we've done specials on individual nations
fighting this war and we have looked at micro economics
especially that of the central powers and especially their failures
in many regular episodes. But what was going on
on a macro level? How, for example, did
the allies finance their massive war economies?
Let's find out.
I'm Indy Neidell, this is a great war special episode
about the allied war economies in the first world war.
Now before we start,
this episode is sponsored by supremacy 1914.
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War time economics
can be a bit of an abstract topic, but supremacy 1914
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Anyhow,
1916, the year of battles,
had shown the allies that the stalemate
could not be broken by man power alone.
It was the battles of the Somme and Verdun
that kick started the western allies war economy. By war economy, I mean
the total mobilization of industries
and accumulation of resources to produce more shells,
more guns, more planes, simply more of everything
to beat the enemy through superior mechanical firepower.
However, winning the war
by out producing the central powers through economical superiority
was a dangerous gamble.
As it would strain the nations to the breaking point and expose their
vulnerability to debt and over extension.
In Britain, the control the British ministry of munitions
had over material and supply was greatly expanded
with David Lloyd George becoming first, secretary of state for war
in June 1916,
and then prime minister in December. The government
built its own national shell factories and took
full control of the rail and shipping systems.
This, of course, restrained the private sector and the government
further regulated the market by requisitioning
resources like iron, fertilizer,
glycerin, fax, and timber for the army.
The nation also had to reorganize
its agricultural output. Before the war
Britain was far more reliant on imports of food
than, say, Germany. And while
theoretically it could have been starved by the
German U-boat campaign, the agrarian economy was
able to adapt and be filled with prisoners of war,
while capital flowed through London. So by relying on
on imports from the dominions and trade with the U.S.
the mass production of armaments,
on a scale never before seen in history,
was possible.
In the last week of September 1918,
British artillery was battering the Germans
with 3.4 million rounds
a week. That was more than twice the opening barrage
of the Somme, and there were hundreds of thousands
of shells stock piled all over France.
Guns lost to, say, the German spring offensive
in 1918 were
unimportant in the sense that there were plenty of reserves.
If the war had lasted into 1919,
tank, aircraft, and even gas production
was to be easily doubled, tripled, or even
quadrupled. However,
economists were concerned.
Just keeping the pound on the gold standard,
was a battle in itself for the financiers of London.
Conservative party leader Bonar Law said
"our financial situation is was a source of great anxiety"
because of the sheer costs of the war.
By the end of 1917 Britain was buying
for the whole entente, 75 million U.S. dollars
worth of stuff a week. That's nearly 1.5
billion in today's money, per week,
and Britain's national debt was soaring.
And the income tax rate, that had been
doubled to 12 percent in late 1914,
would hit 30 percent in 1918
and it really was the whole empire that had been
economically mobilized. Indian wheat was shipped
on mass to Italy, half the shells for the
standard 18 pounder gun came from Canada.
And yet, it was nowhere near enough,
so dependency on the U.S. grew and grew.
In 1916, 45 percent of the
cost of the battle of the Somme had been paid for
by American investors and by the end of that year
a total of 2 billion dollars had financed the
entente war effort under the auspices of Wall Street
Mobil J.P. Morgan.
In 1917 and 1918
these numbers would continue to grow enormously.
But this was a dangerous gamble.
It did allow Britain to feed it's
population while also expanding it's arms production
but the complex system of loans and the tremendous
sums involved were making more and more
dangerously real the possibility of ruining the
empire, had the war dragged on
into 1919 or 1920.
But Wall Street was not only stabilizing the pound,
it was doing the same to the Franc and Lira as France and Italy
also transformed into war economies.
The French had fully focused on armaments
and maximized output and by mid 1918
they could produce over 1,400 rifles
per day, a 1,000 planes a week,
and 7 million shells for a 75
millimeter field gun a month. The mass production was
really advocated from the summer of 1916
when Philippe Petain became chief of staff. He believed
the only way to kick the Germans out of France
was by superior accumulation and
diversification of firepower.
A huge program of factory construction and
conversion was begun centered around Paris.
And by mid 1918, the French had over 5,000 heavy
and super heavy artillery pieces and
an armada of bombers, tanks,
and cars, and trucks.
But, like with the British, this caused
the national debt to skyrocket. With an all
or nothing mindset the government embarked on
massive deficit spending raising the income
tax was nowhere near enough to cover this.
Bond sales couldn't cover the loans and important to note here,
from the beginning France's economy
was at a disadvantage since the German
occupation from the beginning of the war
meant losing a huge percentage of coal and iron deposits.
France had a man power disadvantage as well, compared to Germany
and pressing ever more men
into service forced a reliance on imports. I mean
with all those men called up from the regular work
french exports were down 70 percent. Two thirds
of french farmers were called to the war
so France became dependent on American wheat.
And in the winter of 1917 - 1918
there was a shortage of food, oil and coal
as exports from the U.S. suddenly bogged down.
That lack of coal and oil meant real
problems keeping the train network, France's life line,
running properly. Coal stocks were down a tenth
of 1916 totals on some routes
and had Germany been able to put pressure
on for another winter the system may very
well have collapsed. The same story holds in
general for Italy who did make an impressive
transition into a war economy.
In terms of GDP Italy was
, I guess you could say, a second class power compared to
the allies. It's arms industry though, was not,
that was on par. For example, all
the heavy artillery pieces lost at Caporetto in late 1917,
they had all been replaced by
August 1918 with better more modern ones.
And throughout the war, Italy, could supply its
whole army solely with Italian made
weapons and ammunition. For this
they could thank the million men and tens of thousands of women
working in newly built privately owned
factories controlled and funded through the
industrial mobilization office. Problem is
to pay for all of this Italian banks
simply printed more currency so inflation
grew and the value of the Lira fell. Also
while steal, chemical, and automobile
output grew as well the infrastructure was
seriously weakened by constant use. On top of that
the supply situation in the North grew serious
when coal and food became scarce in late 1917.
This was, partly, because of the loss at Caporetto
that lost a lot of grain storage but also a
bad harvest didn't help and there were bread riots.
The police even feared for a revolution if
imports from overseas were somehow cut off.
So the Italian economy, too, was at its
absolute limit.
The coal and food crisis that final winter of the war
really showed how fragile the allied war
economies actually were. Heck in Britain they issued
food stamps because suddenly there was only enough
wheat to supply the country for six weeks.
The unrest in food lines was a politician's nightmare, I mean,
the specter of the Russian revolution sort of
colored their imaginations. The mounting debt,
the strain on national infrastructures, these brought
the coalition closer to losing the war
then is often perceived. Without the massive aid the U.S.
brought across the Atlantic: food, fodder,
copper, oil , and so on and without the
loans of billions of dollars from American bankers
, who were literally banking on victory,
the war economies of the western European allies would
not have been possible. And their overall economic
situation may well have ended up much closer
to that of the central powers.
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