Economic history of World War I

As Stephen Broadberry and Mark Harrison conclude, once stalemate set in late in 1914: "The greater Allied capacity for taking risks, absorbing the cost of mistakes, replacing losses, and accumulating overwhelming quantitative superiority should eventually have turned the balance against Germany".

Manpower had to be channeled into the front lines (all the powers except the United States and Britain had large trained reserves designed just for that).

Agriculture had to provide food for both civilians and for soldiers (some of whom had been farmers and needed to be replaced by women, children and the elderly who now did the work without animal assistance) and for horses to move supplies.

[3] Gross domestic product (GDP) increased for three Allies (Britain, Italy, and the U.S.), but decreased in France and Russia, in the neutral Netherlands, and in the three main Central Powers.

The financing was generally successful,[10] as the City's strong financial position minimized the damaging effects of inflation, as opposed to much worse conditions in Germany.

Convoys and the construction of new tankers solved the German threat, while tight government controls guaranteed that all essential needs were covered.

The introduction of convoys as an antidote to the German U-boats and the joint management system by Standard Oil and Royal Dutch/Shell helped to solve the Allies' supply problems.

In January 1918, the U.S. Fuel Administrator ordered industrial plants east of Mississippi to close for a week to free up oil for Europe.

[20] 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.

[27] Billy Hughes, prime minister from October 1915, expanded the government's role in the economy, while dealing with intense debates over the issue of conscription.

He says the war turned a peaceful nation into "one that was violent, aggressive, angst- and conflict-ridden, torn apart by invisible front lines of sectarian division, ethnic conflict and socio-economic and political upheaval.

London provided assurances that it would underwrite the war risk insurance for shipping in order to allow trade amongst the Commonwealth to continue in the face of the German U-boat threat.

[31] Inflation became a factor as consumer prices went up, while the cost of exports was deliberately kept lower than market value in an effort to prevent further inflationary pressures worldwide.

the average weekly wage during the war was increased by between 8–12 per cent, it was not enough to keep up with inflation and as a result there was considerable discontent amongst workers, to the extent that industrial action followed.

Belgium was heavily industrialized; while farms operated and small shops stayed open some large establishments shut down or drastically reduced their output.

[43] Neutral countries led by the United States set up the Commission for Relief in Belgium, headed by American engineer Herbert Hoover.

The Union Minière du Haut Katanga company dominated the copper industry, exporting its product along a direct rail line to the sea at Beira.

Before the war the copper was sold to Germany and, in order to prevent loss of capacity, the British purchased all the Congo's wartime output with the revenues going to the Belgian government in exile.

The Anglo-Dutch firm Lever Bros. greatly expanded the palm oil business during the war and there was an increased output of cocoa, rice and cotton.

A show of national unity had accompanied Russia's entrance into the war, with defense of the Slavic Serbs the main battle cry.

The initial conscription was well organized and peaceful, and the early phase of Russia's military buildup showed that the empire had learned lessons from the Russo-Japanese War.

Because of inadequate material support for military operations, the War Industry Committees were formed to ensure that necessary supplies reached the front.

Food shortages increasingly impacted urban areas, caused by military purchases, transportation bottlenecks, financial confusion, and administrative mismanagement.

Discontent was high in rural areas since so many men were taken for service, industrial jobs were unavailable, wages grew slowly and inflation was just as bad.

The solution included nationalizing the coal mines and the railroads for the duration, shutting down factories one day a week to save fuel, and enforcing a strict system of priorities.

The army set prices and wages, gave out draft exemptions, guaranteed the supply of credit and raw materials, limited patent rights, and supervised management–labor relationships.

[72] Total spending by the national government reached 170 billion marks during the war, of which taxes covered only 8%, and the rest was borrowed from German banks and private citizens.

Causes involved the transfer of many farmers and food workers into the military, an overburdened railroad system, shortages of coal, and the British blockade that cut off imports from abroad.

The strong agriculture and food industry of the Kingdom of Hungary with the centre of Budapest became predominant within the empire and made up a large proportion of the export to the rest of Europe.

[94][95][96] In addition to this the opening of Panama Canal in 1914 caused a severe drop in traffic along Chilean ports due to shifts in the maritime trade routes.