we’ve done specials on individual nations fighting this war and we have looked at micro economics especially that of the central powers and especially their failures in many regular episodes. But what was going on on a macro level? How, for example, did the allies finance their massive war economies? Let’s find out. I’m Indy Neidell, this is a great war special episode about the allied war economies in the first world war. Now before we start, this episode is sponsored by supremacy 1914. A world war one real time strategy browser game. War time economics can be a bit of an abstract topic, but supremacy 1914 is a great way to learn just how vital your economy is for victory. At the end of this video there will be a special offer for viewers of this channel. Anyhow, 1916, the year of battles, had shown the allies that the stalemate could not be broken by man power alone. It was the battles of the Somme and Verdun that kick started the western allies war economy. By war economy, I mean the total mobilization of industries and accumulation of resources to produce more shells, more guns, more planes, simply more of everything to beat the enemy through superior mechanical firepower. However, winning the war by out producing the central powers through economical superiority was a dangerous gamble. As it would strain the nations to the breaking point and expose their vulnerability to debt and over extension. In Britain, the control the British ministry of munitions had over material and supply was greatly expanded with David Lloyd George becoming first, secretary of state for war in June 1916, and then prime minister in December. The government built its own national shell factories and took full control of the rail and shipping systems. This, of course, restrained the private sector and the government further regulated the market by requisitioning resources like iron, fertilizer, glycerin, fax, and timber for the army. The nation also had to reorganize its agricultural output. Before the war Britain was far more reliant on imports of food than, say, Germany. And while theoretically it could have been starved by the German U-boat campaign, the agrarian economy was able to adapt and be filled with prisoners of war, while capital flowed through London. So by relying on on imports from the dominions and trade with the U.S. the mass production of armaments, on a scale never before seen in history, was possible. In the last week of September 1918, British artillery was battering the Germans with 3.4 million rounds a week. That was more than twice the opening barrage of the Somme, and there were hundreds of thousands of shells stock piled all over France. Guns lost to, say, the German spring offensive in 1918 were unimportant in the sense that there were plenty of reserves. If the war had lasted into 1919, tank, aircraft, and even gas production was to be easily doubled, tripled, or even quadrupled. However, economists were concerned. Just keeping the pound on the gold standard, was a battle in itself for the financiers of London. Conservative party leader Bonar Law said “our financial situation is was a source of great anxiety” because of the sheer costs of the war. By the end of 1917 Britain was buying for the whole entente, 75 million U.S. dollars worth of stuff a week. That’s nearly 1.5 billion in today’s money, per week, and Britain’s national debt was soaring. And the income tax rate, that had been doubled to 12 percent in late 1914, would hit 30 percent in 1918 and it really was the whole empire that had been economically mobilized. Indian wheat was shipped on mass to Italy, half the shells for the standard 18 pounder gun came from Canada. And yet, it was nowhere near enough, so dependency on the U.S. grew and grew. In 1916, 45 percent of the cost of the battle of the Somme had been paid for by American investors and by the end of that year a total of 2 billion dollars had financed the entente war effort under the auspices of Wall Street Mobil J.P. Morgan. In 1917 and 1918 these numbers would continue to grow enormously. But this was a dangerous gamble. It did allow Britain to feed it’s population while also expanding it’s arms production but the complex system of loans and the tremendous sums involved were making more and more dangerously real the possibility of ruining the empire, had the war dragged on into 1919 or 1920. But Wall Street was not only stabilizing the pound, it was doing the same to the Franc and Lira as France and Italy also transformed into war economies. The French had fully focused on armaments and maximized output and by mid 1918 they could produce over 1,400 rifles per day, a 1,000 planes a week, and 7 million shells for a 75 millimeter field gun a month. The mass production was really advocated from the summer of 1916 when Philippe Petain became chief of staff. He believed the only way to kick the Germans out of France was by superior accumulation and diversification of firepower. A huge program of factory construction and conversion was begun centered around Paris. And by mid 1918, the French had over 5,000 heavy and super heavy artillery pieces and an armada of bombers, tanks, and cars, and trucks. But, like with the British, this caused the national debt to skyrocket. With an all or nothing mindset the government embarked on massive deficit spending raising the income tax was nowhere near enough to cover this. Bond sales couldn’t cover the loans and important to note here, from the beginning France’s economy was at a disadvantage since the German occupation from the beginning of the war meant losing a huge percentage of coal and iron deposits. France had a man power disadvantage as well, compared to Germany and pressing ever more men into service forced a reliance on imports. I mean with all those men called up from the regular work french exports were down 70 percent. Two thirds of french farmers were called to the war so France became dependent on American wheat. And in the winter of 1917 – 1918 there was a shortage of food, oil and coal as exports from the U.S. suddenly bogged down. That lack of coal and oil meant real problems keeping the train network, France’s life line, running properly. Coal stocks were down a tenth of 1916 totals on some routes and had Germany been able to put pressure on for another winter the system may very well have collapsed. The same story holds in general for Italy who did make an impressive transition into a war economy. In terms of GDP Italy was , I guess you could say, a second class power compared to the allies. It’s arms industry though, was not, that was on par. For example, all the heavy artillery pieces lost at Caporetto in late 1917, they had all been replaced by August 1918 with better more modern ones. And throughout the war, Italy, could supply its whole army solely with Italian made weapons and ammunition. For this they could thank the million men and tens of thousands of women working in newly built privately owned factories controlled and funded through the industrial mobilization office. Problem is to pay for all of this Italian banks simply printed more currency so inflation grew and the value of the Lira fell. Also while steal, chemical, and automobile output grew as well the infrastructure was seriously weakened by constant use. On top of that the supply situation in the North grew serious when coal and food became scarce in late 1917. This was, partly, because of the loss at Caporetto that lost a lot of grain storage but also a bad harvest didn’t help and there were bread riots. The police even feared for a revolution if imports from overseas were somehow cut off. So the Italian economy, too, was at its absolute limit. The coal and food crisis that final winter of the war really showed how fragile the allied war economies actually were. Heck in Britain they issued food stamps because suddenly there was only enough wheat to supply the country for six weeks. The unrest in food lines was a politician’s nightmare, I mean, the specter of the Russian revolution sort of colored their imaginations. The mounting debt, the strain on national infrastructures, these brought the coalition closer to losing the war then is often perceived. Without the massive aid the U.S. brought across the Atlantic: food, fodder, copper, oil , and so on and without the loans of billions of dollars from American bankers , who were literally banking on victory, the war economies of the western European allies would not have been possible. And their overall economic situation may well have ended up much closer to that of the central powers. As I said in the beginning this episode was sponsored by supremacy 1914 If you think you have the strategic and economic finesse to take your nation to victory you should give this world war one, real time, strategy browser game a try. Supremacy will take you right into strategic depths of the first world war. With real time game play and against real player opposition on historically accurate maps. You might be playing, not for years, but maybe months. Forge alliances or back stab your neighbors and the best thing the game is getting a complete overhaul right now. And if you sign up through the link right now below the video your also guaranteed a 19 euro starter package to invest into your tank production. The registration is completely free though, so taking a look is definitely worth it. Now if you want to learn more about the impact of the naval blockade during and after the war you can click right here for our special episode about that. Do not forget to subscribe, see you next time.