On 20 February 1915, while recuperating in hospital, he was captured by the German Army and spent the rest of the war in a POW camp in Silesia.

During the spring of 1919, after a string of victories over the Red Army, Balodis was given command over larger units and eventually over the Southern Group of the armed forces.

After the conclusion of the Latvian War of Independence, the post of Commander-in-Chief was abolished in February 1921 and in July of the same year, Balodis asked to be discharged from the army.

Beginning in July 1933, Balodis held frequent talks with Kārlis Ulmanis about the need for the end of the multi-party system in Latvia.

During the following years of authoritarian, corporatist rule, Balodis could always be found next to Ulmanis, creating a perception of duumvirate, while in reality, his role was limited to military matters.

After the signing of the Soviet–Latvian Mutual Assistance Treaty on 5 October 1939, Latvia became a virtual protectorate of the Soviet Union without a shot being fired.

Tensions within the ruling circles increased to the point where on 5 April 1940, Balodis was relieved of all his posts without a clear official explanation.