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Reading Summary Topic 2 - WWI & Its legacy.docx

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University of Toronto St. George
Jon S.Cohen

Reading Summary – 2. WWI & Its Legacy Feistein, Temin & Toniolo, The World Economy Between the Wars (2008) Ch.2*  Revolutionary aspects of the war:  Rapid shift of resources from consumption to arms production; reorganization of economic life  General conscription (changed labor force completely in the country side)  Demise of several empire (Kaiser, Austro-Hungary, the Ottoman)  Mass movement;  Food scarcity (farmers not willing to sell because there isn’t a market)  International economy developments:  Displacement of the agricultural sector in the belligerent countries led to the lifting of import duties in order to gain access to the cheapest overseas suppliers. (e.g. grain & meat in the U.S., Canada, Argentina, Australia)  Financial cooperation was undertaken by the Entente powers in the form of inter-allied loans.  The economic consequences of the war;  Actually, social impact is the most severe;  Two exogenous shocks:  Great shift in consumption & production pattern;  Excess capacity once the war is over;  Competition: countries that did not suffer too much from the war (U.S., Japan) invaded the market – response: larger business units (collusion, cartels, monopoly)  A more rigid economic environment: everything is centrally negotiated  A weak financial structure: swollen public debt; no international cooperation;  A fragile international monetary system: off gold; inter-allied loans, stopped right after war  Unreasonable high reparation from defeated countries;  The economic consequences of the settlement:  Businessmen & industrialists were divided on every issue on returning to the laissez faire economy;  Powerful growth of the organization, strength and solidarity of the working class.  Treaties:  The way in which the political map of central and eastern Europe was redrawn disrupted long- standing economic relations and created new barriers to trade (12 more new states)  Each new state has its own currency, fiscal & monetary policy, raised tariff as a source of much needed revenue;  The attempt to hold Germany responsible for the war by imposing huge demands for reparations for the losses became a major cause of political antagonism and economic discord.  Reparation + territory (industrial center) occupied by the Allied power. Broadberry and Harrison (eds.), The Economics of World War 1 (2005) Chapter 1*, 2, 7  Chapter 1: The Economics of WWI: an overview  Key question 1: What did economic factors contribute to victory and defeat in World War I?  Key questions 2: How did the war affect postwar economic institutions and performance in the economics that took part or were most affected by the war?  War of attrition; “If Germany could not win the war for the Central Powers in the first six weeks, using surprise in the west and an army with superior military qualities, then the chances of victory could only diminish over a longer span of time in which economies would be mobilised on each side and the balance of resources would count for more and more.”  Allied Superiority  Population, territory, GDP: Allied far outweighs the Central; especially after the U.S. joined. GDP per head was initially lower than Central (because all the poor colonies), but once U.S. joined this was reversed.  Mobilisation and the level of development: level of economic development; proximity to the front line, duration of the engagement  factors determining the success of mobilising resources.  Subsistence farming: large peasantry’s disadvantage in wars. Non-peasantry countries could expand agriculture and increases supplies in the war; peasantry countries take resources away from agriculture; farmers don’t want to sell food because there isn’t a market; food scarcity & famine (the Russia vs. Germany graph)  Cost of war  Bogart’s direct & indirect costs  Long run impact: national wealth  Human capital + physical cap
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