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US Entry to the War
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MattShizzle
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US Entry to the War
Was 100 years ago today 4/4/1917.
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Roo St. Gallus
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cape_royds
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The Great TARP of 1917
I'll jot down a few unsystematic thoughts on this topic:
1. WW, most of the American people, and even most of the American upper class, all probably wanted to stay out of the war, but like everybody else in the world, they were unprepared for the duration, extent, and possible consequences of the Great War. When conflict reaches a civilizational scale, it's hard to stay out.
2. Legalities aside, by 1917 the USA was not staying out of the war, anyway. In reality, the USA was already deeply involved. This was not because of public sector policy. It was because of private sector policy--especially the financial sector.
3. By the end of 1916, the entire US banking system had bet itself on an Entente victory. It was a situation, quite literally, of "Entente Victory--or Bust!"
4. Given the naval superiority of the Entente, it was unsurprising that US industry, and thus US banks, would end up doing most of their business with the Entente. Given the aggregate superiority of the Entente in human and material resources, it was "rational" that US businessmen would feel secure banking on an Entente win.
5. But just because a decision is rational and evidence-based, doesn't mean that it is correct, and still less does it mean that it would be correct in terms of the reasoner's own particular situation. WRT to US finance in the Great War, most of the loans made to the Entente were fairly short-term, two or three years. After two years of war, the Entente's aggregate superiorities in men and material were not translating into political victory, at least not on a timeframe that was going to do an American bond financier all that much good.
6. By 1917, if the Entente can't pay back, and pay back pretty soon, every large bank in the USA will fail. Even though a financial crisis wouldn't destroy America's farms or factories, nevertheless WW would find himself presiding over a huge bank crisis and a deep national economic depression. Congratulations, Woodie! The country as a whole might be physically unscathed, but the upper class would be virtually laid waste--unless something happened to change the rules of the game.
6. When the USA entered the war, the rules of the game did indeed change. The government restricted gold exchange, inflated the currency supply, and publicly guaranteed all war loans made to the Entente by US banks. In other words, one of things that happened when the US government legally went to war, besides the enormous direct stimulus of public war expenditure itself, was that there was a massive bailout of previous, private, war expenditure.
7. This was no mere bagatelle: by the end of 1916, US private loans to the Entente amounted to about 4% of GDP. For the purpose of comparison, the 2008 TARP was authorized to about 5% of GDP. But the US economy in 2008 was much more debt-driven and financialized than the US economy of 1917, as well as being a lot more worldwide. The financial sector was more than twice as big in 2008 than it was in 1917. The ratio of debt to GDP was very much bigger in 2008 than in 1917. So in relative terms of finance and debt, and their role in the political economy of the United States, the 1917 bailout was a lot bigger than the 2008 bailout.
8. I don't want to exaggerate the domestic financial sector role in US entry into the war, but it was an important factor and it shouldn't be neglected. The reason this issue doesn't get more attention was obviously because of the violence and drama of the war itself. Nevertheless the memory of this situation gave impetus to the various pieces of neutrality legislation that followed the war. A lot of people in the USA felt that their country's businessmen had dragged everybody else into a war, and they didn't want that to happen again.
1. WW, most of the American people, and even most of the American upper class, all probably wanted to stay out of the war, but like everybody else in the world, they were unprepared for the duration, extent, and possible consequences of the Great War. When conflict reaches a civilizational scale, it's hard to stay out.
2. Legalities aside, by 1917 the USA was not staying out of the war, anyway. In reality, the USA was already deeply involved. This was not because of public sector policy. It was because of private sector policy--especially the financial sector.
3. By the end of 1916, the entire US banking system had bet itself on an Entente victory. It was a situation, quite literally, of "Entente Victory--or Bust!"
4. Given the naval superiority of the Entente, it was unsurprising that US industry, and thus US banks, would end up doing most of their business with the Entente. Given the aggregate superiority of the Entente in human and material resources, it was "rational" that US businessmen would feel secure banking on an Entente win.
5. But just because a decision is rational and evidence-based, doesn't mean that it is correct, and still less does it mean that it would be correct in terms of the reasoner's own particular situation. WRT to US finance in the Great War, most of the loans made to the Entente were fairly short-term, two or three years. After two years of war, the Entente's aggregate superiorities in men and material were not translating into political victory, at least not on a timeframe that was going to do an American bond financier all that much good.
6. By 1917, if the Entente can't pay back, and pay back pretty soon, every large bank in the USA will fail. Even though a financial crisis wouldn't destroy America's farms or factories, nevertheless WW would find himself presiding over a huge bank crisis and a deep national economic depression. Congratulations, Woodie! The country as a whole might be physically unscathed, but the upper class would be virtually laid waste--unless something happened to change the rules of the game.
6. When the USA entered the war, the rules of the game did indeed change. The government restricted gold exchange, inflated the currency supply, and publicly guaranteed all war loans made to the Entente by US banks. In other words, one of things that happened when the US government legally went to war, besides the enormous direct stimulus of public war expenditure itself, was that there was a massive bailout of previous, private, war expenditure.
7. This was no mere bagatelle: by the end of 1916, US private loans to the Entente amounted to about 4% of GDP. For the purpose of comparison, the 2008 TARP was authorized to about 5% of GDP. But the US economy in 2008 was much more debt-driven and financialized than the US economy of 1917, as well as being a lot more worldwide. The financial sector was more than twice as big in 2008 than it was in 1917. The ratio of debt to GDP was very much bigger in 2008 than in 1917. So in relative terms of finance and debt, and their role in the political economy of the United States, the 1917 bailout was a lot bigger than the 2008 bailout.
8. I don't want to exaggerate the domestic financial sector role in US entry into the war, but it was an important factor and it shouldn't be neglected. The reason this issue doesn't get more attention was obviously because of the violence and drama of the war itself. Nevertheless the memory of this situation gave impetus to the various pieces of neutrality legislation that followed the war. A lot of people in the USA felt that their country's businessmen had dragged everybody else into a war, and they didn't want that to happen again.
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Ozymandias
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cape_royds
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- Location: Vancouver, Canada
ZT was less important as a cause of war, than it was in terms of providing PR and pretext.
If German sabotage and meddling in America were real causes of US entry into the war, then why wait for 1917? There had already been any number of such pretexts for war--a veritable conveyor belt of casus belli. Consider the WWI career of the German spook Franz von Papen:
https://en.wikipedia.org/wiki/Franz_von ... orld_War_I
As I remarked on the "Russian Wastage" thread, agents of the various belligerent powers were throwing around slush money at any almost any scheme that had the prospect of causing headaches for the enemy, often with the ass-biting consequences that we're all familiar with nowadays.
German agents were already blowing stuff up in the USA, and already sending money and arms to political factions in Mexico with an aim to causing problems for the USA, long before ZT.
If we want the really big reasons why the US gov't decided for war in 1917, then I think we need to look at the macroeconomic and geopolitical factors first. That's not to say the lesser stuff wasn't important in terms of domestic and international political propaganda.
If German sabotage and meddling in America were real causes of US entry into the war, then why wait for 1917? There had already been any number of such pretexts for war--a veritable conveyor belt of casus belli. Consider the WWI career of the German spook Franz von Papen:
https://en.wikipedia.org/wiki/Franz_von ... orld_War_I
As I remarked on the "Russian Wastage" thread, agents of the various belligerent powers were throwing around slush money at any almost any scheme that had the prospect of causing headaches for the enemy, often with the ass-biting consequences that we're all familiar with nowadays.
German agents were already blowing stuff up in the USA, and already sending money and arms to political factions in Mexico with an aim to causing problems for the USA, long before ZT.
If we want the really big reasons why the US gov't decided for war in 1917, then I think we need to look at the macroeconomic and geopolitical factors first. That's not to say the lesser stuff wasn't important in terms of domestic and international political propaganda.
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cape_royds
- Posts: 149
- Joined: Sun Apr 26, 2009 6:35 am
- Location: Vancouver, Canada
All of the belligerent powers had their spooks trying to raise hell in enemy countries, every way they could. It was natural for Germany to try to find some Irish nationalists to support (on the other hand, not all Irish nationalists would necessarily seek or accept German support).
One celebrated case was Sir Roger Casement:
https://en.wikipedia.org/wiki/Roger_Cas ... olutionary
As you would expect in the murky realms of spookdom, the radical Unionists of the UVF were also importing weapons from Germany, just a few months' before war's outbreak in 1914. Sir Edward Carson, later a member of Lloyd George's war cabinet, was involved in the conspiracy:
https://en.wikipedia.org/wiki/Edward_Carson#Unionism
One celebrated case was Sir Roger Casement:
https://en.wikipedia.org/wiki/Roger_Cas ... olutionary
As you would expect in the murky realms of spookdom, the radical Unionists of the UVF were also importing weapons from Germany, just a few months' before war's outbreak in 1914. Sir Edward Carson, later a member of Lloyd George's war cabinet, was involved in the conspiracy:
https://en.wikipedia.org/wiki/Edward_Carson#Unionism
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cape_royds
- Posts: 149
- Joined: Sun Apr 26, 2009 6:35 am
- Location: Vancouver, Canada
In fairness to the UVF, they were spending their own money to buy arms. Nevertheless the Germans were suspiciously cooperative, in allowing the purchase and export to Ireland of a large shipment of weapons and explosives, at a time of high tensions surrounding the Home Rule issue.
In the last analysis, the strongest aid that the Germans ever gave to the Irish republicans came in the form of the heavy casualties they inflicted on the UVF on the Western Front. The people who were most determined to fight for the Unionist cause were also people who enlisted in great numbers to fight for the Empire, in order to prove the value of maintaining Union. The UVF, enlisting together, formed an entire division of the British Army. They made excellent shock troops.
https://en.wikipedia.org/wiki/36th_(Uls ... me.2C_1916
In the last analysis, the strongest aid that the Germans ever gave to the Irish republicans came in the form of the heavy casualties they inflicted on the UVF on the Western Front. The people who were most determined to fight for the Unionist cause were also people who enlisted in great numbers to fight for the Empire, in order to prove the value of maintaining Union. The UVF, enlisting together, formed an entire division of the British Army. They made excellent shock troops.
https://en.wikipedia.org/wiki/36th_(Uls ... me.2C_1916