The Great War: Impact on the Economy

The Great War (WWI)

• WWI, also known as the First World War, was a significant historical event with continuing relevance today
• The war had profound political and economic ramifications
• Major characteristics of the war included: socio-economic changes occuring over long time periods, changes in demography, resources, technology, abrupt political changes, and the destruction of international economic relations.

Disintegration of the International Economy

• Major socio-economic changes typically occur gradually over long periods of time, influenced by demography, resource availability, and technological advancements.
• Political shifts can be sudden, leading to unexpected economic changes.
• World War I destroyed the complex international economic and trade system that had evolved during the 19th century, ending the "first globalization".

WWI: A Still Relevant Debate?

• WWI was the first global war, employing soldiers from various nationalities and employing modern economic and technological warfare
• The war marked the beginning of state planning in the economic realm.
• Geopolitical changes resulted in the end of old empires (Austria-Hungary, Ottoman) and the emergence of new non-European powers (US, Japan)
• The war signaled the start of the communist experiment
• The war spurred nationalism and had a significant cultural impact.

Origins of World War I

• From a diplomatic standpoint, the assassination of Archduke Franz Ferdinand by a Serbian student triggered the war
• Austria-Hungary declared war on Serbia, triggering a cascade of alliances involving Russia and other European powers.
• The conflict was a complex result of a process that began in the mid-19th century, focused on imperial expansion and the partitioning of lands by European Powers.
• The Balkans were a region of intensifying conflict due to competing desires for dominance by European powers and rising nationalism in new states (Serbia, Romania, Bulgaria).
• This conflict was driven by a combination of factors including: breakdown of alliances, new nationalistic demands, new geopolitical demands, economic competition, differing cultures and ideologies and advancements in technology and science

WWI: Consequences of the Conflict

• WWI brought about profound economic and political changes
• The war involved extensive economic mobilization, strong government intervention, and significant economic losses.
• The war ended the initial phase of globalization, impacting trade, foreign investment, the gold standard, migration, and financial markets.
• The war involved a significant reallocation of resources from civilian goods to military production
• Labor force, capital, and raw materials were primarily focused on wartime demands, leading to substantial growth in the metallurgical, shipbuilding, chemical, mechanical, and armaments industries.

WWI: Consequences of Peace

• The American intervention in the war significantly altered the outcome
• The Treaty of Versailles in 1919 formally ended the war, imposing punitive measures and debts on Germany
• Key consequences of the treaty included: growth of economic nationalism; and monetary and financial instability.