Finances of the War | Events & Statistics | Articles & Essays | Newspaper Pictorials: World War I Rotogravures, 1914-1919 | Digital Collections | Library of Congress (2024)

FAQs

What were the finances of ww1? ›

Rockoff estimates the total cost of World War I to the United States at approximately $32 billion, or 52 percent of gross national product at the time. He breaks down the financing of the U.S. war effort as follows: 22 percent in taxes, 58 percent through borrowings from the public, and 20 percent in money creation.

Among the Allies, Britain and its Empire spent $47 billion and the U.S. $27 billion (the U.S. joined after the war started) while among the Central Powers, Germany spent $45 billion.

Major powers in 1914–18 financed their war efforts largely via government bonds, some issued through major merchant banks, some through government-run institutions. And governments could also print money on their own. WW1 indeed showed exactly how much governments could organize and control national economies.

Almost exactly two-thirds of the war funds came from bonds and one-third from taxes. This was a time when $17 billion was an almost unthinkably large number; an equal share of gross domestic product today would amount to $3.6 trillion.

A private serving in WWI earned $30 a month. His food, clothing and things like soap, toothpaste etc. were covered by the military. The starting pay comes out around $550 a month in 2018 dollars.

During WWI, economic growth continued and even accelerated as the United States mobilized for the war in Europe. After the war ended in November 1918, the global economy began to decline. Between 1916 and 1921, the U.S. economy experienced two recessions.

Perhaps one clear winner did emerge from the conflict, however: the United States. The US sold materials and lent money to the Allies during the war and, as a result, amassed gold reserves that underpinned its post-war global economic dominance, while other countries were gripped in an inflationary spiral.

Though it lasted fewer than four years, World War II was the most expensive war in United States history. Adjusted for inflation to today's dollars, the war cost over $4 trillion and in 1945, the war's last year, defense spending comprised about 40% of gross domestic product (GDP).

After the Treaty of Versailles called for punishing reparations, economic collapse and another world war thwarted Germany's ability to pay.

Why was the US so rich after ww1? ›

Increased foreign investment was not the only sign of growing American economic power. By the end of World War One, the United States produced more goods and services than any other nation, both in total and per person. Americans had more steel, food, cloth, and coal than even the richest foreign nations.

Increasing diplomatic tensions between the European great powers reached a breaking point on 28 June 1914, when a Bosnian Serb named Gavrilo Princip assassinated Archduke Franz Ferdinand, heir to the Austro-Hungarian throne. Austria-Hungary held Serbia responsible, and declared war on 28 July.

The Government also raised money by selling "Liberty Bonds." Americans bought the bonds to help the Government pay for the war. Later, they were paid back the value of their bonds plus interest.

The main economic consequence during and at the end of WWI was the loss of money and resources on both sides. The countries involved had to invest many resources in weapons, strengthen their armies, and the developing new technological advantages. Before the war, Germany had emerged as a new industrial power.

The Treaty of Versailles didn't just blame Germany for the war—it demanded financial restitution for the whole thing, to the tune of 132 billion gold marks, or more than $500 billion today. How—and when—could Germany possibly pay its debt? Nobody could have dreamed that it would take 92 years.

The European liquidation of American securities in 1914 (also called the financial crisis of 1914) was the selloff of about $3 billion (equivalent to $91.26 billion in 2023) of foreign portfolio investments at the start of World War I, taking place at the same time as the broader July Crisis of 1914.

The United States War Revenue Act of 1917 greatly increased federal income tax rates while simultaneously lowering exemptions. The 2% bracket had previously applied to income below $20,000. That amount was lowered to $2,000. The top bracket (on income above $2 million) was raised from 15% to 67%.