Table of Contents
From the economic point of view, World War I has been one of the most devastating in terms of the economic losses it caused. World War I era not only hampered the economy of the countries that were directly associated with the war, but it also caused massive losses to the other related economies as well. Therefore, the global economy went through a severe shock after the world war got over. Widespread poverty, hunger and malnutrition are among the most important economic consequences of the world wars. The objective of this essay is to provide an analysis of the post-world war era from the perspective of economics.
World war I had affected the global economy by lowering the aggregate demand and government expenditure. Most of the funds of the world spent heavily on the national defence at the cost of infrastructure development. Later after the war, infrastructure in a most parts of Europe got destroyed that resulted in the economic depression immediately after the world war. However, after the world war, the economies started to revitalise as well. One of the major improvements that had strengthened the argument against the colonialism is the rising living standard in all parts of the world including the developing countries. Intriligator (2017) stated that a number of countries achieved independence following the conclusion of the world war. The global economy grew at an average rate of 5% during that time. Apart from that, economic consequences of the World War I also altered the trend in the global economy as well. Free market mechanism and its advocate lost its foothold and belief shifted to the notion that intervention of the government is important for the economy to prosper (Runciman, 2017).
The post-World War I era also start to shift from the agriculture-dominated economies to a manufacturing sector dominated economies. The revival of the global economy following the end of World War I and the increase in the government spending made the economist believe that it is the capital which is most important for the economic growth. Crafts (2018) thought that it is the lack of capital injection in the economy is what made the colonial economy underdeveloped. Meanwhile, trends have also been seen in the system of the countries as well. There was clear evidence of mistrust in the market-driven economies and government decided the investment level in the economy. The participation of the government in investment activities and mistrust in the global market-oriented economy also led to import substitution strategies in most part of the world. Therefore, the definition of the development and the process of achieving it changed significantly after the end of the world wars.
Therefore, there was a shift in the industrial needs in the economies of the world. Economies started to perceive the industrialization as the fuel for the growth and the development of the economies. The government started to spend a lot of capital on the process of industrialisation that further trickled down to the related economies and brought economic prosperity (Gilpin, 2018). Apart from that, labour productivity has also improved after World War I. With high investment in the physical capital of the economy, the labours could produce more at the same cost, and hence most of the economies of the world saw a drop in the price level as well. This drop in the price level and increase in the average income of the consumers in the market helped in an impressive improvement in the standard of living of the world population (Bayer & Pabst, 2018). The economy of USA was affected less compared to the other countries especially those in the European region. The world economy experienced a shift in the political power after the end of the world war. Therefore, the political map also rearranged after the end of the world war I. After the end of World War I, there was an acute development in countries such as the United States. Worth (2017) noted that the government of USA collected a huge worth of patent and reparation cost from the countries of the central powers.
In addition, the end of World War I had an impact on the distribution of the wealth as well. This happened due to the fact that, the colonized countries paid heavily for the reparations of the destructions in the victor countries and other parts of the world. This influx of huge capitals along with the spending of the respective government on the development of the infrastructure led to the improvement in the per capita income of the world population (Rothbard, 2017). The consumer spending increased, and the world economy experienced a boom in the overall economic activity. In the year 1917, near the end of the world war, the Russian revolution also influenced the economic system of the world. Russian revolution showed the world that autocracy and the imperial rule is one of the main reasons for the lack of capital movement within the economy and hence the underdevelopment of the economy. Russia experienced impressive growth in terms of the national product that put the country at par with powerhouses like the USA (Awan, 2016). There was an extreme change in the economy of Russia in the participation level of the government which catered the growth of the economy. In addition to that, the Russian revolution is also the beginning of increasing labour productivity and labour rights that influenced other parts of the world as well.
World War I has an significant influence on the history of the global economy. The world economy underwent fundamental changes after the World War I. Mistrust in the market economy and the importance of the government intervention as shown by the Russian economy changed the basic belief of the world. Countries that did not involve in the World War I also showed signs of improvement in terms of standard of living. Import substitution policies were widespread and a combination of government spending and reparation cost helped increase the aggregate demand and hence the overall output.
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Bayer, M., & Pabst, A. (2018). Heroes and victims: economies of entitlement after violent pasts. Peacebuilding, 6(1), 49-64.
Crafts, N. (2018). 13 Walking wounded: The British economy in the aftermath of World War I. The Economics of the Great War, 119.
Gilpin, R. (2018). The challenge of global capitalism: The world economy in the 21st century. Princeton University Press.
Intriligator, M. (2017). Globalisation of the World Economy: Potential Beneﬁts and Costs and a Net Assessment. In Economics of Globalisation (pp. 85-94). Routledge.
Rothbard, M. N. (2017). World war I as fulfillment: Power and the intellectuals. In The Costs of War (pp. 249-299). Routledge.
Runciman, D. (2017). The Confidence Trap: A History of Democracy in Crisis from World War I to the Present-Revised Edition. Princeton University Press.
Worth, O. (2017). Hegemony, international political economy and post-communist Russia. Routledge.