The First World War and the International Economy

Published by EH.NET (May 2001)

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Chris Wrigley, editor, The First World War and the International Economy. Cheltenham: Edward Elgar, 2000. x + 221 pp.$95 (cloth), ISBN:1-85898-675-3.

Reviewed for EH.NET by David Greasley, Economic History, University of Edinburgh.

This volume comprises an introductory essay by the editor, and a further eight more specialized chapters. The contributors take different approaches to gauge the Great War’s impact. Some consider individual countries, for example Peter Fearon and Kenneth Brown look respectively at the US and Japan, while others, including Andrew Marrison and Sarah Palmer, provide cross-country studies, of the rise of protection and the changing position of women. Additionally, Alan Fowler and Joachim Voth each consider the war’s impact on one important sector, namely cotton in Britain and banking in Germany. Chris Wrigley sets the scene by considering the experiences of a variety of countries, though he argues that the war’s main effect lay in Europe. The agenda he sets and the questions posed span across the war’s consequences for manufacturing, food and fuel, trade and business, and labor and business. Wrigley highlights and anticipates that the First World War did mark a discontinuity in the development of the world economy, but that its impacts were complex and varied, and sometimes are, as in the cases of Japan and the US, overstated.

The second chapter, by Terry Mills, reinforces the introduction by showing how modern methods of extracting trends and cycles from output time series might shed light on the war’s longer-term effects. The empirics of this discussion are rather modest, with only four countries receiving detailed analysis, and one of these, Canada, where trend growth declined between the world wars, does not benefit from detailed attention in later chapters. The four-country results do show a variety of experiences, with Britain appearing hardest hit by World War One. The data, however, are not always comparable, for example GDP is used for the UK, while the US and German data are GDP per capita, and post-World War One boundary changes did tend to reduce the UK’s GDP, but raise her GDP per capita.

The discussions of the US by Fearon and Japan by Brown point to continuity in these countries’ aggregate industrial growth records, but they usefully pinpoint compositional shifts towards heavy industry and construction. Changes in the geographical location of US industry, notably the rise of west coast shipbuilding, and in personnel management and reduced labor turnover are also highlighted. Fearon, though, takes a cautious, sensible, approach in gauging and downplaying the war’s impact in the US. Similarly, Brown, while offering speculation that Japan’s treatment at Versailles, by the other victors, may have influenced Japanese politics and policies on the road to Pearl Harbor, discerns only a modest direct impact. Usefully, he shows that Japan’s cotton industry grew modestly, especially compared to steel, over the war years.

Fowler considers in detail the fortunes of Lancashire’s cotton industry, emphasizing the deleterious effects of the war, especially on exports to India. To an extent his analysis, by stressing that rising tariffs during the war hit Lancashire hard, coincides with that of Timothy Leunig, which argues that the industry remained competitive in open markets to 1914. Fowler also argues persuasively that raw material shortages, and thus the rising costs, were damaging the British industry by 1917. Less convincing is the discussion of Japanese competition in the Indian market, which the data in Table 4.1 show to be of less importance than suggested by the discussion in the text. Nor does Fowler consider Susan Wolcott’s view that sterling’s real exchange rise against the rupee provided a crucial opportunity for domestic Indian manufacturers to make profitable investment in cotton.

Voth poses a more specific question than other contributors, asking whether or not the war, via the post-war inflation, led to the collapse of the German banking system in 1931. He concludes that it did not, drawing upon the work of Richard Grossman, which highlights that bank failures were more prevalent in countries with fewer branches per bank, and more branches per capita. However, to the extent that extreme macroeconomic shocks led to the banking collapses, and these shocks were linked to war-related inflation and a dysfunctional Gold Standard, the First World War contributed to macroeconomic instability and bank failures.

The chapters by Marrison, Wrigley, and Palmer, offer valuable international comparisons. The prize for breadth goes to Marrison, who reports measures of protection for thirty countries, both for the war years and for the preceding and subsequent decades. His measure, customs duties revenue relative to import values shows a modest average rise in the 1920s, but also a wide variety of experience, with India, the UK, and the Netherlands witnessing the sharpest shifts towards protection. Other countries, though, especially those of south and east Europe, and of the periphery, maintained their higher rates of protection, and to an extent direct controls and prohibitions blur the comparative and inter-temporal protectionist records. Wrigley’s discussion of the war’s impact on organized labor spans much of Europe, and shows how the power of organized labor rose during the war, but was much diminished by the international economic downturn of 1921. Rather differently Palmers emphasizes the complexity and paradoxes of women’s wartime experience, using cross-country examples for illustrative rather than comparative purposes. She sees the Great War as both promoting and inhibiting progress towards female equality.

Collectively the chapters of this volume offer useful insights on how the First War impacted on elements of the international economy. For the European economies the authors show that the war was an important though complex discontinuity in their development. The case that the US and Japan were less affected is also well made, though other parts of the world, for example India, and perhaps Canada given Mills’s results, deserve more specific attention. The other reservation is that many of the chapters rest heavily on previously published research. Drawing this material together has value, but does not represent leading-edge research.

David Greasley is Reader in Economic History, University of Edinburgh. He is working presently on aspects both of New Zealand’s macroeconomic history (with Les Oxley), and the Great Depression (with Jakob Madsen).

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