Sterling and Strings

Peter Davies

In opposition, Harold Wilson spoke out against American involvement in Vietnam. In May 1954, during his Bevanite phase, he declared that ‘not a man, not a gun, must be sent from this country to defend French colonisation in Indo-China … we must not join or in any way encourage an anti-Communist crusade in Asia under the leadership of the Americans or anyone else.’ Later the same day, in a speech in Manchester, he had gone even further, proclaiming that ‘at the moment the danger to a negotiated settlement in Asia is provided by a lunatic fringe in the American Senate.’ After he became leader of the Labour Party in 1963, Wilson placed much emphasis on close Anglo-American co-operation, going against his earlier position. He continued, however, to voice his opposition to any extension of the Vietnam conflict and in March 1964, and again in June, pressed the Conservative prime minister, Alec Douglas-Home, to advise President Johnson against extending the war into the North.

Following his election victory in October that year, Wilson was advised by the Foreign Office that, with regard to Vietnam, ‘ministers should agree to support the United States in this limited and controlled form of offensive action.’ He appears to have acceded to this advice at first, noting in February 1965 that ‘Her Majesty’s Government realised that, as long as fighting continued in Vietnam, both South Vietnamese and US forces had the right to take appropriate action themselves.’ As America’s aerial bombardment of the North escalated, however, Wilson became far more sceptical about the conduct of the war and when pressured refused to send troops.

On 1 March 1965, Humphrey Trevelyan, a member of the UK mission at the UN, wrote to Wilson that he had ‘attended a CIA briefing last Friday afternoon’ which had demonstrated ‘pretty conclusively’ that ‘the Americans are in a hopeless position in South Vietnam.’ Wilson made the following note on the telegram: ‘Yes, I very much agree.’ Eleven days later, he relayed his grave misgivings about American policy to the US ambassador to London, David Bruce. If America continued in its escalation of the conflict, he warned, it could cause the biggest rupture in Anglo-American relations since the Suez crisis. But this threat was never carried through, and Wilson would continue to provide Lyndon Johnson with staunch diplomatic and rhetorical support over Vietnam throughout the president’s time in office.

Wilson repeatedly defended the American position in exchanges with the Soviet Union, the Commonwealth and Britain’s European allies. He also defended it in the House of Commons, and the foreign secretary, Michael Stewart, even appeared on television to defend American actions. At a televised ‘teach in’ in Oxford in June 1965, Stewart argued that ‘the future relationship between North and South could, in time, be a matter for the genuine free decisions of the people of both regions … Britain says yes to it, the United States says yes to it, at present China, the Soviet Union and North Vietnam say no.’

The only time Wilson ever publicly voiced dissent was in June 1966, following substantial political pressure. In a statement from Downing Street, which was later repeated in the House of Commons, he announced ‘with regret that United States aircraft have attacked North Vietnamese targets touching on the populated areas of Hanoi and Haiphong,’ and that ‘we must dissociate ourselves from an action of this kind.’ The statement, however, also reaffirmed British support for the US, and an examination of the primary sources reveals not only that the Johnson administration was informed in advance about what Downing Street was going to say, but that the president himself made changes to the text. Although Johnson ‘did not like the word “dissociate”’, the vice president, Hubert Humphrey, and the defence secretary, Robert McNamara, confirmed that ‘the prime minister’s position was well understood’ and ‘there would be no hard feelings.’

As the war in Vietnam progressed, however, opposition among the public and inside the Labour Party increased, and by late 1967 there was intense pressure on Wilson to distance himself from the American position. In October, at the Labour Party Conference in Scarborough, a resolution calling on ‘the Labour government to dissociate itself completely from the policy of the United States government in Vietnam’ was passed by 2,752,000 votes to 2,633,000. A previously quiescent public was increasingly unhappy about Britain’s diplomatic support: a poll published in November found that 66 per cent of the electorate thought Britain should stop backing the US. Adding to the clamour, in December the Foreign Affairs Committee of the Parliamentary Labour Party called for the government to ‘declare publicly that it can no longer support the United States position in Vietnam’. By March 1968, even the party’s policy-making forum, the National Executive Committee, pressed Michael Stewart to carry through the resolution passed in Scarborough. Despite all this, Wilson didn’t shift.

To try to explain his refusal to give in to the wishes of a majority both of his own party and of the electorate, one needs to consider Britain’s economic situation at the time. One of the most fundamental aims of Wilson’s economic policy was to prevent a devaluation of sterling, a fight he eventually lost in November 1967. But sterling’s position was precarious, and Britain was increasingly dependent on external help to shore up reserves. There were crucial US-led rescue packages for sterling in November 1964 and September 1965, and essential verbal support was also provided by the Johnson administration in July 1966.

Wilson fervently denied both in public and to the cabinet that there was any connection between America’s support for sterling and his backing for the US effort in Vietnam. During the Labour Party Conference in September 1965, a Daily Mirror editorial asked: ‘are we officially conniving in this disastrously unsuccessful and ill-judged American campaign merely because the United States might withhold its support of sterling if Britain dares to criticise?’ At the conference itself, a delegate from Nottingham pressed Wilson over the link: ‘I know the pound is important; I know the American loan is important; but so are the lives of the Vietnamese people.’ Wilson was furious, replying:

I am surprised that this question can even have been put. At no time – and I say this categorically – has there been any attempt to link economic co-operation with any aspect of foreign policy … I can confirm that there have never been, whether in White House talks, in telegrams, in ambassadorial approaches, or even on the hot line, any attempts to link Vietnam with economic or monetary co-operation.

In a cabinet meeting in February 1966 Wilson again denied the link, and Richard Crossman, the minister of housing, recorded in his diary that Wilson ‘repeated time after time that the Americans had never made any connection between the financial support they gave us and our support for them in Vietnam.’

The evidence confirms that Wilson initially tried to ensure that no such connection was made by the Johnson administration. In March 1965 he told Michael Stewart, who was about to visit Washington:

should the president try to link this question with support for the pound, I would regard this as most unfortunate and no doubt you will reply appropriately. If the financial weakness we inherited and are in the process of putting right is to be used as a means of forcing us to accept unpalatable policies or developments regardless of our thoughts, this will raise very wide questions indeed about Anglo-American relationships.

It seems, however, that the US administration not only tried to use its financial support and the promise of further funds to pressurise the British government into sending troops to Vietnam, but that it implicitly warned Wilson that Britain would face severe repercussions should his diplomatic support cease.

The link between American support for sterling and British support for the Vietnam War was first made in a telephone call between Johnson and Wilson in February 1965, less than three months after a US-led $3 billion sterling rescue operation. Angered by Wilson’s wish to fly to Washington for emergency talks in response to the escalation of US bombing, Johnson threatened Wilson: ‘I do not want to heat up the situation that involves your country, whether monetary, Malaysia or whatever it is.’ (The Malaysian confrontation had been instigated by the Indonesian president, Sukarno, in January 1963, in protest against the creation of the Federation of Malaysia, and had led to serious border clashes. By January 1965 there were 60,000 British troops in the region.) As American bombing continued in February and March 1965, Crossman observed that the prime minister was mindful that criticism of America for its behaviour in Vietnam could have implications for sterling.

On 16 June 1965, John Stevens of the British Embassy in Washington wrote that ‘the administration still do not think that a devaluation of sterling would bring down the US dollar but this attitude may change as their hopes of strengthening the US balance of payments are dashed. I suspect, however, that the administration is worried that economic and political developments in the UK may undermine our support on Vietnam.’ A month later, Stevens wrote in more explicit terms, informing Wilson:

politically the US feels very isolated over Vietnam, hence their gratitude for our support, their nervousness about our possible defence cuts and their desire to involve other countries in sharing their international burdens. In terms of sterling this means that as long as we are supporting them in Vietnam they will be sympathetically interested in any deal with us which helps sterling.

This summary was written during the sterling crisis of July 1965, and it was at this point that the US administration first explicitly linked British policy to America’s propping up of the pound. Johnson wrote to Wilson:

I know that your government has already signalled its interest and concern by giving assistance. I now ask that you give most earnest consideration to increasing that assistance in ways which will give a clear signal to the world – and perhaps especially to Hanoi – of the solidarity of international support for resistance to aggression in Vietnam and for a peaceful settlement in Vietnam.

McGeorge Bundy, the national security adviser, went further, informing the ambassador in Washington, Patrick Dean, that ‘what the president particularly wanted from us was a military contribution in the form of men on the ground. Two platoons were suggested or even less or a military field hospital. Bundy said that the result of such a contribution would be worth “several hundred million dollars”.’ While this offer seems to have been withdrawn, for fear of alienating Wilson, US memoranda make clear that it represents the thinking of the Johnson administration. In one memorandum, Bundy was told that Henry Fowler (the secretary of the treasury), Robert McNamara and George Ball (the undersecretary of state) all believed that ‘UK troops in Vietnam, while not strictly a necessary condition for us to be forthcoming on sterling, would greatly improve the odds.’

Although Wilson refused the request for troops, he was now very much aware that the US administration was unambiguously linking the two matters. The Foreign Office also seems to have recognised the need to tread carefully. In August 1965, John Addis, the British ambassador to Manila, wrote to Edward Peck at the FO that ‘I have over recent years argued many times against the stifling of our reservations and have advocated that we should tell the Americans our misgivings over their policies when we have them.’ Peck’s response was ambiguous: ‘We are again giving some thought to the possibility of a frank exchange of views with the Americans on the subject. As usual, however, it does not seem to be quite the right moment. We have other things we want to talk to them about.’ The only high-level exchanges between 25 August and 13 September concerned the sterling rescue package.

On 21 September 1965, 11 days after this billion-dollar support package for sterling, an FO document entitled ‘Sterling and Strings’ reported on a meeting between George Ball and the prime minister. It emphasised that, in its foreign policy, Britain could ‘pursue independent lines, in the face of American disapproval, in specific contexts, provided that we think we can get away with it’. But Vietnam was an issue of fundamental importance to Johnson. According to a telegram from Patrick Dean, ‘it was vital that Britain recognised how strongly the president feels about the situation in Vietnam and how extremely sensitive he is to any form of criticism, particularly that of a negative character.’ The president warned his ‘friends and allies’ that ‘they should not stab him in the back or slap him in the face.’

Later, in a conversation with Hubert Humphrey, Wilson was warned that ‘the president saw these matters in intensely personal terms. If he were given cause to think that . . . he was being “betrayed” by the prime minister, his reaction could be very violent indeed.’ As Clive Ponting and Ben Pimlott have demonstrated, Britain’s defence policy east of Suez and its economic policies were both adjusted as a result of US financial pressure; yet Dean reckoned that support for the US in Vietnam was more important to the president.

In June 1966, after further instability in sterling, both Walt Rostow, McGeorge Bundy’s replacement as national security adviser, and Francis Bator of the National Security Council warned the British Embassy in Washington that if Wilson criticised the United States too strongly over Vietnam, it would have implications for future US support for the pound. Dean reported on 23 June 1966 that ‘Bator took Bendall aside last night and more or less repeated to him what Rostow had said to me … saying specifically that if there’s a row between the prime minister and the president over all this it will spill over into a lot of other matters e.g. I suspect, support for sterling.’

British fears of the consequences of differing with the US are made clear in the one and only cabinet memorandum that was prepared on Vietnam. It was drafted by the Foreign Office after the cabinet, on 28 September 1967, pressurised Wilson to give a full summary of his policy on the conflict. The document itself holds that repudiating US actions would have enormous repercussions economically, and the government’s nervousness was evident in the weeks preceding the document’s release to cabinet, when the cabinet secretary and foreign secretary anxiously tried to ensure that discussion on the issue should be limited, afraid that even dissent within the cabinet could harm Britain’s chances of further support at a time when the currency was under relentless speculative pressure. Burke Trend, the cabinet secretary, who had played an instrumental role in the decision-making process on Vietnam and over economic policy, wrote in a letter to Wilson:

It is possible – admittedly by over-simplifying what the memorandum says – to read it as simply saying that the Americans are right, that the North Vietnamese are wrong and that there is nothing we can do about it … read in this sense, the memorandum might touch off a rather unprofitable discussion in cabinet; and it might be a pity to provide a gratuitous opportunity for the expression of anti-American sentiment at a time when we may soon be needing some practical financial help.

There was disquiet in the Foreign Office about admitting to the cabinet the role that economic considerations had played. When the memorandum was sent round the FO, William Rodgers minuted that ‘my only doubt about a good paper is whether paragraphs 12 and 13 are best included, given the likely circulation now or in the minutes to some critics within the government whose murmurs are sometimes heard outside.’ Paragraphs 12 and 13 related to the economic considerations involved in the formulation of Britain’s Vietnam policy.

Further evidence of the role played by economic factors can be found in a memorandum entitled ‘Vietnam Negotiations – British Interests’, written to provide background for Michael Stewart’s visit to Moscow in May 1968. The FO’s advice was that Wilson and Stewart should use their leverage to get the United States out of Vietnam as soon as possible, even if it would fall to Communism, for the sole reason that this would avert a potentially disastrous monetary crisis that would have severe implications for the British economy. The FO now promoted the view that ‘our interest in change and in an American withdrawal is that it should create as little disturbance as possible. Nevertheless, there are worldwide reasons why a continuation of the current American effort in South-East Asia has serious potential dangers for our own position.’ The memorandum continued:

Any further pressure on the dollar could lead to a financial crisis in which sterling would be involved. Moreover, financial crises are often recognised too late and come very suddenly. There is therefore a danger that if the Americans withdraw too slowly because of a desire to avoid too great an abandonment of their present objectives, they may run the risk of sudden financial crisis.

It therefore advocated:

When the point is reached at which our intervention is required or thought necessary, our objective will almost certainly be to help the United States find a way of retreating with the least possible stress in Asia or in the United States itself, accepting the risks that a Communist dominated Vietnam will bring to the stability of South-East Asia, and hence to our own interest there.

Harold Wilson continued to deny – in his memoirs, for example – that there had been any link between the United States’s support for sterling and Britain’s support of the Vietnam War, but there had been one occasion when he wasn’t so duplicitous. In May 1966, he had a confrontation over Vietnam with Frank Cousins, the former trade-union leader who was now a government minister. When Cousins demanded to know why Britain ‘hadn’t taken a firm stand against US policy there’, Wilson replied furiously: ‘Because we can’t kick our creditors in the balls.’