By 1914, Europe’s armed forces had been built up in a sustained arms race, and clusters of nations had been linked together in military alliances. Nationalistic and imperialistic rivalries had combined to produce a dangerous state of affairs. In France, many still sought revenge for the territory and reparations that France had been forced to give Germany as a result of the Franco-Prussian War of 1870-1871. In Austria-Hungary, fear of the restive Slavic minorities had increased. In Britain, Germany’s attempt to challenge British naval supremacy had produced heightened tensions. Germany in turn feared being surrounded by hostile military alliances. And this list of fears and conflicts could be greatly expanded.
Even on the eve of war, however, there was still considerable optimism that the peace would hold. Europe had experienced several decades without a major war, and in the meantime, industrialization and relatively free international trade had produced rapidly rising standards of living. A war that would destroy the fruits of this progress seemed irrational. Many people believed, moreover, that the rising international solidarity of the labor movement would undermine support for a war entered into by imperialistic capitalist powers. Although financial markets were retrenching, they gave no sign that a cataclysm lay ahead. The optimists were wrong.
The assassination of Austrian Archduke Ferdinand by a Serbian revolutionary on June 28, 1914, set off a chain reaction that soon engulfed Europe in the bloodiest war the world had yet seen. On one side were the Allies: Britain, France, Italy, and Russia, and several smaller nations. On the other side were the Central Powers: Germany, Austria-Hungary, and their associates. Many believed that the war would end quickly as the Franco-Prussian War
Had done. But on the western front, a German advance into France became bogged down in trench warfare, producing a stalemate that could not be broken even with the loss of incredible numbers of lives. By one conservative estimate, 10 million people died in the war and another 20 million were wounded (Chickering and Forster 2000, 6).
The first economic reaction in the United States was a financial panic. The stock market was closed for four months, an unprecedented event that has never been repeated (Silber
2007), and banks experienced considerable pressure as depositors tried to convert their money into gold. But the crisis soon passed. Under the Aldrich-Vreeland Act, adopted after the crisis of 1907, banks had been authorized to issue emergency currency as a temporary substitute for gold, and the issue of this currency put an end to the crisis. At one point, this currency amounted to nearly one-quarter of the currency in the hands of the public (Friedman and Schwartz 1963, 172). It soon became clear that the period of American neutrality (from 1914 until 1917) would be immensely profitable for American business. German imports from the United States fell to practically nothing because of the British naval blockade; but Britain, France, and other European countries began to purchase large amounts of food and munitions at ever-rising prices from the United States. A wide gap opened between America’s soaring exports to Europe and America’s declining imports. The Europeans paid for these exports by extinguishing holdings of American debt, by shipping gold, and by incurring new debts. When the war began, the United States was a debtor, the normal status for a developing country. When the war ended, the United States was a creditor that held much of the world’s stock of monetary gold. Before the war, the world’s financial center was London; after the war, it was New York.
With the fighting so far away and so bloody, sentiment in the United States initially favored keeping out of the war, but eventually many forces and events combined to push the United States toward active involvement on the side of the Allies. Partly it was the close cultural and linguistic ties between Britain and the United States. But the crucial factor in turning public opinion against Germany was Germany’s use of submarine warfare. In 1915, after the sinking without warning of the British ship Lusitania (with the loss of 1,198 lives, including 124 Americans), President Woodrow Wilson sent a series of strongly worded warnings to Germany. For a time, Germany moderated its use of submarines. In early 1917, however, the Germans returned to a policy of unrestricted submarine warfare in a desperate gamble to starve Britain into submission before intervention by the United States could turn the tide.
America’s involvement in the war would be brief but decisive. The United States declared war on April 17, 1917. American forces were instrumental in winning a number of important victories. These victories and the prospect of enormous American reinforcements and victories to come forced the Germans, exhausted by years of war and blockade, to negotiate. The armistice with Germany was signed on November 11, 1918, just 19 months after America entered the war. When the war ended, the Central Powers still controlled large amounts of Allied territory from France to Crimea. And the Germans believed that they had agreed to end the fighting based on assurances from President Wilson of a just peace. As we will see, many Germans would come to feel that Germany had been deceived.
World History
