Word Count: 1899
Index
P.3 A.Plan of Investigation
P.3 B.Summary of Evidence
P.6 C.Evaluation of Sources
P.7 D.Analysis
P.10 E.Conclusion
P.11 F.Bibliography
A.Plan of Investigation
This investigation assesses the economic effects of World War I on the United States of America (USA). In order to fully understand the effects of World War I on the USA the investigation analyzes the role of the USA during the conflict and their late entry into the war. The investigation also discusses the impact of the USA lending money to European countries. The scope of the investigation are the direct economic consequences of World War I during the 1920`s and how these led to paradigm shifts which still exist in today’s societies. The sources used are historians’ accounts and economic data. Two of the sources used in the investigation, USA`s Great War by Robert Zieger and Great Depression in the USA written by Robert S. McElvaine, are then evaluated for their origin, purpose, value and limitations.
B.Summary of Evidence
World War I
Actively involved in World War I since 1914, even though their military action started in 1917. From 1915 the USA exported goods such as food and munitions to the allied powers.
October 1914 : the British government ordered 400,000 rifles from American manufacturers.
1913 – 1916 exports rose from $ 2 billion to $ 6 billion.
January 1915 : the Commercial Agency Agreement signed by the British government and the House of Morgan, facilitated cooperation between American munitions and arms makers and technical experts with the British government and allied ordnance. The House of Morgan acted as a dealmaker and oversaw this process.
The Commercial Agency Agreement led to the House of Morgan buying more than $3 Billion worth of goods for the allies between January 1915 and April 1917
The House of Morgan partnered with other financiers to eventually give over $ 0.5 billion of short term loans to the allies by 1917.
By 1917 the British utilizing public subscription loans, borrowed more than $ 2.7 billion. In March 1917 the British had fully exhausted their securities and gold reserves.
The cost of the First World War
|
|
Dead(millions) |
Financial cost (Pounds million) |
|
Britsh Empire |
0.947 |
6,418 |
|
French Empire |
1.400 |
5,200 |
|
Germany |
1.800 |
8,300 |
|
Austria-Hungary |
1.200 |
4,100 |
|
Russia |
1.700 |
5,060 |
|
USA |
0.116 |
2,600 |
|
Italy |
0.650 |
2,400 |
|
Serbia |
0.048 |
- |
Post World War I
Total farm income in the USA dropped from $22 billion in 1919 to $13 billion in 1928.
This overcapacity was fuelled by machinery becoming more efficient and leading to a higher output and the Fordney-Mccumber Tariff making imported goods heavily expensive, hence consumers buying local goods.
In the 1920`s the average American farmer was able to feed his own family and 14 others. Due to increased output and decreased demand, the price of wheat, oats, corn and potatoes fell by around 50 % , leading to many farm bankruptcies.
Approximately half of all Americans lived in rural areas, somehow tied to farming by either working on a farm or selling goods to farmers, hence the farming crisis affected more than 60 million Americans.
The techniques used in the First World War, to advertise and sell war bonds were used to sell mass produced goods. The “Buy now, pay later” program was introduced.
60% of all cars being bought on credit and 80% of all radios being bought on credit. The model of efficient car production was introduced by Henry Ford in 1913.
The Allies demanded reparation payments from Germany and from 1924 through the Dawes Plan.
1920`s : income was distributed very unevenly. Between 1923 and 1929, workers` wages increased by 8 % while the manufacturing output per person-hour increased by 32 %. Corporate profits increased by 65 %. This led to the two class system of entrepreneurs and blue collared workers. In 1926 the Revenue Act was introduced cutting the taxes on incomes over $1 million by two thirds, making the top 0.1 % in the USA as wealthy as the bottom 42 %.
C.Evaluation of Sources
America’s Great War written by Robert H. Zieger
America’s Great War written by Robert H. Zieger gives an insight into World War I and the American Experience. The author of the book is a Professor of History at the University of Florida widely known for his works either on international or domestic issues affecting American society and labour. He has been involved in the publication of eleven books all concerning the issue of labour in America which means he is an expert in this area. The value of this book for my investigation is that it is very concisely focused and extremely detailed. The book shows the effects of military, domestic, diplomatic and legislative aspects of the war, and its implications in a balanced way. However, its narrow focus can be seen also as a limitation because the book is deeply USA centred which means the international context is not considered.
Great Depression in the USA by Robert S. McElvaine
Great Depression in the USA written by Robert S. McElvaine is an overview of the Great Depression, featuring economic data. For this investigation only the “Causes of the Great Depression” section was used. The purpose of this section is to inform readers about the events leading up to and the course of the Great Depression chronologically. The author Robert S. McElvaine is a Professor of Arts and Letters and Chair of the Department of History at the Millsaps College, Mississippi and an expert in the field having also written The Great Depression: America, 1929-1941. Apart from that he has also written nine other history related books of which two have been chosen as “Notable Books of the Year” by the New York Times Book Review. The value of this source are that it includes a range of statistics that reflect the 1920`s in terms of the farming and private consumption market, hence macro-economic data which can be used to see trends in individual behaviour rather than data only applicable on large scale. The limitations of this source are that it factors out the global nature of the conflict and thereby the foreign effect on the statistics. Another limitation of source for my investigation is that it does not look at World War I itself, but rather events afterwards.
D.Analysis
The effects of World War I on the USA were significant, considering that many present day developments can be traced back to World War I . Due to the U.S.A holding back and maintaining neutrality until 1917, it gave them a key advantage over other countries. For one, the number of dead soldiers was when compared to other countries relatively low. While the British Empire had to suffer 0.947 million casualties and a financial cost of £ 6,418 million, therefore had the highest losses both in casualties and financially, the USA had to suffer 0.116 million casualties and a financial cost of £ 2.6 billion. This neutrality did not only save the lives of many U.S soldiers, but also prevented the U.S having to carry a financial burden similar to the one carried by other countries.
The U.S.A was a strategic partner of great importance for the allies already fighting the war. As the evidence shows, not only did the British borrow $ 2.7 billion in public subscription loans but the demand for American goods also tripled from $2 billion to $ 6 billion in 1916. The allies alone purchased $ 3 Billion of American goods between 1915 and 1917. This leads us to the conclusion, that the borrowed capital flowed back into the U.S. This meant great wealth for the U.S finance system due to the fact that the capital not only earned high interest rates, yet it also fuelled the industry. This flow of capital is responsible for economical paradigms still existing today such as the financial centre of the western world being located in New York rather than in London, as it was the case up until World War I. The historian William H. Glasson puts it like this “The people of the United States have all been profoundly affected in wealth and welfare during the past five years by caused growing out of the gigantic conflict between the nations of the world”.
The massive increase in foreign demand kick-started the American economy leading to an increase in local demand, which was then even increased by the Fordney-Mccumber Tariff which made imported goods heavily expensive, causing Americans to buy local goods. This led to capacity needing to be built up, which in return meant that the industrial production of goods was the only possible way to meet the demands .This led to the final establishment of the two class system of blue and white collared workers. This can statistically be proven, because the workers wages increased by 8 % during 1923 to 1929, while the productivity (manufacturing output per-person) increased by 32 %. Not even the bankruptcies of many farms, indirectly affecting half of all Americans could stop this dynamic.
An industrial elite also emerged in the USA post World War I. Due to corporate profits in this time span increasing by 65 %, and the decision by the government to cut taxes by 2/3 on incomes above $1 million , this made the top 0.1 % of the USA as wealthy as the bottom 42 % in 1929. Ultimately these developments not only caused for the gap between rich and poor to become infinitely large, but it also led into the “American way of life“ or the “American Dream”. As workers saw their bosses becoming wealthier, and also seeing what could be done with this wealth, they aspired to becoming equally wealthy. Due to excess capital being available, entrepreneurs could also find capital for their ventures, adding to this upswing dynamic by starting small businesses.
Another effect of World War I on the USA, was that the mass production of goods paired with the marketing techniques initially developed from selling warbonds and salesmen travelling around the country led to a pressure on the average consumer to consume. Due to the fact, that the new found macro economic wealth did not reflect in most workers salaries, many products could not have been sold, had there not been the “Buy now, pay later” idea. This led to 60% of all cars being bought on credit and 80% of all radios being bought on credit. The principle of loans, that had essentially made USA wealthy through lending money to European nations, were now a part in the daily lifestyle of an average American. This principle of living far beyond ones means, not only led to the Great Depression by creating debt which could not be financed any longer, but also to the consumption driven society still prevailing today.
E.Conclusion
The economic effects of World War I on the USA shaped the country as it is known today. Britain gave away the role as world power in order to take on loans that were needed to win the war and in return New York became the center of the financial world. While this shift might have taken place anyhow due to the increase in population size in the USA, World War I definitely accelerated this shift. In addition the consumption driven society based upon loans as it still exists today emerged from World War I.
Word Count: 1899
F.Works Cited
Collier, Martin, and Philip Pedley. Germany 1919-45. Oxford: Heineman Educational, 2000. 37-41.
Glasson, William H. Some Economic Effects of the World War. North Carolina: Raleigh Edwards & Broughton Printing Co., 1920.
McElvaine, Robert S. “Great Depression in the USA.” Encarta Online Encyclopedia. 2 Nov. 2008 <http://encarta.msn.com/encyclopedia_761584403_2/great_depression_in_the_united_states.html
Morris, Terry, and Derrick Murphy. Europe 1870 – 1991. 2nd ed. London: Harper CollinsPublishers Ltd, 2004. 183-83.
Tucker, Spencer C.. World War I : A Student Encyclopedia. Santa Barbara, CA: ABC-CLIO, 2005.
Walsh, Ben. Modern World History. London: Hodder Murray, 1996.