US Decision to Enter World War I Term Paper

Pages: 5 (1716 words)  ·  Style: MLA  ·  Bibliography Sources: 5  ·  Level: College Sophomore  ·  Topic: American History

World War I, like all wars tend to, had a devastating effect on all the parties involved. The War in question began in Europe, resulting from a dispute between just two countries. The rest of Europe became involved through various alliances, loyalties, and enmity, respectively. The involvement of the United States lasted only months, from 1917 to the end of the War. The country's initial declaration of neutrality for the majority of the War ended when the country's economy was seriously threatened by Germany's warfare practices (Feldmeth).

In addition, there were a number of reasons for the eventual involvement of the United States in World War I. Some of these, as cited by Hugh Rockoff, include the fact that the United States felt their affiliation to Britain and France to be stronger than to Germany and Austria. In addition to Germany's practices, the observed need and near-exhaustion in the former countries compelled the United States to take action for the sake of traditional alliances (Feldmeth).

In terms of economics, the trading rights of the United States also played a role (Rockoff). Naval blockades began to impact the country's exports to Europe, even in terms of food. In response, European neutrals were used as intermediaries, although the Wilson Administration was highly dissatisfied with what they viewed as a violation of international law. While Britain and France then however extended their blockade even to the neutrals, the above-mentioned German policies is what drove them to a final decision for entering the War (Feldmeth).

Ultimately, however, it was not the conventional surface vessels used by Britain and France to enforce its blockade that enraged American opinion, but rather submarines used by Germany.

In contrast to British practice, Germany completely disregarded what the Americans viewed as the laws of war. They would for example use submarines to attack and sink enemy submarines without warning or further investigation (Rockoff). The American feeling regarding such practices is strongly voiced by President Woodrow Wilson in a speech to Congress on 2 April, 1914 (Duffy). In the speech, the President strongly opposes Germany's warfare against any enemy ship, whether military or commercial. It is therefore the combination of Germany's violation of humanity towards United States citizens, even when non-military, and the fact that this seriously impacted the economy, that drove the United States to finally enter the War.

In general terms, the United States' involvement in the war impacted the economy in terms of exports favorably. According to Rockoff, for example, exports to Europe from 1913 to 1917 rose from $1.479 billion to $4.062 billion. If the country had remained neutral, this would have impacted the economy negatively (Rockoff).

The United States mobilized an army of some 4,791,172 Americans to enter the War, of which 2,084,000 reached France, and 1,390,000 saw active combat. These escalated numbers had a great impact on the economy in terms of demand for items such as food and clothing, weaponry, training and transport. The expanding Navy also placed significant demands upon the economy in terms of shipping and transport needs. To meet these increasing needs, the Army contracted their needs to the private sector, with a concomitant rise in federal spending from $477 million (1916) until it peaked during 1918 at $8,450. In addition, other wartime agencies and allies often used U.S. loans to finance their wartime needs (Rockoff).

Another result of the increase of the U.S. military force is the rise in the total labor force of the country. From 1916-1918, the total labor force for exampled showed an increase from 40 million to 44 million, as a result of many high school graduates entering the labor market, and the ease of finding work during this time of high demand in the various sectors. This also had a positive impact on the military force, as its size could be maintained even while increasing the size of the local labor force of the nonfarm private sector (Rockoff). Wages in the industrial sector rose by six or seven percent during the War, further encouraging the labor force.

Several industries benefited from the military involvement of the United States. It is also interesting to note that the steel, copper, rubber, petroleum and other basic raw material industries in the United States benefited even before the involvement of the United States. While Britain and France were importing their supplies from the country, the United States was also building up its own supply of such materials presumably in the event of their involvement. All that was then necessary was for manufacturers and suppliers to maintain their output of materials when the U.S. became actively involved in the War (Rockoff).

While it initially took some time to support the mobilization effort with home-produced materials, American troops initially often had to use French artillery. Nevertheless, once factory conversion and building were complete, the supply chain stabilized and all materials for the war effort were supplied by the United States. There was some effort to coordinate supply production by the Allies, but eventually the United States' policy was to supply its own people with its own materials (Rockoff).

In concrete terms, financing was needed to support the war effort. As seen above, Federal spending increased significantly during the United States' involvement in the war. The government implemented several policies in order to raise the funding needed. Three of these are: raising taxes, borrowing from the public, and printing money. The exact way in which the latter was accomplished was rather complicated. According to Rockoff, the government might sell a bond to the Federal Reserve, which would then pay with a deposit account created for the government, and the government could in turn draw from this account to cover its funding. In this way money was "created" to pay for the increasing needs of the war effort. According to Rockoff, this is practically the same as simply printing new money to use for such funding. Rockoff draws attention to the fact that such practices were not considered worthy of closer investigation at the time. One reason for this can be the untouchable gold standard, and as such the threat of inflation and the danger of steering away from the gold standard was not necessary to regard as serious (World War I History).

In terms of financial policy, the government had an equal choice between taxes and public borrowing. This issue raised several conflicts within the government, the economic and the business sectors, each with their own views on the issue and which policies might be considered best. The economic sector believed that raising taxes was best, basing their belief on Adam Smith's arguments regarding the public awareness of the cost of war. Men of affairs believed that a balance was needed between the two extremes. According to Rockoff, Treasury Secretary William Gibbs McAdoo felt that such a balance would best be divided equally - taking 50% from bonds and 50% from taxes, as he did not wish to frighten the wealthier classes away from their support for the war effort. Taxes were then raised by the War Revenue Act during October 1917. While taxes were then increased significantly, federal expenditure increased to an even greater extent (Rockoff).

According to Rockoff, the only way to close the gap create was by borrowing. Short-term borrowing was supplemented by long-term bonds, including the Liberty Bonds and the shorter-term Victory bonds. These were made attractive by exempting investors from taxes, which, as Rockoff points out, is somewhat ironic. The government raises taxes to fund their efforts on the one hand, while creating tax free products on the other. Again, the Federal Reserve invested in many of these bonds in a further effort to create money, as in the strategy above. Rockoff provides the statistics of funding to finance the war: 22% was financed by taxes, 20 to 25% by printing money, and 53 to 58% by bonds (Rockoff).

Another interesting issue related to economics during World War I is the government's role in the mobilization effort. They no longer used the policy followed during the Civil war, which was relying on the price system for resource allocation. Instead, the Wilson Administration attempted to manage this issue from Washington. One of the reasons Rockoff sites for this is the Administration's suspicion of the market concomitantly with their desire to protect the public against practices such as profiteering. Economic control was another issue observed in Europe, and the United States could do this best from a single location.

In order to control the economy then, several agencies were created, the most important of which, in terms of the war effort, include: the Food Administration, the Fuel Administration, the Railroad Administration and the War Industries Board. By means of these Agencies, the United States gave up, for the time being, its reliance on the market (Duffy).

In addition to the immediate economic and human costs, which were significant, the American financial policies during this war also had some long-term effects. Firstly and not surprisingly, the Federal government finances… [END OF PREVIEW]

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