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The War Economy and the Rise of U.S
Introduction
The First World War and the wartime economy was the most devastating event that shook the whole world most governments thought that the war would be over by the Christmas of 1914 but it went on for four years. But what happened to the strongest economy in the history of mankind? Let us see how and what happened after the war to the world economy.
As you know, the World War was a power struggle between two sides The Allies − Britain, France, and Russia against the Central Powers − Germany, Austria, Hungary, and Ottoman turkey. Even though the world had witnessed many wars but this was the first in history that was fought with the latest warfare technology and by the most powerful countries in the world thus it was the first modern industrial war according to various statistics there were 9 million dead and 20 million injured. The dead were mostly of working age and most of them were the breadwinners of families their loss meant a reduction in the income of the household which eventually led to poverty.
During the war, the production of household items was drastically reduced.
Industries produced war-related goods like machine guns, explosives, and automobiles needed for compact.
The societies went into drastic change as men went into battle and their role was later carried on by women
The carefully interlinked countries who were once traders and business partners were now fighting with each other cutting their link.
The banker of the world Britain now borrowed large sums from the US for wartime production which transformed the U.S to a world debtor to a world creditor. As a result, US citizens owned the most overseas assets.
Resumption after the War
The post-war recovery of the world economy had its own difficulties. Britain, once the most surplus trader and financier of the world, was now in debt and its economy was one among the weakest in the world.
During the war, there were numerous changes that took place around the world and that affected Britain’s position in the world order which are as follows −
Industries developed in Japan and India which made Britain’s dominance over their economy on the weaker side because it could not compete with the new japan and Indian market.
The war had led to a large increase in production and employment but after the war, both decreased.
Britain tried to reduce the wartime expenditure so it could make it on par with the actual revenues but this proved to be fatal because this led to huge job losses and it is said that one in every five British citizens was unemployed
Before the war, Europe was the wheat bowl of the world but after the war Europe was found to be in a glut in wheat output which affected the income of households and the prices of grains.
The Rise of the U.S.; the Rise of Production and Consumption
When the whole world was struggling to stay on its feet only one country revived quicker than any other and that was The US. The recovery growth of the US was the strongest in the 1920s. Even though mass production was a feature of the 19th century it was the main pillar of the economy in the early 1920s.
Mass production in the US proved to be successful because -
The cost and prices of engineering goods were lower during this phase.
Due to higher wages, the disposable income of households increased they could now afford purchases like cars as a result car production rose to more than 5 million in 1929. And likewise, there was a rise in machinery like refrigerators, radios, and washing machines.
The system of hire purchase comes to play, where the buyer is not expected to pay the price of the products as a whole but they could do it in installments.
Conclusion
The ascend of the U.S. to be the leader of the world began. The boom in housing and consumerism was the basis for large investments creating a cycle of high employment and incomes raising the level of investment which then added to more employment again.
By 1923, the U.S. was the largest lender in the world and started to resume exporting capital before any other country. The U.S. imports and capital export created a platform for quicker European recovery
But all of this momentum was to be short-lived as the World economy was hit by a sudden speed breaker which was the Great Depression.
FAQs
Qns 1. What all did the war destroy economically?
Ans. The WW1 had many consequences and economic destruction was the main one in the following ways −
Trade and capital − both were increasing day by day between the end of the Napoleonic era and the beginning of the Great War and it was not until 1993 that the global economy would reach a proportion as it had attained by 1913 and the international capital was not by 1996.
The flow of people − the migration during the 19th century was the highest in the history of the world. if one had to move to another country he would have only wanted to bare the cost of travel and there was no barrier and the travel cost became cheaper and cheaper and there shall not be such a movement ever again.
Small government − The accepted standards of military outlay averaged 2 to 3 percent of the economy and currency should be fixed to gold post- war all these inhibitions were thrown away and now every country inflates their military spending more by each year.
Taxes − income taxes proved to be the largest revenue during the war and after the war, the US highest tax was 77% which was 7 % in 1913 and during ww2 the rates peaked at 94 percent in Us and 98% in Britain.
Regulation − the least intrusive government in Europe was Britain. But after the war, the government exercised its power more extensively than any other previous monarchies present in Britain. In no country did the control recede to pre-war levels. Not until the great depression.
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