Initially against unrestricted submarine warfare, he was persuaded to support it; the continuation of this policy caused the United States to declare war on Germany.

[6] During this period, he and other senior members of the naval command worked repeatedly to break monopolies in the shipbuilding industry, as a means to keep costs low and stable.

During the July Crisis that instigated World War I, Capelle was temporarily the acting state secretary, as Tirpitz was away at his summer home.

[11] In this capacity, he endorsed the "blank check" Kaiser Wilhelm II had extended to Austria-Hungary in the aftermath of the assassination of Archduke Franz Ferdinand by Serbian terrorists the previous month.

[12] With regard to the deepening crisis, Capelle stated that while "many swords will be rattled and much poisonous ink spilled, Europe will not tear itself to pieces over Serbia.

[14] In March 1916 Capelle was recalled to service and replaced Tirpitz, whose views on the naval war had become unpopular, as the State Secretary for the Navy.

Admiral Paul Behncke, who would later serve as Capelle's deputy, stated that, "In the Navy, the position of the RMA has become purely administrative, it no longer plays a leading role.

"[16] Though Capelle was initially opposed to unrestricted submarine warfare, a group of senior officers led by the commander of the High Seas Fleet, Admiral Reinhard Scheer, convinced Capelle to change his mind, who in turn worked to convince Wilhelm II to permit a return to unrestricted submarine warfare.

[18] Nevertheless, by February 1918, design work on the new class of battleships had ground to a halt, and Capelle could do nothing about it; by this far into the war, the U-boat arm had absorbed all of the limited production capabilities of the Navy.

His deputy, Paul Behnke, briefly replaced him but was also forced out due to his opposition to Scheer, who had by this time been promoted to the Seekriegsleitung (Chief of Naval Staff).