Economic Development of the United States during the War

At the time when in all the other warring countries the public economy was subjected to deep changes in consequence of the war, showing itself chiefly in the decline of material well-being, paper currency, high cost of living, stoppage in the growth of the population, and even reduction of the latter – America had not only not suffered from the war, but on the contrary she had gained by it. True, the prices had also risen greatly during the war, but this was not owing to a decrease of the productivity and the shortage in commodities ensuing therefrom, as in the other warring countries but was called forth by the favourable business conditions which had been created for America as the purveyor of the Entente.

Here are a few figures illustrating this fact:

The productivity of the United States amounted in millions to:

Some facts concerning the manufacturing industry are also well known: thus the colossal development of shipbuilding in America and the abnormal growth of the construction of passenger motor cars.

The number of officially registered automobiles in the United Slates amounted to:

(This number of automobiles is cited in the Scientific American, January 1920.)

Out of this number of motor cars only 4 per cent are trucks, the rest are passenger cars, mostly private ones. Out of 50 million tons of kerosene produced in the United States one-half is consumed by automobiles.

Finally we must mention the gigantic development the cotton industry, namely, in millions of pounds:

The period of war was an extremely favourable combination circumstances for the United States. All the productive forces of the country were drained to the utmost. “All the workers found employment, all the machines were in operation. The factory owners sent agents to the rural districts in order to obtain workers from the farming industry. From 30 to 50 per cent of workers (on an average) changed their place of work every month finding a better one in regard to the conditions of labour,” as G.E. Roberts, Vice-chairman of the National City Bank of New York, writes in an article entitled Contemporary Prices and the Economic Situation (The Economic World, November 1920).

The rapidly developing industrialisation is showing itself in the modification of the forms of foreign trade. It is a well-known fact that the excess of the American exports over the imports constituted in 1919 over three milliard dollars, i.e. almost the half of the total exports. The export of the manufactured goods had already then exceeded that of agricultural products. Here are the corresponding figures in millions of dollars:

After the end of the war the United States appear as an industrial country, exporting chiefly manufactured goods.

Agriculture has not suffered either from the surplus consumption called forth by the war, as had been the ease in the warring countries of Europe. The best proof thereof is the development of cattle breeding. This department of rural economy shows the following picture (Statesman’s Yearbook, 1920):

In Millions

The total cost of the farm produce in millions of dollars amounted to:

In ten wars the cost had increased by three times, and as the rise in the prices had not nearly reached these proportions it is clear that a considerable increase of production has taken place. Therefore the rise in the prices in America must be examined from a different plane than that of Europe. In the latter the high cost of living must be ascribed to a shortage of commodities called forth by the abrupt fall of the productivity, whereas the State standardising of the prices was unable to suppress their rise. In America the rise in the prices and the colossal profits of the capitalists were the result of the competition among the warring countries in regard to the products of American industry, notwithstanding that the latter had been working under increased productivity.

The profits were received by the capitalists of the United States in two forms. First the American investments (interest-bearing papers), which, had been in the hands of the citizens of the countries of the Entente before the war, were claimed by the American Government and returned to the United States, Second. Enormous masses of gold began to stream into the United States. The result of this was that out of the total quantity of the actual gold fund belonging to the State and emission hanks of the whole capitalist world, and amounting by the end of 1920 to 1501.3 million pounds sterling, not less than 853.4 million pounds sterling, consequently over one half, belong to the United States. (The Economist, February 19th 1921).

But the United States have not only paid all the money which they owed Europe, they have not only taken to themselves more than half of the gold fund of the capitalist world, they have besides this acquired claims of the value of many milliards on the European countries and especially England. From a debtor-country the United States have become a creditor-country – the world creditor. The paper currency of the United States is on par with the gold.

The causes which in other countries had called forth a deep change in the structure of the public economy had exercised but an insignificant influence in America. The United States entered the war rather late and with such comparatively small forces that the hindrance to production in the presence of such rich resources as the United States dispose of was of no significance. The direct development of the United States from a colonial agricultural, indebted State into an Imperialist industrial Power was not only not delayed by the war, but it was undoubtedly accelerated by it.