A number of insurmountable difficulties are at once encountered when an attempt is made to arrive at the costs of a war so recent and of such magnitude as the Great War. A large number of the war expenses continue to exist, and, as indicated in the above discussion, will continue to exist for generations to come. But many of the more immediate costs are not yet paid and should still be considered. Demobilization has not been completed, armies have not ceased to police the conquered territory, men are still in the hospitals or in vocational training - all these entail an expense which might be said to arise from the more immediate aftermath of the war, and should in reality be counted as a part of the cost of the war period.

The actual expenditure during the war period is greater than should be attributed to war costs, because states would be making expenditures even if the war did not exist. A part of the expenditures, as for food and clothing, and for the shelter of the soldiers, are but substituted for those which would otherwise be made by individuals. To arrive at an approximate war cost, consequently, the amount of the expenditures for civil purposes should be estimated and deducted from the aggregate expenditures. The value of devastated land areas and of destroyed capital can only be estimated, and from this should be deducted the value of permanent additions to capital, such as merchant marine, railroad equipment, and the added stimulus to invention, as in the perfection of the air craft. The rapid depreciation in the value of the various monetary units must also be considered.

Because of all these problems, any figures which have been computed are at best only approximations. Our concern, however, is not to deal with actualities, but to attempt to convey, in some measure, the magnitude of the burden, and the total figures are so great that a few million dollars either way would make little difference.

Since the signing of the armistice, November 11, 1918, a number of writers have attempted to calculate the cost of the war.1 The figures deal most extensively with taxes and borrowings, while in some cases attempts have been made to estimate the burden of the indirect costs, such as loss of life, property, etc. The aggregate figures of the direct money costs are so appalling as to have no real meaning. The estimates which have been made range from a little more than $210,000,000,000 to about $240,-000,000,000. Because of the incomprehensibleness of these figures some detailed analysis must be undertaken in order to appreciate their significance.

Daily Costs. - The effect of the war upon the indebtedness of the principal belligerents was discussed in the chapter on Public Indebtedness. Reference should be made to this in seeking to estimate the burden which the debts have placed upon present and future generations through the mortgaging of the social income.2 Some idea of the cost of the war while it was in progress may be gained by a summary of the daily expenditures of the principal nations. The daily expenditures of the pre-war year have been deducted from the total daily expenditures. The table not only shows the actual expenditures, but shows the growth as the war progressed. The dates given are approximate, and the data are gathered from a table given by Professor Seligman. It is interesting to note that in the beginning the daily expenditures of Germany exceeded those of the other countries.

1 The best treatments on the cost of the war to date (1921) are Direct and Indirect Costs of the Great World War, by E. L. Bogart, published by the Carnegie Endowment for International Peace; "The Cost of the War, and How It Was Met," by Edwin R. A. Seligman, in The American Economic Review, vol. ix, No. 4; and "Debts, Revenues, and Expenditures, and Note Circulation of the Principal Belligerents," by Louis Ross Gottlieb, in The Quarterly Journal of Economics, vol. xxxiv, No. 1. The author wishes to acknowledge his indebtedness to these publications for many of the figures herewith presented. Some of the tables are given exactly as presented by these authors, while others are modified to more nearly suit the purpose in hand.  2 See Chapter XVI. The Single Tax, p. 409.

Average Daily Expenditures in Millions oF Dollars

Date

Great Britain

France

Italy

Austria

Germany

1914-15......

$ 9.46

$ 8.5

$ 4.4

$ 6.4

$13.3

1915-16......

18.16

12.2

7.5

8.7

15.9

1916-17......

26.69

17.6

10.4

10.4

22.7

1917-18......

33.36

32.4

6.5

12.3

31.0

A glance at this table dispels the notion that the nations were financially exhausted. - In every case except Italy there was a continuous and rapid increase in the amount of money which was spent daily. As large as these sums appear, they were eclipsed by the expenditures of the United States after her entry into the war. A more detailed analysis of these sums will be of interest to American students. The figures represent the actual war expenditures, and are also from a table given by Professor Seligman.

War Expenditure of the United States in Millions

 

1917

1918

1919

Month

Total

Average Daily

Total

Average Daily

Total

Average Daily

January.................

• • * •

• • •

$1,030

$33.2

$1,902

$61.4

February................

• • • •

• • •

952

34.0

1,129

40.0

March ...................

• • • «

• • •

1,096

35.9

1,319

42.5

April ......................

$ 219

$ 8.0

1,155

38.5

1,369

45.6

May..........

467

15.0

1,448

46.7

1,052

33.9

June .....................

350

11.7

1,452

48.4

749

24.9

July..........

602

19.4

1,548

49.9

• • • •

.........

August ...................

697

22.5

1,745

46.8

• • • •

.........

September ..............

686

22.9

1,497

49.9

• • • •

......

October ..................

884

29.5

1,605

51.8

• • •

.........

November ...............

926

30.9

1,875

62.5

.....

.........

December.....

1,045

33.7

2,001

64.5

....

....

The reader will be able to find many interesting comparisons from this table and the preceding one. The rapid increase in the expenditures and the enormity which they reached is almost startling. The highest daily expenditure of Great Britain was about $33,000,000, while that of the United States was nearly double that sum. Another interesting feature is that the greatest expenditure came after the armistice was signed, and that it was still large months thereafter.

Source of Revenue. - The item of interest which next commands attention is what was the source to which the administrators of these various countries could continually turn and always find a supply of funds ready to be used? The two sources upon which greatest reliance was placed were, of course, loans and taxes. In the light of the discussion of these methods as factors in war finance in the preceding chapter, a comparison of the amounts secured from each source by the principal nations will be interesting. The following table presents these facts in tabulated form, and also shows the extent to which each country relied upon taxes. The total receipts and disbursements of the United States for the war years, and for preceding years, as well as some ratios, are given in another table.1

These tables present a number of interesting aspects. The United States and England, it will be noticed, raised a much larger percentage of their revenue from taxes than did the other countries, in that from 25 to 30 per cent came from taxes. The others were much lower. The fact is clearly demonstrated that, in spite of the great increase in taxes, the majority of the revenues came from loans. Then, too, it is interesting to notice the comparative use that was made of direct and indirect taxes. In the table of revenues and expenditures for the United States, the growing importance of the direct system for securing revenue is illustrated. The change from a less than 10 per cent to over 65 per cent reliance upon this form goes to establish its efficacy.

1 These two tables are taken, somewhat modified, from Gottlieb. See note, p. 494.

Receipts in Taxes of Important Countries in Millions

   

Country

Year

Total Tax Receipts

Total Expenditures

Loans to Allies

Ratio of Tax Receipts to Expenditures

Ratio of Tax Receipts to

Expenditures Less Loans

United States ..................................

Apr. 6, '17-June 30, '19

$ 8,400

$32,428

$9,102

25.9

36

Great Britain ..................................

Aug. 1, '14-Mar. 31, '19

11,439

46,385

8,464

24.7

30.1

France ............................................

Aug. 1, '14-Jan. 1, '19

3,998

25,961

2,413

15.4

17.0

Italy.........................

Aug. 1, '14-June 30, '18

1,684

11,291

• • « •

14.9

14.9

Germany 1.......................................

Aug. 1, '14-Jan. 1, '19

4,046

36,795

2,261

11.0

11.7

1 The figures for Germany represent total revenue exclusive of borrowing.

       

Revenues and Expenditures op the United States in Millions

 
   

Pre-war Period

 

War Period

 
 

1913-14

1914-15

1915 - 16

July 1, '16 April 5, '17

April 6, '17 June 30, '17

1917-18

1918 - 19

Income and profits taxes ........................

$ 61

* 80

$125

$ 33

$ 146

$ 2,314

$ 3,019

Customs duties ......................................

292

210

213

160

65

180

184

Miscellaneous internal taxes ................

319

335

388

306

323

872

1,297

Panama Canal ......................................

       

2

6

6

Total......................

735

698

780

550

567

3,665

5,152

Ordinary Disbursements .......................

700

731

723

719

317

7,875

14,936

Foreign loans ........................................

       

885

4,738

3,479

Special Disbursements .........................

       

14

84

100

Total......................

700

731

723

719

1,216

12,697

18,515

Ratio of direct taxes to total taxes..

9.1

12.8

17.2

6.6

27.3

68.7

67.1

Ratio of tax receipts to total disburse ments.........................

96

85.5

100.4

69.4

43.9

26.5

24.3

Ratio of tax receipts to total disburse ments less foreign loans .....................

96

85.5

100.4

69.4

161.3

48.3

29.9

A similar study of the use of direct and indirect taxes in the other countries will reveal a wide variation in the extent to which each was used. In England the percentage of direct taxes rose to nearly 75. In Italy slightly more reliance was placed upon direct taxes than before the war, but their use was not extended. France is the exception, for the percentage of the revenue which was raised from direct taxes continued to fall until it reached about 25 per cent, when it began to rise again. In Germany the habit of the government had been to rely mainly upon indirect taxes. This policy was followed rather closely until near the end of the war, when some direct taxes were used. In studying the relative merits of these two forms as suitable for emergency financiering, much consideration should be given to the incidence of the tax, so that one class of citizens would not be unduly burdened.