is owned and operated by the Economic History Association
with the support of other sponsoring organizations.

Financing the First World War

Author(s):Strachan, Hew
Reviewer(s):Voth, Hans-Joachim

Published by EH.NET (January 2007)

Hew Strachan, Financing the First World War. Oxford: Oxford University Press, 2004. viii + 268 pp. $20 (paperback), ISBN: 0-19-925727-2.

Reviewed for EH.NET by Hans-Joachim Voth, Department of Economics, Universitat Pompeu Fabra, Barcelona.

Long before the trains started to roll towards the battlefields in 1914, the coming of World War I put heavy demands on other types of transport. All over the world, in late July, ships were loading unusual freight, in unusual quantities. As William Silber describes in his When Washington Shut down Wall Street [1], the cargo for the ships waiting in New York harbor came from only a few miles away. Workers at depositories stacked thousands of bars of gold in wooden kegs, covered them with saw dust to reduce abrasion, and nailed them shut. Armed transports took the crates and barrels with their precious cargo to the docks, before they were sent to the strong rooms of the waiting passenger and cargo ships.

As the risk of war grew, the soon-to-be belligerent powers sold foreign assets, and began to repatriate the proceeds in gold. Before the barbarism of the conflict became apparent to all, gold, the “barbarous relic” in the words of Keynes, started to change from currency anchor to strategic asset. Hew Strachan’s Financing the First World War is about the struggle to find the funds necessary to fight World War I — the first and the last of the major armed conflicts when all the main powers were on the gold standard when hostilities broke out. This scramble turned out to be every bit as desperate as the attempts to hoard gold in the summer months of 1914. The history of finance during World War I has often been told with a view to the hyperinflations and deflations, the booms and busts that followed — how economies coped with the large increase in money in circulation, the economic dislocation and the overhang of debt. As the introduction explains, Strachan is less concerned with the consequences of financing World War I. Instead this book aims to explain how the war was fought on the financial battlefield.

This is part of a much larger project. Strachan was commissioned to write a comprehensive replacement of Cruttwell’s (1934) A History of the Great War. Strachan’s To Arms is the first installment in what is promised to be a three-volume history of the conflict. Financing the First World War is not a self-contained book as such, written with the intention to get to the bottom of financing arrangements during the Great War. Rather, Oxford University Press is re-issuing parts of To Arms, the first volume of Strachan’s three-volume book on World War I, as separate paperbacks. In addition to this book, there are The Outbreak of the First World War, and The First World War in Africa. Strachan probably knows as much about the military, political and financial history of belligerents as any other author; he has also done an admirable job summarizing the main secondary works in German, French, Russian, and Italian. Since Strachan’s own university (Oxford) has abolished even basic language requirements (like a two modern languages and Latin) for the study of history because of alleged “elitism,” this is certainly to be welcomed. It is also in pleasing contrast with other English-language books on World War I, which often focus on the Anglo-German rivalry.

This is an ambitious and knowledgeable book. It is also poorly structured, strikingly confusing, and monumentally boring. The main problem seems to be that it has been re-assembled from the ingredients of a larger book. Like meat cuts reassembled into false filets, the book looks like the real thing, but certainly doesn’t taste like it. Chapters starts well enough, with a small, intriguing vignette — how the garbage-strewn battlefield of World War I indicates the prolific use of materiel, how a German Reichstag delegate encountered problems getting change when trying to pay for his dinner in Berlin in August 1914, etc. Yet these are rare morsels in army-style fare of dry prose and even drier numbers, cooked up without salt or spices. This reviewer thinks of himself as a bit of a chiffrephile, in Angus Maddison’s elegant phrase — someone who has a healthy appetite for figures. Yet the main account of financial questions related to the war effort in Strachan’s book is close to unreadable. The reader is treated to a constant bombardment with financial figures, without much explanation. A barrage with millions of Sterling here is followed by salvos of millions of Russian Rubles, Bulgarian Levas, German Marks and French Francs in adjacent sectors. They left this reader shell-shocked. Little or no effort is made to put them into context, nor is there much of an explanation of “how big is big” (they are certainly almost never related to something economically meaningful such as GDP). Only occasionally do we learn that the British tax increases in 1917 — after much back and forth – produced only enough additional revenue to cover the cost of five days’ fighting. A typical example reads like this:

A total of 4,460 million marks was subscribed, producing a surplus of 1,832 million over existing debt. The second, in March 1915, raised 9,060, a surplus of 1,851; the third, in September 1915, 12,101 million, a surplus of 2,410; a fourth 10,712 million, a surplus of 324 million…. The fifth loan was 2,114 million marks short of its target, the sixth (in March 1917) 6,732 million, the seventh (in September 1917) 14,578 million, and the eighth 23,970 million. The total of the last loan, issued in September 1918, fell back to 10,443 million marks, and left a shortfall of 38,971 million (p. 123).

Surely, this is why tables or graphs were invented? Yet not a single table or figure adorns the entire, 278-page book. The author apparently felt no need for such complications. This is no simple oversight, but indicative of his approach to the subject. All too often, we are simply told the sequence of minor political intrigues and major budget moves, in a blow-by-blow sequence, for one belligerent after the other.

For all its command of the minutiae, this book represents a wasted opportunity for comparative history. The book contains no insightful, analytical, systematically comparative discussion of war finances as such, other than a narrative of political maneuvers concerned with financial questions. For the most part, the discussion is strung across countries in a way that clarifies little. We are treated to very brief overviews in the introduction of topics — financial mobilization, taxation, domestic borrowing, foreign borrowing, etc. Then, quasi in subchapters, we are told how individual countries handled these issues. There is no attempt to summarize what the chapters show, nor is there even a brief section that would conclude and argue a case. If there is a guiding theme, I failed to find it. The book simply peters out with some observations on the Balfour mission to the U.S. in 1917, before moving on to suggestions for further reading.

The First Word War produced bouts of nostalgia in many. After the cessation of hostilities, Keynes wrote longingly about a world where goods from all corners of the globe could be ordered quickly, where capital flowed freely and no passports were necessary to cross borders. This book engendered a different kind of nostalgia in this reviewer — for a long-lost world where middle-aged copy editors in sensible shoes corrected spelling mistakes, editors at university presses leaned on authors to write to the best of their ability, a time when authors tried to publish books that were definitive works, not repackaged slices of a bigger volume which also contain prolific quantities of reworked secondary material; a time when charity publishers didn’t go out of their way to boost revenues by academic recycling; and one when publishing a book without a concluding chapter was unthinkable.

Note: 1. William L. Silber, When Washington Shut down Wall Street: The Great Financial Crisis of 1914 and the Origins of America’s Monetary Supremacy, Princeton: Princeton University Press, 2007.

Hans-Joachim Voth is ICREA Research Professor in the Economics Department, Universitat Pompeu Fabra, Barcelona, a Research Affiliate at the Center for International Economics (CREI, Barcelona), and a Research Fellow in the CEPR International Macro Research Program. Recent publications include “Interest Rate Restrictions in a Natural Experiment: Loan Allocation and the Change in the Usury Laws in 1714,” Economic Journal 2007 (with Peter Temin, forthcoming), “Why England? Demographic Factors, Structural Change and Physical Capital Accumulation during the Industrial Revolution,” Journal of Economic Growth 2006 (with Nico Voigtlaender), and “Credit Rationing and Crowding Out during the Industrial Revolution: Evidence from Hoare’s Bank, 1702-1862,” Explorations in Economic History 2005 (with Peter Temin).

Subject(s):Military and War
Geographic Area(s):Europe
Time Period(s):20th Century: Pre WWII