John Maynard Keynes' view of pre-World War I life for the middle and upper classes; Keynes' view of the "double bluff" by which "progress" was sustained in the prewar industrial world

FIRST WORLD WAR LOSSES
The number of known dead has been placed at about 10,000,000 men, the wounded at about 20,000,000, distributed among the chief combatants as follows (round numbers):

Country	Dead	Wounded	Prisoner
Great Britain	947,000	2,122,000	192,000
France	1,385,000	3,044,000	446,000
Russia	1,700,000	4,950,000	2,500.000
Italy	460,000	947.000	530,000
United States	115,000	206,000	4.500
Germany	1,808,000	4,247,000	618,000
Austria- Hungary	1,200,000	3,620,000	2,200,000
Turkey	325,000	400,000	NA

American losses were small compared to the other combatants, 115,000 dead as against almost a million Britons and 1,385,000 French. The economic strain was much less as well. As the graph from Slouching Towards Utopia?: The Economic History of the Twentieth Century, Chapter X. World War I by University of California at Berkeley Professor of Economics J. Bradford DeLong shows, the British government used more than a third of the entire national product during the war (compared to less than 10% before). Wartime mobilization in the U.S. lasted much less than in Britain and consumed a far smaller portion of resources (about 20% at the high point of 1918). This would have profound consequences. To read DeLong's analysis, click on the graph.

Great Britain went from being the world's leading lender of money to being its greatest debtor.

1. The U.S. assumed the role of world creditor, lending vast sums to France and Russia and other nations as well as to Britain.
2. The mountains of war debt intensified the pressure upon British and French political leaders to insist upon Germany bearing the costs of the war in the form of reparations.
3. Reparations, along with political instability and the economic losses sustained during the war, threw the German economy into "hyperinflation." Money lost value so rapidly that workers demanded they be paid daily. By the end of the week, Monday's earnings would be worthless.
   

Before the war a German mark was worth about 25 cents. By 1921 its value had fallen so sharply that it was worth barely more than a penny. By 1924 its value was so small it could only be written in scientific notation. This meant, among much else, that savings had become worthless. It meant that no one outside of Germany would accept payment in German currency. And that meant, among much else, that reparations payments had to be made in dollars. Where would the German government find dollars? The only source was the U.S. government. So, Germany borrowed dollars from the U.S. to pay reparations to France and Great Britain which then used the dollars to repay loans to the United States. It was a system which kept the international economy at constant risk. Further, it meant that none of the European powers, including the victors, could successfully recover from the economic effects of the war.

 

As the graph at right, also from DeLong's Slouching Toward Utopia?, shows, unemployment in Great Britain before the war ranged between 2% and 8%. Once the war ended, a sharp dropoff in government spending produced a sharp recession with unemployment reaching 12%. Conditions improved after 1921, but unemployment failed to fall below 8%. Another way of thinking about this is to note that the high of the prewar years became the low of the 1920s.

The American economy also suffered a sharp recession immediately following the war, and for the same reasons. The Wilson administration cut war purchases and demobilized the American Expeditionary Force. This meant that, as industries were converting back to peacetime production, millions of men entered the labor market. However, unlike the British (and French and German) experience, the American economy quickly rebounded. The U.S. still had surplus capital. Its economy actually emerged from the war stronger than before.