Syndicate has created misunderstanding.”
159
Ibid., p. 5. Fummi’s language was fairly vague and tended to suggest that the opposition of
such men was prejudiced, but he exploited the appearance of the exclusive power of J.P.
Morgan & Co. “Such above situation probably gives some Italian Treasury officials and
bankers who have never been entirely cordial to idea of Italy’s finances being advised by
J.P. Morgan & Co. opportunity of emphasizing now to Minister of Finance that they have
never much favored only one bank having so much influence on Italian financial policy
even if such bank were J.P. Morgan & Co.”
160
HUGSBA-TWL, bk. 190, fol. 19; as well as bk. 173, fol. 19, tel. n. 31, Giovanni Fummi to
Thomas W. Lamont, Rome, May 17, 1926.
 8. The Morgan Bank and Investments 155

Lamont supposed,161 there is some possibility that, in a moment of tension

with the House of Morgan, Pace had the approval of Volpi in what might
have been an exploratory attempt to discover if there were any chance to
create some profitable competition among the various American banks. In
truth, these attempts only served to demonstrate that the Italian govern-
ment could not do without the services and good offices of the House of
Morgan in order to secure the cooperation of American finance and enjoy
the use of its capital markets. Several further events proved this to be the
case.
The Bankers Trust Company of New York had for several months
processed exchange operations for a Roman bank that, in turn, acted on
behalf of the government, apparently in the context of the Italian
Treasury’s interventions in support of the lira. In the first days of the new
drop in the lira’s value, in May 1926, Pace had asked the representative of
Bankers Trust if his bank would be willing to consider a concession of a
credit line in dollars in exchange for Treasury bills or, perhaps, a mail
credit of $33,000,000 countersigned by J.P. Morgan & Co. However, on
May 14, the Paris representative of Bankers Trust rushed into the offices of
Morgan, Harjes & Co., assuring them that he would do nothing without
the full approval of J.P. Morgan & Co. The Bankers Trust representative
thus received the order to report to Giovanni Fummi in Rome, who in this
way learned of the contacts between Pace and the Bankers Trust Company.
Fummi then confronted Pace, who, in the face of a direct conflict with
Morgan Bank, backed down. In fact, he immediately declared that the
Italian Treasury had no need for a mail credit since, having ended the
program of intervention on the exchange market, there was no further
need to keep large reserves in liquidity. In regard to the short-term credit
lines, for three or six months, that Pace considered normal banking oper-
ations, Fummi and Oluf Bernsten (the representative of the Bankers Trust
Company in Rome) agreed that their respective New York offices would
create a unified policy to follow up on the matter. Pace apparently stated
that the treasury in its current situation was no longer even interested in

161
HUGSBA-TWL, bk. 173., fol. 20, tel. n. 26/4714, Thomas W. Lamont to J.P. Morgan &
Co., London, May 19, 1926: “This [simultaneity of the drop in value of the lira and the
dissolution of the syndicate] of course was merely a coincidence but some pesky sub-
officials have exaggerated that and one of these especially named Pace Director of Italian
Treasury felt that Minister was relying too exclusively upon our advice. (stop) He is one
who apparently without encouragement from his chief has encouraged these casual
conversations with Bankers Trust Co., also extension of operations with French
Ledmon & Co. etc.”
156 United States Economic Policy toward Italy

this type of credit. Evidently, after Fummi had spoken with Pace and the
Paris office of Bankers Trust had turned to Morgan, Harjes & Co., Fummi
had only to dictate his terms to Bernsten, who, perhaps disingenuously,
had imagined that he would be able to conduct business directly with the
Italian Treasury.
Fummi seemed satisfied that he had reestablished his monopoly and
limited himself to recommending to the firm that it should show itself
willing to dispense this type of short-term credit line in the event that the
Italian Treasury should feel it necessary in the future. As for Pace’s behav-
ior, it seems that he had turned to Bankers Trust not so much to explore a
new channel of American funding as to avoid communicating with the
House of Morgan about the operations to support the lira’s exchange
rate – a policy they notoriously opposed because they preferred a legisla-
tive solution for stabilization. The Bankers Trust Company, for its part,
was clearly not willing to put its good relations with the House of Morgan
in jeopardy, at least not over this particular issue. The behavior of the Paris
representative as well as his rapid return to Fummi’s ranks provide clear
evidence for this conclusion.162
A second episode, also involving Bankers Trust Company, happened so
nearly at the same time as to constitute part of the same incident. On
May 19, two days after Fummi, Pace, and Bernsten had discussed the
short-term credit lines, Bankers Trust Company of New York communi-
cated to Arthur M. Anderson, partner at Morgan, that its Paris representa-
tive had “been advised of the possibility of financing in this market on behalf
of a consortium of Italian municipalities under the leadership of Beneduce
and along the same lines as the loan made to consortium of Italian Public
Utilities Co.”163 This consortium was to have the responsibility of securing
credit on the New York financial market in order to then lend monies, in
lire, to various Italian city governments. The credit was to be underwritten

162
On this first incident with Bankers Trust Company, see HUGSBA-TWL, bk. 173, fol. 15,
and also fol. 18, tel. n. 26/2773, Morgan, Harjes & Co. to Thomas W. Lamont, Paris,
May 14, 1926; as well as HUGSBA-TWL, bk. 190, fol. 19, tel. n. 32, Giovanni Fummi to
Thomas W. Lamont, Rome, May 17, 1926.
163
HUGSBA-TWL, bk. 272, fol. 30, as well as bk. 173, fol. 20, tel. n. 26/2212, J.P.
Morgan & Co. to Thomas W. Lamont, New York, May 19, 1926. The same telegram
was sent by Morgan Grenfell & Co. to Giovanni Fummi, on the following day. In terms of
the Italian public utilities company, called Istituto di Pubblica Utilità, in question was a
bond on behalf of various Italian interests that had formed a consortium for the occasion,
with a maturity in 1952, and an issuing price of $93. See for example ACS-GVM, bk. 13,
fol. 161, Nuovi prestiti statali, appunto della Regia Ambasciata d’Italia, Ufficio del
Consigliere Commerciale.
 8. The Morgan Bank and Investments 157

by a lien on local taxes and the value of the currency guaranteed by the
Italian government. The Bankers Trust Company did not even attempt to
conduct the operation apart from the Morgan firm, but expressed the
opinion that it would be opportune to approach Beneduce to obtain “a
leading position in this business.” The response of Anderson on behalf of
the firm was somewhat harsh: J.P. Morgan & Co. did not believe that any
such operation was imminent and maintained that, were the Italian govern-
ment to undertake such an affair, the minister would have approached them
directly. As a precaution, Anderson invited Fummi to speak to Volpi on the
subject. Notably, the partner insisted most strongly on reaffirming the
primary role of the Morgan Bank in any business that might concern the
central government.164
Some time earlier, around the first of May, the discussion of a different
operation, a loan on behalf of the state railway system, had confirmed the
same criteria. The House of Morgan, through Fummi, had expressed to the
minister their conviction that it was not a good time to dump new Italian
bonds on the New York market. Volpi had responded by stating that no
decision had yet been made on the topic, nor would it be taken without first
consulting the firm. He added, however: “I also confirm however the
advisability of regarding favourably [the proposal of] Marshall Field
Glore Ward & Co. in view of their interest in our Italian affairs and the
esteem which J. P. Morgan & Co. themselves have for them.”165 The
minister’s statement was interesting in that it contained at the same time
acceptance of the special jurisdiction of J.P. Morgan & Co. in all Italian
transactions and the attempt not to exclude the possibility of doing busi-
ness with a different intermediary. In reality, the negotiations between
Volpi and the representative from Marshall Field, Glore, Ward & Co.
had gone further than this invitation implied, to the point that the minister
had approved an agreement for a bond issue, without yet having fixed the
date of issuance or the price. The price would in any case have needed to
conform to the current market price of Italian bond shares already issued
at 7 percent. The date was also to be fixed in consideration of the market
context, with the stipulation that if it were not completed before July 15,
the agreement would expire and require renewal.166

164
Ibid.
165
This letter from Volpi to Fummi is cited (possibly in translation from an original in Italian)
in HUGSBA-TWL, bk. 173, fol. 18, tel. n. 26/2197, J.P. Morgan & Co. to Thomas
W. Lamont, New York, May 15, 1926.
166
Ibid., p. 2.
158 United States Economic Policy toward Italy

Once again, back in New York, Marshall Field took care to keep J.P.
Morgan & Co. informed, proposing that they should share the initiative
for this business. Indeed, argued the administrators at Marshall Field, even
if the agreement were signed by the director general of the state railways
system, it had been authorized by the government. This would be specified
in the bond certificates’ accompanying information, with the note that,
according to their legal department, the bond represented an obligation on
the part of the Italian government itself. For this reason, the agreement was
within the jurisdiction of J.P. Morgan & Co. Marshall Field himself invited
Morgan to assume the leadership of the operation if it so wished.
The House of Morgan headquarters asked for Lamont’s opinion on this
question, though it noted that “some of us are not particularly keen about
the business.” In the meantime, the partners had given formal author-
ization to Marshall Field, Glore, Ward & Co. to seal the deal with the
railways, on the terms previously negotiated, as well as to discuss “the
business here with friends like Harris Forbes & Co. in a preliminary way
leaving open for the moment the question of our attitude when and if the
business is to be done.”167 Again in this case, the potential competitor of
the House of Morgan exercised extreme caution in proceeding, particu-
larly at the level of headquarters. These were actually tentative efforts on
the part of other financial forces to participate in the management and
issuance of Italian credit. Nobody wanted to try to replace the House of
Morgan. Volpi’s attitude toward all this was to encourage the increase in
numbers of his American financial interlocutors, but never at the expense
of the fundamental relationship with Morgan Bank.
Another similar episode took place involving the Chase National Bank
of New York, in participation with Blair & Co. and Lemon & Co., a
French bank suspected by the Morgan partners of having promoted many
of these external attempts to enter the Italian credit business. On May 18,
1926, Gates McGarrah, the president of the executive committee of Chase
National Bank, appeared at the headquarters of J.P. Morgan & Co. to
inform them that his and the other banks had received a request for credit
from the Italian Treasury in the amount of $5 million for sixty to ninety
days. This was apparently one of the short-term credit lines that Pace had
called “normal banking transactions,” for the purpose of shoring up the
value of the lira on the exchange market. Pace did not seem to realize that
all his initiatives ended up sooner or later on a partner’s desk at Morgan
Bank. McGarrah had gone to Morgan Bank, exactly like his colleagues at

167
Ibid., pp. 2–3.
 8. The Morgan Bank and Investments 159

all the other banks. And yet he did not want to waste the opportunity to
make his momentary (and perhaps only psychological) advantage felt.
He wondered whether there had been any rift between us and the Italians. (Stop)
We told him that we knew of no rift, that through Fummi we were in constant
communication and that we had not been asked for any such credit. (Stop)
McGarrah said he might ask Albert H. Wiggin who is in London to see you
[Lamont, transl. note] and talk to you about it.168

To what conclusions should all these episodes lead? There is no doubt

that they demonstrate a certain will on the part of the Italians to widen the
net of their relationships with the American financial world. In theory,
Pace’s attitude was perfectly reasonable: to put all their eggs in one basket
with just one bank was to give up any possibility of leverage in negotiations
for better terms, and to be exposed to any pressure and threats from their
sole interlocutor without having recourse to alternatives. It was also
natural that this sentiment should arise during a moment when Volpi,
who had not yet decided to move forward with the legislative stabilization
of the lira, was feeling the full weight of the Morgan Bank’s pressures to
carry it out as soon as possible. As long as the policy of defending the lira’s
exchange value on the markets continued, it was natural to pursue the
necessary supplies of hard currency from banks other than Morgan, which
did not share the firm’s disapproval of that program. It was precisely the
all-encompassing nature of the relationship with the House of Morgan
that was awkward, because it forced the minister to submit the entirety of
Italian economic policy to the firm’s scrutiny even when all he wanted was
to discuss one single, simple transaction.
And yet Volpi was sufficiently aware of the power relationships within
the American financial world, and between it and European governments
(starting with the Italian), not to question the dominance of J.P. Morgan &
Co. He knew that any attempt to enlarge Italian contacts must proceed
with the greatest caution. It would also have been unthinkable to pursue
alternative relationships without the authorization of a minister who was,
like Volpi, master of his own bureaucracy and energetically steering the
ministry’s progress. But the fact that Pace was the one to initiate most of
these contacts with other banks does seem significant. Was this in order not
to directly involve the minister, to the point that Lamont was able to
suppose that he was not aware of Pace’s actions? When Volpi explicitly

168
HUGSBA-TWL, bk. 173, fol. 19, tel. 26/2206, J.P. Morgan & Co. to Thomas
W. Lamont, New York, May 18, 1926.
160 United States Economic Policy toward Italy

indicated to the House of Morgan that he intended to do business with

another financier (this was the case with the Marshall Field-state railways
loan) he was careful to repeat his intentions not to move forward without
consulting the partners. What is more, when the more “clandestine” con-
tacts did come to the attention of the Morgan Bank and their representa-
tive Giovanni Fummi, the minister offered no resistance to decisions that
brought the business back under the control of the Morgan firm. Pace had,
significantly, renounced his credit request when confronted about his
contacts with Bankers Trust Company – or at least pronounced himself
willing to deal with Morgan Bank for any further requests. Not only was
any attempt to escape the control of Morgan Bank very cautious, but, at
the first hint of trouble, it was abandoned promptly.
The behavior of the competing American banks confirms that Volpi was
right to be so careful. Perhaps he was aware of the experience of the French
government when it tried to procure credit from Morgan competitors.
Here is how the matter was described by Benjamin Strong, governor of
the Federal Reserve Bank of New York, in a letter to his closest colleague,
George L. Harrison:
It seems that the French Government has been sounding out other American
bankers. They had a talk with Mortimer Schiff, who very properly said that it
was Morgan’s business and that anyway such credits were of no value to stabilize
the franc when the French people were exporting capital. I believe they also had a
talk with Blair’s representative, who took somewhat the same position, and
Lamont has written a very confidential letter to Clarence Dillon discussing the
matter in such a way that he thinks will result in Dillon doing nothing.169

The primacy of J.P. Morgan with regard to relationships with foreign

governments was, then, fully recognized within American financial circles
as well as abroad. Even the head of the Federal Reserve Bank was appa-
rently familiar with the situation. This hierarchy was no doubt determined
by the intricacies of power relationships on Wall Street as well as by the
solid tradition that, starting with the war loans, the House of Morgan had
established by making itself the principal link to the European market.
American financial circles found it to the general good to accept this
position of dominance, despite the fact that other banks certainly did not

169
Clarence Dillon was president of Dillon, Reed & Co. FRNBY-BS, BS’s trip to Europe
1926, vol. 1, April 30–July 18, n. 1000–6, Benjamin Strong to George L. Harrison, May
15, 1926. Dillon showed himself to be reasonable just as Lamont had predicted.
HUGSBA-TWL, bk. 173, fol. 17, tel. n. 26/1265, Thomas W. Lamont to Morgan,
Harjes & Co., London, May 19, 1926. Lamont pronounced himself pleased that the
meeting with Dillon was so satisfying, though he said he had been certain it would be.
 8. The Morgan Bank and Investments 161

lack the competitive spirit on other occasions regarding the House of

Morgan. First of all, these other banks were not excluded from the interest
that constituted the principal form of profit from this business. All the
major investment banks contributed to the bond issuances once they were
agreed upon. What they conceded to Morgan Bank was the biggest slice of
the bond shares as well as the special commission claimed by the firm that
finalized the deal. This practice allowed the concentration of power neces-
sary to keep firm control of a set of transactions that could have otherwise
become infinitely complex and politically consequential – a control that
was in the best interest of the American financial community as a whole.
The power of Morgan Bank consisted, in point of fact, in its profound
expertise and familiarity with the political and financial actors on the
European stage and in its resulting capability of fully understanding the
political connotations and effects of the actions carried out. The Morgan
partners were all part of that restricted elite of men of finance who often
were also called on to fill governmental positions of great responsibility.
They were the major builders of the global policy that American finance
was constructing in Europe, from the prewar era forward. Their activity as
bankers – in the strict sense as providers of capital – was inherent in their
function as the true inventors and executors of financial policy. Although
this role was in a certain sense secondary to their banking business, far
from weakening it, it was a source of strength. Their opportunities to do
business became available when their policy formulation was successful.
Under such circumstances, it is not surprising that the other American
banks tended not to question their roles or that, seeing the success of the
House of Morgan’s management of these circumstances, they would con-
tent themselves with financial benefits that might be more limited but were
dependable and predictable.
The previous examples show, however, that the local representatives of
the other American banks, in Rome and occasionally in Paris, were less
rigid about adhering to this etiquette. They were both more closely con-
nected to the local opportunities that presented themselves from time to
time and less acutely aware of the overall strategy being pursued by
American finance with the participation of its respective banking institu-
tions. For similar reasons, it was natural that Giovanni Fummi was the
representative of Morgan who was most concerned by the ups and downs
in the economic relationship with Volpi and other Italian government
officials. Fummi was, as previously discussed, fairly alarmed by their
reactions to the news of the dissolution of the $100 million bond syndicate,
as well as by the outside contact attempts made by the director general of
162 United States Economic Policy toward Italy

the treasury. It was Fummi who asked the Morgan Bank to authorize him
to offer Pace any short-term credit he might deem necessary.170 It had also
been Fummi who “earnestly desire[d],” in the words of Lamont, that the
Morgan Bank should assume the lead on the railways loan with Marshall
Field, Glore, Ward & Co.171
Fummi’s state of anxiety was owing to the fact that he could follow all
these events up close, and he noted all the worrying symptoms in the
minister’s behavior. But it should also be said that Volpi’s strategy, how-
ever cautious and easy to abandon as soon as the signals looked negative,
had borne some fruit. The House of Morgan had begun to consider some
of the business offers to which it had previously been hostile – the short-
term credits are a case in point. There is no doubt that Lamont himself
recognized the difficulties emerging in Rome and tried to meet the minister
halfway. At an early stage, he cabled to New York that he agreed that the
firm should lead the railways bond issue together with Marshall Field,
because “Fummi says there is still [a] misunderstanding in Rome in refer-
ence to winding up [the] Bond Syndicate,” and to head up the new bond
“would have [an] ameliorating effect on [the] Minister.”172
Just less than a year later, however, when the railway business with
Marshall Field seemed ready for conclusion and the episode of the dissolv-
ing of the syndicate was more or less forgotten, the Morgan Bank’s
definitive veto suddenly arrived – and with singular brutality. In
February 1927, the bank wrote to Volpi that they noticed an almost radical
change in policy compared to what George Whitney had been told the
previous autumn in Rome. Whitney remembered that at the time the plan
was to authorize certain private enterprises to issue foreign bonds and in
this way create a reserve of foreign currency, but that the government did
not intend to use its credit. A large number of bonds were now about to be
issued on the American market with Volpi’s authorization; the bank could
not see how Volpi would want to issue government bonds at the same time.

170
In HUGSBA-TWL, bk. 173, fol. 20, tel. n. 33, Giovanni Fummi to Thomas W. Lamont,
Rome, May 19, 1926, Fummi asked Lamont to transmit his previous telegram
(HUGSBA-TWL Papers, bk. 190, fol. 19, tel. 32, Giovanni Fummi to Thomas
W. Lamont, Rome, May 17, 1926) to the New York headquarters in order to request
authorization to communicate to Pace that the House of Morgan would be willing to offer
mailing credits should the Italian government deem it useful.
171
HUGSBA-TWL, bk. 173, fol. 19, tel. n. 26/4712, Thomas W. Lamont to J.P. Morgan &
Co., London, May 18, 1926, p. 5.
172
Ibid.
 8. The Morgan Bank and Investments 163

They requested most politely but firmly that Volpi fully inform them as to
his intentions.
The partners also took care to inform the minister that they were in
possession of the telegram in which George Raffalovich, who had served as
liaison, had informed Marshall Field of the minister’s desire to conclude
the railways loan, but that that bank now declared itself in agreement with
the firm’s point of view on the matter. Once again, J.P. Morgan & Co.
demonstrated to Volpi that he had no chance of doing business in New
York’s financial markets without their approval, and moreover that such
approval was dependent on not just his, but their own assessments of what
was in the best interests of the Italian state’s economy. Nor did their
assessment function solely through the economic merits of the situation;
as in other occasions, in this message too they questioned the general intent
of the minster’s politics. Was this a productive investment, or was it
necessary to fill a budget deficit? What relationship did it have to the
loan concluded to fund the city of Rome? Precisely how would the monies
from these bonds be used? Why did the minister need to carry out an
official government bond issue for this purpose? These are the types of
questions they posed, which did very little to hide their concern that the
Italian government was raising funds to use in new currency exchange
interventions, a path they wanted to close down in order not to put off any
longer their primary goal of legal stabilization of the lira.173
At this point Volpi had no choice but to retreat and try to salvage some
portion of his dignity. Nor could he refuse the request to defend his
policies. Morgan Bank had flexed their muscles once again and proven
their monopoly over the Italian ability to raise credit on American markets.
At the same time, they had clearly shown their intention to subordinate
that credit raising not only to an evaluation of any single operation’s merit,
but to their overall approval of Italy’s entire line of financial policy. And
the only policy they planned to approve would involve the rapid and
definitive stabilization of the lira, accompanied by a series of credit issues
for productive goals. The unhappy minister could only respond with his
thanks for the care taken to protect the prestige of Italian credit. He
assured them that his policy had not changed since November 1925 and
his meeting with Whitney. All the bonds he had authorized were aimed at
reconstruction, be they issued by private companies or the government; he

173
ACS-GVM, bk. 13, fol. 2339, Morgan-Fummi, J.P. Morgan & Co. to Giuseppe Volpi di
Misurata, New York, undated.
164 United States Economic Policy toward Italy

could justify each one as part of the original plan to increase productivity
and heal the Italian economy.
At this point Volpi could do nothing more than announce that the
government had chosen not to pursue the railway bond issue, portraying
it as a trivial matter, despite the fact that he himself had spent the better part
of a year working toward the deal. His surrender could not have been more
unconditional, nor could it have gone any other way, given the political
and financial power that the Morgans wielded in the United States, but
most of all given the original and fundamental choice the Fascist regime
had made regarding stabilization and American financing.174
Lamont, too, had always been perfectly conscious of the real balance of
power in the field. His decision not to travel to Rome in May 1926 had been,
in the final analysis, the most discreet and clear signal to the minister that he
needed the Morgan Bank more than the bank needed him. Lamont knew
very well that only vigorous American support would allow the Fascist
government to succeed in stabilizing its currency – a success that was
fundamental to the internal and external consolidation of the regime. He
also knew that American support would only be channeled through the
auspices of Morgan Bank, which at that moment controlled Italian access to
the American financial market. It was true that precisely this fact condi-
tioned the Morgan Bank’s strong interest in assuring the successful stabili-
zation of the lira. But to Volpi it was clear that he had no alternatives to the
relationship with Morgan Bank, as the other American banks had recently
given ample demonstration. This is why, when Lamont informed Fummi
that he would not be coming to Rome, he was also able to add, “Believe we
can work situation out for all right. Don’t worry. Warmest regards.”175 Had
Volpi been one of those who cared above all else to present themselves as the
defenders and vindicators of national autonomy and dignity, he might have
been more demoralized. But the minister had long before learned to under-
stand and accept necessary subordinations of this kind, when he had nego-
tiated with German financiers before the war.176

174
ACS-GVM, bk. 13, fol. 2339, Morgan-Fummi, Giuseppe Volpi di Misurata to J.P.
Morgan & Co., Rome, February 10, 1927.
175
HUGSBA-TWL, bk. 173, fol. 19, tel. n. 33, Thomas W. Lamont to Giovanni Fummi,
London, May 18, 1926, 17:05. This telegram was the immediate follow-up to the one in
which Lamont had informed Fummi that he would not come to Rome: HUGSBA-TWL,
bk. 173, fol. 19, tel. n. 32, Thomas W. Lamont to Giovanni Fummi, London, May 18,
1926, 13:10.
176
See on this topic Romano, p. 117 and n. 20, who writes: “The term ‘subordinate relation-
ship,’ which has been used to describe the relations between Italy and the United States in
 9. American Investments in Europe 165

9. american investments in europe

While the importance of the American financial contribution to the Italian
economy was a given, with all the conditions such a relationship carried,
the relative weight of American investments compared with the total of
American investments and with the amount of them in other countries in
the same period deserves some analysis. It is also useful to specify the
nature of American investment in Italy – that is, to observe in what
measure direct investments compared to portfolio investment. From the
preceding table, it is clear that the periods of the First World War and
1924–1929 were the high points of American portfolio investment in
Europe. In the period of greatest growth, 1924–1929, there was a marked
but not dramatic drop in British and French shares, while there was a fairly
strong growth in Italy (798%) and also in Germany (670.4%). The growth
rates for these two countries were so notable that by 1929 they placed
investment in Germany in first place in absolute terms and the Italian
portfolio second, ahead of France and Great Britain. It must be kept in
mind that if the direct investment figures were included (in which the
possession of shares is accompanied by voting control in the company),
the relative values would change significantly, especially as regards
American investment in Great Britain.
American Portfolio Investments in Europe (1897–1935), Excluding
Direct Investments (millions of dollars)

Country 1908 1914 1919 1924 1929 1935

Austria 0.5 0.5 0.2 26.7 72.3 56.8

Belgium − − 11.6 181.2 214.2 151.9
Bulgaria − − − − 13.4 12.9
Czechoslovakia − − 0.2 31.5 31.8 29.8
Danzig − − − − 3.0 2.6
Denmark 0.3 0.3 15.2 89.3 165.2 134.8
Estonia − − − − 3.8 3.7
Finland − − − 29.0 63.2 32.1
France − 10.0 342.5 448.9 343.4 157.7
Germany 32.3 23.1 1.6 132.3 1,019.3 828.6
Great Britain 134.8 121.6 890.5 413.9 286.5 42.3
Greece − 3.0 2.6 8.6 28.5 27.4

this period, is useful only if we forget that the men of Volpi’s generation had already gone
through a similar experience with the German financial market, and they maintained that
it was possible to reconcile their national priorities with the needs of a fragile and parched
capitalism such as Italy’s.” Note this key term “maintained.”
166 United States Economic Policy toward Italy

Holland − − − 98.6 61.5 132.4

Hungary − − − 9.0 63.3 56.7
Ireland − − − − 5.1 1.8
Italy − − 38.4 40.6 364.6 271.4
Lithuania − − − 1.8 1.8 1.8
Luxembourg − − − − 7.1 6.0
Norway − 3.0 5.0 97.1 185.4 150.5
Poland − − − 29.6 131.7 96.6
Romania − − − 2.5 9.7 22.3
Russia 29.0 29.0 126.5 104.0 104.0 104.0
Spain − − − 0.4 − −
Sweden − 0.5 20.0 65.8 195.7 212.9
Switzerland − − 35.0 115.5 48.7 −
Yugoslavia − − − 18.2 50.0 47.4
Total in Europe 196.9 191 1,489.3 1,944.5 3,473.2 2,584.4

Source: C. Lewis, America’s Stake in International Investments, Washington, D.C.:

1938, p. 654.

On this topic there are figures from other, somewhat fragmentary sources
that nonetheless establish a comparison between direct investments and
portfolio investment at the end of 1930. The year 1930 was obviously a
time of serious disturbances as opposed to 1929. Direct investment in Italy
actually remained higher than would be predictable; in this category are
included the funds for the electrical industry created through investment trusts
for this purpose in the United States. Still, the comparison between the
previous table and the one that follows offers some further basis for analysis.
Long-Term American Investments in Europe at the End of 1930
(in thousands of dollars)

Country Direct Portfolio Total

Austria 17.377 97.688 115.065
Belgium 65.246 188.965 254.211
Bulgaria 0.812 13.281 14.093
Czechoslovakia 4.875 30.518 35.393
Denmark 15.924 167.790 183.723
Finland 1.206 78.043 79.249
Other Baltic States 10.124 6.867 16.991
France 161.809 309.525 471.334
Germany 243.969 1,176.988 1,420.957
Great Britain 497.805 143.587 640.892
Greece 10.136 42.851 52.987
Holland 44.024 122.574 166.598
 9. American Investments in Europe 167

Hungary 9.520 109.358 118.878

Ireland 3.129 3.497 6.626
Italy 121.216 279.924 401.140
Luxemburg 0.600 6.957 7.557
Norway 23.470 190.878 214.348
Portugal 17.546 − 17.546
Poland 53.193 124.130 177.323
Romania 15.836 9.375 25.211
Saar Territory − 7.952 7.952
Spain 91.480 3.000 94.480
Sweden 19.230 253.536 272.766
Turkey 13.755 − 13.755
Yugoslavia 8.132 49.833 57.965
Total 1,468.248 3,460.620 4,929.277

Source: U.S. Department of Commerce, Bureau of Foreign and Domestic Commerce,

“American Direct Investments in Foreign Countries,” in Trade Information Bulletin
no. 731, Washington, D.C., 1930, p. 10.

As can be seen from the data of the U.S. Department of Commerce,

taking direct investments into account brings Italy into fourth place behind
Great Britain, Germany, and France, respectively. This resulted not only
from the considerable patrimony of preexisting direct investment in Great
Britain and France, accumulated over the period just before that of this
table’s figures (1924–1929), but also from the fact that the Italian govern-
ment was fairly reluctant to give the necessary authorizations for foreign
capital to acquire voting shares in Italian companies. It had been a specific
political decision to create a special commission, led by the minister of
finance, to carefully screen direct investments. Ever since the meetings
between Volpi and Thomas Lamont of Morgan Bank at the time of
Volpi’s stay in the United States, he had made clear that the government
intended to maintain rigid control of every offering of shares on foreign
markets by private industry.177 This intention, repeated in the Chamber of
Deputies, corresponded not only to the desire and benefit of centralizing
negotiations and offerings on each foreign market (and particularly the
New York market), but also to the choice to avoid any foreign capital
gaining too much control of Italy’s production system. In a letter of
December 12, 1927, Mario Alberti – this time in his role as central director
of the Credito Italiano bank – wrote to Minister Volpi in order to clarify

177
ACS-GVM, bk. 13, fol. 2339, Fummi-Giovanni, Giovanni Fummi to J.P. Morgan & Co.,
Rome, March 3, 1926.
168 United States Economic Policy toward Italy

the type of concerns they had on this issue. Alberti’s purpose in writing was to
emphasize the necessity of finding external sources of financing for Italian
industry, especially in order to sustain investment programs in the hydro-
electric and construction sectors. After having rejected ordinary short-term
credit from Italian banks and savings and loans (because they were sources
already exhausted in previous efforts), as well as further offerings of bonds on
foreign markets (because of the difficulty of raising the necessary mortgage
funds and individuating certain and permanent profits to service the interest
and depreciation), Alberti proposed creating an exchange for Italian joint-
stock companies on foreign markets. On this point, he added significantly:
Once the protection of national management of companies has been ensured, with
the necessary syndicates, majority votes, and shrewd arrangements in the organ-
ization of holdings and investment trusts, there will be no reason to fear any threat
to the national control of the industrial policy and practices of the country.178

Alberto Pirelli, for his part, had on multiple occasions shown his reluc-
tance to rely excessively on American credit, especially if that would mean
giving up control of Italian companies’ voting shares or allowing American
companies to make major inroads on the Italian production system. At the
time of the conclusion of the war debt settlement, Pirelli wrote to his father
in the following terms:
. . . I have never agreed with Volpi and Alberti – or for that matter Stringher,
Beneduce, and others – on the necessity of raising funds in America (if not within
set limits and only for the execution of clearly planned monetary rehabilitation) and
therefore in my heart I have never, no matter how much my colleagues may have
done, considered the settlement of our debt as inevitably linked to the negotiation
of bond issues. On this theme I have continually exerted a restraining influence.179

178
ACS-GVM, Mario Alberti and [illegible signature] to Volpi, Milan, December 12, 1927.
179
AALP, p. Riparazioni e Debiti, IX, 1925–1926, Alberto Pirelli to Giovanni Battista Pirelli,
Washington, D.C., undated [?] November 1925. Indeed, Pirelli opposed the settlement of
the war debt with the United States for years, partly for the reason cited in his letter to his
father, and in part because he believed that if it were necessary, a more useful tactic would
be to first settle the debt with Great Britain – a negotiation he carried out along with Sir
Otto Niemeyer of the Treasury. On this topic, see AALP, 07100, Alberto Pirelli to Guido
Jung, Milan, May 21, 1923, in which he reported his words to Mussolini: “When I saw
the President . . . I told him: ‘You know that I am convinced of the need to say clearly to the
Americans that we intend to pay them, and that is mostly because there appears to be a
chance to secure reasonable conditions for that repayment; nonetheless I would have
preferred that we did not announce this in public. Not because it would make our
negotiations with the English government any more difficult, but because it would
make the English government’s position more difficult with their Parliament and their
contributors. . . . What is more, I would have thought it opportune to refer at the same
time to the problem of emigration to the United States.’ The President answered that he
 9. American Investments in Europe 169

If we also then consider the testimony of Dino Grandi, who recounted

that Agnelli had “threatened that revolution would erupt in Turin” if Ford
had been allowed to build an automobile factory in Trieste,180 it becomes
clear that within Italian financial and industrial circles there was wide-
spread resistance to the excessive influence of American capital. On one
point there was nearly total unanimity: the youthful Italian industrial
system should not have to compete in its own backyard, nor was it a
good idea to allow a large amount of American or foreign direct invest-
ment. On these grounds, the Italian government should not cede an inch
(although men like Grandi would happily have done so, as long as the
political advantages were worth it), because the peaceful relationship
between the regime and the most important Italian business interests
depended on it. Pirelli, Agnelli, and the Credito Italiano bank formed a
powerful triad on this issue. The government’s choice became clear during
the final phase of the war debt negotiations, when Secretary of the
Treasury Mellon’s proposal gained preference, despite its slightly more
burdensome financial obligations, for fear that Hoover’s proposal, which
contained a revision clause, would become an instrument for Hoover and
American business interests to insinuate a direct American presence and
competition into Europe. As seen previously, Dwight Morrow himself, of
the Morgan Bank, had made this implication clear.
Did this choice indicate a general push for autonomy from American
financial influence? Obviously not. Pirelli admitted to being isolated in his
opinions, and he himself stated that he wanted American support for the
definitive stabilization of the lira. There is no doubt that a subordinate
relationship was created not only by a colonization of industry by the
hegemonic country, but that already at that earlier moment – for the more
industrially developed debtor nations – the subordination was created by
the great financial and monetary mechanisms the debtor states were forced
to accept in order not to remain isolated from the world market. Choosing
Mellon and the bankers, and rejecting Hoover and his plans, did not mean
avoiding a relationship of dependence; it was simply the preference for a
type of dependence that would allow the protection of the ideological
summits of the regime, and even more importantly the protection of the
principal Italian industries, which feared the competition of direct

had written the full text of that announcement by his own hand, but that he certainly
accepted my criticism.” This citation sufficiently clarifies their reciprocal attitudes, not
only regarding the specific problem of debt consolidation, but generally on the subject of
how much priority should be given to American finance.
180
Grandi, Interview.
170 United States Economic Policy toward Italy

investment and foreign influence in Italy. To choose the bankers and

Andrew Mellon as interlocutors signified playing by the strict rules of the
game – monetary, economic, and also political – that were involved in the
program of stabilization that American finance wanted to carry out in
Europe. The hegemon of American capitalism – the finance sector – was
not primarily interested in the direct control of European industry, as the
previous table demonstrates, but rather in the overall influence that could
translate into a policy of pacification and stabilization that would best
prepare the ground for the profitable expansion of American capitalism in
its entirety. The analysis of the relationship between Minister Volpi and the
Morgan Bank proves the extent of that policy’s influence over the daily
politics of the regime, up to and including the stabilization of the lira. The
conclusion of that process demonstrates how permanent the nature of this
influence would have become if the economic crisis had not created the
conditions for a relaunching of the regime’s nationalism. This nationalism
was far from merely propagandistic, and yet even it would be accompanied
by novel forms of external dependence.

10. the stabilization of the lira

The war debt settlement, and its ratification by the American Congress,
had opened the American financial market to the Italian state, local insti-
tutions, and private business. But precisely this new indebtedness being
contracted by Italians made it all the more urgent for American public and
private finance to reach its traditional goal: the legal stabilization of the lira
and its resulting return to the gold exchange standard. This objective was
just one facet of the overall American policy toward Europe, which aimed
for Europe’s political and social stabilization; monetary stabilization was
seen as a powerful tool for this project. At first, monetary stabilization was
guided by a financial commission of the League of Nations presided over
by Montagu Norman, the governor of the Bank of England. Later, when
the Europeans had stopped attempting to evade the financial dominance of
the United States, Benjamin Strong, the governor of the Federal Reserve
Bank of New York, became the principal protagonist in the operation.181
Strong continued to work in close concert with Montagu Norman,
although the case of the lira would prove that this did not mean that they

181
L. V. Chandler, Benjamin Strong Central Banker, Washington, D.C.: 1958, pp. 128ff.;
R. H. Meyer, Bankers’ Diplomacy: Monetary Stabilization in the Twenties, New York
and London: 1970, pp. 1–15.
 10. The Stabilization of the Lira 171

always saw eye to eye.182 They took care to stay in contact and consult
with – or pretend to consult with – their colleagues who presided over the
reserve banks about the gold standard. From this “gold standard club”
and their collaboration on the processes of stabilization, an international
cooperation was born and grew – under American guidance (although the
Bank of England was, in relative terms, stronger and more influential than
it would be after the Second World War) and largely autonomous from the
control of the banks’ respective governments.
The case of Italy demonstrates, however, just how the activity of the
reserve banks – and in particular their efforts for stabilization – was not at
all unconnected to the economic interests of their respective countries, and
especially to the affairs and influence of private finance. It was in fact under
the auspices of Morgan Bank that the stabilization of the lira was
launched. As seen above, the Morgan partners had an expansive concept
of their role, as comprising not only the traditional services of business
banking, but also the ongoing cultivation of the interests of their clients, in
the United States and, when necessary, abroad. In this case, the client was a
very special one: a government that, due to its authoritarian structure,
constituted the most efficient vehicle, from the perspective of the American
bankers, for establishing business relations with all the most important
sectors of the Italian economy. The partners therefore recognized no limits
on their field of intervention on behalf of their client: they saw no differ-
ence, for example, between politics and economy, being perfectly aware of
the exclusively academic value of such a distinction in this context. The
financial fortunes of Fascist Italy were not linked only to an analysis of the
Italian economy. What counted, in this industrialized country with a
government that no longer conformed to the contours of a traditional
liberal state, was the overall image of the regime. Its stability, its historical
justification, its compatibility with American values and interests – this
was how the success or failure of Fascism would be judged. In the same
way, anyone who cared about the financial interests of Fascist Italy could
not simply address the American technicians of the economy, nor even the
potential buyers of bond shares, but would have to satisfy public opinion
in the larger sense, using every tool at his disposition. The partners paid
meticulous attention to all the forms of leverage they could exploit in
influencing public opinion positively, and particularly those sectors of
the public most qualified to advance their strategy. In some cases, they

182
H. Clay, Lord Norman, London: 1947, pp. 218ff.; A. Boyle, Montagu Norman, London:
1967, pp. 146ff.
172 United States Economic Policy toward Italy

themselves served as the direct promoters of this leverage and influence (for
instance, when serving on the Council of Foreign Relations), and in others
they assiduously courted those men who filled such positions.183
It would be a mistake to imagine that the partners of the House of
Morgan were interested in the stabilization of the lira only because they
wanted to protect the returns on their own credit agreements. The stabili-
zation of the lira was part of an overall plan carried forward by financial
agents and governments to improve and rebuild the European economy. In
this array of personalities, the leadership role of the Morgan Bank partners
never faltered, even when the initiative shifted to the terrain of monetary
stabilization that should properly have been the jurisdiction of the reserve
banks. Indeed, in the United States’ Federal Reserve System, it was the
Federal Reserve Bank of New York that managed the international rela-
tions for these operations – but its governor, Benjamin Strong, was a
product of the House of Morgan.
The historiographical debate around the stabilization of the lira, focus-
ing on the conclusion of its revaluation with the so-called Quota 90 [see
p. 135 of communication cited in note 10 – trans.], obscured for some time
the fact that the return to the gold standard was not a simple financial
operation carried out by the internal economic choice of each country.184
This was the case not only because currency exchange by definition
requires a relationship with other currencies, but also because at that
time there was already in existence a procedure that had to be observed
in order to provide the necessary backing for stabilized currencies, in
which the central banks of the gold standard countries had to participate
and in which a few private banks of particular influence also participated.
This backing was secured through the concession of loans and was con-
tracted in such a manner as to assure the future guarantors, headed and
represented by Strong and Norman, that the value at which currency was
pegged would correspond to the real value of gold held by the government
through the necessary economic and financial measures performed by that
government and its reserve bank system. This procedure, obviously, was
not imposed by any legislative norm – not even the League of Nations
could legislate or enforce such a binding rule – but by the concrete relations
of power among the various entities involved. In this way, long before the

183
H. Nicolson, Dwight Morrow, New York: 1935, p. 146.
184
R. De Felice, Mussolini il Fascista, Turin: 1968, pp. 222ff.; G. Gualerni, Industria e
Fascismo. Per una interpretazione dello sviluppo economico Italian tra le due guerre,
Milan: 1976, pp. 3–16.
 10. The Stabilization of the Lira 173

foundation of the International Monetary Fund (IMF), governments were

already compelled to open the management of their economies to interna-
tional discussion, to articulate their positions regarding several key issues
of economic reconstruction in the postwar period (from war debt to
reparations, and, in the largest sense, all the questions involved in the
reconstruction of the German economy) and in general to submit to the
influence of Anglo-American finance, which controlled the mechanisms of
the stabilization procedure. In recompense, this same financial cabal
offered the countries greater tranquility in the fluctuations of the market.
The first attempt to stabilize the Belgian currency failed precisely because
American private banking was not involved in the operation.185 Poincaré’s
France, on the other hand, consonant with its foreign policy, preferred to
stabilize its currency much later and according to its own itinerary, but it
could only succeed in this due to its more robust economic and financial
structure.186
In this perspective, the extreme coherence of Fascist financial policy
comes into focus. From the very start, Mussolini obsequiously respected
the power relations and hierarchy that reigned in world finance, having
chosen to give preference to the American component. This was not only a
matter of choosing the strongest interlocutor, but also the most neutral
one, or rather the one whose interests did not conflict with those of Italy, at
least in the immediate term. The United States would not enter into
territorial disputes or attempt to play European powers against each
other in order to divide them. In harmony with this choice, Mussolini
had been careful to tailor his behavior so that Fascism would enjoy the best
possible image enhancement among American commentators: he avoided
raising the question of emigration despite the basically humiliating con-
ditions in which Italy found itself, and he had patiently sought a settlement
of the war debt in a favorable sense without violating the principal of the
“sanctity of debt” so dearly held by American public opinion.
The problem of stabilization was approached in the same spirit. Once
they had made the choice and selected the interlocutor, Mussolini,
Minister of Finance Giuseppe Volpi di Misurata, and governor of the
Bank of Italy Bonaldo Stringher followed the rules of the game – perhaps
stretching its rhythms somewhat – according to the substantially coherent
and decisive wishes of their American partner in the affair. The discussion

185
Meyer, pp. 16–41.
186
Ibid., pp. 30–31; E. Moreau, Souvenir d’un Gouverneur de la Banque de France, Paris:
1954, pp. 17ff.
174 United States Economic Policy toward Italy

was conveniently opened by Volpi with Benjamin Strong in Washington,

just after the signing of the war debt accord. Strong quickly demonstrated
himself to be attentive and available, declaring himself ready to proceed
despite the fact that the governor of the Bank of England immediately
made his opposition known, due to the anti-German attitude of Volpi and
his evident intention of having the Bank of Italy (which should have been
the principal spokesperson according to the norms of the reserve banks’
governors, evidence of their expectation of autonomy from their own
governments) take its proper place.187 In the interim, until Strong could
travel to Rome to enter more detailed discussions, the Fascist government
paid careful attention to the observations and occasional criticisms passed
along from Lamont by Giovanni Fummi. One of these messages, sent on
the occasion of Mussolini’s speech of February 16, 1926, in which he had
responded to the anti-Italian declarations of the Bavarian prime minister
Held, was especially notable:
Sentiment in this country towards Italy is very much less favorable than what it was
when Count Volpi and you were here. There is no need in mincing words about it. I
must talk with you just as I would with one of my own partners and I must say to
you that the chief disturbing factor as to sentiment has been the various utterances
from time to time of your Premier. I don’t know how accurately the newspapers
have reported these, and it is not my function in any event either to praise or
criticize what Mr. Mussolini says. But the effect created on the public here has been
that Mussolini was preparing for a fresh war. This I regard as perfectly absurd, yet
one has to face the facts and that is what the public here is being led to believe, not
through any anti-Fascist propaganda here but simply by reason of the regular
dispatches from Rome.188

The message illuminates once again just how sensitive Americans were
to everything to do with Germany and, more in general, how much any
anti-German utterance seemed to threaten the renewal of conflict. The
Americans reacted strongly to any seeming reinforcement of their stereo-
types of Europeans as endlessly litigious and used such moments to renew
their commitment to isolationism. But the message also reveals to what
extent the relationship between the Fascist government and American
finance served both to keep the Italians aware of every little echo of their
actions in the United States and, therefore, to condition their choices and
behavior at every instant.

187
G. G. Migone, “Aspetti internazionali della stabilizzazione della lira,” pp. 50–53.
188
HUGSBA-TWL, bk. 190, fol. 19, Thomas W. Lamont to Giovanni Fummi, New York,
March 4, 1926.
 10. The Stabilization of the Lira 175

But the Morgan Bank partners did not stop at being the mirror for
American reactions to Mussolini’s politics. They continually worked to
pressure the Fascist government into action on the plan to stabilize the lira,
which Volpi had invited Strong to discuss in their first meeting. Volpi’s
maneuvers to defend the lira’s exchange value reawakened a kind of
doctrinaire furor in the partners, together with their worry that the minis-
ter of finance might consider these expedients a permanent surrogate for
the only true solution to the problem of the lira: the return to the gold
standard.189 In particular, the partners wished Volpi to complete the first
necessary step toward his stated goal, which was to formulate a concrete
plan for stabilization that defined the necessary internal measures and
prepared the necessary studies for de jure stabilization. They were in no
less a state of continual anxiety over the way in which Volpi, in the mean-
time, managed the lira and over the various manifestations of Mussolini’s
foreign policy; yet simultaneously they were not immune to the attraction
exerted by his authoritarian and centralized power, which seemed to open
so many possibilities for unopposed action.190 It was on this basis that the
so-called Leffingwell Plan was born. Named after one of the elder partners,
Russell Leffingwell, thanks to his previous experience as assistant secretary
of the treasury in the Wilson administration, was the principal monetary
expert at the House of Morgan. Leffingwell’s initiative was encouraged by
the ratification of the Italo-American war debt accord and the nearly
contemporaneous conclusion of the Mellon-Berenger agreement on the
French debt. According to Leffingwell, it was important to strike while the
iron was hot, preparing the return to the gold standard of the three
Latinate currencies in the same agreement by convincing, if possible,
France, Italy, and Belgium to stabilize at the same rate. The partners
were aware of the enormous difficulties such a plan presented but trusted
in the despotic capability of Mussolini to facilitate its achievement.
As has been written elsewhere, it was certain that in the face of this
mode of reasoning, of which the Leffingwell Plan was merely one expres-
sion, American isolationism revealed all its limitations. This was an exam-
ple of a fully thought-out plan for the role the United States should play in
the coming years, not at the level of theory but as part of a fully informed
evaluation of the economic power brokers’ means and their autonomy
from the conditions isolationism imposed on the government to deploy
them. While at the diplomatic level the American government was

189
Migone, “Aspetti internazionali,” pp. 56ff.
190
Ibid., pp. 64–65.
176 United States Economic Policy toward Italy

conspicuous by its absence from the European scene, Morgan himself felt
completely certain that no one in France or in England – no one except J.P.
Morgan & Co. – could offer the necessary leadership. Leffingwell was of
the opinion that they owed it to themselves, as well as to the holders of
French, Italian, and Belgian bonds and to the allied governments they had
helped rescue, to exhaust every possible effort in their aid, after the war as
during it.191 Apart from the almost sentimental reference to the wartime
commitment (which was in itself significant), there was in this statement a
precise acknowledgment of continual action involving Europe that
included, but was not limited to, offering banking services. It was rather
a grand economic project translated into political action, intended to
channel the opportunity provided by the development of global capitalism.
American financiers would not stop at providing the capital for
European reconstruction, but took on the problem of the political situation
in its general and particular forms (as the case of Italy demonstrates) in
order to best serve the goal of the economic restructuring. The result was a
wide-ranging interest in preserving peace, as well as an insistence on
encouraging a unitary process, which, though headquartered in New
York, would provide a broad and stable basis for European recovery and
a natural outlet for the exuberance of American capital. It was a matter, in
sum, of reinforcing with new monetary instruments the political future
augured by the great powers at the Locarno Conference. The analogy to
the second postwar period, including the Marshall Plan, social reconcilia-
tion, and American encouragement for European unification, is both apt
and meaningful.192
The Leffingwell Plan, as was logical, did not have any practical results.
It violated the concrete political relations among the countries concerned,
given their different regimes and approaches to the specific problem of
stabilizing their currencies. In these same years, France and Italy were in
conflict over ideology (since France offered refuge to the Italian anti-
Fascists), over territory and policy in the Mediterranean, and over the
Fascist regime’s need to relieve nationalist tensions with a scapegoat (a
role for which the Anglo-American and Germanic powers were not can-
didates because Italy could not afford to offend the United States). Only
France, which personified the policy of intransigence toward Germany and
which in the years of the Third Republic could be portrayed as not only
revanchist but corrupt and unstable, could serve as both a safe and

191
HUGSBA-TWL, bk. 172, fol. 28, J.P. Morgan to T. W. Lamont, New York, April 2, 1926.
192
Migone, “Aspetti internazionali,” pp. 68–69.
 10. The Stabilization of the Lira 177

plausible target. Only with the Locarno Pact, when Briand’s politics of
reconciliation emerged, would Italy have to change its tone and act more
favorably toward France. In the case of the Leffingwell Plan, however, the
Americans had asked too much of the Fascists’ spirit of collaboration. It
was one thing to soften the anti-French rhetoric in order to profit from the
political role of guarantor in concert with Great Britain for the Locarno
Pact’s four-way alliance. It was an entirely different matter to commit to a
stabilization plan that infringed upon Italy’s sovereignty, even if it was
only in a strictly monetary sense; this kind of supranational obligation was
totally incompatible with Fascist ideology. Furthermore, agreeing to stabi-
lization at a common rate would have required giving up the propaganda
advantage Italy desired of stabilizing the lira at a rate higher than the
French currency, a victory that seemed possible at that moment’s market
values. In these circumstances, Volpi followed the simplest strategy: he
serenely declared his open acceptance of the plan, fully expecting the
French to be the ones to scuttle the project. In this way, he could allow
the plan to die while still preparing the way for Italy’s real objective: to wait
for the moment when the United States would have at its disposal much
greater resources, both in the government and among financial interests, to
efficiently guarantee the success of a stabilization project. The Leffingwell
Plan also anticipated the future in its hints of various other attitudes that
were destined to reemerge: the American pressure in favor of European
economic unification; the extraneous position of the British in such mat-
ters; a clearly articulated French resistance based on its own financial
sector’s search for an autonomous position and resulting hostility toward
the “Anglo-Saxon” sector; and the weakness and relative acquiescence of
Italy in the face of American initiatives, even the inconvenient ones, which
was overcome only by shielding Italian interests behind the opposition of
other powers (such as, in this case, the French).
The most concrete result of the failure of the Leffingwell Plan was to
increase American impatience with the French. By contrast, their admiration
for the Italian regime was accentuated; it was the ever more decided opinion
of the Morgan Bank partners that Mussolini was to be praised as a leader
who knew what he wanted and was able to get it done efficiently. If it was
not possible to pursue the uniform stabilization of the “Latin” currencies,
and the Briand government was insufficiently strong to stabilize the French
franc on its own, it was useless to wait indefinitely for the French. It was far
more sensible to pursue stabilization with the man who was ready and
willing; this would become known as the “Italian approach” to European
stabilization. Thus began the planning for Benjamin Strong’s visit to
178 United States Economic Policy toward Italy

Rome.193 It is enough at this point to observe how the conversations to

which this decision gave rise, after a diligent preparation by Lamont and
Fummi from the Morgan Bank, took on the characteristics of an actual
negotiation. For the first time, during these talks the foremost representatives
of Italian economic policy were called to account for their internal and
external operations and made to understand the conditions under which
the international financial community, headed by the United States, would
be willing to admit Italy into their ranks. The key, of course, was joining the
network of reserve banks on the gold standard. Mussolini, Volpi, and
Stringher were each subjected to an experience comparable to passing
their comprehensive exams: as their examiners, Strong and his companion
Garrard Wilson, the undersecretary of the treasury, intended to discuss with
each man the specific competencies of his position, testing him not only on
the strictly financial aspects of the government’s deflationary policy, but
requiring reassurance regarding the peaceful intentions of Fascist foreign
policy and the stability of the regime on the basis of social pacification. It
would be an exaggeration to pinpoint this meeting at the Casina Valadier of
Villa Borghese between “il Duce” and the governor of the Federal Reserve
Bank of New York as the decisive historical moment when, in passing a test
on the economic and social conditions of Italy, Mussolini cemented Italy’s
future as part of the American-led West. Still, the policy of revaluation, the
return to the gold standard, and the legal stabilization of the lira were all
guaranteed in this culminating moment, even if the final agreement on
stabilization would take place more than a year later. And this key moment
was a highlight in the larger process that such economic choices facilitated:
the progressive consolidation of American engagement in the European
economy, and especially in Italy, which would provide Fascist Italy with
legitimate membership in the Western capitalist community, clarify its real
ideological orientation, and bring it into close cooperation with the emerg-
ing dominant power of America. Strong wanted to make an objective, first-
person inspection of those conditions necessary to the successful guarantee
of international support for the lira’s return to the gold standard; but he
brought with him all the baggage and preconceptions of the American elite
from which he came, all of which militated against his straying from the path
that had been laid out by the Morgan Bank partners. Nor did his Italian
interlocutors make any errors to distract him, confirming in every detail his
preexisting impressions about the Fascist regime and its economy.

193
G. G. Migone, “La stablizzazione della lira: la finanza americana e Mussolini,” in Rivista
di storia contemporanea no. 2 (1973): 151ff.
 10. The Stabilization of the Lira 179

The meeting with Strong was also a turning point for the Fascists. The
agreement presented decisive advantages for Italy, which would be able to
enter the international financial community on a sure footing and stabilize
its regime politically as a result; but it was also a clear acceptance of an
ongoing dependent relationship on a foreign power, which a nationalist
regime could not welcome unreservedly. Strong’s visit had been preceded
by the regime’s strengthening of the powers and prerogatives of the Banca
d’Italia, necessary to the successful de jure stabilization of the lira, as well
as a propagandistic score proving once again how efficiently the Fascist
government could move toward those goals Volpi and Strong had dis-
cussed at their first meeting in Washington. After Strong’s trip to Rome,
other, more significant provisions quickly followed to further the cause of
stabilization.194
In August, Mussolini gave the Pesaro speech, in which he linked the
stability and prestige of the regime to the fortunes of the lira; in the cabinet
meeting at the end of the month, he made the first provisions for reducing
monetary liquidity, transferring the remains of the $100 million Morgan
bond to the Banca d’Italia and reinforcing the powers of Governor
Stringher at the expense of Volpi’s.195
Days earlier, an exchange of letters between Mussolini and Volpi
revealed how the ongoing drop in currency value had spurred the dictator
to action; he joined his voice to the American chorus of criticism against
the market interventions his minister of finance had been performing to
defend the lira. In particular, he linked the ultimate consolidation of the
regime to the definitive strengthening of the lira. He concluded that
We must realize that we are confronting the whole financial world’s lack of faith in
Italian finance, a lack of faith that explains and provokes speculation lowering

194
On the interpretations of the Pesaro Speech and the “quota 90,” see P. Sraffa and A. Tasca,
“Politica monetaria,” in Lo Stato Operaio November–December 1927, reproduced in
L. Villari, Il capitalismo italiano del novecento, Bari: 1972; R. Sarti, “Mussolini and the
Industrial Leadership in the Battle of the lira 1925–1927,” in Past and Present n. 47 (1970);
idem, Fascism and the Industrial Leadership in Italy 1919–1940, Berkeley: 1971;
V. Castronovo, “La storia economica,” in Storia d’Italia. Dall’Unità ad oggi, Turin:
1975, vol. 4, I, pp. 267–275; M. Abrate, Moneta risparmio e credito in Piemonte nell’ultimo
mezzo secolo, 1926–1976, Turin: 1977, pp. 3–14; J. S. Cohen, “La rivalutazione della lira
del 1927: uno studio sulla politica economica fascista,” in G. Toniolo, ed., Lo sviluppo
economico italiano 1861–1940, Bari: 1973; P. Ciocca, “L’economia italiana nel contesto
internazionale,” in P. Ciocca and G. Toniolo, eds., L’economia italiana nel period fascista,
Bologna: 1976.
195
G. G. Migone, “Gli Stati Uniti e le prime misure di stablizzazione della lira (estate 1926),”
in various authors, Italia e America dalla Grande Guerra ad oggi, Venice: 1976, p. 37.
180 United States Economic Policy toward Italy

currency value. As long as this lack of faith did not have internal consequences, the
situation presented no imminent danger; but the day that politics crosses the border
(and in the long run it is inevitable), the distrust will spread throughout the country
and cause depositors to withdraw their funds (which amount to $51 billion), and
the regime would have no power to stop the collapse.196

This was not only the old Mussolinian demonology that regularly
supplied the regime’s propaganda content: accusations against interna-
tional speculators that eventually became a “Jewish-pluto-democratic
“conspiracy; the secret intrigues of exiled anti-Fascists with unknown
and unnamed international financial connections to strangle the regime.
This was, above all, the clear perception of worldwide economic interde-
pendence; the Italian economy could not ignore the existence of capitalist
mechanisms of credit, guaranty, and market that linked it to the interna-
tional situation. In his classified correspondence with Volpi, Mussolini
affirmed that “We are alone, in the face of our grave responsibilities”;
that it was a matter, once again, of battling “international liberal-
democratic concepts”; that it was necessary to save “this marvelous
Italian people who have worked heroically for the past four years and
now suffer like saints” from “having their throats slit with the golden blade
of the Anglo-Saxons.”197 And yet he never mentions the possibility of
breaking with the Anglo-Saxon financial forces, despite his claims to
want to combat their ideological and cultural models. On the contrary,
at the moment when he linked the survival of the regime to the faith
international finance would repose in it, he was affirming that the objective
of the regime was to definitively conquer that faith. He did not propose
abandoning the policy, which, up until that moment, had been insufficient;
rather, he wished to accentuate and increase it. He did not challenge the
orthodoxy of international capitalism, but challenged himself to adhere
more closely to it. If the condition for being welcomed into its drawing
room was to return to the gold standard through a deflationary program,
he would be the champion of deflation. “Il Duce” did not have, and could
not have, his own economic agenda; he had to advocate the prevalent one,
which alone could guarantee the class relations on which his regime was
based. He was careful to specify that the regime, “by its totalitarian, logical
and ineluctable nature,” would succeed at this agenda as well as and better
than any bourgeois parliamentary government. But the promise to do so
autonomously had a limited and propagandistic value. Certainly he

196
DDI, VII, 4, Benito Mussolini to Giuseppe Volpi di Misurata, Rome, August 8, 1926.
197
Cited letter from Mussolini to Volpi.
 10. The Stabilization of the Lira 181

refused to allow the old guard of Italian capitalism to man the helm,
although he did not disdain their collaboration (Stringher, Beneduce,
Pirelli, Alberti, and Fummi were all examples), because the regime needed
to steer the ship of state. As the rhythm of events showed, from the first
meeting with Strong until the definitive stabilization of the lira, Mussolini’s
only priority was to demonstrate that he was moving under his own steam
toward the destination indicated by forces whose superior power he recog-
nized. This was his priority in both internal and external matters. Some have
seen his insistence on a specific rate for stabilization – the famous quota 90 –
as a manifestation of his autonomy, and that of his favored class, the petite
bourgeoisie, in the face of capitalist interests.198 Those who, however, have
studied the manner in which each step of the itinerary toward the de jure
stabilization of the lira and the resulting return to the gold standard was
conducted in conformity with the suggestions of the leaders of American and
international finance cannot give much credence to that claim. It was true
that these financial elites expressed occasional perplexities regarding
Mussolini’s choice of stabilization rate, but they never pursued these
criticisms; evidently, they considered such details of secondary importance
and did not see them as an impediment to their provision of the necessary
support. Nor can it be overlooked that those same industrialists who com-
plained about the revaluation ended up benefiting from it when it served to
reinforce the power relations between them and their labor force. Even if
they paid a transitional cost in terms of profits, they gained power in the long
run. In sum, the most important factor was not the rate at which the currency
was pegged, nor the side effects that derived from stabilization, but the fact
that the regime had been able to choose for itself the path to stabilization and
consolidate its power – as well as, in the end, the power of Italian capitalism
and its links to international capitalism, reinforcing with the recession their
combined social control over the country.
The narrative of the process of stabilization itself clearly proves which
social and political groups participated in and benefited from it. Prominent
exponents of international finance and of the Italian economy never once
left the scene, despite some grumbles. The return to the gold standard was
not an affirmation of the political autonomy of the regime, but on the
contrary an important, perhaps decisive, consolidation of its dependent
relationship on Italian and international capital.199

198
De Felice, I lineamenti, and idem, Mussolini il Fascista, pp. 222–296.
199
V. Foa, “Introduzione,” in P. Grifone, Il capitale finanziario in Italia, Turin: 1971, pp.
vii–xliv; Grifone, pp. 56–77; Gualerni, pp. 16ff.
182 United States Economic Policy toward Italy

The process did meet with some opposition. Perhaps most important
among the voices raised against the rate of stabilization were those outside
the country who disliked the idea of such a complete insertion of the Italian
economy and the Fascist regime that guided it into the international
financial system. As mentioned, the governor of the Bank of England,
Montagu Norman, had from the earliest moment served as the catalyst
around whom were activated those who did not wish to financially support
the stabilization of the lira. Their concerns centered on two crucial issues in
Italy: its policy toward Germany and the independence of the Banca
d’Italia. Norman went on to indefatigably oppose external support of
stabilization, weaving a dense web of correspondence with his counter-
parts who governed their respective central European banks, in which he
sought to persuade them against the Italian operation. He further sought to
inflict a sense of inferiority on the Banca d’Italia in regard to the other
banks, due precisely to its status as representative of an unstabilized
currency. On one particular occasion, when the Belgian franc was finally
stabilized in the autumn of 1926, the Banca d’Italia was excluded from the
consortium of banks that guaranteed the transaction. This was despite the
fact that the Banque de France did participate, even though their currency
had not yet returned to the gold standard either.200 Norman was pursuing
a double strategy, blocking the policy of supporting the lira in his bilateral
relations with other banks while simultaneously pressuring the Banca
d’Italia (and sometimes humiliating it, as in the case of the Belgian
franc). His intent may have been to rush the Italians into an unprepared
stabilization, without the necessary international support, that would have
had disastrous consequences.201
In reality, Norman’s opposition was not mostly of a technical nature,
nor did it have so much to do with the international situation – issues such
as the attitude toward Germany or the autonomy of Stringher. Rather,
Norman was opposed to the nature of the regime that was to carry out the
stabilization of the lira. In November 1926, after the measures Mussolini

200
BE, bk. Italy sec. 62, Hjalmar Schacht to Montagu Norman, Berlin, November 10,
1926; BE, bk. Italy sec. 62, Louis Franck to Montagu Norman, Brussels, November 12,
1926; BE, bk. Italy, sec. 62, Montagu Norman to Novacovics, November 15, 1926; BE
bk. Italy, sec. 62, Montagu Norman to Louis Franck, London, December 22, 1926; BE,
bk. Italy, sec. 62, Montagu Norman, London, December 22, 1926; BE, bk. Italy, sec. 62,
Montagu Norman to G. Vissering, London, December 28, 1926.
201
G. Falco and M. Storaci, “Fluttuazioni monetarie alla fine degli anni Venti: Belgio,
Francia, e Italia,” in Studi storici, no. 1 (1975); idem, “Il ritorno all’oro in Belgio,
Francia e Italia: stabilizzazione sociale e politiche monetary (1926–1928),” in Italia
contemporanea no. 126 (1977).
 10. The Stabilization of the Lira 183

had put in place in the summer and early autumn, the conditions seemed
ever more ripe for the lira’s return to the gold standard. Both private
American bankers’ pressures to proceed and Benjamin Strong’s criticism
of Norman’s reluctance grew to the point that Norman had to take the bull
by the horns and reveal his true reasons for opposing the stabilization of
the lira. He made this revelation to the single most authoritative and most
enthusiastic advocate of the return to the gold standard, J. P. Morgan, Jr.,
himself. Norman took the opportunity of Morgan’s visit to London to tell
him in person; but he restated his point of view in a letter he afterwards sent
to Morgan, apologizing for having let him leave without saying good-bye,
as he wanted to take every opportunity to let him know how grateful they
all were for his help. He had planned to chat further with Morgan about
Italy, he said, so that those in New York would not take offense or
misunderstand him. Fascism, he wrote, had certainly replaced chaos with
order in the space of a few years, and something in that line had been
absolutely necessary. Il Duce had been the right man at the right time. But
he was no longer the right man for Italy’s current situation; now he was
part of a larger mechanism, and the tail was wagging the dog. And that tail
was completely determined to stamp out any form of dissent: freedom of
the press, and of speech, even in private, were being wiped out. From the
economic and financial perspective, he wrote, the country seemed to have
made a great deal of progress, but internal restrictions did not allow for
any outside opinion to register or to determine the real state of things.
Regarding the foreign bonds, he did not think that all the reasonable
conditions made by foreign bankers had been fulfilled, and investors
might soon begin to form a negative opinion of Italian bonds.
Meanwhile, the demands of the central bankers, according to Norman,
differed in quality and not in quantity from those of private bankers: the
latters’ goal was to furnish funds for stabilization or other useful projects.
But the funds available from the former were in less substantial amounts
and could only serve as the external sign of their desire for collaboration.
He wanted to emphasize the difference between these two goals, because
the central banks had little history or tradition to set a precedent for their
choices. They might prosper and become durable institutions, or they
might turn out to be a short-lived experiment of the postwar period.
While it was true that no reserve bank could be greater than its state, in
order to prosper, they would have to attain and guard a certain amount of
autonomy from their own governments. In Italy, where every activity was
politicized, there was no banker, not even Stringher, who could risk
criticizing Volpi or the government. Italy might still come out well from
184 United States Economic Policy toward Italy

this uncertain moment, but he was sure that it was not a good circumstance
for the Bank of Italy, and he compared it to other unsatisfying banking
situations like those of Poland, Russia, and Spain. Norman apologized for
his attitude, which Morgan had called “too liberal.” But he hoped he had
explained his reasoning well and asked for more time to see how the Italian
situation would develop.202 All in all, he apologized for sounding “too
liberal” to J. P. Morgan’s ears, but this was his position.
Norman tried to convince Morgan not to interfere in the problem of
stabilizing the lira, distinguishing between the role and the standards of
judgment of private bankers as opposed to the leaders of the reserve banks.
This went further than his previous claim that the reserve banks must be
guaranteed their independence, though that concept remained at the base
of his argument. In light of later developments, the insistence with which
Norman sustained the right and obligation of the reserve banks to remain
above politics and to follow their own policies, including developing
international relations founded on their own autonomous capacity, now
seems interesting. Naturally, he neglected to acknowledge how much the
“autonomous” role of his own nation’s bank was conditioned by the
economies to which it was linked and by the interests dominating them.
Norman was careful to underline that his reservations did not stem from
anti-Fascist prejudice, as is otherwise clear from his positive evaluation of
Mussolini’s restorative role at the outset of the regime. Nonetheless, he
brought an unusual note into the debate as conducted by the Western elite,
observing that the Fascist regime’s authoritarian nature, impermeable to
external influence, could create unpredictable and uncontrollable future
circumstances. In other words, Norman was arguing, not without reason,
that there was not complete interdependence between the Italian regime
and its economy, even if up until that point the regime had made no moves
incompatible with the most rigorous strictures of capitalism. The fact was
that the government had the ability to control the flow of information,
including even technical analysis necessary to the best functioning of the
economic system. Norman did not conclude from this that the monetary
policy of the moment was misguided, only that the institutional conditions
were changeable and might influence future orientations of that policy. He
claimed that all this was the more crucial because the question was qual-
itatively different than simply offering Fascist Italy free access to the
international capital market (a decision he made sure not to dispute a
posteriori, least of all with J.P. Morgan). At this point, the question was

202
BE, bk. Italy sec. 62, Montagu Norman to J.P. Morgan, London, November 19, 1926.
 10. The Stabilization of the Lira 185

whether to admit Italy for the first time to the restricted circle of great
powers linked to the gold standard, a circle that just at that moment was at
work establishing an international monetary system. In a certain sense, this
choice would mean undertaking an international project to stabilize the
Italian regime.
Can one make the general conclusion from Norman’s arguments that
the Fascist regime was indeed autonomous from the influence of the
international capital, not because it insisted on the quota 90, but on the
basis of its institutional character? That is to say, did the totalitarian nature
of the Fascist state render it extraneous to international capitalism? And
did, therefore, the treatment of Fascist Italy by the United States and Great
Britain constitute an error that Norman was trying to correct? Or was it
rather the result not only of special interests, but of an overall plan carried
out in those years by the leadership of the world economy?
In truth, the discussion that Norman opened with J.P. Morgan, impor-
tant as it may have been for the arguments it introduced and for the proof it
provides of the remaining conflicts between the two greatest financial
powers, is a false historical path to understanding. It seems to show that
in November 1926 there was some possibility of revising the approach to
Fascist Italy chosen by the principal governments and most relevant eco-
nomic forces of the West. Those forces, which had viewed the Fascist
seizure of power with approval, had not changed their positive judgment
even when confronted with disturbing evidence of Fascism’s internal trau-
mas – from the assassination of Giacomo Matteotti to the occupation of
Corfu, and all the vindictive rhetoric toward France and other competing
powers. They repeatedly chose instead to focus on the substantially pru-
dent and respectful foreign policy of Mussolini toward the dominant
powers and to facilitate Italy’s settlement of war debt and private fund-
raising. In so doing, they had uninterruptedly moved ahead in their consent
to Italy’s eventual full inclusion in their sphere of influence. Under these
conditions, not even the prestigious governor of the Bank of England could
make any criticism, however well founded, that would suffice to change
the course. His protests were destined to fall upon deaf ears, not just
because they were late in coming and presumed the ability to change a
path chosen long before, but because they rested on entirely hypothetical
reasoning. They contained no negative analysis of political, much less
economic, choices already made by the regime; he merely pointed out
that the regime was capable of changing that orientation. That was not
enough to interrupt the overall plan of the Americans, who were funda-
mentally indifferent to the nature of any single European regime – when
186 United States Economic Policy toward Italy

they were not explicitly admiring of the efficiency of Fascism in contrast to

the bumbling parliamentary systems. The Americans had concentrated
their resources on the economic reconstruction of Europe through mone-
tary stabilization, following the orthodox dogma of economists and cap-
italists of the era. It must be said in their defense that only the total
overturning of the system on which they based these predictive policies –
the crash of 1929 and the Great Depression – put Mussolini’s Italy and
other powers in the position to begin making choices hostile to those
orthodox interests.
Naturally, the decision in favor of stabilizing the lira depended less on
the persuasiveness of these respective arguments and more on the balance
of power among the actual decision makers. Montagu Norman showed his
awareness of this fact when, in his letter to Morgan, he stated that no
reserve bank could be greater than the state to which it belonged.203 Still, at
the end of 1926, Norman must have believed that the game was not yet
over and that the Americans, and especially Benjamin Strong, had not yet
made their final decision. In the course of 1927, the process of revaluing the
lira continued, while at the same time several episodes allowed Norman to
go on with his own passive resistance. As for the Italians, they wasted no
time establishing formal banking relationships with the Federal Reserve
Bank of New York and the Bank of England. Furthermore, Benjamin
Strong had the chance to demonstrate his concern about the Italian ten-
dency to intervene in price limits and salary controls, which went beyond
what he considered sound. A summer meeting in New York finally cleared
away these differences. The governors of the principal reserve banks met –
without Stringher – and decided to push the Italian government to increase
the pace of reform, authorizing the Banca d’Italia to open accounts with
the Federal Reserve Bank of New York and the Bank of England. At this
point, the Americans forcefully instructed Norman that the time had come,
both politically and economically, to proceed with the stabilization of the
lira. Strong admitted, realistically, that the status of the Banca d’Italia, in
particular the autonomy of its governor, was not at the same level of the
other central banks, but he concluded that in the choice between
“autonomy” and “stabilization” the latter took precedence.204

203
Ibid.
204
FRBNY-BS, 2, Norman to Strong; n. 1116.7, Montagu Norman to Benjamin Strong,
London, November 22, 1927. The governor of the Banque de France expressed himself
similarly: FRBNY, C. 261 1A,17 Italian Stabilization, Emile Moreau to Montagu
Norman, Paris, December 19, 1927.
 10. The Stabilization of the Lira 187

It was revealed to Norman at this juncture the exact outlines of the

decision he had to make. A secret, internal memorandum of the Bank of
England clarified in five succinct points how Norman understood the
reality of the situation. First, it stated, stabilization had intrinsic advan-
tages, but its principal merit was to make a necessary step toward pacifi-
cation. Second, they might favor stabilization for its intrinsic advantages,
but it could also be used to defeat their objectives. Third, as bankers they
could not discriminate among their clients, and Italy was obeying their
conditions, at least superficially. But there was no reason to believe that
Italy truly wished to collaborate. Fourth, if they did not cooperate, it was
likely that stabilization would be carried out anyway and their apparent
defection would cost them American favor [italics mine]. Fifth and finally,
they would therefore have to proceed, despite their reservations. It might at
least be opportune to notify the Italians from the start that they were not to
be invited to join the community of central reserve banks unless they could
prove that they would cooperate with both the letter and the spirit of the
rules of cooperation among them.205
The memorandum was little more than a simple logical proof. We do
not want the stabilization of the lira. The Americans want it. They are
stronger than we are. We are constrained to accept stabilization because
we cannot risk losing their partnership. In this sense, the decision of the
reserve bank system to support the lira’s return to the gold standard was no
longer really about Italy’s admission to the club of monetary cooperation.
It was, more importantly, a major step along the path to the United States’
replacement of Great Britain at the summit of world finance. It was the
American representatives who were able to vigorously impose their politics
on the others, ignoring the admittedly well-founded concerns of the British
spokesman – even though he was one of the main friends and advisers of
the American financiers, as was consonant with the “special relationship”
forming between the two powers in the interwar years. The Americans,
however, did not hesitate in their insistence on the general consent to their
longtime plan for Fascist Italy. Norman, for his part, had the good sense to
be completely aware of all this and to adapt himself accordingly. Indeed, at
the end of November he informed Strong that when the moment was ripe,
they would be ready to join the Americans in helping the Bank of Italy
stabilize the lira.206 After a rapid visit to London by Stringher in the

205
BE, undated memorandum.
206
Letter from Norman to Strong, cit.
188 United States Economic Policy toward Italy

following days, Italy issued the invitation to Strong to travel to London

and conclude the negotiations.
But the final meetings in London at the headquarters of the Bank of
England, which took place between Stringher and Beneduce on the one
hand and Strong, Norman, and Siepmann of the Bank of England on the
other, were not without embarrassing moments.207 At Norman’s request,
several private banks were involved – J.P. Morgan & Co. acted as the go-
between, along with Morgan, Grenfell & Co.; Hambro Bank, which tradi-
tionally represented Italian interests in London; and Rothschild Bank.
Together, these banks underwrote $75 million in loans to support the
stabilization, while another $75 million was provided by the reserve
banks. At first the loans were covered by Strong’s and Norman’s commit-
ments from their respective institutions. The causes of embarrassment were
both the fault of Montagu Norman, who did not fully succeed in playing
the British role of “good loser.” First there was the purely formal maneuver
in which Norman, according to Strong’s testimony, forced Stringher to
submit a written request to Moreau and Franck, respective heads of the
French and Belgian reserve banks, for their bids on the loan; Norman had
apparently agreed with Moreau and Franck ahead of time to give Stringher
a taste of his own medicine, since he had required the same formality at the
time of the Belgian stabilization.
The second problem was far more significant, since the question of the
rate at which to stabilize the lira ended up in debate again. Norman tried to
impose a rate of 100 lire to the pound, which caused it to come out in the
course of an intense interrogation of the Italian representatives that
Mussolini himself had ordered the higher level. Norman had to content
himself with expressing his reservations through the statements of the two
governors, in which they disavowed all responsibility for the rate of
stabilization. This was finally fixed at 92.5, or nineteen lire to the dollar.
In reality, this was not a serious-enough disagreement to derail the process,
and it did not in any case implicate Strong. He actually commented in his
final report that he had been somewhat scandalized by the fact that
Norman took such a position. Stabilization at 100 percent of the pound
sterling would mean at the maximum a gain of 11 percent for a few
categories and an equivalent loss for other categories. He was struck by
the possibility that such a change could have exposed the Italian govern-
ment to ridicule and could have caused a great deal of dissatisfaction, if not

207
BLCU-GLH, Strong correspondence and memoirs 1927–1928, Benjamin Strong,
Memorandum Italian Stabilization Negotiation, Washington, D.C., December 26, 1927.
 10. The Stabilization of the Lira 189

active hostility. Apart from that, the information regarding the stabiliza-
tion level would have been communicated to an ample number of banks
and bankers, and the temptation represented by the ability to profit from
that insider knowledge might have become a real and dangerous risk.
Given these considerations, he was convinced that there would have been
no way to justify cooperating with such a demand regarding the level for
stabilization. All this had been fully discussed with Norman in private, and
he had realized that Norman was ready to compromise.208
The quota 90, in the point of the view of the major reserve bank’s
governor, was not, then, the fruit of Mussolini’s ideological extravagance.
On the contrary, Strong severely judged Norman’s attempt to change the
rate at the last minute, and, partly to safeguard the reputation of the Fascist
government, he forced his British colleague to desist. Later, Louis Franck
and Hjalmar Schmidt also expressed their opinion that it would not have
been possible to stabilize the lira at any other level than its current value.209
More generally, the entire question of stabilization was always, even in the
final phase of its negotiation, really only a secondary priority in the face of
the main goal: that the lira should return to the gold standard and that its
central bank should join the coalition of international monetary coopera-
tion. As Strong concluded, even taking these points into account, he had
never participated in an important negotiation that had been conducted as
poorly. The true reason was that Italy had already adopted all the neces-
sary preliminary measures, carrying them out with great vigor and success
before arriving at the final decision to stabilize. The majority of other
countries that had stabilized their currencies, with the sole exception of
England [!], had not succeeded in reaching the same results ahead of time.
Strong felt it had to be recognized that the great show of self-discipline and
capacity for sacrifice made by Italy gave them the right to be supported in
their plan without so much hemming and hawing.210
The sense of self-control so admired by Strong was, interestingly, noth-
ing more than the autocratic powers enjoyed by Mussolini that the part-
ners of the Morgan Bank had already so favorably compared to the more
complicated and unpredictable procedures of the European parliamentary
democracies. Similarly, the spirit of self-sacrifice that he mentioned was in
reality the sacrifices imposed by the process of deflation and the repression

208
Ibid.
209
FRBNY, C. 261, 1926, Italy-Banca d’Italia, Benjamin Strong to George L. Harrison,
Evian-les-Bains, July 20, 1928.
210
BLCU-GLH, Strong, Memorandum Italian Stabilization Negotiation.
190 United States Economic Policy toward Italy

of the Fascist state on the classes and categories most affected by the
financial operation.
One may therefore conclude that the plan of the private American
bankers was successfully carried out by the representatives of the major
reserve banks, under the leadership of Strong, and despite the inconclusive
attempts by Montagu Norman to oppose it. Strong did not hesitate to
congratulate himself on this positive outcome, noting that stabilization
had been agreed upon literally and exactly according to the terms he had
first offered Mussolini and Volpi during his visit to Rome eighteen months
previously. The bonds secured for Italy in the preceding months were now
guaranteed by the consolidation of the Italian lira, and even more so by the
process of strengthening the regime (and reinforcing the class structure on
which it depended), just as foreseen by the American financial community
involved in planning the reconstruction and restoration of all of Europe
according to its vision. It was no accident that this development took place
in a period coinciding with the internal stabilization of the Fascist regime as
it assumed an ever more unequivocally dictatorial form and substance.
Mussolini had shown himself fully deserving of Strong’s trust, and it would
be difficult to argue that he had in any way exercised autonomy from
Italian or international capitalist forces. He had in this way reached his
goal of consolidating his regime, just as he had expressed it to Volpi in their
private correspondence in August 1926 and then again publicly in his
speech at Pesaro. Italian industrialists had had to submit to some sacrifices
in terms of their profit margins, but they had been compensated in the
reinforcement of their political and employment power through the work-
ings of deflation. Moreover, they had won the decisive victory of liquidat-
ing the institutions of organized labor, through the combination of the
Palazzo Vidoni pact [an October 1925 agreement that effectively banned
independent trade unions and placed all organized labor directly under
Fascist control – trans.] and the further economic and political weakening
of the working classes through the deflationary lowering of salaries.211
Within this field, those who were already strongest and most competitive
benefited disproportionately, so that they became even more capable of
entering the international market on profitable terms and assuming, then
and in the years to come, the role of go-between for international capital

211
The decrease in the real value of salaries between 1927–1930 was around 10 percent; this
drop in the labor costs was accompanied by a progressive rise in productivity. See
S. Romano, Giuseppe Volpi, Milan: 1979, p. 157. On the social standardization resulting
from Mussolini’s economic policy, see also Foa, pp. xxxix–xliv; Castronovo, pp. 273–
276; and Gualerni, p. 38.
 10. The Stabilization of the Lira 191

and the Italian economy. The Banca d’Italia began for the first time to
participate fully in the restricted circle of reserve banks engaged in the
construction of an international monetary system. Thus, in December
1927, under the aegis of Benito Mussolini and the American bankers
who acted in place of a still-isolationist government, began the construc-
tion of the hegemony of the United States. This hegemony, and the depend-
ent relationships resulting from it, would be among the few historical
conditions to survive the coming storm and go on growing in the years
to come.
 chapter 3

The United States and Italy Confront

the Great Depression

1. the economic crisis and international relations

It is a frequent and even trivial assertion that the Great Depression had
devastating effects not only within each of the industrialized societies, but
also in their relationships and their effect on the international balance
of power. More rarely have historians and political observers of the era
actually tried to analyze exactly how and in what measure these disrup-
tions took place. In order to reconstruct the specific effects on the relation-
ship between Italy and the United States, one must begin with an overall
evaluation of the crisis.
Charles P. Kindleberger wrote that it was useless trying to determine if
the causes of the Great Depression lay mainly in the United States, and
in particular in the monetary policy of the Federal Reserve Bank of New
York, as Friedman and Schwartz had argued,1 or in the political and
economic imbalance of the Old World, as Herbert Hoover had claimed
during his second presidential campaign of 1932.2 As Kindleberger
asserted, when a building burns, we could choose to blame the spark, the
combustible fuel, the draft that fed the flame, the bystanders who did not
put out the first flames, the contractor who did not build a flame-proof
building, or the firefighters who did not arrive quickly enough, but the
truth is that we must consider the full combination of these circumstances.3

1
M. Friedman and A. J. Schwartz, A Monetary History of the United States, 1867–1960,
Princeton: 1963, p. 360.
2
H. Hoover, The Memoirs of Herbert Hoover, New York: 1952, vol. III, pp. 1, 61–62, 251.
3
C. P. Kindleberger, “The Great Depression, 1929–1933,” originally for Il Mondo
Contemporaneo no. 8, director Nicola Tranfaglia, Florence: 1978, 7.

192
 1. The Economic Crisis and International Relations 193

Kindleberger’s point applies to the historical question at hand. In this

work, it is not important to establish whether to blame Benjamin Strong
for his errors or to flay Castor and Pollux (as Keynes called the two
functionaries of the British Treasury who, in league with Clemenceau,
fixed Germany’s reparations payments at an outrageous sum) for their
crimes.4 What must be established, however, is the differing relevance of
the economic crisis in the greatest economic power in the world compared
with its effects in other countries and the influence this had on its interna-
tional role. To continue Kindleberger’s metaphor, it was not one house
that burned, but an entire city. And those who did not escape from the fire
in the biggest building had no way to fight the fire in the rest of the city,
because they were too busy saving their own property.
The raising of customs barriers greatly contributed to the propagation
of the crisis. On June 17, 1930, President Hoover signed the Smoot-
Hawley law; it drastically raised the principal customs taxes, up to 100
percent on some raw materials.5 In this way, Hoover – despite being firmly
convinced of the necessity for an industrially strong nation to practice free
trade and encourage external expansion – bowed to the combined pres-
sures of the lobbies of agriculture and the hardest hit business sectors.
Some observers did note that this helped support internal demand.6 More
than one thousand orthodox economists, however, immediately signed
a manifesto arguing that the United States was, with this tariff increase,
denying its debtor nations the possibility of repayment and inviting repri-
sals by which each country would reduce its exports and its national
product.7 Indeed, in the following months twenty-five nations, Italy
among them, installed tariff increases that powerfully restricted their
economic interdependence with the United States and favored the pursuit
of more autonomous economic practices. When Roosevelt, after the first
wave of internal reforms, approved the Reciprocal Tariff Act of 1934 –
which allowed customs reductions of 50 percent for countries granted
most favored nation status – a new allocation of resources between inter-
nal consumption and imports had already been cemented. This change
was particularly notable in countries such as Italy and Germany, and the
resulting modification of commerce flows had political effects as well.8

4
J. M. Keynes, The Economic Consequences of the Peace, London: 1920, p. 26.
5
J. H. Wilson, American Business and Foreign Policy, Boston: 1973, p. 74.
6
W. A. Lewis, Economic Survey, Philadelphia: 1950, pp. 60–61.
7
Kindleberger, p. 27.
8
On the commercial policies of Fascism, see G. Gualerni, Industria e Fascismo. Per una
interpretazione dello sviluppo economico Italian tra le due guerre, Milan: 1976, pp. 97–106.
194 The United States and Italy Confront the Great Depression

The May 11, 1931, failure of Credit-Anstalt, which had been responsible
for 70 percent of Austrian banking operations, is usually pinpointed as the
political turning point moment for depression in Europe. That failure, due
mostly to the artificial restrictions imposed on commercial and financial
relations among the former Habsburg states, precipitated the financial crisis
throughout central Europe. Most affected was the German financial sys-
tem, which had a large presence in Austria and in the Credit-Anstalt bank;
there was a massive withdrawal of foreign capital from Germany after the
collapse. In turn, this made German debt holders increasingly unable to
fulfill short-term obligations and finally resulted in the German govern-
ment’s refusal to continue reparations payments as set by the Young Plan.
At this point, the financial relationship that had developed throughout
the 1920s between the United States and Germany became a problem.
By the spring of 1931 Germany, on the verge of financial insolvency, had borrowed
from foreign sources – in large part American – between two and one-half and
three times as much money as she had actually paid out in reparations to the Allies
after the beginning of the Dawes Plan of 1924. The reparations, as all informed
individuals knew, were in part sent on to the United States as war debt payments,
by Britain, France, and other nations. American bankers unfortunately had used
the money of their fellow citizens (who, one should add, lent the money willingly
enough because of the high German interest rate) to finance both the circular
payments, Germany to the Allies to the United States to Germany etc., and much
additional German borrowing. When the Germans began to act as if they might
default these private loans, the bankers had in their possession a great mass of
paper which they could not easily convert into cash to pay depositors when the
word got around, and runs began on their cash holdings.9

Two typical interpretations of the causes of the crisis, by now of global

dimensions, derive from this kind of analysis. Both were present at the
moment as well as in successive historiography. The first is identified with
Joan Hoff Wilson, an expert on that president’s foreign economic policy.
It corresponds largely to Hoover’s own explanation from the beginning of
the crisis, merely critiquing his failure to enact his ideas during his tenure as
secretary of commerce.10 According to Wilson,
Had this country adopted less traditional payments, there would have been no need
for either the abnormal amount of short- and long-term foreign loans or the
excessive expansion of American exports which occurred after the war.11

9
Robert H. Ferrell, American Diplomacy in the Great Depression: Hoover-Stimson Foreign
Policy, 1929–1933, New Haven: Yale University Press, 1957, p. 108.
10
Wilson, American Business, pp. 105–106.
11
Ibid., p. 122.
 1. The Economic Crisis and International Relations 195

Once the New Deal was under way, this type of argument also partially
coincided with the attack on bankers epitomized by the congressional
investigation of investment banking’s role in foreign lending. This populist
and isolationist rhetoric accused the bankers of irresponsibly promoting
foreign bond issues in order to profit on commissions, without properly
taking into account the risks to which they were thereby exposing the
American public when they acquired those bond certificates.12
This type of interpretation was based on the obvious desire to exonerate
the system itself from responsibility for causing the crisis, instead attribut-
ing the problem to mistakes made by isolated individuals. Still, what
Wilson labeled abnormal quantities of loans and excessive exports did
not stem from the iniquity and myopia of bankers. They were products of
structural characteristics of the American economy after the First World
War, those enumerated in the Introduction. In summary, these were the
increase in production, which required external outlets for both its goods
and its excess capital, and the fiscal policy of expanding profits without
a correspondent increase in the pay and therefore the buying power of the
masses, so that internal demand did not grow in tandem with supply.
The existence of external outlets for American goods and capital
depended to a crucial extent on the capitalist reconstruction of Europe.
For this to be possible, it was necessary to invest in Europe, funds for which
could only come from the United States. This investment could not only be
in the form of private production and building, but included the need for
loans to sustain monetary stabilization through a deflationary policy and
the political and social stabilization of Europe – a stabilization necessary,
in turn, to guarantee a return on those same American investments. Even
Ferrell himself, despite his argument that the entire crisis stemmed from
the short circuit in the capital transfer between Germany and the United
States, added that, through the Dawes Plan, Germany was “able to carry
through a program of re-equipment which enormously raised her indus-
trial productivity, and included an entire remodeling of her iron and
steel industry, which had been cut in two by detachment in 1919 of
Alsace-Lorraine; by 1929 Germany had attained an output of raw steel
only slightly short of the level of 1913.”13

12
This type of attack inspired a special congressional investigation. See 72nd Cong., 1st sess.,
“Sale of Foreign Bonds or Securities in the United States,” Hearings before the Committee
on Finance, U.S. Senate, Washington, D.C., 1932.
13
Ferrell, pp. 108–109; see also C. R. S. Harris, Germany’s Foreign Indebtedness, London:
1935, p. 11.
196 The United States and Italy Confront the Great Depression

One might object that this was the bankers’ policy rather than that of
the American government. In reality, anyone familiar with the sources
on the relationship between bankers – especially those of the House of
Morgan – and the highest levels of the Harding and Coolidge administra-
tions knows that the bankers were virtual governmental delegates in these
matters and that their actions went far beyond the normal scope of invest-
ment banking. Proof of their political role was the Dawes Plan itself,
marking the convergence of European statesmen, who were willing to
compromise on the reparations question, and American bankers, led by
J.P. Morgan and Co., who were interested in financing the reconstruction
of German industry. Carrying out the plans for the stabilization and
reconstruction of the European economy together, they represented a
general interest motivated by the demands of the American production
system as it emerged from the First World War. It may, and should, be
argued that the unwillingness of large sectors of the country to accept
the new responsibilities weighing on a global hegemon created serious
distortions and that among them was certainly the choice to assign to
private elements duties that should have been under the jurisdiction of
the State Department and the treasury. But it must be remembered that
those bankers belonged not only to the same class but to the same elite
oligarchy of men. Then and for many years to come, the positions of
foreign policy making and those of domestic economic policy were filled
in alternating fashion by this group of men. This practice continued despite
the protests arising from time to time from the agricultural and populist
sectors. In the end, the fact that the United States had no explicitly articu-
lated and congressionally ratified policy around which to rally all the
resources of diplomacy, military, and economy – which is what did happen
in and after the Second World War – had serious effects. But that in no way
reduces the actions of the bankers to a simple selfish misuse of power at
the expense of the overall interests of the American economy. Rather, the
nature of their financial activity offered them a global vision and made
them capable of carrying out an interest of state with which they were in
complete agreement. In this cooperative service to a common cause, they
avoided isolationist obstacles and successfully bore the public responsibi-
lity through private means.
As in every capitalist economic activity, the bankers obviously also
responded to normal incentives of profit. These incentives occasionally
led the less accredited and tradition-inspired banks (and not only them) to
make imprudent choices and to offer loans that were insufficiently solid
investments, with the resulting higher margins of risk. Nor is there any
 1. The Economic Crisis and International Relations 197

doubt that issuing some of these loans in the form of bonds, which trans-
ferred the risk directly to the public while the bankers kept their commis-
sion no matter what the end result, favored overly casual risk assessments
on the part of the bankers. But even these anomalies were the result of the
extreme abundance of available capital up until 1928 (when the boom
of the New York stock market created an unprecedented bubble), made
possible by the policies of the Republican administrations of the preceding
years. Hoover himself, who would accuse the bankers of failure in the
face of a glaring problem, had as secretary of commerce limited himself
to demanding that every loan correspond to an immediate advantage or
profit to an American industry. Even the populist attack on the bankers
in the first years of the New Deal never posed the problem of the overall
legitimacy of a policy that extended American influence over most of the
globe by means of social repression, pay restriction, profit protection, and
disregard of social needs for resources. It simply denounced the crimes of
the individual banker who chased profits at the expense of the public. In
this way, the fundamental causes of the Depression were sought only in
the real or assumed abuses of single actors or companies, rather than in the
total lack of proportion between demand and supply deriving from deeper
imbalances in the production system and the class structure.
The mechanism of war debt and reparations has frequently been
denounced as one of the main sources of the crisis by all those historical
personages and historians wanting to minimize the internal causes. Joan
Hoff Wilson went so far as to affirm, contradicting the mainstream histor-
iography on the issue,14 that the failed cancellation of debts and repar-
ations constituted one of the main reasons for the Depression by making
the international financial system ungovernable and contributing to the
short circuit between American capital and foreign payments. She further
blamed American bankers for being primarily responsible for this failure.
According to her, they had an interest in perpetuating both debts and
reparations inasmuch as they were the basis for the bankers’ claim to
exclusive technical management of finance, as well as the source of the
web of loan and bonds they were able to generate.15 Wilson went on to
claim that debt forgiveness would have been possible if the bankers had
made any serious attempt to convince the Congress and the public of its
advisability.

14
C. Parrini, Heir to Empire: United States Economic Diplomacy, 1916–1923, Pittsburgh:
1969, pp. 124ff.; Ferrell, pp. 106ff.
15
Wilson, American Business, pp. 153–156.
198 The United States and Italy Confront the Great Depression

The truth is that this was not a case of errors in evaluation that can be
attributed to some sinister influence by a specific group, but a symptom of a
basic and insuperable contradiction. There were innumerable occasions
in which all those involved in international finance, who had no intention
of crippling the German economy for political motives, affirmed that debts
and reparations constituted a threat to the political and economic stability
of Europe. Why then did the bankers not fight harder for cancellation? The
question deserves a clarifying response in order to demonstrate that basic
contradiction that impeded the United States from taking on the leadership
of the Western capitalist world between the world wars.
It has been shown that the war debt issue acquired a symbolic value in
isolationist politics. A politician’s refusal to compromise on the demand
for debt payment became the measure of his independence from the
intrigues of European politics, and of his patriotism in the defense of
American interests. It was true that such a measurement left completely
unspoken the actual economic significance of the issue, just as it was true
that in the end isolationist opinion accepted large reductions in the capital
of war debts. This was possible because the complicated distinctions
between various figures, capital and interest, and mature and future inter-
est computation made it difficult for laymen to understand just what had
changed. But it was a different story when the choice was clearly whether
to cancel debt altogether. The bankers could not launch a frontal attack
on this risky terrain on which a defeat threatened to stop or severely slow
other important aspects of their plans. Such a loss would have created even
larger problems, especially for those who held elective offices, in carrying
out the long-term policy of American finance.
It is a serious error to underestimate the substance and depth of
isolationist sentiment in those years. In summary terms, we may state
that during the 1920s isolationism was partly a political myth (and sub-
sequently an American historiographical one). This was because American
capitalists, and in part statesmen, did not at all resign themselves to
isolation. They continued their pursuit of external expansion. This does
not mean, however, that isolationism can be disregarded. To adopt Adler’s
expression, that impulse was not eradicated but only, partially, con-
tained.16 It was not a purely ideological, or superstructural, contradiction;
it was the manifestation of the social defeat of a large part of the American
population in the crucial period just after the First World War. The
employers won that hard-fought struggle using every means available

16
S. Adler, The Isolationist Impulse.
 2. Hoover and Stimson’s Foreign Policy 199

and succeeded in blocking the creation of a working-class front that had

shown real potential power. It therefore became necessary to vent that
class dissatisfaction by directing it elsewhere, such as onto the European
nations responsible for the war. Above all, xenophobic and ultranationalist
feeling was exploited in order to justify and undergird social repression. In
the end, immigration quotas and closures became the main concession
made to organized labor, helping to direct union politics toward a corpo-
rativist and nationalist model. In other words, once again the weapon of
racism was used to divide and conquer the working classes, following the
recipe cooked up in the South toward populism and blacks. Of course, the
experience of racism against American blacks was a cautionary example
of how, once such a weapon was used, it was extremely difficult to disarm.
It became particularly entrenched in a system that awarded such strong
power to elected representatives who were strictly beholden to their voting
constituents. To return to the main point, the idea of debt cancellation was
not blocked by some few members of Congress getting on the isolationist
hobbyhorse, or by a minority of ideologues. It was a pillar on which rested
the whole structure of mass consent for the governing elite. If the tangle of
international indebtedness did cause or at least contribute to the economic
crisis, that was not due to the litigious nature of Europeans, nor to the
cowardice of a few bankers and politicians, but to the fundamental char-
acter of class relations in the United States and the effects of the social
struggle that had recently taken place there.

2. hoover and stimson’s foreign policy

Herbert Hoover, who became president on March 4, 1929, conducted
foreign policy in a manner totally coherent with his reductive interpreta-
tion of the crash. He believed it was essentially a crisis of economic
confidence that did not require any radical change to American economic
policy, least of all to the structural and ideological foundations of that
policy. The crash was due to the continued instability of Europe and to
distortions in the American banking system that Hoover did not hesitate
to label “rotten.”17 Hoover never changed his basic orientation; in foreign
policy as in domestic, even when faced with the most dramatic manifes-
tations of the crisis – be it the Wall Street crash or the failure of Credit-
Anstalt – they only reinforced his preconceived agenda.

17
Hoover, pp. 21–26, 107.
200 The United States and Italy Confront the Great Depression

Among the most significant political figures of the Harding and

Coolidge cabinets, Hoover was the most diffident regarding the renewal
of commitments to Europe. He accepted the idea only under certain clear
conditions. We have already discussed his concept for American expansion
in the industrialized world as he articulated it during the negotiations on
Italy’s war debt. Yet he was too much of an expert on American industry,
of whose interests he had been the principal governmental guardian right
up until his election to the presidency, to ignore that the extraordinary
growth of American production and profits required not only expansion
but the full recovery of the European economy.18 When Hoover became
president, Mellon remained at his post as the secretary of the treasury,
where he continued to represent the world of finance. Moreover, in place of
Frank Kellogg, Henry Stimson became the new secretary of state. Stimson
might have been the most Wilsonian statesman within the Republican
Party. Linked to the internationalist tradition of the New York Bar
Association, particularly well connected among the biggest corporate law
firms, Stimson was perhaps the favorite protégé of Elihu Root. Root had
been secretary of state, was the main advocate of international justice in
the nation, and was known as the grand old man of the Council on Foreign
Relations and all the most important New York social circles. From this
background, even more than from his recent experience as governor in the
Philippines, Stimson had formed a solid attachment to those principles of
liberal internationalism of which Woodrow Wilson had been the most
eloquent interpreter. These principles led him to favor every form of inter-
national intervention, founded on the concept of collective security. He
was also capable of real discernment when it came to the political and
ideological motives of any state’s international conduct – though this was
limited in a fashion that his relations with Fascist Italy would reveal.
Both the historiography and the memoirs of this period are full of
references to the contrasts between Hoover and his secretary of state.19
In reality, we can say that these contrasts were more ideological and
personal than political; they rarely surfaced in any divergences regarding
important political decisions. But there were frequent psychological con-
flicts between the engineer from the Midwest and the cosmopolitan New
York lawyer, and they viewed European events from quite different per-
spectives. Overcoming the tension that characterized their relationship,
however, they collaborated on the main attempt made between Wilson’s

18
Ferrell, p. 23.
19
See especially Ferrell, pp. 39ff.
 2. Hoover and Stimson’s Foreign Policy 201

fall and the initial crises leading up to the Second World War to reaffirm
the American political and diplomatic presence in foreign affairs.
A plan for American business was already quite clear, even if the
reluctance of the isolationists – which was the natural consequence of
the suddenness with which such responsibilities had fallen on American
shoulders after the First World War – prevented the full and unified
deployment of every American resource in its service.20 Hoover and
Stimson did nothing more than pursue the cautious path, already forged
by previous administrations, of renewing the American commitment to
world politics within the limits and in the ways that were possible without
encountering congressional obstacles. Hoover was probably motivated
by the belief that a greater role played directly by the government would
reduce the power wielded as indirect representatives by the New York
bankers. As for Stimson, his desire to participate personally and with the
legitimacy of the law in solving the international crisis brought him partic-
ular enthusiasm in exploiting the more flexible conditions of isolationist
politics established during the second half of the 1920s. The Locarno Pact
had created a far better atmosphere than the one during the occupation of
the Ruhr. Hoover and his secretary of state were ready to benefit from the
clearer air. Still, despite the lesser irritability of the Congress, there were
some issues that remained off limits. War debt was one example; a partic-
ularly touchy one was any collaboration with the League of Nations. But
even the isolationists seemed somewhat open to discussing disarmament.
Indeed, there was a general sense of pacifism, sometimes with specific
religious roots, at the very heart of isolationist culture. Senator Borah
had on multiple occasions since 1920 called for disarmament measures.
Thus encouraged, in the spring of 1928 secretary of state Kellogg had put
forward a proposal by Aristide Briand, who had initially tried to reopen
dialogue with the United States regarding some form of reciprocal security
pact. After the Americans refused this proposal, he transformed the orig-
inal into a pact renouncing war as an instrument of national politics. The
Americans promoted this pact, making it multilateral in order to commit
all signatories to refusing war and to resolving their conflicts through
peaceful means, and it became the Pact of Paris. Despite the completely
innocuous character of the pact – it provided for no form of sanctions
in the event of its breach – it was the first return to the international scene
of American officials and a real step toward a renewed commitment to
international politics on the part of the United States. Perhaps better

20
Kindleberger, pp. 30–33.
202 The United States and Italy Confront the Great Depression

known as the Kellogg-Briand Pact, it became a useful premise for the

restarting of disarmament talks, which Hoover and Stimson advocated
enthusiastically. First they convened a naval conference in London in
January 1930; two years later came the General Disarmament Conference
in Geneva. In the meantime, Stimson had not only supported but encour-
aged and even led the European powers and the League of Nations in a
politics of pressure against Japan’s occupation of Manchuria. This was
the occasion for the proclamation of the Stimson Doctrine, according to
which the United States did not “intend to recognize any situation, treaty or
agreement which may be brought about by means contrary to the covenants
and obligations of the Pact of Paris.”21 Although Great Britain’s unwill-
ingness, on the basis of the Lytton report, to take the lead in a concrete
action against Japan frustrated Stimson’s attempt, it was clear that the
greater participation of the United States would tend to rupture the limits
of isolationism more and more. It was perhaps to be expected that Hoover’s
intervention, necessitated by developments in the economic crisis – and
starting with the so-called Hoover moratorium on war debts – would also
increase American involvement in international affairs.
What was the European reaction to the increased, even if still cautious
and partial, American willingness to play a role in international politics?
The French government, obsessed with its fear of one day having to face a
new German offensive, must have viewed it with favor. This was especially
true since the French had repeatedly called for American participation;
but the specific positions taken by Hoover and Stimson on the questions
of disarmament and war debt were certainly not what the French had
hoped for. Rather, these initiatives called for reconciliation between the
two major European antagonists, without the security measures that
France considered a prerequisite for any form of improved relationship
with Germany. Ramsay MacDonald, the British prime minister, usually
sided with Hoover in these reconciliation attempts once the issue of balanc-
ing British and American naval forces had been decided. Together they called
for a reduction of armaments and a general remission of international debts.

3. italian foreign policy from

mussolini to grandi
The case of Italy is particularly interesting. In the three years during which
he was minister of foreign affairs, Dino Grandi not only conducted a policy

21
Ferrell, pp. 151–169.
 3. Italian Foreign Policy from Mussolini to Grandi 203

of European reconciliation and strengthening of the League of Nations

that coincided with the objectives of Hoover and Stimson, but Washington
became the main point of reference of Italian foreign policy. He was at
least partially justified in this since, as he claimed in one of his frequent
attempts to defend a policy that did not seem completely in line with Fascist
ideology, he was only continuing the policy that Mussolini himself had
conducted when he held the portfolio of the Foreign Ministry. As Di Nolfo
wrote:
Until this time Mussolini’s activity as Foreign Minister showed a sense of respon-
sibility and a vision limited only by the consideration of Italian interests. Mussolini
had not taken an autonomous or original position on any important questions
between 1922 and 1929 (with the exception of the memorandum on reparations
in 1923), contenting himself in every other case with following the initiatives of
others and remaining at the margins of the issues.22

Nor could Mussolini entirely do without a few dramatic gestures and

speeches, necessary to play to his own base; although, after the problems
with Corfu, especially in terms of relations with the British, he used this
classic dictatorial prerogative with greater prudence. Overall Mussolini
had remained within the limits of caution.
As Di Nolfo affirmed, it is difficult to distinguish any unitary and
coherent theory in Mussolini’s foreign policy. Above all, it is hard to
identify a specifically Fascist solution to the general problems pertaining
to relations among states. Essentially, Mussolini’s foreign policy consisted
in consolidating the Fascist regime and choosing how best to propagandize
Fascism abroad. There was actually a coherent pattern guiding Mussolini’s
conduct in this period, even if the first impression seems one of contra-
dictory choices. Based on his perception of the balance of power in Europe
and the wider world at that moment, he operated in a consistently defined
field of action. At the center of political relations in those years was the
conflict brewing from France’s attempts to impose upon Germany a strict
implementation of the Treaty of Versailles. France was still the strongest
military power in Europe. But the United States and Great Britain were
instead pursuing a policy designed to favor reconciliation between the
two traditional adversaries, in order to further the political and economic
stability of Europe. As discussed above, the stabilization of Europe, pro-
moted with alacrity by American bankers and supported by the British

22
E. Di Nolfo, Mussolini e la politica estera italiana (1919–1933), Padua: 1960, pp. 252ff.
On the meeting Mussolini called the British and French foreign ministers to at Territet, see
the classic account in R. Guariglia, Ricordi 1922–1946, Naples: 1949.
204 The United States and Italy Confront the Great Depression

government, necessitated first of all the economic reconstruction of

Germany, a goal that excluded the ongoing moral and political humilia-
tion of the Germans. While France’s main priority was always to bolster its
own security through pacts and military alliances guaranteeing its protec-
tion from future German aggression, Great Britain preferred to prioritize
multilateral power structures, above all the League of Nations, as its
favored venue for performing the role of mediator. The conflict between
the plan for stabilization and the French policy of security marked the
entire decade in various ways. After the occupation of the Ruhr, the Dawes
Plan and the Treaty of Locarno inaugurated a new period in Europe of
decreasing tension; in this context, the plan for stabilization seemed to
gain more permanent legitimacy. Although the American government did
not directly participate in European diplomatic exchanges-for obvious
reasons, it is certain that American capital, managed by American bankers,
constituted the essential factor in favor of stability.
Given that this was not merely a rhetorical device for defining the
relations among European states, Fascist Italy was obliged to make impor-
tant policy choices as well, even if they were not explicitly based on any
theory of international relations. Mussolini’s Italy could not have had any
hesitation regarding France, a politically unstable country full of rancor
and resentment toward the rest of the world, with whom there were
conflicts of interest in a multitude of issues and which appeared to Italian
nationalist opinion as the party most responsible for the Italian humilia-
tions at the Versailles peace talks. Italy’s choice was obviously to favor the
Anglo-American powers, geographically much more distant, with whom
there were no territorial disputes (with the sole future exception of Great
Britain’s objections to Mussolini’s eventual expansionist project in Africa)
and who, most importantly, held the key to the economic and financial
reconstruction of Europe. Mussolini’s willingness to cooperate with the
British and Americans in this conflict was obviously linked to his desire to
satisfy the Americans, who would virtually cancel Italian war debt, make
numerous public and private funds available through loans and bonds,
and from 1926 to 1927 finally achieve the stabilization of the lira. When
Montagu Norman opposed the collaboration Americans requested to help
stabilize the lira, he also accused Volpi of being anti-German. Similarly,
when Mussolini attacked the Bavarian minister Held regarding the terri-
torial dispute over the Alto Adige region, he risked damaging his good
relations with the American banking community more than he ever did
with more aggressive acts having to do with less sensitive issues. Still, the
Italian conduct regarding the occupation of the Ruhr, Alberto Pirelli’s
 3. Italian Foreign Policy from Mussolini to Grandi 205

treatment of the reparations issue as dictated to him by Mussolini, and the

ongoing Italian hostility to any French military proposal all combine to
clearly demonstrate that the Fascist choice of alliance in these matters
was to favor the policies of London, Washington and, indeed, New York
of reconstruction and mediation, including during the period preceding
Grandi’s assumption of the duties of foreign minister. One might simply
say that Mussolini’s gut instinct for power guided these choices. But it is
better to consider the fact that the plan for the economic stabilization of
Europe, while it required certain sacrifices, including some limitations on
sovereignty in both the short and long terms, was also a plan for stabilizing
the Fascist regime in both its international status and its internal class
structure. Mussolini accepted American financial leadership and friendly
relations with Great Britain, with the necessary political consequences,
because he thereby obtained the international cooperation he needed to
stabilize his own economy and consolidate the class power structure in
Italy through a deflationary policy aimed at returning the lira to the gold
standard. These developments strengthened the regime in both formal and
practical terms. The drawback of this policy direction was to be in perma-
nent tension with France, not only on the basis of the traditional territorial
and ideological conflicts due to France’s harboring of anti-Fascist exiles,
but now also regarding the great themes of European cooperation: the
acceptance of the United States’ growing financial hegemony, the collab-
oration with Great Britain’s international politics, an attitude toward
Germany nearly the opposite of France’s intolerance, and the refusal of
all Parisian proposals for military security alliances. Upon closer exami-
nation, however, this was not truly a drawback for Italy; it was, rather, the
necessary corollary of an extremely prudent diplomatic policy that in
substance did little to protect the national autonomy that Fascist ideology
loudly proclaimed ought to be Italy’s first priority in all foreign relations.
As Dino Grandi confirmed, Fascist Italy not only had to take France into
account, but actually needed a long period of tension with France before it
was possible to create a cooperative relationship, if not an alliance.23
In a certain sense, the most difficult political moments for Mussolini
were the occasions when France, usually led by Aristide Briand, showed
itself willing to reenter the group of European nations inspired by the
Anglo-American policy of collaboration and to accept a more relaxed
approach toward Germany. It would be on just this terrain that
Mussolini’s politics and Dino Grandi’s conduct as minister of foreign

23
Dino Grandi, interview with the author, Taormina: January 3, 4, 5 and 6, 1970.
206 The United States and Italy Confront the Great Depression

affairs would subsequently part ways and finally determine the break
between the two men. The difficulty became clear with Locarno. For
obvious strategic reasons, Grandi repeatedly claimed that his foreign
policy was the continuation of Mussolini’s. Probably Grandi did not
himself believe this, given his belief in his own original analysis. In his
memoirs, the reader sees an understandable temptation to downplay
Mussolini’s political acumen: “il Duce” wanted to settle the war debt out
of pure conventional respectability, and not because he had understood
that this was a necessary step for obtaining financial and political credit
for the regime; Mussolini conducted a hostile policy toward France out of
personal resentment, and not because he had chosen to privilege other
alliances; and so on.24 In his interpretation of the Treaty of Locarno there
are clear distinctions made not only between his own politics and those of
Mussolini, but also between two different phases of Italian foreign policy.
Grandi, in his most important speech on foreign policy given to the Grand
Council (Gran Consiglio del Fascismo, originally the Fascist Party’s ruling
council, which by 1928 was a constitutional body of state and the main
institutional body of Fascist government – trans.) on October 3, 1930,
spoke of the Treaty of Locarno in the following way:
Can we truly say that Italy has joined this international pact out of sincere
conviction? No, we cannot say this. Locarno was and is the son and heir of
Geneva. Locarno was an initiative of the French and the English in the atmosphere
of Geneva: that was enough to make Italians view it with antipathy and diffidence,
and the reason why it was judged to be against Italian interests. We agreed to
Locarno at the last minute after having maintained throughout the negotiations
the position of observers, and we agreed when we were confronted with the fait
accompli of German adhesion, which forced us to join in or be cut out of the concert
of the four Great Powers of Europe. But we did it out of necessity and against our
will. Prisoners of our own polemics, and of our anti-Geneva rhetoric, we failed to
grasp that this Treaty among the four Great Powers of Europe is greatly in Italian
interests as well . . .25

How should this paradox illustrated by Grandi be explained? Locarno

was the most important political and diplomatic result of the stabilization
plan carried out by the Anglo-American powers. It was no accident that
it had been preceded by the Dawes Plan, which created the basis for a
massive injection of American capital into Europe, drastically reducing the
victorious powers’ calls for reparations and allowing Germany to secure

24
Ibid.
25
ADG, III, D. Grandi, Discorso al Gran Consiglio del Fascismo, Rome, 2 ottobre 1930,
p. 295.
 3. Italian Foreign Policy from Mussolini to Grandi 207

immediate sources of funding for its own industrial recovery. At the same
time, as Grandi noted, Italy not only saw its own role as a great power
ratified, but that role was actually increased by its position as guarantor of
the treaty. The consolidation of the Fascist regime, with the repressive turn
after the Matteotti affair and the failure of the Aventine secession, as well
as the definitive liquidation of the political opposition and social stabiliza-
tion anchored by monetary stabilization, were all part of the same logic.
The direction of international politics also influenced Grandi in this direc-
tion, with the renewal of international conferences and the calming of
tensions between France and Germany after the passages of the Dawes
Plan and the Treaty of Locarno. In this context, he made the reevaluation
of the Locarno Conference the point of departure for a wholesale accept-
ance of the politics of European reconciliation, which characterized the
policy of his entire tenure as minister of foreign affairs. Grandi was con-
vinced that Italy had neither the power nor the opportunity to conduct an
aggressive politics in the Danube and that any pronounced attempt to
revise the peace treaties concerning the region would leave Italy totally
isolated. Only the more profound effects of the Great Depression and the
fall of the Weimar Republic would make a more aggressive approach
realistic in times to come. Given the current situation, the regime had little
choice but to make a virtue out of necessity. For several years, Mussolini
and the Fascist regime were encouraged to end their passive acceptance of
the reigning international climate and exploit the lessened tensions by
bringing the consolidation of the regime to bear in claiming leadership of
the politics of international reconciliation. This task was facilitated by
ongoing French reluctance, especially when the ever-changing French
governments were led by men such as Tardieu who represented its most
conservative and nationalist tendencies. In other words, Locarno had not
succeeded in erasing the French obsession for pursuing alliances to guar-
antee France’s military security, which they saw as ever more threatened;
and so they continued to defend the economic and territorial handicaps
imposed upon Germany by the Treaty of Versailles. Such an approach
allowed Grandi to pursue his pro-British policy, centered on the League of
Nations and favorable to disarmament, in contrast with that of the French.
He thus managed to confirm himself to London and to the American
bankers as a partner of Great Britain in guaranteeing both French and
German respect for the border at the Rhine.
And yet there was no lack of reasons for which Mussolini and the Fascist
regime, although susceptible to every formal opportunity for Italian prestige
in international relations, might still view the treaty negatively and be
208 The United States and Italy Confront the Great Depression

suspicious of the “spirit of Locarno” as it appeared in the following years. In

the first place, every direct communication between France and Germany,
which was obviously going to be favored by Great Britain, generated the
fear among Italian diplomats of ending up isolated in European foreign
politics. This danger was clearly perceptible during several moments of
the naval conference, but especially so during the 1932 economic conference
at Lausanne, which provided part of the justification for Grandi’s defenes-
tration. From Mussolini’s point of view, it was one thing to favor Great
Britain and American financial policies against the French; it was altogether
different to submit to a collaboration plan in which France even momen-
tarily rose above its anti-German scruples to become a partner of the
Anglo-American powers. Mussolini’s attitude toward the Leffingwell Plan
was symptomatic in this regard: if the French themselves had not forced
the failure of that American plan for the collective stabilization of the
Latin currencies, the dictator would have suffered a major embarrassment.
Mussolini wanted to stabilize the lira, and the support of American bankers
was indispensable to do it, but only as a last resort would he have accepted
the monetary Locarno so dear to the Morgan Bank associates.
In the context of an eventual greater European concert of powers in
which the Franco-German conflict would no longer be the dominant motif,
the real hierarchy of power would reemerge. Mussolini’s Italy would be
presented with the uncomfortable dilemma of accepting its lower rank in
such an order, or of pursuing a policy on its own behalf that during the
1920s it really did not have the internal or international strength to back
up. Furthermore, an eventual permanent reconciliation between France
and Germany would have as its inevitable consequence the renewal of the
Entente Cordiale with Great Britain. This would force Fascist Italy to
abandon its hopes for blackmailing France into offering colonial conces-
sions or in any case rising above it in the traditional conflict between the
two nations. At that point it would no longer suffice to favor the richer and
stronger nations as a function of anti-French competitiveness. Italy would
be forced to fully confront its real position in the European power struc-
ture, as well as the contradictions between its own ideological rhetoric and
the concrete demands of an economy ever more dependent on the Western
capitalist system.
In 1929, the year in which Dino Grandi became minister of foreign
affairs after a long apprenticeship in the shadow of Mussolini and
Contarini, it was no longer enough to conduct a policy founded on the
otherwise solid base of cooperation with Great Britain and the American
bankers; such a policy had too long avoided the question of coherence with
 3. Italian Foreign Policy from Mussolini to Grandi 209

its own regime’s ideology. Although it is doubtful that such choices had
ever been made “on the basis of Fascism’s original and autonomous
premises,” it was nonetheless true that
From . . . 1929 on, first the new reparations talks and then the disarmament
conferences threw into relief the great problems that [. . .] underlay the turn in the
global situation, and demanded new positions on Italy’s part [. . .]. For the first
time, therefore, Mussolini and Fascism were faced with problems that called into
question the entire vision of international affairs that Mussolini had tried to
formulate in his years as Foreign Minister. Their particular character could no
longer be approached with a restricted and unilateral point of view; a more ample
perspective and the consideration of the general interest had become necessary.26

In reality, as has already been argued, Grandi could make use of the
fundamental choice of alliance that Mussolini had already made, though
with some adjustments; he would especially have had to play the part
of best behaved pupil in order to point out the contrast with the French,
incapable of letting go of their oppressive and militaristic attitude toward
Weimar. At the same time, the Italian economy, with the deflation
required by a vigorous revaluation of the lira, had no problems of internal
stability, and the effects of the Great Depression were late in reaching
Italy. Nor, after the Spa conference, which had awarded the modest sum
of 10 percent of the German reparations payments – augmented to 12
percent later, at The Hague – did Italy have much to loose from a policy
favoring the cancellation of intergovernmental debt, which constituted an
obvious obstacle to international cooperation. Grandi could therefore
easily favor the cancellation of those debts and, more in general, at least
give lip service to those orthodox and Wilsonian solutions for strong
economies, starting with the liberalization of commercial exchange. As
an industrially weak power, deprived of raw materials and poor in cap-
ital, Italy had a strong interest in any form of arms limits that did not
damage its political prestige by putting it in a formally weak position with
regard to France. In this case, too, it was not hard to make virtue of
necessity by assuming within the embrace of the League of Nations the
leadership of those small nations and especially those Socialist, radical,
and Labour forces within Great Britain and France that were ideologically
favorable to the politics of disarmament. What was most important, for
the purposes of this analysis, was how this policy positioned Grandi in
relation to the wishes of Hoover and Stimson to reinsert the United States
in the European political context.

26
Di Nolfo, pp. 252–253.
210 The United States and Italy Confront the Great Depression

4. the london naval conference

From this point of view, the naval conference of London was Grandi’s first
occasion to attempt a collaboration that assumed growing importance in
his eyes, and its best advantage was its coherence with some of Mussolini’s
own political and economic choices in the 1920s. Such a path might lead so
far as to make Italy the chief spokesperson for American foreign policy in
Europe and in the League of Nations, where the United States continued
to be absent, in obedience to the ongoing reluctance among American
isolationist circles in the Congress and public opinion. Naval disarma-
ment, as seen above, was a particularly friendly terrain for the reentry of
the U.S. government in world politics. Indeed, the initiative came from
that very conference in Washington at which such positive results had
been attained, especially from the points of view of the Americans and the
Italians. At that conference the proportional levels of maximum tonnage
for battleships and aircraft carriers had been fixed at 5 for Great Britain
and the United States, 3 for Japan, and 1.67 for France and Italy. In other
words, the United States had reached parity with the major maritime
power in history, while Carlo Schanzer had obtained parity for Italy with
France, during one of its darkest phases for domestic and diplomatic
politics. Naturally, one had to keep in mind that similar accords were
important not so much for their effective reduction of arms as for their
recognition of the relative political status of each nation, a position the
Italian government was particularly sensitive about.27 On February 21,
1927, the Italian government had refused President Coolidge’s invitation
to a conference of the signing powers of the Washington treaty for the
extension of the limits to other categories of arms not mentioned in the
treaty. Despite the close relations already cemented between them (this was
on the eve of the stabilization of the lira with the decisive support of the
American central banks), the Italian government justified its refusal with
the affirmation of the principle – which it renounced when it accepted the
convocation of the London Conference in 1930 – according to which
“there exists an undeniable interdependence among every form of arma-
ment by any single power and it is no longer possible to adopt partial
measures among only five Great maritime Powers.” The memo from the
Italian government went on to add:

27
So Grandi always argued. See D. Grandi, Interview. See also ADG, II, L’adesione italiana
all’invito britannico, p. 59.
 4. The London Naval Conference 211

If the United States due, to its favored geographical position, has been able to
reduce to the minimum its land-based arms, Italy for its unfavorable geographical
position cannot expose itself, without grave risk, to a binding limit on its maritime
armaments, which are already insufficient for its defensive needs.28

The refusal of the Italian government was inspired by the obvious

concern not to worsen the power relationship with regard to France,
which in the meantime had further reinforced its Continental dominance.
What were the reasons leading the Italian government to renounce its
own favored position, and wait for the planned conference on general
disarmament without first confronting the issue of naval arms? The first
reason was the accord reached between France and Great Britain in which
the former accepted the latter’s superiority in all naval categories, in
exchange for a few small concessions to the French regarding land-based
disarmament, with a consequent improvement in the political atmosphere
between the two major European powers. The accord had revived the old,
traditional, diplomatic worry that Italy would be left isolated,29 an even-
tuality that brought British ex-prime minister Lloyd George to tell his
fellow Liberal Party members that they were all insane to sign a pact that
set them against Italy, but actually stark raving mad to sign a pact that
made them America’s foe.30
In the second place, Italy had very favorably viewed the agreement
between Hoover and Ramsay MacDonald, at the time of the Labour
Party prime minister’s visit to the United States in the fall of 1929.31
MacDonald, who had succeeded Stanley Baldwin after an important
electoral victory for Labour, wished to repair the ailing “special relation-
ship” with the United States. In this pursuit, he accepted numerical parity
in all naval arms categories as the United States had been requesting for
some time and which had failed to win agreement at the 1927 confer-
ence.32 Why would Italy see this accord in a positive light? Normally, Italy
preferred limitations on overall tonnage to specified single-category limits,
as was logical for a weak power that could only aspire to a superior arms

28
ADG, II, Memorandum del Governo italiano all’Ambasciatore degli Stati Uniti d’America
in Roma, 12 febbraio 1927 (in risposta a memorandum del Governo Americano circa una
nuova conferenza sulla limitazione degli armamenti navali, del 10 febbraio 1927), pp. 62ff.
29
ADG, II, Memorandum del Governo Italiano all’Ambasciatore di Francia in Roma, 6
ottobre 1928 (in risposta a memorandum francese del 3 agosto 1928), pp. 63–64.
30
ADG, II, D. Lloyd George, Discorso al Congresso del Partito Liberale, Yarmouth,
1928, p. 65.
31
ADG, II, D. Grandi, Discorso alla Camera dei Deputati, May 9, 1930, p. 173.
32
ADG, II, Dino Grandi all’Ambasciatore d’Italia a Parigi, Rome, November 12, 1929.
212 The United States and Italy Confront the Great Depression

comparison in a few chosen categories, to which it devoted particular

effort. This accord contradicted that oft-stated principle.33 But Grandi
was aware that American engagement in European politics could only
take place through a renewal of close ties, not only financial but also
political, with Great Britain. He declared repeatedly that not only did he
welcome the return of the United States to world politics – as witnessed
also by his positive judgment regarding the Kellogg-Briand Pact, which he
interpreted as a first step in the right direction34 – but that he also approved
of the special friendship between those he did not hesitate to call, even
publicly, “the two greatest peoples of the world.”35 Furthermore, the
understanding between Hoover and MacDonald lessened the immediacy
of Italy’s greater fear: a reinforcement of the alliance between France and
Britain, which could only occur at the expense of Italy and of its role as
guarantor and mediator. Grandi felt that the Locarno Pact had created this
role for Italy to play alongside Great Britain and continually strove to
maintain both nations in this partnership.
Due to these motives, the Italian government was the first to respond
positively to the Anglo-American invitation to the naval disarmament
conference. It was immediately necessary to begin negotiations with the
French, without whose cooperation the conference would be unable to
reach any positive end. Negotiations got off to a promising start when
Prime Minister Briand let it be understood that he was willing to extend
the principle of naval parity previously accepted at the Washington
Conference when he was the foreign minister of his country. After the
fall of Briand’s government and his substitution by André Tardieu, with
Briand back in the role of foreign minister, this possibility evaporated.
When on January 21, 1930, the London Conference opened, France and
Italy still had not joined in with the tentative agreement approved by the

33
ADG, II, Memorandum del Governo italiano all’AMbasciatore di Francia in Roma, 6
ottobre 1928, pp. 63–64.
34
D. Grandi, Interview; see also ADG, II, L’adesione italiana all’invito britannico, p. 54.
35
ADG, II, D. Grandi, Discorso alla Camera dei Deputati, Rome, May 9, 1930, p. 188:
“Hasn’t isolationism been one of the fundamental motivations in the most difficult
moments of the history of these two greatest of living peoples, the English and the
American; and to this word ‘isolation’ have they not added, with admirable pride, the
attribute ‘splendid’?” Grandi’s speech did not fail to attract the attention of the American
press. The San Francisco Chronicle, on May 15, 1930, carried an article stating that
Grandi was the first European prime minister to declare that the Anglo-American friend-
ship was not a threat to any other nation, but rather the best possible form of global
understanding. The paper found it significant that it took a Fascist representative to make
this observation.
 4. The London Naval Conference 213

so-called maritime powers – the United States, Great Britain, and

Japan.36 Grandi had no choice but to present the Italian position in
front of the entire conference in its most advantageous and conciliatory
guise.
The memorandum containing the Italian requests listed the following
points:
1) Italy favors the effective reduction and not the overall limitation of naval
armaments. The criteria for limitation may imply augmentation or crystalliza-
tion of armaments, and result in the opposite consequence of the desired
reduction.
2) Italy recognizes the existing connection between armaments and security, but
maintains that the need for armaments cannot be determined in an absolute
sense; rather, only a relative determination can be made compared with the
armaments of other nations.
3) Italy considers these two principles as the only justifiable basis for determining
general arms limitation.37

In other words, Italy declared itself open to an effective reduction of

naval armaments – a propagandistic position, but believable inasmuch as
disarmament corresponded to a precise interest of the poorest among the
so-called great powers. In this way, Grandi won the sympathy of a signifi-
cant portion of the English Parliament, to the point that one hundred
Labour MPs adhered to the proposal, calling for the total abolition of
both submarines and armored battleships. Earlier, both Italy and France
had refused to discuss the abolition of submarines, requested of them by
the major naval powers, given that they constituted an indispensable
attack force for nations that could not compete on the basis of tonnage.
Italy renounced this prerequisite, but asked in return that battleships also
be abolished, which was of course unacceptable to both the British and the
American militaries, yet sufficient to court the more pacifist members of the

36
ADG, II, pp. 67–72. Tel. 728, Dino Grandi to Gaetano Manzoni, Italian ambassa-
dor in Paris, Rome, October 14, 1929; tel. 342–409–83; Dino Grandi to the Italian
ambassadors in London, Washington, and Tokyo, Rome, October 17, 1929; Nota
di risposta del Governo Francese, Paris, October 18, 1929; tel. 973, Dino Grandi to
Gaetano Manzoni, Rome, November 12, 1929; tel. 846–607, Gaetano Manzoni to
Dino Grandi, Paris, November 19, 1929; tel. 1010–660, Gaetano Manzoni to Dino
Grandi, Paris, December 4, 1929; Gaetano Manzoni to Dino Grandi, Paris
December 15, 1929.
37
ADG, II, D. Grandi, Discorso alla Camera dei deputati, Rome, May 9, 1930. See also DDI,
7, VII, 335, Dino Grandi to Benito Mussolini, January 29, 1930.
214 The United States and Italy Confront the Great Depression

House of Commons.38 But these were all preliminary skirmishes, necessary

to the construction of the pacifist image of the Fascist regime among
the more democratic sectors of Anglo-American public opinion. Nor did
Grandi skimp on more formal expedients. In his first speech to the gathered
statesmen of the conference, he only referred to Hoover as the “Head of a
great state represented here to which the cause of peace owes a great deal.”
The true issue, both from the Italian point of view and in terms of the
success of the conference, was relations with France. The rapport between
the two minor nations appeared decisive for two reasons: first, only an
agreement between the two Mediterranean powers regarding their relative
forces would allow their participation in a global extension of the
Washington treaty; second, even in the event that an agreement could be
reached as to parity or some other formula for armaments, it would be
necessary for the maximum tonnage agreed upon not to exceed limits that
would disrupt the maritime powers’ relative quotas. In fact, Great Britain
had been forced to accept parity with the United States when faced with
the latter’s ambitious construction program, but it had no intention of
relinquishing its traditional “two power standard,” which held that the
British fleet must be stronger than the sum of all other European naval
forces. In the event that France and Italy, having reached an accord on the
relative strengths of their two fleets, set a tonnage quota so high as to
threaten the maintenance of the two-power standard without thereby also
revising the quotas previously set among the maritime powers, the confer-
ence would have been – to make the obvious pun – sunk. It followed that
the United Sates and Great Britain were both intent on reaching an agree-
ment between France and Italy that would both solve the problem of
relative strength between the two latter nations and reinforce the stability
of the two-power standard and the previously agreed quotas between the
former. Grandi therefore confirmed to the conference that
. . . Italy is ready to accept any reduction of armaments, even to the lowest level, as
long as it will not be surpassed by any other continental power.39

Fascist Italy would not relinquish its claim to parity with the French
fleet, but it left to France the decision on the specific numbers – while still
declaring its preference for the largest possible reduction. This meant

38
Daily Herald, London, January 23, 1930; ADG, II, p. 115, containing the report of a
motion presented in the House of Commons by 100 MPs (97 Labourites and 3 Liberals) on
March 14, 1930, calling for the elimination of battleships from all the world’s naval fleets.
39
ADG, II, D. Grandi, Discorso alla Conferenza di Londra, January 23, 1930, p. 94.
 4. The London Naval Conference 215

putting the burden of confrontation with the English and the Americans
on the French if the proposed tonnage was excessive in their eyes. Grandi
knew well that France, at the moment of the London Conference, was not
willing to concede naval parity to Italy.40 This had been communicated
to him earlier in a memorandum to that effect from the French foreign
minister. But Fascist Italy could certainly not appear militarily weak com-
pared to the stato liberale government still in power when the Washington
accords were made. In compensation, the total openness regarding specific
tonnage quotas allowed the Italian delegation to present itself favorably to
American public opinion and to the pacifists of France and Great Britain.
How did Briand articulate his strategy for the London Conference?
France’s first priority was to make use of the negotiations on naval dis-
armament to achieve a political victory he had aimed at throughout his
entire 1920s foreign policy posture: a political alliance with Great Britain,
and possibly with the United States, that guaranteed French security
regarding Germany and forced Fascist Italy either to join the alliance or
to remain isolated. Briand presented a number of proposals he thought
served this goal: the extensive interpretation of Article 16 of the Charter of
the League of Nations, a Mediterranean security pact, and even an advi-
sory pact among the great powers to isolate Germany that broke with
the Locarno Pact’s approach of placing Germany and France on equal
footing in formal terms. He used Great Britain and the United States’ desire
to agree on naval disarmament as a negotiating tool in each of these
proposals; this required that France request such an elevated tonnage
limit that the two-power standard would be threatened, so that only if
the great powers accepted a security pact with France would that country
reduce its proposed tonnage limits. This in turn would force Great Britain
to pressure Italy to accept a naval accord that formalized its inferiority
relative to France, forcing the Fascist government to choose between
isolation and a serious political defeat.41
Initially, the French tactic seemed destined for success. Briand presented
a maximum tonnage quota that was incompatible with the interests of the
greater powers and, on that basis, induced MacDonald to open negotia-
tions for a security pact that, according to MacDonald, though without
“the precise character of a military alliance,” would tend to “make obli-
gatory for all States such military measures as could be recommended

40
ADG, II, tel. 11, Gaetano Manzoni to Dino Grandi, Paris, January 3, 1930, p. 79.
41
ADG, II, Le garanzie di Locarno e le sanzioni, p. 130. See the considerations of Tardieu:
DDI, 7, VII, 315, Dino Grandi to Benito Mussolini, January 21, 1930.
216 The United States and Italy Confront the Great Depression

by the League of Nations” on the basis of Articles 11 and 16 of the

Covenant.42 At this point, the Italian delegation found itself confronting
several days of dramatic difficulty under pressure from Ramsay MacDonald
and inspired by French demands. In their March 27 meeting, MacDonald
informed Grandi that negotiations for a security pact were about to be
completed, in which case France would agree to reduce its maximum
tonnage proposal from 724,479 to 600,000 (or a maximum of 650,000).
Italy would be asked to accept a 400,000-ton limit in order to maintain the
two-power standard. MacDonald, while declaring his regrets, “added that
if Italy did not accept this proposal Great Britain would be forced to accept
a four-power accord.”43 Grandi’s historical discourses on the earlier
unwillingness of the British government to accept this interpretation of the
Covenant and on the right of the other member nations to weigh in on the
issue could do little in the face of MacDonald’s stand. Grandi risked setting
off a campaign in the French press to blame Italy’s stubbornness for ship-
wrecking the conference, or even inviting direct action against Rome’s
government to induce it to accept the proposal.44 Even if this road were
not taken, it recalled unfortunate memories of Wilson’s direct call to the
Italian people, bypassing the Italian delegates at the Versailles peace confer-
ence. And there remained the dilemma facing Grandi and Mussolini: accept
not only diplomatic isolation but also the role of enemy of world peace, or
choose a political defeat unacceptable even to an Italian government less
conditioned by strict nationalist prejudices than France. The game of naval
armament quota proportions, which would formalize a hierarchy among
the powers, had the unfortunate characteristic of being easily apprehended
by all. It would not be a mere diplomatic loss, knowledge of which the
regime could keep in the strict confines of diplomats and foreign corre-
spondents; it would become a public scandal that could not be watered
down or reinterpreted convincingly even by the regime’s own press.
Why then did the MacDonald and Briand proposal fail? First of all, it
was due to the hostility of the United States, which Grandi continually
emphasized both in his public statements and in his ongoing meetings with
Secretary of State Stimson and his spokesman heading the American
delegation, Hugh Gibson. The original elevated French request regarding

42
ADG, II, D. Grandi, Appunti sul interview col Primo Ministro MacDonald, London,
March 28, 1930, pp. 152–153.
43
ADG, II, Tel., Dino Grandi to Benito Mussolini, London, March 28, 1930, p. 152.
44
Le Temps, March 30, 1930; L’Ere Nouvelle, April 5, 1930. On the pressures exerted by
Briand and the Foreign Office, see for example DDI, 7, VII, 393, February 27, 1930; 7,
VIII, 430, Dino Grandi to Benito Mussolini, March 15, 1930.
 4. The London Naval Conference 217

maximum tonnage, necessary to Briand’s strategy, provoked a wave of

protest from the American press and from important sectors of the British
press and public opinion. France had no choice but to sacrifice its already-
compromised public image, taking on the role of power hostile to the
principle of disarmament in the name of a policy that was closely tied to
the methods of secret diplomacy and bilateral negotiation. Such an image
and methods were distinctly unpleasant to Anglo-American public opin-
ion.45 This climate ended up weighing decisively on the crucial point for
the French. When they began negotiations for the security pact that
Tardieu and Briand claimed as a condition of their reconsideration of
tonnage quotas, the Americans reacted bitterly. On February 17, Senator
Robinson from the American delegations declared:
The people of the United States are against any involvement in European political
questions. They would reject any accord that explicitly or implicitly carried an
American obligation to dedicate our army or our navy to enforcing international
commitments in the interest of foreign powers.46

Nor did the Americans stop at clarifying that they were not willing to
enter into any multilateral agreement to satisfy France’s wish for security.
The Americans saw the French request as a wily attempt to exploit the
American and British desire for disarmament, in order to achieve its own
secondary goals. Such a stratagem drew vehement reactions from the
majority of the press, but also the disappointment and growing diffidence
of those who, like Stimson, did indeed wish to guide American foreign
policy toward a growing engagement with international relations and yet
had to demonstrate respect and caution regarding the ongoing difficulty of
American domestic politics. Even if Stimson personally felt open to the
French proposals and had contemplated the advisory pact, the secretary of
state knew all too well that he would have to justify himself to Hoover, and
above all to the Senate. This body felt no tenderness about any United
States involvement in European alliances, which would only have slowed
the careful progress toward a strategy of reengagement followed by

45
Times, February 7 and 10, 1930; Daily Herald, February 14 and 15, 1930; Daily Telegraph,
February 6, 1930.
46
ADG, II, Le garanzie di Locarno e le sanzioni, note 4, p. 149. In reality the attitude of the
American delegates was frequently more prudent than this quote implies. See for example
DDI, 7, VIII, 371, Pro memoria dell’incontro Grandi, MacDonald, Stimson, February 18,
1930, in which Stimson remained silent; DDI, VIII, 434, Pro memoria dell’incontro
Grandi, Stimson, Morrow, March 18, 1930, defined as “frosty” by Grandi, even if in
Mussolini’s favor.
218 The United States and Italy Confront the Great Depression

Stimson and reluctantly endorsed by his president.47 When American

newspapers began to refer to a “surrender” to French solicitations, Stimson
had no choice but to issue a press release denying the accusation, which
definitively ended any possibility of American adherence to pacts negotiated
on the sidelines of the naval disarmament conference.48 The American
attitude also had an important influence on opposition opinion in Great
Britain. Under these conditions, MacDonald had to abandon the negotiation;
French politics had been defeated, and the Italian government – most of all
Grandi himself – could breathe a sigh of relief. Naturally, what got the Italian
government out of this scrape was the refusal of decisive political sectors
in both the United States and Great Britain to accept the logic of security
as pursued so single-mindedly by the French. The policy of Italy, and espe-
cially of Grandi, was influential in encouraging and developing that refusal.
Just as Briand had targeted the narrow margins of maneuver enjoyed by
MacDonald and Stimson in relation to their nations’ representative bodies
by engaging in secret and restricted negotiations, Grandi exploited those
same restrictions on his Anglo-American counterparts by playing to the
larger public audience and appealing to its sympathy for disarmament and
suspicion of secret alliances.49
It was of little import that Grandi represented a Fascist dictatorship that
had repeatedly declared its nationalist ideology and desire to revoke the
Versailles peace treaty and that had nothing but contempt for the pacifists
and democrats of the Anglo-Saxon countries; that Italy supported disar-
mament only in the interest of a precise calculation of national status; or
that the appeal to minor powers might appear instrumental. More than
any of these issues, what counted were hard facts, and the fact was that
Italian policy served the aspirations of those in the United States, as in
Great Britain, who favored the reduction and control of arms but did not
wish to become enmeshed in a Continental system of European alliances.
As for the specific development of relations between the United States
and Italy, Grandi could reasonably state before the Grand Council of
Fascism that
The work achieved by Italy at the London Conference has also created a close
collaboration between Italy and Great Britain, and in particular [author’s empha-
sis] between Italy and the United States of America. These three nations, so different

47
H. Stimson and M. Bundy, On Active Service in Peace and War, New York: Harper &
Brothers, 1947.
48
Ferrell, pp. 98–99.
49
Ibid., p. 100.
 4. The London Naval Conference 219

in so many ways, have demonstrated that they possess an identical vision of the
solutions to the great problems left to us by the world war. It is to be hoped that,
continuing on this path forged at the Conference of London, we will develop a
shared and unanimous activity in the politics of Great Britain, the United States,
and Italy. The definitive clarification of the relations between Germany and France
depend to a great extent on this shared and unanimous activity, as does the
clarification of the relationship between France and Italy; which is to say, the
peaceful future of Europe depends on it.50

It was certainly contradictory to speak of an “identical vision” in

reference to Great Britain. In a different part of that same speech, Grandi
referred (if blandly) to the difficult position in which the Italian delegation
had found itself as long as MacDonald had seemed willing to make
the accord with Briand. It was also an obvious exaggeration to say that
“Italy’s moral right to naval parity with a stronger Continental force
[one-power standard] than the two Anglo-Saxon powers has been recog-
nized.”51 There was, however, an objective commonality of interest
between Hoover’s policy of cautious rapprochement to European issues
and Grandi’s own policies. It was not just a quirk of personality or accident
that, in their frequent meetings outside the official sessions of the London
Conference, Stimson and Grandi created a relationship of close coopera-
tion that was destined to develop further in the following years and to be
remembered by the secretary of defense, even after Italy’s defeat in the
Second World War.52 Still, such contacts on the personal level would have
had very little impact if the press and American public and congressional
opinion had not enthusiastically embraced the Italo-American conver-
gence of interests on the disarmament question and thrown into relief
the positive contrast between Italian and French tactics. Typical of the
American assessment was the comment in the Chicago Tribune from
February 20 that Americans appreciated the Italian attitude regarding the
French, who were losing prestige in public opinion. Even those Americans
who did prefer the French had been disgusted by Tardieu’s rigidity.53
While France’s unpopularity rose, Italy benefited from past years’
friendly press treatment of the Fascist regime, its perceived stabilizing
and antisubversive role, and the positive attention lavished on the figure
of Mussolini. All this allowed the interpretation of Grandi’s foreign policy

50
ADG, III, D. Grandi, Discorso al Gran Consiglio del Fascismo, Rome, October 2,
1930, p. 278.
51
Ibid., p. 277.
52
D. Grandi, Interview.
53
Chicago Tribune, February 20, 1930.
220 The United States and Italy Confront the Great Depression

not only without negative ideological judgment, but actually as a worthy

manifestation of a regime about which, with very few discordant excep-
tions, Americans had nurtured an essentially positive opinion. It was no
surprise that the public relations to which Fascist representatives had so
assiduously dedicated themselves, following the example of “il Duce,”
had paid off in the reports of the various foreign correspondents to
American newspapers.54 Nearly the entirety of the American press, like
the Labour and Liberal press in Great Britain, had formed – and went on
to perpetuate – the impression that blame for a failure of the London
Conference was not to be distributed equally. Whereas Italy pursued a
policy that meshed perfectly with Stimson’s plans for assuming the leader-
ship role that awaited the United States, France had concerns and habits of
behavior that alienated the two great Anglophone powers and damaged its
image in their public opinion.
This impression was further reinforced about a year after the London
Conference, on the occasion of the failure of a last attempt by the United
States and Great Britain to obtain a naval accord between France and
Italy.55 According to the initial terms of the accord, the Italian government,
fearful of an eventual naval arms race, agreed not to apply the principle of
parity.56 This was due to France’s identification of a much larger number
of ships that were about to go out of commission, and which therefore
could be replaced during the period contemplated. In return, Italy obtained
parity with France in the construction of new ships and parity with the
maritime powers in terms of maximum submarine tonnage.57
This was an important step in the intensification of the relationship
between Italy and the United States. That Mussolini himself had not been
extraneous to such a goal, even in this phase, is demonstrated by his
statement to the Associated Press. After having boasted of the beneficial

54
The Chicago Daily News, June 30, 1930. This was the case of Price Bell, an American
special correspondent in London, who submitted a report of the conference clearly
influenced by his previous contacts with the regime, saying that France’s defeat at the
London Conference was its own fault. The English, Japanese, Italian, and Americans all
wanted France to achieve a satisfying deal, but the French spent the entire time worried
that the Italians were out to betray them in favor of Germany and ruined their own
negotiations. According to Bell, the Italians had no such intention; they actually wanted
to reconcile with the French. It is debatable if the understanding with France was really so
close to the Italian foreign minister’s heart, although he certainly would have preferred an
outcome like that of the Washington conference to nothing at all.
55
ADG, III, D. Grandi, Discorso al Gran Consiglio del Fascismo, Rome, March 5, 1931, p. 3.
56
Ibid., p. 14.
57
ADG, III, pp. 47ff., Comunicato ufficiale pubbicato contemporaneamente a Roma, Parigi,
Londra del testo dell’accordo naale intervenuto tra Italia, Francia e Inghilterra.
 4. The London Naval Conference 221

effects of a naval accord on the economic crisis and affirmed that “Italy has
done its duty,” he concluded with the following:
It was my pleasure to see that the United States had always played an efficient and
objective role in bringing the negotiations for the newly accepted accord to a
positive end. The people and the Government of Italy highly appreciated this role
and are just as pleased to note that this new phase of world pacification was
initiated with the precise and forceful statements made by President Hoover at
his inauguration. I can say that the American program to reduce armaments is also
the Italian program, and that I firmly hope that Italy and the United States will
continue to cooperate to achieve this goal.58

Two days later, Hoover’s reply from Washington arrived, of unusual

amplitude and scope for a statement on European political events. After
affirming, with some exaggeration, that “the Franco-Italian naval accord
signifies the completion of a work begun two years ago for the reduction of
naval armaments and marks the end of naval arms races among the five
Great maritime Powers,” the president underlined the United States’ role
of stimulus to the accord, through Ambassador Gibson’s voyages to Rome
and Paris. He concluded:
I feel that the responsible heads of governments and the peoples of the world owe a
debt of gratitude to the infinite patience and ability of all who have collaborated so
effectively toward the settlement and that they realize the fortunate augury which
the solution of this problem by direct conversations between the interested parties
contained for the progress in the removal of the obstacles on the path of a general
and reasonable limitation of all armaments.59

Since the economic crisis offered few occasions for Hoover to proclaim
good news, the president emphasized every development in the politics of
disarmament, which he considered one of the principle campaigns of his
presidency. He thought of it as the path that would most effectively allow
him to guide the country back to international engagement, given the
positive response of public opinion to the themes of disarmament and peace.
That he may have exaggerated not only the value of the agreement in
question – which was, as we shall see, stillborn – but indeed the whole

58
ADG, III, pp. 46–47, Benito Mussolini, Dichiarazione all’Associated Press.
59
Herbert Hoover, “Statement on the Franco-Italian Naval Agreement,” March 4, 1931,
in Public Papers of the Presidents of the United States: Herbert Hoover. Containing the
Public Messages, Speeches, and Statements of the President January 1 to December 31,
1931. Washington, D.C.: U.S. Government Printing Office. Consulted online at:
University of Michigan Digital Library, Public Papers of the Presidents of the United
States, http://quod.lib.umich.edu/p/ppotpus/ consulted October 19, 2012; ADG, III, p. 3,
Herbert Hoover, Dichiarazione alla stampa Americana, March 4, 1931.
222 The United States and Italy Confront the Great Depression

theme of disarmament, was not unrelated to his limited comprehension

of the economic crisis. He had failed to grasp the destructive effects of
the crisis on not only the economies but the international relations of
the nations in depression. In reality, the “patience and ability” of Briand,
Henderson, and Dino Grandi as they formulated the terms of naval dis-
armament, which would last all of one morning, were of little value in
the face of the economic storm sweeping through Germany. The German
chaos weakened the American ability to intervene and severed the links
of dependence and interdependence holding together the Western world.
The sad epilogue of the Franco-Italian accord annulled Hoover’s efforts
toward disarmament yet actually consolidated the Italian reputation
for pacifism and respectable conduct. French opposition experienced a
regrowth of vitality, even after the approval of the agreement by the
respective parliaments. In the moment of the final drafting of the agreed-
upon terms, the French delegates raised new objections and proposed
amendments that threw the entire accord back into question.60 In this
way, the ongoing effort to reach concrete results on arms limitations
was, once again, stymied. The Anglophone press did not fail to launch
poison darts at the French and praise the Italians in the matter, with the
result that Italy ended up with the political advantage of having empha-
sized its pacifism and willingness to cooperate, in stark contrast with the
French neurosis over security.

5. the world disarmament conference

Disarmament issues continued to remain at the center of the collaborative
relationship between the Hoover administration and Fascist Italy even
after the failure of a Franco-Italian accord to complete the London agree-
ments in extremis. By this time, in fact, the preparations had begun for the
World Disarmament Conference, long anticipated by the commitments of
the victorious powers in the Versailles Treaty, the Locarno Pact, and the
Kellogg-Briand Pact.61 The problem had become ever more pressing given

60
According to Grandi, the French opposition came from both military circles and the naval
industry, supported by the diplomats of the Quai d’Orsay. Whereas Great Britain and Italy
maintained that the text of the accord regulated all the construction undertaken by the
Italian and French navies until December 31, 1936, the French argued that the deadline
applied only to construction completed before that date. ADG, V, La missione di libertà, di
equilibrio e di conciliazione della politica italiana, pp. 94–95; D. Grandi, Discorso al
Senato del Regno, Rome, June 3, 1931, p. 105.
61
ADG, VII, I, Clemenceau, Reponse du Président de la Conférence de la Paix aux observa-
tions de la Délégation allemande au sujet du projet de Traité de Paix, Paris, June 16, 1919.
 5. The World Disarmament Conference 223

that the economic and social chaos in Germany appeared to be opening

the door to those nationalist forces that explicitly called for rearmament.
Nonetheless, French intransigence continued to demand that disarmament
be compensated for by security safeguards that would protect it against
Germany in the context of a new great power alliance. The French dele-
gates to the League of Nations pushed for subsequent postponements of
the conference, but the United States and Italy found themselves united in
favoring its convocation, and they had the last word, as the conference was
called for February of the following year in Geneva.
It was therefore not a coincidence that Secretary of State Henry
Stimson decided to begin his voyage in Europe with a visit to Rome,
during which he would for the first time open concrete negotiations
regarding the imminent conference with European statesmen. The sum-
mer of 1924, when Italy had protested in vain against then-secretary of
state Charles Evans Hughes excluding Rome from his tour of the principal
European capitals, now seemed far in the past. Although the dramatic
financial situation that had moved Hoover to propose a moratorium on
payments of governmental debts (a proposal Italy had immediately accep-
ted) weighed heavily on the Roman proceedings, Stimson’s demeanor in
his dialogue with Grandi confirmed the rumor the press had been report-
ing that Stimson’s European trip was mainly focused on preparing the
disarmament conference. This was no surprise, since the issue was the
Hoover administration’s main foreign policy priority.62 The meetings,
which took place July 11 and 12, 1931, are summarized in a memoran-
dum by Grandi. These were the early exchanges of their dialogue as he
recorded them:
STIMSON spoke at length of the necessity that the European and non-European
states dedicate themselves seriously to the technical and political preparation for
the World Disarmament Conference that is to begin next February in Geneva. It is
very likely that the conference will begin slowly while all await the results of the
French elections. If the parties of the Left win the French elections, there will be
fewer difficulties for the Conference in reaching agreement. If the Conference does
not succeed, the negative consequences would be incalculable. It represents the last
hope. Should that hope be disappointed, we will witness a renewal of all the typical
phenomena that inevitably precede the outbreak of a new world war.
GRANDI: I declare myself in agreement with Stimson. I too believe that a
victory of the Left in France would be in the best interests of all . . .63

62
New York Herald Tribune, July 13, 1931.
63
ADG, V, V, D. Grandi, Appunti sui colloqui col Segretario di Stato degli Stati Unitie
H. Stimson, Rome, July 11 and 12, 1931, p. 37.
224 The United States and Italy Confront the Great Depression

Here, then, was the Republican secretary of state, a Wall Street lawyer,
together with the Fascist foreign minister, both fervently hoping for the
victory of Blum and Herriot, just as Grandi had boasted happily of his
collaboration with Henderson and MacDonald. The key to this apparent
paradox lay in Grandi’s analysis of the French elections, an analysis
that was of course the one most welcome to Stimson and the rest of the
Americans at that time, who were worried by, if not downright hostile
toward, French politics.
France is afraid of Germany and is taken by a fever to arm itself and its allies to the
teeth. Arms fever results inevitably in a fatal politics of domination. Thus, from this
original fear, France arrives to the point of affirming her right to dominate all of
Europe politically and militarily. France strengthens her alliances, alliances that are
like all alliances – guarantees of war and not of peace. Naturally, the armament of
France and her allies provokes worry and fear in the other countries, which feel
constrained to arm themselves in turn, arms that reinforce French fears and
encourage more new arms construction on France’s part. In this way, the more
fears are fed, the more arms are built and the greater the danger of war. Together
they form a vicious circle from which we must all escape together.64

The French attitude reinforced the isolationist opposition by offering

men such as Senator Borah continuing arguments sustaining the useless-
ness of any effort to intervene in European politics and the risk that such
an engagement would involve the United States in a new world order with
which it would not share the same values and goals. The French pursuit of
security through the politics of alliance and rearmament corresponded
precisely to what the Americans – isolationists and Wilsonians alike –
considered the origin of the First World War (and the most likely cause
of the Second). Grandi knew this well and lost no public or private
occasion to underline this risk to his American interlocutors.
And Germany? What analysis did the foreign minister offer his American
colleague on this issue? And how did Stimson respond?
Germany in its turn proceeds in an irrational manner. The domestic situation is
difficult, politics just as difficult. Nonetheless, German politics frequently assume
the same character they demonstrated before the war. Defeat seems to have taught
the German people nothing. Their recent customs proposal with Austria is an
example. Another error Germany is on the brink of committing consists of the
following: the military leaders of the Reich maintain that Germany must present
itself at the coming disarmament conference with the argument that “The signatory
states of the peace treaties have not fulfilled their obligation to disarm, therefore
Germany has the right to arm herself.” A mistaken analysis. Germany must instead

64
Ibid., p. 38.
 5. The World Disarmament Conference 225

say: “We have disarmed and we have obeyed the peace treaties. Now it is time for
all the signatory states to equally show their good faith and fulfill the promises they
made in those treaties.”
STIMSON: I agree and I will speak of it with Brüning. No country will be in as
advantageous a rhetorical position as Germany, if it avoids errors.65

While Grandi did succeed in introducing the element of German policy

that most concerned Italy in the following years – the growth of a pan-
Germanic threat at the Brenner Pass – he was careful not to retrace the old
anti-German image that justified French politics, and which the Americans
had opposed since the peace talks at Versailles. His complaints were
presented as constructive criticism and were received as such by Stimson,
who immediately agreed to influence Brüning to follow a line of conduct
that would harmonize with his plans for European disarmament. The ever
more profound disquiet of German society, and the lethal consequences it
might have for the foreign policy of their governments, were present but
remained implicit in the discussion between the two colleagues. What was
inevitably lacking in such a conversation was an analysis of the economic
roots of the politics of rearmament infecting all of Europe and of the
resulting relationship between that tendency and the damages caused by
the Depression.
But there was one question, a kind of test case, to which Stimson was
particularly sensitive and which he wished to pose to Grandi as a represen-
tative of Fascist Italy with whose perspectives he seemed to share so much:
STIMSON: Is there nothing new between Rome and London? The English are
today truly our brothers. The London Naval Conference sealed the understanding
between Great Britain and the United States of America, which constitutes a great
new departure point in the history of our two nations.
GRANDI: On the character of the relationship between Italy and England I
have already had the opportunity to speak to you at length during the London
Conference. Friendship and cooperation with Great Britain is an accepted prin-
ciple of Italian policy. The Locarno Pact happily consecrated Italy and Great
Britain’s position both directly between the two of us and in regard to our
common position toward France and Germany. In terms of the crucial questions
at stake – disarmament, reparations, and the economic reconstruction of
Europe – the governments of London and Rome walk the same path, which is
also the chosen path of the United States of America.66

Grandi was well aware that the primary vehicle of American policy in
Europe was and would remain Great Britain, that there was no possible

65
Ibid., p. 39.
66
Ibid.
226 The United States and Italy Confront the Great Depression

understanding either with the officials in Washington or the bankers

in New York that did not depend on the good graces of London. The
relations between the two Anglo-Saxon empires, one in decline and the
other endowed with the potential for an ever more extensive dominance,
were characterized by collaboration, even as a transfer of power became
imminent. If the Italian government wanted to develop its role as a finan-
cial client of the United States and participate in the American politics of
cooperation in Europe as announced, not without some contradictions, in
the Locarno Pact, the point of reference could only be London. In the face
of Mussolini’s impatience on this question, Grandi often responded, with
some exaggeration:
Great Britain is like an old auntie, very old, from whom we hope to inherit. How
does a nephew behave to encourage his old auntie to keep him in her will? He treats
her with great tenderness!67

On this as on other occasions, Grandi’s excessive ambitions, or for that

matter illusions, were revealed. Grandi hoped that Italy could in the future
take the place of Great Britain as main European ally of the United
States. In the meantime, this ambition translated itself in an obsequious
adherence to every American indication of its values and priorities and in
a continuous pursuit of alliance with the British. From this point of view,
English liberalism and Labourite pacifism were the most favorable entry
points for an Italian diplomacy which wanted to combat French domi-
nance and aim for a reinsertion of Germany into the so-called concert
of nations – a goal that would have the welcome side effect of preventing
pan-Germanic nationalist aggression, which was still at that time viewed
by Mussolini as a threat to Italian borders so exhaustingly conquered in
the First World War.
Given this verification of their general agreement on politics, Grandi
thought the moment had come to advance a concrete proposal for the
preparatory phase of the World Disarmament Conference. Hoover had
just formulated the proposal for a moratorium on payments of interna-
tional debts, which Italy had received with particular enthusiasm and
regarding which he had said to Stimson:
What a disappointment it would be if all the obstacles [created by France] to the
American initiative were not rapidly overcome! We are well aware that the United
States in that case would probably return to prioritizing in America [sic!] the habit

67
D. Grandi, Interview.
 5. The World Disarmament Conference 227

of that traditional isolationism that Hoover has so courageously led the American
Nation away from at last.

His proposal in terms of disarmament shared, by analogy, the same

logic:
. . . I think that it would be advantageous if all the States, in anticipation of the
conclusion of the Disarmament Conference, would solemnly commit themselves
from this moment to suspend their naval, land-based, and air force construction. It
would be a kind of vacation or truce, in other words a moratorium on arms that
would have the same political and psychological value as the moratorium Hoover
created in these last few weeks on international debts. The start of the Geneva
Conference would take place in an atmosphere of commitment, even a transitory
one, but one that already found the States working together. This would be of great
benefit to the proceedings of the negotiations for a general accord.

The minutes kept by Grandi here add that “Italy would be ready to take
the initiative, but undoubtedly if it were proposed by the government of
the United States of America, its success would be more likely.”68
The proposal was immediately accepted by Stimson who, after having
consulted Hoover, in the next meeting with the Italian foreign minister on
July 14, affirmed (according to the minutes kept by Grandi):
In the meetings I am about to attend in Paris and Berlin, I will prepare the ground
for the favorable reception of this initiative, which should rightly remain an Italian
initiative. In any case, you may count on the unconditional support of the United
States when you believe the moment is right for an official proposal to the other
Governments.69

The occasion chosen by Grandi was offered by the twelfth assembly of

the League of Nations. In his speech on September 7, Grandi repeated
the by now customary themes of Fascist foreign policy under his direction:
homage to a security that was not founded on military alliances or the
militarization of international organizations, but on disarmament and the
peaceful mediation of controversies; the construction of a peace favored by
the cancellation of international debts, following the logic of the Hoover
moratorium; the liberalization of exchange; a politics of debt forgiveness
toward Germany, inspired by the Dawes and Young Plans; disarmament
that constituted, on the part of the victorious powers, the fulfillment of
a precise obligation to themselves and each other, as well as to Germany,
who had been forced to disarm by the terms of the peace treaty. Finally,

68
ADG, V, V, D. Grandi, Appunti sui colloqui, p. 37.
69
Ibid., p. 41.
228 The United States and Italy Confront the Great Depression

Grandi launched his proposal of a moratorium on the construction of

all new arms in anticipation of the future disarmament conference’s
deliberations.70
The proposal resonated with the collective anxiety provoked by the
turbulent German situation, not only in Anglophone diplomatic circles,
but among neutral countries as well. Still, if one believes what Grandi later
recounted to Hoover, even before public opinion could react to the pro-
posal, it had already begun to encounter serious obstacles. The French did
not dare to demonstrate open opposition, but they did succeed in slowing
the concrete application of the proposal’s terms. Germany’s military lead-
ers were also opposed, but Brüning decided to adhere anyway. The British
government itself gave in only after having realized that the proposal also
had American origins. In fact, Ambassador Gibson had been sent specif-
ically by the United States to help support the proposal.71 At the end of the
discussion, the proposal was accepted in a motion presented by the dele-
gates of Denmark, Norway, the Netherlands, Sweden, and Switzerland.
Approved unanimously, the representatives of all the states present were
invited to confirm their adherence on or before November 1. While the
majority of nations – among them the United States, Great Britain,
Germany, the Soviet Union, and Turkey – would have been willing to
apply the moratorium immediately, the representatives of Japan, France,
and their allies raised objections.
As the proposal took shape in this way, Hoover and Stimson consoli-
dated the international initiative built around the president’s disarmament
plan. Hoover wanted to shore up European collaboration before the
tension between France and Germany, accentuated by the predictable
yet all-too-serious developments on Germany’s domestic front, exploded.
Above all, the proposal of a moratorium allowed the Hoover administra-
tion to demonstrate that America’s cautious approach to the world polit-
ical scene was obtaining positive results. While Stimson’s attempt to build
a collective intervention against Japan was clearly in tune with American
interests, it did not have the desired effect, mostly due to Great Britain’s

70
ADG, V, VII, D. Grandi, Discorso all XII Assemblea della Società delle Nazioni, Geneva,
September 7, 1931: “All the Governments ought to commit themselves for the period of
one year beginning on November 1, 1931: not to augment their spending on land-based
arms for the current financial year and not to exceed the total of the same spending in the
following year until the end of the moratorium; (b) not to begin building any ships, with the
understanding however that ships already under construction may be completed; (c) to
suspend the construction of new aviation equipment.” (p. 147)
71
ADG, V, VIII, Gli Stati Uniti a Ginevra, pp. 152ff.
 5. The World Disarmament Conference 229

reluctance.72 This made disarmament an even more crucial proving

ground for Hoover, especially after the disappointment of the London
Conference. The American press reaction was relevant in this regard: not
only did they express support for Grandi’s proposal, but they saw in it the
development of further possibilities for American international engage-
ment. The New York Times commented that the government and the
people of the United States had welcomed Grandi’s proposal, which
found such a warm response because it was sure to increase the chances
of success at the disarmament conference. Indeed, the enthusiasm of the
White House led some observers to predict that the United States would
soon present the same idea in even more radical form.73 The editorialists
of the most authoritative American daily paper were by now publicly
discussing the details of what would prove to be the Hoover Plan.74
On the very eve of Grandi’s November visit to Washington came the
news that all the nations participating in the coming disarmament confer-
ence had accepted the moratorium.75 The Italian foreign minister had not
only achieved a success in the preparatory phase to the conference, but had
also consolidated the position of Italy as the most faithful interpreter of
American policy as it was developing in relation to Europe.
Grandi’s visit to Washington was extremely significant as a moment of
synthesis and consolidation of two years’ worth of intense exchanges. It
did not produce any specific decisions relative to the imminent disarma-
ment conference, although that theme was at the center of the minister’s
speeches as well as the somewhat spasmodic attention paid to his every
move by the American press. The meetings with Hoover and Stimson
confirmed the convergence of views between the two governments on the
topic of disarmament as well as their more general vision of the European
political situation.76 The most important result of Grandi’s visit, due also
to its influence on the disarmament theme, was the strengthening of the
pacifist image of Italy as a leader flanking Hoover’s administration at the
vanguard of the forces for disarmament.
He gave a political speech on general themes before the Council on
Foreign Relations, the sancta sanctorum of the internationalist establish-
ment of New York. There he restated the general principles of the Italian

72
D. Grandi, Interview.
73
New York Times, September 11, 1931.
74
See also New York Telegram, September 16, 1931.
75
ADG, VI, IX, Il senso morale nei rappori internazionali, p. 85.
76
ADG, VI, XI, La collaborazione tra Italia e Stati Uniti, pp. 104ff; ADG, VI, I, I colloqui di
Washington, pp. 7–10.
230 The United States and Italy Confront the Great Depression

program for disarmament; and again at his second serious political speech,
given to the Foreign Policy Association, he entirely dedicated his remarks
to the issue of European security and disarmament. At every moment
it was clear that Grandi implicitly contrasted himself to French Prime
Minister Laval, who had also just visited the United States. Although
Grandi, out of tactical considerations, avoided any direct criticisms or
polemics against French policies, he did emphasize repeatedly how pleased
he was that Laval had made the voyage.77
Still, his statements on security issues constituted a clear, if indirect,
contradiction of French positions, articulated in terms sure to please the
American press. In addition to the well-known concept according to which
security was not possible except as a benefit of the process of disarmament,
Grandi took particular care to emphasize the moral aspects of the pursuit
of peace.78 In this spirit, Grandi also underlined another principle sure to
curry favor in that singular context of moralism and realism that charac-
terized the New York financial and political elite: that peace must be
accompanied by justice, or, in other words, that Germany could be won
over to the project of European pacification only on the condition that,
concerning disarmament as in other issues, it receive the treatment due to it
in conformity with its fulfillment of the obligations imposed by the Treaty
of Versailles, and in recognition of Germany’s objective importance among
the nations of Europe. He made continuous references to the decisive
role of the United States, with Italy firmly committed to cooperation and
support.79
This was repeated to the Foreign Policy Association:
I wish to add that our hopes in the Disarmament Conference find much encourage-
ment in the attitude of the American government and American public opinion. As
soon as we realized in Italy all the earnest determination with which the United
States would tackle the problem, we felt that it had finally a good chance of getting
out from the nebulous state of an ideologic academy into the realm of practical
possibilities.
To this end, we will be only too glad to move with you with all our strength and
all our heart.80

77
Ibid.
78
ADG, VI, D. Grandi, Discorso al Council on Foreign Relations, New York, November 23,
1931, p. 51; Discorso alla Foreign Policy Association, New York, November 26, 1931, p. 71.
79
ADG, VI, D. Grandi, Discorso al Council on Foreign Relations, p. 51.
80
ADG, VI, D. Grandi, Discorso alla Foreign Policy Association, p. 76. Published in English
as Grandi, Dino. 1931. Address by His Excellency Dino Grandi, minister of foreign affairs
of Italy, November 26, 1931, The Waldorf Astoria, New York. New York: Foreign Policy
Association.
 5. The World Disarmament Conference 231

The goals inspiring this kind of declaration were quite clear. Grandi
was pursuing a policy that did not promise immediate benefits, at least
not according to the traditional standard of Italian nationalism, which
measured political success in square meters of acquired territory, even
empty land. The Italian foreign minister had an absolute necessity to
make the results of his visit as visible and strong as possible, by emphasiz-
ing their long-term payoffs, especially in terms of the privileged relation-
ship with the United States. He had now understood, due also to the
experience of the negotiations over the war debts, that the relationship
between state hierarchies, centers of private interest, and relevant circles of
public opinion were notably more direct in the Anglo-American nations,
but especially in the United States, than they were in the majority of
European states (and above all in Fascist Italy). The close collaboration
that he had managed to create with Stimson would not be valuable unless it
were the expression of a more widespread consent among those Americans
who were most occupied with foreign relations. In a more general sense,
Grandi was also aware that the friendship with America would serve no
purpose without that favorable public opinion he worked so assiduously
to court. Americans must earnestly desire the development of that as yet
embryonic engagement in European politics. In Grandi’s mind, the politics
of disarmament were also, perhaps above all, the vehicle with which
the United States would make its power felt in Europe. It was therefore
necessary on the one hand to utilize this tendency in the various interna-
tional assemblies by making Italy their main spokesperson, and on the
other to consolidate it, convincing even the more reluctant sectors of
American public opinion that the United States would successfully secure
European partners for its program of disarmament and pacification.
Grandi’s public statements during his trip to the United States thus tended
to emphasize Italian support for Hoover and Stimson’s policies, on whose
fortunes his own destiny depended as well, since he would soon have
to offer his “duce” an account of his actions. It was therefore in the best
interests of both Stimson and Grandi to dramatize the collaboration
between their two nations as the basis for a greater coalition that would
be consolidated at the conference. The American press was not slow in
responding to this cue, offering numerous comments on this point, while
the Boston Herald notably reprinted the message launched by Grandi
more or less verbatim.81

81
Boston Herald, November 29, 1931; see also New York Times, November 27, 1931; New
York American, November 29, 1931; Washington Post, November 30, 1931.
232 The United States and Italy Confront the Great Depression

In reality, this anticipatory atmosphere that had grown up around the

convergence between the United States and Italy relative to the imminent
disarmament conference would prove to be in large part merely an illusion.
It was true that agreement existed; the conference proceedings would
demonstrate as much. It was also true that it produced an early encourag-
ing result: the moratorium on new arms building. But it was equally true
that this convergence was not sufficient to guarantee concrete results
that were more widespread and long lasting. There was no aspect of this
collaboration that was not the product of propaganda concerns – or, if one
prefers, of general principle rather than specific commitment. It was not
solid enough to change the larger reality of European and world power
relations that the Americans hoped for in February 1932 when the World
Disarmament Conference opened in Geneva.
In sum, the position of the United States contained the following contra-
diction, visible in Stimson’s affirmation during one of his inconclusive
meetings with Laval and repeated later to Tardieu in April 1932:
I then reviewed my attitude towards the Arms Conference stating at length what
I had told Laval last October. I said I had always regarded it as more in the nature of
a European peace conference than anything in which we had direct responsibility.82

Stimson had seen clearly, even during the conclusive phase of the
London Conference, that it was not possible to achieve significant results
even in this circumscribed area without confronting the general problems
dividing Europe. Stimson had this capacity of vision; he, like Grandi, was
aware that they were in a race against time. To win, it would be necessary
to revise the punishments imposed on Germany by the Versailles Treaty,
before the Weimar Republic succumbed to the economic crisis and the
Nazi onslaught. The United States did not totally disavow the responsibil-
ities arising from this problem: Hoover’s moratorium was a courageous
decision that responded precisely to the urgency of eliminating one of the
heaviest legacies of the First World War, and did so on the particularly
delicate terrain of American public opinion about debt and repayment.
Nor did he refrain from taking an analogous initiative on disarmament.83
The other side of this coin, however, of which both Hoover and Stimson
were painfully aware, kept them from raising the issue of treaty revision
with the French. The politics of reopening dialogue with Germany and

82
YUL, HLS, Diary, April 15, 1932. Stimson’s diaries were published as Stimson, Henry,
Henry Lewis Stimson Diaries 1909–1945, New Haven: 1980. The relevant volumes are 20
and 21 (reel 4).
83
C. O. Johnson, Borah of Idaho, New York: 1936, pp. 320, 445–448; Ferrell, pp. 20–202.
 5. The World Disarmament Conference 233

rescuing the moribund Weimar Republic were impossible given a France

armed to the teeth, militarily allied with the states on Germany’s eastern
borders, and obsessed with the problem of security; this France was
simultaneously aggressive and fundamentally weak, and needed the most
careful maneuvering to be brought to the table or, alternatively, isolated
and worked around. There was additionally the objective possibility of the
Soviet Union’s support, committed as it was to a politics of democratic
alliance by the presence of Litvinov at the League of Nations. All this was
necessary but not sufficient. Nor was the greater willingness of French
business – traditionally linked to the American market – or the radical and
Socialist left within French politics enough to sway France in this direction.
Even the Dawes Plan and the Locarno Pact had not succeeded in working
without two fundamental conditions: American capital and some form of
renewed political guarantee of French security.
In 1932, at the opening of the World Disarmament Conference, the
United States was no longer capable of offering either the first or the second
of those conditions. The economic crisis had drastically damaged, if
not eliminated, the availability of American capital, and American public
opinion, while interested in concrete results toward disarmament, was
nevertheless unwilling to submit to binding commitments to the ever less
popular French. Even the simple advisory pact that Stimson had proposed
at the end of the naval conference, that would reappear in the new disarma-
ment conference, was incompatible with the domestic mood of Americans,
nor was it in any case enough to satisfy the French.84 This was the dilemma
that risked shipwrecking the whole conference: an accord could only be
reached on the basis of French concessions, but those concessions could
only be won through very strong pressure that would first isolate the
French and then offer them some kind of quid pro quo.
Only the United States could have taken the initiative in this direction,
but its impotence is clearly revealed in Stimson’s diaries, where he
described the preparations for Laval’s visit in October 1931 – a visit
that, if the United States had been able to carry out an overall political
design, would have been far more significant that Grandi’s. In his diary,
Stimson related, on November 30, that the president “is so busy with his
domestic and financial problems that he is not capable of thinking ahead
about international ones.” Hoover was not at all interested in the coming
meeting with the French prime minister: “In the first place the Laval meet-
ing was evidently just a nuisance to him. As I told him after we had been

84
Ferrell, pp. 99, 213.
234 The United States and Italy Confront the Great Depression

going for awhile, it seemed to me all he was thinking about was how he
could best stop Laval from picking his pocket while he was here.”85
At this same time, the president still had the American economy crum-
bling around him. In the last three months of 1931, the number of bank
failures reached its height in absolute numbers.86 On the international
front, the crisis in the Far East appeared even more tragic to American
eyes. MacDonald and Simon did not realize that their failure to cooperate
with Stimson in forming a collective response to Japan had further dam-
aged the possibilities for American international engagement. The United
States was also a power in the Pacific, an area toward which isolationist
hostility was traditionally somewhat less intense. Hoover’s attitude in this
context reflected a basic fact: the Depression had weakened the structural
foundations for any foreign relations leadership on the part of his nation.
Thus, Stimson was correct in his assertion that the disarmament confer-
ence, in order to be productive, would have to take the shape of a confer-
ence for European peace. He created a self-fulfilling prophecy, however, by
commenting that this was the exact reason for which the United States
could play only a limited role. In his bilateral meetings alongside the
general conference sessions, Stimson was not only forced to repeat that
he was unable to assume any commitments to guarantee French security,
but he also tied the hands of MacDonald, who had to state that he was
bound by the same limitations, in order to prevent the failure of the
conference from being blamed on the United States.87
Under these conditions, the disarmament conference was condemned to
failure, even though it did create a further reinforcement of Italo-American
relations. These were however insufficient to change the general outcome.
As soon as general debate began, the French leader Tardieu proposed a
plan of militarization of the League of Nations as the condition for any
disarmament by individual states, exposing the conflict between his
approach and that of all the other participants. In particular, Italy’s
Grandi and the United States’ Hugh Gibson argued for what were labeled
qualitative measures of disarmament, consisting of a series of proposals for
abolition of arms whose use was primarily offensive. This criterion had the
advantage of being easily translated into specific and concrete measures
but was unacceptable to the French, who, gauging their relative military
strength inferior to that of their presumed enemy, claimed that they had

85
YUL-HLS, Diary, September 30, 1931.
86
Ferrell, p. 198.
87
YUL-HLS, Diary, April 21 and 23, 1932.
 5. The World Disarmament Conference 235

no choice but to rely on offensive strategies. Many newspapers, such as

the Gazette de Lausanne and the Manchester Guardian, referred to an
“Anglo-American-Italian diplomatic initiative.”88 With the approval of
the qualitative criterion, the conference adjourned, leaving the field to
three technical committees charged with formulating concrete proposals
to conform to the principle.
As was predictable, when the conference reopened in June, debate was
mired over the definition of aggressive and defensive arms categories.
The intense consultations that had taken place in April, during Stimson’s
journey through Europe, had produced no results on the matter that could
have solved the impasse: European security. Stimson for his part had
repeated what he had already told Laval during his trip to Washington,
and MacDonald was in no position to add to or revise this position. In the
meantime, the French domestic situation again gave proof of its instability
as Laval’s government fell. Worse, on the eve of the reopening of the
conference, Brüning’s government fell, to be replaced by the pro-Nazi
von Papen, who then immediately dissolved the Reichstag. While a confer-
ence on economy met in Lausanne in an ever more dramatic context, the
American delegate Gibson tried to persuade Tardieu’s successor, Herriot,
that the American public would not tolerate the cancellation of interna-
tional debts unless military budgets were first slashed. As was logical,
MacDonald and Grandi, perfectly attuned to American needs, maintained
both in Lausanne and in Geneva that debt and disarmament were inex-
tricably linked issues.
In this general context of uncertainty and anxiety, the disarmament
conference had managed in four months to do nothing more than agree
on a general procedural measure of doubtful significance and one concrete
measure, the interdiction of poison gas as a weapon, which had been all
but a given in any case. Hoover found himself once again urged on by
events; unable to propose any plan for collective security for the reasons
noted, he could only take the initiative in one area that Congress and public
opinion would support: disarmament. Thus, on the morning of June 22,
the head of the American delegation, Hugh Gibson, presented Hoover’s
new proposal to the tense audience assembled for the conference.
The proposal was based on both quantitative and qualitative measures.
Quantitatively, Hoover requested a reduction by one-third of land-based
arms (other than for police forces, which would be proportionate to
the German ones, with some exceptions justified by relative imperial

88
Gazette de Lausanne, April 22, 1932; Manchester Guardian, April 14, 1932.
236 The United States and Italy Confront the Great Depression

“responsibilities”), of battleships in number and tonnage, and of submar-

ines (to a limit of 35,000 tons per fleet). He further proposed the total
abolition of bombardment aviation and the reduction by one-quarter of
aircraft carriers, cruisers, and torpedo boats. Italy and France would have
to conform to the terms of the Treaty of London on the basis of the accord
concluded March 1, 1931, between Italy, Great Britain, and France and
never applied.89
It was obvious that this was an extreme attempt to rescue the confer-
ence. Nor was this the only reason the proposal could not easily be
ignored; it also took into account several demands advanced by the various
participants. It did not stop at invoking the abolition or drastic reduction
of the so-called offensive weapons (of which it avoided a specific definition,
in order not to elicit new technical disagreements), but it also called for
quantitative reductions. Furthermore, the proposal came from a power
economically capable of bypassing the armed forces of all others, given the
construction program it would have been able to carry out. Finally, it was
made in the name of the world’s major creditor nation, which had in other
contexts signaled that its favor toward debtor nations would be propor-
tional to their willingness to cut their own military budgets. Nonetheless,
Simon, the British foreign minister who spoke following Gibson, could not
hide his government’s embarrassment. And Paul Boncourt affirmed for
France that the American proposals were “so fascinating in their simplicity
to actually seem too simple regarding the complexity of certain problems.”
He intended by this to point out, not without reason, that the proposal
tended to totally disregard the political conditions regarding the problem
of security to which the French government subordinated any major dis-
armament measure. While the German representative Nadolny observed

89
ADG, VII, VI, Appello al buon senso e alla buona volontà, pp. 80–81; in Grandi’s notes
Gibson’s proposal was recorded in the following words: “I propose a reduction of circa
one-third of land-based arms. To limit the offensive character of land-based arms, I
propose the adoption of those projects earlier proposed to the conference that aim for
the total abolition of tanks, chemical warfare, and mobile heavy artillery. I propose the
abolition of one-third of all land-based arms beyond the needs of police forces. [. . .] I
propose that all states accept forces answering the needs of policing, a military propor-
tional to Germany’s, and including some modifications for the colonial powers. I propose
the total abolition of bombardment airplanes. I propose the reduction by one-third of the
number and the total tonnage of battleships; by one-quarter the tonnage of aircraft
carriers, cruisers, and torpedo boats; by one-third the tonnage of submarines, for which
no state should maintain a tonnage greater than 35,000 tons. The Treaty of London set
limits and proportions for the naval forces of the United States, Great Britain, and Japan. I
propose that France and Italy cooperate with naval disarmament by adhering to the Treaty
of London on the basis of the Italo-Franco-British accord of March 1, 1931.”
 5. The World Disarmament Conference 237

that the proposal did not resolve the problem of the right to equality posed
by his government, Litvinov limited himself to offering details on a few
aspects of the proposal, and the Japanese delegate Matsudaira stated his
opposition to reducing naval armaments. At this point, Grandi intervened,
as he would later maintain, without having consulted Mussolini.90 Grandi
limited himself to a brief declaration in which he affirmed that
Italy accepts the plan for disarmament presented today by the American delegation
to the general commission in all its parts without distinction. This acceptance is
unconditional.

He listed all the measures proposed by the United States, underlining the
“concrete nature of our adherence,” and concluded:
It has been a year since President Hoover with his offer of a moratorium opened the
path to a practical solution to the problem of disarmament. Italy did not hesitate
last year and it will not hesitate today.91

Grandi’s declaration elicited what the British Labour Party newspaper,

the Daily Herald, reported was the most enthusiastic applause yet generated
at the disarmament conference; “Pertinax,” the commentator of the Echo
de Paris, characterized the ovation as “indecent”;92 and the American
delegate Hugh Gibson, in a message of congratulations, described such a
spontaneous enthusiasm of which he had never seen its like in all his long
experience of international assemblies.93
A message followed from Stimson, who for the first time publicly
affirmed:
. . . Our two Governments are working side by side toward a favorable solution to
the problem of disarmament.94

While the entire American press, the neutral countries, and the social
democrats sang the praises of this gesture by Fascist Italy, one message of
congratulations that was conspicuously absent in the chorus was from
Mussolini himself.95

90
D. Grandi, Interview; elsewhere in the interview, Grandi would maintain that diplomacy at
some points requires prudence, at others audacity.
91
ADG, VII, VI, D. Grandi, Discorso alla Conferenza per il disarmo, Geneva, 22 June 1932,
pp. 83–84.
92
Daily Herald, 25 June 1932; Echo de Paris, 23 June 1932.
93
ADG, VII, VI, Hugh Gibson to Dino Grandi, 23 June 1932, pp. 91–92.
94
ADG, VII, VI, Henry Stimson to Benito Mussolini, p. 85.
95
ADG, VII, VI, p. 91.
238 The United States and Italy Confront the Great Depression

Hoover’s disarmament proposal and the declaration of support by the

Italian foreign minister marked the apex of both the disarmament effort
and the collaborative politics of Italy and the United States. Still, the
conference ended without any real consequences. After vain attempts at
an accord and the withdrawal of Hitler’s Germany from both the confer-
ence and the League of Nations, in June 1934 the conference and disarma-
ment itself were definitively shut down.
The proposal was spectacular politics and offered a surprising commit-
ment from a United States that was just taking its first steps back onto the
path of international politics after the parenthesis of the 1920s. But it was
completely insufficient as a response to the gravity and especially the
complexity of the problems overtaking Europe. It was a case of too little,
too late. Too late because the divisive effects of the global economic and
political crisis had by this time rendered the victory of National Socialism
irreversible in Germany, with obvious repercussions for other reactionary
dictatorships. Too little since the obvious limits of American initiative,
and in general of the conduct of the only country theoretically capable
of assuming global leadership, were built into their specificity. Only an
initiative that had addressed the issue of disarmament but connected that
action to an overall plan for European pacification, affronting both the
revisionist demands of Germany and the French desire for security, would
have had any chance of breaking the stalemate. In reality, the economic
crisis had damaged Hoover’s ability to assume responsibilities at the
international level of politics, reduced the influence and capacity of
American capital compared to earlier years, and brought to the fore
economic models and ideologies that did not base themselves on interna-
tional interdependence but rather on bilateral exchange and the pursuit of
autarchy, including in the matter of rearmament.
In such conditions, even the collaboration between Stimson and Grandi
was revealed to rest on shaky ground. Their shared points of view and
agreement on a course of action had been conspicuous but had produced
no results beyond the propagandistic. Grandi had recognized the immense
potential for political and social stabilization represented by American
hegemony in Europe, considering disarmament the first and most impor-
tant vehicle for the realization of that vision. He had therefore adopted
commitments and rhetoric that were ultimately incompatible with the real
nature of the regime he represented, especially without some more material
benefits to show for the compromise. It was no accident that one month
after this culminating episode, Grandi was dismissed from the position of
foreign minister.
 6. Economic Collaboration between the United States and Italy 239

6. economic collaboration between

the united states and italy in the face
of the crisis
The desultory progress of disarmament talks, the faceoff between France
and Germany, the inability of other governments (starting with the United
States) to break through that stalemate – all these were the manifestations
of an ever-deteriorating situation that was intimately related to the devel-
opment of the economic crisis. Yet even in the management of the crisis, the
Fascist government and the Hoover administration, as long as it remained
in power, maintained a collaborative relationship. The collaboration was
based on what has passed on to history as the Hoover moratorium on
intergovernmental debt payments. With the Young Plan (so named after
the American financier Owen D. Young who presided over the relevant
international panel of experts and who was the real creator of the earlier
Dawes Plan) approved on June 7, 1929, the obligations of Germany had
been drastically reduced. These obligations had already been lessened
and linked to a plan of mostly American investment by the Dawes Plan.
Now, according to the Young Plan, Germany was committed to paying
annual amounts, lasting until 1988, whose amounts would increase over
the course of the first thirty-six years. Still, the annual payments could
amount to a minimum of only 660,000,000 deutsche marks, while the
payment of the remaining amount could be deferred up to two years in
the case of exchange problems – which would be handled by the new Bank
for International Settlements, headquartered at Basel – or other serious
impediment. The annual amount was guaranteed by a bond issue on the
German railway system. Although the Young Plan constituted a compro-
mise between the Anglo-Americans, interested in a full recovery of the
German economy, and France, which had not let go of its desire to weaken
Germany with any instrument available, including international pay-
ments, the experts assumed that the plan would be a definitive solution
to the German debt, given that the total annual payment called for was less
than Germany had successfully paid under the Dawes Plan.
The United States was always in favor of the most forgiving policy on
the question of reparations, which it had unilaterally renounced, but it
could not explicitly call for total cancellation without calling into question
the obligations assumed by its ex-allies to repay the debts contracted
to America. Great Britain, with the Balfour note, but especially with the
various proposals by Bonar Law at the second London Conference in
1922–1923, had ended up accepting the idea of giving up the monies
240 The United States and Italy Confront the Great Depression

owed it by the other allies, even at the cost of having to go on paying its
own debts to the United States, all in order to obtain the cancellation of
German reparations. The French refusal, motivated mainly by the convic-
tion that French security depended on keeping Germany weak, even if by
artificial means of weakening, was nonetheless strengthened as a bargain-
ing position by the American refusal to forgive France’s own debts.
The reasons for that refusal, contradictory with American plans for
expansion in Europe, were explained above. Since both Congress and
public opinion would not support the cancellation of debts,96 debtor
nations were not given the option of subordinating them to Germany’s
payment of reparations, nor was there ever the possibility of a global
cancellation plan.
The situation changed only after the crisis became rampant throughout
central Europe. After the failure of Credit-Anstalt in May 1931, despite the
attempts of the Bank of International Settlements and the Bank of England
(which was itself in serious difficulty), Germany underwent a flight of
capital from the deutsche mark that threatened its gold reserves and the
foreign currency reserves of the Reichsbank itself. The industrial recovery of
the country had been financed largely by American banks, to the point that
in the middle of 1931 they possessed bills of exchange or credit instruments
in Germany and Austria that totaled more than $1.7 billion.97 In the early
phase of the crisis, just before the failure of Credit-Anstalt, American
banks – in particular Chase National Bank and Lee, Higginson & Co. –
had continued to buffer the situation by offering substantial additional
credit.98 It was natural that the German financial crisis would have imme-
diate repercussions on American banks, which, after a small recovery in
early 1931 that resulted in an increase in the Dow Jones index and raised
share prices, then found themselves holding large amounts of short-term,
unguaranteed German debt.
It was in the context of this situation that Herbert Hoover made the
decision he later called “the riskiest” of his career.99 The proposal of a
general moratorium on intergovernmental debt payments touched a sore
nerve: not only would the United States renounce the annual payments
from its debtors, but for the first time it would implicitly be admitting
the link between debts and reparations – although officially Hoover still

96
Ferrell, p. 107; and in opposition, Wilson, pp. 155–156.
97
Ferrell, p. 116.
98
Ibid., p. 111.
99
T. G. Joslin, Hoover Off the Record, New York: 1934, p. 91.
 6. Economic Collaboration between the United States and Italy 241

continued to deny the existence of such a relationship.100 It was a question

of principle that could have had extreme consequences, opening the way
for a definitive cancellation of all international debt. It was no surprise
that Stimson had been encouraging Hoover for some time toward just such
a move,101 while undersecretary of the Treasury Ogden Mills was favor-
able toward a moratorium of at least two years and Mellon wanted a
preemptive agreement with the French since – it was predictable – they
would be the most reluctant to accept the proposal.102 But, as Ferrell
rightly observes, these men did not have to face constituents, and they
could afford to be generous.103 Herbert Hoover, like his predecessors, was
in a different position with respect to the electorate; and indeed, it was only
after long consultations with congressional leaders and the ensuing wor-
sening of the crisis in Germany that the president decided to formulate his
proposal.104 Hoover was encouraged by his economic advisers, who were
convinced that one of the main causes of the crisis consisted in the difficulty
in transferring the necessary sums for debt and reparations payments from
one currency to another (despite the fact that the bank in Basel had been
created for precisely this task). In reality, Hoover’s choice became obliga-
tory when he realized that Germany, even if one imagined that Brüning’s
government would act in good faith, would have to choose between
making reparations payments or debt payments to American banks, but
would not be able to do both. In this scenario, the American crisis, which
had slowed somewhat in the early months of 1931, would take on new
vigor.105 Faced with this dilemma, the president could harbor no doubt,
nor did public and congressional opinion, both accepting the proposal
with virtually unanimous consent.106 It would however be an oversimpli-
fication to think that Hoover had made this decision solely on the basis of a

100
Ferrell, p. 107.
101
Joslin, p. 93.
102
Ferrell, pp. 112–113n.
103
Ibid., p. 108.
104
ADG, V, p. 29, Herbert Hoover, Washington, June 22, 1931. The text of the presidential
message read: “The American Government proposes the postponement during one year
of all payments on intergovernmental debts, reparations and relief debts, both principal
and interest, of course, not including obligations of governments held by private parties.
Subject to confirmation by Congress, the American Government will postpone all
payments upon the debts of foreign governments to the American Government payable
during the fiscal year beginning July 1 next, conditional on a like postponement for
one year of all payments on intergovernmental debts owing the important creditor
powers . . .”
105
Ferrell, p. 108.
106
Ibid., p. 113.
242 The United States and Italy Confront the Great Depression

necessity that happened to conform perfectly and uniquely to his interpre-

tation of the crisis and its solution. As is well known, the historiographical
judgment of Hoover’s handling of the crisis has fluctuated considerably,
becoming among other things a battlefront between New Left historians
and liberal historiography.107 Beyond the caricatures of Hoover that have
undoubtedly been painted by historians close to the New Deal, such as
Arthur Schlesinger Jr., there is no doubt that the president, along with
the entire governing class to which he belonged, had been raised on the
orthodox dictum of laissez- faire and had difficulty grasping the depth of
the crisis, which he tended to interpret as a short-term event produced by
lack of confidence on the part of economic agents. On the basis of this
analysis, the remedy was prescribed by the canon of classical economics:
the crisis would purge the system of its errors, sweeping away the least
competitive businesses, until recovery began as rational economic actors
regained confidence. On the international level, the solution was just as
obvious. Although Hoover frequently criticized the bankers, who in the
course of the 1920s had concentrated on foreign loans, he stole their
recipe: defense of currency stabilization and now a step in the direction
of debt cancellation. Only the question of customs barriers had left him
uncertain, faced as he was with a congressional offensive that he could not
ignore.
The moratorium was a subsequent occasion for the Fascist government –
and in particular for its foreign minister, Grandi – to reinforce ties with the
Hoover administration. This was no improvisation; throughout the 1920s,
Mussolini had avoided aligning himself with the French position on repar-
ations. During the London and Paris Conferences in 1922 and 1923,
Mussolini had sided with the British in presenting a plan whose cardinal
points were the relatedness of debt and reparations, and a bond loan plan
contributing to the economic recovery of Germany. He had shown himself

107
W. A. Williams, America Confronts a Revolutionary World: 1776–1976, New York:
1976; J. Wilson, Herbert Hoover: Forgotten Progressive, Boston: 1975; W. Lippmann,
The New Imperative, New York: 1935; C. Degler, “The Ordeal of Herbert Hoover,” in
Yale Review (Summer 1963); A. Romasco, “Herbert Hoover’s Policies for Dealing with
the Great Depression: The End of the Old Order or the Beginning of the New?” in
M. Fausold and G. Mazuzan, eds., The Hoover Presidency, Albany: 1974; E. Rosen,
Hoover, Roosevelt, and the Brains Trust: From Depression to New Deal, New York:
1977; M. Rothbard, “The Hoover Myth,” in J. Weinstein and D. Eakins, eds., For New
America, New York: 1970; E. Hawley, “Herbert Hoover and American Corporativism
1922–1933,” in Fausold and Mazuzan, cit.; W. A. Williams, Some Presidents: From
Wilson to Nixon, New York:1972; for a counterargument see A. Schlesinger, “Hoover
Makes a Comeback,” in The New York Review of Books, XXVI no. 3 (March 8, 1979).
 6. Economic Collaboration between the United States and Italy 243

willing to travel the path of cancellation forged by Balfour and then by Bonar
Law, on the condition that Italy be liberated from its war debt obligations at
the same time. The link between debts and reparations disappeared only
from the public declarations made by Italian representatives during the phase
of negotiations with the United States for the regulation of the war debt, since
that was the most touchy subject for American public opinion, as discussed
above. This was an orientation that, as well as corresponding to sensible
financial reasoning, was also in line with the habitual respect Mussolini
demonstrated in terms of the German policy of the Anglo-Americans.
These precedents allowed Mussolini and Grandi to salute the Hoover
moratorium as a decision conforming to policies long pursued by the Fascist
government. In the Italian message of acceptance, it was specified that the
moratorium was being agreed to “despite the fact that such proposals impose
a notable sacrifice on Italy,” although it was also emphasized that its “high
moral significance has been perfectly comprehended by the Italian peo-
ple.”108 The proclamation of the moratorium proposal came from Hoover
on June 20, 1931. The Italian message of acceptance came four days later,
June 24. It was all the more significant because the Italian government used
that time to call a meeting in Palazzo Chigi – “as ordered by the Head of the
Government” – in which Grandi participated along with Minister of Finance
Mosconi and the director of the Banca d’Italia, Gaetano Azzolini. There it
was decided to give the order for immediate execution109
“of the project of the United States Government, informing Governments of Debtor
Nations that Italy does not intend to claim the deposit of sums due to it according to
the Young Plan or the Hague accords before the deadline of July 1. We simulta-
neously inform the Governments of the Creditor Nations that we will set aside
those funds dedicated for our payments in anticipation of a collective decision until
that same date.”110

The effect that Mussolini and Grandi intended to produce was certainly
to reinforce Hoover’s positions, making his proposal reality, but it
was also to isolate the French government, which had received the
initiative with evident hostility. In the following days, Hoover was occu-
pied in negotiations with the French, conducted through the
Paris embassy, that concluded with a compromise: France would accept

108
ADG, V, p. 32, Dispaccio diretto dal Governo italiano al Regio Ambasciatore a
Washington, Rome, June 24, 1931.
109
ADG, V, p. 32, Dispaccio della Agenzia Stefani, Rome, June 25, 1931.
110
ADG, V, D. Grandi, Discorso alla Conferenza di Londra per l’applicazione della
moratoria Hoover, London, July 20, 1931, p. 133.
244 The United States and Italy Confront the Great Depression

a limited moratorium that would exempt Germany from the payment

amount represented by its annual quota, which would now be postponed,
while still paying France the amount corresponding to the so-called uncon-
ditional quota. This attenuation of the moratorium, but above all the delay
its negotiation caused, kept Hoover’s initiative from having the explosive
impact necessary to break the trend of the German banking crisis, as
he had initially expected. It was then too late to prevent the situation
from precipitating further. The second major bank of Germany, the
Darmstädter und Nationalbank, folded. Only the intervention of the
German government and a short-term loan from the major central banks
to the Reichsbank stopped a total meltdown. Still, what Hoover had
wanted to accomplish with the moratorium, to prevent the forfeit of pay-
ments to private American banks, had largely succeeded – and to the
benefit of the American economy. But the French government was able
to require political conditions for any further financial interventions in
Germany’s favor.111 The episode proved that the United States, in the full
midst of its own banking crisis and already heavily exposed to German
financial risk, was not politically strong enough to use its financial resour-
ces in sufficient measure to close out competition from other European
states, especially France. The Italian ambassador in Paris, Manzoni, had
grasped French intentions from the start:
Hoover Proposal: Berthelot [the secretary-general of the Quai d’Orsay] attributes it
to the necessity of rescuing major American investments in Germany and also sees
an electoral calculation by Hoover courting the votes of German-Americans. But
he admits that it is a first step, and a sharp move, in the American style, toward the
solution of all the difficulties of the European situation and the world crisis – a
beginning that, whatever its contents, fair or not, ought to be received positively,
but revised and adjusted. Berthelot recognizes that more than the economic aspect
it is the political, and how it is linked to the economy, that must be reformed to
create a rebirth of confidence in Europe and in the world so that the general
situation can be calmed and improved. [. . .] I believe I may confirm the idea that
here only political guarantees in addition to material ones will secure financial
cooperation: one has the firm sense that the Americans and the English are very,
even too much in the case of the English, committed to credit operations in Austria
and Germany and cannot face the crisis there alone. They will certainly need French
intervention, and the French financial situation is such that French finance is
not only indispensable but will have to play the starring role, covering at least
three-fifths of the operations: therefore its legitimate political demands will have to
be heard and fulfilled.112

111
Ferrell, pp. 113–116.
112
ADG, V, Gaetano Manzoni a Dino Grandi, Paris, June 23, 1931, p. 19.
 6. Economic Collaboration between the United States and Italy 245

Grandi, for his part, did not miss the occasion to publicly and privately
deplore the delays caused by France’s partial refusal to adhere to the
moratorium. Beyond the usual propaganda motives, he was authentically
worried about the development of the crisis that was making Germany
ever more ungovernable, France ever more rigid, while taxing ever more
brutally the limited goodwill of the two great Anglophone powers to
stay engaged in Continental Europe’s troubles. The greatest danger to his
policy did not derive from relations with France, but from an overall
situation that lessened the authority of those very centers of collaboration
and mediation that Grandi had worked so hard to cultivate and which he
had seen as decisive: the League of Nations, the disarmament conference,
and the economic conferences among the major European states.
Actually, not even the Italian government had had a first reaction of total
and immediate support of the moratorium. Only after American remon-
strance was an effort abandoned to make Italian adherence conditional on
the dissolution of the announced customs union between Germany and
Austria.113 As late as during the meeting at which Grandi announced Italy’s
unconditional adherence to the moratorium to the German ambassador in
Rome, von Schubert, a meaningful exchange of remarks took place:
GRANDI: [. . .] The German Government has declared that the project of a customs
union was a way to lessen the difficulties of the German situation. Here in Hoover’s
proposal we have a tool one hundred times more effective for the easing of
economic difficulties. It is more than logical, therefore – it is natural – that
Germany, offered such a benefit, which she will be the only one to gain from,
should respond with a gesture of equal goodwill and international solidarity; that
is, to go no further with a project that has raised so much alarm and concern in
Europe. We don’t intend to link the Hoover proposal through any diplomatic
connection to the German plans for customs unification. These are exclusively
European problems that will be discussed by European Governments.
VON SCHUBERT: The Government of the Reich, in my opinion, cannot accept
the linkage of the two problems that regard such different fields of action. Are you
telling me that the Italian Government reserves the option to re-create this con-
dition later?
GRANDI: I don’t know. Today it will not. As for tomorrow, we shall have
to see.114

When Grandi concluded his meeting with von Schubert, affirming the
impression that “Germany is doing its best so that Italy and France may

113
Moscati, Locarno, p. 117.
114
ADG, V, D. Grandi, Appunti sul interview con l’Ambasciatore di Germania, Rome, June
24, 1931, p. 20.
246 The United States and Italy Confront the Great Depression

overcome the differences in sentiment and interest that have as yet divided
them,”115 he was not only flaunting what genre of language even the
Italian foreign minister, who usually spoke in measured tones, felt able to
permit himself toward Germany before Hitler’s advent. Grandi was also
expressing a profound and authentic aversion of the Italian government
toward the resurgence, near its own borders, of a pan-German power
strategy. With respect to Germany, the Italian reactions were contradic-
tory: on the one hand the alignment with the United States and Great
Britain in the logic of European reconciliation dictated a constructive
approach usually stressed, especially since it provided a clear contrast
with the French position. And yet every so often the obscure fear that
Germany provoked even in Fascist Italy would take shape, particularly
when the matter directly concerned Italian security and self-interest, such
as in the case of the Alto Adige (or South Tyrol) and the assimilationist
policy of Angleichung. Mussolini then could not help but take a stand,
even at the cost of displeasing his powerful Anglophone friends. The
salient fact – which relates to the meeting between the two diplomats
recounted above – consisted in the strategic withdrawal (masked by hints
of an ambiguous future revival) Grandi was forced to make regarding the
original effort to make the suspension of the customs union a compensa-
tion for Italy’s cooperation with the moratorium. Perhaps a certain arro-
gance in his language was not extraneous to his goal at that moment. It is
meaningful that, while France was able to force the United States into
negotiations and to modify the terms of the moratorium, Fascist Italy gave
up on all efforts to do so when the Americans, predictably, reacted neg-
atively. In other words, given an opportunity to make one’s support of
Germany count not in words but in deeds, Italy still privileged its image as
faithful facilitator of American policies in Europe over any other advant-
age and therefore gave unconditional acceptance of, and obedience to, the
moratorium.
Chancellor Brüning, for his part, was careful not to attach any great
importance – at least not to all appearances – to the veiled and vague threats
proffered by Grandi to his ambassador. On June 26, two days after the
Italian acceptance of the moratorium, Brüning telegraphed to Mussolini:
. . . I believe I am not mistaken in saying that the action of the President of the United
States is aligned completely with the far-sighted and energetic policy that Italy,
under your guide, has long pursued. This is confirmed for me by the rapid decisive-
ness with which the Royal Italian Government has adhered without reserve to the

115
Ibid., p. 21.
 6. Economic Collaboration between the United States and Italy 247

American proposal, decisiveness that finds an enthusiastic echo in all the German
people.116

Brüning thus, ably, not only showed Mussolini that he recognized his
behavior to be coherent in terms of reparations, but that he had seen
through Mussolini’s desire to boast of his closeness to American positions,
and that it was dependent on Hoover’s willingness to accept Mussolini’s
policies, not the other way around. The determining factor was the power
relationship between the two countries in question. The insistence on the
rapid and unconditional character of the Italian decision had the double
purpose of making it more difficult for Mussolini to rethink or regret it
(although Grandi’s threats had only a tactical and contingent value,
Brüning preferring to solidify his position) as well as to do him the favor
of rejecting the rumors, damaging to both of them, about the vacillations
(that indeed there had been) on the eve of the decision.
Within the next few days, Henry Stimson’s visit to Rome offered Grandi
the occasion for highlighting the core motivations of the Fascist govern-
ment. His statements to the Associated Press on the eve of his American
colleague’s arrival in Italy were inspired by the recent Hoover proposal,
but went so far as to be transformed into a hymn in praise of the economic
interdependence of the capitalist world.
Grandi began by affirming that Hoover’s proposal was “practical”
because it was “for immediate application” and asserted, somewhat
rashly, that
[. . .] one day it will be better understood as an act of great political wisdom when it
will be clear how it worked to prevent developments that could have been very
painful and serious for both America and Europe.117

This was not yet another effort to please the American public. There was
an important error of analysis, common to the capitalist governing class
of those years, that Grandi shared: just as Hoover maintained that the
crisis was essentially the product of a failure of confidence among eco-
nomic actors, so was Grandi of the opinion that it remained possible to
reconstruct the European order on the basis of the restoration of confi-
dence in international relations.
Grandi added:
I have always disagreed with the concept of the world as divided into geographic
sectors, and in the response given precisely a year ago to the French project of

116
ADG, V, p. 35, Heinrich Brüning to Benito Mussolini, Berlin, June 26, 1931.
117
ADG, V, D. Grandi, Dichiarazioni all’Associated Press, Rome, July 4, 1931, p. 127.
248 The United States and Italy Confront the Great Depression

a political and economic Paneuropa, I openly critiqued this concept. The Italian
Government has always opposed any regime of European secession from
America. These two years of crisis have proven how necessary solidarity is, not
only among the States of the same continent but among the States of all con-
tinents. Just as the prosperity and well-being of a nation is the result of the
well-being of each individual, so too can the general prosperity be guaranteed
only by the well-being of each individual Nation. Europe cannot do without
America, and if this intercontinental solidarity should spread, the world will be
the better for it.118

In the moment that the crisis hit precisely those mechanisms that were
the pillars of economic interdependence (from the commercial exchanges
to the monetary system founded on the gold standard), Grandi took a clear
stand. It would be reductive to say that Fascist foreign policy was hostile
to the Europeanist projects of Briand because it saw in them the idealized
or utopian projection of a French hegemony aspiring to exert its control
over all of Continental Europe. While that is true, the hostility that Grandi
expressed also stemmed from the conviction that the United States and
secondly Great Britain were the true hegemonic powers, including in
Continental Europe. Not only that, but Grandi believed that their domi-
nance was in the main better for Italian interests than the French version
would have been. This is a striking anticipation of certain future discus-
sions that, twenty-five years later, would contrast what would come to be
called the “Atlantic community,” a European community resigned to
American leadership and included in a wider zone of free trade and free
movement of capital, with a “Europe of the homelands” proposed by
France, generally hostile toward American interference and diffident
about Great Britain’s imperial ties. Just as striking is the analogy between
the position of Fascist Italy in the few years preceding the worst turn of
the European crisis and the position of a contemporary, democratic Italy,
proeuropean but always responsive to American leadership.
But these were positions of principle that would have to be revised in
the harsh light of the real crisis in political relations caused by the war and
the Treaty of Versailles and worsened by financial disintegration. Stimson
and Grandi may have seen eye to eye in their own personal meetings,
but they could not pretend that they would not be called immediately to
account by men who were unlikely to bend to their reasoning. In the course
of their Roman colloquy, July 11 and 12, 1931, principally concerning
disarmament issues, there occurred this symptomatic exchange:

118
Ibid., pp. 127–128.
 6. Economic Collaboration between the United States and Italy 249

STIMSON: [. . .] Any news from Berlin on the situation after Hoover’s proposal
[for a moratorium]?
GRANDI: No good news. The German Government declared that the domestic
situation is dramatic and that in Berlin they blame the French Government for
having compromised the effect and benefit of the President’s proposal with its
quibbles . . . I believe that you, dear Stimson, will have as much work to do in
Paris as in Berlin. I hope for the sake of Europe that you succeed in reconciling them
so that the American gesture can have the positive results that our peoples have seen
in it.119

Indeed, Stimson had a great deal of work in the following days. He had
to leave Rome early, in order to hurry to Paris, because the moratorium (or
what was left of it) had not actually been enough to stop the German
banking crisis from worsening and having dangerous effects on the United
States.120 In Paris, he went from meeting to meeting with French delega-
tions and German representatives, in various combinations of bilateral and
collective groups of the major powers. The atmosphere Grandi found there
when he arrived a few days after Stimson (thus underlining the costarring
role played by Italy in these high-level political and financial talks) reflected
the reality of the situation:
I believe that such a meeting has rarely occurred as has here taken place: an
international conference of heads of state and foreign ministers of the great powers
in a chaotic situation such as seen today. We are under pressure from unpredictable
and uncontrolled events, without any government having been able before arriving
here to prepare a plan for what should or should not be done.121

Such a reconstruction was not dictated mainly by resentment from one

who felt himself excluded. The disorientation was real and stemmed from
the shared feeling that, especially in Germany, events were about to
run out of control that might definitively compromise the chances for
European reconciliation. At the same time, the goals of the various
governments and the conditions they negotiated under were such that
no program was possible, not even a stopgap, to deal with the worst
consequences of the economic crisis. Nor was it a reasonable expectation
that the economic issues could be separated from the problem of disarma-
ment, reproposed by Germany without appreciable results (the work for

119
ADG, V, D. Grandi, Appunti sui colloqui con il Segretario di Stato agli Esteri degli Stati
Uniti H. Stimson, Rome, July 11 and 12, 1931, pp. 37–38.
120
Ferrell, p. 116.
121
ADG, V, D. Grandi, Relazione al Capo del Governo sui lavori del Congresso di Parigi e
della Conferenza di Londra, 18–24 luglio 1931, Rome, July 27, 1931, p. 78.
250 The United States and Italy Confront the Great Depression

the World Disarmament Conference had become a dead letter after the
failure of the first American proposals).
What was missing from the start was someone capable of assuming a
leadership role. Stimson and Mellon were both in Geneva in the position of
needing quick fixes for the shared effects of the German financial crisis and
the state of the American banking system. This prevalent need was incom-
patible with the role of counsel and executive for a global long-term plan to
solve all the aspects of the crisis. Stimson asserted that the mainspring of
American action was not the losses of American investments in Germany,
but the deep conviction that German recovery was of maximum impor-
tance for the political and economic reconstruction of Europe and there-
fore the whole world. But his interlocutors were aware that his first task
was to staunch the leak in his country’s banking system, already seriously
overexposed from two years of economic crisis. Nor could Stimson hope
to convince Laval – who temporarily held the post of French prime
minister as he waited to turn it over to Herriot – on the strength of mere
words that the pacification of Europe must pass through the reconstruc-
tion of the German economy. The French were well aware, as indicated by
Berthelot’s words to Manzoni, presented above, that the Americans were
financially weakened by the crisis and still strongly influenced by isolation-
ism, which had indeed been given new vigor by the crisis itself. Finally,
Hoover was about to enter the period when a president must consider his
actions in light of a new campaign season, and the coming elections did
not look like an easy win for him.
Nor were the British in any position to play a leading role. As the events
of coming weeks would demonstrate, English banks and the pound sterling
itself were also damaged, even more than New York, by the German
banking crisis. Obviously, all these financial considerations did not change
the real hierarchy among the great powers – even wounded by the crisis,
the American economy still dwarfed the French one – but there was some
immediate consequence to the fact that the French government could
intervene quickly with substantial aid to the Reichsbank. Stimson was
forced to admit that the president of the United States did not have the
ability to offer or guarantee loans. For this reason – but not only for this
reason – Stimson indicated another option: American banks, he said, had
already decided to intervene, as long as the Banque de France and the Bank
of England did as well. The Great Depression arrived between the Dawes
Plan and the conferences of Paris and London, with major effects on the
foreign policy as well as the financial policy of the United States. Hoover
could polemicize as much as he wanted against the foreign policy of
 6. Economic Collaboration between the United States and Italy 251

American bankers throughout the 1920s, but when push came to shove,
he had no choice but to admit that men such as Strong, Lamont, and
Young had an ability to act that the crisis denied him. They too were
now deprived of the weapon that had made them so strong in the preceding
years: available capital and the possibility of committing it abroad.
Under these conditions, in which neither the United States nor Great
Britain could take the initiative, a power vacuum allowed direct and
unproductive negotiations between Laval and Brüning to force the stalling
of the whole conference. Laval, who would later take a very different
tack, represented in this period the legacy of the French nationalism of
Clemenceau and Poincaré. Using his strong position, he made French
financial aid conditional upon political favors, which, as Brüning said to
Grandi, if any French government were actually to go through with,
. . . it would immediately be overthrown by popular fury, provoking a much worse
political situation than the one the French Ministers intended to resolve by making
these unacceptable proposals.122

The nature of the requests was more objectionable than the burden
they represented: the virtual stoppage of all construction on German
armored cruisers, the commitment to respect the Young Plan at the end
of the moratorium, the promise to renounce any revision to the treaties
despite the fact that the right to treaty revision was guaranteed in Article
19 of the League of Nations Charter, the repression of German nation-
alist and veterans’ associations, and a lien on customs duties to guarantee
the loan. These measures would return Germany to the state of limited
sovereignty to which it had been reduced by the Treaty of Versailles.
Brüning knew perfectly well that they would only have hastened the rise
to power of the National Socialist movement growing in strength at that
very moment.
This was yet another confirmation of the French interwar policy that
was aggressive toward the bourgeois democrats and then became submis-
sive and cowardly toward Hitler – aggressive rather than powerful since
Laval was not capable of imposing his conditions; he simply profited from
the German financial difficulties and the fact that they could not be fully
solved without him. Since the political price that France demanded was
excessive, Brüning had only one choice left: wait for a French government
that might be more willing to negotiate, while the financial crisis went on
creating social disintegration in his country.

122
Ibid., p. 90.
252 The United States and Italy Confront the Great Depression

If Stimson and Henderson did not succeed in imprinting their own

direction on events, it comes as little surprise that things were no different
for the Italian foreign minister. In Paris, Grandi limited himself to repeat-
ing that Italy would enthusiastically participate in the Hoover moratorium
and was willing to take on a proportional burden of any aid package
agreed upon to “offer further succor to Germany.” He did not renew the
request of a German renunciation of the customs union with Austria,
perhaps because he knew that Laval would see to it. In this way, Fascist
Italy aligned itself once again with the United States and Great Britain,
enduring the consequences of their impotence.
Less predictable was Grandi’s second declaration, taken up by Laval
with satisfaction:
. . . The Italian Government follows with sympathy and interest the direct conver-
sations between the French and the Germans, sincerely wishing them a favorable
outcome.123

Why on earth would Grandi, who had previously not hesitated to

severely criticize French harshness toward Germany, in this case pretend
to believe that a positive outcome of the direct negotiations was a possi-
bility? The most likely explanation was the separate conversations that
Laval and Grandi were having at the same time in Paris. Here they outlined
the hypothesis of a general political accord between France and Italy
that would concede to Fascist Italy some of the African opportunities
Grandi had been pursuing for some time – Ethiopia and the mandate
over Cameroon were mentioned – and that, upon improving the political
climate between the two countries, would induce Italy to less rigidity in its
international loyalties, inconvenient as they had been from the French
point of view.124
The reality was more complicated. Grandi’s expressed hope for a
Franco-German accord was not at all in contradiction with the alignment
of Italy with the policies of Great Britain and the United States, nor was it
an isolated gesture. As we have seen, in his trip to Washington following
Laval’s visit there, Grandi would take constant care not to oppose France,
expressing only appreciation toward the French.125 A policy of European
reconciliation, as desired by the Anglophone great powers, could not take
place without France, even though it had to represent the overcoming of

123
Ibid., p. 84.
124
Ibid., pp. 84–85.
125
ADG, VI, I, I colloqui di Washington, p. 7.
 6. Economic Collaboration between the United States and Italy 253

France’s anti-German policy. For this reason, whoever aligned himself

with reconciliation could not exacerbate any conflict with France that
might render an already serious situation more difficult. On top of that,
he would have to show himself willing to make accommodations regarding
the French. This was the tendency behind the attempt at a naval agreement
with Briand, negotiated at the last moment after the failure of the London
naval conference, due solely to the stubbornness of French naval and
nationalist circles. Given these considerations, a favorable position on a
direct accord between France and Germany served two purposes at once:
first to encourage Laval’s openness; but second to confirm once again, with
Stimson and Henderson as witnesses, the reasonable and pacifist nature of
Fascist foreign policy. Clearly this was a policy that carried a price tag
Fascist ideology would never want to pay. As long as France did not
collaborate with the other great powers, the Italian role of adapting to
and even anticipating its goals of pacification was not only appreciated but
also won recognition. Grandi’s pacifist policy appears less contradictory to
Fascist ideology once we understand it as still aggressively directed against
someone. To the extent that France showed some willingness to cooperate,
the Italian position would remain pleasing to the Anglophone powers but
would lose its importance as the tradition of direct dialogue between
Great Britain and France was reborn. This is just what came to pass at
the Lausanne Conference.
In the meantime, Grandi knew well that the conflict with France was
largely just a concession to the publicity needs of the regime he repre-
sented. He also knew that, while it was not contradictory to the policy
that he was pursuing, at least as long as France continued to play the
role of main adversary of any compromise with Germany; it could
hardly be reconciled with the Anglo-American objective that he was
claiming to share: European pacification. It would therefore be neces-
sary to reach an agreement with France, obtaining some solid conces-
sions for the frustrated nationalism he had turned his back on before
Italian helpfulness became superfluous, in order to reach some general
European agreement that would force Italy to choose between subordi-
nation and isolation on the world stage. On this theme, Grandi wrote
to Mussolini:
I believe that we must avoid the damage and the danger of all the pathological
situations that have become chronic. Otherwise, we end up in love with our own
sins: this is the mindset of many French and many Italians right now. The Italo-
French polemic, which has almost become a chronic illness for our two countries,
also runs the risk of exhausting itself without having produced any beneficial
254 The United States and Italy Confront the Great Depression

results for Italy or for France itself, results that should come from a clear and
concise clarification of delicate and complex situations. Add to this the experience
of several months ago, which we must attentively analyze: I am speaking of the
German initiative to create a political union with Austria.
This sudden and unexpected event, while it clearly revealed the progress of a
reborn pan-Germanic movement, also determined the creation of an automatic
common front of Italy and Germany to defend and resist.126 It is clear that this is
the most propitious moment to definitively clarify our relations with France, before
any other German move can occur [. . .] to immobilize us again and confront us
with France and Germany together, proving to France that it is superfluous to make
any sacrifice for a political advantage that events are already conspiring to bring
directly to it . . .127

In truth, the very fact that the French and Germans were involved in
a direct negotiation, one to which any general accord among the great
powers had to be subordinated, is significant in itself. The United States
and Great Britain had neither the strength nor the will at that particular
moment, in which their banks were most exposed to the risks of the
German crisis, to impose an authentically multilateral negotiation and
force the French to come to terms with others’ points of view. It was a
completely different situation from that during the Dawes Plan negotia-
tion, which had been not only or even mostly the fruit of the goodwill of
Streseman and Briand, but rather of the pressure applied by American
bankers when they were the only ones both willing and able to furnish the
necessary funds for Germany’s reparations payments. It was clear that
France and Germany, left to themselves, would not have reached an
accord, given how hard it was to do so even with outside pressure.
In these conditions, the Italian interventions at the following London
Conference and at the twelfth assembly of the League of Nations were
those of a spectator aware of the gravity of the moment but unable to play
any constructive role in the action. The ever more evident paralysis envel-
oping Hoover’s administration made Italy even more impotent in its
aspiration to be the faithful spokesperson for American policy on the
Continent.128 In his awareness of the gravity of the moment, Grandi had
no choice but to grip the Hoover moratorium even more tightly, as a sign
of the American commitment that in reality was already becoming less
certain – as he himself noted. In diplomatic language, he wrote deploring

126
Sic! He must have meant to say Italy and France.
127
ADG, V, D. Grandi, Relazione al Capo del Governo, p. 88.
128
ADG, V, D. Grandi, Discorso alla Conferenza di Londra per l’applicazione della
moratoria Hoover, London, July 20, 1931, p. 135.
 6. Economic Collaboration between the United States and Italy 255

the fact that the French-American negotiations over applying the morato-
rium had weakened its beneficial effects.129
Stimson and Mellon needed an outcome from the London Conference
that could at least lay the foundations for suspending Germany’s foreign
debts, including the private ones. Otherwise, the ongoing crisis might
undermine not only the current financial health of the banks, but also
any future ability to fulfill their obligations; this would have consequences
of the utmost seriousness for their American and English creditors.
Grandi’s strategy in this case not only led him to exclude the possibility
of subjecting any financial aid to Germany to political conditions (though
he refrained in any case from openly criticizing the French position),
but also to express the essence of the American position at the London
Conference and afterwards:
It is necessary to recognize that the burdens weighing on Germany from reparations
must be adjusted in such a way as to calm the fears regarding Germany’s ability to
fulfill its foreign commercial obligations, as well as any diffidence among depositors
in the international sector to whom Germany might turn for aid for the necessities
of her economic life. The Italian Government declares in this moment its readiness,
within the limits of its ability, to do its part in this sacrifice as it has in others.

Italy, as represented by Grandi, adhered not only to the goals but also to
the interpretation of the crisis guiding the Hoover administration. While
he expressed his conviction that the crisis had characteristics that were
intertwined – that is, both dependent on the European political situations
and on its financial difficulties – he linked the solution for overcoming
them to the problem of confidence, “that simultaneously indispensable and
imponderable factor.”130 It is facile to observe that Hoover was preaching
to the economic actors and the American public and that, if only they
would have faith in the health of their own economic institutions, every-
thing would be fine – while Grandi affirmed that European peace and
prosperity depended on restabilizing faith in international relations. What
they had not grasped, or could not allow themselves to admit, was that by
now the mechanisms of production and international exchange that had
been restored during the 1920s were definitively broken. This had already
created results that also affected politics, as the growing instability of the
German situation attested most extremely and dangerously. The very lack
of progress at the London Conference was further proof of the insufficient
nature of those leaders’ analysis. The commission that would be the only

129
Ibid.
130
Ibid., p. 136.
256 The United States and Italy Confront the Great Depression

concrete result of the conference would eventually decide what the United
States and Great Britain had hoped it would: to freeze German debts,
including private debts, with the result of avoiding formal insolvency.
But the facts remained. That decision, which constituted acceptance of
the Layton-Wiggin report ordered by the Bank of Basel, on whose recom-
mendations the London Conference had been called, represented the
moment of de facto insolvency for Germany.
The formality of the decision aided only American and (especially)
British banks in avoiding insolvency with regard to their own creditors.
There were immediate and ever more dramatic consequences. Despite the
loans from the Federal Reserve Bank of New York and the Banque de
France, on September 21 the Bank of England was forced to abandon the
gold exchange standard; all the countries whose central banks were linked
to the pound sterling, starting with the ones in Scandinavia, followed their
decision soon after. This was the first and most important crumbling of
the great edifice constructed during the 1920s through the international
cooperation of the central banks under the guidance of Benjamin Strong
and Montagu Norman. It ignited a process that gradually led to the
devaluation of almost all currencies and finally to the dramatic decision
by Roosevelt to take the dollar itself off the gold standard. At an early
point, the abandonment of the fixed rate by the currencies that made up
the sterling zone functioned as a subsidy of their nations’ exports; but once
the other currencies, as was inevitable, adapted, there was a general
shrinking of the volume of exchange given the lack of any assured means
of exchange. As a consequence, the economic interdependence at the core
of the capitalist world, reinforced in previous years, now suffered two
harsh blows: on the one hand commercial exchange, already hard hit by
the Smoot-Hawley Act, and the retaliatory measures of other countries,
were decimated; on the other hand, the monetary collaboration linking
Italy and Germany to the major capitalist countries disappeared almost
entirely. Under these circumstances,, the analysis founded on the restora-
tion of confidence or “faith” that recurred in the various statements of
Hoover, Mussolini, and Grandi was revealed in all its limitations.
The insufficient and hidebound laissez-faire analysis of the epoch was
matched by the type of remedy proposed by the United States and Italy
(excepting only the question of the cancellation of war debt along with
reparations), all totally inadequate to the real gravity of the situation. Only
a few days after the pound sterling was taken off the gold standard, Grandi
invoked not only actual disarmament but also the abolition of economic
armaments at the League of Nations. He saw the raising of customs
 7. Grandi’s Visit to Washington 257

barriers as a major threat to peace, intimately linked to the political

and military insecurity into which Europe was descending.131 Though
Grandi’s specific point was well taken, even at the end of Grandi’s meetings
with Hoover and Stimson in Washington from November 16 to19, their
joint statement repeated their shared conviction that
. . . the restoration of confidence within each Nation will definitively occur only
through the reinforcement of international financial stability and effective faith that
extends among all the Nations.132

By this point, such words were mere whistles in the storm, but Grandi
would still repeat them at the Lausanne Conference.133

7. grandi’s visit to washington

Overall it can be said that Grandi’s visit to Washington produced a para-
doxical result. For a decade, Fascist politics had made constant reference to
American power. Initially, as directed by Benito Mussolini, Fascist conduct
had reflected the need to stabilize the regime with more than nationalist
claims, cementing consensus and financial aid from abroad. This foreign
support had been solicited with particular vigor from those who had the
greatest resources and the fewest immediate claims for political or terri-
torial redress. In a later period, as has been observed,134 the regime could
permit itself a foreign policy linked more to grand issues than to specific
claims. The policy of this period may be characterized as both revisionist,
regarding the French interpretation of the Treaty of Versailles, and prudent
or even conservative, inasmuch as it singled out the United States and
Great Britain as the decisive powers in determining the world’s equili-
brium. Dino Grandi, as foreign minister, gave a complete and coherent
shape to a policy of friendship based on the evaluation of strength that
Mussolini had made the central element of his diplomacy and pursued ever
since the days of the March on Rome. Grandi’s visit was the most salient
act of this period, during which Italy’s convergence with the Hoover
administration’s orientation was more or less total. As Hoover strove
laboriously to participate in world politics, the two nations were bolstered

131
ADG, V, D. Grandi, Discorso alla XII Assemblea della Società delle Nazioni, Geneva,
September 7, 1931, p. 146.
132
ADG, VI, Comunicato congiunto al termine degli incontri Hoover-Grandi, Washington,
D.C., November 19, 1931, p. 8.
133
ADG, VII, VII, pp. 98ff., Dino Grandi to Ramsay MacDonald, Lausanne, June 27, 1932.
134
Di Nolfo, pp. 253ff.
258 The United States and Italy Confront the Great Depression

in their harmony by virtual unanimity from their publics, founded on a

decade of appreciative evaluations of the Fascist regime made by the
members of the American governing class.
The outcome of Grandi’s visit was therefore no improvisation; it was
the moment of harvest for all the seeds of popularity the regime had long
been sowing with its careful attentions to the United States. Indeed, their
planting had been theorized as the central act of Italian foreign policy,
together with Grandi, at the Palazzo Chigi meeting long before. But how
was this growth concretely realized? Grandi synthesized his goals for the
visit thus:
I have stated [. . .] a few simple truths: (1) that I came to America without a hidden
agenda; (2) that Italy asks nothing from America, but offers her loyal cooperation
in solving today’s great international problems; (3) that Italy is doing fine on her
own and has no need of anything; (4) that I was not in America to propagandize for
any political doctrine; (5) that American wealth makes no difference to me; (6) that
Italy is a friend to France, and Laval’s visit had been noted in Italy with cordial
sympathy.135

It is difficult to say if these lines served more to summarize Grandi’s real

approach during his visit or to reassure Mussolini about his proudly
Fascist attitude in staying detached from the American experience. It was
undoubtedly important that at that moment Italy had no favors to ask or
any specific cause to plead136 – a refrain continually repeated throughout
his visit, especially in his meeting with Hoover and during a breakfast
offered in his honor by Thomas Lamont of the House of Morgan, attended
by the principal exponents of the New York financial community.137 The
Italian message was to underscore that, despite the crisis, the Italy of 1925
had passed and had no further need to ask for the cancellation of debts, to
plead for new credits, or to explain the indispensable need for support to

135
ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, Relazione inviata del
Ministro degli Esteri al Capo del Governo italiano il 2 dicembre 1931, p. 94.
136
ADG, VI, p. 6, D. Grandi, Dichiarazione ai giornalisti all’arrivo a New York, New York,
November 16, 1931: “I have not come to America with a selfish nationalist agenda, but
only to offer the Italian contribution to the general work of international cooperation.”
137
ADG, VI, pp. 68–69: “Minister Grandi, interviewed the same day by several American
journalists regarding his meeting with Morgan, Lamont, and other representatives of
American finance declared that his conversations ‘were interesting and useful’ on the topic
of “the problems of financial reconstruction of the world and the means to exit the present
depression suffered by the Nations.’ Asked ‘if the news arriving from Europe claiming
that he was planning to ask for loans’ was true, Grandi gave a strong denial, affirming that
‘Italy has no need of loans because our financial policy is based on sound and stable
foundations.’ [. . .]”
 7. Grandi’s Visit to Washington 259

stabilize its currency. Grandi had not forgotten the real power imbalance
between the two countries; indeed, the support of the United States was
more important than ever (to him personally as well as to the regime), but
the support no longer had to arrive in concrete and immediate aid pack-
ages. Rather, it had become a matter of presenting Italy as one of the
protagonists of world politics, which, without unduly exaggerating its
role, sustained positions that could encourage the United States to a greater
engagement in European politics and reinforce the ability of the Hoover
administration to keep moving in this direction.
Grandi had to avoid several (fairly obvious) traps in his path to bring
his visit to a successful close. When all was said and done, he reported to
Mussolini that
Italy’s adversaries had painted my trip to America as a double scheme, first to profit
by my diplomatic mission to propagandize for Fascism, and second to slander
France’s reputation.138

We have already seen how Grandi was not only aware that too-strident
polemical tones were unacceptable in the public discourse of the
Anglophone powers with whom he intended to cultivate a privileged
relationship. He also knew that any payoff of the politics of reconciliation
of which Italy had made itself a spokesperson had to pass through an
entente with France. He had succeeded in opening up the topics closest to
his heart with Laval, which he had to do in homage to the ideology of his
regime, but Grandi had no intention of creating an open polemic with him,
especially knowing that the eyes of the informed American public opinion
were focused on them. Still, he could not completely renounce the chance
to underscore the contrast between Italian and French foreign policy. For
every theme he mentioned, from disarmament to international debt to
European security, he exploited the French position without explicitly
criticizing it. He needed to make only friendly explicit statements in
order to mitigate the harshness of his disagreement on each of these topics.
An example was his statement after the first meeting with Hoover:
[. . .] We followed President Laval’s visit to Washington with the most cordial
sympathy. In this visit, Italy saw an encouraging sign of continuing work for
general cooperation, essential to the maintenance of peace and to the restoration
of prosperity.139

138
ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, p. 94.
139
ADG, VI, D. Grandi, Dichiarazione dopo l’incontro con il Presidente Hoover,
Washington, D.C., November 16, 1931, p. 7.
260 The United States and Italy Confront the Great Depression

Sympathy, cooperation, peace, prosperity: these were the words and

concepts by which the foreign minister intended to characterize his visit,
without betraying any formal bitterness toward the French president or
the council of ministers. Even better, newspapers such as the Detroit Free
Press made the opportune comparison for him, likening Laval to a grubby
salesman looking only to turn a profit for his country while describing
Grandi as a worldly and wise leader who would not ask for any special
treatment for his country that did not take the rest of the world into
account and whose proposals were good in a broad sense for peace and
disarmament.140 In this way, while Grandi lauded Laval, the American
press obliged him by highlighting his breadth of vision as contrasted with
the presumed narrow-mindedness of the French.
Just as delicate was the question of Italo-American anti-Fascism. This is
not to say that it presented a problem in terms of its size as a movement,141
despite the notable dimensions of the protests organized in New York for
the arrival of the Fascist delegation (during its sojourn, the police and the
mainstream press successfully kept protesters almost completely isolated).
The problem was rather one of not succumbing to any provocations. It
is likely that the Italian consul generak in New York had received severe
orders to keep the local Fascist sympathizers under tight discipline, given
their lack of diplomacy and political tact in other situations. As for Grandi
himself, not only did he avoid any mention of the regime that, after all, he
was there to represent, unless it was to emphasize its pacifism, but he even
allowed himself the luxury of asking for clemency for an anti-Fascist
arrested during one of the demonstrations.142 Above all, Grandi could
count on the antipathy that the anti-Fascists, mostly Socialists or anar-
chists as they were, elicited among the American governing class. It is
utterly plausible that Hoover, in his first remarks during the meetings
with Grandi, had indeed characterized them in the following words:
They do not exist for us Americans, and neither should they exist for you. You can
be certain that I hope you will not accord any importance to this minor detail.

After all, the executions of Nicola Sacco and Bartolomeo Vanzetti

had taken place only a few years before. Beyond the problems posed by

140
Detroit Free Press, November 18, 1931.
141
Dadà, “Contributo metodologico”; Diggins, pp. 123ff.
142
ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, p. 95. “In the first meeting,
Hoover told me right away of his regret on having learned that several anti-Fascists had
tried to disturb my visit when it was such a pleasing event for him and for the American
nation.” Also see Diggins, p. 125.
 7. Grandi’s Visit to Washington 261

anti-Fascists, Grandi, like any Italian politician visiting the United States,
had to deal very cautiously with the Italian-American community. The
American press would only pay attention if something unfortunate were
to happen on one of these occasions. Grandi’s approach was simply to
publicly repeat the invitation to become good American citizens as the
most effective means for serving one’s place of origin. The positive out-
come of this choice, from the point of view of the Fascist regime, would be
revealed at the time of the war in Ethiopia.143
Grandi explored several themes of international politics during his
meetings with Hoover and Stimson, and then in his peregrination of the
centers of the American governing class (from the Council on Foreign
Relations to the Foreign Policy Association, from the Overseas Writers’
Club to the New York Times). In so doing, he created a sort of ideological
contract with his listeners rather than giving rise to any discussions with
immediate policy goals. He paid homage to all the central myths and
aphorisms of American capitalism, but also of those sectors of American
public opinion that made a habit of paying attention to international
relations. It may appear comic that he would explain to that gathering of
bankers, military suppliers, industrialists, and merchants that was the
Council on Foreign Relations that
. . . there is no longer any merit to the opinion that international relations only
affect the few – such as bankers, military suppliers, industrialists, and merchants –
or that they therefore constitute an exclusive interest group of the so-called capital-
ist class.144

He was, in reality, catering to the desire of that oligarchy not to appear

as such, but also to its aspiration to play an educational role in relation to
wider public opinion, which had to be carefully guided to acceptance of
their country’s imperializing role, and to be comfortable with the inevi-
tably more explicit expressions of that role to come.145 When he declared
that stabilization and reconciliation, goals that still characterized the
thinking of such groups, were inspired by the conviction, which he shared,
that there was no other path to effectively defeating Bolshevist class war-
fare, Grandi was sounding the refrain of the common anthem linking

143
ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, p. 101; ADG, VI, pp. 34–41,
D. Grandi, Discorso agli Italo-americani in Filadelfia, Philadelphia, November 20, 1931.
144
ADG, VI, D. Grandi, La fiducia nel domani [Faith in tomorrow – trans.] – Discorso al
Council on Foreign Relations, New York, November 23, 1931.
145
ADG, VI, D. Grandi, Disarmo e giustizia internazionale – Discorso alla Foreign Policy
Association, New York, November 26, 1931, pp. 70ff.
262 The United States and Italy Confront the Great Depression

his audience to the regime he represented. Anti-Communism had been

the motive for their pro-Fascist sympathy since the days of the March
on Rome.
Their encouragement of social hatred, in the guise of internationalism, is no less
dangerous to real collaboration between peoples than it is to cooperation between
the classes within each nation.146

Nor was Grandi ashamed to carry the discourse into less trodden paths
for Fascist ideology: having paid ritual homage to Fascist nationalism
using a quotation from Alexander Hamilton,147 he went on to declare
his hopes for peace, to be realized through the growth of an international
ethics as defined by Elihu Root.148 He cited Root and not Wilson, because
the Council was a prevalently Republican group, as was the administration
hosting him, and perhaps also because Wilson was still a name forbidden
to pass the lips of a Fascist minister, even one who did not hesitate to
invoke “new diplomacy”149 and the force of public opinion as the foun-
dation of peace among peoples.
These statements were more than just empty political rhetoric, however,
because Grandi was backed not only by the popularity of his regime in
the United States, but also by a few solid facts: the financial collaboration
throughout the 1920s, the London naval conference, the Italian embrace
of the Hoover moratorium, and above all the fundamentally constructive
policy toward Germany that not even the polemics over the Alto Adige, or
South Tyrol, and the customs union had been able to reverse. And Grandi
was careful not to apply ideology to any of the political problems of
the moment. He used it, rather, to assert a convergence of principle con-
stituting a solid base for agreement on the two themes of greatest priority:
disarmament and the Depression. We have already examined how he was
able to produce agreement on disarmament between his nation, unable to
compete in an arms race, and the United States, so powerful in armaments
that they were very happy to consolidate the balance of power as it stood at
that moment. As for economic questions, Grandi did not miss the chance
to praise Hoover’s courage in proposing the moratorium; and he advo-
cated principles – currency stabilization, free trade, financial cooperation,
aid to Germany – that were guaranteed to align with the conventional

146
ADG, VI, D. Grandi, La fiducia nel domani, p. 45.
147
Ibid., p. 46.
148
Ibid., p. 51.
149
ADG, VI, D. Grand, Commento alla dichiarazione congiunta al termine degli incontri
Hoover-Grandi, p. 10.
 7. Grandi’s Visit to Washington 263

wisdom of the Republican governing class. All his American interlocutors,

from the journalists to Hoover himself, who directed a particularly biting
remark toward the French, agreed that if only Europe would imitate the
foreign policy of Fascist Italy, things would be much better.
Grandi was probably justified in claiming in his report to Mussolini that
. . . today in America Italy enjoys, among the governing class as among the common
people, the greatest height of prestige and of political and moral authority it has
ever attained.150

Still, what good was all this popularity among the American masses,
this benevolence from the governing class, if the United States could not or
would not actually take action and make its presence felt in Europe, when
the crisis made them most necessary? Grandi’s mission, and in general
his entire foreign policy toward the United States, found great success in
terms of building consent and obtaining support, particularly within those
restricted circles where Stimson and Hoover could directly be present and
influential. Many years later, Grandi quipped that “Stimson kept me alive
for three years.”151 But Grandi’s deeper goal, one that he really did not
have the power to translate into fact, was to convince Americans of all
walks of life of the urgency of their renewed commitment to Europe. At a
key moment in their meetings, Hoover told Grandi that his government
did intend to “go further, much further,” than the moratorium proposal
that had been hollowed out by French objections. The United States were
willing to enter into discussions over a general cancellation of debts and
reparations, but they could not overstep those bounds – thus Hoover’s
pleasure, according to Stimson, in being able to use Grandi “as a foil to the
French.”152 At this point, Stimson recounted:
The president then gave a summary of the attitude of the American man on the
street. For a hundred and fifty years we had kept out of Europe; then in 1917 we
had been dragged in a great war. We had spent forty billions of dollars in the war,
and we had added ten billions more in the shape of loans after the war. [. . .] And yet
Europe was in a worse condition than she was before the war. This, he said, led to
despair as to Europe and European affairs on the part of the ordinary American
citizen, and now he just wanted to keep out of the whole business. This was the
general attitude of the American public, and he did not see how the United States
could take the leadership in any direction.153

150
ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, p. 102.
151
D. Grandi, Interview.
152
YUL-HLS, Diary, October 5, 1931.
153
YUL-HLS, Memorandum by Stimson of conversations between Hoover and Grandi,
November 18, 1931.
264 The United States and Italy Confront the Great Depression

In return for any further commitment to European politics, the United

States would require disarmament and the cancellation of reparations
corresponding to any debts cancelled. France was not willing to take this
step unless it received commitments to political, and possibly military, aid
in return. Stimson would probably have been happy to make such con-
cessions, but neither Hoover nor any other elected official could dare to
offend voters’ wishes in such a way. The result was the stalemate reflected
in Hoover’s remarks to Grandi. In any case, Hoover lacked that acute and
direct perception of the danger that a radical political upheaval in Europe –
and especially in Germany – really represented. Ferrell notes that Hoover
became fully aware of the dramatic effects of the financial crisis in
Germany only after a meeting with his ambassador to Berlin, Frederick
M. Sackett, in May 1931. Even then, he only thought of offering help in
financial terms; nor could it have been otherwise as long as he remained
ignorant of the political dangers inherent in a crisis of the Weimar
Republic. Perhaps the fact that Germany’s political crisis encouraged a
turn to the right made Hoover and the American governing class less alert
to the threat it represented. There is no doubt, moreover, that the experi-
ence with Fascist Italy had reassured Americans about such movements.
Italian Fascism had been able to keep the most subversive elements of
its movement under control, had not allowed excesses that might have
repulsed the Western capitalist world’s sense of civic decorum, and above
all had shown itself adroit in finding and keeping to its proper place in that
world’s hierarchy. All this created a significant precedent that served to
soothe American fears to the point that it had to be the foreign minister
of Fascist Italy who reminded Hoover of the greater implications of the
German situation. To Hoover’s explanations justifying persistent isola-
tionism in American society, Grandi responded:
We do not know how long Europe will be able to wait, or whether in the meantime
some huge crisis, for example in Germany, will compromise the results of Europe’s
long and patient work toward political and economic restoration. A crisis in
Germany would have immediate effects on all of Eastern Europe, from the Baltic
to the Aegean. And the United States, because of its world power, would not be
able, even if it tried, to ignore its world destiny.

Grandi reminded Hoover of the words spoken by Theodore Roosevelt

on this topic in 1911:
As long as Great Britain is capable of defending, not only in theory but also in fact,
the balance of power in Europe, everything will go well; but if it should become
unable to fulfill this task, the United States will be at least temporarily obligated to
 7. Grandi’s Visit to Washington 265

intervene to reestablish that equilibrium, directing its efforts indiscriminately

against every country or group of countries who threaten it. Indeed, because of
our strength and our geographic position we are becoming ever more the [guaran-
tors of] the balance of power of the whole world.

Although Grandi was expressing a position that was clearly in opposi-

tion to the French stance, in terms of disarmament and international debts,
he did not speak generally “against any hegemony in Europe” but insisted
on the specific dangers of the German situation. He agreed with Hoover
on the necessity of a constructive policy – that is, one that would not allow
France to force Germany “to sign [the Treaty of Versailles] all over again.”
According to Grandi,
Germany has, whether in good faith or bad, committed huge financial errors, but
that is no reason to force the German people into desperation.

He recommended that the United States follow a policy of support for

Chancellor Brüning in line with what it had already promised during his
visit to Berlin. Grandi, though fearing the rise of the radical right, believed –
along with the majority of the bourgeoisie of that time – that the best
way to avoid this eventuality was to bring the Right into an alliance with
the Center, which remained its main political point of reference.154
Such a policy required not only an American financial intervention in
favor of the German banks that risked dragging their American creditors
into crisis with them, but a more organic strategy on the part of the United
States in dealing with the European situation in its entirety. It was no
coincidence that Grandi invoked that work of restoration (and it was
interesting too that he chose that word rather than the “reconstruction”
more commonly spoken of) in which the United States had participated
during the 1920s. It was just on this point that Grandi’s mission failed –
and could do nothing else but fail. Weighed in total, beyond the financial
bind created by the crisis as well as by isolationism, the profound and
deeply rooted incomprehension of the threat represented by the rise of
Fascist regimes throughout the world sealed that failure. In a certain sense,
the fact that it was the foreign minister of an already-consolidated Fascist
government to recommend a policy of intervention and reconciliation
increased the ideological confusion, without managing however to remove
the obstacles blocking the path he advocated. Grandi could not secure any

154
ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, pp. 97–98; on the Grandi-
Brüning meeting, see ADG, V, D. Grandi, Appunto riassuntivo delle conversazioni avute
col Cancelliere Bruening in occasione della visita a Berlino, October 25–26, 1931, pp. 42ff.
266 The United States and Italy Confront the Great Depression

concrete assurances about an interventionist policy in Europe under such

circumstances; even though Stimson seemed to concur with him, there
was nothing feasible to be done on the part of the United States. At the
same time, Grandi’s very success among the members of the governing
class and the press served to reinforce their belief that Fascist regimes were
not automatically a threat to peace. The eloquence he employed both
publicly and privately in recommending disarmament, the cancellation of
“tragic accountability” from the war, and reconciliation between France
and Germany was not sufficient to rouse the American action he hoped
for, but it was sufficient to reassure his audience that Mussolini’s regime
had enduring pacifist intentions. They could not comprehend that even
Italian Fascism’s peacefulness was merely transitory. Lacking a structural
analysis of the nature of that regime and of the political effects of the
worldwide economic crisis, the American governing class and American
public opinion were prisoners to the judgments their inherited values and
assumptions suggested to them. It would be several years before the danger
posed by Hitler’s militarization, in alliance with the Italian and Japanese
dictatorships, would finally sink in and break the spell of class solidarity
that the very popularity of Mussolini’s regime had helped to cement.

8. the lausanne conference

Neither Grandi nor his American interlocutors could be unaware that the
next international meeting regarded the intricate financial controversies
that continued to block any joint initiative to deal with the economic crisis.
And yet from this point of view, Grandi’s visit was virtually useless. It
is not that Italy and the United States could have bilaterally created
definitive solutions; in that sense, it was Laval’s visit that had been far
more seriously ineffective. Still, the United States and Italy had been
collaborating ever since the London naval conference in a shared political
perspective of European pacification. Stimson had repaid the Italian efforts
on his behalf at several crucial junctures (e.g., helping Italy avoid isolation
during that very conference). For better or worse, Grandi’s trip
to Washington had confirmed the extreme loyalty and mutual confidence
between the two governments. Under the circumstances, it would have
been logical to do as they had in the past and agree on some points of
common conduct in the coming months regarding disarmament and espe-
cially the economic crisis. If no plan of action or even detailed discussion
of those topics emerged from the Washington conversations, it was not due
to any lack of faith or to any disagreements, but was simply because the
 8. The Lausanne Conference 267

United States was less and less capable of exerting its leadership. After the
di facto failure of Hoover’s moratorium proposal, the president found
himself mired in domestic difficulties and had been forced to retreat. As
he told Grandi,
You tell me that Italy is ready to cancel reparations if debts are cancelled. I know.
The Government of the United States responds to Europe: “Cancel the reparations
and we will cancel the debts.” This is already a new step forward for America. But
we cannot go further. And since France did not want to hear of canceling repar-
ations, we had to answer, “Well, then you are on your own. You try to reorganize
the finance and economy of Europe. Europe will have to realize that this policy will
bring it more disadvantages than advantages.”155

Hoover’s words recalled the Chinese proverb suggesting that he who

sits by the river and waits will sooner or later see the corpse of his enemy
float by. But he was honestly trying to explain the impotence of a president
who no longer had a popular mandate domestically, who faced an immi-
nent election, and who could no longer even perform in his own country
those actions he recommended to the Europeans. At the earlier London
Conference in the summer of 1931, the American delegation had been
mostly concerned with confirming that block on the private debts of
German banks that had failed to stop the crisis of the pound sterling or
the wave of failures that had overflowed into the American banking system
as well. The following six months saw a worsening of the German political
crisis: Brüning fell from power, and in a last-gasp effort to save the
Weimar Republic, he was substituted by the nationalist von Papen, who
by then had the Nazis waiting in the foyer – and continuing indecision by
the French over the question of reparations. The Lausanne Conference,
which was supposed to resolve these issues, was postponed from January
to June. In the meantime, a commission of experts, nominated by the
International Bank of Basel,156 concluded that
. . . the German problem that has so strongly influenced the financial paralysis
affecting the whole world demands an action that only Governments can undertake
[. . .]. Action is urgent due to the global character of the problem. We must avoid
the disastrous consequences of the period of postponement accorded to Germany,
which expires February 22, 1932. The damages deriving from Germany’s ruin

155
ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, p. 97.
156
ADG, VII, VII, La conferenza di Losanna, p. 94; responding to the German request to
suspend reparations payments, the International Bank of Basel – created by the Young
Plan – nominated an international commission of experts with the task of drafting the
preparatory report for the Lausanne Conference.
268 The United States and Italy Confront the Great Depression

would be such that all the world would be overcome and no currency would
survive . . .157

Despite the seriousness of the situation, Hoover had to recuse himself, at

least temporarily. On January 25 he announced, through his ambassador
in Paris, that “Europe will have to solve the problem of its debts without
the intervention of the United States.”
Aside from Hoover’s impotence, the Lausanne Conference marked a
positive moment of thawing in the relations among the European states
and, in particular, between France and Germany. Herriot, after a few
negative statements on the eve of the conference, went ahead with recon-
ciliation and accepted an accord calling for the virtual cancellation of
reparations,158 with the sole conditions of an analogous acceptance of
the cancellation of debts by the United States and the convocation of a
world economic conference in London the following year with the clear
goal of involving the United States. The London Conference was to be a
global attempt to restructure the world economy founded on the familiar
concepts of debt cancellation, currency stabilization, and free trade.
Although Herriot and the radical and socialist forces supporting him had
always leaned toward an agreement for the cancellation of reparations, it is
notable that the French government conceded to the nationalist von Papen
(with the National Socialists hot on his heels) that which had been denied
to his predecessors, the men who might actually have defended the political
and economic equilibrium of the Weimar Republic. Just so did France
parade its stubborn rigidity before the less authoritarian and revanchist
forces in Germany, only to become ever more docile in the face of
Germany’s subsequent aggressions. Herriot and MacDonald, after having
reached an agreement, invited Italy and Germany to join them in an
advisory pact that committed the signing powers to
1) make every effort to resolve in the same spirit as the accords of Lausanne the
problems of the current moment and those that may emerge consulting each other
in absolute candidness on every question that may involve the European regime; 2)
work in Geneva to solve the problem of disarmament in an equitable and favorable
way for all the Powers; 3) cooperate for the success of the world economic
conference.159

These were little more than pious recommendations, although they

reflected a whisper of the collaborative spirit that had emerged at

157
Ibid., pp. 94–95.
158
E. Herriot, Jadis-D’une guerre à l’autre 1914–1936, Paris: 1952, pp. 307–334.
159
ADG, VII, VII, La conferenza di Losanna, p. 97.
 9. The Significance of Grandi’s Policies 269

Lausanne. The weak point distinguishing these accords from, for example,
those of Locarno consisted in the fact that they were based exclusively
on the French turnaround – the radical Herriot had temporarily taken
the place of Laval – while the German government, with the rise of the
nationalists to direct power, limited itself to graciously accepting the con-
cessions other countries were willing to make. Above all, the Lausanne
accords were gutted by the nonparticipation of the United States. In
December, when the U.S. Congress passed a resolution that no foreign
debt to the United States should be cancelled or reduced, the Lausanne
Agreement was effectively a dead letter.
In this way, the entire question of debts and reparations returned to the
drawing board. Technically, this meant that the Young Plan was still in
force, but in practice Germany refused to make any further payments.
Other countries, starting with Great Britain, did make symbolic or partial
payments upon the expiration of the moratorium until the time when the
U.S. Congress decided to refuse such forms of payment. The final attempt
of Hoover to prolong the moratorium had also failed – worth reexamining
in light of its comparison with Roosevelt’s economic policy. It this way the
whole question of intergovernmental debt was resolved outside the legal
bounds of international economic relations, a further sign of the disinte-
gration of international order, caused by a crisis that was no longer only
financial.

9. the significance of grandi’s policies

And as for Italy? Renzo de Felice has argued that the Lausanne Conference
was, if not the cause, then at least the emblematic occasion for the defen-
estration of Dino Grandi from Palazzo Chigi. In this he retraces, in atte-
nuated form, the judgment of Leonardo Vitetti, one of the most ambitious
and “promising” Fascist diplomats of the time, who, in a report to Rome
from July 1932, wrote:
The Lausanne conference closed with Italy’s politics in the red. Considering its
results from any point of view shows that they were prejudicial against us. The
Lausanne conference marked:
1) The liberation of Germany from its financial obligations toward the Allies,
without liberating the Allies from their obligations toward the United States, or
Italy and France from their obligations toward England;
2) An Anglo-French rapprochement in the form of a Loyalty Pact that even if it
does not have the character attributed to it by Herriot, still represents on the
part of Great Britain the agreement that the best procedure for solving the
270 The United States and Italy Confront the Great Depression

problems of European politics is to start with a preliminary agreement between

England and France;
3) A reinforcement of the position of Germany, which, liberated from the burden
of reparations, will be able from now on to dedicate itself freely to its foreign
policy goals, of which at least two – rearmament and the absorption of
Austria – are in open contrast with our own interests.160

These judgments reflect the author’s evident desire to ingratiate himself

to Mussolini, criticizing his foreign minister on the eve of his liquidation.
But there was also an authentic incomprehension of Grandi’s policy,
typical not only of the rougher sectors of the Fascist Party (and in growing
measure of Mussolini himself), but also of ample sectors of the “career
diplomats,” traditionally nationalist and sometimes opportunistic.
The recent foreign policy of Italy had been favorable to European
reconciliation under the auspices of the United States and Great Britain
and founded on disarmament and the cancellation of intergovernmental
debts. It had found its natural headquarters in Geneva. According to
the career diplomats, this was essentially a gigantic stratagem for forcing
France to make concrete territorial concessions in the traditional quarrels
between the two states. Grandi’s role as the head of the class for disarma-
ment and international cooperation; his continuous pursuit of a prelimi-
nary understanding with the United States and, where possible, with
Great Britain; his sensitivity to the moods of public opinion, especially
the Anglophone public, and to the medium and small European powers
only made sense inasmuch as they could be shown to be quickly bringing
about real success for Italian nationalist ambitions. “The ‘nothing for
nothing,’ the obsession with avoiding ‘empty hands,’ [mani nette, the
slogan by Count Corti expressing the desire to avoid becoming a colonial
power at the Berlin Conference of 1884–1885, and which ever since had
been a bugaboo of the disappointed Italian nationalists – trans.] the will to
expansion,” of which Giorgio Rumi has written,161 were not in reality
exclusively characteristic of the fiery Fascist spirits of the early movement
but expressed the well-rooted tradition of a large part of the Italian
upper classes, to which the diplomats of Palazzo Chigi fully belonged.
The humiliations of Schanzer and other liberal politicians, which certainly
contributed to the formulation of the famous remark by Mussolini at
Territet, did not only rankle with the squadristi, nor is it any accident

160
L. Vitetti, Relazione sulla politica estera italiana inviata a Roma da L. Vitetti, July 1932,
in R. De Felice, Mussolini il Duce. Gli anni del consenso 1929–1936, Torino: 1974,
Appendice 5, p. 838.
161
G. Rumi, Alle origini della politica estera fascista (1919–1923), Bari: 1968, pp. 263ff.
 9. The Significance of Grandi’s Policies 271

that Count Corti’s polemic about mani nette emerged after the
Risorgimento. Seen in this light, Vitetti’s criticisms of the results of the
Lausanne Conference, and indirectly of Grandi’s policies in general, given
their coherence, were to some extent well-founded. To what end had three
years of work in favor of disarmament gone, years of moderation in the
polemic with Germany, years of courting the editors of the Times and the
New York Times (and even the Gazette de Lausanne, the Daily Herald,
the Dagens Nybeter) if France was not only not isolated but able to flaunt
before both Germany and Italy the fait accompli of a bilateral agreement
with Ramsay MacDonald? What instruments of influence were left to Italy
in dealing with Germany if it became threatening again and obtained
recognition for its wish to stop paying reparations, without its weakest
creditors having obtained any such recognition or forgiveness of their
debts to Great Britain and the United States? De Felice himself remained
stuck in this interpretation when he focused on Grandi’s African ambitions
and policy of blackmail toward France, to the exclusion of all Grandi’s
other efforts:162
Even if there are not any in-depth monographs on this period, it is easy to see that
all Grandi’s positions were in these years aimed at a single objective: to reach an
agreement with Paris that would cover the whole range of questions between the
two countries (and therefore would include also the normalization of Italo-
Yugoslav relations) and thus putting France in a difficult position in every case
and with all possible means, undermining her continental hegemony and at the
same time making of Italy a peaceful and responsible great power that could plan a
policy that would be not only the alternative to France’s but more modern, more in
line that is with the necessities of the difficult political and economic moment that
Europe was going through and with the aspirations of both the other States and
vast sectors of international public opinion.163

In this way a certain interpretation of the Fascist regime is protected

from critique. It is posited that ideology and politics had more importance
than class relations and power imbalances, more importance than the
material and moral interests of the social coalition flanking the regime,
and, in terms of international relations, more importance than the objec-
tives that would have been pursued by those nations and those classes
most interested in defending a certain social order, including in Italy.
According to this argument, until 1929 Mussolini did not conduct a true
foreign policy, trusting in the immobility of the international situation and

162
De Felice, p. 377.
163
Ibid., p. 381.
272 The United States and Italy Confront the Great Depression

worrying only about the internal consolidation of his regime.164 Did the
problem of imperialism exist only in terms of Italy’s pursuit of imperial
status, or also as an ambition that Mussolini had but perhaps postponed?
De Felice never asks what international order the regime came to power in
the context of and consolidated itself in. Nor does he question if a foreign
policy aimed at the consolidation of the regime required only a few
grandiloquent gestures to satisfy the Blackshirts or actually presumed a
precise choice of alliance within international capitalism; to wit, the pur-
suit of concrete material support, indispensable for the stabilization of the
regime in the mid-1920s, and requiring a compatible orientation in foreign
policy, especially regarding the crucial questions of the reconstruction of
Europe and specifically of Germany. De Felice asserts that, on the interna-
tional level, there were two alignments (though it might be better to speak
of viewpoints) regarding Italian Fascism: on the one hand the Democrats
and Social Democrats who nurtured hostility toward Mussolini, and on
the other those realists who saw Fascism’s anti-Communism as a positive
characteristic even as they pointed out Fascism’s peculiarities. But which of
these two alignments prevailed in the 1920s? Who were the realists and
what interests did they represent? Only “numerous English conserva-
tives,” as De Felice implies, or perhaps also those who actually held the
reins of the two major capitalist governments (Ramsay MacDonald, who
should have been a leader in the first group, did not disdain collaboration
with the Fascist government on many occasions as we have seen)? And if
they underscored the peculiar and specifically Italian nature of the Fascist
phenomenon, with motivations that were frequently veiled racism, did
they not still maintain international interests for which the Fascist regime’s
anti-Communist and stabilizing influence were clearly useful? We know a
great deal, perhaps too much, about every last one of Mussolini’s aggres-
sive expostulations throughout the 1920s – from Territet to Corfu, from
his irredentism to the Danubian revisionism. Have we not perhaps failed to
learn something more about the politics that Italy did not control or invent
but was subjected to? Usually the economic weakness of the country,
its lack of raw materials and liquid capital, were invoked by the Fascist
government to justify expansionism. If we agree that these conditions were
real, we must examine the network of external support and solidarity
allowing Fascist Italy to survive. As others before him did, De Felice too
continued to focus on the foreign policy determined by Mussolini; but it

164
Ibid., p. 323.
 9. The Significance of Grandi’s Policies 273

may be more productive to investigate the external factors conditioning

Italian conduct in various phases of the regime’s history.
During the three years in which Grandi filled the post of foreign minis-
ter, the evident preoccupation of De Felice was to show how his policies
were compatible with an interpretation claiming the determinative priority
of Fascist ideology over the regime’s supporting interest groups. If in the
first phase Mussolini was still conditioned by those groups, his policies
“did not assume even in the years immediately following 1929 a character
altogether [emphasis mine] more aggressive or directly imperialist.” It is
not an easy task to demonstrate how Mussolini’s policies as carried out by
Grandi from 1929 to 1932 were not “altogether . . . aggressive or directly
imperialist.” De Felice identified the main sources of inspiration for Grandi
as Alfredo Oriani and Machiavelli, applicable to any political situation.
The analysis of his politics, as argued above, was based on his African
ambitions – which were relevant, and to which he did refer even in con-
versation with those hostile to such plans, such as Hoover and Stimson.165
There is not even a doubt that his policies had the goal of forcing France
into negotiations, although De Felice claimed that it was “the sole objec-
tive” of all his initiatives.
Especially in the final period of Grandi’s tenure, his efforts to reach an
accord with France to guarantee Italy some opportunities in Africa became
frenetic to the point of conducting conversations with Herriot and the
undersecretary of foreign affairs Paganon without Mussolini’s author-
ization, in the desperate hope (as De Felice rightly observed166) of extract-
ing a preliminary commitment that might save his job.167
All this is surely true. But it is another thing to claim that an accord with
France is not “the sole” but only one of the main objectives of Grandi’s
policy. It is hardly plausible that he would have mounted a complex and

165
ADG, V, D. Grandi, Appunti sui colloqui col Segreatario di Stato agli Esteri degli Stati
Uniti H. Stimson, Rome, July 11 and 12, 1931, p. 40; ADG, D. Grandi, Appunti sulla mia
missione negli Stati Uniti, p. 95, where Grandi reports that he told Hoover: “There is a final
Italian problem that is essentially a problem of survival. We will end up suffocating one of
these days. We need the world to address this issue as well.” On the Danubian revisionism
of Mussolini, H. J. Burgwyn, Il revisionismo fascista, La sfida di Mussolini alle grandi
potenze nei Balcani e sul Danubio 1925–1933, Milan: 1979. Credit for rechanneling the
debate to the crucial point that Italy was dependent on conditions abroad goes to
G. Santomassimo, “Il fascismo degli anni ’30,” in Studi storici vol. XVI, no. I.
166
De Felice, p. 401.
167
ADG, VII, D. Grandi, Appunti sul interview con M. Paganon, Sottosegretario di Stato
francese agli Affari esteri e fiduciario personale di Herriot (presenti i Ministri plenipoten-
ziari A. Rosso e G. Rocco), Geneva, July 8, 1932, pp. 148ff.
274 The United States and Italy Confront the Great Depression

organic architecture of policy from disarmament to the financial restruc-

turing of the whole world, from courting Great Britain to making himself
the spokesperson for American interests in all quarters, only in order to
obtain the go-ahead from France to try a colonial adventure in Ethiopia
and gain the mandate for Cameroon. The interpretation has the advantage
for its advocates that it replaces Grandi and his policy within the presumed
major Fascist current of nationalism above all else – though still not quite
rising to the level of being “not altogether . . . aggressive and directly
imperialist.” In this way the three years during which Grandi – and not
only Grandi, but Mussolini, it is important to remember – conducted
Italian foreign policy remain compatible with the image of a regime that
disregarded the special interests and class loyalties that had brought it to
power and instead prioritized its own ideological autonomy.
But in reality Grandi’s policies – and it would become clear that they
were different from Mussolini’s, if not so much in immediate terms then
certainly in intentions for the future – were at the same time more ambi-
tious and more idealized. It is worth returning to the topic of the Lausanne
Conference on this point. Grandi, in fact, with some reason, refused to
consider that conference as his personal Caporetto [referring to the 1917
Italian defeat that came to mean a terrible rout in popular culture – trans.].
The evaluation of the Italian role on that occasion varies depending on
the goals one chooses to emphasize. Vitetti’s negative judgment, even in
its opportunism, was based on the idea that the goal of Grandi’s foreign
policy was to force France to negotiate on colonial territory issues, or to
continue to hold Germany for ransom to the original commitments of the
Treaty of Versailles. This was not the case. Grandi actually proposed first
of all the erasure (or, as Mussolini put it, the elimination of the “tragic
accountability”168) of every financial remainder from the First World War,
whether debts or reparations. From this point of view, it makes no sense to
criticize the results of the Lausanne Conference as having cancelled repar-
ations but not debts, forcing Italy to renounce its traditional position that
reparations and debts were indivisibly linked. The annulment of repara-
tions on the part of debtor nations constituted an ulterior form of pressure
on the creditor (which in the meeting of Hoover and Grandi, and probably
Laval as well, had been left open as a likely outcome), to the point that
that annulment was explicitly made on the condition that war debts were
also annulled. Never, in fact, were reparations and war debt so intimately

168
ADG, VII, D. Grandi, Il diritto di vita dell’Italia. Discorso al Senato del Regno, Rome,
June 3, 1932, p. 165.
 9. The Significance of Grandi’s Policies 275

linked as at Lausanne. The factor that created the failure – not of Italian
policy but of the policy of all the European countries that participated in
the conference – was the continual refusal of the American Congress
to accept debt remission. This refusal was made despite the fact that the
progress on the part of the European countries was not so much a financial
concession as much as a policy reversal on the German question that finally
concurred with the traditional position of the Americans on European
reconstruction. The decisions made at Lausanne were furthermore ratified
by the Italian cabinet of ministers (and therefore also by Mussolini
himself).169 “The decisions of Lausanne,” ran its statement, “reaffirm the
compensation between reparation and debts and represent the decisive
step on the path toward their final cancellation according to Italian pro-
posals.” These were pious illusions, but they were not Grandi’s alone.
Undoubtedly the procedure that gave rise to the subsequent four-way
advisory pact (which was a direct accord between Herriot and MacDonald)
placed Italy in a difficult situation, but it is also true that it served to
confirm its status as one of the four European great powers. It also put
into practice, even if only formally, the policy of reconciliation that Italy
had been pursuing in every international conference of the past three
years. Grandi worked to make his conversations with the German rep-
resentatives result in their pressure on their government to adhere to the
pact (“Germany and Italy should not, in my opinion, be too picky,”
wrote Grandi to the ambassador in Berlin, “about the fact that the
British Government addressed Paris in this matter before turning to
Rome and Berlin. MacDonald obviously understood the importance of
ensuring a positive response from Herriot, remembering that Herriot had
opposed the advisory project offered by von Papen simply because it
originated with Germany.”)170
There is more. The Italian contributions at Lausanne, summarized in a
letter Grandi sent to the British prime minister and president of the confer-
ence, Ramsay MacDonald, was tantamount to an organic presentation of
the classical solutions of international capitalism to the crisis (with the
coherence as well as the defects typical of such an approach).171
The cancellation of the financial obligations of the war is not and should not be an
end in itself, but the premise and condition for the rebirth of confidence and the

169
ADG, VII, La conferenza di Losanna, note no. 14, pp. 117–118.
170
ADG, VII, tel. n. 745, Dino Grandi all’Ambasciatore d’Italia a Berlino, Rome, July 17,
1932, p. 115.
171
ADG, VII, Dino Grandi to Ramsay MacDonald, Lausanne, June 27, 1932, pp. 98ff.
276 The United States and Italy Confront the Great Depression

renewal of normal economic and financial relations among the various countries.
It is indeed my conviction that this is the final goal of the Conference. To that end,
the Italian delegation is of the opinion that the monetary reorganization on a
stable basis of the currency of the various countries is the necessary and most
effective condition for the renewal of European trade, while any financial assis-
tance that disregards the monetary problem or the need to create a stable capacity
for foreign payments would do nothing but prolong and finally worsen the
situation.172

It is unsurprising that a delegation made up, besides Grandi, of the

Finance Minister Mosconi, Alberto Beneduce, and Alberto Pirelli would
hold such opinions. Equally relevant is a congratulatory telegram arriving
from Thomas Lamont, senior partner of the Morgan Bank, who expressed
his pleasure “for the happy result of Lausanne and for the effective work
you personally carried out at the conference.”173 It was completely natural
that the more progressive sectors of Italian capitalism, as represented by
Beneduce and Pirelli as well as by the man who for more than a decade had
carried out the plan for capitalist stabilization in Europe, would identify
with such policies. In a certain sense, these names evoked the past, the era
of the mid-1920s when classical economics appeared to be the best tool for
guaranteeing capitalist expansion without any foreseeable limits of time
or space. The representation of those concepts in June 1932 indicated the
very incomprehension of the real nature of the crisis that characterized
Herbert Hoover as well. These were remedies that did not envision any
substantial changes in individual economies, beyond the traditional defla-
tionary squeeze connected to monetary stabilization, but they showed the
will to return to that interdependence at the global level that remained a
primary interest of the strongest economies, in particular that of the United
States. In conclusion, the failure of Grandi’s policies at Lausanne was not
to be found in the cancellation of reparations and the advisory pact among
the major European powers, decisions completely in line with his position
on European reconciliation and capitalist recovery, but rather in the fact
that he found himself by that point in the unpleasant position of preaching
capitalist orthodoxy to those who – starting with the Hoover administra-
tion and the German Reich – were prey to its contradictions and on the
verge of abandoning it entirely. One year earlier, after the meetings in
Paris and London, when for the first time the dramatic consequences of
the crisis were wreaking havoc on international relations, Dino Grandi

172
Ibid., p. 100.
173
ADG, Thomas W. Lamont to Dino Grandi, undated.
 9. The Significance of Grandi’s Policies 277

had, perhaps out of the habitual desire to please his “Duce” and tell him
unwelcome news in the most palatable way, written the following:
While the conference work went on and the dreadful specter of the economic crisis
and growing misery seemed to weigh on all spirits, I could not help but think
proudly of my country: without indigence, ordered, tranquil, happy, with its major
industries active, with its streets where the people walk happily without experience
of the evils other peoples are suffering, even those who seem more rich or powerful,
sure of themselves and of their future.174

He did not realize that in just this paradoxical situation lay the deep
causes that would prevent the escape from the “closed economies” that
only a year later he would call “an ever greater social danger and an ever
more serious threat to the stability of international relations.”175
The stubbornness of the defense of the international order founded at
Locarno and by the Dawes Plan even in the face of the destructive effects
of the economic crisis reveals the true underlying motivations of Italian
foreign policy in those years. As stated above, this was both more ambi-
tious and more idealistic than the simple nationalist Machiavellian maneu-
vers that De Felice attributed to Grandi. His was an ongoing attempt to
secure the basic goals chosen by Mussolini in the decade after his rise to
power – in collaboration with such men as Volpi, Stringher, Pirelli, and
Beneduce – and to defend those choices even in the face of ever harsher
impediments brought on by the crisis. The key to this policy, as well as the
reasons for its failure, may perhaps be found in the most intense speech
given by Grandi during his tenure, to the Grand Council of Fascism on
October 2, 1930. With this speech Grandi had to justify his policy to men
whose ideological orientation was diametrically opposed to such initia-
tives. He posed the problem in provocative terms:
What on earth has been happening to our foreign policy in this past year? What can
it mean, this talk of pacifism, disarmament, locarnism, league-ism, europeanism
[. . .]? [emphasis in original] [. . .] Have we not always, we Fascists, maintained that
democratic peace and disarmament are a lie, that Fascism has but one path, and
that is to resolutely and forcefully arm ourselves to face any eventuality and to solve
our own national problems by ourselves?176

Grandi offered the predictable explanations, instructing his colleagues

on the distinction between ideology and interests of state in foreign policy;

174
ADG, V, D. Grandi, Relazione del Ministro degli Affari Esteri sui lavori del onvegno di
Parigi e della Conferenza di Londra, 18–24 July 1931, Rome, July 27, 1931, p. 92.
175
ADG, VII, Dino Grandi to Ramsay MacDonald, Lausanne, June 27, 1932, p. 101.
176
ADG, D, Grandi, Relazione al Gran Consiglio del Fascismo, Rome, October 2, 1930, p. 284.
278 The United States and Italy Confront the Great Depression

on the victory represented by the Locarno Pact; on the usefulness of the

politics of disarmament for a “poor power” such as Italy; on the necessity
to revise the habit of polemics regarding the League of Nations that had
been characteristic of the post-Wilsonian era; even on the natural propen-
sity of Italy for a policy of power equilibrium on the Continent. But at the
root of all these issues was one basic calculation: the current balance of
power in the world, which Grandi described at the beginning of his speech.
The war had turned America into the “richest and most powerful” nation
in the world, and despite the effects of the economic crisis it was approach-
ing a new engagement in the politics of Europe and the rest of the world,
abandoning the isolationism that had become damaging even to itself.
“What should the Italian approach be in the face of this American atti-
tude?” Grandi asked. In his judgment, it was necessary to learn the “sad
lesson of 1919”:
If we lost a great portion of the fruits of victory, it was largely due to the fact that
other Nations were able, and knew how, to conquer the sympathy and the com-
prehension of the American governing class, arbiter in that moment of the destiny
of the world, and to direct it toward solutions that were contrary to our rights and
to our international interests.

What should the Italian approach be now, in 1930?

By posing the problem, we solve it. We must become the avant-garde Nation in the
movement for recovery of the collaboration between America and Europe . . . If it is
true, as it is true, that Italy is preparing to once more present the whole world with
those same national problems that the peace conference did not solve, or solved in a
way that was partial or even contrary to our rights and our national interests, it is
indispensable from this moment to begin to construct in the American spirit that
sympathy and that comprehension that ten years ago we lacked entirely [. . .].177

This is anything but the nationalism of Oriani! Whatever the ideological

roots of this way of thinking, its clear motivation was the profound
awareness and acceptance of the fundamental subalternity of the county
whose interests Grandi defended. The frustrated ambitions of Italy would
not be realized by its policies in the Danubian basin, which Grandi did
at times conduct with daring nonchalance; nor would it suffice to exert
pressure on France (those who insist on putting this issue at the center of
their historiographical arguments are, apart from all else, forgetting that
French consent would not have been enough for Italy to realize its colonial
dreams in Africa anyway, as the Ethiopian war proved). It was necessary to

177
Ibid., p. 261.
 9. The Significance of Grandi’s Policies 279

learn the lesson of Versailles as it had been taught to bourgeois opinion at

the time. Orlando and Sonnino were defeated, above all, because they had
not understood the changed power relations in the world after the Great
War. They had been unable to orient themselves in the Wilsonian universe.
Not only did Grandi want to avoid repeating that error, but he believed
that Italy, which had not been tangled up in the mortal controversy
dividing France and Germany, was the most fit to fill the role of “avant-
garde nation” favoring the United States’ assumption of its full hegemony
in Europe. He affirmed:
I sincerely believe that no European nation today is more capable than Italy of
stabilizing an understanding with the United States of America on the political,
spiritual, moral, and ideological levels for a concordant and common activity in
confronting the great problems agitating the world.178

To this end, the millions of emigrants were a help, as long as they were
motivated to act as American citizens who, as such, could exert influence in
favor of their country of origin. What would be especially important was
. . . the frank sympathy that Americans have shown during these past few years for
all that is new, fresh, and vital about the Fascist regime’s work in our country . . .

In this way Grandi reconnected himself to Mussolini’s policy, which

had not only been strengthened by the popularity he had been able to
conquer for the regime in the United States and in the rest of the world, but
had also paid a healthy attention to the interests and vulnerabilities of the
United States so that he had been able to exploit them for the regime’s
consolidation.
Naturally, at the moment when the foreign minister proposed a policy,
and especially if it were a policy that was not all about glory and conquest
but rather required submission to the dominance of another country in the
name of ideals that were extraneous to Fascist culture, he could not do so in
superlative terms. Italy not only had to encourage the United States into a
new engagement with European politics, but it had to be “the avant-garde
nation” in this sense. Given this logic, Great Britain itself was not stronger
than Italy because of its empire, but because of what would be called in
another era its “special relationship” with the United States. Grandi pro-
posed to skip over this prior commitment, although he was sharp enough
to understand that it would have been a serious error to try to break
up the two Anglophone powers too quickly, especially since America’s

178
Ibid., p. 262. See also Burgwyn, pp. 208–234.
280 The United States and Italy Confront the Great Depression

relationship with Great Britain was actually one of its reasons for caring
about European intervention. Grandi realized, therefore, that a policy of
friendship with the United States meant an equally close relationship with
Great Britain (so that it was not a rival to be defeated but, as mentioned
above, an old maiden aunt whose inheritance was to be coveted). In what
way, then, was this ambitious goal to be reached?
American sympathies for the regime and the pressures exerted by Italo-
Americans could certainly facilitate some successes – as happened during
the negotiations for war debt consolidation – but they were not in them-
selves sufficient to make Italy the ultimate interpreter of American policy in
Europe. What counted most of all was
. . . the commonality of ideas that has been recently revealed between the Italian and
American politics of how to imagine peace and how to concretely realize it . . .179

The choice of Locarno as the foundation of Italian politics was signi-

ficant in showing off the status of Italy as a guarantor power flanking
Great Britain and also served as an ongoing reminder of the postwar point
when American influence had been at its height and the American design
for stabilizing Europe had been strongest. Italian willingness to support
disarmament was not only in its interest as a poor “great power” but also
served Hoover’s needs if he was going to convince Americans to renew
U.S. commitments in European politics. The moratorium on war debt
payments, monetary stabilization, and liberalization of trade were not
only helpful to Italy as a debtor nation that needed to boost exports even
with a relatively strong currency still tied to the gold standard, but also
conformed to the traditional objectives of a great nation aware of its own
potential for dominance, objectives the United States would abandon only
temporarily under the worst blows of the economic crisis.
Grandi understood that not only the ends but also the means of such a
policy had to conform to American expectations. He paid careful attention
to public opinion, he pursued consensus among the medium and small
powers, he showed sensitivity to the emotional and moral components of
mass consent regarding international issues, and he flattered the educa-
tional self-image of American elites who wished to provide guidance to
a mass public not yet entirely ready to accept American responsibility
abroad. This practice of “new diplomacy,” with its habits of direct and
informal exchanges of opinion among the representatives of foreign policy,

179
Ibid.
 9. The Significance of Grandi’s Policies 281

was not a mere expedient for Grandi, as De Felice himself agreed,180 but
formed a policy suited to “a great power both pacificist and responsible,
leading the way to a policy that would not only be an alternative to the
French approach, but altogether more modern,” and which would oblige
Stimson to affirm, when he would gladly have avoided doing so, that
Mussolini “was in those years, in his foreign policy, a sound and useful
leader, no more aggressive in his nationalism than many a democratic
statesman.”181
As for Grandi, if he was not prey to the pettiness and lack of imagination
of many nationalists – Fascist or otherwise – of his era, obsessed by
colonial ambitions and insistent on “nothing for nothing,” it is still true
that the young foreign minister, ex-squadrista from the Po Valley, inter-
locutor of important members of the Italian industrial class, was not the
man his party rivals tried to paint him as. His archenemy Italo Balbo tried
to portray him, at the moment of his disgrace,182 as an authentic champion
of world peace or at least a man who had allowed himself to be dazzled by
the lofty ideals of the MacDonalds, Stimsons, and Herriots of the world.
But Grandi’s efforts were more realistically aimed at finding the proper role
for his country, proportional to its potential, on the team that in those
years appeared to be the clear winner. He was joined in these efforts by
those moderate sectors of the regime to which he had allied himself at
the time of his replacement of Finzi as undersecretary of the interior after
the Matteotti affair, when he had formed a solid friendship with Luigi
Federzoni and had been served well by the lessons of Contarini. Grandi
had chosen to reflect the aspirations of the most evolved and cosmopolitan
members of Italy’s industrial and financial class. His policy during his three
years’ tenure at Palazzo Chigi was a continuation of the work of men such
as Alberto Pirelli in the years of negotiating war debt and reparations
and Giuseppe Volpi di Misurata in his work on loans and credit, as well
as Bonaldo Stringher and Alberto Beneduce, who aided such efforts; these
men had all brought positive results to the regime and to Italian industry
and had helped consolidate the regime financially and socially by securing
its place in the network of Western capitalism. With these solid interests
at his back, Grandi had then put to the test his own nose for politics and

180
De Felice, p. 381.
181
Stimson and Bundy, pp. 269–270.
182
I. Balbo, “Disarmo ginevrino,” in Il Popolo d’Italia, July 31, 1932. Despite these appa-
rently dramatic turns of events, the successive policy would be characterized by D’Amoja
as “an old policy made new.” F. D’Amoja, Declino e prima crisi dell’Europa di Versailles.
Studio sulla diplomazia italiana ed europea (1931–1933), Milano: 1967.
282 The United States and Italy Confront the Great Depression

the ambition of a provincial in pursuit of wider fame and fortune – at a

level probably no less fierce than Mussolini’s own. His model had not
been Oriani or Ramsay MacDonald. Upon his return from the United
States, Grandi wrote to Mussolini that “Italy is going through a period
very similar to that of 1848–1860, the Cavourian period of the Kingdom’s
history”:
At the Congress of Paris in 1856 no one heard Cavour speak of the Italian question
and for that he was harshly attacked by the reactionaries of old Torino. But he had
prepared himself in that way to lead Europe into an unavoidable acceptance of
Italian unity in name of those liberal ideas that inspired that century. And Europe
did follow him for the next decade. The foreign policy of a State consists in fact in
making the interests of its own nation coincide with the shared interests of other
nations in the name of a great ideology of peace.183

The United States had the dominant force to incarnate such values
and was “indispensable to us if we are to affirm in the coming years the
fundamental issues of Italian survival.” For that reason, every individual
aspiration had to be subordinated for the moment to the determinative
power of America and would be successful only inasmuch as it was
correctly justified in ideological language Americans could understand
and appreciate.
Sometimes a failed policy throws an intense light upon future develop-
ments. We have seen how the Leffingwell Plan highlighted the permanent
interest of the United States in capitalist stabilization based on an ever
more united collaboration of the European states, twenty years before the
launch of the Marshall Plan. There is no doubt that the policy conducted
by Grandi from 1929 to 1932, even if it did not reach its goals, prefigured
the privileged relationship (which could not be anything other than one of
subordination, given the hierarchy of forces arrayed) Italy would create
with the United States in the following generation. At that later time, the
ideology and political goals of the United States would be the model for a
constant effort of engagement on the part of the entire mainstream Italian
governing class. It is important to note that the policy Grandi perfected
had given expression, already in those years, to the conviction in expert
quarters of Italian capitalism that the American influence on Europe would
sooner or later become decisive. A similar belief was latent even in the
policies of Mussolini himself, or at least in his concrete choices, until the
Depression dissolved the political and economic links holding the Western
nations together. De Felice, who did not fully understand all this in his

183
ADG, D. Grandi, Appunti sulla mia missione negli Stati Uniti, p. 103.
 9. The Significance of Grandi’s Policies 283

effort to prove the regime’s total autonomy from capitalism and therefore,
in the international sphere, from the principal capitalist power, still cor-
rectly underlined the fact that Grandi was convinced Fascism was only
transitory.184 He tried to ally his state with the strongest power, according
to the logic of the governing classes of a country whose subordinate status
they understood and accepted, and who used that relationship to consol-
idate their own internal position.
The institutional order of the regime was secondary with respect to such
hierarchies of power and was beneficial only to the extent that it served to
consolidate them. Dino Grandi expressed those interests and values that
could help cement the alliance when he spoke to the representatives of the
American governing class at the Council on Foreign Relations: consolida-
tion of class relations, expansion of a stronger capitalism fed by the solid-
arity and positions of power it sheltered, firm opposition to Bolshevism
and any form of anticapitalist subversion. Everything else was secondary;
Dino Grandi certainly would not have hesitated even well before July 25,
1943, to scrap any aspects of the Fascist regime and its more ideological
extremes if they proved incompatible.
Why, then, did the effort fail in those years? Because it was founded on a
basic assumption that would reveal itself to be false. Grandi told the Grand
Council of Fascism that
The economic crisis has manifested itself with more gravity and violence, especially
in the United States, with all the character and symptoms of a sudden and myste-
rious epidemic previously unknown to history. Its cycle of abundance and famine is
of Biblical proportions. It certainly gives one pause to think that the richest and
most powerful Nation in the world, the one that has revealed the characteristic
signs of the dominating race of the twentieth century [emphasis mine], was the first
to be attacked by the virulent disease, and that from rich and happy America this
illness of poverty and misery that we call the “economic crisis” is spreading rapidly
to the other continents. It is however very probable that the United States, after
having been the first to suffer, will also be the first to recover. It is equally probable
that the economic crisis will constitute the determining factor in a new political
direction for the United States. The symptoms of this transformation in American
politics are for that matter already visible.185

Not only did he believe that the Depression would not accentuate
American isolationism, he thought it would accelerate the process of

184
De Felice, p. 377.
185
ADG, III, D. Grandi, Relazione al Gran Consiglio del Fascismo, Rome, October 2, 1930,
p. 259.
284 The United States and Italy Confront the Great Depression

overcoming it, which was already in action. This was Grandi’s interpreta-
tion of the Kellogg-Briand Pact – not a statement of principle, but a
concrete guarantee of reengagement. He attributed great importance to
the American presence at the Washington Naval Conference, and to the
collaboration growing between their two countries. He concluded:
Are we therefore on the verge of the effective return of the United States to a politics
of collaboration with Europe? I believe so.

Probably it was not so much his political judgment that failed Grandi
in this situation as his understanding of the economic crisis and its effects
on international statesmanship. Hoover and Stimson were actually both
convinced that American power could not rest on its laurels but would
have to find ways and means to grow in the world. In a certain sense the
effects of the economic crisis, when they began to show after the failure of
Credit-Anstalt, reinforced this belief; but it would founder on the rocks of
the growing obstacles in world events.
Both American men, along with Grandi and the great majority of the
governing class holding the reins of the Western economies in the years
after the First World War, failed to appreciate the nature of the crisis and
continued to prescribe the traditional remedies their background sug-
gested. But, beyond that, they failed to understand one important fact
that Roosevelt and his collaborators did fully grasp: that the restoration
of the American and worldwide economy required a political and psycho-
logical break with the past. That break made possible the entire building
of mass consent for a policy of restructuring and redistribution without
which the means of production and property would not have survived
intact. Breaking from the past meant discarding those elements of eco-
nomic interdependence – the gold standard, free trade, liberalization of
goods and capital – that Hoover, Stimson, Grandi, Lamont, and countless
others continued to invoke based on their experience of the 1920s.
Hoover, for example, had cursed the bankers and then proceeded to imi-
tate their logic and point of view with only the minor adjustment of a
greater sensitivity to the reactions of the electorate.
The net result was that his administration tried the path of reengage-
ment in Europe but was forced from it despite the proof of its necessity
provided by the destructive effects of the crisis in central Europe when the
domestic situation – including the weakening of the president himself –
blocked further progress. While the international conferences offered
Grandi the gratifying appearance of collaboration between the United
States and Italy, they did not produce real results – either in disarmament
 9. The Significance of Grandi’s Policies 285

or war debt – and the crisis went on uprooting one by one the pillars of
economic interdependence built by the international collaboration led
by the Anglo-Americans throughout the 1920s. The war of protectionist
tariffs; the bank failures in the United States, Great Britain, and Germany;
the impossibility of agreement on cancelling war debt and reparations;
the abandonment of the gold standard by the Bank of England: these losses
left the field open to the different approaches of the individual national
economies and encouraged them to accentuate their autonomy and put all
their efforts into rearmament as the irreplaceable motor of production in
every state.
Under these circumstances, the fundamental premise of Grandi’s policy
as carried out from 1929 to 1932 with Mussolini’s authorization finally
crumbled. The United States not only did not renew its European ties under
the stimulus of the crisis, but the crisis actually transformed political and
ideological isolationism – which economic actors and even the American
government had largely bypassed during the 1920s – into an isolationism
that was concrete and economic, and would oblige Roosevelt to renounce
even in formal terms the role of guarantor of the economic system of
interdependence and therefore also of international relations. As the con-
ferences went on without producing results, and as the United States failed
to effectively break the stalemate between France and Germany, Grandi
lost his main partner. As discussed above, the paradox of Grandi’s visit to
the United States was that it testified to the success of his effort to become
the favorite interlocutor of the United States just at the moment when that
status served no further purpose, since its leaders were not capable of
making their presence count in the matters that most concerned Fascist
foreign policy. In other words, the major point of strength of Italian policy
in those years had now failed: its structural basis. Italy lost the support
that was supposed to be guaranteed it by its tie to the strongest power and
guide of Western capitalism. Grandi, and that wing of the regime and the
governing class he represented, had not been mistaken in their valuation of
the balance of power. But, due to their mistaken valuation of the nature
of the crisis, they had not seen that the power of the United States was still
only virtual and would not be mobilized in their favor in those conditions.
Mussolini, who had also known how to distinguish which power would
best help him consolidate his regime in the course of the 1920s, had
allowed his foreign minister to pursue this relationship despite its contra-
dictions with the ideology and inclinations of parts of his movement.
Now he had to face the consequences. But he had also kept his habitual
cunning, and reserved an alternative escape route.
286 The United States and Italy Confront the Great Depression

When Mussolini saw which way the new winds were blowing, he
changed course. Strengthened by the growth of mass consent, stability,
and monolithic power his regime had conquered during the previous
phase, Mussolini now turned to capturing the possibilities offered by the
new circumstances and the economic crisis itself. For its part, the United
States, having contributed to the consolidation of that regime, now had to
stand by and witness the change in orientation that would lead in the space
of a few years to Italy’s emergence among the ranks of its enemies.
 chapter 4

Roosevelt and Fascist Italy, from the London

Economic Conference to the Italo-Ethiopian
War (1933–1936)

1. foreign policy during the roosevelt

administration
The sudden ejection of Grandi from Palazzo Chigi in the “changing of the
guard” of summer 1932, followed by the defeat of Herbert Hoover in the
American presidential election in November of the same year, marked a
turning point also in the relations between Fascist Italy and the United
States. During the three previous years, an ambitious if unfruitful collab-
oration had been built between the two countries, no matter that such
cooperation had a different meaning from each one’s point of view.
According to Grandi, the collaboration with the United States, for that
brief period, had been one of the central elements of Italian foreign policy.
His hope was a renewal of American commitment to European politics,
with the expectation that America’s best allies would gain power and
prestige in the process.1 For Hoover and Stimson, the Italian support in
that endeavor had not been as important. Italy was a very useful pawn in a
larger game the president and the secretary of state were playing in order
to conquer an eventual position of leadership for the United States in
Europe. That required the relations among all the European states to
follow a path that would reinforce interventionists in America. The
Fascist government was not powerful enough to guarantee that result by
itself; but certainly its amiable position as Grandi articulated its policy to
them and to the American public had helped Hoover’s administration.

1
DDI, VII, 2, 102, Benito Mussolini to Vittorio Emanuele III.

287
288 Roosevelt and Fascist Italy

In reality, this game had failed even before the players were replaced.
Grandi was not liquidated as a result of the Lausanne Conference and not
even exclusively for his deviance from Mussolini’s wishes – although that
deviance was ever more accentuated, as Roberto Cantalupo has shown.2
Nor did Hoover lose the election because his moratorium on war debts and
his disarmament proposals had ended badly. Deeper events, linked to the
political and economic earthquake of the crisis, had rendered the attempt
at European reconciliation obsolete. And the reversal in Italo-American
relations was not a consequence of decisions made by their successors;
Mussolini and Roosevelt had to contend with the changed conditions
shaping international relations they found waiting for them in 1932.
Lloyd C. Gardner dedicated a study of Roosevelt’s economic foreign
policy to emphasizing all the elements of continuity in his internationalism,
comparing them with the findings of William Appleman Williams on
Roosevelt’s predecessor. These reevaluations had a clear polemical agenda
against the apologetic historiography on the subject of the New Deal.3 The
most fervid admirers of Roosevelt’s innovations were not able to deny
that the orientation of the then-governor of New York, as he presented it
during his election campaign, was not far removed from the conventional
wisdom Herbert Hoover also championed. Both Schlesinger and Freidel –
the two definitive biographers of Roosevelt – found evidence in his cam-
paign speeches of strong insistence on balancing the budget, showing great
prudence in public spending, and little if any of that reforming spirit that
would characterize the famous hundred days of his presidency as well as
several later phases of his administration.4 Roosevelt was equally attached
to the Wilsonian tradition of expansionism and internationalism. He had
after all begun his career as undersecretary of the Navy in Wilson’s first
administration and, as a vice presidential candidate for the Democratic
Party in 1920 had defended Wilson’s foreign policy. He was certainly

2
R. Cantalupo, Fu la Spagna. Ambasciata presso Franco. Febrraio-aprile 1937, Milano:
1948, pp. 42ff.; cited also in R. De Felice, Mussolini il Duce, Torino: 1974, p. 394:
“Mussolini said that Grandi had done everything wrong, in three years, everything: he
had allowed himself to be entrapped by the League of Nations, he had practiced a pacifist
policy, he had been super pro-democrat and super pro-Geneva, he had compromised the
ambitions of the new generation, he had made England and France his bedmates, and since
they were the men of the situation he had left Italy pregnant with their disarmament baby.”
3
W. A. Williams, Storia degli Stati Uniti, Bari: 1973 (originally published as The Contours
of American History, 1961).
4
A. M. Schlesinger Jr., L’età di Roosevelt, Bologna: 1957 (originally The Age of Roosevelt;
volume I entitled The Crisis of the Old Order: 1919–1933); F. Freidel, Franklin
D. Roosevelt, Boston: 1973.
 1. Foreign Policy during the Roosevelt Administration 289

aware that some of Wilson’s essential policy points were inappropriate

in 1932. Whatever his personal leanings, however, he had no choice
but to strongly oppose any American rapprochement with the League
of Nations. William Randolph Hearst had made his endorsement of
Roosevelt conditional on that point, and Roosevelt needed his support at
the Democratic Convention in order to secure the nomination for presi-
dent. Nor could Roosevelt make any specific promises regarding European
political engagement. And yet his entire foreign policy in the course of
the 1930s was characterized by a cautious, sometimes tortuous progress
toward an international role proportional to America’s growing strength
as a great power. One can certainly identify clues pointing toward his
intention in this regard among his associates. It is very likely that Cordell
Hull, despite their difficulties, was chosen and retained as secretary of state
not only because Roosevelt needed southern Democrats’ support, but also
and especially because they shared essentially the same vision of foreign
policy. Hull was known for his obsession – as Guido Jung, among others,
called it – with the idea that commerce was the solution to all international
ills.5 But during the Ethiopian crisis, it would become clear just how much
he also partook of that democratic-liberal moralism and the search for
collective action that were also essential elements of the Wilsonian legacy.
Norman Davis, who was variously employed by Roosevelt during his early
years for the disarmament negotiations and for financial talks in Europe,
was a living link between Roosevelt and the New York banking world,
made up primarily of Republicans who pursued politics as members of the
Council on Foreign Relations and advocated throughout all those years
for European reconstruction.6 Nor could his childhood friend William
Phillips, first undersecretary of state and then ambassador to Rome, be
called an isolationist.7 The labels of isolationist or nationalist also could
not correctly be applied to men such as Rexford Tugwell and Raymond
Moley, who, in their role as planners and members of Roosevelt’s brain
trust, dedicated to the formulation of domestic reform proposals, were
certainly more reluctant than the State Department was to take on foreign
policy commitments that might imperil their primary goals.8

5
ASMAE-AAP, bk. 4 Stati Uniti 1933, fol. Debiti e riparazioni – sf. Missione agli U.S.A., tel.
n. 174, Guido Jung to Benito Mussolini, Washington, D.C., May 3, 1933.
6
L. A. Shoup and W. Minter, Imperial Brain Trust, New York: 1977, pp. 11–28.
7
M. C. Kellett, William Phillips and Italo-American Relations, 1936–1940: A Case Study of
the New Diplomacy, unpublished thesis, Princeton University, 1957.
8
R. Moley, The First New Deal, New York: 1966, pp. 39 and 42–43; R. G. Tugwell, The
Brains Trust, New York: 1968.
290 Roosevelt and Fascist Italy

The orientation of Roosevelt’s collaborators was symptomatic,

although it cannot be forgotten that, never so much as in his case, the
president became his own secretary of state. It is therefore necessary to
examine his foreign policy choices on a case-by-case basis as he was
confronted by the problems brought on by the Depression even before
his inauguration. Gardner, who argues that Roosevelt was consistent in his
internationalism – whether in regard to his original ideological formation
or to his predecessor’s record – does not see a deeper significance in his first
choices at the world economic conference in London, an event that has
become the main historiographical evidence for an isolationist slant in
Roosevelt’s pragmatism.9
It is important, however, to distinguish between the president’s
theoretical preferences and his concrete choices as they were dictated in
the political possibilities of the moment. Like Hoover, he identified himself
with the basic principles of Wilson’s vision of American economic expan-
sion: monetary stability, free trade, and free movement of capital (with
very little insistence, of a strictly political kind, on the repayment of the
infamous war debts). Much of the confusion pertaining to Roosevelt’s
politics and conduct, before and after the London Conference, was created
by his tendency to call on those principles even in those moments when he
was defending decisions he called temporary or contingent, and which
therefore had quite different significance.10
The conflict that arose between Roosevelt and Hoover over war debts
was typical in this sense: contemporaries and historians alike have spilled
oceans of ink over this issue.11 Hoover wanted to commit his successor to
several elements of continuity with his own policy in order to guarantee the
United States’ global responsibility in financial matters. The December 15,
1932, deadline for payments on war debts offered Hoover, while he was
still in the White House, the occasion for asking the president-elect to
cooperate in a decision to extend the moratorium on payments. It would
have been a very important signal of the entering administration’s willing-
ness to act as guarantor of the remains of the international economic
system.12 The equivocation began because Roosevelt signaled his willing-
ness in principle but then did not follow up with any actual shared

9
See for example H. Feis, 1933: Characters in Crisis, Boston: 1966.
10
Moley, p. 430.
11
See Moley, pp. 21–36; H. Hoover, The Memoirs of Herbert Hoover, vol. 3, New York:
1952, pp. 183–191; Feis, 1933, pp. 15–86; R. H. Ferrell, American Enterprise in the Great
Depression, New York: 1957, pp. 235–238.
12
Hoover, pp. 183–191.
 1. Foreign Policy during the Roosevelt Administration 291

declaration on the topic.13 But he did not intend to assume any responsi-
bilities to Hoover on this or any other topic, because he was afraid of being
used as a political tool by the outgoing president.14 More than any prin-
ciples on the topic, which he may actually have shared with Hoover, more
important for Roosevelt was to cement his relationship with Congress
and the public in a moment of terrible crisis. Unemployment was rising,
the banking crisis was about to worsen, and Hoover’s unpopularity for his
politicies and for the social class he represented was at its apex. In these
circumstances, even (and in some ways especially) where his views did not
differ much from Hoover’s, it was necessary for Roosevelt to establish in
the most dramatic and clear way that he was not an insider of those
hated circles of Washington and New York that many blamed for creating
the Depression – that he instead represented change and a new path
for his country. Nothing could have been more politically damaging for
Roosevelt than to address the American people for the first time as their
president by saying that he was cooperating with Herbert Hoover in
exempting some European countries from their debts to the United
States. They wanted to hear the opposite – that he had gone immediately
to work solving their own most vital and immediate problems. This
political necessity weighed on all of Roosevelt’s foreign and financial
policy decisions, especially in the first months of his mandate. Even after
his inauguration, the question of war debt continued to be a source of
confusion about Roosevelt’s true politics. He invited the main govern-
ments participating in the coming London Conference to send representa-
tives to Washington for preparatory talks with the new administration.15
In the course of the spring of 1933, there was a rapid succession of visits
from Ramsay MacDonald, Herriot, and Guido Jung, who had at one time
been financial attaché at the Italian embassy in Washington and had just
been named finance minister by Mussolini. To each of them Roosevelt gave
the impression that he was basically willing to drastically cut the already
reduced commitments to repayment these countries had made when they
consolidated their debts.16 During all these months Roosevelt insisted,
however, together with his main adviser of the moment, Raymond
Moley, on the necessity of negotiating this matter separately from any
other question. He even extracted from MacDonald the promise – which

13
Feis, 1933, pp. 80–91.
14
Moley, p. 35.
15
Moley, pp. 395ff.
16
ASMAE-AAP bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni sf. Missione agli U.S.A.,
Conversazione Jung-Warburg, Washington, D.C., May 4, 1933.
292 Roosevelt and Fascist Italy

was not actually fully honored – that such questions would be kept off
the agenda of the coming conference.17 This somewhat artificial stance
had the goal of avoiding any formal public statements by the American
government on debt cancellation, although Roosevelt, for example to
Guido Jung, did justify himself by emphasizing that, unlike his predeces-
sor, he did not want to use the debt issue for leverage in any other matter.18
In this way Roosevelt chose the path of, in effect, forcing his debtors
into default, which he evidently thought preferable to a controversy with
his own Congress and domestic public opinion. In this way, and without
regard to his own preferences, he broke with the orthodox concept of
international economic relations and also dropped the leadership respon-
sibility of the United States that Hoover had worked to make him assume.
Roosevelt conformed to the best Wilsonian tradition in his treatment of
customs barriers. And if the nomination of Cordell Hull had a more than
tactical purpose, it was surely to emphasize the new administration’s
determination to fight the protectionist policies so drastically strengthened
by the Smoot-Hawley Act of 1930.19 Once more, in the course of the
bilateral talks in Washington preceding the London Conference, the inter-
locutors of the various delegations were lectured by the president and
especially by the secretary of state on the necessity of a collective effort to
break the protectionist spiral. At the end of his first meeting with Hull,
Jung telegraphed to Mussolini:
Secretary of State gave me the impression that he maintains that tariff reform will
be the cure for all ills.20

Again meeting with Jung, Roosevelt insisted on the proposal for a tariffs
truce already put forward by Norman Davis in the preparatory committee
for the conference, but in such terms as to make Jung suspect that it was
merely a strategic maneuver for the benefit of Congress.21 In any case,
Roosevelt had committed himself with his secretary of state to introduce a
bill to Congress giving the executive ample powers to negotiate agreements

17
Ferrell, pp. 259–260.
18
ASMAE-AAP, bk. 14, Stati Uniti 1933, fol. Debiti e riparazioni sf. Missione agli U.S.A.,
G. Jung, Dettagli sul mio incontro con il presidente Roosevelt, Washington, D.C., May 4,
1933.
19
J. W. Pratt, “Cordell Hull,” in R. H. Ferrell and S. F. Bemis, eds., The American Secretaries
of State and their Diplomacy, vol. 12, New York: 1964, pp. 1–11.
20
ASMAE-AAP, bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni, sf. Missione agli U.S.A.,
tel. 174/1, Guido Jung to Benito Mussolini.
21
ASMAE-AAP, bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni, sf. Missione agli U.S.A.,
tel. 174/1, Guido Jung to Benito Mussolini.
 1. Foreign Policy during the Roosevelt Administration 293

for 50 percent reductions of customs tariffs. Only when the delegation

had already arrived in London did Roosevelt telegraph Hull that he had
decided not to present the necessary bill to Congress.22 The two Houses
were meeting in special session to debate and approve the entire formi-
dable group of laws introduced by Roosevelt in the course of the oft-
referenced first hundred days, with the goal of resolving the unemployment
crisis and restructuring industry and agriculture. He tried to console his
secretary of state by writing that he would be able to negotiate the pre-
liminary agreements with individual states; these would then be submitted
to Congress during another special session convened for that purpose.23
This was clearly a dodge, given that the American delegation in London
was now in the position of being unable to negotiate on two of the major
questions of international economics: war debt and customs barriers. It is
true that the following year would see the passage of the Reciprocal Tariff
Act.24 Nonetheless, at the crucial moment (or at least at the moment the
participants thought was crucial) at the London Conference, once again
the president had given priority to his own domestic economic battles, in
comparison with which products for export were a minor issue.
But it was on monetary policy that Roosevelt made his most dramatic
choice, bringing Ramsay MacDonald to question whether the man bom-
barding the London Conference he presided over with messages from
Washington could be the same person he had met in that city.25 Again in
this case, Roosevelt’s ultimate decisions stood in contradiction of his initial
statements. His official position during his electoral campaign and during
the period when Great Britain abandoned the gold standard had always
been the traditional one according to which currency stabilization and a
collective return to the gold standard constituted the fundamental condi-
tion for international economic relations to return to normal. But in the
course of the month of April, the United States had also de facto aban-
doned the gold standard, adopting a practice of day-by-day defense of
the currency similar to the one Giuseppe Volpi had so chocked the Morgan
Bank partners with before the definitive stabilization of the lira in
December 1927.26 Raymond Moley described the event in his memoirs
with the following words:

22
Feis, 1933, p. 175.
23
Ibid.
24
L. C. Gardner, Economic Aspects of New Deal Diplomacy, Boston: 1964, pp. 15–24.
25
Feis, 1933, p. 240.
26
G. G. Migone, “Aspetti internazionli della stabilizzazione della lira: il Piano Leffingwell,”
in Problemi di storia nei rapporti tra Italia e Stati Uniti, Torino: 1971, pp. 88ff.
294 Roosevelt and Fascist Italy

One morning in April, Will Woodin entered [and the president greeted him] by
saying that he had taken the country off the gold standard. A smile came to the
pixy-like face of Woodin and he replied, “What? Again?”
This fairly well expresses the difficulty of fixing with exactness the date when the
United States abandoned the gold standard.27

Probably in this case Moley was right to state that the decision was
taken not on the basis of Roosevelt’s sympathies for the monetary
theories of Keynes and George F. Warren – according to which prices
could be regulated through ongoing modifications to gold’s value – but
rather on the basis of the formidable political pressure in favor of
inflationary policy that the Depression had encouraged in wide sectors
of both Congress and the rest of the country.28 The agricultural sector,
the old populist movement still strongly present in both parties, the
pressure from the Hearst-owned press, and above all the reality of
the Depression were more decisive than any theory of Warren’s or
Keynes’s.
Naturally, the international consequences of this decision made on the
eve of the London Conference were not slow in coming: Germany and
Great Britain had already turned in this direction. France, Italy, and all the
countries that had defended their currencies’ rate in relation to gold now
had to deal with the pressing problems brought on by variable exchange
rates. This had not been the decision of any ordinary industrialized coun-
try, but rather of the principal creditor nation of the world with the most
important production system even in the contexts of the Depression – a
nation that had for a decade or more made the return to the gold exchange
standard after the war one of the pillars of its policy. Together with the
acceptance of Senator Thomas’s amendment, which gave the president
ample power to conduct inflationary policies, this decision signaled that
the United States had made a significant change under the guidance of
Roosevelt. America had chosen to privilege a politics of price stimulus and
recovery of production and employment over any further support of
the instruments that up until 1931 had structured the entire international
monetary system.29
In the bilateral meetings conducted in Washington, Roosevelt did not
hide the fact that his primary concern was for prices, especially agricultural
prices. His exchange with Jung on the topic was exemplary:

27
Moley, p. 298.
28
Feis, 1933, p. 120.
29
Ibid., pp. 126–130.
 1. Foreign Policy during the Roosevelt Administration 295

The president considers it necessary to take shared action to raise world prices; it is
indispensable to relieve the burdens on landowners in debt. I said that Italy would
favor an improvement in price levels but does not believe monetary instruments or
temporary controls would fulfill this goal. Italy instead believes that, as the various
nations compete to devalue their currencies and engage in customs wars, there can
be no other result than a further reduction in prices. A rise in prices can only be
achieved through a rise in demand – that is, in buying power or through a reduction
in supply by lessening production.30

Obviously, the balance of power remained favorable to the United

States, but on monetary matters the roles of the two countries had been
reversed over the past five years. It was now the Italian finance minister
preaching the virtues of the gold standard and reacting with alarm to
any hint that the president of the United States intended to manipulate
exchange rates to modify price levels.
Roosevelt explained to Jung, as he had to the representatives of other
countries concerned, that abandoning the gold standard was only a tem-
porary measure and that the U.S. government still favored monetary
stabilization and the return to the gold standard. He was also willing to
put his plans on paper (he had done so with other declarations), and he and
Jung formulated a statement at the end of their meetings:
A truce in the field of tariffs and other obstacles to international trade is essential
if the Conference is to undertake its labors with any hope of success. We are in
agreement that a fixed measure of exchange values must be reestablished in the
world and we believe that this measure must be gold.
The entire problem of raising world prices and restoring the opportunity to
work to the men and women who today wish to work and can find no employment
is a unit. It must be attacked as a unit. Along with the measures which must be taken
to restore normal conditions in the financial and monetary field, and stability in
international exchanges, must go hand in hand with measures for removing the
obstacles to the flow of international commerce.31

The joint statement offered space for the stimulus Roosevelt was carry-
ing out, but its wording was unequivocal on the monetary issue. But it
certainly had not been Jung’s insistence that produced this result. Even
after he had rejected a proposal for temporary stabilization prepared in
the monetary commission of the conference by the American delegation

30
ASMAE-AAP, bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni, sf. Missione agli U.S.A.,
tel. 174, Guido Jung to Benito Mussolini, Washington, D.C., May 3, 1933, p. 3.
31
ASMAE-AAP, bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni, sf. Missione agli U.S.A,
relaz. 6, all. Joint Statement by President Roosevelt and the Finance Minister of Italy,
Signor Guido Jung, May 6, 1933. English text online at The American Presidency Project,
http://www.presidency.ucsb.edu/ws/index.php?pid=14635.
296 Roosevelt and Fascist Italy

together with the monetary experts of the gold standard countries,

Roosevelt told Moley as he was leaving for London that he was willing to
approve a stabilization accord, as long as it allowed the dollar to fluctuate
within a wide-enough margin to avoid endangering the slow rise in prices
that had already begun.32
Moley rushed precipitously to London to communicate the latest opin-
ions of the president and, with difficulty, managed to persuade the gold
standard countries to issue a joint statement with the most innocuous word-
ing possible. In that statement, the gold standard countries announced their
desire to remain on the gold standard, and the others (particularly the United
States and Great Britain) confirmed their desire to return to it. The statement
only committed those countries with paper currency to limiting exchange
rate speculation, through the cooperation of their central banks, which were
tasked “in due course” with restabilizing the gold standard overall.33
The drafted statement, according to the American delegates, was the
minimum that would satisfy the gold standard countries’ representatives.
When Moley intervened to delete some extensive interpretations of
the central banks’ commitments that the French delegation had tried to
introduce, Moley reported that Guido Jung protested, “You are breaking
my heart,” to which Moley replied, “That is because you have a heart of
gold.”34 The statement was a simple reassertion of the objective Roosevelt
had repeatedly claimed of returning to the gold standard; but it provoked
an explosive message from Roosevelt that famously forced the confer-
ence’s failure.
Some have underscored how Roosevelt’s message was based on a mis-
understanding because he was fulminating about a proposal for temporary
stabilization that was not included in the actual joint statement.35 But the
accuracy of the content is not the pertinent point; it is, rather, the political
significance that matters. Roosevelt took advantage of the occasion to
openly polemicize against what he called the “old fetishes of so-called
international bankers.” He affirmed that, rather than a stability in foreign
exchange that would be “temporary and . . . artificial,” desired only by a few
large countries, he preferred to put the American economic recovery first:
Let me be frank in saying that the United States seeks the kind of a dollar which a
generation hence will have the same purchasing and debt paying power as the

32
Moley, p. 440.
33
Ibid., p. 441.
34
Ibid., p. 458.
35
Ibid., pp. 462ff.
 1. Foreign Policy during the Roosevelt Administration 297

dollar value we hope to attain in the near future. That objective means more to the
good of other nations than a fixed ration for a month or two in terms of the pound
or franc.36

Roosevelt was obviously not arguing against the specific – and anyway
nonexistent – proposal of temporary stabilization. Perhaps he did not even
support the substitution of gold with an international currency advocated
by Keynes (though Keynes did show satisfaction with Roosevelt’s stance),
as Moley hypothesized.37 Roosevelt was signaling in the most dramatic
way that his primary concern regarding the international responsibilities
of the United States was the internal recovery of his own country. In the
second place, he had also taken the opportunity to oppose American
capitalism, not in itself but in the form of that restricted elite of capitalists –
international bankers – that were by this point its riskiest aspect. In his
characteristically pragmatic, not to say contradictory, fashion, Roosevelt
thus affirmed his desire to break with a certain capitalist culture. He made
ample concessions to the inflationary pressures present in the country’s
economy at the same time as he publicly reaffirmed the eventual goal of
returning to “permanent stabilization,” balanced budgets, and free mar-
kets. He never questioned capitalism yet worked to transform it by achiev-
ing reforms in reverse gear (as Gardner put it38), and thereby responded to
and contained potentially subversive pressures. In the same way, he never
abandoned the basic Wilsonian recipe for an integrated world capitalism
in which America’s natural hegemony would be able to fully develop.
And still he was clearly aware that this approach required tortuous turns
and measures that could temporarily act in contradiction to each other,
in order to respond to various political pressures he found irresistible as
they came in turn. His success was possible, as has been said often, because
alongside the underlying firmness in his goals, he showed pragmatism,
willingness to experiment, and a sincere aversion to that dogmatism –
more cultural than political – of the Republican governing class that had
preceded him in the White House throughout the 1920s. Arthur Ochs,
owner of the New York Times, once told Dino Grandi that Herbert
Hoover was a very good president, but that he was also an engineer; and
like all engineers, he had only one solution to every problem.39 Roosevelt,

36
Ibid., p. 464.
37
Ibid., p. 465.
38
Gardner, Economic Aspects, p. 19.
39
ADG, Dino Grandi, Appunti sulla mia missione negli S.U., Relazione inviata dal Ministro
degli Esteri al Capo del governo italiano, December 2, 1931.
298 Roosevelt and Fascist Italy

on the other hand, was the opposite of an engineer. He was capable in any
moment of making use of the most disparate and even contradictory tools
to reach a goal. Nonetheless, he was forced to subordinate any effort
to renew American international engagement to the recovery of his own
economy. To meet the challenge of the Depression within a capitalistic
framework, it was necessary to sacrifice the existing political equilibrium
as well as the ties of commercial interdependence. In so doing, world peace
would also be sacrificed.

2. roosevelt and italian fascism

What effect did Roosevelt’s policy have on relations with Fascist Italy and
the reactionary dictatorships in general (Hitler was by now in power and
the militaristic sections of the Japanese governing class were on the rise
from the momentum of conquering Manchuria)? In his memoirs, Cordell
Hull finally gave vent to the bitterness he had felt over the role he had been
forced to play at the London Conference, reflecting in the process a point of
view largely present throughout the historiography on Roosevelt, even in
the favorable interpretations:40
I believed then, and do still, that the collapse of the London Economic Conference
had two tragic results. First, it greatly retarded the logical economic recovery of all
nations. Secondly, it played into the hands of such dictator nations as Germany,
Japan, and Italy. At that very time this trio was intently watching the course of
action of the peace-seeking nations. At London the bitterest recrimination occurred
among the United States, Britain, and France. The dictator nations occupied first-
row seats at a spectacular battle. From then on they could proceed hopefully: on
the military side, to rearm in comparative safety; on the economic side, to build
their self-sufficiency walls in preparation for war. The conference was the first, and
really the last, opportunity to check these movements toward conflict.41

There is no doubt that at the London Conference, and on Roosevelt’s

initiative, the tendency of the existing economic system toward fragmen-
tation was definitively sanctioned. Showcased from that moment forward
were the unwillingness and incapacity of the major world powers, starting
with the United States, to take the initiative in reversing that tendency; the
momentum toward autarchy based on the arms industry; and the decrease
in the flow of commerce, with what little remained taking the ever-clearer

40
William E. Leuchtenburg, Franklin D. Roosevelt and the New Deal (New York: Harper &
Row, 1963), p. 602; Moley, p. 495.
41
C. Hull, Memoirs, vol. I, pp. 268–269.
 2. Roosevelt and Italian Fascism 299

pattern of being conducted between soon-to-be military allies. Hjalmar

Schacht, the central banker who so egregiously served Hitler’s cause, could
rightly say that in London Roosevelt had followed a favorite dictum of
Hitler and Mussolini: “Take your economic fate in your own hands.”42
It would nonetheless be a serious mistake to assume that these develop-
ments were caused by one decision of Roosevelt’s, or any other individual,
during the London Conference. It is a typical trope of a certain kind of
historiography to attribute determinative power for major structural
changes to one specific person in one place and time. Rather, this was a
historical process resulting from decades of ideological and political con-
solidation. Otherwise we reduce the results of a certain way of living, of
thinking, and of organizing production, interpersonal relations, and the
interactions of states to an individual’s errant and fleeting choice.
The influences to which Roosevelt was responding in his dramatic
message to London had been forming over some time. They were the
profound consequences of the Depression on the largest economy in the
world, and of the way in which that crisis spread from the United States
to Europe and especially to Germany. Hoover had tried to confront the
crisis using traditional remedies, on both the domestic and international
level. But in the economic conferences of 1932, it was already clear that
the United States had abdicated the effort Hoover had initiated with his
moratorium proposal. Roosevelt was simply the man who recognized
that failure and, without renouncing the fundamental aspirations of acting
as the most powerful country in the world, he chose to commit fully to
internal reconstruction. The price of that commitment was the temporary
abandonment of the leadership role in an international capitalist commun-
ity, with all the consequences of that absence – consequences that were all
the more dire after the National Socialists took power in Germany, the
European economy with the greatest potential. Kindleberger had reason to
argue that the world economic (and political) situation was aggravated
by the lack of American leadership, since the United States was the only
country with the ability to act as the “lender of last resort.”43 Still, it is
important to note, as Kindleberger apparently did not, that that path had
effectively been tried, even if not in a completely unified and consistent
manner, by the American financial and governing elite in the 1920s.
Moreover, the crisis that led to the Depression was set off by internal
distortions in the economy of America itself, so that the potential lender

42
Leuchtenburg, pp. 202–203, as cited in Moley, p. 495.
43
Kindleberger, The Great Depression, p. 30.
300 Roosevelt and Fascist Italy

of last resort was forced to put its own house in order, leaving few if any
resources, or willpower, for intervention elsewhere during the most acute
moments of the crisis.44
The turn relations with Italy took after Roosevelt’s arrival in office is
indicative of the power of the circumstances produced by the Depression
over any individual political choices or ideological inclinations. Aspects of
the discussions between Roosevelt and Jung revealed the weakening of
the interdependent relationship constructed over the previous decade,
also crucial to the stabilization of the Fascist regime. Although Roosevelt
did not greatly change his rhetoric in favor of the interdependent monetary
system supported by the gold standard as a principle, the United States
had abandoned the very gold standard it had so assiduously guided Italy
toward. Now Italy, despite negotiations between Jung and James Warburg
for a further reduction in the war debt, was approaching the possibility
of default.45 Moreover, Italy had just begun to respond to the tariff
war unleashed by the United States. The Italian Fascist economy had
benefited from American bond issues, whose repayment was now uncer-
tain in the general wave of public and private defaults caused by the crisis
in Germany. Aside from any shared points of view between Roosevelt and
Jung regarding the gold standard, of which there were in any case not
many, the United States no longer had any real power to influence the
decisions of a regime it had itself helped to consolidate in obedience to class
interests and an expansionist foreign policy that the crisis had forced it to
abandon.46
Two years later, a report by Augusto Rosso, Italian ambassador in
Washington, offered a synthesis of the gradual breakdown in Italo-
American relations. It was not through an explicit and conscious choice
by either party, but a lack of convergent interests. These were the years,
from 1933 to 1935, when the American effort initiated by Hoover and
Stimson to construct a policy of European engagement weakened while,
in the same period, first the economic and then the political autonomy of
Fascist Italy grew to a point that Fascist foreign policy could turn in a new
direction. A previously only embryonic and sporadic aspect of that foreign
policy now came to the fore. Rarely has an ambassador’s report been so

44
P. Ciocca, “L’economia italiana nel contesto internazionale,” in Ciocca, ed., L’economia
italiana nel periodo fascista, Bologna: 1976, p. 26.
45
ASMAE-AAP, bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni sf. Missione agli U.S.A.,
Conversazione Jung-Warburg, New York, May 7, 1933.
46
ASMAE-AAP, bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni sf Missione agli U.S.A.,
Conversazione Jung-Roosevelt, Washington, D.C., May 5, 1933.
 2. Roosevelt and Italian Fascism 301

lucid and explicit as Rosso’s in its self-criticism and political analysis

regarding a regime’s conduct of the relationship with another country.
In Rosso’s report to Galeazzo Ciano, minister of propaganda but also
Mussolini’s son-in-law, the nostalgia of this former right-hand man of
Dino Grandi for the pro-American policy of the previous period shines
through.47 The usual rhetoric was there, and was not empty, but it had
been reduced to the minimum: “There is no need to tell you that we are
serene and sure of the future of the great undertaking willed by il Duce
and that our hearts beat in unison with those of the nation.” This was the
summer of 1935, just before the attack on Ethiopia. Rosso affirmed, in a
completely unusual manner for him, that
As unpleasant as it is, especially for the Ambassador in Washington, I cannot do
less than honestly recognize that the American attitude toward Italy and toward
Fascism is today less favorable than it was, for example, in 1933.

He was trying to bring to Ciano’s attention the fundamental reasons

that had created that situation, probably to avoid any illusions in Rome –
and especially on the part of a recently appointed minister – that the matter
could be fixed by any propagandistic effort, which might actually be
controversial and counterproductive.48 With his usual clarity,49 Rosso
explained that the trade policy of restricting imports of merchandise and
exports of currency, ever more evident given the war economy the regime
was preparing, had run up against the free market monomania of Cordell

47
ACS-MCP, bk. 2, fol. 8 Rosso Augusto, Augusto Rosso to Galeazzi Ciano, Washington,
D.C., July 19, 1935.
48
In fact, in the course of the report he included among the elements that had created tension
in the relations between the ambassador and the State Department the propaganda
initiative among Italo-American students that the regime had been carrying out through
the consulates.
49
Concerning Rosso’s personality it is worth reporting the judgment of Sir Ronald Lindsay,
in one of the annual reports British ambassadors generally compiled regarding their local
colleagues. Before coming to Washington, Rosso had served as head of the delegation to
the League of Nations from the Italian Foreign Affairs Ministry. He was well known and
much appreciated by his British counterparts in Geneva for his serenity and simplicity, his
openness and good common sense. These qualities, according to Lindsay, made him well
adapted in an Anglo-Saxon setting. Though Rosso criticized Mussolini for not marrying
(sic), he himself appeared to be an inveterate bachelor. He was a tireless worker – a good
thing since the communities of Italo-Americans in New York, in Chicago, and throughout
the United States obliged him to be continually on call and to deal with such thankless tasks
as presented him by the typical Sicilian ex-Mafiosi who made up those communities.
(PRO-FO 371/18761, Sir Ronald Lindsay to Sir John Simon, Washington, D.C., April
14, 1934.) Beyond the clear racist tone present in these observations, they do show clearly
how Rosso succeeded in favorably representing the Fascist regime abroad.
302 Roosevelt and Fascist Italy

Hull. Initially, Hull had asked for a statement on this matter from
Mussolini, declaring his own willingness to conclude the first of the most-
favored-nation treaties with Italy as foreseen by the Reciprocal Tariff Act
of 1934.50 Not only was there no Italian response forthcoming, given the
obvious incompatibility with their new commerce policy, but an attempt
also failed to create a practical trade agreement even though it had origi-
nally been proposed by Italy, again due to evident lack of political will in
Rome. In these circumstances it was not surprising, according to Rosso,
that the United States now intended to abrogate that part of its current
commerce treaty relating to most-favored-nation status. The ambassador
was, however, disregarding the fact that the Depression, and the conse-
quently dramatic choices Roosevelt had made during the London
Conference, had produced such serious failures that Fascist foreign policy
had been primed to change paths and become aggressively activist. The
same problem emerged even more clearly in terms of disarmament. We
have seen how, in the earlier phase, Hoover’s initiatives had found a loyal
partner in Fascist Italy. Now, Roosevelt had launched “with much pomp
and circumstance” a project to limit arms production and trade. The project
would receive an honorable burial between committee and subcommittee
in the by-now moribund conference. Nonetheless, at its first appearance,
“it was fought openly by two delegations: the Italian and the English,”
precisely those two nations that at other times the United States would have
been able to count on for their strongest support. Rosso concluded:
At this point I want to make it very clear that it is not my intention to criticize our
opposition to the American project. On the contrary, as I understand the problem,
I am sincerely convinced of the necessity to combat it. My intention is merely to
ascertain that, regarding a question very dear to our Government (and I can tell you
personally dear to President Roosevelt as well), we have taken the initiative in
opposing the American plan.51

In other words, once again Rosso did not question the choices being
made in Rome, but asked to be made fully capable of managing them in the
least painful manner. As he affirmed:
In conclusion, I wanted to demonstrate to you how, in these past twelve months,
whether due to the fatal force of things or our action or omission, in several of the
major questions faced by this Government we have assumed an attitude antithetical

50
B. Migone and A. Ferrero (first and second secretaries to the Italian embassy in
Washington at the time), interview with the author, Zermatt, August 20, 1978.
51
Rosso, Rapporto.
 2. Roosevelt and Italian Fascism 303

to the American one. I do so in order to explain the diminished cordiality in our

relations.
. . . And since I am writing to you personally and confidentially, I will not hide
from you that when I was in Rome last summer I gained the impression of a general
disinterest in all things American, almost as if the United States had been excluded
from our sphere of activity. I am obviously not speaking of the greater path of
American foreign policy, which I know il Duce always concerns himself with, just
as I know you always do. I am speaking of the technical and ordinary adminis-
trative details. This impression was reinforced in the past twelve months, which is
discouraging, because if it is true that Roosevelt’s administration has been gradu-
ally alienated from European affairs, the fact remains that we still have important
interests in this country (both material and ideal), and the systematic loss of interest
in the “practical” concerning this country will end up making it ever more difficult
to defend our interests here.

Once again, this old-school ambassador repeated that he was not

criticizing, indeed he accepted, the political orientation of the government
and the regime, even regarding those questions that would soon become
life or death. It is difficult to believe that Grandi’s old collaborator – that
loyal interpreter of the Anglophone democracies, that faithful advocate
of the politics of European pacification and steadfast contact with the
United States – had not grasped that the wind was blowing in a new
direction that would soon become a hurricane in which the United States
would play a decisive role. He was less likely than almost anyone else to
underestimate American power. Nonetheless, he was and wanted to
remain a follower of orders, even when the patriotic inspirations he had
himself been motivated by, threatened to produce ever more contradictory
results. In the end, Mussolini had been happily inspired (from his own
point of view) when he had sent Dino Grandi to represent him in London
and Augusto Rosso, Grandi’s main collaborator, to Washington just at the
moment when Mussolini wanted to change his policy regarding those two
great nations that had been the regime’s main points of reference up until
that moment. The two men became useful instruments in the leader’s
new policy, for their technical expertise, familiarity with the two nations,
and personal credibility in the service of a fundamentally hostile politics.
They made that hostility seem softer, less intelligible, and therefore less
vulnerable – even despite the fact that Mussolini did not use them as fully
as he might have, as Rosso’s report shows.
There were other, more important elements than the services rendered
by two well-chosen ambassadors that allowed Mussolini to stretch his
game a bit longer. Indeed, while the structural ties were stretching thin,
the new administration had not in any way ended the current of ideological
304 Roosevelt and Fascist Italy

sympathy running between Italy and both this administration and the
precedent Republican one. Maurizio Vaudagna’s studies have traced this
renewed current of sympathy among the leaders of the two states to several
similarities in the responses they formulated to the problems created by
the Depression.52 He concluded that the New Deal and the Fascist eco-
nomic policy, under the label of corporativism, shared a common pursuit
of new paths within the capitalist system of production, such as to create a
new and stronger role of the state. Perhaps forcing the issue a bit, Guido
Jung claimed at the end of his sojourn in the United States that
In the attitude of President Roosevelt regarding the domestic problems of the
United States there appears the basic Fascist concept “everything in the state,
everything for the state, nothing outside the state.”53

Roosevelt himself wrote in a letter to Ambassador Long (who for his

part certainly had no need to be further encouraged in his enthusiasm for
Fascism) of July 1933, that Mussolini
. . . is really interested in what we are doing and I am much interested and deeply
impressed by what he has accomplished and by his evidenced honest purpose of
restoring Italy and seeking to prevent general European trouble.54

Perhaps even more significantly, one of the principal theorists and

executors of the reforms of the New Deal, Rexford Tugwell, after a visit
to Italy in October 1934, wrote that
I find Italy doing many of the things which seem to me necessary. The good people
here too are worried about the budget etc. Mussolini certainly has the same people
opposed to him as FDR has. But he has the press controlled so that they cannot
scream lies at him daily. And he has a compact and disciplined nation although it
lacks resources.55

52
M. Vaudagna, “Il corporativismo nel giudizio dei diplomatici americani a Roma,
1930–1935,” in Studi storici no. 3 (1975); idem, “New Deal e coroporativismo nelle
riviste politche ed economiche italiane,” in G. Spini, G. G. Migone, and M. Teodori,
eds., Italia e Stati Uniti dalla grande guerra a oggi, Venice: 1976; idem, “The New Deal
and Corporativism in Italy,” in Radical History Review, vol. IV nn. 2–3 (Spring–Summer
1977).
53
ASMAE-AAP, bk. 14 Stati Uniti 1933, fol. Debiti e riparazioni sf. Missione agli U.S.A.,
Guido Jung, Impressioni generali, Rome, May 7, 1933.
54
Cited in Vaudagna, “The New Deal,” p. 6. Original English text in “F.D.R.: His Personal
Letters: 1928–1945,” Volume 3 of F.D.R.: His Personal Letters, Elliott Roosevelt, ed.,
New York: Duell, Sloan & Pearce, 1950, p. 352.
55
Rexford Tugwell Papers, Box 14, folder Diary 1934, October 20, 1934, no. 2, FDR
Presidential Library, Hyde Park, New York, cited in Vaudagna, “The New Deal,” pp. 6
and 30 (no. 10).
 2. Roosevelt and Italian Fascism 305

These quotations cannot be used, like some Republicans of the era did,
to demonstrate how the men of the New Deal were Fascists (although a few
of Tugwell’s statements are truly extraordinary). Vaudagna justly noted,
along with analogies and parallelisms, the real differences between the two
countries. These were not only on the level of the resources used in each
country’s reconstruction project, but also of the role played by the social
forces internal to those processes and, in the case of the United States, of
the constitutional guarantees that characterized them.56 Yet, it is impor-
tant to note how, in the moment when the American ability to condition
the Italian economy and Fascist regime had been drastically reduced, the
ideological sympathies between the two nations and the resulting image of
Fascist Italy in American public opinion not only continued to be positive,
but found new motivations to be so.57 In so doing, Americans let down
their guard in the face of the new and more menacing totalitarian state that
had emerged in Europe, which also slowed their reaction time to
Mussolini’s change in foreign policy. These delays would be made manifest
when Mussolini began the war against Ethiopia.Indeed, the argument is
even more complicated. As Rosso wrote in the above cited report: When he
came to power, Roosevelt presented the New Deal to the country, which
had a “revolutionary” background and in some of its aspects imitated the
program of Fascism.
Taking note of the obvious analogies, our press hurried to portray Roosevelt as a
disciple of Mussolini, which in that moment may have seemed fully justified. I have
had the sensation since then, however, that it is not opportune for us to insist upon
this theme, because my familiarity with the American mentality warned me that the
word “fascism” would end up as a weapon in the opposition’s hands.

As Vaudagna has documented in his studies, the accusation of fascism

hurled ever more frequently at Roosevelt by his adversaries, starting with
Herbert Hoover and his liberal individualism, forced Roosevelt to distance
himself strongly from the doctrine. In America, wrote Rosso, “the word
‘democracy’ always retains that same fetishistic power that it had for the
pharmacist Homais in Madame Bovary.” The ambassador concluded:
The fact is that for essentially electoral reasons, the two American political parties,
Democrat and Republican, have been polemicizing for the past two years over the
word fascism, each trying to attach that label to the other in a negative sense. That

56
Vaudagna, “New Deal and corporativismo,” pp. 130–134; idem, “The New Deal and
Corporativism,” pp. 20–27.
57
Vaudagna, “Il corporativism nel giudizio,” pp. 220ff.; J. P Diggins, Mussolini and Fascism:
The View from America, Princeton: 1972, pp. 362–374.
306 Roosevelt and Fascist Italy

could have no result for us but a damaging one, without leaving us any way to
repair the situation since it is completely beyond our control.

Still, those positive judgments and analogies from an earlier phase did
contribute to root in large parts of the population the belief that Italian
Fascism was at the very least something very different from German
National Socialism. Even if the American government was finally forced
to clarify its own distance, especially after the war began against Ethiopia,
initially public opinion saw its long-held clichés about the goodness of
Fascism confirmed, even from this new point of view.
Perhaps most importantly of all, these assessments of Italian Fascism
led Roosevelt’s administration to believe until the very last moment that
Mussolini could be used as a moderating influence on Hitler, or at least
that the United States would be able to convince him to divorce his destiny
from his more aggressive German colleague. As early as March 1933,
Walter Lippmann posed the crucial question:
Will Mussolini . . . throw in his lot with Herr Hitler, form a coalition of fascist
nations in Central Europe, and demand territorial revision at the risk of war? Or
will he use the great influence which he now exercises to promote a policy of
moderate and pacific pressure designed to maintain peace by the constructive
solution of the chief territorial questions?58

The response by Lippmann and others up until the Ethiopian war was
that the latter would be true.59 He believed that “a competent diplomacy in
Europe and in the United States can . . . find a way, with the help of Italy, to
preserve the peace . . .”60
There is a great deal of evidence that Roosevelt did not limit his interest
in Mussolini’s Italy to the sphere of social relations and state theory. Until
the Ethiopian war, the president continued to consider Mussolini a possi-
ble peacemaker, or at least an example of a different political reality than
Nazi Germany. Indeed, in the period from Grandi’s dismissal to the confer-
ence at Stresa, Mussolini did not brusquely abandon his previous conduct,
but continued to play the role of a man searching for a peaceful solution to
European tensions.61 In particular, he continued the collaboration with

58
New York Herald Tribune, March 16, 1933; Interpretations, 1933–1935, 322, quoted in
L. Jordan, America’s Mussolini: The United States and Italy, 1919–1936, unpublished
thesis, University of Virginia, 1972, p. 312.
59
Ibid.
60
Ibid.
61
R. Grispo, “Il patto a quattro-La questione austriaca-Il fronte di Stresa,” in various
authors, La politica estera italiana dal 1914 al 1943, Rome: 1964, pp. 118–158.
 2. Roosevelt and Italian Fascism 307

the United States in the context of the World Disarmament Conference.62

He also made himself appreciated for the Four-Power Pact and for his
mobilization against the Anschluss.63 It thus happened that Roosevelt
could tell a foreign visitor in the autumn of 1934,
Despite certain manifestations which may be interpreted as bellicose I believe that
among European statesmen, Mussolini is the one with the clearest vision of the
situation and who works hardest and with perfect sincerity for the maintenance of
the peace.

Rosso recounted the episode, noting also that “the president would
however indulge himself in one of his habitual ventings of antipathy for
Nazi politics.”64 Roosevelt had already written in a similar vein to his
ambassador in Rome, Breckinridge Long, who was himself a fervent
admirer of Mussolini as well as a personal friend and donor of the presi-
dent of the United States.65
It was clear that among New Dealers there was a diffuse tendency to
think that Roosevelt and that “admirable Italian gentleman” (as the pres-
ident himself called him at one point)66 would be able to work effectively
together, or at least in parallel, to confront the Depression and the problem
of peace of Europe. As Nicholas Murray Butler, president of Columbia
University and an old admirer of Mussolini and supporter of Roosevelt,
wrote to Margherita Sarfatti at the end of 1933,
Therefore, it is, that of the first-rate powers, intellectually and morally speaking,
there are at the moment only two – Italy and the United States – which are in
possession of a leadership which is outstanding and internationally recognized.67

For several years Roosevelt felt an affinity for the Fascist dictator, whom
he saw as very distinct from Hitler, and for many years he hoped they

62
The archive of Norman Davis contains numerous messages concerning his relations with
the Italian delegates, and more generally concerning relations with Italy. LC-NHD, bk.
47, fol. Pell, Robert, Revision of confidential memorandum for Mr. Luce, New York,
December 15, 1934; Conversation between Messrs. Luce, Goldsborough and Ingersoll,
New York, 18 December 1934; LC-NHD, bk. 12, fol. Misc. telegrams, Rome, January 5,
1934.
63
Diggins, p. 323.
64
ASMAE-AAP, bk. 20, Stati Uniti 1934, fol. Rapporti politici, posizione 1 bis, sf. 1, tel. 322,
Augusto Rosso to Benito Mussolini, Washington, D.C., October 17, 1934.
65
Diggins, p. 279.
66
Ibid.
67
BLCU-NMB, fol. Sarfatti Margherita, Nicholas Murray Butler to Margherita Sarfatti,
New York, December 8, 1933.
308 Roosevelt and Fascist Italy

would meet in person68 – initially for the same reasons that had led Hoover
and Stimson to pursue a dialogue in hopes of European peace, and after
the Ethiopian war with the intent of separating Mussolini from Hitler. At
the end of 1936, Roosevelt stated that he still wanted to meet Mussolini
and went so far as to propose a place (Malaga). Suvich, then ambassador
in Washington, felt that the meeting was not imminent (the Spanish Civil
War had begun) but that the proposal meant that Roosevelt had not let go
of the idea. Indeed, he would not give up the idea completely until right
before the war began.69
This way of reasoning missed a fundamental factor that changed the
significance of every action of mediation and “moderated revisionism” in
Europe. When Hoover, Stimson, and Grandi tried and failed at European
pacification, Germany had not changed its regime. At that time one could
still imagine that concessions, of territory or of another kind, would serve
to stop the process of political radicalization in Germany, save the Weimar
Republic, and secure the moderate leadership of Chancellor Brüning. From
the moment that Hitler assumed the chancellorship, there could be no
more doubts regarding what kind of political forces would come to the
fore in Germany, in a spiral of escalating concessions and aggressions.70
For this reason, Mussolini’s initiatives, which gave rise to the Four-Power
Pact, also took on a different significance from his earlier policies. And
yet that very first meeting between Roosevelt and a Fascist representative
(Guido Jung) had raised clear red flags about that very problem. The
German question offered the occasion for their liveliest exchange:
The discussion on Germany and on the new path of Germany politics was lengthy
and on my part I had to adopt a great deal of tact in speaking of the problem.
President Roosevelt seemed very poorly disposed and prejudiced against
Germany and very worried by the danger that, according to him, Hitler’s regime
represented for both European and world peace. I reminded him that the German
government has such important internal problems to deal with that it is unimagin-
able that Germany could feel capable of provoking any foreign conflict again for
many years. Nonetheless the principal problem for the German government is to
reconstruct the spiritual unity and regenerate the morale of Germany.

68
Diggins, p. 280.
69
ASMAE-AAP, bk. 27, SU 1936, fol. Rapporti politici sf. 6, Campagna elettorale e
presidenziale.
70
A. L. Rowse correctly argued that the regime change in Germany created a line of
demarcation beyond which subsequent concessions to Germany assumed the character
of encouragement for aggressive foreign policy rather than the previous character of a
correction of the iniquities in the Treaty of Versailles. See A. L. Rowse, Appeasement: A
Study in Political Decline, 1933–1939, New York: 1961.
 3. War in Ethiopia. Challenges the Principle of Collective Security 309

[. . .] President Roosevelt told me that the world could not be satisfied and
tranquil with a Germany who would abstain from making war for five years or
so, only as long as it took until she were again capable of doing it.71

This lucid perception of the impending danger did not create

the corresponding capacity to act on its consequences, in terms of either
Germany or Italy. Yet, more than a decade of collaboration based on a real
convergence of interests would not be erased in the space of a few days.
The Ethiopian war, and the role played in it by the United States, would
provide another proof of this

3. war in ethiopia. challenges the principle

of collective security
The Great Depression had eliminated the ability of the United States to
determine the political stabilization of Europe through financial and com-
mercial interdependence. In this context, the concept of collective security,
originally promoted most energetically by the American secretary of
state Henry Stimson, had also suffered since the United States no longer
promoted or supported the efforts of the League of Nations, for example
when Japan attacked Manchuria. Furthermore, the cultural sympathy
between some New Dealers – those most wedded to a program of internal
reforms that required ending deflationist policies, with the resulting inter-
national consequences – and Mussolini’s Italy had consolidated the con-
tinuing favorable judgment of Fascism in America. This was true even if
the terrain for agreement had moved from economic interests to the rather
weaker ground of ideological pursuit of a third way, as an alternative to
capitalism and Soviet Socialism, to confront the crisis.
When Mussolini attacked Abyssinia, he introduced into this context
the first decisive rupture between the two countries in the interwar years.72
But before this rupture reached its dramatic peak in American public
opinion (accompanied by a slower and more contradictory turn among
elites), it was the very invasion73 that marked a high level of collaboration

71
ASMAE-AAP, bk. 14, Stati Uniti 1933, fol. Debiti e riparazioni – sf. Missione agli U.S.A.,
Guido Jung, Dettagli sul mio incontro col Presidente Roosevelt, Washington, D.C., May 4,
1933.
72
Diggins, pp. 277ff.
73
A. Del Boca, Gli Italiani in Africa orientale, vol. II, Bari: 1979; G. W. Baer, The Coming of
the Italian-Ethiopian War, Cambridge, MA: Harvard 1967; R. Mori, Mussolini and the
Conquest of Ethiopia, Florence: 1978. A. E. Highley, The Actions of the State Members of
the League of Nations in Applications of Sanctions against Italy 1935–1936, Genoa: 1938;
310 Roosevelt and Fascist Italy

between the two countries. It can actually be argued that the treatment
reserved for Mussolini in such a decisive moment for him was, along with
the stabilization of the lira, the culmination of a policy of collaboration
that he had planned since the first moments of his assumption of power.
Americans were divided into a complex array of positions on the issue
of Mussolini’s African enterprise.74 And yet very few of them had a real
sense of how high the stakes were. If the Spanish Civil War has been called
the dress rehearsal for Second World War (even if Great Britain and France
had not yet aligned themselves decisively), the Ethiopian war was the
practice run for the politics of the future Axis coalition and created the
necessary conditions for cementing such an alliance. Given that the
Japanese conquest of Manchuria had had a more marginal significance
in the maturation of a crisis destined to have its epicenter in Europe, it was
Mussolini’s attack on Abyssinia that constituted the first important
attempt by the Fascist dictatorships to test the great powers’ determination
to hold onto the world order of the first postwar period.
The Abyssinian war offered a formidable occasion for the champions
of the principle of collective security sanctioned by the Covenant of the
League of Nations. The violation of the League’s charter could not have
been more flagrant: one member of the League had been attacked without
provocation (the incident at Ual-Ual, or Welwel as it was often called in
English, even at the time not sufficed to hide that fact) by another member
of the League. What was more, the attacker was not as formidable as its
aggressiveness would seem to suggest, although it should not be forgotten
P. Bartholin, Aspects économiques des sanctions prises contre l’Italie, Paris: 1937;
L. J. Cibot, L’Ethiopie et la Société des Nations, Paris: 1939; A. Cohen, La Société des
Nations devant le conflit italo-éthiopien (Décembre 1934–Octobre 1935), Geneva: 1960;
E. L. Leroux, Le conflit italo-éthiopien devant la SDN, Paris: 1937; G. Salvemini, Prelude to
World War II, London: 1953; A. Berio, “L’affare etiopico,” in Rivista di studi politici
internazionali, XXV (April–June 1958): 181–219. On the attitude of the United States
regarding the Ethiopian war, see H. Wilson Jr., For Want of a Nail: The Failure of the
League of Nations in Ethiopia, New York: 1959; H. B. Braddick, “A New Look at American
Policy During the Italo-Ethiopian Crisis, 1935–1936,” in Journal of Modern History
XXXIV (March 1962): 64–73; R. A. Friedlander, “New Light on the Anglo-American
Reaction to the Ethiopian War, 1935–1936,” in Mid-America XLV (April 1963):
115–125; R. Manzoni, “Le leggi di neutralità degli Stati Uniti d’America (1793–1941)”,
in Rivista di studi politici internazionali XXIII (January–March 1956): 28–70; H. Hiett,
“Public Opinion and the Italo-Ethiopian Dispute,” Geneva Special Studies, vol. 7 no. 1 (Feb.
1936); J. Norman, “Influence of Pro-Fascist Propaganda on American Neutrality, 1935–
1936,” Essays in History and International Relations in Honor of George Hubbard
Blakeslee, Worcester, MA: 1949.
74
On the intertwining of neutrality policy, sanctions, and the Ethiopian war, see H. Feis,
Three International Episodes, New York: 1966; R. A. Divine, The Illusion of Neutrality,
Chicago 1962; J. E. Wiltz, In Search of Peace, Baton Rouge: 1963.
 3. War in Ethiopia. Challenges the Principle of Collective Security 311

that Italy’s status after participating in the victory of WWI was higher at
that time than it would later be. Even if the regime’s internal consensus
was strong, and reinforced in the face of the half measures adopted by the
League of Nations as sanctions, the military and economic vulnerability of
Mussolini was completely obvious.
Despite this, Mussolini’s undertaking was not an isolated incident
because already for some years the countries left unsatisfied by the
Treaty of Versailles had begun to reveal their intentions to modify its
conditions. Japan had occupied Manchuria, making a puppet state there.
Most notably, after Hitler came to power, Germany had in rapid succes-
sion quit the World Disarmament Conference and the League of Nations
(October 14 and 24, 1934), then formally denounced the articles of the
Treaty of Versailles that required disarmament, reintroducing obligatory
military service and creating thirty-six army divisions. There was no
doubt at all that the Depression, with its corrosive effects on the interna-
tional economic system, had served as the turning point for an explosion
of revisionist tendencies. These tendencies were being expressed in unilat-
eral coups by totalitarian regimes consolidated by an aggressive ideology
toward other states. Even if there were as yet no unified front among these
regimes (in July 1934 Mussolini had actually mobilized his own troops
against the threat of Anschluss, annexation of Austria by Germany, that
would take place four years later ), these states shared ideological, struc-
tural and behavioral characteristics that made their containment a prob-
lem as a group.
If a state can be forced to desist from its stated goals by means other than
warfare, it can be said that that state is gravely vulnerable. The potential
coalition of nations against Mussolini’s aggression was very strong, and
Mussolini himself was vulnerable. Great Britain, France, the Soviet Union
and the other League of Nations members had military, and especially
naval, power capable of crushing Italy in an open conflict.75 But Mussolini
was also vulnerable because it could have been equally effective to wield

75
P. Pieri and G. Rochat, Pietro Badoglio, Turin: 1974; R. Mori, p. 140. Mori wrote:
“Badoglio, who already in mid-August had, as we have seen, declared most explicitly
that the Italian armed forces were not capable of success against England, at the end of
September after a series of meetings with Great Power leaders re-emphasized the impos-
sibility of a positive result in the case of war against England. ‘In conclusion,’ he admon-
ished, ‘and to use precise terms required by the gravity of the situation, the conflict would
bring us to a true catastrophe.’ After this conclusion, Badoglio, availing himself of the
shared opinion of the State leaders, allowed himself to discourage Mussolini even at the
price of adulatory tones from any armed conflict with Great Britain. ‘Your Excellency,’ he
wrote, ‘has done enormous good for our country. You have brought worldwide honor to
312 Roosevelt and Fascist Italy

other measures against him if only those governments had willed it. The
success of the Fascist military was clearly dependent on the ability of the
Italian army to solve the problem of communications and transport
(the Ethiopian war was the first large-scale motorized war). That offered
the powers that wished it a few clear opportunities to thwart the Italian
invasion. First of all, Great Britain had control of the straits (Suez and,
eventually, Gibraltar) that the troop carriers would have to pass through
to arrive at the theater of war. Secondly, because of the long distances of
overland communications, the invading army needed a sizable refueling
capability as well as other raw materials beyond the normal national levels.
Fifteen years after its founding, the system of international relations con-
ceived by Woodrow Wilson faced a decisive trial whose result would
determine every other effort to chip away at the political and territorial
order sanctioned at Versailles.76
The events that followed are well known. Although Mussolini’s aims in
Ethiopia became more explicit in the course of 1935, Great Britain and
France did not make any serious attempt to oppose him preemptively. In
particular, the three-way conference at Stresa ended without MacDonald
or Laval declaring themselves on the issue,77 while the French prime
minister, both in the January accord and in the following meeting, gave
to understand that he would not raise any obstacles in the way of Italy,
now distracted from those objectives that usually conflicted with French
interests and perhaps still open to cooperating against the growing
German menace.78 When in September the military aggression became
explicit, the pressure of democratic public opinion in the major member
nations of the League provided the impulse for the approval of a few
sanctions. These included an embargo on the export to Italy of arms,
capital, and a few raw materials (but not the vital one, oil) and on imports
from Italy. Since it quickly became clear that such measures were not in
themselves enough to interrupt Mussolini’s acts of war, it was also pro-
posed to embargo petroleum, which would have paralyzed the transport
and supply lines of the Italian army if applied right away to prevent Italy

it. Your Excellency cannot interrupt this grandiose action.’ And he ended with the hope:
‘Your Excellency surely knows that in his inexhaustible resources, of which he has given
luminous proof, he will find an honorable solution to the terrible current problem which
avoids war with England.’”
76
Mori; FDRL-PSF, bk. Italy: Long, Breckinridge Long to F. D. Roosevelt, Rome, November
29, 1935. Naturally, Mussolini had maintained that even partial sanctions were equivalent
to acts of war.
77
Mori, pp. 20–25.
78
Mori, pp. 5–10.
 4. The Role of the United States 313

from stockpiling it. For a few weeks it seemed that the conditions would
be right in Geneva for a concerted action under the guidance of Great
Britain. In reality, the efforts to define and extend the collective action by
the League were paralleled simultaneously by Great Britain and France’s
efforts to appease Mussolini. This led to the Hoare-Laval Pact conceding
to Italy the de facto control of Ethiopian territory and economy, preserving
Ethiopia’s sovereignty only in formal terms. This pact, though swept away
by a wave of indignation, especially in British public opinion, forced Hoare
to resign from the position of foreign minister, with a destructive effect on
the policy painstakingly being constructed at the League of Nations. This
led to the total loss of indispensable British leadership, since the British
government, worried about its own military preparedness, did nothing
more than repudiate Hoare’s initiative without taking any further steps in
the direction of collective security. The neutral countries, more willing to
accept the discipline of the League, assumed stances of understandable
diffidence relative to the great powers. Finally, Hitler’s coup in occupying
the Rhineland on March 7, 1936, not only provoked a renewal of the
initiative in Geneva, but definitively moved international attention away
from Mussolini’s attack. Indeed, international concern for securing
Mussolini as an ally against Germany was strengthened. Badoglio’s army
had no further obstacles in its way; the Italians entered Addis Ababa
on May 5.

4. the role of the united states

The role of the United States was significant, even decisive in this whole
matter. It should be assessed within the general context of the intense and
even passionate debate about American foreign policy and specifically
about the best way to insulate America from a European conflagration.
As already discussed, the New Deal’s economic policies, and the resulting
abandonment of the United States’ role as stabilizer in the international
economy, had given new substance to the isolationist ideology of a pre-
vious era. Further, the investigation by a congressional commission
chaired by the ultraisolationist Senator Nye had revoked all those specters
from the First World War, when, according to Nye and his colleagues, the
interests of arms dealers and Wall Street financiers had dragged a reluctant
public into war against the central empires.79 Above all, the recurrent
tensions in the relations among the European states, frequently reported

79
Wiltz, pp. 29ff.
314 Roosevelt and Fascist Italy

in overdramatic terms by the isolationist American press, did not move

public opinion to favor collaboration with the efforts toward collective
security. Rather, they wished to pursue formal juridical mechanisms to
sanction and consolidate American noninvolvement in any eventual con-
flicts. Complicating this pursuit was a power struggle, characteristic of the
American system, between executive and legislative (particularly regarding
the Senate) powers over foreign policy. Behind the obviously abstract and
naive effort to legislate American neutrality hid the will of some members
of Congress to keep control of foreign policy conduct within their own
hands. That control had been largely evaded in past years, as we have seen,
due to the international role successfully played by bankers and experts
who as private citizens were not subject to congressional control but who,
by virtue of their close connections to the Republican administrations of
the 1920s and the interests they represented, had enjoyed ample support
from the executive branch. With the Depression, the institution of the
New Deal, the crisis of international economic relations, and the sudden
unpopularity of high finance, foreign policy had to pass to other hands.
Men such as Norman Davis, Paul Warburg, and the governor of the
Federal Reserve Bank of New York, George L. Harrison, did provide
some continuity in this transition and preserved great influence in many
international negotiations. But what happened was a renewal of the tradi-
tional conflict between the presidency and the State Department on one
side and the most influential members of congressional committees on
foreign policy on the other. There was a risk that at any moment this
could reignite into the virulence that had characterized the great battle
over ratifying the Treaty of Versailles.
The development of the Ethiopian crisis acted as a catalyst for prodding
Congress into new legislation protecting Unites States neutrality in the
event of a multistate conflict. Roosevelt and the State Department, unable
to stem the rising tide of neutralism, did attempt to revise the language
of the bill in order to preserve their own autonomy of action. At first
Roosevelt, on the advice of his State Department advisers, opposed the
work of the isolationist senators when, supported by Key Pittman, the
chairman of the Foreign Relations Committee and Democratic majority
leader, they tried to pass a law forcing the president to cease all arms sales
to belligerents, whether allies or enemies, aggressors or defenders.80 But
Roosevelt’s attempt to defend his discretionary powers would have to be
abandoned. Already in May of 1934 Congress had approved a motion

80
F. L. Israel, Nevada’s Key Pittman, Lincoln, NE: 1963.
 4. The Role of the United States 315

forbidding the sale of arms to Paraguay and Bolivia in their war over the
Chaco region. Further, Roosevelt’s pragmatism again came to the fore as
he calculated that an embargo would damage Italy more than Ethiopia,
which was unable in any case to buy and transport arms from the United
States.81 Most of all he realized that in such a delicate phase of his admin-
istration, when his domestic agenda was under attack from conservative
members of Congress and the Supreme Court itself, he needed to keep the
isolationists on his side as much as possible. The isolationists, progressives,
and rural populists were overlapping groups. Keeping their support, and
using Pittman as a bridge between them and the administration, was one of
the most delicate aspects of Roosevelt’s strategy after he had been under
the threat throughout 1935 of a party split that could have brought on
a defeat as crushing as the one of the Republican Party in 1912.82 In
addition, the international situation was so precarious that any delays
would be serious; the law on neutrality had to be passed before formal
war was declared between Italy and Ethiopia or it would lose all political
force. The law therefore passed the Senate on August 24, 1935, with only
two votes against, after having passed the House the day before. It stated,
“That upon the outbreak or during the progress of war between, or
among, two or more foreign states, the President shall proclaim such
fact, and it shall thereafter be unlawful to export arms, ammunition, or
implements of war . . .”83 The president had been forced to give up his most
important discretional powers and had only demanded that the law should
expire after six months in the hope that he would be able to revisit the issue
when the situation improved. In reality, as Divine observed, a precedent
had been set that the president would not be able to roll back.84 California
Senator Hiram Johnson, despite knowing that neutrality could not be
guaranteed only by legislation, exclaimed, “The joint resolution makes
plain the policy of the United States of America to keep out of European
controversies, European wars, and European difficulties. So today is the
triumph of the so-called ‘isolationists,’ and today marks the downfall . . .
of the internationalist . . .”85 Yet, the Ethiopian crisis revealed a whole new
array of alignments and coalitions motivated by the question of American

81
R. A. Divine, p. 113.
82
Israel, p. 143
83
Congressional Record, August 23, 1935, p. 14370; ibid., August 24, 1935, list of votes
p. 14434, passing of bill p. 14370, “Neutrality Bill” language p. 14365.
84
Divine, p. 113.
85
Congressional Record, August 24, 1935, pp. 14430–14432.
316 Roosevelt and Fascist Italy

neutrality; Woodrow Wilson’s old adversary in fighting for the League of

Nations had evolved significantly.
Up until that moment, the debate on neutrality had not included a specific
evaluation of the practical effects of such a stance in the new world of
economic and political crisis. The main advocates all had their gazes fixed
squarely on the past. In Europe, where more immediate concerns now
prevailed, the legislation was interpreted as a dangerous sign that the
United States was definitively rejecting any cooperation in collective action.
Only in Rome was the American declaration of neutrality welcome, coming
as it did just when the country was about to embark on a war of conquest.
The secret report compiled annually by the Italian ambassador in
Washington on foreign relations with the United States recorded that
Without this legal barrier, the worst consequences could have fallen on our coun-
try, successive events will confirm. Nonetheless [. . .] the Administration remains
firm in its position. The compromise that it had to accept or have forced upon it by
the Senate symbolizes the first step toward taking away the President’s ability to use
his discretionary powers to declare embargoes in all future world situations.86

The Italian satisfaction with the law goes to show that it did not have
the exact effect Roosevelt and his isolationist collaborators might have
hoped. On a practical level, however, the arms sales forbidden by the law
would not have been a determining factor in any case. Soon enough the
situation would demonstrate the truly decisive aspect of relations with the
United States pursued by Fascist Italy in this military effort. The economic
sanctions passed in Geneva were not sufficient to make Mussolini desist
from his plans, even if they exerted a notable pressure on the Italian budget
and gold reserves. Such decisions could not squeeze the Italian economy
fast enough or hard enough given the long-term control over commerce
and exchange the regime had established. The story was different when
it came to raw materials – above all oil, that indispensable product for
both domestic production and waging long-distance war. The so-called
Committee of Eighteen of the League was to meet and decide whether to
increase sanctions. A memo circulated by Palazzo Chigi to foreign repre-
sentatives shows the importance attributed to avoiding an extension of
sanctions to cover raw materials and in particular oil. The memo empha-
sized “the capital importance of any extension of the embargo to cover
petroleum, whether for the consequences it would have on the life of the

86
ASMAE-AAP, bk. 27, S.U. 1936, fol. Rapporti politici, pos. 1, sf. 13, Politica estera
Americana. Quaderno 49. Stati Uniti-Situazione politica nel 1935. (Relazione del
Segretario della R. Ambasciata in Washington, Nob. B. Capomazza).
 5. The Position of the Roosevelt Administration 317

civilian population or for the undeniable significance of such an act as a

hostile attempt to suffocate the nation.”87
If the League of Nations had adopted the proposal known as 4A, which
followed a Canadian suggestion, it would have added to the existing
sanctions an embargo on “petroleum and its derivatives, secondary prod-
ucts and residues, iron ore, iron and steel, etc., coal and coke, etc.” In that
case, the attitude of the producer states of those materials would have
become decisive, especially oil-producing states, which for the most part
were not League members – that is, most importantly, the United States of
America. It had the resources to completely neutralize the effects of the
League’s embargo by meeting all of Italy’s import demand by itself. That
decision depended in turn on the willingness of the American government
to follow the League’s restrictions, or at least not to make a mockery of
them by unleashing an unlimited flow of oil toward Italy and what would
come to be called Italian East Africa (Africa Orientale Italiana). More
specifically, the Roosevelt administration would play the decisive role by
proving the level of its ability and will to block the oil companies from
pursuing such a profit.

5. the position of the roosevelt administration

At least the State Department and Roosevelt himself were completely
aware that the stance assumed by the United States could decisively help
or hinder the position of the League of Nations. Various sources confirm
that Roosevelt, Hull, and in particular Roosevelt’s more liberal partners
such as Secretary of the Interior Harold Ickes and Harry Hopkins were
completely hostile to Mussolini’s agenda and favored every attempt to
reinforce the will of Great Britain and France in leading the League in an
effort for collective security. Their willingness, however, was limited by
political considerations. They did not want to sacrifice any popularity in
their domestic struggle in the name of a European commitment that
promised no certain success, given that the European allies were them-
selves hesitant in their conduct toward Mussolini. Roosevelt and Hull
showed a prudent approach in choosing the most restricted interpretation
of the expression “implements of war”; they did not include in that
category those crucial raw materials involved in the embargo.88 In other
words, the administration required an extension of the current legislation,

87
Cited in Mori, p. 175; Leonardo Vitetti, Interview.
88
Harris, p. 54.
318 Roosevelt and Fascist Italy

without which they did not feel authorized to forbid the export of those
decisive raw materials to belligerents. The president adopted two further
measures: Hull communicated to Geneva that the United States did not
care to be questioned on their position regarding sanctions, explaining that
their willingness to collaborate would depend on their need to avoid all
formal entanglements. Secondly, Roosevelt and Hull were determined to
prove their independence from Geneva’s institutions, if necessary by beat-
ing them to the punch on the timing of any recognition of a state of war. As
Harris argued, this served the double purpose of pleasing the pacifists and
revisionists who were opposed to any American entanglement in foreign
affairs as well as allowing Hull some freedom of maneuver in limiting trade
with belligerent nations and thus indirectly cooperating with the League of
Nations.89
Throughout October and November, Hull used this limitation in
various ways. He repeatedly stated that whoever traded with the bellig-
erents or used their transport systems did so at his own risk. Such
declarations from the secretary of state and the president culminated in
a press conference on November 15, 1935, at which Cordell Hull
declared a moral embargo on several products – petroleum, copper,
trucks, tractors, scrap iron, and scrap steel – that by their nature would
reinforce the war effort (in particular that of Italy). Hull called any export
of these goods exceeding the normal peacetime levels “directly contrary
to the policy of this Government as announced in official statements of
the President and Secretary of State, as it is also contrary to the general
spirit of the recent neutrality act.”90
The administration did not go so far as to impose its own point of view
on exporters through an open-ended interpretation of the law (and in
particular of the expression “implements of war”), but it could make the
moral embargo more effective by intervening in those few cases where a
commercial transaction was directly subject to the will of the government.
Thus, the Shipping Board Bureau of the Commerce Department could deny
authorization for the sale of a decommissioned ship the Italian government
wished to purchase as scrap iron, and the Commerce Department could
prevent the USS Ulysses from carrying a shipment of oil to Italy because that
ship had an expired mortgage. In this action, the secretary of state did his

89
Ibid., pp. 74–75.
90
“Statement by the Secretary of State (Hull), November 15, 1935,” U.S. Department of
State, Publication 1983, Peace and War: United States Foreign Policy, 1931–1941,
Washington, D.C.: 1943, p. 293.
 5. The Position of the Roosevelt Administration 319

best to maximize the few legal and politically feasible tools at his disposal.
The British ambassador in Washington telegraphed to his foreign minister,
Sir Samuel Hoare, in response to a precise request for information on the
matter, that it was impossible to predict whether the United States would
expand the existing limits on their trade with Italy, but that
The only thing which you may count on as certain is the determination of Secretary
of State to restrict shipments to normal proportions. Knowing what we do of this
persistent character you may feel quite confident that he will do his utmost to effect
this. But his powers are very restricted indeed and he is thrown back on extra-legal
methods.91

Probably Hull was too zealous for Hoare’s tastes, since Hoare was more
concerned with his secret negotiations with Laval to offer Mussolini most
of what he was seeking in order to end further conflict. In the meantime,
Ambassador Rosso protested energetically against the American actions
regarding the Ulysses.92
The federal banks had for some time been keeping tabs on all those
banks holding Italian companies’ credit. This however was a form of
pressure that did not translate into legislation or even any explicit policy
formulation by the federal government. It is nonetheless important to take
into account that the financial arena, traditionally anglophile and less
conditioned by the profit motive, was much more willing than the export
merchants and industrialists to conform to the government’s wishes. From
this point of view, the conduct of the Morgan Bank is enlightening. It
found itself between the frying pan and the fire as one of the traditional
banking agents of the Italian government in New York (even if those ties
were loosened by the Depression) as well as a fast friend of both France
and Great Britain, to both of whom Morgan was linked by numerous ties,
not all of them strictly financial. Not unlike other banks, at the beginning
of June, when the debate in the United States over the coming African war
was already brewing, the Morgan Bank decided to reduce by 25 percent
the amount of short-term credit offered to Italian banks (justifying this
choice by the noted reduction in Italian imports) and shorten the duration
of those credit terms from one year to ninety days. The partners did not
hesitate to communicate to Rome, through their representative Giovanni
Fummi, that this proviso was linked to the fact that

91
PRO-FO, 371/19218, tel. n. 412, Sir Ronald Lindsay to Sir Samuel Hoare, Washington,
December 5, 1935.
92
NA-DS, Memorandum from Green to Dunn, November 18, 1935.
320 Roosevelt and Fascist Italy

public opinion in this country regards the African development with little sympa-
thy. This feeling is not unlikely to express itself, almost unconsciously perhaps in
diminished eagerness as to Italy on the part of American importers and also for the
financing of exporters.93

Only a month later, Thomas W. Lamont, who was significantly in

London, approved the cancellation of the ninety-day credit term and the
bank’s ability, starting from October 15, to decide as it saw fit when to
continue existing credit agreements or create new ones. As was logical for
the bank’s representative in Rome, Giovanni Fummi tried to get Lamont
to postpone this decision, in the hopes that a rumored peaceful solution to
the Ethiopian crisis might come first. But Lamont confirmed the decision,
arguing that House of Morgan had to have complete freedom to act
expeditiously and that it was in any case a good idea to warn the Italian
government of his position.94 Fummi had no choice but to explain to the
Italian finance minister, Paolo Thaon di Revel, the attitude of the New
York banks regarding Italy, underlining that the particular stance of
J.P. Morgan & Co. was at least relatively more favorable. He did not
report how convinced the finance minister was by this argument.95
This was a series of decisions that, while managed with the maximum
caution, constituted a rupture of the long-term collaboration established
by the Morgan Bank as an agent of the Italian government in the widest
sense. Naturally, every decision had to be made in such a way as to leave
the path open for a future rapprochement. The bank had to offer a more
general explanation for its stance regarding Italy: a reevaluation of Italy’s
credit rating in America that justified the individual provisions taken in the
face of war preparations and influenced by the pressures of the government
and the Federal Reserve. When Lamont went to Europe in the summer of
1935, he asked the monetary expert of the bank, Russell Leffingwell, to
help him formulate such an evaluation that he could then have Giovanni
Fummi show to the Italian authorities.96 Later, after meeting Fummi in
Switzerland to better evaluate the Italian situation, Lamont transformed
Leffingwell’s letter into a memorandum that then became part of Fummi’s

93
HUGSBA-TWL, 191–194, J.P. Morgan & Co. to Morgan & Cie., for transmission to
Giovanni Fummi, New York, June 6, 1935.
94
HUGSBA-TWL, 191–194, Thomas W. Lamont to J.P. Morgan & Co., London, July 11,
1935.
95
HUGSBA-TWL, 191–194, Giovanni Fummi to Thomas W. Lamont, Rome, August 1, 1935.
96
HUGSBA-TWL, bk. 191–194, Russell L. Leffingwell to Thomas W. Lamont, New York,
July 12, 1935. All Leffingwell quotations below refer to this citation.
 5. The Position of the Roosevelt Administration 321

own prepared notes.97 “Having come here rather recently from New York
I can perhaps give you a little idea of the status of Italian credit in the
United States of America at the present moment,” wrote Lamont. Every
effort, in sum, was made to present these changes in their least binding
but also least provocative form. The partners wanted to emphasize that
Italy’s preparations for war were gravely damaging its credit rating in the
United States. Perhaps one of the objectives of the memorandum was to
introduce an element of doubt in Mussolini’s calculations, or at least to
make him more amenable to compromise; but it was clear that the partners
wanted him to understand that the war would create a situation that would
not be resolved through rhetoric aimed at saving face with American
public opinion or markets. “The Ethiopian development overshadows in
my thought, and everyone’s, the Finance Minister’s planned economy
speech,” wrote Leffingwell. And Lamont restated that point in his memo-
randum by writing that
Our newspapers display such foreign news in a way to catch the attention of the
whole public. You would hardly dream that Abyssinia – Italy – Mussolini – are
the chief topics of conversation in the U.S.A. these days, breakfast and dinner. The
feeling is one largely of bewilderment and dismay. People are asking themselves
what there can possibly be in Abyssinia worth a prolonged campaign, costly in lives
and money.

At the same time, both Leffingwell and Lamont clarified that the immi-
nent war was only the straw that broke the camel’s back. This was made
clear in the document presented to Fummi:
In a word, Italian Government, banking and commercial credit has been running
downhill in London and New York for the last two years – most noticeably in the
last twelve months. This loss is due to the receding state of the Italian economy.

Leffingwell, who was one of the main theorists of the strongly defla-
tionist policy of the return to the gold standard of the 1920s, was above all
concerned by Italian monetary policy in the new Keynesian climate of the
‘30s with the American abandonment of the gold standard:
I am profoundly convinced that the honorable and so far successful effort of the
Italian Government to maintain the lira at a fixed price in spite of the depreciation
of the dollar and the pound sterling, not to mention other commercially less

97
HUGSBA-TWL, bk. 191–194, Giovanni Fummi to Thomas W. Lamont, London, August
7, 1935, to which is attached a copy of the memorandum “that you wrote while you were
in St. Moritz.” All Lamont memorandum quotations below refer to this citation.
322 Roosevelt and Fascist Italy

important currencies, is drastically and devastatingly deflationary, and that the

supporting measures for canalizing trade and controlling the exchange are also
deflationary. It is an evidence of the great mastery of the Duce and of his super
political genius that he has been able to maintain the lira stationary against an ebb
tide of such overwhelming proportions.

To some extent Leffingwell considered Mussolini’s recessionary policy

with poorly disguised admiration, at a time when the orthodoxy he had
theorized and helped administer in Europe for more than a decade had
been thrown into crisis. However, the rigid logic of the material interests of
the economy on which the Leffingwells of the world still staked their
fortunes demanded that Italy adapt its economy and above all its currency
to the criteria that had at this point been embraced in the dollar and sterling
zones. This actually did demonstrate continuity with previous Morgan
Bank policy: as in the past, the return to the gold standard had been seen
as necessary for inserting the Italian economy into the monetary and
commercial system dominated by the dollar; now the ‘30s required a
similar adaptability, but in the opposite direction. At this point free trade
and monetary cooperation on an international level were necessary, under
an Anglo-American leadership that needed to be rebuilt from the ground
up after the damage caused by the Depression and its prioritizing of
domestic concerns. What worried Leffingwell and Lamont the most were
not so much the social effects of such a policy, but above all its effects on
trade and finance, and in the final analysis on the weakening of the Italian
economy that might ensue, definitively excluding it from international
markets. As Leffingwell wrote:
Now, exchange control, and the canalization of trade, have grown so that pur-
chases tend to be made only in countries to which sales are made. While these
controls have the temporary effect of making the maintenance of the gold value of
the lira possible, inevitably they tend to restrict the volume of trade and to restrict
the choice of what Italy buys and reduction in the price of what she has to sell.

Lamont pushed the point, in the articulation of the memorandum,

underscoring that the reduction in the volume of trade immediately trans-
lated into a damage to Italy’s credit, “For you recognize that London and
New York bankers get ill news very quickly and heavily diminishing
foreign trade is quickly noised abroad as a very unfavorable symptom.”
Lamont noted that it was the drastic reduction in trade volume that had
been the main sign of the financial crisis that struck Great Britain in
September 1931. In fact, affirmed Lamont, several Italian industrialists
had recently failed to secure credit in London. The same would occur in
 5. The Position of the Roosevelt Administration 323

New York. Short-term credit had been drastically restricted there, includ-
ing by the Morgan Bank itself.
The main worry of the partners is legible between the lines: that Italy’s
policies would remove its economy from the control of the interests they
represented. But, in order to make their arguments most effective, they
endeavored most of all to warn of the negative effects such a policy would
produce in the Italian economy itself, regardless of the work any financial
and commercial interlocutors Italy chose for herself might try to perform.
On this topic Leffingwell claimed:
The reason why this fundamental fallacy persisted so long is that it does work after
a fashion. It takes a long time for bad economic habits to undermine the health of a
loyal and patriotic people like the Italians, blessed with a sunny climate and used to
simple living in a fertile and pleasant land.

It seemed that the old myth of Italy as the garden of Europe had been
exhumed for the occasion. Naturally this sort of analysis neglected several
basic economic and political realities: first of all, it was the Depression and
its redirection of political priorities in America that had encouraged a
similar conduct on Italy’s part and, more seriously, in Nazi Germany;
and secondly, Mussolini had already made political choices that required
a new economic order. The partners were trying to undermine those very
realities by harking back to old free trade models. In this they ran up
against the fact that Mussolini had already calculated that his new orien-
tation would have the cost of a crisis of Italian credit in the New York and
London markets, and had concluded that the price was worth it. Even the
emotional appeal in Lamont’s memorandum was of little use:
In other words, Italy’s best friends in England and America are having the ground
out from under their feet. No matter how great their devotion, no matter how much
they have admired the Duce, Italian developments have simply deprived their
foreign friends of the power to assist her.

Perhaps these observations, accompanied by such intense professions of

friendship, were mostly aimed at keeping open the lines of communication
in hopes of a future renewal of business in more favorable circumstances.
In the meantime, the governmental controls on banks became stronger
and stronger. On September 18 one of the vice presidents of City Bank of
New York spoke with the State Department’s economic adviser, Herbert
Feis, to deny the published rumors that his or any other New York bank
was doing “anything out of the normal” in terms of financing exports
destined for Italy. Feis was convinced that the goods imported from Italy
324 Roosevelt and Fascist Italy

were for the most part being paid for in cash.98 Less than two months later,
in the midst of the controversy over exporting raw materials to Italy, the
National Association of Credit Men (a professional bankers’ organization)
organized in New York a meeting of bankers and exporters in which the
former warned the latter that if the United States were to prohibit further
exports to belligerent nations, even irrevocable letters of credit held by
Italian interests at American banks would not be honored. Many bankers
present affirmed that they were already including such a warning clause in
their letters of credit for payments of exports to Italy.
Nor was this the only sign of disturbance. At the same meeting it was
emphasized that, as in other world markets, New York’s total volume of
exports to Italy had dropped in the past two months but that exports of
cotton, oil, and other raw materials had increased.99
Simultaneously, with little more than symbolic effect, Secretary of the
Treasury Henry Morgenthau cancelled his reservation on an Italian ship
for his voyage to Europe, setting an example for patriotic Americans to
deny Italy even this small amount of financial support. These pressures
reached their height on November 22, when the Italian ambassador in
Washington, obeying government instructions, went to Hull to deplore the
official declarations from American representatives over the past months.
He referred in particular to the one made by Hull himself on November 15,
calling such actions hardly neutral in their negativity toward Italy, as well
as violations of the treaty on commerce and navigation of 1871 between
their two countries, which declared “total liberty of commerce and navi-
gation.” He added that any extension of the embargo to include raw
materials would constitute “a hostile act” toward Italy. Rosso abstained
from mentioning any reprisals, however, believing with good reason that
they would have little effect, and might be counterproductive. In fact, he
thought it probable that the recent statements by Secretary of the Interior
Ickes against exporting oil to Italy and the letter from the Shipping Board
advising the ships it controlled in the merchant marine not to carry raw
materials to belligerents were already themselves the results of threatened
reprisals that had reached the secretary’s ears. Naturally, Rosso, in tele-
graphing this opinion to Mussolini, was implicitly cautioning Rome to
curtail its rhetoric.

98
NA-DS, Memorandum of the Undersecretary of State [William Phelps], Washington,
D.C., September 18, 1935.
99
PRO-FO, 371/19214, Sir Ronald Lindsay to Sir Samuel Hoare, Washington, D.C.,
November 7, 1935.
 5. The Position of the Roosevelt Administration 325

The lengthy memorandum dictated by the secretary of state at the

meeting’s close elicited Roosevelt’s congratulations (“You did a splendid
job in making our position clear and, at the same time, pointing out the
very untenable position in which Italy has deliberately placed herself,” he
wrote) and gives the impression that the visit of the Italian ambassador
was the opportunity for the secretary of state to give vent to some strong
feelings. Although the meeting appears to have been the strongest instance
of American pressure exerted on Italy, it also revealed the sense of embar-
rassment and impotence in the Roosevelt administration at not being
able to force measures to limit the essential strategic exports to Italy and
end its African adventure. Even in the heat of a meeting that according to a
witness brought the Italian ambassador to abandon “the calm serenity of
manner that generally characterizes him,” Hull was careful to maintain
the cardinal points of the ideology the Roosevelt administration had to
respect: in particular the impartial character of any restrictive measure
visited on the belligerents, and the United States’ total independence from
any decisions made in Geneva. The insistence and vivacity with which
Hull, in this and other occasions, insisted on the latter point led Rosso to
conclude that he might be protesting too much and the opposite might be
true. Hull had rebuked the Italian representative for the missed war debt
payments; called it “truly surprising” to claim that the American unwill-
ingness to offer an unlimited supply of war materials was a hostile act; and
asked in conclusion why Italy was not willing to sit down and resolve this
question peacefully, reminding him that Hull and the president themselves
had almost begged Mussolini not to start a new war, with no result other
than to be importuned with requests for further supplies from
a government in the midst of a war “ad libitum”. The secretary of state
did not fail to mention, with evident pleasure, the content of this meeting
to Rosso’s British colleague, Sir Ronald Lindsay, saying that “he had not
spared his words to the Italian Government.”100
The meeting between Hull and Rosso ended the phase in which the
Roosevelt administration tried hardest to contribute to a collective action
restricting Mussolini. The natural internationalist inclination of Hull and

100
ASMAE-AAW, Augusto Rosso to Benito Mussolini, Washington, D.C., November 26,
1935; FDRL-PSF, Franklin D. Roosevelt to Cordell Hull, Palm Springs, November 27,
1935; Joseph C. Green to J. Pierrepont Moffat, Washington, D.C., November 25, 1935;
Augusto Rosso to Benito Mussolini, Washington, D.C., November 27, 1935 in “Collana
di testi diplomatici” n. 7, Augusto Rosso, Roma: 1979, p. 48; PRO-FO, 371/1922, tel.
segreto n. 1331, Sir Ronald Lindsay to Sir Samuel Hoare, Washington, D.C., December
10, 1935, pp. 1–2.
326 Roosevelt and Fascist Italy

Roosevelt, both old disciples of Woodrow Wilson, had been elicited by the
sense that Geneva was finally going to act effectively under British leader-
ship as well as by the data from the Commerce Department showing that
American exports to Italy were objectively a large contribution to Italy’s
ability to wage war. This responsibility weighed heavily on the shoulders
of Washington’s leaders.

6. italo-american trade and the oil question

It is impossible to make an exact calculation of the Italian demand for oil
in the period of the Ethiopian war, but the following figures on total oil
imports offer a useful, initial overview.

Period Tonnage
1933 1,738,000
1934 1,856,000
1935 (Jan.–June) 1,012,000
1935 (July–Sept.) 531,000

Source: PRO-CAB 245/257, Memorandum by Petroleum

Department of the Board of Trade, London, 27
November 1935, p. 4.

Remember in considering the data for 1934 that about 600,000 tons
should be added because the figure in the chart does not include the oil that
had not yet cleared customs or the oil left over from the previous period.
Further, these figures do not include the amount of oil imported directly
by Italian East Africa. Taking into account that the real amount of oil
imports for 1934 was about 2,500,000 tons, and extrapolating from the
data for the period July–September 1935 to the later months, the total
annual demand for oil in 1935 was a minimum of 2,700,000 tons. But
this is a minimum estimate that does not take into account the increase
in demand due to the war, which was presumably an exponential rise. As
a matter of fact, the oil companies themselves made the more generous
estimation of an annual Italian demand of 3,800,000 tons, based on a daily
demand of 8,000 tons.101
The crucial aspect of the sanctions’ possible effectiveness, with or with-
out the cooperation of the United States, was the supply sources. Where

101
PRO-CAB, 245/257, Memorandum by the Oil Companies. Oil Sanctions and Italy,
London, December 1935, p. 3.
 6. Italo-American Trade and the Oil Question 327

did Italy get those 2.5 million tons of oil it needed in the two previous years,
and where could it find that same amount (actually more, due to the war)
in 1935 and 1936?
This table, furnished by the Petroleum Department of the Board of
Trade (of the British Foreign Commerce Ministry), answers the first
question:

Exporting Nation (by percentage) 1933 1934 1935* 1935**

Romania 35.2 34.1 40.6 59.1
Soviet Union 29.6 21.7 21.7 20.0
Iran 9.8 11.6 15.0 3.2
United States of America 9.0 11.2 7.1 8.5
Dutch Indies 7.5 8.2 10.7
Other countries 8.9 12.9 10.6 19.2
(*)

Sources: PRO-CAB, 245/257, Memorandum by Petroleum Department, p. 4; PRO-CAB,

245/257, Memorandum by the Oil Companies. Oil Sanctions and Italy, London, December
1935, p. 1
* These figures are for January–June, inclusive.
** August–November 15: data furnished by the British Petroleum companies.
(*) Venezuela accounted for 12.4 percent in this number.

The expert subcommittee nominated by the League of Nations made a

different set of calculations for 1934:

Romania 32.2
Soviet Union 27.8
Iran 10.3
United States of America 6.4
Latin America 17.4
Other countries 5.9

Source: H. Feis, Seen from E.A.: Three

International Episodes, New York: 1947, p. 309.

The only substantive difference between the two calculations had to

do with the proportion represented by Latin America, primarily
Venezuela. In the figures from the Board of Trade, it was estimated to be
around 12 percent, included under “Other countries,” whereas the League
of Nations experts attributed 17.4 percent of Italy’s total imports to it in
1934. The Board of Trade attributed 10.7 percent to the Dutch Indies
in the same period, while the experts in Geneva put the amount at about
5.9 percent in “Other countries.” These discrepancies are not sufficient
328 Roosevelt and Fascist Italy

to modify the most important conclusions suggested by comparing the

last three columns of each table, however. The following data regarding
exports to Italian East Africa further accentuate them:

Provenance 1934 August–November 15, 1935

Romania _ 14.6
Soviet Union 24.5 5.9
Venezuela – –
Iran and Dutch Indies 41.4 16.7
United States of America 7.8 26.9
Other 26.3 35.9
Total 100.0 100.0

Source: PRO-CAB, 245/257, Memorandum by the Oil Companies. Oil Sanctions and Italy,
London, December 1935, p. 2.

When Hull and Rosso had their meeting, at a moment when in Geneva
the extension of the embargos to oil was being seriously considered, Italy
had already begun revising its import strategy for raw materials. First of
all there was a drop in imports from those countries that appeared most
hostile to Mussolini’s Ethiopian project and were most committed to
the sanctions already in place. The imports from the Soviet Union, while
remaining consistent, diminished notably starting in 1934. The same was
true for Iran, which marked its total dependence on British imperial policy.
Imports from the United States, however, grew proportionally starting in
the autumn of 1935.102 This impression is strengthened by observing the
data regarding the imports directly to the theater of war, which throw into
greater relief the political influence on the overall configuration of Italian
imports. Romania not only remained the principal source but increased its
overall share during the period considered. The relatively modest amount
of Italian demand satisfied by American oil became greater, which one
can tell was destined to serve military needs by disaggregating the various
subproducts. According to the League of Nations data, in the period
1932–1934, Italy imported from America 14.9 percent of its crude oil,
9.4 percent of its diesel, 3.5 percent of its gasoline, and a whopping
48.3 percent of its total lubricant demand.103

102
In his first parliamentary speech as foreign minister, in the House of Commons on
February 24, 1936, Eden stated that Italy’s oil imports from the United States had gone
from 6.3 percent in the period January–September 1934, to 17.8 percent in October–
December 1935 (Earl of Avon, The Memoirs of Anthony Eden, Earl of Avon, vol. 1:
Facing the Dictators, 1923–1938, Cambridge, MA: 1962, p. 357).
103
H. Feis, Seen from E.A.: Three International Episodes, p. 306.
 6. Italo-American Trade and the Oil Question 329

Turning to the total American figures for raw material exports to Italy,
the effect of the Ethiopian war and the League of Nations sanctions
becomes very clear. But the data on raw materials only make sense in
the context of the overall commercial relationship between Italy and
America.
The failure of the United States to participate in the sanctions had a
strong effect even on their early phase, which aimed to limit purchases of
Italian imports (and which were, obviously, closely tied to the problem of
Italy’s access to raw materials, inasmuch as they provided the hard
currency necessary to do business with suppliers who, as was the case
with American oil companies, dealt in cash in order to avoid tax-based
governmental sanctions as well as to be more sure of a client that was
obviously in precarious financial straits and therefore not a good credit
risk).104 Indeed, the United States and Germany, which were not mem-
bers of the League of Nations, were responsible for the purchase of
23 percent of Italy’s exports in 1934. The United States by itself made
the following transactions:

Italian Imports (percentage of total) Italian Exports (percentage of total)

1933 15.0% 8.7%
1934 12.5% 7.4%

Source: Feis, Seen from E.A., p. 304.

If we extend the comparison to the years affected by the Ethiopian war,

the result is significant:
American Commerce with Italy (in millions of dollars of that year)

Italian Imports Italian Exports

1934 276 213
1935 4,558 218
1936 771 224

Source: Feis, Seen from E.A., p. 304.

Disaggregating these numbers by month makes the connection to the

war even more evident:

104
PRO-CAB, 245/257, Memorandum by Petroleum Department of the Board of Trade,
London, November 27, 1935, p. 5.
330 Roosevelt and Fascist Italy

American exports to Italy

(in thousands of dollars)
October 1934 6,226 October 1935 6,529
November 1934 8,445 November 1935 9,125
December 1934 4,821 December 1935 7,944
January 1935 6,257 January 1936 5,420
American imports from Italy
(in thousands of dollars)
October 1934 2,943 October 1935 4,401
November 1934 4,179 November 1935 6,108
December 1934 5,207 December 1935 4,740
January 1935 2,424 January 1936 3,170
Exports to Italian East Africa
August 1934 11 August 1935 1,704
September 1934 29 September 1935 508
October 1934 45 October 1935 363
November 1934 18 November 1935 590
December 1934 4 December 1935 374
January 1935 20 January 1936 22

Source: Feis, Seen from E.A., p. 306.

It is clear that the overall amounts of trade between the two countries,
especially Italian imports, were dramatically influenced by the war, reach-
ing an apex in the final months of 1935. The figures for Italian East Africa
are notable to the extent that they demonstrate how the war transformed a
fundamentally nonexistent trade in that region into a fevered trade – or
rather, import – situation that can only be explained in terms of the war.
The table that follows, instead, specifically illustrates Italian imports of
raw materials and machinery from the United States. These figures also
show an effect from the war, including the effects of extending sanctions.
As the table shows, all raw materials and products except cotton under-
went a very strong increase (hovering around 100%) from 1934 to 1935,
without however nearing the levels of 1928, before the Depression. The
only exception is machinery and transport vehicles, which deserve a short
and separate explanation. A large part of the controversies in this era
swirled around raw materials, and especially oil. The available figures
indicate that purchases of trucks from Ford and General Motors were of
great importance for what was the first motorized war of substantive size
and which played out almost exclusively through communication and
supply lines. If we add to the figures in the table the fact that the exports
of such products to Italian East Africa had gone from a value of $172,706
 6. Italo-American Trade and the Oil Question 331

in the first ten months of 1934 to the enormous amount of $2,961,681 in

the first ten months of 1935,105 there can be no other possible conclusion
than that the motorization of the Italian war effort was largely guaranteed
(to be more precise would require the data on other available vehicles, but
the sum of purchases still constitutes clear evidence) by the import of
American vehicles.106
American Exports to Italy (in dollars)

Refined Vehicles and

Cotton Oil Scrap Iron Copper Machinery
1928
Aug. 2,819,021 1,185,278 1,512,072 338,338
Sept. 6,944,953 1,487,134 1,662,619 267,479
Oct. 8,928,786 1,987,212 1,024,669 604,465
Total 18,692,760 4,659,624 0 4,199,360 1,210,282
1934
Aug. 1,512,529 477,435 224,564 329,077 549,613
Sept. 2,079,999 580,830 220,994 303,675 460,861
Oct. 3,740,755 382,857 179,458 188,237 426,153
Total 7,333,283 1,441,122 625,016 820,989 1,436,627
1935
Aug. 1,528,740 656,355 370,712 764,988 1,011,360
Sept. 2,026,395 624,287 479,135 454,468 1,059,203
Oct. 2,602,443 1.087,942 463,817 534,094 832,514
Total 6,157,578 2,368,584 1,313,664 1,753,550 2,903,077

Source: CFR, Information for Members, attached to Council on Foreign Relations,

Conference on American Neutrality Policy, New York, November 13, 1935.

The data specifically on oil are equally revealing. Beyond the figures
recorded in the table of the Council, it may be observed that, according to
data from the Department of Commerce and cited by Herbert Feis, when
Hull received Rosso’s visit he already knew that exports of oil to Italy and
Italian Africa for the month of October had reached a sum of $1,084,000
dollars, while in that same month in 1934 they had only been about a third
of that ($382,857). In the following months, the situation would become
even more acute. Given that the monthly average of all petroleum exports
to Italy between 1932 and 1934 had been $480,000, there was an extra-
ordinary growth in imports due to the war even if one discounts the usual

105
NA-DS, 711.00111 Armament Control/662, Charles W. Yost, office chief, Office of Arms
and Munitions Control to the Federal Motor Truck Company, Washington, D.C.,
December 23, 1935.
106
See also B. Migone and A. Ferrero.
332 Roosevelt and Fascist Italy

seasonal increase of 10 percent.107 In November 1935, it was $1,684,000;

December, $1935, 2,674,000; and in the last three months of 1935 it
reached the stunning total of $5,442,000. This is in comparison to a
total for the entire year of 1934 of $6,062,000.108 Herbert Feis, at that
time the economic adviser to the State Department, observed: “Included in
our shipments during the last three months of 1935 was $828,000 sent
directly to Italian East Africa – that is, directly supplied for the use of the
Italian Army and Navy and Merchant Marine.”109
This progression of data regarding American oil exports clearly dem-
onstrates that, starting in the month of October, the Italian government
had begun to modify its choice of suppliers in preparation for imminent
sanctions from the League of Nations, especially depending on American
oil to provision the expedition corps in African territory. The total amount
indicates the significant, even determinative, weight of American oil in the
Italian war effort.
The reasoning of the British petroleum companies as set out in a memo-
randum for the cabinet was even bolder in coming to this conclusion.110
According to that memorandum, the United States produced around
400,000 tons of crude per day. Even if the major oil companies were willing
to respect the moral embargo proclaimed by the Roosevelt administration,
the minor companies and producers were completely uncontrollable in this
way; their production alone amounted to 80,000 tons of crude per day
(60% of world demand).111 Their conclusion: the normal Italian demand
was 8,000 tons per day, so that, even without supplies from Romania and
the Soviet Union, and allowing for an exceptionally large demand from Italy
in wartime, Italy would be able to obtain all the oil it wanted simply by
turning to the wildcat American oil companies.
The evaluation by the British oil companies should be taken with a grain
of salt, given their own interests in discouraging the extension of sanctions
and above all in preventing sanctions without the complete participation
of the United States. In the first case they would loose, together with the
whole sector, the profits from trade with Italy, but in the second they
would actually be forced, probably for good, to give up the positions
reached within the Italian market to their American competitors lying in
wait. And yet their reasoning is convincing. As they showed, what counted

107
Feis, Seen from E.A., p. 307.
108
Ibid., p. 307–308.
109
Ibid., p. 307.
110
PRO-CAB, 245/257, Memorandum by the Oil Companies, pp. 2–3.
111
Harris, p. 88.
 6. Italo-American Trade and the Oil Question 333

was not the total amount of oil imports from the United States to Italy, as
these were relatively limited numbers even if they were rising rapidly. What
was important was the elasticity of supply, especially outside the normal
channels of the major oil companies, that might be influenced by the
embargo. In this regard only if the figures cited in the memorandum were
wildly falsified would it in any way change the basic truth they reveal. And
in truth, even the assumption that the major oil companies would respect
the embargo was not a given. The administration itself never offered a
precise definition of what was meant by normal peacetime levels of busi-
ness. The most natural application of such a principle would use the data
from 1934 as a baseline, but the lack of an official definition was in and of
itself a loophole for anyone with less than sincere intentions. Another
expedient available to the major oil companies, which extracted much of
their oil outside of American territory, was to do business through a
foreign branch while the headquarters continued to appear to obey
the embargo. There was an episode that, although it turned out to be
unfounded, showed how much the administration and Roosevelt himself
were aware of this danger. At a certain point a rumor began to circulate
that Standard Oil had created a branch in Switzerland in order to trade
conveniently with Italy without any regulation and without contradicting
the moral embargo within the United States.112 Immediately, Roosevelt
wrote to Hull:
Please ask the Standard Oil of New York, Standard Oil of California if this is true,
and why the Standard Oil Company of Switzerland has been organized. If it is for
the facilitating of exports of oil from this country to Italy, I strongly recommend
that you tell the story to the Press. F.D.R.113

On these instructions, the State Department contacted the presidents

of the three companies of Standard Oil (Socony Vacuum Oil Company,
which had taken the place of Standard Oil of New York; Standard Oil
Company of New Jersey; and Standard Oil Company of California), which
denied the existence of the company in question. The State Department
charged its official in Berne, Hugh Wilson, with further investigating the
matter on the scene.114

112
FDRL-OF, 663, Robert P. Skinner to Cordell Hull, Istanbul, November 21, 1935.
113
FDRL-OF, 233 A, Franklin D. Roosevelt to Cordell Hull, Warm Springs, Georgia,
November 23, 1935.
114
FDRL-OF, 663, Cordell Hull to Franklin D. Roosevelt, Washington, D.C., November 27,
1935.
334 Roosevelt and Fascist Italy

Aside from the fact that this was a false alarm, the episode demonstrates
how easily the major oil companies could have exploited various loopholes
and how rudimentary the implements of regulation at the administration’s
disposal. The very words of the president offer more indirect proof of
the disproportionate resources of the oil multinationals: he spoke of “facil-
itating of exports . . . from this country.” That meant that, if Standard Oil
had exported the oil from the United States to Switzerland, and from there
to Italy, it would violate the moral embargo proclaimed by the Roosevelt
administration. And if instead this same operation had been made not
with oil from American wells but from Standard Oil wells in other parts of
the world? In that case, according to the president’s words, there could be
no objections. Did the moral embargo, or a future more strict embargo,
apply only to oil extracted in the United States or to all oil under American
control? The first case would be mere farce; the second would mean
securing the cooperation of the authorities in the countries of extraction
in a major undertaking to support sanctions. Also, in the latter case, the
embargo would only be effective if it were of general application, which
would mean that the United States and League member nations would
work together, starting with Venezuela, where 60 percent of the oil was
controlled by American interests, the other 40 percent by British compa-
nies.115 There was even a further possibility for subterfuge on the part of
the major companies. They could have exported oil to a country that was
not part of the League of Nations and that did not intend to participate
in the sanctions (the memorandum of the British companies gave the
express example of Japan), which would in turn be able to export it to
Italy, as long as the necessary means and funds could be found to deal with
the greater costs this lengthy itinerary would induce.
Although the moral embargo proclaimed by the United States would
not be sufficient to block the flow of the oil Mussolini needed for domestic
demand as well as for the war, it seemed that the major oil-producing
nations were willing to respect an eventual embargo declared by the
League of Nations. On November 29, immediately after the Committee
of Eighteen decided to postpone any declaration, the League’s secretary-
general, Avenol (who was perhaps more than any other qualified to make
such a statement), expressed some precise positions. The enforcement of an
embargo on oil by the Soviet Union, Romania (of utmost importance for
the percentage of Italy’s imports it represented), Iraq, India, and Finland
was taken for granted by Avenol, because those countries had already

115
PRO-CAB 245/257, Memorandum by the Oil Companies, p. 3.
 6. Italo-American Trade and the Oil Question 335

announced their acceptance of Proposal 4A, including oil even if the

opinion of the Petroleum Department of the British Board of Trade should
be taken into account: that,116 Romania ought to be compensated in some
way for its participation as Italy represented so much of Romania’s com-
mercial income. Great Britain affirmed its willingness, so the Netherlands
and Iran could be expected to adapt themselves to its wishes. The position
of Venezuela was more in doubt because Italian influence was strong there,
even though, as seen, the British and American oil companies controlled
extraction.117 Given that, of the most important producing countries,
Romania, in addition to being favorable to the embargo, was also in
close contact with the American government118 and the Venezuelan gov-
ernment could also be influenced by the Americans, it was clear that
the United States’ attitude regarding an eventual oil embargo declared by
the League of Nations would have a decisive effect.
Finally, the British were also considering another possibility, which was
eventually judged impractical: instead of embargoing oil, preventing its
transport; that is, creating a blockade on oil tankers.119
In synthesis, an oil embargo would have effectively forced Mussolini, if
not to surrender, at least to move quickly to negotiation from a weakened
position. Confirmation is to be found not only in Mussolini’s violent
reaction to the proposals – he went so far as to threaten war against
Great Britain, according to the beloved account of Sir Samuel Hoare and
Lord Lothian120 – but also in the evaluation of the British Board of
Trade,121 according to which Italy had at its disposal the ability to stock-
pile a maximum of three extra months of oil under normal circumstances
even if it added to its own Agip reservoirs those it might requisition from
British and American companies. Still, the United States’ moral embargo
would not be sufficient to reach this objective. The loopholes it offered,
the attitude of the smaller exporters, the maneuverability of the major
companies, and American extraction capabilities all were such as to allow

116
PRO-CAB, 245/257, Memorandum by Petroleum Department, p. 2.
117
NA-DS, 765/2812, tel. n. 625, Prentiss Gilbert to Cordell Hull, Geneva, November 29,
1935, p. 4.
118
NA-DS, 711.00111 Armament Control/514, Cordell Hull, Memorandum of
Conversation between Secretary Hull and the Rumanian Minister, Mr. Charles
A. Davila, Washington, D.C., November 29, 1935.
119
PRO-CAB 245/257, Memorandum by the Oil Companies, p. 6.
120
See CFR, Study Group Reports, The Most Honorable the Marques of Lothian, American
Neutrality and European Peace, Digest of Dinner Discussion, New York, January 20,
1936.
121
PRO-CAB, Memorandum by Petroleum Department, p. 6.
336 Roosevelt and Fascist Italy

Italian supply despite the embargo. This impotence was clear from the
ongoing increases in American exports even after the proclamation of the
moral embargo. In the absence of an explicit American adherence to a
League of Nations embargo, the participation of other states such as
Venezuela and perhaps Romania would be a dead letter. The oil embargo
could have been a decisive weapon, but only if it had been universally
enforced.
Reversing the terms underscores the situation. The cited figures show
clearly that, while there might be some minimal residual doubt of the
effectiveness of an embargo on oil that included the United States, there
can be no doubt that an embargo executed only by League member nations
could only be ineffective. Finally, the timing also sealed its fate. If Geneva’s
offensive in November had brought on a total blockage of oil exports
supported also by the United States, it could have had a serious if not
determinative effect. A block in February – when talks were renewed on
the issue – would be less certain, even with U.S. participation, since in the
meantime Italy had been able to stockpile conspicuous supplies as well as
modify its list of suppliers. Therefore, one may conclude that the crucial
factors were, first, the failure of the Roosevelt administration to obtain
legislation supporting the embargo in October and, second, the adminis-
tration’s inability to interpret the legislation that did pass – and in partic-
ular that expression “implements of war” in a manner that would allow
for the same result. The numbers show as well that the so-called moral
embargo had little effect other than perhaps to encourage the powers in
Geneva to extend the embargo to cover oil and other raw materials. The
insistence with which Ambassador Rosso indicated on November 27 that
it was by then a matter only of avoiding a partial embargo of the exports
exceeding normal peacetime trade levels tends to prove that such a limit
provoked considerably minor worries in Rome.122

7. the debate on the embargo of raw materials

If the verbal statements, moral pressure, and few administrative measures
that were within the prerogatives of the governments were largely insuffi-
cient to produce practical results, what possibility remained at the end of
November for going further? How could Roosevelt and Hull encourage
Geneva to extend economic sanctions to include oil? What assurances

122
Augusto Rosso to Benito Mussolini, Washington, D.C., November 27, 1935, in Collana
di testi diplomatici, n. 7, Augusto Rosso, Rome: 1979, pp. 46–48.
 7. The Debate on the Embargo of Raw Materials 337

could they offer that the United States would support such measures in
concrete ways? After the meeting between Hull and Rosso, Rome had had
to take note of the mood in Washington, as shown in a long message sent
from Ambassador Long to Roosevelt with the clear intent of going over
the heads of the officials at the State Department.123 In it, Long, without
diverging for an instant from his usually amiable reception of every Italian
mood and signal, expressed his opinion with great clarity. In synthesis,
his argument was as follows: (1) Mussolini cannot do without oil (on this
topic he supplied interesting information – that Italy had reached the end
of its reserves as well as its own sources) and a total embargo would stop
its ships. (2) Therefore, he would be forced to go to war in Europe, because
he would never accept such a humiliating reversal. (3) “We are not
members of the League and have no obligation in that respect, but if we
take the action which serves as a predicate for League action, then we will
be morally responsible for precipitating the European war, and we will
suffer the consequences of it.” (4) Therefore, “I implore you to direct the
policy of the American Government along the lines of strict neutrality.”
Regarding the more specific question of Mussolini’s attitude toward the
United States, Long said that he would consider an oil embargo by the
United States a hostile act:
His reasons are three-fold: first, it is a violation of the treaty; second, it is a breach of
what he considers neutrality; third, it will make possible the action at Geneva which
Great Britain desires to effectuate by emplacing a general embargo, and he views
our action in that connection as being in coordination with (if not in collaboration
with) the power opposing him. As a consequence of his reasoning the United States
will be placed in the same position that the other principal Governments at Geneva
will be in, and he will treat us accordingly.

Long’s message was an interesting essay on the reasoning that contin-

ued to hold sway in the halls of what would soon become the Allied
governments. Practically right up until the invasion of Czechoslovakia,
they continued to react to the aggressions of Mussolini and Hitler by
considering the dictators’ desires not as an element to contradict or influ-
ence, but as an unchangeable feature of the situation that had to be
respected in order to “salvage the peace.” In truth, Long was ignoring
two important factors. First, Roosevelt was not politically capable of doing
any more than he was already doing or allowing Hull to do, in the absence
of an initiative from Geneva. Otherwise, America’s early action, which

123
FDRL-PSF, fol. Italy: Long, Breckenridge Long to Franklin D. Roosevelt, Rome,
November 29, 1935.
338 Roosevelt and Fascist Italy

at the time of the declaration of war could be presented as the spirit of

independence from Geneva, would look excessively zealous.
In the second place, Great Britain itself was wavering, even though it
was to that nation that the isolationists and even Long attributed the
influence that led the United States to lean in favor of sanctions. The
exchange between Foreign Secretary Sir Samuel Hoare and the British
ambassador in Washington, Sir Ronald Lindsay, looks especially signifi-
cant in this context. They wrote in the days immediately following the
League of Nations’ committee’s decision to postpone the decision on
extending the embargo to oil. The American ambassador in London,
Bingham, let Hoare know (although he blamed Laval for the postpone-
ment) that his government was none too happy with this development.124
Afterwards Hull took the opportunity to solicit a favorable decision from
Geneva on the extension of the sanctions to raw materials and especially
oil, letting Sir Ronald know that the more Geneva defended the principle
of collective security, the more the American government would be able to
offer solidarity of action.125 At the same time, however, it was clear to
Lindsay that the secretary of state was already stepping past the bounda-
ries of the legislation Congress had passed for the administration; nor
was Hull able to predict when or if they might vote him wider powers. In
a meeting between Lindsay and the secretary of state on December 7, Hull
went so far as to say that:
. . . he could not understand why Geneva should hesitate for a moment. Here were
Nations assembled to do what they could in the cause of peace. Were they to “lie
down and die” without making an effort at the first difficulty? In his opinion “they
should sweep right ahead at once.” If it became clear that outside Powers by their
action or inaction were defeating the League then it would also be clear that “they
were crucifying peace.”126

Although Lindsay betrayed a growing irritation toward those “many

Governments” who “incited to bravery” even though they themselves
were “remote from danger,”127 he also repeatedly expressed his conviction
that the Roosevelt administration should propose to respect an embargo
declared by Geneva and that the Congress would end up accepting the

124
PRO-FO, 371/19165 tel. n. 1009, Sir Samuel Hoare to Sir Ronald Lindsay, London,
November 28, 1935.
125
PRO-FO, 371/19219, tel. n. 424, Sir Ronald Lindsay to Sir Samuel Hoare, Washington,
D.C., December 8, 1935.
126
PRO-FO 371/19219, tel. 422, Sir Ronald Lindsay to Sir Samuel Hoare, Washington,
D.C., December 7, 1935.
127
PRO-FO, 371/19219, tel. n. 424.
 7. The Debate on the Embargo of Raw Materials 339

initiative. Lindsay went so far as to suggest to Hull, during an informal

conversation, that the Congress would be able with a simple resolution to
add oil to the products already under embargo, debating afterward at
their leisure as to the act of neutrality that should replace the one currently
in force. Hull, who did not seem at all put off by the suggestion, under-
scored nevertheless that it would likely be a disastrous scandal were any-
one to know that he was discussing a legislative issue that was the sole
jurisdiction of the U.S. Congress with the British ambassador.128
Lindsay would have been more prudent, indeed, if he had read an earlier
message from Sir Samuel Hoare more carefully. On November 30, Hoare
had sent a long telegram in which he outlined his government’s policy on
the oil question. After blaming the dillydallying at Geneva on the French,
Hoare expressed fears that had a familiar ring, echoing quite faithfully the
worries Long had communicated to Roosevelt:
There are, however, two other considerations that we must take into careful
account. In the first place, there is an accumulation of reports tending to show
that the imposition of an oil embargo may drive Signor Mussolini into a desperate
act. This contingency cannot be ignored. It is, therefore, necessary for us to clear up
the position with the other members of the League and to make it as certain as we
can that if such an attack were made upon Great Britain, it would be resisted by the
full forces of other members. [. . .] These discussions must take some little time and
the fact that they will be taking place must on no account be misinterpreted as
evidence that we are weakening in our general policy.

To this argument, which appears to have been little more than the
intentional acceptance of the propaganda issuing from Palazzo Chigi,
Hoare added another that revealed more clearly the true nature of his
policy:
Secondly, there is an accumulation of evidence that Signor Mussolini is beginning
to realize the full difficulties of this position and the advisability of making terms.
[. . .] I am also inclined to think that, in view of Signor Mussolini’s disposition, the
actual imposition of an oil embargo would in present circumstances make him
more rather than less intransigent. On this account I would welcome a breathing
space for these negotiations.129

Aside from any tactical errors by the French or British, and any cunning
maneuvers of Fascist diplomacy, there was a basic political fact: the refusal

128
PRO-FO, 371/19122, tel. 1331, Sir Ronald Lindsay to Sir Samuel Hoare, December 10,
1935.
129
PRO-FO, 371/19165, tel. 369, Sir Samuel Hoare to Sir Ronald Lindsay, November 30,
1935.
340 Roosevelt and Fascist Italy

by those governments (and by ample sectors of the governing classes,

particularly the American one) to conduct a policy that would defeat
Mussolini, at the cost of his liquidation. The key here is to recognize that
his liquidation would indeed be a cost for those governments: that is
why they found practically any concession preferable. The Hoare-Laval
Pact would demonstrate this, and was already in the air when the foreign
secretary wrote the message to Lindsay; in the final analysis, these states-
men were working toward Mussolini’s political triumph. As Rowse noted
in his interesting memoir entitled The Appeasers (the title reveals the focus
of the book on those British politicians who pursued the policy of appease-
ment, attempting to placate fascist dictators through concessions), Sir John
Simon – the foreign secretary previous to Hoare – explicitly confirmed this
when, confronted with a proposal to act drastically against Italy, he said,
“We couldn’t do that: it would mean that Mussolin would fall!” Rowse
commented: “That was what was at the back of their minds – the anti-Red
theme that confused their minds when they should have been thinking
in terms of their country’s interests and safety.”130 While Rowse did
grasp the true roots of that policy, he remained prisoner of the political
and historiographical judgments that considered it a tragic error rather
than the logical consequence of a class-based worldview shared by all the
leaders involved. This inclination was also present in American society; but
this is a topic we shall return to later.
When Geneva’s engines seized up, largely due to French threats since it
was more fearful than ever of Germany’s future initiatives, Mussolini used
the opportunity to postpone as well the meeting scheduled for November
29. When, furthermore, the Hoare-Laval Pact became known, it made the
position of Roosevelt and Hull untenable as well. The American govern-
ment could only send cautious signals in favor to Geneva even with the
temporary support of major isolationists such as William Borah131 for
moral pressures to reduce trade with belligerent nations.132 Many isola-
tionists, in the Congress and in the press, were motivated by memories of

130
Rowse, p. 26.
131
Harris, p. 90.
132
On the basic orientation of the senator there can be few doubts. He had already declared
himself in agreement with the poet and fervent admirer of Mussolini, Ezra Pound, in
saying that Roosevelt’s policy was the result of “orders from London,” while his
colleague in the Senate and fellow isolationist Arthur Vandenberg telegraphed him
that Mussolini’s aggression should not in any case be considered a violation of the
Kellogg-Briand treaty (LC-WEB, bk. 16, William E. Borah to Ezra Pound, Boise, Idaho,
October 30, 1935; LC-WEB, bk. 16 Arthur H. Vandenberg to William Borah, Grand
Rapids, MI, November 2, 1935).
 7. The Debate on the Embargo of Raw Materials 341

the First World War, when it had been precisely the defense of free trade
with belligerents that had been one of the determining factors in America’s
entry into the war. They could accept the formal equidistance of a policy
aimed at reducing this kind of trade, without overanalyzing just what
kind of trade it was or in what direction it was effectively targeted. It
was an entirely different affair for the administration to find itself in
the position of advocating restrictive measures that were every day more
clearly revealed in their real nature by the press and even eventually by
the protests of Italians and Italo-Americans, while the League of Nations
itself failed to actually take the action championed by the president. The
indignation roused by the Hoare-Laval Pact in America as well did not
galvanize a reaction against Italy, but instead was a harsh blow to the little
existent goodwill there had been for negotiating an end to Mussolini’s
war in Africa. Sir Ronald Lindsay provided the most eloquent description
of the situation in the United States when the pact became public knowl-
edge. Of the “most serious and responsible” journalists, he said,
their condemnation of proposal is unanimous, complete and unequivocal, and
even those who have been most friendly such as the New York Times and
Christian Science Monitor are only a little behind the others. His Majesty ‘s
Government and the French Government are blamed for an “iniquitous bargain”.
Plan must bankrupt collective system and act as incitation of other ambitious
states. It is a vindication of the Italian Government’s aggression and represents
such terms as might have been exacted after victory. It is “an international
disgrace”, “immoderate and impossible”, “a staggering defeat for the League of
Nations”. [. . .]
On the reason for this sudden change all the usual nonsense is written (e.g. some
Imperialistic aims revealed as soon elections are safely over, or reluctance of a
Conservative government to see a Fascist government brought down). [. . .]
It is everywhere taken for granted that there is no more any question of an oil
embargo. I expect the Administration’s policy of limiting export to normal pro-
portions will be allowed to lapse but I am unable to forecast what Congress will do
in regard to neutrality legislation.133

If Sir Ronald had taken the “nonsense” more seriously, he might have
found himself in a less embarrassing situation with the administration he
had been exhorting to new measures against exports until the last possible
moment.
Behind the scenes of this latest flood of isolationist sentiment and
resentment, those interests and persons hostile to any policy of opposition

133
PRO-FO, 371/19171, tel. 447, Sir Ronald Lindsay to Sir Samuel Hoare, Washington,
D.C., December 17, 1935.
342 Roosevelt and Fascist Italy

to Italian imperialism could continue to operate freely. In the final phase

of the debate on the Ethiopia war – on the occasion of the renewal of the
neutrality legislation – these forces showed themselves with renewed vigor.
The new tendency was promptly noted by Ambassador Rosso, who sum-
marized the new situation in this way:
This wave of criticisms against the States Department was certainly encouraged by
the postponement of the decision in Geneva on the extension of the sanctions, and it
has been manifested with such energy that I felt justified in telling Your Excellency
that the situation has shifted significantly in our favor. I meant by that to refer more
to public opinion than to the position of the Government (which has also changed
to a certain extent with the adoption of the criteria of normal trade levels); the
public has been angered by the embarrassing position the American Government
finds itself in thanks to its rush to “run ahead of the League.”
And he added significantly:
We must count especially on the power of this popular sentiment to exert its
influence over the Senators and Representatives who will meet in Washington at the
beginning of January.134

Rosso saw in the events of those days the confirmation of his prediction
from back in June listing all the reasons why America’s close cooperation
with Great Britain and the League of Nations was unlikely.135

8. the neutrality act of 1936

Under these conditions, the deadline for renewing the neutrality legislation
by the end of February became the last chance to extend the embargo.136
With his characteristic political pragmatism, Roosevelt anticipated the
necessity for a compromise with the isolationists (in particular Senator
Nye). The bill approved by the president was presented simultaneously
in both Houses of Congress, by Senator Pittman and Representative
McReynolds. It confirmed an embargo on arms and munitions, extended
to cover loans or credit to the belligerents and accompanied by the

134
Augusto Rosso to Benito Mussolini, Washington, D.C., 27 November 1935, in Collana di
testi diplomatici, n. 7, p. 45.
135
NA-IR, bk. 430, Augusto Rosso to Benito Mussolini, Washington, D.C., June 25, 1935.
136
Green wrote that he, Judge Moore (one of the assistant secretaries), and Hackworth (the
legal counsel of the State Department) were working hard on a new version of the
neutrality law. It was difficult work; he reported that at that moment he had reached
the point of nausea trying to reconcile the opposing forces of what the White House
wanted and what could actually have a chance of passing the Senate. HUHL-JPM, Joseph
C. Green to J. Pierrepont Moffat, Washington, D.C., November 25, 1935.
 8. The Neutrality Act of 1936 343

presidential power to impose restrictive quotas on exports to all belliger-

ents. Parties who conducted trade did so “at their own risk.”137
In return, Roosevelt renounced any battles of priority between the
legislative branch and his own prerogatives, accepting that the measures
he was authorized to take would be formally “impartial” – that is, directed
toward both belligerents. At first it seemed that the president’s tactic had
secured success (although it did elicit McReynolds’s disappointment,
who as majority leader of the president’s party had hoped for a stronger
affirmation of presidential powers). Even Senator Nye indicated his sat-
isfaction with the bill presented by the administration. Nonetheless, in
the hearings that took place in the Foreign Relations and Affairs
Committees of each House, there was the usual conflict between those who
supported presidential powers and those who wanted to restrain him. A third
position finally appeared in this debate and was victorious:138 the bill spon-
sored by Senator Thomas that simply extended the existing legislation and
added a provision forbidding loans to the belligerent countries. In Thomas’s
solution, the U.S. government would have had to definitively give up any
effort to deprive Fascist Italy of the products it needed at that time. The bill,
thus amended, ended up gaining nearly unanimous approval, since with only
a few exceptions the isolationists were pleased to be able to deny the president
the ability to manipulate trade in the service of foreign policy and the
president himself wanted to avoid setting a dangerous precedent by signing
legislation that increased the Congress’s control over his actions. Melvin
J. Mass, representative from Minnesota, was almost the only voice of dissent:
While for a time we may escape involvement in foreign wars, the ultimate outcome
will be that a few powerful, militaristic nations, unchecked by anything, will
gradually create a situation of world-wide conquest, and the time will come when
we alone will be left in the way of their complete world dominance. As surely as we
take this attitude of smug indifference now, we ourselves will then become the
object of attack and invasion.139

When he signed this legislation, Roosevelt accepted the negation of

the only powers that could have effectively stopped the trade from which
Italy was benefiting. Although he announced that it should continue, the
sterility of the moral embargo was so exposed by this neutrality episode
that even State Department officials who were most in favor of an

137
New York Times, January 4, 1936, p. 1.
138
Divine, pp. 152–156.
139
Congressional Record, February 17, 1936, p. 2246, cited in Divine, p. 157.
344 Roosevelt and Fascist Italy

interventionist policy, such as Hull and Green, had advised that it be

thrown out.140
The American refusal to intervene encouraged – and was, perhaps,
decisive in – the decision of the League of Nations in the following
month of March to give up the effort to extend the sanctions to include
oil. By that time, Mussolini’s troops were marching toward Addis Ababa.
It is debatable whether a different decision by the Americans in February
might have changed the whole course of the Ethiopian war. Although there
are reliable sources that testify to the effect that an oil embargo could have
had in November 1935 (in 1938 Mussolini told Hitler that “if the League
of Nations had followed Eden’s advice in the Abyssinian dispute . . . and
had extended economic sanctions to oil, I would have had to withdraw
from Abyssinia within a week”141), it is possible that by February and
March the military undertaking and the stockpiling of oil reserves had
advanced to the point that they would only have slowed, but not stopped,
the final outcome. That those reserves were so abundant was due to the
sizable acquisitions Italy had made in the United States in the months
previous to the neutrality debate. Thanks to Ford and General Motors,
Mussolini had a complete transportation fleet ready to go. The mobili-
zation orchestrated by the Italian ambassador in Washington over the
neutrality debate and the possibility of embargo seems to show that its
outcome was hardly insignificant to the Italian government.

9. the solidifying of political factions

The congressional debate and its public echoes had the effect of revealing
those forces, personalities, and interest groups that had militated from the
beginning against any policies that might damage the Fascist regime,
forcing them out into the open and obliging them to publicly state their
position. Which factors and alliances produced the pro-Mussolini camp?
American historians who have tried to articulate the reasons that led
the American government to allow Mussolini to provision his military
adventure through United States’ exports tend to privilege the isolationists
in their analyses. The isolationist group was particularly strong in the
Senate and enjoyed a great deal of power over Roosevelt for its ability to
hold his domestic reforms hostage. Feis, Harris, and to some extent Divine
all concur with the general interpretation of most American historiography

140
Divine, pp. 157–158.
141
P. Schmidt, in R. H. C. Steed, ed., Hitler’s Interpreter, New York: Macmillan, 1951, p. 60.
 9. The Solidifying of Political Factions 345

that the difficulties and resulting sluggishness of American foreign policy in

the 1930s in arriving at a more militant approach to confronting the Fascist
dictatorships was due, if not exclusively then at least decisively, to popular
isolationism in American public opinion.142 The pacifist sentiments of a
majority of Americans were, according to this argument, stoked by politi-
cians in Congress from the midwestern farmlands that were the heartland of
populism. They used this inflammatory rhetoric to block Roosevelt and his
white Anglo-Saxon Protestant governing elite from successfully implement-
ing the farseeing and acute internationalist policy natural to that world of
finance, university culture, and East Coast cosmopolitanism.
A careful analysis of the relations between the United States and Italy
in the course of the 1930s, starting from the Ethiopian war, offers a very
different picture. First of all, the isolationists were not the compact mono-
lithic group they have been portrayed as. Divine’s own account of the
itinerary of the second Neutrality Act clarifies just how the divisions
among the isolationists blocked the approval of a law that, while remain-
ing equally rigid in its formal impartiality, would have allowed the presi-
dent to drastically reduce trade with Italy in the sectors most crucial to the
war effort.143 That bill had been specifically drafted to meet the demands
of the group of isolationist senators headed by Senator Nye, especially
including Key Pittman from Nevada.144 This aspect of Roosevelt’s medi-
ations had reached its goal. But that did not stop Hiram Johnson
and William Borah (who had earlier declared himself satisfied with the
administration’s position against war-related trade, at least in the form of
the bland moral embargo), who were the two historical leaders of the
isolationist wing of the Senate, from playing leading roles in forcing the
Congress to deny Roosevelt any power in the limitation of trade. Notably,
Ambassador Rosso had frequent secret communications with Senator
Borah, as well as being in close touch with the isolationist press (especially
Hearst’s many newspapers, through his contact with the editor, Arthur
Brisbane, who had been so receptive to the attentions showered on him by
the Italian embassy).145 Another columnist who had close relations with

142
O. Barté, Gli Stati Uniti nel secolo XX, Milan: 1978, pp. 248ff.
143
Divine, p. 147.
144
F. L. Israel, Nevada’s Key Pittman, Lincoln, NE: 1963, p. 169.
145
B. Migone and A. Ferrero. On the contacts between Brisbane and the Fascists see ASMAE-
AAP, bk. 43, Stati Uniti 1937, posizione 58, onoranze ed onorificenze, fol. 2, Brisbane
Arthur: condoglianze del Duce, Galeazzo Ciano to Fulvio Suvich, Rome, December 26,
1936: “I beg leave Y. E. to extend to the family of Arthur Brisbane my most sincere
condolences for the loss of the distinguished journalist, sincere friend of our country.”
346 Roosevelt and Fascist Italy

the embassy,146 Frank Simmonds, made significant anti-British arguments

against an American embargo on raw materials. There was not, therefore,
one clear isolationist faction that defeated Roosevelt’s policy, but rather
several traditional isolationist spokesmen flanked by a variety of individ-
uals and interest groups focused on other issues, all of whom used typical
isolationist rhetoric to activate a public opinion trained to respond.
Exporters, headed by the New York Chamber of Commerce, the
Wall Street Journal, and Ambassador Rosso – to name a few – had little
in common with “isolationism,” but they exploited isolationist arguments
when it suited them, such as the ideal of neutrality toward both belligerents
and the danger of any form of collaboration with the League of Nations.
More than an isolationist faction – limited and, in any case, divided at the
crucial moment – those who wanted America to join in bolstering collec-
tive security found themselves opposed by the public’s fear of another war,
a fear that was ably exploited to produce majority support for an isola-
tionist position.
Exactly who were these able exploiters of Americans’ fears? Rosso’s
reports reveal their identities clearly. He too referred to an “isolationist
current” and an “internationalist current” in Congress. But he also clari-
fied how, behind these two generalizing labels, at which most historians
have stopped, there were instead different groups, interests, and men with
little in common with generic isolationism as an ideology. Instead, for
specific reasons, they were interested in impeding an American interven-
tion against Mussolini. Among these groups who were potential allies of
current Italian interests, Rosso placed Italo-Americans in the first rank – or
rather, “the Italo-American vote,” that is to say naturalized and politicized
Italo-Americans. Nonetheless, Rosso added:
There exist [. . .] other factors that could be made use of, with more direct effects
such as: 1st – Catholic reactions against the Anglophile propaganda of Protestant
churches [. . .]. This reaction is already under way, and I will naturally work to
encourage it in all ways; 2nd – The possibility of creating worries among the
American public about the danger of English domination, based on their control
over the League of Nations; 3rd: – The suspicious attitude among Naval circles
toward British naval policy.
It is obviously in our interest to raise these issues and encourage their discussion
by the public in such a way as to influence members of Congress.147

146
A. Rossi-Longhi (Councillor and Rosso’s deputy at the Italian embassy in Washington),
interview with the author, Rome, December 17, 1966.
147
ASMAE-AAP, bk. 271, Stati Uniti 1936, fol. Rapporti politici, posizione 1, sf. 2, Legge
sulla neutralità Americana, from the Foreign Ministry to the Embassies in Paris, London,
 9. The Solidifying of Political Factions 347

It was true that American Catholics constituted an important base for

Ambassador Rosso as he prepared a campaign opposed to intervention
against Italy. Precisely because the Protestant churches and their commun-
ities, as well as African-American organizations, were the most important
militant forces in the anti-Fascist struggle,148 the Catholic hierarchy with
few exceptions (such as the archbishops of Chicago149 and Baltimore150)
reacted by defending the Italian government.151 The Catholic press was
particularly motivated to defend what had been characterized as the silence
of Pius XI about the war. Father William B. Smith, in an unpublished thesis
for Catholic University of America, summarized the press coverage thus:
It would seem that the majority of writers on the Ethiopian war in American
Catholic periodicals stayed away from any consideration of religious motives or
justification of the event. If such was suggested, moral principles were usually
brought forth to answer opposition to the war. This is not to say that Catholics
in America favored the war. Many did not, and said so, but most said nothing.
There was still a certain feeling of identification with the Italians because of the
number of Catholics in Italy, and also, no doubt, because the Pope was not
considered to have spoken so definitively as to allow for no doubt on the question.
[. . .] [S]ome did defend the silence of the Holy Father, while others denied it, and a
few proposed justification for Italy’s invasion.152

In truth, Smith’s conclusions, which carry the imprimatur of Cardinal

Patrick O’Boyle, diverged in part from some of the very documentation he
provided.153 From his evidence, one can see that only the Catholic Worker,
linked to the Catholic union movement, took an editorial stance of total
condemnation of Fascist aggression,154 whereas other periodicals more
representative of the Church in the United States (such as America, a
Jesuit publication; Commonweal; and The Catholic World) and the great
majority of diocesan papers were committed to offering justifications for
Mussolini’s war and above all to strenuously defending the papal position.

Berlin and the Italian delegation in Geneva, November 15, 1935, which forwarded: tel.
Augusto Rosso to Benito Mussolini, Washington, D.C., November 9, 1935.
148
Diggins, pp. 301, 307–312.
149
W. B. Smith, The Attitude of American Catholics toward Italian Fascism between the
Two World Wars, unpublished thesis, Catholic University, Washington, D.C.,
1969, p. 218.
150
Ibid., p. 219.
151
Diggins, pp. 299–301.
152
Smith, pp. 222–223.
153
Ibid., pp. 119–223.
154
“Christian Nations Invite Ruin for Christendom,” in Catholic Worker III (September
1935): 1–6; F. L. Burke, “Italy Invades Ethiopia,” in Catholic Worker III (October 1935):
1–6.
348 Roosevelt and Fascist Italy

Such rhetoric offered Rosso ample room for action among American
Catholics, even without resorting to such extremists as Father Coughlin,
Roosevelt’s fearsome adversary and supporter of American abstention
in the matter of the Ethiopian dispute, who could have further provoked
the administration.155 Rosso clearly grasped that the sympathies of
American Catholics were due, apart from to the attitude of Pius XI and
other exponents of the Italian Church hierarchy, to the ethnic makeup of
their own church. It was mostly composed of the Irish, easily led to favor a
policy that was presented above all as anti-English, as indicated by Rosso’s
telegram to Mussolini. In this context, Rosso deemed it of great impor-
tance to develop influence in the Irish community by expanding his con-
tacts among Irish publications such as the Gaelic American and the Irish
Times, which published an article titled “Mr. Hull Has Declared War on
Italy.” Nor did he hesitate to contact such activist organizations as the one
for the independence of the Irish Republic, obviously motivated by hatred
for Great Britain. Rosso knew how to make this kind of support pay off:
. . . the Irish vote represents a strong group for the Democrats, and Mr. Farley, head
of the Democratic Party and himself Irish, ought to be particularly sensitive to their
influence.156

Farley, who held a strategic position in evaluating the electoral effects

of Roosevelt’s policies, was already favorable, having been impressed by
the Fascist agricultural land reclamation projects he had witnessed during
a trip to Italy two years earlier.157 Rosso’s observation regarding the
attitude of the American Navy was also linked to the rivalry between it
and the British Navy that had not been overcome by the London Naval
Conference.158
From the Italian point of view, the goal was not to identify those forces
that were a priori isolationist, but rather those that, for specific reasons
relevant to the issue at hand, would support an isolationist position or

155
Smith, pp. 204–205; C. H. Tull, Father Coughin and the New Deal, Syracuse, NY: 1965,
p. 102; Diggins, pp. 182ff.
156
NA-IR, T-586.430, Augusto Rosso to Benito Mussolini, Washington, D.C., December
27, 1935.
157
FDRL-OPF 309, James Farley to Franklin D. Roosevelt, Washington, D.C., December 8,
1933, also cited in Diggins, p. 280. Farley was not the “head” of the Democratic Party,
since each political party in the United States is headed by the presidential candidates
named at party conventions, but as the president of the party’s national committee (as
well as serving as the Postmaster General), he was the main administrator of the presi-
dent’s electoral fortunes.
158
B. Migone and A. Ferrero.
 10. Italian-Americans and the Ethiopian War 349

would deploy isolationist arguments to avoid their government’s active

intervention in this matter. In other words, this was a small-scale repetition
of the same process that had resulted in the defeat of the ratification of
the peace treaties of 1919. At that time, too, the ideologically pure iso-
lationists had actually been a minority among those who opposed
Woodrow Wilson. It had been a coalition of social, ethnic, and political
groups who for complex reasons and diverse motives had converged
around the Senate’s refusal of the peace treaties and especially of the
League of Nations. In 1919 as in 1935–1936, anti-British feeling played
an important, though by no means exclusive, role in cementing heteroge-
neous forces around a single political profile.

10. italian-americans and the ethiopian war

To return to the role played by Italian-Americans in these developments,
there is one particular source on this topic that must be examined, both for
its circumstantial character and the vantage point of its author. Joseph
C. Green, in charge of the Office of Arms and Munitions Control, enforced
the enforcement of the neutrality acts. All the protests, pressures, sugges-
tions, and other mail sent to the U.S. government concerning the war in
Ethiopia arrived on his desk. His judgment was quite clear; in one of his
long and detailed missives to a colleague, he summarized the course of
events:
The reason for the defeat of the bill [presented by Pittman and McReynolds on
behalf of the administration] has never been thoroughly understood by the public.
I say reason [emphasis in original] advisedly. There was only one. The various
criticisms directed against the bill on grounds of law and policy had no real effect.
The bill would have passed had it not been for the highly organized and highly
effective opposition of the Italian-Americans. Fascist organizations all over the
country had their members write five form letters each – one to the President, one
to the Secretary of State, and one to each of their two senators and to their
Representative of Congress. I handled over 10,000 such letters during the month
of January. These letters were supplemented by the public appearance of Fascist
representatives before the Committees and by intensive lobbying in the Senate and
House Office buildings. Senators and Representatives – particularly the latter –
from Massachusetts, Rhode Island, New York, Connecticut, New Jersey,
Pennsylvania, Maryland, West Virginia, Ohio, Michigan and California trembled
openly in their boots. The Italian-Americans are such a highly organized minority
that Representatives facing election in November did not dare to vote for a neutral-
ity bill which met with their displeasure. Many of them were perfectly frank in their
discussions with me in regard the situation with which they were confronted. One
man from Connecticut, who was in principle strongly in favor of the bill, asked
350 Roosevelt and Fascist Italy

me how he could possibly vote for it in view of the fact that he had 40,000 Italians
in his district. The crisis came on February 7. McReynolds went to Pittman and
told him that he could not proceed with the [administration’s] bill. Pittman and
McReynolds came up to the White House and jointly told the President the same
thing. After a conference between the President, the Secretary [of State], Judge
Moore [Assistant Secretary at the State Department], Pittman and McReynolds, the
bill was dropped and Pittman hastily drafted the substitute which was eventually
passed. [. . .] The Administration unsuccessfully attempted to make it clear to the
public that it had not changed its attitude, but that Congress had refused to follow
its lead. [. . .]
The Italian-Americans gave us a fine object lesson in the use of political pressure
by an organized minority.159

The lesson Green referred to concerned the opportunities offered by

the American constitutional and electoral system for minorities to exert
political influence. The Italian-Americans were not alone in having access
to legally defined spaces from which to influence politics, starting with
congressional hearings The presidential elections, founded on a two-way
winner-takes-all electoral college, acted as a multiplier of the votes they
mustered, since any changed vote represents the gain (and loss) of two
votes between the two major candidates. In the electoral college system, a
minority group that can show its organizational strength and that identi-
fies itself as a single-issue interest group can force each candidate to court
its vote by taking a clear stand on that issue as an almost irresistible form
of political conditioning on elected representatives.
Green did not know, although he intuited, that the Italo-American
capacity to promptly mobilize and achieve goals was not spontaneous.
The State Department, through an investigation by its chief special agent
in New York, made a notable effort to find proof that the propaganda
emanating from the Italo-American community was really the fruit of
organizing by the consulates.160 Several similar incidents in previous
months had led to the dismissal of the Italian vice-consul in Detroit, and
this gave the State Department hope that it might be able to repeat the
exposure and the request for expulsion.161 A few cases had been raised
before the newly sitting Committee on Un-American Activities in the

159
HUHL-JPM, Joseph C. Green to J. Pierrepont Moffat, Washington, D.C., April 22, 1936,
pp. 10–12.
160
NA-DS, 711.00111 Armament Control/680, R. C. Bannerman, memorandum for
Mr. Green, Washington, D.C., January 6, 1936; H. Kisey to R. C. Bannerman,
Washington, D.C., January 3, 1936.
161
ACS-MCP, bk. 2, fol. 8, Rosso Augusto, Augusto Rosso to Galeazzo Ciano, Washington,
D.C., July 19, 1935.
 10. Italian-Americans and the Ethiopian War 351

House of Representatives. The special agent of New York affirmed that

the organizers of a meeting he had investigated clearly had close ties with
the consulate of New York, though they were American citizens. He was
not able to prove that their activity had been directly incited by the
consulate. The investigative officer in Washington could only reassure
his superiors that they would continue their efforts to find proof of a
tangible relationship between the consulate and the American Friends of
Italy, the committee used for antisanction propaganda, in the hope that
they would drop their guard and show less caution in protecting the
illusion of the New York consul’s noninvolvement.162 This hope came to
naught, since Rosso and his collaborators were evidently aware of the
gravity of any proven involvement by Italian authorities.
While it is probable, if not certain, that the consulates suggested and
helped organize the activities of these prominent Italo-Americans, this was
not the decisive aspect of the Italian contribution to the Italo-American
campaign anyway. The real link was strictly political and had been decided
years earlier. The most important role of Italian-Americans was their
electoral power, which they used to the fullest extent possible in the
American system. The choice to naturalize, that is to take on American
citizenship, was a natural path for immigrants; one might even say it was
obligatory. American citizenship was prized because it guaranteed not
only stability and permanent residence in the United States and the possi-
bility of bringing over more relatives, but also the promise of upward
mobility. As a citizen, the immigrant became part of the nation, partic-
ipating in American political life and, within limits, organizing collectively
and choosing and influencing a party (for most immigrants this was the
Democratic Party) and its elected officials.
But the Italian government often acted contrarily to this process, both
before and after the Fascist seizure of power. Italian rhetoric about the
adventures and suffering of the emigrant, rather than translating into
living conditions that might lead him to remain in the mother country in
order to spare him those pains, favored activities aimed at maintaining
the emigrant’s links to the mother country: Italian schools, support for
emigrants’ organizations, Italian language publications, congresses of emi-
grants’ representatives, legislation that maintained the right to vote in Italy
even after taking foreign citizenship, and bank branches to make it con-
venient to send remittances back to Italy – a source of income the govern-
ment relied upon for its balance of payments. This network gave rise to

162
Bannerman, Memorandum.
352 Roosevelt and Fascist Italy

public and private structures dedicated to nurturing the links between the
emigrant and his land of origin, which were sometimes counterproductive
for the government, and more often for the emigrant. In the specific case of
the United States, every impediment introduced in the process of natural-
ization was not only damaging to the emigrant, but meant that he wielded
less political influence that might favor the Italian government.
The characteristics of the Fascist regime were such as to exacerbate the
already-present tendency of the Commissariato Generale dell’ Emigrazione –
the organization responsible for relations with Italian expatriate
communities – to cultivate islands of so-called italianità abroad. The nation-
alist rhetoric that had already been a part of post-Risorgimento and Liberal
Italy was now substituted by the very extreme version of the Fascist regime,
which made foreign policy one of its main ideological touchstones.163
Further, the Fascist Party itself aspired to expand beyond Italian borders,
with its fasci all’estero (Fascist bands abroad).164
Every time this nationalism became too explicit, it irritated the more
delicate sensitivities of American public opinion. The United States, with
its composite and complex citizenship, could not permit its ethnic groups
to refuse to assimilate by remaining subject to foreign influence. Exemplary
in this regard was the reaction of Secretary of State Charles Evans Hughes
in 1923, when the American press reported that a law had been passed
by the Fascist deputy Casertano in the Italian Parliament giving American
citizens of Italian origin the continuing right to vote in their country
of origin.165 Americans reacted similarly to stories of Italian emigrants
who, on returning to Italy, were harassed by Italian military authorities
as deserters even if they were citizens of another nation.166 The fear of
subversives, frequently linked to ethnic and racial prejudice, had been a
leitmotiv of the repressive and reactionary politics of the immediate post-
war period, dramatically illustrated by the trial of Sacco and Vanzetti.
Moreover, the Fascist regime, though prevalently judged as reflecting a
positive restoration of law and order, was not completely exempt from the
risk of falling into Americans’ general category of subversives, or at least
of foreigners whose ways were too alien from mainstream of American
custom. For that reason, nothing (or almost nothing) could be more
damaging to the positive image Fascism had worked so hard to cultivate

163
Rumi, cit.
164
Bertello, cit.
165
ASMAE-AAP, bk. 159 8, Stati Uniti 1923, fol. 7361, tel. 96, Gelasio Caetani to Benito
Mussolini, March 14, 1928.
166
Dino Grandi, interview.
 10. Italian-Americans and the Ethiopian War 353

in the United States than the suspicion that it wished to export its politics
to America, even if that suspicion were provoked by little more than some
ridiculous and innocuous wearing of black shirts. Even a little intemper-
ance or excess show of zeal, in this context, could have compromised the
whole effort of the Italian government to negotiate positive deals on war
debt and future credits, not to mention the question of restrictions and
quotas on immigration.
The Italian embassy in Washington was always extremely aware of
the danger and careful in its dealings with the foreign ministry to avoid
the more extreme pro-Fascist factions of the Italo-American community
gaining the upper hand and damaging the work of the Italian government
concerning topics the diplomats rightly judged more important. There was
an ulterior motive that pushed first Gelasio Caetani and de Martino167 and
later Augusto Rosso to adopt a strict intolerance toward the organization
of the Fascist Party in the United States. Had it succeeded in consolidating
itself, it could have been a menace or at least a source of constant bother
for the embassies.168
Given these choices, the central authorities of the Fascist state never
had any real hesitation, despite some interruptions in the completion of
their agenda. The Fascist organization in the United States was dissolved
twice (definitively in 1931) with Mussolini’s consent and by explicit
initiative of Dino Grandi, first when he was undersecretary and then
when he became minister of foreign affairs. In September 1928, Grandi,
then undersecretary of foreign affairs, wrote to Ambassador de Martino
that the action of the Fascist League of North America was “more damag-
ing than useful to the Regime’s cause,” although at that moment “no one is
planning to suppress it.” What was necessary was to establish its absolute
dependence on the diplomatic and consular authorities.
Just as within the borders of the Kingdom the Prefects are the supreme authority
not only of the State but also of the Regime, so and for even more important reasons
is it true that Ambassadors, Ministers, and Consuls are the supreme authority of the
State and of the Regime in foreign lands.169

Paradoxically, this exact principle, indispensable for assuring that the

Fascist League would not commit any idiocies to damage the relations
between Fascist Italy and the United States, was an unacceptable concept

167
Ibid.
168
Bertello, cit.
169
ASMAE-AAW, bk. 173, fol. Fasci, 26 September 1928, Rome, Dino Grandi to Giacomo
de Martino, September 26, 1928.
354 Roosevelt and Fascist Italy

to the American authorities. The Fascists in the United States were to be

tolerated inasmuch as they constituted free associations of American citi-
zens. American authorities had no interest in whether or not those people
damaged relations between the two countries, as long as they committed
no crimes. On the other hand, any ambassadorial or consular diplomat who
intervened with American Fascists, according to the principle declared by
Grandi, created an intolerable situation to American law, which did not
allow any foreign representative to exercise legal control over American
citizens or their organizations.
Obviously, this impasse could be resolved only by dissolving the Fascist
League in America. But one year later, following a public scandal concern-
ing the Fascists, de Martino found himself having to reassure Stimson of
his determination to dissolve the League again,170 with the approval of
Mussolini and under pressure from Morgan Bank (whose partners were as
always solicitous of Fascist Italy’s good reputation).171 After a few more
months, even the secretary of the Fascist Party, Augusto Turati, had
become convinced of the same necessity.172 Grandi, by that time foreign
minister, and fully occupied in developing a special relationship with the
United States, was more than agreeable. Only Piero Parini, the director
general of Italians Abroad, pathetically continued to flood the desks of
Mussolini and Grandi with memos singing the praises of the Fascist
leagues and their obedience to the diplomatic and consular authorities.173
The attempt to enfranchise emigrants in Italy was blocked by Mussolini,
who had sensibly been buttonholed by Gelasio Caetani. Also stymied were
attempts to send representatives from Italo-American communities to
congresses of emigrants being organized in Italy.174 In recompense, the
traditional organizations of the Italo-American communities were rein-
forced: mostly English-speaking, with vaguely liberal and Masonic origins,
such as the Order of the Sons of Italy. In the 1930s, an organization was

170
NA-DS, 811.00F/84, Conversation between Henry Stimson and Giacomo de Martino,
November 19, 1929.
171
HUGSBA-TWL, bk. 190, fol. 29, tel. 1867, Giovanni Fummi to Thomas W. Lamont,
Rome, December 24, 1929.
172
ASMAE-ASG, bk. 1, 1930, fol. 11, sf. 16 Italiani all’estero e scuola, Augusto Turati e
Dino Grandi, Rome, August 23, 1930. Turati wrote: “My opinion on the matter is clear
and cruel: Fascist leagues abroad must be abolished.”
173
ASMAE-ASG, bk. 1, 1930, fol. 11, sf. 16, Italiani all estero e scuola, Piero Parini, Appunti
per S.E. il Ministro, October 6, 1930.
174
ASMAE-AAP, bk. 1598, Stati Uniti 1923, fol. 7361, tel. 96, Gelasio Caetani to Benito
Mussolini, March 14, 1923. To Caetani’s remonstrances, Mussolini’s note in the margins
responds, “Telegraph that nothing will be done.”
 10. Italian-Americans and the Ethiopian War 355

founded to unite Italo-Americans born in the United States and who had
therefore been citizens since birth. Great attention was paid to controlling
Italian-language publications in America, including by Mussolini himself,
as always highly sensitive to issues of the press and propaganda. Special
care was taken with those notable Italo-Americans who had reached high
ranks in society and wealth (this was the case with Amedeo P. Giannini,175
founder of the Bank of Italy, and later of the Bank of America in California;
also the Villa brothers, major importers in New York) and with those who
used their wealth to influence American politics. Among these the most
relevant example was Generoso “Gene” Pope, owner of the most impor-
tant Italian-language daily, Progresso Italo-Americano (and later also of
the Corriere d’America, founded by Luigi Barzini), and an important
New York businessman as well as the biggest spokesperson for his ethnic
community in the Democratic Party machine of New York. The director
of the Agenzia Stefani, Manlio Morgagni, described Pope at that time in
the following way in his report to the head of Mussolini’s press office:
I will not permit myself to offer my entire opinion of this gentleman and his political
action in New York’s financial circles because I lacked, first of all, the essential
details; but if pressed, I would not hesitate to compare him to certain other power-
ful men in the cities of America with the difference, however, that he does his work
without [. . .] the use of an automatic pistol.176

Pope was actually a very useful man for the regime. He had less
influence at the national level under Republican presidents, but when
Roosevelt, whom he had supported from the beginning, became president,
Pope was in the right position to make himself heard at the White House.

175
A man such as Giannini was capable of getting an audience at virtually any level of
society. Following a letter in which Giannini reported the remonstrances of Ettore Patrizi,
owner of L’Italia and of La Voce del Popolo in San Francisco, the two most important
Italian-language dailies outside New York, Roosevelt wrote personally to his secretary,
Marvin MacIntyre, instructing him to contact Giannini and explain that there was no
connection between the American action against trade with belligerent nations and the
initiatives of the League of Nations. He wanted Giannini told that only those exports
above the normal level of past years was targeted and that the American law was meant to
discourage the export of goods that might serve as war supplies and munitions. The
indirect and prudent way in which Giannini – a pro-Fascist but more importantly a
newcomer to America’s elite governing class – made his opinion known to the president
is remarkable. FDRL-OF, 547-A, F. D. Roosevelt, Memo for Max; Amedeo P. Giannini
to Marvin H. MacIntyre, New York, November 25, 1925; telex Ettore Patrizi to
A. P. Giannini; Marvin H. MacIntyre to Amedeo P. Giannini, Warm Springs, Georgia,
December 3, 1935.
176
ACS-FAS, Manlio Morgagni, fol. Relazione per il capo dell’ufficio stampa del Capo del
Governo, December 23, 1932.
356 Roosevelt and Fascist Italy

This was a kind of political conduct that hardly bothered to veil its
ideological agenda, only avoiding as much as possible any direct confron-
tations with American authorities, but going so far under Grandi as to
openly advocate the necessity for all Italian immigrants to be naturalized
(in a speech in Philadelphia in 1931, which provoked angry reactions from
the highest military authorities in Rome).177
So was Green correct in identifying the pressure of the Italo-Americans
as the real reason for the defeat of any further attempt to limit exports
to Italy for its war effort? There is no completely decisive proof in this
matter, although Green had very good evidence. It is necessary to distin-
guish between the main cause and the specific reason for the defeat of
the bill in Congress and the policy of controlling exports not named in the
first Neutrality Act. Green seems to have interpreted the pressure of Italo-
Americans rightly: it was determinative in that it was the straw that broke
the camel’s back. At this point it is useful to mention that the crisis among
Roosevelt’s men in Congress began in the House of Representatives, where
the majority party had stronger numbers but where the electoral college
system rendered the representatives more vulnerable to the pressures of
organized minorities in small constituencies. It is also important to note
Green’s observation that “Pittman loyally defended the Administration’s
bill until the pressure of the Italian-Americans made it necessary to throw
it overboard.”178 Above all, what is striking is the succession of events
narrated by Green. Although we cannot exclude the possibility that other
pressures existed that had more weight, it is certain that there was some
causal relationship between the lightning-fast organization of the Italo-
American campaign orchestrated by Pope and his associates, and the
emergency meeting that killed the bill in Congress.

11. the opposition of exporters

All this does not mean that Roosevelt’s defeat was due only to Italo-
American lobbying. There were other very powerful factors with more
long-term presence within American society and even within his own
administration. Since the declaration of the moral embargo, but in partic-
ular during the battle over the renewal of the Neutrality Act, a body of
opposition grew in the business community that fought any form of

177
Dino Grandi, interview.
178
HUHL-PM, Joseph C. Green to J. Pierrepont Moffat, Washington, D.C., April 22,
1936, p. 14.
 11. The Opposition of Exporters 357

reduction of exports to Italy. In first place, the parties directly interested

in export trade mobilized promptly. At the time of the moral embargo,
Charles Sherrill, president of the Chamber of Commerce of New York
State, wrote a letter to Roosevelt in which he articulated what would
become the main argument of businessmen in this debate:
. . . exporters and merchants on our eastern seaboard are now more interested in the
freedom of the seas for American ships than at any time since the World War.179

Another way that exporters’ opposition manifested itself was in the

storm of requests for clarification that rained down upon the State
Department, which found itself in the difficult situation of managing a
policy that was indeed quite vague, particularly in terms of its application
to specific cases. In general, the attitude in the business press toward
the moral embargo was negative, although in a few cases there was
some willingness shown to share responsibility for national security.180
Roosevelt’s lobbying did not elicit great political opposition campaigns
because it was easier to simply ignore it and go about business as usual,
accepting the invitation of the Italian embassy’s trade adviser to profit from
the favorable opportunities presented by the sanctions applied by other
countries to take over a larger share of trade with Italy.181 The oil compa-
nies and automobile industry in particular did not initially lobby against
the Neutrality Act through their publications and professional associa-
tions, instead fighting a private battle to defend their profits from the
lucrative wartime trade with Italy. A few examples illustrate the multi-
plicity of methods used in this battle and the variety of attitudes with which
these groups managed relations with government authorities.
On November 22, Pyke Johnson of the National Automobile Chamber
of Commerce telephoned Joseph Green, head of the Office of Arms and
Munitions Control of the State Department. Mr. Johnson told the official
that numerous automobile makers had recently considered large-volume
sales to the Italian government and Italian customers. American groups
would want to know, before signing such contracts, if they would be
“frowned upon” by the American government. For his part, Green noted

179
Cited in Divine, p. 131.
180
Ibid. See also “Impartial Neutrality,” in Barron’s XV (October 14, 1935): 1; “What Price
Neutrality,” in Magazine of Wall Street LVII (October 26, 1935): 6; “Neutrality,” in
Export Trade and Shipper XXXII (November 25, 1935): 6; “Neutrality,” in American
Exporter CXVIII (January 1936): 40–41; “For Honest Neutrality, Not Favoritism,” in
Business Week (November 30, 1935): 40.
181
Harris, p. 79; New York Times, October 9, 1935.
358 Roosevelt and Fascist Italy

that such products, although not subject to the embargo, were on the list
of products whose sale to belligerents had been specifically advised against
by the secretary of state in his declaration on November 15. Probably the
function of these kinds of contacts was to underscore formal deference to
the government at the same time that business went on as usual behind
the scenes. Otherwise there is no plausible explanation for the statistical
data cited earlier showing a vertiginous rise in sales of just those vehicles
used by the Italian army for the Ethiopian campaign.182
In other cases, the methods were less oblique and did constitute lobby-
ing or political pressure. Henry A. Hassan Jr., representing the oil com-
pany Sinclair’s European business, had a conversation with the U.S.
ambassador in Paris, Jesse Isidor Straus. He showed no scruples in plead-
ing the case for the opportunity represented by the United States’ entry into
the Italian oil market, with the goal of conquering a profitable portion of
the market that was not for war aims. Evidently Mr. Hassan was not very
worried that this perspective would be contradictory with the principles
of Roosevelt’s moral embargo, which in its most accepted interpretation
discouraged exceeding previous levels of trade, although it is true that
his reference to Italian demand in peacetime indicated some remaining
ambiguity in the moral embargo and its interpretations. Mr. Hassan was
more concerned however with explaining at some length to Ambassador
Straus – who did not give him any encouragement – that Italy’s imports of
petroleum from the Soviet Union were in rapid diminution and that also
those from Romania were destined to diminish due to the end of the
clearinghouse between the two countries. Apparently Sir John Cadman,
president of the Anglo-Persian Petroleum Company, had confided to him
that his company had recently concluded a lucrative contract with Italy
and that American oil companies needed to catch this train before it left
the station. Despite the reserved demeanor of the ambassador, his inter-
locutor insisted that the restrictive attitude of the administration would be
made to look ridiculous compared with the clearly ambiguous attitude of
the British.183
The impression left by Mr. Hassan was not invalidated by the cour-
teous, formal assurances that on other occasions were offered by the
heads of the American oil companies in their correspondence with the

182
NA-DS, 711.00111 Armament Control/494, Joseph C. Green, Memorandum for the
Secretary of State, Washington, D.C., November 22, 1935.
183
NA-DS, 711.00111 Armament Control/621, Jesse Isidor Straus to Cordell Hull, Paris,
November 22, 1935.
 11. The Opposition of Exporters 359

State Department.184 As Herbert Feis, the economic adviser to the

State Department at the time and certainly no anticapitalist subversive,
observed, “The record proves that profitable trade will cease only under
command;”185 nor is there any doubt that those who made use of that
trade were ready to use every tool at their disposal (which was no small
amount) to discourage the imposition of such a command.
The numerous complaints created by such a possibility became an
actual political campaign by the capitalist sector (with the exception of
the New York Times, the Jewish community of Wall Street, and those
financiers most closely linked to Great Britain; the House of Morgan, to
which we will return, kept a low profile in this matter) when it came to
debating the proposals that would have given the government the power
to take strong measures in a new Neutrality Act in February 1936. A
well-known authority on international law, John Bassett Moore, had a
leading role in articulating the main arguments: it was a matter of demon-
strating that the neutrality called for by all parties did not consist in limit-
ing measures, but rather, on the contrary, in the uncompromising defense
of the freedom of the seas and, therefore, of American trade. He joined
with Senators Johnson, Connally, and Borah in this argument. Borah had
asserted:
I only want protection for the American citizen in what we say in our law is a
legitimate business. [. . .] I do not consider that neutrality is synonymous with
cowardice.186

Together with those periodicals of the exporters’ associations such as

Export Trade and Shipper and American Exporter, the Commercial and
Financial Chronicle, usually fairly representative of the general mood of
Wall Street, was among those whose voices were repeatedly raised in
support of the curious assertion that the “humiliating” legislation under
consideration by Congress constituted “the denial of legitimate war profits
to American business, industry, and finance, on the specious theory that
war as such is morally wrong and no neutral should profit by it.” The wave
of criticism was enlarged in a decisive manner by the majority of the
informational dailies in the wake of the moral embargo declaration, so
Ambassador Rosso could report with satisfaction that:

184
See for example NA-DS, 711.00111 Armament Control/650 W. C. Tegle, president of the
Standard Oil Company of New York, to R. Walton Moore, assistant secretary of the State
Department, New York, December 9, 1935.
185
Feis, Seen from E.A., p. 308.
186
Cited in Divine, p. 148.
360 Roosevelt and Fascist Italy

It is precisely in opposition to these administrative pressures that a large part of the

press has recently risen up – including several newspapers which have always been
hostile to the African undertaking – to protest against what the New York Tribune
defined as a moral embargo enforced through a system of administrative blackmail.
So too did the Chicago Daily News declare Roosevelt’s policy illegal when he
presumes to interpret the will of Congress arbitrarily and in an abuse of his powers.
Also the Chicago Tribune, the Washington Daily News, the Philadelphia Ledger
and to a certain extent even the Italophobic Washington Post, which observed that
to block the export of oil the president would have to ask Congress for the author-
ity to include it in the list of embargoed products.187

What surely cut the business sector to the quick was the emergence of a
strategy that, in the name of collective security, interfered with the free
market. At this point, the mechanism kicked in that linked Roosevelt’s
attempts to limit trade with Italy to an overall policy of government
regulation of private property and interests; a policy the business world
looked upon with less favor than ever by the end of the president’s first
term. In other words, their opposition to the New Deal, with all its
implications for the relationship between the government and private
industry, ended up nurturing and becoming equivalent to their opposition
to Roosevelt’s attempt to curb trade with Italy.
There was more. Thirteen years of excellent relations between the lions
of American industry, finance and the Fascist regime had made their mark:
thirteen years of paeans to Mussolini as the prototype of capitalist ration-
ality in a country with innumerable difficulties; thirteen years of justifica-
tions for the free hand the regime had taken with institutional traditions
and limits taken for granted in a country such as the United States. All those
lucrative deals, those solid images, that weak inclination to pass democratic-
liberal judgment (not to mention those thinly veiled out-and-out author-
itarian sympathies) made it extremely difficult to suddenly change course.
They served instead to suggest the use of great caution in any political
choices that might bring about a break of the capitalist world into two
camps, pitting the democratic countries against the totalitarian ones.

12. american diplomats and appeasement

It is particularly interesting to examine the attitudes of the career diplomats
involved in these events, not only because they were experts in

187
Commercial and Financial Chronicle article cited in Divine, p. 149; Augusto Rosso to
Benito Mussolini, Washington, D.C., November 27, 1935, in Collana di testi diplomatici
n. 7, Augusto Rosso, Rome: 1979.
 12. American Diplomats and Appeasement 361

international relations – and therefore also relations with Italy – but also
because they provide a sample of a social group that was simultaneously
restricted and exemplary. After the First World War, there had been a
major effort to build an American diplomatic corps following the tradi-
tional European model, in order to break with the previous American
model of awarding diplomatic posts in a spoils system by the political
party currently in power. During the interwar years, the cases of career
diplomats successfully achieving the highest ambassadorial posts were still
relatively rare, but they had begun to dominate the higher ranks of the
State Department’s bureaucracy. They were a fairly homogeneous group,
tightly knit through both friendship and social provenance. With very few
exceptions they were all white Anglo-Saxon Protestant men, and above all
their families were not merely well-off but specifically part of the restricted
circle of the most visible economic and social elite. The majority were from
New England, with a few Southerners and midwesterners sprinkled in.188
Naturally, both the older model of men from the world of finance and
the new career men interpreted the events they participated in through the
lens of their own class background and assumptions. Further, the nature of
their duties was such as to put them into contact almost exclusively with
the elite governing classes of the countries that hosted them and the even
more restricted group of those who habitually frequented the world of
foreign diplomats and international relations. These would include their
counterparts in career diplomatic service who populated the foreign min-
istries, a few government officials, financial and industrial leaders, and the
so-called high society that in that era in Europe was still made up mostly of
aristocratic families. Inevitably, the American diplomats, with rare excep-
tions, found themselves more at ease with the leaders of the conservative
political parties than with those of the socialist parties and movements or
with intellectuals of varying radical ideas. This unilateral understanding of
the host country, typical of the diplomats of that era, was particularly
accentuated among the Americans, especially in their relations with the
“Old World.” They were, therefore, more vulnerable to the fascination
exerted by the worldly and urbane milieus they entered, and despite being
representatives of the most powerful country in the world, they frequently
suffered a certain sense of intimidation and inferiority in these circles and
were needy in their search for recognition and legitimation.

188
Franklin L. Ford, “Three Observers in Berlin: Rumbold, Dodd, and Fracois-Poncet,” and
William W. Kaufman, “Two American Ambassadors: Bullitt and Kennedy,” in Gordon
A. Craig and Felix Gilbert, eds., The Diplomats 1919–1939, Princeton: 1953.
362 Roosevelt and Fascist Italy

American diplomats who were charged with Italian relations in the

interwar years offer an interesting confirmation of this profile. This is not
to repeat the old cliché (which was not actually unfounded) that the
Roman nobility, prevalently pro-Fascist, exerted a powerful attraction
on the naive American envoys. The documentation to trace accurate
portraits of the American ambassadors and their relations with the
Fascist regime exists and does not merely consist of official correspond-
ence, but also of their diaries and personal correspondence.189 The first
three ambassadors – Child, Fletcher, and Garrett – all conducted relations
of close collaboration with the Fascist regime. This was of course in
conformity with the orders of their government, though occasionally
these men went further than those directives, expressing their enthusiasm
for the regime in the propagandistic press. The Roosevelt administration
was initially represented in Rome by Breckenridge Long, a horse breeder
from Virginia and major donor to Roosevelt’s election campaign who
exemplified the way that economic and social conservatism could coexist
with an isolationist outlook in foreign relations.190 From the very beginning
of his mission, Long was enamored of the Fascist regime and served for
years as an untiring advocate for it, even though, unlike Child, who was a
journalist as well as an ambassador, Long only used State Department
channels of communication in addition to maintaining a close correspond-
ence directly with Roosevelt. He did not stand out for his attitude in the
context of the political and ideological tone of the New Deal years; but
when his pro-Fascist zeal brought him to overidentify with Mussolini’s
ambitions in Ethiopia, Roosevelt’s entourage did express some concerns.
A few of his colleagues at the State Department also offered ironic comment
on his enthusiasm and the ingenuousness with which he served as
Mussolini’s spokesman to the U.S. government. Roosevelt’s right-hand
man, Louis Howe, wrote to him in October 1935 that the ambassador in
Rome had been “hypnotized” by Mussolini and was sending five or six
telegrams a day that were hard to distinguish from pure Fascist propaganda.
He had also apparently given a particularly indiscreet interview.191

189
Child’s memoirs are cited above; there are also fragments of Fletcher’s diary in the Library
of Congress; the diaries of Long, at the Library of Congress, and of Phillips, at the
Houghton Library at Harvard University, offer copious detail on their entire tenures as
American representatives in Rome.
190
J. F. Watts, The Public Life of Breckinridge Long, 1916–1944, unpublished thesis, Ann
Arbor, MI: 1964.
191
FDRL-PSF, Louis M. Howe to Franklin D. Roosevelt, October 18, 1935; cited also in
Harris, p. 71.
 12. American Diplomats and Appeasement 363

Long was an indefatigable asserter of strict American neutrality

that excluded every form of limitation of trade with Italy as well as any
collaboration with the League of Nations.192 In truth, his attitude toward
the Ethiopian war was completely in line with that of the most conservative
circles of French and English politics that produced the Hoare-Laval
accord. On several occasions, in his meetings with Mussolini, he too
tried offering solutions along the same lines.193 What is significant here is
that Howe’s criticism did not stop him from remaining serenely at his post
throughout the war in Ethiopia, right until the end of the first Roosevelt
administration.
His successor was a more nuanced and interesting figure. William
Phillips was for many years, under various guises, at the very center of
American policy regarding Italy. He served twice as undersecretary of
state: at the time of Fascism’s seizure of power, when the austere figure
of Charles Evans Hughes dominated the State Department, and later from
Roosevelt’s election until the end of the Ethiopian war, when he was sent
to take Long’s place in Rome, where he served until war between the two
countries was declared. Unlike Long, Phillips was no diplomatic dilettante.
He was, rather, one of the first career diplomats to rise to the highest posts
of American foreign policy. Especially during his service as undersecretary
of state under Roosevelt, Phillips found himself wielding considerable
power and influence. He had the double advantage of being in charge of
the management of the entire bureaucracy of the State Department (given
that Hull, coming as he did from the Senate, had neither experience nor
interest in that aspect) and having the ear of the president, who was a
childhood friend. The two men were alike in class background and social
status, although they did not agree in their politics. Phillips was a con-
servative, quite distant from the reformist ideology and stridently demo-
cratic outlook of many New Dealers. As a professional diplomat, however,
he was always cautious in taking any autonomous position, remaining
constantly sensitive to the wishes of his superiors. This double aspect – a
social position that was reflected in his political orientation, but at the
same time his ambition to fulfill the role of impartial executor of govern-
ment policy – also showed through in his analysis of Fascism in Italy. He

192
Excellent evidence of Long’s position in this regard are the reports, headed “Dear Chief,”
he lovingly sent directly to Roosevelt. In addition to those already cited, see the following
dispatches: FDRL-PSF, Italy-Long, Breckinridge Long to Franklin D. Roosevelt, Rome,
October 30, 1935; November 8, 1935.
193
Watts, pp. 79ff.
364 Roosevelt and Fascist Italy

shared the attitude of his social set toward the rise and development of
the regime; at the time of the debate over an oil embargo, he took advant-
age of the opportunity to declare himself more explicitly than his usual
bureaucratic reserve allowed in a memorandum to the secretary of state
Cordell Hull. He wrote that: (1) Only the major oil companies would
respect any embargo, while the 150 smaller enterprises would follow
their own path. (2) The American government could not predict what
kind of sanctions Geneva might declare. (3) “The question is whether the
United States should undertake to penalize American trade before we
have any knowledge as to the real situation resulting from the action of
the League” [. . .] (4) “I do not like the idea of putting the President in the
position of making an appeal to the oil industries of the country, which is
not respected by the smaller companies and therefore not effective. [. . .]”
(5) “In brief I believe that it will be wiser to await the result of the League
in this case rather than to act somewhat precipitously now. It may even
be wiser to await action by our Congress in order that the Government
may be in position to exercise real restraint upon the export of raw
materials. . . .”194 Facts would prove Phillips’s bureaucratic prudence
well-founded, since the League of Nations did not decide to extend sanc-
tions to cover raw materials, the smaller oil companies (and perhaps even
the major ones) did not respect the moral embargo, and the Roosevelt
administration did indeed find itself in an embarrassing position for having
anticipated Geneva. And yet there is no doubt that Phillips was opposing
an action by the president that would have increased the American com-
mitment to anti-Fascism, nor can it be ignored that he placed importance
on the penalization of American interests that might be involved.
Nonetheless, the Ethiopian war certainly increased his critical attitude
regarding Mussolini’s foreign policy195 Although in the next episode
involving the recognition of his conquest, Phillips did advise taking a
conciliatory stance toward Mussolini,196 and hoped until the very end to
convince Mussolini to stay out of the world war while he was serving as
ambassador in Rome.197

194
FDRL-PSF, fol. Italy-Phillips, William Phillips to Cordell Hull, Washington, D.C.,
November 14, 1935.
195
Divine, pp. 101–102.
196
NA-IR, bk. Stati Uniti 1936, fol. 1291, Fluvio Suvich to Benito Mussolini. According to
Suvich, Phillips advised conciliation because he wanted to leave the door open for his own
transfer to Rome. In reality Phillips’s position was in line with his overall vision for
relations with Fascist Italy.
197
HUHL-WP, W. Phillips, Diary.
 12. American Diplomats and Appeasement 365

It could be objected that it is only right for ambassadors to maintain an

attitude of openness, if not outright sympathy, toward the government
hosting them. Apart from the fact that the diplomats considered here, with
the possible exception of Phillips, went well beyond mere openness, the
truth was that their attitude was quite representative of the general ori-
entation of most career diplomats. Hugh Gibson, who represented the
United States at the disarmament talks in Geneva in the 1930s, projected
a similar accommodating attitude.198 The same was true of J. Pierrepont
Moffat, who was in charge of the Western Europe section of the State
Department until the eve of the Ethiopian war. Moffat’s own letter to the
ex-secretary of state Henry Stimson (who was, one can see, of a different
opinion) reveals the arguments made by diplomats at the time of the
Ethiopian crisis against the interventionist tendencies of the president
and the current secretary. These men hesitated to take a line of open
opposition to the Fascist dictatorships until events left them no other
choice. Moffat wrote to Stimson that his worst fear was what an Italy
victorious in its aggression would do next. But, apart from that outcome,
his other worry was the consequence of Italy suffering a severe defeat,
which might be almost as bad.199 The rest of his letter made it clear that
he thought the latter possibility more worrisome than the former.
Disregarding Stimson’s arguments in favor of collective security200 and
his sensible observations regarding the fragility of the Stresa Front (which
he called an old-fashioned accord whose weaknesses had long since
become obvious), Moffat argued that Italy had to stay strong because it
was the only power capable of impeding Germany’s dominance over
central Europe. He expressed the fear that, unless Geneva played its
cards extraordinarily well, an Italian crisis would bring the inevitable
day of German aggression closer. Stimson, or anyone else, could have
responded that precisely in light of this danger it was necessary to take
exemplary action against Italian aggression in order to have it serve as a
warning to Germany and Japan. Moffat added that he was also concerned
that since the Hoare-Laval Pact was rejected and Eden had triumphed,

198
The Italian ambassador in Rio de Janeiro reported the “favorable sentiments toward Italy
and the fascist regime” held by Gibson, who boasted that he “had become close to il Duce
during his travels to Rome, when he was a delegate to Geneva.” ASMAE-AAP, bk. 27,
Stati Uniti 1936, fol. Rapporti politici posizione 1, sf. 3 Ambasciatore Americano a Rio de
Janeiro, Policastro a Delegazione Italiana Ginevra, Roma, January 28, 1936.
199
HUHL-JPM, J. Pierrepont Moffat to Henry l. Stimson, Sydney, January 14, 1936.
200
HUHL-JPM, Henry L. Stimson to J. Pierrepont Moffat, New York City, December 5,
1935.
366 Roosevelt and Fascist Italy

British policy – and the League of Nations policy – could only end up one
way, and that was in provoking the fall of Mussolini, which Moffat feared
would clear the way for a Communist revolution to penetrate into the
heart of Western Europe.201 The fact that the Soviet Union, in the person
of Foreign Minister Maxim Litvinov, maintained a hardline policy against
the dictatorship further concerned Moffat. Russia showed no interest
in the principle of collective security until it looked likely to help deal a
lethal blow to Fascism, he pointed out. This was no coincidence; it was
because Fascism had been the dedicated adversary of Communism for
fourteen years.
Here in crude terms was the dilemma of a large part of the Western
governing classes in the late 1930s – and not the much-maligned American
isolationists and populists. The Fascist dictatorships were aggressive, they
rejected the Treaty of Versailles, they could threaten the interests of some
and the empires of others. Many grasped the threat represented by Nazi
Germany, but only the most attentive observers of the international
situation.202 And yet for a large part of the governing classes, which had
applauded Mussolini’s seizure of power and had not opposed the rise of
Japan’s or Germany’s authoritarian leaders, intervention against them
even in the event of a flagrant violation of the peace still constituted an
unnatural act against their worldview and their class identity. Despite the
fact that the 1929 crisis and the consequent destruction of the financial
and monetary interdependence of the industrialized world had under-
mined the basis for their political unity, a solidarity born of the similar
economic and social structures of their otherwise differing political and
institutional regimes continued to shape their thinking. The dilemma
became urgent in the face of the Communist (more than merely Soviet)
threat. The central fact at the heart of the fears of men such as Moffat were
not the horrors of Stalin’s totalitarianism, at that time still little known
and rarely debated, but the idea of Communism as a global subversive
force that would destroy the order and social structure of every country,
starting with the United States. If this had been true already after the First
World War, as Arno Mayer showed,203 the Depression and especially its

201
Moffat, letter to Stimson. Moffat’s attitude is even more significant in light of the fact that
he was no ordinary bureaucrat, but was considered one of the most brilliant diplomats of
the middle to high ranks and, above all, had for some years directed the European affairs
office of the State Department.
202
A. A. Offner, American Appeasement: United States Foreign Policy and Germany
1933–1938, Cambridge: 1969.
203
Mayer, Politics and Diplomacy of Peacemaking.
 12. American Diplomats and Appeasement 367

specific manifestation in the United States had further intensified those

fears, which had been calmed to some extent during the course of the
1920s. It should not be forgotten that at the same time as the debates on the
Neutrality Acts and the threat of Fascist aggression, the workers’ struggles
that would lead to the creation of a militant union such as the CIO were
well under way. The success of Roosevelt’s reform experiment was not
at all assured, and to many it seemed like a gateway to Bolshevism.
Moffat referred to the Hoare-Laval accord with a hint of nostalgia. As
an attentive observer of the international situation, the moralistic pacifism
of the American masses was alien to him, as was their scandalized reaction
to what they perceived as the cynicism and double-dealing of the European
leaders. Moffat, just like all the conservatives of France and England,
wanted to resolve the dilemma before them through a policy of appease-
ment that would preempt Mussolini’s military victory but would not
crush him. In this light, the continual postponement of the extension of
sanctions and the parallel search for a conciliatory proposal that would
satisfy Mussolini were not far different from American conduct and rea-
soning on the situation, although the motivations behind those actions
might have differed. If the Americans could maintain that the indecision
and ambiguity of the French and British made it impossible for them
to initiate any more collaborative policy toward Geneva, the reverse was
also true: the British and French press never tired of commenting that
any extension of sanctions would have no effect unless the United States
cooperated fully in enforcing them. Each side had provided the other with
an alibi. One might object that in the case of the United States, the popular
isolationist sentiment played a determinative role in this outcome, while
in Europe the repugnance at the thought of conflict with Mussolini was
more evident. But as has been argued above, the role of isolationism has
been exaggerated in previous accounts. Instead it was the manipulation of
pacifist feelings among Americans by groups who were clearly and openly
concerned with defending their own interests that, added to the class
solidarity and philo-Fascist leanings of such part of the governing class,
concentrated in the State Department,, as well as the pressure of Italian-
American voters, added up to the American line of conduct.
Both the historiography and the body of memoirs concerning the ori-
gins of the Second World War show full awareness of the lateness with
which the future Allies reacted to the rearmament and aggression of the
Fascist dictatorships. The Munich Pact has been singled out as the most
significant moment in the politics of appeasement, and it has been argued
that this strategy is based on a tactical error, however fundamental: the
368 Roosevelt and Fascist Italy

failure to understand that only a firm reaction involving the use of force
would have been capable of stopping the expanding aggression, and there-
fore could have prevented the outbreak of Second World War.204 This
interpretation completely fails to identify the roots of the politics of
appeasement. It criticizes the failure to react to Fascist aggression, but it
never investigates the beliefs of those who should have been acting more
firmly from the very moment these dictatorships arose and gave every
indication of the future direction of their foreign policy, especially after
the Depression had removed the economic obstacles to their decisions. The
complacence and, in Italy’s case, the open support of the future aggressors,
should suggest rather that appeasement was not just a tactical error, the
illusion that one could calm the tiger by giving it human flesh. Appeasement
is better understood as the extreme final attempt to save the collaborative
relationship built on common interests (in the case of Fascist Italy) and later,
more prevalently, on a shared aversion to Communism as the greater threat
to the social order underpinning all these nations and ultimately
the international structure as well. If this is the true interpretation, the
lateness with which the Western powers awoke to the real menace of the
Fascist forces is not to be blamed on obdurate American isolationists or
the tactical errors, based on mistaken calculations, of British and French
politicians. The so-called Cliveden “set,” Neville Chamberlain, the Times of
London, Laval, Flandin, Bonnet, American oilmen, Generoso Pope,
Randolph Hearst, Lamont, Moffat, and so on ad infinitum, were not
naive tacticians who did not know how to show firmness in the face of
clear danger. They behaved in a way that was perfectly logical and predict-
able in the light of a different danger they saw as the greater threat.
In other words, the powerful and wealthy tried to defend, to the very
end, their own unity at the international level; they finally gave way only in
the face of the massive pressure of their populations, which were converted
from their pacifism to a willingness to fight by the piling up of Fascist
aggressions. The Abyssinian conflict was important because it served as the
first occasion in which that tragic dilemma of the Western governing
classes was clearly revealed, and clearly failed to live up to the occasion.

13. the morgan bank and appeasement

The argument deserves to be treated in even more depth than is possible in
the confines of this work. To understand the reluctance to conduct a real

204
See especially Earl of Avon, pp. 134–159.
 13. The Morgan Bank and Appeasement 369

anti-Fascist policy in the second half of the 1930s it would be necessary not
only to examine each separate episode (starting with the Abyssinian war)
that led to the outbreak of world war, but also to make a full class-based
analysis of the forces, interests, and alignments that dragged their feet for
so long before taking action against the danger presented by the Fascist
regimes. Several individual moments appear particularly significant: the
stance of the Morgan Bank during and after the conflict in Ethiopia stands
out for its probative value. It was the most politically well-informed and
sophisticated institution in that segment of American capitalists with
strong ties to France and Great Britain. We have seen how J.P. Morgan,
Jr. and his partners represented that sector of American finance that, while
promoting the leadership role the United States due to the size and strength
of its production system, always tried to assure a peaceful and smooth
transition of power from the British. More than any others, they were the
ones who felt the consequences of the Depression and the decline of invest-
ment banking as the default guides of American political economy.205 Yet
even during Roosevelt’s administration, they did not change their basic
orientation. This included the special relationship with Fascist Italy and the
insertion of that relationship into the context of the British conservatives’
vision of foreign policy for Europe, until it was seriously damaged by
Mussolini’s campaign for autarchy and by the general American with-
drawal from its guiding role in the world economy.
In the course of the war in Ethiopia there was no doubting the opinion
of the bankers. In a letter to Lord Robert Cecil, Lamont made his funda-
mental position completely clear at the very height of the crisis.206 Yet
later on, many partners of the Morgan Bank were counted among the
supporters – and probably the major donors – of Wendell Wilkie, whose
Republican presidential campaign represented an important, if belated,
moment of mobilization against the Axis powers.
They were not men whose financial interests alienated them from the
interplay of international politics; nor were they investors looking East
for new opportunities. They were not even exponents of that famous
isolationist populism that for so long (although this was partially the
fault of historians who should have known better) was held responsible
for the lateness of the United States’ anti-Fascist awakening. Nor were they

205
Vincent P. Carosso, Investment Banking in America. A History, Cambridge: 1970.
206
HUGSBA-TWL, Thomas W. Lamont to Lord Robert Cecil, New York, November 29,
1935.
370 Roosevelt and Fascist Italy

among those, such as Charles Lindbergh and Joseph Kennedy, who pro-
claimed “America First!” until the very last moment, claiming that the
United States had to reject every tie that might bind it to the Allied and
anti-Fascist cause. The Morgan partners were, no more and no less, the
representatives of that part of American finance best equipped to under-
stand European developments and most motivated to make America’s
weight felt by aligning it with the major democratic powers of Europe in
their moment of need.
Naturally this discussion must be understood in the context of the war
in Ethiopia and the phase immediately following it. As mentioned above,
in the summer of 1935, when the news of Fascism’s aggression against
Ethiopia was growing worse by the day, the Morgan Bank adhered to
the credit restrictions on Italy that the Federal Reserve Bank of New York
had requested of American banks. We saw how Lamont, as advised by
Leffingwell, explained to the regime’s officials the reasons (which were
hardly unique to the bank) they were perplexed by the African under-
taking. Like the Morgan Bank, the entire commercial and exchange appa-
ratus of the New York financial market lost confidence in the regime and
ended up downgrading its credit status. Although the memorandum given
to the Italian authorities through Giovanni Fummi was articulated as a
way to keep dialogue with the regime open, its significance was clearly as a
moment of rupture.
The problem of the sanctions, especially the issue of an oil embargo, had
a more unsettling influence on Lamont, who ended up opposing the idea
entirely. Lamont was certainly the most authoritative partner, second only
to the titular partner, and the most influential in terms of strictly political
issues, especially those regarding Europe and Italy. In the letter previously
cited to Lord Robert Cecil, the British delegate to Geneva, Lamont had
written that many Americans approved the idea of neutrality and forbid-
ding the sale of war supplies to belligerents. While the current law fortu-
nately worked against Italy as it was supposed to, it certainly could not be
called neutrality since it was the opposite. And because it was the opposite
of neutrality, the American people were against it. What if conflict arose
between Great Britain and Italy, and the United States had to stop exports
to Great Britain? While many liked the idea of limiting exports to Italy,
many others found it senseless to refuse to sell them oil while Great Britain
and France went ahead and continued doing so. Why should Americans
stand on principle when no one else recognized the principle?207

207
HUGSBA-TWL, Thomas W. Lamont to Lord Robert Cecil.
 13. The Morgan Bank and Appeasement 371

Lamont’s declaration is fairly clear as soon as one deciphers who

“people,” “many,” and “many others” refer to. Of course, Giovanni
Fummi, as a good patriot, had telegraphed to the partners that the sanc-
tions were encouraging a great sense of national unity in favor of
Mussolini. He reported that forty-four million Italians were determined
to stick it out, and even those who had previously been less enthusiastic
about the African expedition now joined the unanimous chorus in favor of
Mussolini’s objective.208 He warned too of the ability of the Italian pop-
ulation to give up not only their comforts and luxuries, but even basic
needs in order to cancel out the effect of the sanctions. He concluded the
telegram (which would be dutifully sent on to Minister of Finance Paolo
Thaon di Revel) with an appeal to the sense of duty of every person in a
position of influence. Italy should be offered understanding and the chance
to satisfy its needs; no one should fool himself that Italy would change its
perspective because of sanctions.209
Fummi, that humble but extremely useful man, despite his nearly two
decades of collaboration and the achievement of a high position in the
world of Italian finance (Fummi was for many years on the boards of
directors of Fiat and Pirelli, both before and after the Second World War),
was forced to address the powerful partners with the title of “Mr.,” while
they showed the arrogance of colonizers by continuing to familiarly call
him Nino. Fummi reminded the partners of their obligations at a moment
in which – it should not be forgotten – the consensus built by the regime
and collective enthusiasm in Italy were at an all-time high. It is difficult
to ascertain what the effect of such a clear and surprising opinion was,
especially coming from a man who had never been anything but a loyal
defender of the Bank’s interests. This kind of communication, which
served as a vessel for concrete and personal ties as well as class and
financial interests that survived the first fractures as they began to appear
and divide these two camps, is primary evidence of the motivations sus-
taining a policy of appeasement for so long.

208
AGF, fol. Pre War Correspondence, sf. S. E. Sen. Dott. Paolo Thaon di Revel, tel. 2694,
Giovanni Fummi to J.P. Morgan & Co., Rome, November 21, 1935.
209
It is notable that the police were in possession of the code used by Fummi, and that he, since
the summer of the previous year, had chosen to transmit copies of all his telegrams to the
minister of finance, in order to avoid misunderstandings or translation errors. See AGF, fol.
Pre War Correspondence, sf. Capo del Governo, Giovanni Fummi to Guido Jung, Tome,
June 25, 1934; June 27, 1934; Giovanni Fummi to Benito Mussolini, Rome, June 27, 1934.
This should not however make it seem that Fummi’s patriotic tones were insincere; they
were coherent with his entire history of conduct in his reports to the Morgan Bank, inspired
by his profound conviction that they were in the interest of his country as he saw it.
372 Roosevelt and Fascist Italy

Returning to Lamont and the issue of sanctions, it is possible to measure

the considerable effect of the war on his thinking. When it was all over, he
wrote in his diary during a visit to London in June 1936, going back over
the points that had been most important:
2 points I cannot understand – why with the whole composition of the League
changed and weakened, England for a minute thought that sufficient collective
action could be secured to become effective vs. Italy. With USA, Japan, and
Germany out, with Austria new, with Italy opposing, how could Sanctions work
unless it were made short, sharp and quick military enforcement?
2nd – why the British Foreign Office should have turned its foreign policy over
completely to the people day by day – viz. Peace Ballot etc.? Again, how can British
ever forgive themselves for losing the Abyssinian Emperor his Kingdom by rejecting
the Hoare-Laval proposals and not submitting them to him?210

Considering Lamont’s earlier position, this is not simply a case of

hindsight being twenty-twenty. Rather, his references to the alignments
among nations (which implicitly indicate how Lamont believed in 1936
that only an anti-Soviet alliance could be feasible) and especially his
seeming support of the Hoare-Laval Pact appear extraordinarily signifi-
cant. That pact served as a litmus test in identifying who supported react-
ing to the Fascist regimes’ aggressions through concessions, in the name of
a not-yet-exhausted solidarity among capitalist nations – or at least anti-
Communist ones. Nor is it accidental that the diary points to the close
political and society ties linking Lamont to the Cliveden set (Cliveden
was the residence of the Astor family, the owners of the Times), Stanley
Baldwin, Neville Chamberlain, Halifax and Lothian, and Dawson – in
sum, to all the builders of the policy that would culminate with the Munich
Pact. This way of thinking, so common in the American governing class,
found a strong echo in the forces dominating British politics until the
outbreak of war against Germany. At least in 1936, for the House of
Morgan being pro-British meant being linked to that environment, in
continuity with the relations that had been created with Mussolini’s Italy
in the preceding decade. Lamont and his partners dealt with those in
power, and in 1936 Winston Churchill was still far from holding the office
from which he would lead wartime Britain.
After Italy’s victory in the war, the Morgan Bank would continue its
prudent conduct, while remaining within the bounds of the prevalent

210
HUGSBA-TWL, bk. 173, fol. 8, Diary, June 2, 1936. The peace ballot was an informal
referendum through which the great majority of the British people had expressed their
support for intervention, rejecting every aggression, using means based on the principle of
collective security.
 13. The Morgan Bank and Appeasement 373

Anglo-American policy vision. Once again it was Giovanni Fummi who

took the initiative to solicit renewed financial commitment from the Bank.
In a certain sense, Fummi’s authority was reinforced because the sanctions
had had disastrous results (even if nobody of that environment discussed
what might have happened if they had been applied uniformly and
decisively and had included oil). At the end of March 1936, Lamont was
considering a trip to Rome but feared that it might be interpreted as a sign
of willingness to reopen talks for new funding for Italy. Fummi telegraphed
him that his presence in Rome would indeed be taken in that sense, and
Lamont decided not to make the voyage.211 Fummi took the opportunity
of Lamont’s request for advice to send him a long letter arguing in favor of
a renewed Morgan Bank commitment to Italy that presented a portrait of
the political and economic conditions in Italy after the victory in Ethiopia.
Fummi affirmed that there were those in Italy who saw American capital
as a tool for making profit in Ethiopia and looked especially to American
oil and mining companies. More in general, while relations with Great
Britain remained cool, many Italians placed their hope in New York’s
financial markets and hoped for a currency stabilization.
If world economy must in the end, though slowly, revert to the old system of
interchange of goods, services and capital, we may see the leading Powers, in
their own interest in order to benefit general world conditions, anxious to assist
countries like Germany and Italy in their need. When the time comes, it is possible
that the value of the Lira will have to move in unison with the devaluated sterling
and dollar. . . .212

Fummi seemed to discern the beginning of a return to the conditions of

the 1920s. Nonetheless, his prudent realism made him add that “There is a
strong tendency to lead the country into a state of independent economy,”
although he immediately added that in Italy’s case it was unlikely to prove
possible, because it would require a too-drastic reduction of imports from
abroad.
Fummi made an effort to predict future development in Italian politics
in which the need for capital, including for Ethiopia, would bring
Mussolini to again embrace free trade and international monetary coop-
eration as he had when these were the reigning conditions of political
economy and foreign affairs before the Depression. According to Fummi,

211
HUGSBA-TWL, bk. 191, fol. 5, tel. 80098, Giovanni Fummi to Thomas W. Lamont,
Rome, March 29, 1936.
212
HUGSBA-TWL, bk. 191, fol. 5, Giovanni Fummi to Thomas W. Lamont, Paris, March
27, 1936.
374 Roosevelt and Fascist Italy

that would depend to a great extent on the willingness of the United States
and Great Britain to leave behind an “insular” attitude and take on the
responsibility of leadership. It is probable, if not certain, that Fummi was
motivated in this by the minister of finance, who was interested in creating
his own communication channels with the Americans. A symptom of this
was referred to in passing in his letter as he mentioned that he would not
be surprised if the Bank were asked to convert a government bond on the
New York market. After a few months, Fummi took up the discussion
again with a new message, in which he emphasized the great power of
Mussolini deriving from the political unity of the country and denied the
rumors of a friendship treaty with Germany.213 Fummi made a special
point of consulting the partners about the interest shown by other banks in
the Italian situation. Several large New York banks, among them Chase
National Bank and National City Bank, were returning to offering normal
terms to Italian banks of three months for short-term credit. Clarence
Dillon, president of Dillon, Reed & Co., and other American bankers
had already been to Rome investigating investment opportunities in
Ethiopia. In particular, Mussolini had given an interview to several
American journalists on just this topic. Fummi busied himself in putting
together a cautiously favorable picture of the Italian economy’s health,
observing that while it was not easy or filled with immediate opportunities,
the brief duration of the Abyssinian campaign had created moral and
material benefits, as well as the promise of future gains, and had made
Italians take a newly optimistic view. Fummi made no specific proposals
for investment but implicitly renewed his invitation to the Bank to at least
show the same interest shown by other American banks, to whose com-
petition he was naturally sensitive.
The reaction of the partners, particularly Lamont, who continued
to follow the Italian situation closely, was multifaceted. As seen above,
Lamont decided not to travel to Rome anytime in 1936, partially on
Fummi’s own advice. While Lamont was in London, he had the chance
to speak candidly to Dino Grandi during an intimate breakfast at the
Italian embassy in Grosvenor Square: the Italians had to put aside every
thought of American loans for a long time to come, despite the fact that
Breckinridge Long, the ambassador in Rome, had in his usual pro-Fascist
zeal told Suvich that those funding channels would soon reopen if Italy
would just renegotiate its war debt. At the end of the year, Lamont wrote a

213
HUGSBA-TWL, bk. 191, fol. 5, Giovanni Fummi a J.P. Morgan & Co., St. Moritz, July
29, 1936.
 13. The Morgan Bank and Appeasement 375

letter to Fummi, probably meant as a response to all of Fummi’s corre-

spondence, which better explained the partners’ reasoning in continuing to
refuse his invitations for the time being.
It is not a question merely of the Italian economy or of the resources that might be
available for meeting promptly any such banking credits as they were opened, I
accept without question your confident and even optimistic analysis and prophe-
cies on the status of the Italian economy. But it so happens that after the heavy
losses that we have been obliged to take as a result of the depression in America of
recent years, we are averse to Continental investments at the present time. The
American community, as you know from your recent visit, is exceedingly uneasy
about the whole situation in Europe. It fears an early outbreak of war, and while I
believe you and I believe such an outcome is not imminent, nevertheless, until there
is a better spirit shown among the nations of Europe, most Americans will hold
off from financial commitments there. [. . .] But until the strength of the Italian
economy has been more fully demonstrated than it has today, and until the political
situation in Europe has become less threatening than it is today, we are, as I say, not
planning to make commitments over there.214

This did not however mean that the Bank intended to give up cordial
relations with Fascist Italy. After all, the letter still concluded with the
sentiment that this was not the final word on the subject. Lamont had
taken care, during his private conversation with Grandi, to advise that
every effort be made to reestablish good relations with Great Britain and a
prompt return to Geneva to re-create an atmosphere of cooperation.215 In
a later conversation with Grandi, with Churchill and Neville Chamberlain
also present, the ambassador reported that Lamont proved himself “a
convinced anti-sanctionist” and had emphasized that a gradual improve-
ment in American public opinion toward Italy, after the military victory,
suggested that the moment was favorable for starting trade negotiations
again.216
In reality, it was the Italian government that was not willing to begin
such negotiations, which were conditioned by Cordell Hull’s demand for
a most-favored-nation clause, while the Italians would not abandon the
criteria of “compensated trade.” This divergence was not merely technical:
while the Americans wanted to favor the return of commercial relations in

214
HUGSBA-TWL, Thomas W. Lamont to Giovanni Fummi, New York, December 15,
1936. This letter was never actually ever sent, probably because Lamont’s son, Thomas S.,
himself also a partner, had already answered Fummi; but the text remains useful for
analyzing the bank’s reasoning.
215
HUGSBA-TWL, bk. 173, fol. 8, T. W. Lamont, Diary, June 2, 1936.
216
ASMAE-AAP, bk. 28, Stati Uniti 1936, posizione 1–35, fol. Dichiariazioni bancarie
Lamont, tel. 8388, Dino Grandi to Benito Mussolini, June 19, 1936.
376 Roosevelt and Fascist Italy

a free trade context, Mussolini did not intend to give up the mechanisms
of control and autarchy he had instituted, even at the cost of sacrificing
a higher volume of trade.217 It should have been obvious to Lamont, but
he did not wish to accept that Mussolini had definitively changed tracks.
Grandi reported another relevant conversation in this regard, in which
J. P. Morgan himself, during a visit to London, expressed his interest
in projects investing in the newly conquered Ethiopia.218 Although
Ambassador Rosso probably had good reason to advise caution from his
observation point in Washington – “During the entire Italo-Ethiopian
conflict the Morgan banking group, to which Lamont belongs, has been
a clear advocate of the Anglophile and therefore anti-Italian faction” –
there is no doubt that, while not being ready to get down to the concrete
details of funding, the House of Morgan was interested in reopening a
political dialogue (as shown by the reference to trade relations and the
attitude toward sanctions that would have made it easier to restart finan-
cial projects with Italy).219
The following year Lamont did go to Rome, and met with Mussolini
while there. It is likely that the Spanish Civil War, by then under way,
increased the Bank’s worries about maintaining peace in Europe, but on
the other hand it also underscored the necessity to restore relations among
the anti-Communist countries. The meeting between Mussolini and the
American banker took place on April 16, 1937, and marked a phase of
renewed cordiality. Mussolini seems to have done his best to woo his
guest, sounding all the notes he might be happiest to hear, with his usual
ability to please his foreign visitors. Mussolini gave profuse assurances of
his good will and especially emphasized his desire to restore Italy’s positive
image in British and American public opinion. He asked Lamont’s advice
regarding the best manner to attain these goals, and Lamont committed to
write a memorandum for him on the topic. One of the reasons behind
Mussolini’s success in this kind of meeting was his ability to overcome his
image as truculent and demanding with a great show of humble requests

217
ASMAE-AAP, bk. 28, Stati Uniti 1936, posizione 1–35, fol. Dichiarazioni bancarie
Lamont, tel. 390, Augusto Rosso to Benito Mussolini, Washington, D.C., June 26,
1936; and HUGSBA-TWL, Giovanni Fummi to J.P. Morgan & Co., St. Moritz, July
29, 1936, in which he reported that he had met Lamont in London and they had discussed
the question of a trade agreement between Italy and the United States, the possibility of
which Fummi had duly informed the responsible parties. He said, though, that it was clear
the time was not ripe, though he thought it could be before long.
218
D. Grandi, Interview.
219
See Rosso telegram cited above.
 13. The Morgan Bank and Appeasement 377

for help and advice from his guests, who could not help but feel gratified
no matter how shrewd or powerful they were.220 For his part, Lamont
advised the dictator to make a direct statement to the American public,
correcting for them the image of a “man of war” that was prevalent at that
time. Lamont suggested the points to make in such a statement, with the
goal of simply making public the kind of attitude Mussolini showed in
private interviews such as their own. Diplomatically, the banker explained
to the dictator that giving an interview himself on the Italian situation
was not advisable, because it would have been assumed that the negotiator
of Italy’s loans was not objective in the matter.
The content of the memorandum Lamont prepared does not reveal
Mussolini’s own motivations, though it does offer a faithful reflection of
Mussolini’s statements during their meeting, but it provides a clear sum-
mary of the politics Lamont hoped Italy would follow. Its fundamental
argument was that peace must be pursued through the development of
international economic cooperation, above all trade. Lamont wanted
Mussolini to repeat his own historical interpretation of free trade as the
foundation of peace, offering as his main proof the relations among the
European states from the Congress of Vienna to the Franco-Prussian War.
Lamont even wanted Mussolini to call upon Anglo-American leadership
toward this goal, although he articulated this appeal in prudent language,
noting that in 1930 and after it had been American and Great Britain to
raise customs tariffs and it would now be logical to expect them to be first
to move in the opposite direction of lowering them. Those two nations
with the largest world trade were also the most interested in making that
world peaceful, both economically and politically.221
Although he acknowledged the original American responsibility for
protectionism, it was perplexing that Lamont could expect Mussolini, in
1937, to publicly appeal for Anglo-Saxon leadership, which he had not
even done during the period when he implicitly recognized it and adapted
his foreign policy to it. He finished with a stern admonition that no magic
formula would cure the ills of the world; progress depended on the daily
efforts of the common man. National prosperity was always the result

220
For a reconstruction of the Mussolini-Lamont meeting, see HUGSBA-TWL,
T. W. Lamont, Diary, April 16–17, 1936; AGF, bk. Pre War Correspondence, fol. Capo
del Governo, Giovanni Fummi to Benito Mussolini, Rome, April 20, 1937; Thomas
W. Lamont to Giovanni Fummi, Rome, April 19, 1937; T. W. Lamont, Memorandum
for Giovanni Fummi, Points for consideration in any public presentation of views as
bearing upon American public opinion, Rome, April 20, 1937.
221
Lamont, Memorandum, p. 2.
378 Roosevelt and Fascist Italy

of nothing other than hard work, a simple life, and a bit of savings, year
after year.
The memorandum was an extraordinary example of disconnection
from reality. The relation between its text and the actual events of the
time – not only the Ethiopian war, by then concluded, but the Spanish Civil
War, the remilitarization of Germany, the brutal reality of the increasing
alliance between the two Fascist dictatorships – suggests the interpretation
of the document as a provocation, or at least a form of verification inspired
by skepticism. Could Lamont really have intended to try once more to
influence the Fascist government, even knowing that by then there was
no real hope left? Despite its professions of friendship, the Bank had
shown itself unwilling to risk any more of its money in Italy. And yet any
expression of distrust in this sense was totally lacking from even the most
private documents; and the judgment of the Hoare-Laval Pact and the
very fact that Lamont went personally to see Mussolini at such a time are
eloquent counterindications. It does not even seem that the Morgan part-
ners can be accused of blindness, ignorance, and stupidity, as the British
appeasers have been, for similar behavior. These men’s judgments, con-
duct, and level of comprehension rise above such categories; but their goals
and values in this context allowed them to see and not to see, to understand
and yet to fool themselves, to react and yet to passively accept the unfold-
ing of events. The developments between American bankers and Fascism
in this phase are only comprehensible in the light of their will, dominant
among the governing classes of Britain and the United States (not to
mention the French, who merit their own and far-more-piercing consid-
eration), to try any means to preserve a partnership with the Fascist
dictatorship. Despite their ideological differences, which had not stopped
them from doing very good business in the past, they were more unwilling
to contemplate the alliance with the Soviet Union that Litvinov had been
calling for in Geneva for years in order to cement an anti-Fascist front.
The political and financial dialogues with Italian authorities, the pressing
appeals of Giovanni Fummi, the financial activity of other bankers, the
very attempt by Lamont to turn back the clock to the 1920s – these were
the background to the desperate effort by Roosevelt and the State
Department, prolonged until the very last moment before war was declared
in Europe, to separate Mussolini from Hitler. These would have seemed
reasonable attempts if they had not added to the problem of delay and
obstructionism that prevented the necessary awareness of the global men-
ace the Fascist regimes represented, tragically worsening the situation in
which eventually they would need to be fought with every means available.
 14. The Origins of American Opposition to the Dictatorships 379

14. the origins of american opposition

to the dictatorships
Even within the ranks of the American governing class there were those
who understood the nature of the coming problem earlier than the rest
(as discussed above, there had only been restricted groups in the United
States, mostly of ethnic minorities, many of Marxist or anarchist leanings,
that had been anti-Fascist from the beginning). It was still a weak and
hesitant position, but it grew quickly during the Ethiopian crisis. Stimson
was perhaps the first of the American statesmen to be lucidly aware of the
true nature of the conflict that was building. His experience in trying, as
secretary of state, to organize a collective resistance to the Japanese attack
on Manchuria surely had a clarifying effect on his analysis of the situation
with Italy and Germany. It helped convince him that it was indeed necessary
to use all available means to combat their aggressive acts. He had to account
for other forces and opinions in this, starting with his own president, but
the Stimson Doctrine named for him in 1932 was to refuse recognition to
territorial changes executed through force. In the course of the war in
Ethiopia, he was taken by a nearly ideological fervor, quite rare for a man
of his experience, when it seemed that the League of Nations might still take
decisive action and apply strict sanctions. He wrote to Moffat, who he knew
thought otherwise, that the more he thought about it the more convinced he
became that collective action was the only solution to the modern problems
created by the forces of democracy and industrialization. He thought the
new vitality shown by the League of Nations was having a positive effect on
American public opinion and that, despite the obstacles encountered by
the White House in its efforts for the Neutrality Act the previous summer,
the time was nearly upon them when the U.S. government would be able to
offer support to the League in its embargo against Italy.
Stimson also responded to Moffat’s – though it was not only his – argu-
ment that Italy was doing nothing more than following in the footsteps of
others by pursuing empire, saying that Italy had no moral justification for
violating the commitments it had agreed to by legal treaty. It had been
unlucky perhaps to choose the precise moment when the rest of the world
awoke to the need to reject imperial aggression. But this was no excuse; it
was like a criminal arguing for his innocence because he had committed his
crime when the police were patrolling more carefully than usual.222

222
HUHL-JPM, Henry L. Stimson to J. Pierrepont Moffat, December 5, 1935, p. 2; William
L. Langer, Explorations in Crisis, Cambridge, MA: 1969.
380 Roosevelt and Fascist Italy

This genre of argument was a typical example of what George Kennan,

in his famous essay on American foreign policy, condemned as most
deviant.223 Foreign policy should rest on a solid base of the needs of the
American state without conceding anything to legalism or moralism,
according to the theory behind the Marshall Plan and the policy of contain-
ment of the 1940s. Stimson’s words in justification of his ideological
bias and his obviously excessive optimism regarding the principle of col-
lective security had a vacuous and abstract odor about them. The crucial
point about them, however, is that this appeal to the old Wilsonian
liberalism – and that is what it was – represented the most effective,
perhaps the only, compass the American governing class could steer by
in the turbulent international politics of the 1930s. Stimson was certainly
no reformist or progressive idealist. He shared the usual attitude of his
friends and peers in his restricted social caste, and of the financial interests
linked to them, regarding Fascist Italy. His working relationship with
that country’s representatives was collaborative, in particular with
Dino Grandi, with whom he enjoyed what seems to have been the closest
relationship between any two statesmen of the two nations. Still, the
Wilsonian categories, as moralistic and legalistically formalist as they
were, furnished the surest point of reference, since Mussolini, for whom
Stimson had not hidden his admiration in the past, faced him with the
flagrant manner in which the dictator now violated those rules for interna-
tional cohabitation.
In his reference to the Roosevelt administration, with which he substan-
tially agreed, Stimson forgot that many things had changed in the four
years since he had been able, as secretary of state, to declare his willingness
to collaborate with the League of Nations. The Depression and its effects
on the needs of the domestic economy had negative consequences for
international cooperation. Stimson’s own attempt to convince the League
to act against Japan’s aggression had added to the difficulties ranged
against Roosevelt’s willingness to make the kind of explicit declaration
Stimson now asked of him.
In reality, the greatest distinguishing characteristic between Stimson
and the president or his other advisers was the condition they labored
under in the nature of their positions. Harris stated that political sympa-
thies on the Houston, the ship that carried the president at the moment
of the outbreak of armed conflict between Italy and Ethiopia, were all

223
G. F. Kennan, American Diplomacy, 1900–1950, Chicago: 1951.
 14. The Origins of American Opposition to the Dictatorships 381

directed toward Ethiopia. According to Harry Hopkins, Roosevelt sig-

naled aloud his approval for each favorable mention of Ethiopia as he read
through his briefings.224
Especially during the first phase of the conflict, Roosevelt did not
stop at such verbal expressions of his state of mind. He went so far as to
tell the State Department, although they persuaded him otherwise, that
he intended to publicize the names of American citizens making use of
belligerents’ ships, and the cargo of all the ships that brought goods
to Italy or Ethiopia.225 Yet, these would have been not only fairly severe
measures, but also obviously biased ones, given the nature of the
commercial flows between the United States and the two belligerents.
Roosevelt also briefly contemplated the possibility of interpreting the
expression “implements of war” in the first Neutrality Act to its broad-
est extent, but was again dissuaded by the State Department. Roosevelt
and Cordell Hull shared their opinions on the matter, but Roosevelt
confined himself to encourage and supported Hull’s declarations in
this period.
The position of the secretary of state was concisely and faithfully
summarized by his closest collaborator during the Ethiopian crisis,
Joseph C. Green. He explained that Italy had, in cold blood, begun a
campaign of conquest that flagrantly violated the terms of treaties it had
signed. In so doing, Italy threatened world peace. The League of Nations,
notwithstanding the hidden agenda of any of its member nations, was
trying to pressure Italy to desist from its plan of conquest and to protect
world peace. The American government could not, even if it wanted to,
discriminate among belligerents or cooperate with the League of Nations.
However, within those limits it should do what it could not to stand in the
way of collective action by other powers to restore the peace. In his actions,
the secretary was completely autonomous; no requests had been made to
him from Great Britain or the League, or from any other quarter. If his
choices overlapped with the actions of the League to some extent, Moffat
would note that he had always acted first. He was extremely sensitive to the
criticisms in the press that he was working with the League and found it
necessary to remind them of the complete political independence of this
government. The president was actually even more inclined than the
secretary to take initiatives that would align American policy with the
League of Nations; he had repeatedly proposed to blacklist those people

224
Harris, p. 56.
225
Divine, p. 127; Harris, ibid.
382 Roosevelt and Fascist Italy

and businesses that exported to Italy, and it had been Hull and Green who
had dissuaded him.226
Cordell Hull has been criticized both politically and historiographically
for his monotonous insistence on free trade as the magic bullet for all the
world’s ills, even when it was clearly necessary to consider other measures;
for his frequently vacuous and inconsistent moralism; and for the weak-
ness he showed at any conflict of opinions, not least the one in which
he found himself mired with several members of the Senate, when he
should have defended the administration’s point of view regarding the
Neutrality Act. But the truth is that one can discern the outlines of
Wilsonian liberalism in his conduct, just as in the reactions of Stimson.
What counted was not the somewhat doctrinaire – especially in Stimson’s
case – devotion to the principle and instruments of collective security, but
the somewhat nebulous perception of the fact that the foreign policy of the
Fascist dictatorships would come to radically affect the priorities of the
Western democracies. While the social and ideological biases remained in
these men, they saw more clearly than others that a concrete and immedi-
ate threat was forming that would require confrontation. Although neither
they nor Roosevelt had any strong anti-Fascist feelings, their Wilsonian
legacy at least pricked their consciences at the scandalous violation of
international law and the principle of the peaceful cohabitation of peoples.
If the New Dealers most in favor of top-down reform were particularly
susceptible to the siren call of Fascist corporativism, for other New Dealers
of a more militant democratic faith (such as Harold Ickes, Harry Hopkins,
Morgenthau, and Eleanor Roosevelt herself) the aggressive acts of the
Fascist regimes, and especially Mussolini’s against Ethiopia, served as a
confirmation for their distrust of the reactionary character of those
regimes.
A few U.S. representatives abroad had similar reactions, despite the
prevalent climate of the State Department. In truth, there were only two of
real importance, and they were separated by strategy in the course of
the 1930s. They were George Messersmith, minister to Austria in
Vienna, and William E. Dodd, ambassador in Berlin. Both men were linked
to the liberal tradition of Jefferson – Dodd, a university professor rather
than career diplomat, had actually written a biography of Jefferson – and
both conducted a foreign policy strongly inspired by Wilson. Dodd, as was
natural, saw the developments in Mussolini’s politics, especially as

226
HUHL-JPM, Joseph C. Green to J. Pierrepont Moffat, Washington, D.C., April 22,
1935, p. 9.
 14. The Origins of American Opposition to the Dictatorships 383

regarded Ethiopia, in light of their echoes in Berlin. As early as July 1935

Dodd confided in his diary,227 but also to Roosevelt,228 that Mussolini’s
Ethiopian adventure delighted the Nazi leaders for its negative effects on
the so-called Stresa Front as well as because it made Mussolini incapable of
continuing to guarantee Austria’s security from the Anschluss.229 A short
time later, he arrived at the following conclusion, which would be proven
absolutely correct:
One thing is certain here: the early defeat or forced withdrawal of Italy from
Ethiopia would be considered a serious set-back for German autocratic-military
procedure. If Italy succeeds, it is the common feeling that the two dictatorships
would unite upon a policy of aggression.230

Dodd, consistent with such a conclusion, showered the State

Department and representatives of American foreign policy with requests
to take the initiative in sanctions against Mussolini, whose success in his
view depended in a life-or-death manner on the League of Nations. He
later advocated a total embargo on American exports of oil to Italy,
arguing for the warning it would serve to Germany, another nation
dependent on importing that resource.231 He had telegraphed the State
Department back in August that “The only chance of more democracy in
the world depends upon a blockade of warring Italy.”232
The State Department did not receive with enthusiasm Dodd’s dark
predictions, urgent appeals for a more vigorously anti-Fascist policy, and
continual warnings of the true intentions of Berlin’s leaders. More than
once Moffat expressed his lack of respect for a man he considered a small-
town ideologue incapable of really understanding the situation in Berlin.
As for the undersecretary of state, William Phillips, his main concern
appeared to be the unimpressive standard of hospitality and quality of living

227
“Three Observers in Berlin: Rumbold, Dodd, and Francois-Poncet,” in Gordon Craig and
Felix Gilbert, eds., The Diplomats, 1919–1939; Robert Dallek, “Beyond Traditions: The
Diplomatic Careers of William E. Dodd and George S. Messersmith, 1933–1938,” in The
South Atlantic Quarterly, LXVI, pp. 233–244; William E. Dodd Jr. and Martha Dodd,
eds., Ambassador Dodd’s Diary, New York: 1941; Martha Dodd, Through Embassy
Eyes, New York: 1939.
228
Ambassador Dodd’s Diary, pp. 252–259.
229
FDRL-PSF, William E. Dodd to Franklin D. Roosevelt, Berlin, July 29, 1935.
230
Robert Dallek, Democrat and Diplomat: The Life of William E. Dodd, New York:
Oxford University Press, 1968, p. 269.
231
LC-WED, bk. 47, fol. 1935-R, William E. Dodd to Franklin D. Roosevelt, Berlin, October
31, 1935.
232
NA-DS, 765.84/916, William E. Dodd to Cordell Hull, Berlin, August 22, 1935. Also
quoted in Dallek, p. 267.
384 Roosevelt and Fascist Italy

at the ambassador’s residence, complaining “. . . what in the world is the

use of having an ambassador who refuses to speak to the government
to which he is accredited?” As Dallek justly observed, in normal circum-
stances Phillips would have been right. But Dodd’s reluctance to speak to
Nazi officials was not due only to his moral repugnance for them, but from
the well-founded conviction that he could learn most about the situation
in Berlin in these decidedly abnormal circumstances through the skills of his
own cultivation and spirit of observation.233 William Dodd was surely not as
gifted with diplomatic professionalism and bureaucratic zeal as
his critics, but unlike them he had the culture and the political orienta-
tion necessary to understand just what direction European politics were
heading in in the middle of the 1930s. His reports, which have only been
excerpted here in brief for relevant evidence, were the fruit of an organic
comprehension of the present and future nature of the dictatorships. The
insufferable attitude of the State Department bureaucrats, which vented itself
in futile or merely technical criticisms, also had political origins. In hindsight,
the affirmations of Dodd and Messersmith, like those of Stimson, appear
banal. In the Washington of 1935, however, as in the conservative parties of
Britain and France of the same period, they were cries in the wilderness. The
conventional wisdom among the Western governing classes was that articu-
lated by Moffat and Phillips, since it was the one most easily reconciled to
their own material interests and political biases, even where actual dictator-
ships could not take power.
The isolation of men such as Dodd, and the criticisms they suffered for
their anti-fascism, demonstrate perhaps more than any other evidence
what the atmosphere was among the American governing elites. Until
the very eve of the outbreak of war, what Offner called “American
appeasement” was still their clear preference, an attitude that is far more
explanatory than any argument about generic isolationism, the limits of
American politics in the face of Mussolini’s attack on Ethiopia, or the
reluctance to align with an anti-Fascist front. Isolationism served merely as
a mask hiding multiple interests of a totally different nature. It was cer-
tainly no accident that Roosevelt himself had great respect for Dodd and
willingly lent him an ear.234
At this point it would be customary to attempt a synthesis of Roosevelt’s
overall way of thinking and extremely complex personality. But it is
probably more useful to try instead to understand the way in which he

233
Dallek, p. 271.
234
Dallek, pp. 273–276.
 14. The Origins of American Opposition to the Dictatorships 385

reacted to the political constraints on his action. For that purpose, neither
the work of Harris nor of Feis satisfies. It may be true that Roosevelt was
a hidden internationalist in the Wilsonian sense. In the course of the 1930s,
indeed starting with the very Ethiopian crisis, he did make a perceptible
and continuous, if cautious, effort to lead the nation toward a greater anti-
Fascist commitment in world politics. But what is not plausible is the claim
that isolationism continued to be the most important point of reference in
this period, as if that opposition were the only reason he would not push
further. It is certainly true that, in the moment in which his administration
suffered a violent attack from those conservative and capitalist circles that
would not accept the true nature of his economic policy, there did appear
to be an immediate threat that the party might break from its populist wing
and lose the support of that part of the electorate. It is possible that certain
sectors of that opposition felt favorably toward Fascism, or were even
open supporters of Mussolini. Since that wing was also isolationist, or at
least interested in exploiting any underestimation on the president’s part
of the pacifist and isolationist sentiments of the country, that threat did
weigh heavily on his foreign policy. For example, in his letters “from inside
the Roosevelt Administration,” in the fall of 1935 and spring of 1936,
Joseph Green continually referred to the weakness of the administration,
which reached its height at the beginning of the winter, obliging the State
Department to pay careful attention to the political and electoral effects of
every move they made. Especially sensitive were any choices that could be
interpreted as collaboration with the League of Nations or as opposition
to Mussolini’s campaign for foreign conquest. He wrote that political
tactics had invaded the department to an unprecedented extent. What
effect would it have on the administration and on the party and on the
election campaign? These were the only questions he found them asking
regarding almost every decision.235
Such tactical and electoral constraints – Roosevelt could not afford to
forget that 1936 was a presidential election year – were a precise limit he
could not violate in his policy of cautious support of the hesitant attempts
of the League to suffocate Italian imperialism. In both cases in which
the administration was faced with a choice that offered an opportunity
to deal a blow to Mussolini at his most vulnerable point – his need to
import strategic resources – but which carried a political risk, Roosevelt

235
HUHL-JPM, Joseph C. Green to J. Pierrepont Moffat, Washington, D.C., April 22,
1936, p. 8.
386 Roosevelt and Fascist Italy

did not yield to temptation. He gave up the idea of a broad interpretation

of the first Neutrality Act (yet he was not the type to be intimidated or
influenced by the bureaucratic caution of the State Department, which was
however quite conspicuous, as Green reported), and he resigned himself
graciously to the approval of the law in 1936 that definitively closed the
door to limiting exports of materials Italy would need for its war effort.
Nor should one believe that he was thinking only of the isolationist
senators at these moments: in the second case, they themselves were
divided and the campaign by Italian-Americans was probably the
more decisive factor. Green described the fatal effect of such interventions
on the members of Congress who would stand for reelection in November.
It cannot be forgotten that among those undergoing an electoral test that
fall was the president himself. Still, the weight of a more than decade-long
tradition of Mussolini and his regime’s popularity must also be taken
into consideration. That popularity was not weakened in the radical
transition of the political climate after the introduction of the New Deal.
Its policy makers, in their pursuit of a third way to solve the ills of the
Depression, had taken the place of the Wall Street bankers as the main
American interlocutors of Mussolini. It was not easy to overturn the
consolidated positive image of the regime, an image that had been publi-
cized for years to the American people by American travelers of every
stripe upon their return from Italy and by uninterrupted coverage in the
press, which frequently held up the regime as a positive example of admin-
istrative effectiveness and social order.
As much as Roosevelt might have been opposed by American capitalist
circles during this period, it did not appear to mean that they were without
structural influence or that the reluctance of those factions to tolerate
open conflict with the Fascist regime did not reach him. The weakening
of the financially interdependent relationship between the two countries
may have reinforced support for autarchy through rearmament in Italy,
but it also gave a new strength to the neo-Wilsonian ideas of Stimson,
Roosevelt, and that minority that from the very beginning had had the
insight to oppose the aggression of the Fascist dictatorships. The difference
between those factions of the British Conservative Party that took that
position, in a softer tone than their memoirs would frequently have readers
believe,236 and the American politicians who shared it is that the former

236
HUHL-JPM, Joseph C. Green to J. Pierrepont Moffat, Washington, D.C., April 22,
1936, p. 8.
 14. The Origins of American Opposition to the Dictatorships 387

were excluded and subordinated in government circles until events proved

appeasement a failed course. The latter, however, were government offi-
cials, even if they had many constraints on their actions. And yet, those
who were destined to lead the Allied countries during the war – from
Churchill to Roosevelt, from Eden to Hull – were unable to stop the social
interests they represented from unceasing efforts to reconstitute the inter-
national unity that had led them to accept the Fascist dictatorships in
the first place. The politics of appeasement characterizing the European
theater since the Ethiopian crisis had its roots in the preceding phase, when
the first Fascist dictatorship had been able in complete legitimacy to join
the assembly of capitalist governments collaborating in global financial
and monetary policy under the guidance of the United States. It was not
therefore an error, as further shown by the reactions to Mussolini’s African
undertaking, but rather the expression of a residual solidarity among
those who did not want to risk a confrontation that would divide this
assembly and reinforce the strength of a coalition of class adversaries
under the leadership of Moscow. The Molotov-Ribbentrop Pact was the
only development that finally broke this fantasy. The anti-Fascist minor-
ities within the elite classes may have been served by their political and
ideological loyalty to the legacy of the most progressive liberal tradition.
But what was decisive in their eventual victory was the fact that they
recognized the new reality emerging from the Depression’s economic crisis,
with the destruction of the old global financial system founded on the
gold standard. In this sense it can be argued that the Depression may have
created some of the conflicts of the interwar era with the birth and con-
solidation of the autarchic economies of fascism, but it also gave life to
their antidote in the form of the alliance that, with the contribution of the
Soviet Union, may not have been capable of stopping the war but was in
the end able to win it.
For his part, Mussolini had harvested the best fruits of his long
political strategy, in the Ethiopian war and in relation to the United
States. But the season was about to change. While Lamont continued to
give the Fascist regime good advice, the man from Morgan Bank who had
done so much for the consolidation of the regime in the 1920s now
expressed himself to Dino Grandi in a different way in a conversation
in London on June 2, 1936:
I told him American public shocked by Mussolini aggression. [. . .] I knew reports
had reached him that USA was very antagonistic to England. True, we had our little
scraps, but make no mistake – if England were up against it with her back to the
388 Roosevelt and Fascist Italy

wall, I believe that something would rise in the American people that would lead to
come to aid of Britain.237

Mussolini would have done well to heed the banker’s warning – but
who knows if, in his concern to avoid the dictator’s ire, Ambassador
Grandi ever reported the conversation to him.

237
HUGSBA-TWL, bk. 173, fol. 8, T. H. Lamont, Diary, June 2, 1936.
 Conclusion

The roots of U.S. foreign policy between the two world wars can be found
in Wilson’s internationalist program, as much of it remained operative in
the 1920s. They are also in the social reaction – classist, xenophobic, and
violent – of the immediate postwar period. The extraordinary expansion of
the American production system and consequent abundance of capital
resulted from the war economy that had satisfied the needs of the entire
Entente alliance. The first forms of economic planning then gave new
power to heavy industry and above all to investment banking. Finally,
the ruthless repression of the militant workers’ movement, accompanied
by an ongoing integration of organized labor, created the conditions of an
economic expansion that in peacetime had to flow outside national bor-
ders. Further, a victory in which the United States had played a decisive
role, both economic and military, while it remained relatively unharmed
(to the point of becoming for the first time in its history a creditor nation),
had overturned the hierarchy of power relations among the nations. Still,
the domestic defeat of the Wilsonian program as well as the isolationist
impulse (to use Selig Adlar’s catchword, once more) of large sections of the
electorate, forced subsequent American administrations to avoid those
forms of engagement being forged in new institutions (first among them
the League of Nations), permanent political commitments, and any polit-
ical or military presence in Europe.
And yet, as William Appleman Williams was the first to rightly empha-
size, there has not been enough attention paid to the Wilsonian objectives
that were not abandoned and were important and perhaps even essential.
Those financial sectors linked to the Republican Party that had ridden
the anti-Wilsonian reaction to victory would not give up the goal of

389
390 Conclusion

expansion that remained a thrust of the American economy as it had

developed by that time. It was instead necessary to pursue it in different
ways that would not inflame the same emotions and resentments that they
had themselves helped nurture while pursuing the defeat of the Democratic
party.
To that end, it was not enough to control the markets and raw materials
in developing countries. The industrialized nations that had suffered the
worst damages from the war had to be fully reconstructed. The economic
and industrial rebirth of Europe was necessary for the nation that in fact if
not intention was becoming the new world hegemon, because only in that
context would it find an outlet for the overabundance of goods and capital
that were the consequence also of the force with which social order had
been reimposed after the war. That disproportion between supply and
demand that may also have decisively contributed to the subsequent
crash and the Depression was at the beginning of the decade dealt with
in a plan to reconstruct the European economy. To realize that goal,
injections of capital would not suffice, and in any case were not available
in the existing conditions. In the first place, the political conflicts dividing
Europe, with France as the main agitator demanding the guarantee of its
security through a punitive peace against Germany, would have to be
resolved.
The American governing class was aware that the keystone of European
recovery would be the industrialized area of greatest economic potential –
that is to say Germany. But only if the Europeans changed their policies
would American investors feel ready to risk a sufficient amount of their
capital. The condition for the rebirth of European capitalism was social as
well as political pacification, secured through class discipline, public
order, and productivity. The Dawes Plan and the Treaty of Locarno –
both of which marked a change in European political relations and sealed
the process of social pacification – seemed for a brief period to have
fulfilled these conditions. The policy was clearly articulated by Frank
B. Kellogg, the American ambassador in London and future secretary of
state, as he wrote in 1924 that Europe was beginning to rest on more solid
foundations. The fact that Germany had returned to the gold exchange
standard and that the British sterling was returning to stability were very
good signs. Nothing could be better for the United States, in his view, than
that all of Europe should return to the anchor of the gold standard. The
acceptance of the Dawes Plan had had a tremendous influence on the
British currency. Naturally, the world would look toward the United
States for a good deal of financing, and if the Americans were wise they
 Conclusion 391

would be able to assume a leadership role in this commerce in capital.

Kellogg did not suggest that they should ignore their own domestic market
in favor of foreign investments, but it was a sector that, wisely managed,
could actually become an incentive to American exports.1
The design was traced in a sure hand and pursued with notable unity by
government officials, bankers, and important industrial leaders such as
Judge Gary, president of U.S. Steel, to whom the Kellogg comments were
addressed in a letter. There were limited but precise differences of opinion
and interest between the bankers and the industrialists, which were visible
within the government as well in the tension between the secretary of the
treasury, Mellon, and the commerce secretary, Hoover. While the bankers
were convinced that the most important conditions for American domi-
nance consisted of controlling the international monetary system and
making enough capital available to satisfy external demand over the
middle term, Hoover favored more direct methods, in which the financial
strength of the United States would be put to use in conquering immediate
advantages for American exports and the control of foreign markets. This
disagreement was resolved in favor of the bankers because of their direct
contacts abroad as a result of their intermediary function in international
relations.
How could an external force move the reconstruction of the European
economy forward, given how much it depended on the complex internal
situations of each single nation? Since the U.S. Congress and the national
mood it represented would not at that time allow more direct forms of
political intervention (such as the pact among the former war allies that
French statesmen, especially Briand, pursued like a mirage for more than a
decade), it was necessary to use the financial instrument provided by
American bankers – in particular the Morgan Bank. The bankers acted
as policy makers, directly carrying a fairly Wilsonian set of economic
objectives to the Europeans. In this undertaking, Great Britain served as
the major ally and allowed a peaceful changing of the guard in the leader-
ship of global capitalism. The immediate goal was the return to the gold
exchange standard. This made the availability of American capital condi-
tional on deflationary policies, social restoration in domestic politics, and
cooperation in international relations as necessary conditions of the gold
exchange standard. These efforts foreshadowed the later period of the
Marshall Plan and the foundation of the new international monetary
system of the post–Second World War years. The collaboration between

1
MHS-FBK, bk. 9, Frank B. Kellogg to Elbert H. Gary, London, October 12, 1924.
392 Conclusion

the central banks led by Strong and Norman, the experts’ commissions
that created the Dawes and Young Plans, and the Leffingwell Plan were all
expressions of this political will.
The reason for the particular American interest in Mussolini’s Italy
derived directly from the nature of the plan for European reconstruction.
There were of course also cultural and ideological reasons that an author-
itarian and potentially antagonistic regime was accepted and largely
defended by the governing classes of a country founded on a liberal history,
but in this case concrete interests meant more than theory and rhetoric.
Mussolini’s regime represented above all that very social stabilization
American investors longed for, and in a country that beforehand had been
among Americans’ negative models for development. What were considered
degenerated forms of a democratic parliamentary regime, quite foreign in
several aspects from the American constitutional experience, were willingly
sacrificed in return for the benefits of an energetic restoration of social order
that gave American capitalists a stable and secure interlocutor who could be
decisive and take action efficiently regarding any deals that might be nego-
tiated. Furthermore, Italian foreign policy, though it had no choice but to
express the Fascist ideology and nationalism from time to time, at least until
the Depression appeared benign enough to reassure the State Department
and the Wall Street bankers that it would help create and preserve European
equilibrium. Actually it was more than benign, because while Mussolini led
Italy into conflict with France, he also headed toward a rapprochement with
Great Britain. This in turn excluded any support for a punitive peace against
Weimar Germany and made Italy a favorite in the United States’ plans for
European reconstruction as it unfolded in the 1920s. The way in which the
two countries reached an accord on Italy’s war debt (a watershed moment
not only for the debtor nations, but also for those Americans who wished to
pursue external expansion but had to overcome the reluctance of their
fellow citizens); the process of stabilizing the lira, in which Mussolini
asserted only as much autonomy as it took to play the role asked of him
with even greater vigor; the investment policy that made Italy, after
Germany, the second-largest outlet for American investment between
1925 and 1929 – these were all confirmations of Italian docility in cementing
its relationship with the United States in this period. Since Mussolini could
not overcome the subordinate role his country’s need for external resources
placed him in, he opportunistically pursued links with the strongest
and least demanding partner, with no territorial claims so that he could
simultaneously bolster his international standing and his popularity among
nationalists in the home arena.
 Conclusion 393

The effects of the Depression originating in the United States were not
immediately felt in international relations. Hoover’s presidency, with
Stimson at his side, was actually marked by the ambition to construct a
renewed engagement and commitment of the United States abroad, espe-
cially in Europe. If the secretary of state was mostly motivated by his
support for the principle of collective security, put harshly to the test over
Japan’s occupation of Manchuria, Hoover instead hoped to use the need
for an international response to the debt payment problems created by
the financial crisis to relaunch an American economic plan on a global
scale. He thought that some partial early successes in disarmament nego-
tiations could give him the political capital (especially with American
voters, who greatly favored disarmament) to barter war debt and repar-
ations payments. This was the thought behind the so-called Hoover
moratorium, which he believed would help restore some order to the
Weimar Republic’s ever-worsening situation. Instead, Germany was
caught between a particularly virulent form of the Depression’s financial
crisis and the growth of the National Socialist movement, worsened by
the impoverishment of the lower middle and working classes and the
humiliations deriving from French foreign policy, while the patrons of
heavy industry favored choice of rearmament on the part of National
Socialists as a road to maintaining their own social dominance and
international prestige. Just as Hoover’s economic policies were a throw-
back to the era before the crash, so too his hopes for foreign politics
rested on the old recipes of the 1920s, which simply could not suffice to
confront a European crisis that had become far more serious when the
political and economic distress of the postwar acquired a social base in
these movements.
While American politics ran aground on the shoals of French security
policy, they found a friendlier port than ever in Rome. The short tenure of
Dino Grandi at the head of Italian foreign policy was not as significant for
its concrete results as for the way it represented the final logic of
Mussolini’s earlier choices, carrying them to an extreme “il Duce” himself
may not have imagined. If Mussolini had accepted subordination to
American politics with good graces and also embraced the role of mediator
he could take up in Europe along with Great Britain, Grandi traced a
policy line explicitly based on the dominance of Anglo-American power,
European pacification, the strength of the League of Nations, disarma-
ment, and financial cooperation – all with the possible fringe benefit of win
a favorable agreement in the conflict with France and Britain over the
division of African colonial territories. In this way Grandi foreshadowed a
394 Conclusion

policy that could only be developed after the Second World War, with the
full and active presence of the United States in Europe.
Both Hoover’s and Grandi’s policy aims were, therefore, based on
extremely fragile premises that would be undermined by the ongoing
development of the Depression. The United States would be forced to fall
back on its own domestic concerns, forcing Franklin Roosevelt to
renounce any international leadership role (abandoning the gold standard
on the eve of the London international economic conference) in order to
salvage the American economic system through a series of daring eco-
nomic and social reforms. In this way Italian foreign policy found itself
deprived of its principal point of reference in a country protected to some
extent from the economic crisis by the delay with which its effects reached
an economy that had already suffered earlier forms of stagnation. In the
meantime, the definitive rise of Hitler’s regime radically changed the
international situation, rendering void any European accord and becom-
ing an irresistible force of attraction for Mussolini, while the British and
finally even the French still insistently pursued reconciliation. Fascist for-
eign policy was left to its own original ideological devices, no longer
conditioned by a system of commercial and monetary interdependence. It
began the search for an external outlet to relieve the political effects of
internal economic pressures through a rejuvenation of the aggressive
nationalism kept in shadow until that point.
In 1935 once again, as in 1922, the reactions of the Western democ-
racies to the Fascist policy assumed a paradigmatic value. Italian aggres-
sion in Ethiopia was the first flagrant violation of the Charter of the League
of Nations by a European great power. The Fascist dictatorship put the
commitment of the great powers to collective security to the test, and they
failed. If the first Fascist seizure of power had elicited consent and even
approval from the Western democracies, in the form of the governing
classes of those countries who viewed Communism as a greater threat
but above all valued the social and political stabilization of Italy, the
Ethiopian war struck at the imperial interests of Great Britain and created
a dangerous precedent in a world already witnessing the developments of
Japanese militarism and of Nazism. The fact that Italy was the weakest of
the three Fascist powers made the crisis more significant, because it was
clear that tolerating its act of aggression would be an invitation to the other
dictatorships to commit even more serious acts with impunity. Indeed, the
pattern by which, first, Great Britain and France approved the venture and
then, after a short retreat, forced by the reactions of popular opinion,
followed a policy of appeasement and finally resigned themselves to
 Conclusion 395

accepting the conquest was destined to repeat itself in the face of Hitler’s
imminent abuses of power.
Although the United States was not directly involved, since it was not a
League member, the Ethiopian war became an important test of its deter-
mination in opposing Fascist armed expansion. In particular, the question
of the oil embargo that appeared – and perhaps really was – vital to the
effectiveness of any act by the League of Nations to stop Mussolini’s war of
conquest posed in stark terms the question of anti-fascism in America. In
the United States, as in France and Great Britain, the difficulty of explain-
ing why no retaliatory acts could gather full support leads to a key
historical problem. In the case of the United States, the responsibility
has usually been attributed to so-called isolationism, understood as an
agglomerate of mostly pacifist and populist rural groups who intended to
oppose at all costs any American involvement in foreign affairs. This
interpretation, which by implication relieves the strongest social ranks of
America of any blame, has also been perpetuated by revisionist historians
in justification of the American response and in condemnation of the social
classes profiled in the isolationist ideology. The analysis of the coalition of
forces that derailed even the cautious proposals of the Roosevelt
administration – linked to the internationalist tradition of Woodrow
Wilson, but mostly concerned with resisting the virulent attacks being
leveled at it for its New Deal reforms – offers a more accurate view of the
real reasons behind American abstinence from opposition to Mussolini
and from anything but a very late response to the worsening of the
European situation as it descended into war. In this way it becomes
possible to formulate a better hypothesis about the isolationist phenom-
enon than the one above, which has also served to bolster the myth of
American exceptionalism.
The coalition that defeated Roosevelt’s and Hull’s attempt to apply at
least a partial embargo on oil and other raw materials necessary to the
Italian war effort was actually of diverse composition and was not easily
identified with isolationism as an ideology. The Italo-American commun-
ity may have played a determining role in the concluding phase of the
debate, led by its prominent figures, who were by no means agrarian
populists or faithful isolationists. Economic and commercial interests
also played an obviously relevant role in opposing an embargo they
predicted would damage their business. Even the financial sectors most
closely linked to Great Britain were hesitant and, like the career diplomats
in the State Department, opposed any policy that might create such a
defeat for Mussolini that a power vacuum would open up in Italy and
396 Conclusion

allow “subversive elements” to gain the upper hand. These were the same
interests that constituted the constellation of forces that determined
American acceptance of the Fascist regime at its origin. That is to say, it
was not only the isolationism of the provincial American masses driving a
few key senators in Congress that explains American conduct toward Italy
in this period; a major convergence of interests, predominantly linked to
the traditional elite of American society, created the initial American
version of appeasement. It was these same groups in France and
Great Britain that drove those countries’ practices of such appeasement –
countries that had no tradition of isolationism to muddy the waters. It
seems, then, that although the argument deserves further documentation,
the policy of neutrality regarding the Ethiopian war was determined by the
initiative of minorities and powerful interests that exploited the rhetoric of
pacifism and the sincere sentiments of Americans favoring peace in order
to secure public opinion’s support of a passive response to the growing
threat. Appeasement, as it was practiced by the governing classes, could be
explained by their original reaction to the rise of the Fascist regime when it
began to threaten the peace – a reaction that, it has been shown by this
study, had unequivocal class roots. This leads to a final observation. The
politics of appeasement has always been identified as a particularly British
and French action just before the outbreak of the Second World War,
extended in some limited cases to apply also to American attitudes at that
time. But this interpretation completely fails to explain the roots of
appeasement. It is usually put down to some kind of error of judgment,
as if the concessions to the dictators were simply the result of an ingenuous
belief, nourished by a bad conscience concerning the Carthaginian peace
treaty of Versailles, that their appetites would be satisfied and they would
stop. But the question should really be if this was not an extreme final
attempt to salvage the unity among the capitalist forces that, as much as
they were ideologically divergent, were linked by the fear of Soviet-led
subversion, the fear that had led to much of the approval for Mussolini’s
seizure of power in the first place. If so, the next question becomes whether
that particular concern was not an element of continuity in the politics of
the United States and its allies right through to the period following the
Second World War.
 Index

This index is limited to names of persons and or firms, but does not include subjects. Surnames
are omitted in rare cases when impossible to find. Prefixes (de, De, von, van) are indicated and
indexed by initial letter. Middle names are indicated extensively or by capital letter according
to usage. (Francesca Somenzari)

Abrahams, Paul Philip: 35 Barnes, R.J.: xli

Abrate, Mario: 179 Barros, James: 71, 75, 76
Acerbo, Giacomo: 44, 56 Bartholin, Pierre: 310
Adams, John: 66 Baruch, Bernard: 3
Adler, Selig: 48, 198 Barzini, Luigi: 355
Agnelli, Giovanni, sr.: 169 Bava, Felice: 66
Alberti, Mario: xxxi, 79, 107, 109, 110, 113, Bell, Price: 220
114, 115, 123, 143, 167, 168, 181 Bemis, Samuel F.: 292
Alexander, Philip: xliv Benda, Julien: xv
Anchieri, Ettore: 72 Beneduce, Alberto: xxx, xxxi, 120, 123,
Anderson, Arthur M.: 156, 157 143, 156, 157, 168, 181, 188, 276,
Angelone, Romolo: 146 277, 281
Ara, Angelo: 28 Berger, Meyer: 67, 135
Arendt, Hannah: xviii, xxvi Berio, Alberto: 310
Arone di San Valentino, Pietro: 64, 65 Bernsten, Oluf: 155, 156
Auld, George P.: 35 Bernstein, Irving: 8, 9, 10, 13, 32,
Azzolini, Gaetano: 243 84
Berutti, John M.: 47, 89, 94, 95, 105,
Badaloni, Luigi: xli 135, 140
Baer, George W.: 309 Berselli, Aldo: 36
Baget-Bozzo, Gianni: xxxiii Bertelli, Carlo F.: 63
Bailey, Thomas A.: 30 Bertello, Luciana: xliii, 85, 352, 353
Bairati, Piero: xxii, xlii Berthelot, Philippe: 244, 250
Balbo, Italo: 66, 281 Biddle , Francis: xix
Baldwin, Stanley: 25, 211, 372 Blair, William M.: 114, 158, 160
Balfour, Arthur James: 239, 243 Bloch, Marc: xi, xii, xiii, xxxix
Bannerman, Robert C.: 350, 351 Blum, Léon: 224
Barié, Ottavio: 28, 345 Bolitho, William: 59

397
398 Index

Bonar, Andrew: 239, 243 Chatelain, Roberto: 116

Bonin Longare, Lelio: 115 Child, Dick: 37, 38, 39, 40, 45, 46, 47, 55,
Bonnet, Georges: 368 74, 362
Borah, William E.: x, 133, 139, 201, 224, Child, Richard W.: xxi, 32, 33, 34, 37, 38,
232, 340, 345, 359 39, 40, 42, 46, 57
Bosworth, Richard J.B.: 36 Chilton, William E.: 140
Boyle, Andrew: 171 Churchill, Winston: xxiii, xxiv, 40, 372,
Braddick, Henderson B.: 310 375, 387
Brandes, Joseph: 34 Ciano, Costanzo: 62
Brega, Gian Piero: xli, xliii Ciano, Galeazzo: 301, 345, 350
Briand, Aristide: 26, 49, 99, 177, 201, 202, Cibot, Léon J.: 310
205, 212, 215, 216, 217, 218, 219, 222, Ciccolari Micaldi, Sergio: xlii
248, 253, 254, 284, 340, 391 Cicero, Marcus Tullius: xxxiv
Brisbane, Arthur: 63, 64, 67, 345 Ciocca, Pierluigi : 179, 300
Brüning, Heinrich: 225, 228, 235, 241, 246, Clark, Stephen V.O.: xli, 35
247, 251, 265, 267, 308 Clay, Henry: 171
Bullitt, William: 361 Clayton, Sedgwick C.: 39
Bundy, McGeorge: 218, 281 Clemenceau, Georges: 17, 49, 99, 193,
Burgwyn, H. James: 273, 279 222, 251
Burke, F.L.: 347 Cohen, Armand: 310
Burton, Lee F.: 131 Cohen, John S.: 179
Bush, George W.: xxxiv Connally, Tom: 359
Buti, Gino: 79 Contarini, Salvatore: 62, 77, 78, 79, 80, 81,
Butler, Nicholas Murray: x, 45, 94, 307 82, 116, 208, 281
Conte, Pino: xlii
Cadman, John: 358 Coolidge, Calvin: x, 4, 19, 74, 75, 76, 88, 97,
Caetani, Gelasio: ix, xxx, xli, 53, 55, 99, 101, 109, 113, 121, 122, 123, 124,
56, 57, 59, 60, 61, 63, 64, 65, 66, 130, 131, 133, 136, 137, 138, 140, 196,
68, 69, 70, 71, 78, 79, 80, 81, 82, 83, 84, 200, 210
87, 90, 97, 98, 99, 100, 101, 107, 352, Coppola, Francesco: 30
353, 354 Corcoran, Thomas: xix
Caillaux, Joseph: 100, 116, 118, 127, 137 Corey, Lewis: 91
Callaway, John: xxxviii Cortesi, Arnaldo: 64
Calzini, Loris: xliii Cortesi, Salvatore: 59, 64, 65
Calvino, Italo: xx Corti, Luigi: 270, 271
Cantalupo, Roberto: 288 Coselschi, Eugenio: 62
Cantuti Castelvetri, Lamberto: xli Cowles, John: 140
Capomazza, Benedetto: 316 Cox, James M.: 125
Carli, Guido: xli Crahan, Eric: xliii
Carosso, Vincent P.: 91, 369 Craig, Gordon A.: 361, 383
Carr, Edward Hallett: xii Crisp, Charles: 131
Carr, Wilbur J.: x, 55 Croce Benedetto: xii, xiv
Carter, John B.: 36 Crow, Jim: xix
Casertano, Antonio: 352 Curzon, George: 69, 77, 80, 81
Castronovo, Valerio: xli, 142, 143, 147,
179, 190 Dadà, Adriana: 48, 260
Cavour, Camillo Benso di: 118, 282 Daeschner, Emile: 117, 126
Chabod, Federico: 33, 34 Dallek, Robert: xxv, 383, 384
Chamberlain, Austen: 26 Damiani, Claudia: 47
Chamberlain, Neville: 368, 372, 375 D’Amoja, Fulvio: 281
Chandler, Lester V.: 35, 170 Davila, Charles: 335
 Index 399

Davis, Norman H.: x, 125, 289, 292, 307, 314 Elia, Paola: xlii
Dawes, Charles G.: xxviii, 17, 25, 26, 27, Ellwood, David: xliii
34, 35, 46, 86, 88, 91, 95, 97, 98, 101, Engels, Friedrich: xxii
103, 115, 116, 126, 194, 195, 196, 204, Erba, Achille: xlii
206, 207, 227, 233, 239, 250, 254, 277,
390, 392 Facta, Luigi: 95, 96
Dawson, Geoffrey: 372 Fagiuoli, Vincenzo: xli
Deakin, Frederick William Dampier: xxix Farinacci, Roberto: 51
de Bosis, Lauro: i Farley, James A.: 348
Debs, Eugene: 4 Falco, Giancarlo: 182
DeConde, Alexander: 47 Fasano-Guarino, Elena: 36
Degler, Carl N.: 242 Fausold, Martin L.: 242
De Felice, Renzo: 36, 40, 142, 172, 181, Federzoni, Luigi: 116, 281
269, 270, 271, 272, 273, 277, 281, 282, Feis, Herbert: 13, 14, 20, 34, 290, 291, 293,
283, 288 294, 310, 323, 327, 328, 329, 330, 331,
de Gaulle, Charles: xviii 332, 344, 359, 385
de Grazia, Victoria: xliv Feltrinelli, Inge: xliii
Del Boca, Angelo: 309 Fenwick, Millicent: xix
De Martino, Giacomo: 94, 101, 102, 103, Ferrell, Robert: 194, 195, 197, 200,
104, 105, 107, 108, 109, 110, 111, 113, 202, 218, 232, 233, 234, 240, 241, 244,
114, 115, 116, 118, 122, 129, 130, 138, 249, 264
139, 152, 153, 353, 354 Ferrero Andrea: xli, 302, 331, 345, 348
De Santi, Louis A.: 47 Fini, Marco: xli, 147
De Stefani, Alberto: ix, 60, 76, 79, 90, 93, Finzi, Aldo: 281
97, 100, 104, 109, 110, 114, 141, 142 Fiorenti, Concetta: xlii
De Stefani, Pietro: xli Flandin, Pierre-Etienne: 368
De Visscher, Charles: 72 Fleming, Denna Frank: 30
Diderot, Denis: xiii Fletcher, Henry P.: x, 55, 61, 101, 111, 115,
Diggins, John: xxii, xxxviii, 36, 47, 50, 57, 118, 139, 140, 362 (Ambassador)
60, 61, 62, 64, 65, 66, 67, 84, 85, 93, 94, Foa, Vittorio: 181, 190
131, 260, 305, 307, 308, 309, 347, 348 Foner, Eric: xxxiv
Dillon, Clarence: 160, 374 Forbes, Harris: 144, 158
Di Nolfo, Ennio: 36, 203, 209, 257 Ford, Henry: 8, 9, 169
Di Silvestro, John: 53, 61 Ford, Franklin L.: 361
Divine, Robert A.: 310, 315, 343, 344, 345, Fordney, Joseph: 21
357, 359, 360, 364, 381 Foschini, Antonio: 72
Dodd, Martha: 383 Francis I: xvii
Dodd, William: x, xxv, xxvi, 361, 382, Franck, Louis: 182, 188, 189
383, 384 François-Poncet, André: 361, 383
Dodd, William, jr.: 383 Freidel, Franklin: 288
Dos Passos, John: xxii, 6, 7, 50 Friedlander, Robert A.: 310
Dowling: xxxvii Friedman, Milton: 192
Dunbar Kajetan: 59, 61 Fummi, Giovanni: ix, xxxi, 93, 114, 115,
Dunn, James Clement: xli, 319 119, 121, 130, 133, 134, 152, 154, 155,
Duroselle, Jean-Battiste: 1, 2, 41 156, 157, 159, 160, 161, 162, 164, 167,
174, 178, 181, 319, 320, 321, 354, 370,
Eakins, David W.: 242 371, 373, 374, 375, 376, 377, 378
Eden, Anthony: 328, 344, 365, 387 Fummi, Luisa: xli
Edge, Walter Evans: 132
Einzig, Paul: 35 Galasso, Giuseppe: xii
Eisenhower, Dwight D.: xvi Gandi, Vera: xlii
400
Garavello, Daniela: xlii
Gardner, Lloyd C.: 34, 288, 290, 293, 297
Garrett, John: 362
Gary, Elbert H: 391
Gemelli, Agostino: xvii
Gershenovitz, Debbie: xliii
Giannini, Amedeo P.: 355
Gibson, Hugh: 216, 221, 228, 234, 235,
236, 237, 365
Gidoni, Domenico: 33
Gilbert, Felix: 361, 383
Gilbert, Prentiss: 335
Gini, Corrado: 117
Giolitti, Giovanni: xxiii, 30, 32, 33, 34, 35,
95, 96, 97
Glad, Betty: 86
Glore, Charles: 157, 158, 162
Goldsborough, Laird: 307
Gompers, Samuel: 13
Graham, Ronald: 69
Gramsci, Antonio: xxii, xli
Grandi, Dino: viii, ix, xxxi, xxxii, xli, 47, 51,
53, 67, 77, 78, 80, 96, 100, 104, 107, 115,
116, 117, 121, 122, 139, 169, 202, 203,
205, 206, 207, 208, 209, 210, 211, 212,
213, 214, 215, 216, 217, 218, 219, 220,
222, 223, 224, 225, 226, 227, 228, 229,
230, 231, 232, 233, 234, 235, 236, 237,
238, 242, 243, 244, 245, 246, 247, 248,
249, 251, 252, 253, 254, 255, 256, 257,
258, 259, 260, 261, 262, 263, 264, 265,
266, 267, 269, 270, 271, 272, 273, 274,
275, 276, 277, 278, 279, 280, 281, 282,
283, 284, 285, 287, 288, 297, 301, 303,
306, 308, 312, 352, 353, 354, 356, 374,
375, 376, 380, 387, 388, 393, 394
Green, Joseph C.: 325, 342, 344, 349, 350,
356, 357, 358, 381, 382, 385, 386
Grew, Joseph C.: x, 55, 114, 115
Grifone, Pietro: 181
Grispo, Renato: 306
Gualerni, Gualberto: 172, 181, 190, 193
Guariglia, Raffaele: 203
Guarna, Luigi: xliv, xlvii
Gunther, Franklin M.: 38, 45
Hackworth, Green H.: 342
Halifax [Charles Wood]: 372
Hambro, Everard: 118, 188
Hamilton, Alexander: 262
Hanna, Edward Joseph: 130
Index
Harding, Warren: xxvii, 19, 45, 83, 87, 88,
94, 97, 196, 200
Harris, Brice, jr.: xxxiii
Harris, Charles R.S.: 195, 317, 318, 332,
340, 344, 357, 362, 380, 381, 385
Harrison, George L.: x, 160, 189, 314
Harrison, Leland: 101
Harvey, George: 45
Hassan, Henry, Jr: 358
Hawley, Ellis W.: 242
Hawley, Willis: 193, 256, 292
Hearst, William Randolph: 56, 62, 63, 64,
130, 289, 294, 345, 368
Heflin, Thomas: 139
Held, Heinrich: 174, 204
Henderson, Arthur: 222, 224, 252, 253
Herriot, Edouard: 224, 235, 250, 268, 269,
273, 275, 281, 291
Hersey, John: xiv, xv
Hiett, Helen: 310
Highley, Albert E.: 309
Hilb, Horace: xxxviii
Hitler, Adolf: xv, xxv, xxix, xxxiii, 36, 238,
246, 251, 266, 298, 299, 306, 307, 308,
311, 313, 337, 344, 378, 394, 395
Hoare, Samuel: 313, 319, 324, 325, 335,
338, 339, 340, 341, 363, 365, 367,
372, 378
Hoepke, Klaus-Peter: 36
Hoover, Herbert: viii, xxx, xl, 14, 17, 19, 20,
22, 34, 97, 98, 100, 107, 113, 121, 122,
123, 124, 125, 126, 127, 128, 131, 132,
133, 134, 136, 138, 169, 192, 193, 194,
197, 199, 200, 201, 202, 203, 209, 211,
212, 214, 217, 219, 221, 222, 223, 226,
227, 228, 229, 231, 232, 233, 234, 235,
237, 238, 239, 240, 241, 242, 243, 244,
245, 247, 249, 250, 252, 254, 255, 256,
257, 258, 259, 260, 261, 262, 263, 264,
265, 267, 268, 269, 273, 274,
276, 280, 284, 287, 288, 290, 291, 292,
297, 299, 300, 302, 305, 308, 391,
393, 394
Hopkins, Harry: 317, 381, 382
Howard, Hubert: xli
Howard, Lelia: xli
Howe, Louis: 362, 363
Howell, Robert B.: 139
Hoyt, Edwin P.: 91
Hubbard, George: 310
Hudson, Manley: 72
 Index 401

Hughes, Charles Evans: x, xxv, 17, 20, 33, Knowlton, Evelyne: xli
34, 37, 38, 39, 42, 45, 46, 55, 69, 70, 74, Kuznets, Simon: 10
75, 76, 86, 89, 95, 97, 98, 101, 104, 223,
352, 363 LaFeber, Walter: xxvi
Hughes, Stuart H.: xiii, xiv, xxxiv Lamont, Thomas W.: x, xxiv, xxvi, xxxi,
Hull, Cordell: x, xv, 140, 289, 292, 293, xxxiv, xli, 22, 49, 60, 61, 64, 75, 76, 91,
298, 302, 317, 318, 319, 324, 325, 328, 92, 93, 94, 99, 106, 108, 109, 111, 113,
331, 333, 335, 336, 337, 338, 339, 340, 114, 115, 119, 121, 122, 123, 124, 125,
344, 348, 358, 363, 364, 375, 381, 382, 126, 127, 128, 130, 135, 139, 153, 154,
383, 387, 395 155, 156, 157, 158, 159, 160, 162, 164,
Humphrey, Hubert: xix 167, 174, 176, 178, 251, 258, 276, 284,
Hurley, Patrick Jay: 131 320, 321, 322, 323, 354, 368, 369, 370,
371, 372, 373, 374, 375, 376, 377, 378,
Ickes, Harold: 317, 324, 382 387, 388
Incisa, Agnese: xliv Lamont, Thomas S.: 375
Ingersoll, Ralph: 307 Langer, William L: xxxvii, 379
Israel, Fred L: : 314, 315, 345 Lanza, Aldo: xlii
Larson, Erik: xxv
Jacobson, Jon: 86 Lasturel, Piere: 71
James-James, John A.: 41 Laval, Pierre: 230, 232, 233, 234, 235, 250,
Jefferson, Thomas: 49, 382 251, 252, 253, 258, 259, 260, 266, 269,
Jervolino, Domenico: v 274, 312, 313, 319, 338, 340, 341, 363,
John XXIII: xvi, xvii 365, 367, 368, 372, 378
Johnson, Claudius O.: 232 Layton, Walter: 256
Johnson, Hiram: 139, 315, 345, 359 Lazzati, Giuseppe: xvii
Johnson, Lyndon: xix, xxxiii Leffingwell, Russell: xxvii, 22, 35, 92, 122,
Johnson, Pike: 357 153, 175, 176, 177, 208, 282, 293, 320,
Jones, Jesse: 140 321, 322, 323, 370, 392
Jordan, Laylon: 306 Leffler, Melvin P.: xxvi, 35
Joslin, Theodore Goldsmith: 240, 241 Lenin, Nikolaj: 6, 7
Jung, Guido: xxx, 58, 59, 79, 80, 81, Lenzini, Giacomo: xliii
82, 97, 98, 107, 168, 289, 291, Leopold, Richard W.: 45
292, 294, 295, 296, 300, 304, 308, Leroux, Eugène-Louis: 310
309, 371 Leuchtenburg, William E.: 6, 7, 50, 298, 299
Lewis, Cleona: 2, 35, 146, 147, 147, 166
Kadradic, Catherine: 71 Lewis, William A.: 193
Kahn, Otto: 98 Lindbergh, Charles: 370
Kaufman, William: 361 Lindsay, Ronald: 301, 319, 324, 325, 338,
Kellett, Morris C.: 45, 289 339, 340, 341
Kellogg, Frank B.: x, 101, 103, 104, 105, Link, Arthur S.: 28
111, 113, 114, 115, 123, 128, 130, 131, Link, William: 35, 86
135, 138, 139, 140, 200, 201, 202, 212, Lippmann, Walter: xx, xxiii, xli, 58, 59, 60,
222, 284, 340, 390, 391 61, 123, 242, 306
Kennan, George: 380 Littlefield, Walter: 67
Kennedy, Bobby: xxxiii Litvinov, Maxim: 233, 237, 366, 378
Kennedy, John F.: xviii, xix, 361 Lloyd, George: 17, 29, 211
Kennedy, Joseph: 370 Long, Breckinridge: 304, 307, 312, 337,
Kerr, Philip Henry [Lothian]: 335, 372 338, 339, 362, 363, 374
Keynes, John M.: 15, 193, 294, 297 Lonne, Karl-Egon: 36
Kindleberger, Charles: xxviii, 34, 192, 193, Lorini, Sandra: xxxviii
201, 299 Lovestone, Jay: 13
Kinsey, Hall: 350 Lowry, Ned: 45
402
Luce, Henry : 307
Luther King, Martin; xxxiii
Lytton-Cobbold, David: xli, 250
MacDonald, Ramsay: 202, 211, 212, 215,
216, 217, 218, 219, 224, 234, 235, 257,
268, 271, 272, 275, 277, 281, 282, 291,
293, 312
Machiavelli, Niccolò: 273
MacIntyre, Marvin: 355
MacLean, Alexander A.: 117
Maier, Charles: xxvi, xxviii, xxxviii, xlii
Mamatey, Victor S.: 28
Manzoni, Gaetano: 213, 215, 244, 250
Manzoni, Raimondo: 310
Maritain, Jacques: xviii
Marshall, George: xxi, 176, 282, 380, 391
Marshall Field and Co.: 157,158,
162, 163
Martelli, Manfredi: xxvi
Marucco, Dora: xlii
Marx, Karl: xxii
Mass, Melvin: 343
Matsudaira, Kota: 237
Matteotti, Giacomo: vii, xxii, 46, 50, 51, 52,
53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63,
64, 65, 66, 67, 68, 107, 142, 185, 207
Matthews, Herbert: 67, 68
Mattioli, Raffaele: xxii
May, Ernest R.: xii, xiv, xx, xxxvii
Mayer, Arno J.: 14, 28, 29, 366
Mazuzan, George: 242
McChesney Martin, William: xix, xli
McCormick, Anne O’Hare: 67
McCormick, Nancy Cox: 65
McCormick, Robert R.: 61, 67, 68
McCumber, Porter: 21
McGarrah, Gates: 158, 159
McGuire, Constantine: 117
McReynolds, Sam: 342, 343, 349, 350
Mellon, Andrew: 17, 20, 23, 56, 75, 86, 89,
95, 98, 101, 102, 103, 105, 109, 110, 111,
113, 115, 120, 121, 124, 127, 128, 131,
132, 133, 134, 135, 137, 138, 140, 143,
152, 153, 169, 170, 175, 200, 241, 250,
255, 391
Messersmith, George S.: xxv, xxvi, 382,
383, 384
Meyer, Richard H.: 35, 170, 173
Migone, Bartolomeo, Jr.: xliii
Migone, Bartolomeo,: xli, xliii, 302, 331,
345, 348
Index
Migone, Gian Giacomo: i, iii, iv, xxiii, xxvii,
xxx, xxxv, xlv, xlvi, xlvii, 31, 33, 35, 36,
39, 45, 47, 49, 84, 85, 143, 174, 175, 176,
178, 179, 293, 304
Migone, Sebastiano: xxxiv
Migone, Thi Sao: xv
Miller, Charles: 90
Miller, James Edward: xliii
Mills, Ogden: 241
Milza, Pierre: 36
Minter, William: 289
Mitchell Palmer, A.: 5
Modigliani, Franco: xxvii
Moffat, Pierrepont J.: x, xxv, 325, 342, 350,
356, 365, 366, 367, 368, 379, 381, 382,
383, 384, 385, 386
Moley, Raymond: 289, 290, 291, 293, 294,
296, 297, 298, 299
Molotov, Vjaceslav M.: 387
Moltoni, Pia: xliii
Moore, John B.: 359
Moore R. Walton: 342, 350
Moreau, Emile: xxviii, 173, 186, 188
Morgagni, Manlio: 65, 355
Morgan Grenfell & Co.: 156, 188
Morgan Bank/J.P. Morgan & Co.: vii, viii,
xxiv, xxvi, xxvii, xli, xlv, 5, 15, 20, 22, 24,
25, 27, 49, 52, 60, 64, 67, 75, 90, 91, 92,
93, 94, 98, 99, 105, 106, 108, 113, 114,
115, 117, 119, 120, 121, 122, 123, 124,
125, 127, 130, 132, 133, 136, 137, 138,
139, 140, 141, 143, 144, 150, 151, 152,
153, 154, 155, 156, 157, 158, 159, 160,
161, 162, 163, 164, 167, 169, 170, 171,
172, 175, 176, 177, 178, 179, 183, 184,
185, 186, 188, 189, 196, 208, 258, 276,
293, 319, 320, 322, 323, 354, 359, 369,
370, 371, 372, 373, 374, 376, 378,
387, 391
Morgan, John Pierpont, Jr: xxxi, 24, 92, 94,
99, 121, 122, 124, 153, 176, 183, 184,
185, 258, 376
Morgan, Thomas B.: 65
Morgenthau, Henry: 324, 382
Mori, Giorgio: xli, 32
Mori, Renato: xli, 309, 311, 312, 317
Morrow, Dwight: ix, xxx, 49, 91, 92, 114,
119, 122, 124, 125, 126, 127, 130, 132,
133, 134, 135, 138, 139, 140, 169, 172, 217
Mortara, Giorgio : 117
Mosca, Rodolfo: 28
Moscati, Ruggero: 77, 78, 245
 Index 403

Mosconi, Antonio: 243, 276 Ochs, Arthur: 297

Muggeridge, Malcolm: xiv Offner, Arnold A.: xxv, 366, 384
Mussolini, Benito: i, vii, viii, xiii, xxi, xxii, Olivetti, Gino: 62
xxiii, xxiv, xxv, xxvi, xxix, xxx, xxxi, Olney, Richard: 131
xxxii, xxxiv, xxxv, xl, 30, 33, 34, Oriani, Alfredo: 273, 278, 282
35, 36, 37, 38, 39, 40, 41, 42, 43, 44, Origo, Donata: xliii
45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, Origo, Iris: xx, xli
56, 57, 58, 59, 60, 61, 62, 63, 64, 65, Orlando, Vittorio Emanuele: 28, 29, 30, 279
66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76,
77, 78, 80, 81, 82, 83, 84, 85, 89, 90, Pace, Luigi: 154, 155, 156, 158, 159,
92, 93, 94, 96, 97, 98, 99, 100, 102, 160, 162
103, 104, 105, 106, 107, 108, 109, 110, Paganoni, Marco : 273
111, 112, 113, 114, 115, 116, 117, 118, Paine, Tom: 49
127, 129, 130, 132, 133, 134, 136, 137, Palermi, Raul: 116
139, 142, 143, 153, 168, 172, 173, 174, Paolucci Barone, Giacomo: 58
175, 177, 178, 179, 180, 181, 182, 184, Parini, Piero: 354
185, 186, 188, 189, 190, 191, 202, 203, Parrini, Carl: xxvi, 14, 15, 21, 23, 34, 98,
204, 205, 206, 207, 208, 209, 210, 213, 123, 197
215, 216, 217, 219, 220, 221, 226, 237, Pascucci, Francesco: xli
242, 243, 246, 247, 253, 256, 257, 258, Passerin d’Entrèves, Ettore: xvii, xxiii,
259, 263, 266, 270, 271, 272, 273, 274, xxxvii, 33
275, 277, 279, 281, 282, 285, 286, 287, Patrizi, Ettore: 355
288, 289, 291, 292, 295, 299, 301, 302, Paul VI: xvii
303, 304, 305, 306, 307, 308, 309, 310, Paul- Boncourt, Joseph: 236
311, 312, 313, 316, 317, 319, 321, 322, Pavani, Giampaolo: xlii
323, 324, 325, 328, 334, 335, 336, 337, Pell, Robert: 307
339, 340, 341, 342, 344, 346, 347, 348, Pennachio, Mario: 58
352, 353, 354, 355, 360, 362, 363, 364, Petersen, Jens: 36
366, 367, 369, 371, 372, 373, 374, 375, Phelps, William C.: 35, 45, 324
376, 377, 378, 380, 382, 383, 384, Piaf, Edith: xi
385, 386, 387, 388, 392, 393, 394, Pieri, Piero: 311
395, 396 Pinzani, Carlo: 36
Pirelli, Alberto: ix, xxx, xxxi, 49, 98, 100,
Nadolny, Rudolf: 236 106, 107, 115, 117, 120, 121, 123, 126,
Nazzaro, Pellegrino: 31, 48 128, 129, 130, 136, 137, 139, 147,
Nicastro: xxxvii 148, 150, 168, 169, 181, 204, 276, 277,
Nicoglou, Stephan: 72 281, 371
Nicolson, Harold: 49, 91, 172 Pirelli, Giovanni Battista: 106, 168
Niemeyer, Otto: 168 Pirelli, Leopoldo: xli
Nitti, Francesco S.: 32, 35 Pittman, Key Denson: 314, 315, 342, 345,
Nixon, Richard: xxxiii, 242 349, 350, 356
Norman, John: 310 Pius XII: xvi
Norman, Montagu: xxxi, 27, 170, 171, 172, Phillips, John: xxxviii
182, 183, 184, 185, 186, 187, 188, 189, Phillips, Williams: x, xxv, xli, 45, 74, 75, 76,
190, 204, 256, 392 289, 362, 363, 364, 365, 383, 384
Norris, George: 139 Podestà, Luigi: 153
Novacovics: 182 Poincaré, Raymond: 50, 68, 69, 70, 77, 80,
Nye, Gerald: xxviii, 313, 342, 343, 345 93, 99, 142, 173, 251
Policastro: 365
Obama, Barack: xviii Pope, Generoso: 355, 356, 368
O’Boyle, Patrick: 347 Pound, Ezra: 340
404 Index

Pratt, Julius W.: 292 Sacco, Nicola: 260, 352

Prodi, Romano: xviii Sackett, Frederick M.: 264
Salvemini, Gaetano: xii, xiii, xiv, xxxix, 30,
Quazza, Guido: xli, 1 52, 64, 67, 68, 84, 310
Santarelli, Enzo: 85
Radosh, Ronald: 13 Santomassimo, Gianpasquale: 273
Raffalovich, George: 62, 163 Sapelli, Giulio: xxxviii
Rava, Luigi: 62 Sarfatti, Margherita: 307
Rainey, William: 139 Sarti, Roland: 179
Reed, James: 138, 139, 140, 160, 374 Schacht, Hjalmar: 182, 299
Riassetto: xlii Schanzer, Carlo: 77, 80, 95, 210
Ribbentrop, Joachim : 387 Schiff, Mortimer: 66, 160
Ricci, Rolando: 95 Schlesinger, Arthur, jr.: 2, 3, 5, 11, 242, 288
Robert, Cecil: 75, 76, 369, 370 Schlotterbeck, Karl T.: 2
Rocco, Alfredo: 273 Schmidt, Hjalmar: 189
Rochat, Giorgio: 311 Schmidt, Paul : 344
Rockefeller, John D., jr.: 9 Schmitz, David: xxv, xxvi
Romano Avezzana, Camillo: 70 Schuker, Stephen: xxvi, xliii, 35, 50
Romano, Sergio: 118, 164, 190 Shumate, Richard: 62
Romasco, Albert U.: 242 Schwartz, Ann J.: 192
Romero, Federico: xlii Scialoia, Vittorio: 72
Roosevelt, Eleanor: xix, 382 Sciuto, Stefano: xv
Roosevelt, Elliot: 304 Seldes, George: 62
Roosevelt, Franklin Delano: viii, x, xviii, Sherman, John: 3
xxv, xxvi, xxxii, xxxvii, xl, 1, 11, 41, 193, Sherrill, Charles: 357
242, 256, 269, 284, 285, 287, 288, 289, Shoup, Lawrence H.: 289
290, 291, 292, 293, 294, 295, 296, 297, Siepmann, Harry: 188
298, 299, 300, 301, 302, 303, 304, 305, Sihanouk, Norodom (King of Cambodia): xvii
306, 307, 308, 309, 310, 312, 314, 315, Simmonds, Frank: 346
316, 317, 318, 319, 320, 321, 322, 323, Simon, John: 234, 236, 301, 340
324, 325, 326, 328, 330, 332, 333, 334, Sinclair, Harry F.: 358
336, 337, 338, 339, 340, 342, 343, 344, Skinner, Robert: 333
345, 346, 348, 350, 352, 354, 355, 356, Smith, Frank: xliii
357, 358, 360, 362, 363, 364, 366, 367, Smith, William B.: 36, 130, 347, 348
368, 369, 370, 372, 374, 376, 378, 380, Smoot, Reed: 110, 123, 127, 128, 129, 130,
381, 382, 383, 384, 385, 386, 387, 388, 131, 193, 256, 292
394, 395 Somenzari, Francesca: xliii
Roosevelt, Theodore: 41, 47, 264 Sonnino, Sidney: 29, 30, 279
Root, Elihu: 200, 262 Soule, George: 6
Rosen, Elliott A.: 242 Southard, Frank A. jr.: 35
Rossi-Longhi, Alberto: xli, 346 Spini, Giorgio: xlii, 35, 36, 304
Rosso, Augusto: xxx, 53, 54, 65, 74, 75, 76, Springer, Arthur H.: 140
112, 113, 273, 300, 301, 302, 303, 305, Sraffa, Piero: xxii, 179
307, 319, 324, 325, 328, 331, 336, 337, Staley, Eugene: 35
342, 345, 346, 347, 348, 350, 351, 353, Stammati, Gaetano: 35
359, 360, 376 Steed, R.H.C.: 344
Rothbard, Murray: 242 Stevenson, Adlai: xix
Rovere, Bruno: 145, 148, 149 Stimson, Henry L.: viii, x, xxxii, 194, 199,
Rowe, Jim, jr.: xix 200, 201, 202, 203, 209, 216, 217, 218,
Rowse, Alfred Leslie: 308, 340 219, 220, 223, 224, 225, 226, 227, 228,
Rumbold, Horace: 361, 383 229, 231, 232, 233, 234, 235, 237, 238,
Rumi, Giorgio: xvii, 30, 270, 352 241, 247, 248, 249, 250, 252, 253, 255,
 Index 405

257, 261, 263, 264, 266, 273, 281, 284, Vitetti, Leonardo: xli, 117, 269, 270, 271,
287, 300, 308, 309, 354, 365, 366, 379, 274, 317
380, 382, 384, 386, 393 Vittorio Emanuele III: 46, 83, 287
Storaci, Marina : 182 Vivanti, Corrado: 36
Straus, Jesse I.: 358 Vivarelli, Roberto: 28
Stresemann, Gustav: 26 Volpi, Giuseppe: vii, ix, xxiv, xxx, xxxi,
Stringher, Bonaldo: xxx, 33, 58, 93, 111, 93, 114, 117, 118, 119, 120, 121, 123,
141, 153, 168, 173, 178, 179, 181, 182, 125, 126, 127, 128, 129, 130, 134, 135,
183, 186, 187, 188, 277, 281 136, 141, 142, 143, 144, 147, 152, 153,
Strong, Benjamin: x, xxvi, 21, 22, 27, 35, 154, 155, 157, 158, 159, 160, 161, 162,
160, 170, 172, 174, 175, 177, 178, 179, 163, 164, 165, 167, 168, 170, 173, 174,
181, 183, 186, 187, 188, 189, 190, 193, 175, 177, 178, 179, 180, 183, 190, 204,
251, 256, 392 277, 281
Sturzo, Luigi: 32 Vonnegut, Kurt: xiii, xv
Suvich, Fulvio: 308, 345, 364, 374 von Papen, Franz: 235, 267, 268, 275
von Schubert, Karl: 245
Taft, William H.: 20 von Wiegand, Verner: 63
Tambor, Molly: i, iii, xliii
Tardieu, André: 207, 212, 215, 217, 219, Warburg, James: 291, 300
232, 234, 235 Warburg, Paul M.: 16, 119, 314
Tardio, Lois: xliv Ward, Pierce: 157, 158, 162
Tasca, Angelo: 179 Warren, George: 294
Taylor, Alan John Percivale: xxi Washington, George: 66
Tellini, Enrico: 71, 72 Washington, Sammi: xxxviii
Teodori, Massimo: 35, 36, 304 Watts, James F.: 362, 363
Thaon di Revel, Paolo: 320, 371 Webster, Richard A.: 32
Thomas, Elbert D.: 294, 343 Weinstein, James: 5, 242
Tirabassi, Maddalena: xlii Weintraub David: 10
Toniolo, Giuseppe: 179 Wheeler, Post : 74, 75
Toscano, Mario: 29 Whitney, George: 162, 163
Tranfaglia, Nicola: xli, 192 Wicker, Elmus R.: 35
Tugwell, Rexford: xxxii, 289, Wiggin, Albert: 159, 256
304, 305 Wilkie, Wendell: 369
Tull, Charles H.: 348 Williams, William Appleman: xxvi, 34, 242,
Turati, Augusto: 354 288, 389
Tyrrell, William: 74, 76 Wilson, Garrard: 178
Wilson, Hugh: 333
Valente, Benedetto: xli Wilson, Joan Hoff: 123, 193, 194, 197, 240,
Valeri, Nino: 30 242, 310
Vandenberg, Arthur: 340 Wilson, Woodrow: xviii, xxvii, 1, 2, 3, 5, 11,
Van Meter, Robert H., jr: 35 14, 17, 18, 22, 24, 28, 29, 30, 31, 32, 34,
Vanzetti, Bartolomeo: 260, 352 41, 45, 72, 86, 89, 92, 94, 96, 98, 139, 175,
Vaudagna, Maurizio: xxxii, xxxviii, xl, xlii, 195, 197, 200, 216, 242, 262, 288, 289,
304, 305 290, 312, 316, 326, 349, 382, 389, 395
Ventry, Lance T.: 28 Wiltz, John E.: 310, 313
Venturi, Franco: xiii Winston, Garrard B.: 102, 103, 109, 120,
Venturini, Nadia: xlii, xliii, xliv 121, 153
Vertone, Saverio: xiii Woodin, Will: 294
Viacava, Anna: xliv Wright, Quincy: 72
Villa (brothers) : 355
Villari, Lucio: 179 Young, Owen D.: xxviii, 17, 88, 126, 194,
Vissering, Gerard: 182 227, 239, 243, 251, 267, 269, 392