![]() Before the war was over, it had topped out at 77%. Rates were raised to levels utterly inconceivable before the conflict. ![]() The war demonstrated the massive revenue-generating power of the income tax. navy, concluded-as did many others-that government should do for the economy in peacetime what it did in wartime, and that enlightened, scientific planning and controls by experts would rid us of the sloppiness and greed of free markets. Young Franklin Roosevelt, effectively running the U.S. John Maynard Keynes, from his perch at the British Treasury, was conjuring up ideas for how government could control the pace of the economy via manipulation of the money supply, interest rates, taxation and spending. ![]() This "wartime socialism," as he dubbed it, became the basis for how the Soviet Union would be organized. Lenin was astounded by the increase in Germany’s armament production. They also learned that they could exercise enormous bureaucratic control over their economies. Governments learned that they could seize the liquid assets of those within their domains through taxation, borrowing and inflation. ![]() The Great War forever blasted away these inhibitions. Currencies should be, like the British pound, fixed to gold, and most were, particularly after 1870. Military outlays for the great European powers averaged 2% to 3% of GDP. Thanks to the example of Great Britain-home of the industrial revolution and the most trusted currency that’s ever existed-it became accepted wisdom that modern governments must exercise financial prudence, that is, keep spending under control and budgets in balance. We’ll not experience such ease of movement ever again. If you wanted to move to another part of the world, the only barrier to doing so was the cost of travel, which became cheaper and cheaper. Restrictions were nonexistent, and passports barely existed. The migrations of people in the 19th century were enormous, far larger, relatively, than those of today. Protectionist impulses still lurk, however, often manifesting themselves in currency devaluations to "improve the balance of trade.” Since WWII, thankfully, trade barriers have been progressively reduced, which has been a boon to global prosperity. Don't compare the standard of living then with what we enjoy today instead, compare it with what preceded it. Most haunting of all is the question we’re left with, What was it all for? Unlike for the American Civil War, there was no great moral justification for WWI, such as ending slavery and preserving the last, best hope on Earth.Īmong the immense casualties of this conflict were the economic ones, that is, the ideas and arrangements that made possible the greatest, most rapid rise in living standards ever experienced, even as populations were mushrooming. The 100th anniversary of the start of World War I has fittingly brought forth books, articles, essays and documentaries about the most cataclysmic man-made event in history: the diplomatic blunderings and miscalculations that triggered it the immense battlefield slaughter the destruction of empires and the loss of faith in the religious and liberal values that gave rise to Western Civilization, and the concomitant eruptions of Communism, Fascism, Naziism and modern barbarism. ![]()
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