The major part of the war’s cost was borne by the soldiers, sailors, and airmen, and their families. Some 4.7 million men served in the armed forces; 117,000, as we noted, were killed in battle or died of wounds or disease. Another 204,000 received nonmortal wounds. The human costs of the war cannot be fully understood by translating them into dollar values. Nevertheless, it is useful to look at these costs through the eyes of an economist. The draft can be thought of as a tax. The amount of the tax was the difference between what the government would have had to pay a soldier to get him to volunteer for military service and what the government actually paid. When a soldier received a nonmortal wound or died, there was a further loss: the discounted value of the lost future income.
After the war, it was widely recognized that veterans’ benefits would be paid to compensate families whose loved ones had died in service, and to compensate the survivors for their injuries and for undertaking the hazards of military service. This was a longstanding American tradition. The adequacy of compensation, however, was debated. The “fair” amount of compensation for death or dismemberment is hard enough to agree on, and the idea that war entails heavy psychological costs, shell shock, for example, was just gaining acceptance. There also were more subtle psychological effects, a disillusionment with American life and culture, for example, that sometimes affected the capacity of the veteran to earn a living. The writers who gave a voice to this disillusionment with war and traditional American values, including Ernest Hemingway, John Dos Passos, and F. Scott Fitzgerald, became known as the “Lost Generation.” There was, moreover, simply the idea that pay had been inadequate; fixed in nominal terms while pay for civilian workers rose with inflation. Soon after the war veterans therefore began calling for a bonus to make up for these losses. Payment of the bonus would become a divisive political issue in the post war era. It was not settled until the bonus was finally paid (ahead of the original schedule) in 1936.
Payments to veterans or their families do not change the loss of resources and output that the economy as a whole sustained. These payments merely redistribute the burden of the losses. All of these calculations and the inevitable debate about whether compensation was adequate should not be allowed to obscure the reality that, in the end, it is impossible to put dollar signs on all of the human costs, costs that were high for the United States and staggering for the European belligerents.
The most careful and detailed estimate of the cost of the war was made by John Maurice Clark (1931) in his classic book, The Costs of the War to the American People. Clark took into account many of the complications that one encounters in trying to measure the costs of a war. He made an adjustment, for example, to the wages of the men drafted into the army to account for their lower-than-market wages, and included money technically lent to the Allies but not expected to be repaid. Clark put the total cost at $31 billion. This was about 44 percent of average GDP during the war period (1917-1920). In 2012 a similar share of GDP would be about $6.8 trillion.
World History
