The legacies of the war for the US economy

Did World War I produce a major break with the past Was the American economy fundamentally different after the war than it had been before To answer these questions, or at least to begin to, I will look first at (1) the cost of the war in terms of resources, a difficult issue in itself (2) the change in the role of the United States in international capital markets and finally (3) the long-run changes in ideas about the role of the government in the economy brought about by the war, the least...

Total war and economics in the twentieth century

After 1939 it became impossible not to see World War I as a dress rehearsal for World War II. From this viewpoint the first war was rather like the second war, only not as bad. In its own time it was seen as the nadir of civilisation, but this was only because those involved did not realise how much worse it could get. This is immediately obvious from any statistical comparison ofthe two wars, such as one that was published by a Russian statistician in the last days of the old Soviet Union and...

War finance Barro versus Ramsey

Conventional wisdom has for a long time accepted almost unconditionally that German war finance was based far less on taxes than Britain's and was, hence, less sound and more prone to inflation. Faced with an adverse productivity shock of major proportions, an individual consumer has a strong incentive to smooth out consumption, be it through the depletion of stocks or through borrowing. This incentive is especially strong in the presence of a distortionary tax system, in which the government's...

Fiscal and financial management

War always causes the government to increase its expenditure and thus to seek the extra funding to finance that expenditure. The exceptional nature of the expansion in government expenditure has already been noted (see figure 7.1), and it required an exceptional fund-raising exercise by the government. A flavour of the situation is illustrated by the response of the usually conservative Economist to the September 1915 budget (the third war budget but the first to properly acknowledge the scale...

War losses human and physical capital

In table 8.20 I cite the estimates made by the Soviet demographer Volkov of the number of Russian casualties during the war. Cumulatively Russia lost around 1.45 million men, who were either killed on the battlefield or died from wounds and poison gas. Added to these were Table 8.20. Russia numbers of military casualties, 1914-1917 (thousands) Table 8.20. Russia numbers of military casualties, 1914-1917 (thousands) Source Volkov (1930 54, 56, 59, 60, 68). Prisoners of war are those held in...

Introduction

Italy had long nursed the ambition to complete its national unification by annexing the territories held by Austria around Trento and Trieste before the Great War.1 Yet Italy's diplomacy and armed forces reached war unprepared. It will be argued in this chapter that this reflected international constraints as well as domestic political and social forces before 1914, and it will be shown how these influenced the Italian war effort. As an economic power Italy is most easily compared with the...

Conclusion the war and postwar growth

Sauvy (1984) gives figures for the aggregate cost ofthe war. Human losses relative to population are among the most important in all participating countries. In France, 1.31 million men were killed, and 1.1 million were severely wounded with permanent work incapacity. The existence of 600,000 widows and 750,000 orphans created enormous pension costs (2-3 per cent of GDP during most of the interwar period), the legitimacy of which was sometimes questioned (as in the case of the 900,000 parents...

Russian national income estimates

Estimates of Russian national income in 1913 derive from two main sources. The first estimate was made by S.N. Prokopovich in 1918. Prokopovich derived 'net material product' by calculating volumes of output for agriculture, forestry, fishing, and hunting, large-scale and small-scale industry, construction, transport, communications, and trade. In a subsequent study, Falkus revised Prokopovich's estimates upwards, partly to take account of the actual grain harvest and of prices prevailing in...

Italian GDP during World War I

One problem which confronts anyone attempting to write an economic history of Italy during World War I is the state of the Italian historical national accounts.2 The original estimates were produced by the official Istituto Centrale di Statistica in the 1950s (ISTAT, 1957), and although clearly a major scientific achievement, they also have a number of major shortcomings. As Cohen and Federico (2001 8) note, the accounts lack key series such as constant price estimates of sectoral output, give...

Commercial warfare

Around 1910, 50 per cent of the GDP of the Netherlands was made up of exports. The country was very much dependent on the free trade of raw materials, colonial goods, and finished products. During the First World War the measures taken by the belligerent countries to prevent trading with the enemy had a major impact on the levels of commerce and domestic output in the Netherlands. The Allied blockade, the German U-boat campaign, and finally the requisitioning of Dutch vessels by the Allies in...

Costs of the war

Bogart's study of direct and indirect costs At the end of World War I, a number of attempts were made to quantify the costs of the war. As dilward (1984 9 27) points out, this literature reflected a liberal tradition that saw warfare as having entirely negative effects, and did not perceive any positive changes initiated or accelerated by the war. It will be useful to review Bogart's (1920) study of the costs of World War I in some detail, since it was carried out as part of the important...

Macroeconomic policy

The war involved a massive budgetary effort. Public spending increased suddenly from 10 to 50 per cent of GDP (table 6.8), most of it in the form of military spending soldiers' pay, army provisioning (food, armaments, and ammunitions, etc). Government consumption rose from 2-3 per cent before the war to a maximum of 22 per cent in 1916, when government investment decreased. In the short term, the conviction that the war would be short-lived led to an increase in short-term borrowing through...

Allies incomplete campaign

Given the state of mind of Germany's public, it can be argued that President Wilson's Fourteen Points and the Treaty of Versailles offered a peace arrangement that was too lax and too strict at the same time. It was too lax because it left the task of uprooting the elites supporting the Kaiser and his armies undone. It was too harsh because it attempted an economic ersatz warfare against Germany instead. The underlying problem of the peace arrangement was that the outcome of the war in 1918 was...

Assessments and aftermath

One interpretation attributes Russia's shortcomings during the First World War to policy makers' neglect of economic organisation and their mishandling of conversion to a war economy The mobilization took from the factories those who were essentially needed for the conduct of the war. The only ports left were inadequately equipped for the indispensable imports. The railway system broke down by the end of the first year, and railway repair shops were converted into munition factories. All output...

Russian GDP in World War I

Against this background I attempt to examine the behaviour of Russia's GDP in 1913-18. The only estimate of national income in wartime was compiled in 1918 by the eminent Russian economist S.N. Prokopovich see table 8.1 . The underlying observations are neither secure nor very extensive. Prokopovich computed his index for industry by tracing output per person in the Donbass coal industry and derived his index of 'agricultural productivity' from estimates of the sown area in forty-five provinces...

Financing the war

Table 10.3 shows the sources of finance for the war broken into four components taxation, borrowing from the public, direct money creation, and indirect money creation. Taxation and borrowing are familiar terms. I shall discuss some of the details concerning them below. Direct money creation, as Friedman and Schwartz define it, is the number of deposits and amount of currency created by the Federal Reserve System. This money was used either by the public as currency or by the banks as reserves,...

The production of munitions

How well did the American economy perform the ultimate job of supplying the American armed forces and those of America's Allies with the weapons of war There has been a tendency in the literature to stress the negative side of the picture. Our Allies produced most of the artillery used by American forces in France. Less than a quarter of the aircraft used by American pilots at the front were ofAmerican manufacture. It was hard to find an airplane in which to use the much ballyhooed Liberty...

The costs of war to the Habsburg Empire

Quantifying the costs of World War I is a difficult task on both conceptual and empirical grounds. In the case of Austria-Hungary, one type of'cost' stands out apart from the horrendous loss of human life the empire's dissolution and territorial division among successor states. Evidently, this was not only of political but also of economic significance, for it effectively meant the undoing of much of the cross-regional market integration that had underpinned growth and development over the...

References

J. 1996 , 'Accounting for Economic Growth in the Netherlands since 1913', Economic and Social History in the Netherlands 7 199-242. Bie, R.J. van der 1995 , Een doorlopende groote roes. De economische ontwikkeling van Nederland, 1913-1921, Amsterdam Thesis Publishers. Bordewyk, H. W. C. 1928 , 'War Finances in the Netherlands, 1908-1922 The Costs of the War', in The Netherlands and the World War, Studies in the War History of a Neutral, vol. IV, New Haven, CT Yale...