Download Geographical distribution of investments from three leading

Geographical distribution of investments from three
leading European economies in 1910 (USD billion)
British capital
French capital
German capital
Europe
0,9
5,4
4,2
America
8,8
0,9
2,4
Asia, Africa,
Oceania
6,9
2,0
1,7
Total
16,6
8,3
8,3
1
The peak of first globalization
-
openness to trade gradually decreased by rising protectionism
(neo-mercantilism), almost no extra-tariff barriers, lowering
transport costs level-off impact of rising tariffs
free capital flows under Gold Standard, developed capital
markets for government debt and stocks
free labour movement facilitated by declining transport cost
(especially after 1870); intercontinental flows but also big
migrations inside great Eurasiatic landmass
rising intergovernmental cooperation (Hague Conventions)
economic and social interpretations of roots of war: arms race
as solution to satisfy interests of big industry and junkers
(Prussian landed aristocracy), nationalism as means of
preserving national unity and solving internal problems in age of
mass society and labour movement; relative decline of Britain
due to spread of industrialization; relative rise of Germany and
the will of Weltpolitik
2
Changes in government gold reserves during
World War I (USD million)
States with
decreased
reserves
Scale of change
States with
increased
reserves
Scale of change
Germany
-599 United States
+1354
Austria-Hungary
-268 Japan
+891
Great Britain
-205 Spain
+409
France
-122 Argentina
+239
Italy
-93 Netherlands
+200
Romania
-34 Switzerland
+58
Belgium
-19 Sweden
+49
3
Debt of main warring states (USD billion)
Year
Great
Britain
United
States
Germany Italy
1914
3,4
6,5
1,2
3,0
1918
28,8
24,0
17,2
11,6
1921
37,2
57,4
19,7
17,9
4
World War I & militarization of the economy
- outbreak of war & common hopes for short end
(Schlieffen Plan) – lack of preparation for long-term
war effort on both sides
- British domination on seas – Central States cut off
from supplies – self-sufficiency & autarky, statesponsored robbery on conquered lands
- British dependence on overseas routes – reason for
unlimited submarine warfare
- rising prices of imports due to surging transport cost
- decline of world trade by one fourth/third – unknown
value, in fact
- U.S. neutrality contested from beginning by rising
asymmetry of their credit relations with belligerents
- exhausting of material resources & agricultural
production capacities - continuity of war effort thanks
to drastic reduction of private consumption
(malnutrition & starvation)
5
War economy – basic features
-
-
-
-
-
rapid growth of government expenditures from about 10% GDP in pre-war period (financing
mostly from US market – Entente, or by debt owed to citizens – Central States), shares in GDP:
UK 1916 – 37.1%, France 1917 – 49.9%, Germany 1917 – 59%
replacement of market mechanism by bureaucratic coordination (organization & supervision of
private businesses, food rationing, conscription, control of raw material supplies, state-owned
manufacturing)
new instruments of traditional state policy: quotas and prohibitions in trade policy, suspension of
gold convertibility & issuance of new paper money in monetary policy (rapid growth of money
supply – inflation partially hidden by price & wage controls, goods disappear from imbalanced
market)
separate offices and ministries for management of war economy
most liberal regime – UK, McKenna tariff 1915 – abandonment of free-trade policy, lasting after
the war; Defence of Realm Act; 1916/1917 – rising dependence from American supplies and,
above all, financial market; no food rationing
most restrictive regime – Germany, War Resources Department in Ministry of War, Walter
Rathenau, separate office for coal management, Hindenburg armament program 1916 – total
war, Kriegsamt for direct management of industrial enterprises, price & wage control, state
import monopoly, obligatory supplies in agriculture, food rationing organized by municipal
authorities in cities, corporatist self-governance of industry- supporting state policy)
6
Structural consequences of war
-
-
-
indebtedness of Entente states to USA (largest – France, hence
the strongest pressure on German reparation payments)
indebtedness of Central States to their own citizens
huge deflationary potential of return to Gold Standard
enlarged capacities in primary products (Latin America, part of
colonies and white dominions, also USA)
enlarged capacities of European heavy industry
creation of processing industries in traditional primary products
suppliers – inferior to European counterparts, hence need of
protection after the war (mostly Latin America)
new powers: USA (global leader), Japan (regional leader),
relative industrial & overall decline of Europe
economic disintegration of Central & Eastern Europe –
disputable (Polish case denies the thesis)
creation of new type of political & economic regime – Bolshevik
Russia
7