Now all roads lead to France and heavy is the tread
Of the living; but the dead returning lightly dance.
Edward Thomas, Roads

Saturday, July 23, 2016

Lives and Treasure: What World War I Cost the United States


The United States mobilized about 4.800 million men in World War I. About 2.086 million went overseas, and about 1.390 million saw combat. Although it is true that America’s losses paled in comparison with those of the European combatants, and were substantially less than those America experienced during the American Civil War, they were nonetheless substantial. About 204,000 Americans suffered non-mortal wounds, and about 117,000 died. Of those who died it is estimated that about 53,000 died in battle, and about 63,000 died from [other causes] . . .


Compared to the total U.S. population in 1920 of 106,466,000 or the total labor force of 42,434,000 these numbers may look relatively small: deaths were only .11 percent of the population and only .28 percent of the workforce. But they had a major psychological impact, not only on the families and friends of those killed or wounded, but on the country as a whole, certainly enough to produce strong reservations about any future involvement in a European war.

The most detailed and thoughtful effort to measure the economic costs of the loss of life and other costs of the war is John Maurice Clark’s (1931) "The Cost of the World War to the American People." Indeed, Clark’s study seems to stand alone. There has been no similarly exhaustive study of the impact of World War II. In part, the lack of a similar study for World War II reflects the revolution of ideas held by economists. Although Clark believed that increased spending could have a multiplier effect on aggregate demand (Dorfman 1970), his analysis was essentially neo-classical: resources allocated to the war effort had alternative uses. By the end of World War II most U.S. economists were Keynesians. Wartime spending increased total GDP by more than the initial spending: the war had, from an economic point of view, almost no costs. The war paid for itself by increasing total output through the multiplier process. In World War I, moreover, the U.S. economy was already at full employment when active American involvement began. World War II was different. Although the economy was expanding rapidly in 1941, there was still considerable slack when the U.S. entered the war.


To estimate the costs of the war Clark began with the Treasury’s estimate of total expenditures by the Federal government to 30 June 1921 ($27.2 billion) and then made certain additions and subtractions to bring the total closer to one reflecting resource costs.  Clark (1970, 112, and passim) added (1) the worth of foreign obligations, $7.5 billion, on the grounds that these represented output transferred during the war (and unlikely to be returned later), (2) an adjustment to bring the wages of persons in government service into line with what they could have earned in the civilian sector of $.2 billion, and (3) miscellaneous additions of another $.2 billion. Clark then subtracted (1) interest on war debt of $2.7 billion on the grounds that it was a transfer rather than a use of resources, and (2) part of the deficits of the Federal Railroad Administration of $1.2 billion on the grounds that these were a transfer from taxpayers to shippers. The net result was $31.2 billion. Additions of expenditures made by state governments and private organizations brought the total to a round figure of about $32 billion. 

Sources:  Article: "UNTIL IT’S OVER, OVER THERE: THE U.S. ECONOMY IN WORLD WAR I"; Table: Economic History Association; both by Hugh Rockoff, 2004
Working Paper 10580 NATIONAL BUREAU OF ECONOMIC RESEARCH


5 comments:

  1. A most interesting post and worthy of further thought. I am certainly no economist, but prior to 1914, the "financial capital of the world" was London. At some point during the war, and certainly post WWI, that shifted to New York, where it has remained.

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    1. Generally, it is said that 50-55 thousand Americans died in combat and a comparable number died of the flu. Presumably, those who died of flu were not buried in the battlefield cemeteries. Graves in those American cemeteries total about 85 thousand. One wonders how accurate the figures are. I have read (can't remember where) that in 1930 the VA did a survey and concluded that more than 359 thousand veterans "died prematurely as a result of their service." In 1942, there were about 68 thousand vets in VA hospitals, surely a significant cost.

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    2. Actually....quite a few flu fatalities are buried overseas.

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  2. Entering the war solved an economic problem for President Wilson, because the domestic situation was headed for recession. The war was a boon for American farmers and factories.

    Robert Warwick

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  3. Unfortunately, war is always a boom for the economy. It mobilizes a nation for a unified purpose. It gets the economy producing war materials and support stocks to a much greater degree. It then eats up materials that are expended and need to be replaced. It inflames the minds of youth to visions of glory and allows politicians to feed on this. BUT this is ONLY true IF it is not fought on YOUR land and country. Otherwise it is devastating while enriching other nations. That is how the U.S. came to prominence as "the arsenal of democracy." And it eventually wears down even the strongest of nations with the loss of generations of men, that can not be replaced so readily. War is a dying business, too late the hero... but at times it is a necessary evil.

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