What is the economic history of WW1?
The economic history of World War I covers the methods used by the First World War (1914–1918), as well as related postwar issues such as war debts and reparations.
How did the government raise money for WW1?
In 1863 the U.S. Congress created a national banking system in order to raise money to finance the American Civil War, and since then bonds have been used to finance other wars as well. After the United States entered World War I in April of 1917, the U.S. Treasury Department borrowed money using a series of bond issues.
How much did the US borrow after WW1?
WORLD WAR I WAR DEBTS. During and immediately after World War I, America's cobelligerents borrowed some $10.350 billion ($184.334 billion in 2002 dollars) from the U.S. Treasury.
How much do World War I veterans get paid?
World War I Veterans' Benefits Continue To Be Paid 100 Years After Fighting Began. Even today, one daughter of an American Civil War soldier who died in 1938 receives a pension of $73.13 a month and veterans’ benefits are still paid to 16 widows and children of soldiers who fought in the three-and-a-half-month-long Spanish-American War of 1898.
How did the Second War Loan work?
The success of the Second War Loan meant that additional long term gilts did not need to be issued for about 18 months, and the cost of the war was financed through 1916 by the issue four classes of short term "Exchequer Bonds". These were the 5% Exchequer Bond 1920 (1920 being the year the Government was to repay the borrowing) - this was first issued in December 1915 and closed in June 1916. A total of £205 million was raised by this issue.
What was the interest rate on the Second War Loan?
The Second War Loan was issued in June 1915. Offering interest at 4.5% (but with no discount) it offered a superior yield to the First War Loan and was also firmly aimed at smaller investors from the broader population. It was possible to purchase this in multiples of £5 (and vouchers for 5 shillings, 10 shillings and £1 were issued). Because of the superior return, the Government conceded that holders of the First War Loan - and other gilts - could convert their holdings into this Second War Loan.
What was the 3rd war loan?
The success of the Third War Loan did not stop the Government from needing to receive continuing inflows of money, so in April 1917 a new Exchequer Bond (5%, repayable between 1919 and 1922) was launched. Despite being on offer for five months, these did not prove to be popular, and they raised less than £80 million. It was therefore decided to offer a new type of bond, which could be bought "over the counter" at high street banks - these were National War Bonds.
What was the end of the war in 1916?
Whether it was the failure of the Battle of the Somme to provide a decisive victory, or realisation that the war was going to grind on for some considerable time yet, can't be known, but by the end of 1916, it was becoming obvious that a major new loan would have to be raised by the Government to finance the war.
Who was responsible for the beginning of World War I?
World War I’s victors blamed Germany for beginning the war, committing horrific atrocities and upending European peace with secretive treaties. But most embarrassing of all was the punitive peace treaty Germany had been forced to sign. The Treaty of Versailles didn’t just blame Germany for the war—it demanded financial restitution for ...
How did Germany finance the war?
Germany had suspended the gold standard and financed the war by borrowing. Reparations further strained the economic system, and the Weimar Republic printed money as the mark’s value tumbled. Hyperinflation soon rocked Germany. By November 1923, 42 billion marks were worth the equivalent of one American cent.
What was the Dawes Plan?
In 1924, the Dawes Plan reduced Germany’s war debt and forced it to adopt a new currency. Reparations continued to be paid through a strange round robin: The U.S. lent Germany money to pay reparations, and the countries that collected reparations payment used that money to pay off United States debts.
What happened after the Treaty of Versailles?
After the Treaty of Versailles called for punishing reparations, economic collapse and another world war thwarted Germany's ability to pay. At the end of World War I, Germans could hardly recognize their country. Up to 3 million Germans, including 15 percent of its men, had been killed. Germany had been forced to become a republic instead ...
What was the equivalent of 100,000 marks in 1920?
During a period of hyperinflation in 1920s Germany, 100,000 marks was the equivalent one U.S. dollar. Bettmann Archive/Getty Images. Finally, the world mobilized in an attempt to ensure reparations would be paid. In 1924, the Dawes Plan reduced Germany’s war debt and forced it to adopt a new currency.
What was the Young Plan?
The Young Plan involved a reduction of Germany’s war debt to just 121 billion gold marks. But the dawn of the Great Depression ensured its failure and Germany’s economy began disintegrating again. In an attempt to thwart disaster, President Herbert Hoover put a year-long moratorium on reparation payments in 1931.
When did Germany pay off its reparations debt?
Still, it took decades for Germany to pay off the rest of its reparations debt. At the London Conference, West Germany argued it shouldn’t be responsible for all of the debt the old Germany had incurred during World War I, and the parties agreed that part of its back interest wouldn’t become due until Germany reunified. Once that happened, Germany slowly chipped away at the last bit of debt. It made its last debt payment on October 3, 2010—the 20th anniversary of German reunification.
How much did Germany pay for the war?
The Treaty of Versailles (signed in 1919) and the 1921 London Schedule of Payments required Germany to pay 132 billion gold marks (US$33 billion [all values are contemporary, unless otherwise stated]) in reparations to cover civilian damage caused during the war.
When did West Germany pay its debts?
The final payment was made on 3 October 2010, settling German loan debts in regard to reparations.
Why were reparations cancelled in Bulgaria?
Because of the financial situation in Austria, Hungary, and Turkey after the war, few to no reparations were paid and the requirements for reparations were cancelled. Bulgaria, having paid only a fraction of what was required, saw its reparation figure reduced and then cancelled.
Why did France occupy the Ruhr?
Due to the lack of reparation payments by Germany, France occupied the Ruhr in 1923 to enforce payments, causing an international crisis that resulted in the implementation of the Dawes Plan in 1924. This plan outlined a new payment method and raised international loans to help Germany to meet its reparation commitments. Despite this, by 1928 Germany called for a new payment plan, resulting in the Young Plan that established the German reparation requirements at 112 billion marks ( US$26.3 billion) and created a schedule of payments that would see Germany complete payments by 1988. With the collapse of the German economy in 1931, reparations were suspended for a year and in 1932 during the Lausanne Conference they were cancelled altogether. Between 1919 and 1932, Germany paid less than 21 billion marks in reparations.
What did the Germans see in reparations?
The German people saw reparations as a national humiliation ; the German Government worked to undermine the validity of the Treaty of Versailles and the requirement to pay. British economist John Maynard Keynes called the treaty a Carthaginian peace that would economically destroy Germany. His arguments had a profound effect on historians, politicians, and the public at large. Despite Keynes' arguments and those by later historians supporting or reinforcing Keynes' views, the consensus of contemporary historians is that reparations were not as intolerable as the Germans or Keynes had suggested and were within Germany's capacity to pay had there been the political will to do so. Following the Second World War, West Germany took up payments. The 1953 London Agreement on German External Debts resulted in an agreement to pay 50 per cent of the remaining balance. The final payment was made on 3 October 2010, settling German loan debts in regard to reparations.
Why did Austria pay no reparations?
Because Austria was "so impoverished" after the war, and because of the collapse of the Bank of Vienna , the country paid no reparations "beyond credits for transferred property". Likewise, Hungary paid no reparations beyond coal deliveries because of the collapse of the Hungarian economy.
How much did Bulgaria pay in reparations?
Between the signing of the Treaty of Neuilly-sur-Seine and April 1922, Bulgaria paid 173 million gold francs in reparations. In 1923, the Bulgarian reparation sum was revised downwards to 550 million gold francs, "plus a lump sum payment of 25 million francs for occupation costs".
What was the impact of World War 1 on the US?
The outbreak of World War I found the United States unprepared for the enormous strains the war would place on its fiscal system. When the guns finally fell silent in 1918, the United States had embraced a significantly different tax system, seen its government assume a dramatically enlarged place in the financial affairs of its citizens, and changed from an international debtor to an international creditor nation.
What were the taxes on excess profits in 1918?
In addition, businesses were required to pay excess profits taxes on net income exceeding 7 to 9 percent of invested capital as measured during a three-year prewar period. These rates were graduated from 20 to 60 percent in 1917, reaching a theoretical cap of 80 percent in 1918. Taxes on excess corporate profits accounted for more than half of all monies collected in 1918. Between individual and corporate taxes, the Wilson administration was successful in obtaining financial support for the war from America's most affluent families. The richest 22 percent of U.S. taxpayers contributed 96 percent of all individual tax receipts in 1918. Also to tap the assets of the wealthy, Congress introduced a new and steeply graduated estate tax and imposed excise duties on automobiles, jewelry, cameras, motor boats, and yachts.
Why was the bond campaign flawed?
Nevertheless, the bond campaign was flawed. The social pressure compelling citizens to purchase was often heavy handed, echoing Wilson's infringement of freedom of speech and his mistreatment of conscientious objectors. Most significantly, the Federal Reserve System encouraged its member banks to lend money freely for the purchase of war bonds. This was the equivalent of the government printing money, and because of it the Wilson administration failed to meet its goal of financing half the cost of the war through taxes. The increased money supply was also rampantly inflationary and prices doubled by 1918 despite an ill-fated attempt at price control.
Why did the Federal Reserve encourage its member banks to lend money freely for the purchase of war bonds?
This was the equivalent of the government printing money, and because of it the Wilson administration failed to meet its goal of financing half the cost of the war through taxes.
What was the standard tax rate in 1917?
Personal exemptions to individual income taxes were reduced to $1,000 for a single person and $2,000 for a married couple, above which a standard tax was imposed—2 percent in 1917 and 12 percent in 1918. To these were added surtaxes ranging from 1 percent for incomes above $5,000 to 65 percent for incomes above $1,000,000.
What was the Revenue Act of 1916?
The Revenue Act of 1916 and its companion measures, the War Revenue Acts of 1917 and 1918, differed in detail but not in philosophy. They imposed more steeply graduated income taxes, thus pursuing a redistributive, soak-the-rich policy.
What was the financial decision facing the nation as it confronted?
The financial decision facing the nation as it confronted. the prospect of mobilization was whether to expand the income tax dramatically or to attempt a substantial broadening of the sin taxes. If duties were imposed on a much wider range of consumer commodities, the effect would be to establish a national sales tax.
How much did the UK pay in interest in the Great War?
The government estimates it has paid £1.26 billion in total interest since 1927. Still, the Great War is estimated to have cost the UK around £3.25 billion. Britain can now refinance the 4% Consuls at more favorable terms to the taxpayer, and so it will pay off a tiny amount of its total debt in February—for the first time in 67 years.
Who proposed that the US lend money to Germany to fund its reparation payments to France and the UK?
So the solution to this was brokered by the future US vice-president Charles Dawes, who in 1924 proposed that the US lend money to Germany to fund its reparation payments to France and the UK, who in turn would use the money to repay their war debts.
How long did Hitler's debt last?
Following the Great Depression in 1929, Germany’s debt was cut to 112 billion marks, payable over a period of 59 years. Not that it mattered—Hitler suspended reparation repayments in 1933.
What was the reparation clause in the Treaty of Versailles?
The reparations were part of many humiliating clauses imposed by the Treaty of Versailles following Germany’s defeat in 1918, mainly by France, which suffered so much during the war and was also fearful that without the weight of such repayments, Germany would rise again quickly as a military power and attack it.
What was the lesson of World War 2?
One of the lessons of World War Two was the consequences of lumbering a losing nation with huge debts. ”After WWII, they decided to hang the leaders but not to punish the nation,” Mark Harrison, an economics professor at University of Warwick, told the BBC . ”But in WWI, it was the other way around.”.
When did the 4% consulates get repaid?
Incredibly, because the 4% Consuls were used to refinance even older debt, some of the debt being repaid in early 2015 goes as far back as the 18th century.
When did Germany pay off its debts?
In 1953, following the end of the Second World War, West Germany agreed at a conference in London to pay off its debts from before World War II, and in return was allowed to wait until reunification before paying €125 million in outstanding interest owed from 1945-1952. In 1990, the Berlin wall fell and Germany started paying off ...
How much does Florence Van Valkenburgh Ellenberger get paid?
Yet today, as the 104-year-old widow of a World War I veteran, Florence Van Valkenburgh Ellenberger personifies one of the war’s monetary costs, albeit a small one: She receives a monthly allotment of $1,100, part of the $16.1 million that the U.S. government still pays in World War I pensions annually, though the war was fought a century ago and its last veteran died in 2011. Of the more than 67 million military personnel with the Allied Forces and the Central Powers who fought in WWI, about 10 million died. Ellenberger isn’t sure of her husband Forreste’s role because he rarely spoke about it, she said.
Who gets pensions for spouses of veterans?
Pensions are paid to spouses of veterans, provided the spouse has not remarried, and any children of the veteran who are under 18, or under 23 if attending a school approved by the Veterans Administration .
How much money did the Allies spend on the war?
Among the Allies, Britain and its Empire spent $47 billion and the U.S. $27 billion (America joined after the war started) while among the Central Powers, Germany spent $45 billion. Total war demanded total mobilization of all the nation's resources for a common goal.
What is the economic history of World War I?
Aspect of history. British poster encouraging investment in war bonds. The economic history of World War I covers the methods used by the First World War (1914–1918), as well as related postwar issues such as war debts and reparations. It also covers the economic mobilization of labor, industry, and agriculture leading to economic failure.
What countries played a major role in World War I?
The Commonwealth nations and India all played major roles. The Asian and African colonies provided large numbers of civilian workers, as well as some soldiers. The Indian Army during World War I contributed a large number of divisions and independent brigades to the European, Mediterranean and the Middle East theatres of war. Over one million Indian troops served overseas,, of whom 62,000 died and another 67,000 were wounded.
What was the cause of the civil war in Ireland?
Ireland was on the verge of civil war in 1914 after Parliament voted a home rule law that was intensely opposed by Unionists , especially those in Ulster. When the war broke out the law was suspended and Protestants gave very strong support for the war in terms of military service and industrial output.
What was the main issue in the British war effort?
Energy was a critical factor for the British war effort. Most of the energy supplies came from coal mines in Britain, where the issue was labour supply . Critical however was the flow of oil for ships, lorries and industrial use. There were no oil wells in Britain so everything was imported. The U.S. pumped two-thirds of the world's oil. In 1917, total British consumption was 827 million barrels, of which 85 percent was supplied by the United States, and 6 percent by Mexico. The great issue in 1917 was how many tankers would survive the German u-boats. Convoys and the construction of new tankers solved the German threat, while tight government controls guaranteed that all essential needs were covered. An Inter-Allied Petroleum Conference allocated American supplies to Britain, France and Italy.
How did the Western Front stabilize?
Since the front was highly stable, both sides built elaborate railway networks that brought supplies within a mile or two of the front lines , with horse-drawn wagons used for the final deliveries. In the ten-month battle at Verdun, the French and Germans fired some 10 million shells in all, weighing 1.4 million tons of steel.
What were the advantages of the war in 1914?
The longer the war went on, the more the advantages went to the Allies, with their larger, deeper, more versatile economies and better access to global supplies.
Overview
Evolution of reparations
The Treaty of Versailles stated that a Reparation Commission would be established in 1921. This commission would consider the resources available to Germany and her capacity to pay, provide the German Government with an opportunity to be heard on the subject, and decide on the final reparation figure that Germany would be required to pay. In the interim, Germany was required t…
Background
In 1914, the First World War broke out. For the next four years fighting raged across Europe, the Middle East, Africa, and Asia. On 8 January 1918, United States President Woodrow Wilson issued a statement that became known as the Fourteen Points. In part, this speech called for Germany to withdraw from the territory it had occupied and for the formation of a League of Nations. During t…
German reaction
In February 1919, Foreign Minister Count Ulrich von Brockdorff-Rantzau informed the Weimar National Assembly that Germany would have to pay reparations for the devastation caused by the war, but would not pay for actual war costs. After the drafting of the Treaty of Versailles on 7 May that year, the German and Allied delegations met and the treaty was handed over to be translated and for a res…
Analysis
During the period of reparations, Germany received between 27 and 38 billion marks in loans. By 1931, German foreign debt stood at 21.514 billion marks; the main sources of aid were the United States, Britain, the Netherlands, and Switzerland. Detlev Peukert argued the financial problems that arose in the early 1920s, were a result of post-war loans and the way Germany funded her war ef…
See also
• Aftermath of World War I
• Legal remedy
• Restitution
• Reparation (legal)
• Reparations
Notes
1. ^ Henig 1995, p. 63.
2. ^ Simkins, Jukes & Hickey 2003, p. 9.
3. ^ Tucker & Roberts 2005, p. 429.
4. ^ Fourteen Points Speech
Further reading
• Gomes, Leonard. German Reparations, 1919-1932: A Historical Survey (Springer, 2010). online
• Lloyd George, David (1932). The Truth About Reparations and War-Debts. London: William Heinemann Ltd.
Prewar Taxes
- Before 1914, the American government had customarily received much of its income from the tariff. After wartime conditions shrank foreign imports, the duties collected on "vices" such as alcohol and tobacco products, cosmetics, and playing cards eclipsed the tariff as the largest source of revenue. The adoption of the Sixteenth Amendment in 1913 had legalized the income …
The Income Tax
- Progressives in Congress had long hoped to use Congress's taxing power to reduce economic inequity by taxing the wealthy. In 1916, when President Woodrow Wilson asked for funds to support military preparedness, they saw their chance. Since many Progressives were opponents or only half-hearted supporters of war preparedness, they demanded an expansion of the incom…
War Bonds
- Wilson's policies were less effective in reaching the great resources of the middle classes. Treasury Secretary William G. McAdoo orchestrated an elaborate and innovative campaign intended to prod Americans of average means to furnish financial support to the war effort by emphasizing the voluntary purchase of war bonds. Appealing to what he termed America's "prof…
War Bonds
- Bonds are a form of interest-incurring loans and are sold through commercial banks. In 1863 the U.S. Congress created a national banking system in order to raise money to finance the American Civil War, and since then bonds have been used to finance other wars as well. After the United States entered World War Iin April of 1917, the U.S. Treasury D...
Helping The Allies
- As the financier of its European allies, Uncle Sam fared much better. Prior to the war, Britain had dominated international trade, but German submarines among other things ensured that this was no longer possible. The United States moved to replace Britain as purveyors to Latin Americaand as the dominant world shipping power. Whereas in 1914 the United States was a net internation…
Bibliography
- Brownlee, W. Elliot. Federal Taxation in America: A Short History. New York: Woodrow WilsonCenter Press, 1996. Gilbert, Charles. American Financing of World War I.Westport, CT: Greenwood, 1970. Kennedy, David M. Over Here: The First World War and American Society. New York: Oxford UniversityPress, 1980. Schaffer, Ronald. America in the Great War: The Rise of the …