JOURNAL OF IQRO – ЖУРНАЛ ИҚРО – IQRO JURNALI – volume 14, issue 02, 2025
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ILMIY METODIK JURNAL
Samarqand Davlat Tibbiyot
Universiteti, Ijtimoiy va gumanitar
fanlar kafedrasi, Tarix fanlari doktori
(PhD), Tursunova Gavhar taqrizi
ostida
Abdug’aniev Bekzod Abduvali o’g’li
Samarkand State Medical University,
Teacher of Social and Humanitarian
Sciences Department
Email:
abduganievbekzod2409@gmail.com
ORCID ID: 0009-0002-8597-3356
ECONOMIC AND MILITARY MOBILIZATION OF THE UNITED STATES DURING
WORLD WAR I: POLICIES, CHALLENGES, AND CONSEQUENCES
Abstract:
During the period of U.S. neutrality (1914–1917), foreign demand for American
products surged, driven by shifting trade routes and wartime necessities. Britain and France,
previously reliant on German imports, turned to the United States for essential goods, funding
their purchases through gold transfers, loans, and the sale of seized private securities. With U.S.
entry into the war, large-scale mobilization became imperative, prompting extensive legislative
action, including the establishment of the National Defense Council, the Selective Service Act,
and various economic regulations. War financing involved progressive taxation, war bonds, and
federal control over key industries. The rapid expansion of the military and aviation sectors
significantly impacted the American economy, leading to inflation and unprecedented
government intervention. The study also explores the post-war economic repercussions,
including the Treaty of Versailles and John Maynard Keynes’ critique of its economic burdens
on Germany. This paper provides a comprehensive analysis of U.S. economic and military
mobilization strategies, highlighting their long-term effects on both domestic and international
economic landscapes.
Keywords:
World War I, U.S. Mobilization, War Economy, War Bonds, Selective Service Act,
Woodrow Wilson, Keynesian Economics, Treaty of Versailles, Inflation, Federal Reserve.
Introduction
During the period of U.S. neutrality (1914–1917), foreign demand for American goods surged
due to shifting trade routes and wartime necessities. Britain and France, previously reliant on
German imports, turned to the United States for essential products, financing their purchases
through gold transfers, loans, and the sale of seized private securities. With the U.S. entry into
the war, large-scale economic and military mobilization became necessary, leading to extensive
legislative actions such as the establishment of the National Defense Council, the Selective
Service Act, and various financial regulations. This paper examines the policies, challenges, and
consequences of U.S. economic and military mobilization during World War I, highlighting its
impact on both domestic and international economic landscapes.
Methods
: Historical analysis, Chronological.
Results and Discussion
: The mobilization for war significantly transformed the American
economy. Industrial production increased rapidly to meet military needs, leading to extensive
government intervention in key sectors. The War Industries Board coordinated production, while
the Lever Food and Fuel Act regulated food and fuel supplies. The rapid expansion of the
military also necessitated the introduction of the Selective Service Act, which allowed for the
JOURNAL OF IQRO – ЖУРНАЛ ИҚРО – IQRO JURNALI – volume 14, issue 02, 2025
ISSN: 2181-4341, IMPACT FACTOR ( RESEARCH BIB ) – 7,245, SJIF – 5,431
ILMIY METODIK JURNAL
drafting of millions of soldiers. Financially, the war was funded through progressive taxation,
war bonds, and government control over essential industries. The War Revenue Act of 1917
introduced excess profit taxes and raised tariffs to support military expenditures. Inflation surged
due to the influx of gold into the U.S., and the Federal Reserve struggled to manage the
economic instability. The post-war economic consequences were significant. The Treaty of
Versailles imposed financial burdens on Germany, and John Maynard Keynes criticized the
treaty for its harsh economic penalties, warning of future instability. The war also marked a shift
in global economic power, with the U.S. emerging as a key financial leader while Britain faced
long-term economic decline.
During the period when the United States remained neutral (from June 1914 to March 1917),
foreign demand for American products increased sharply. This was partly a result of a shift in
trade routes. Previously, Britain and France had purchased goods from Germany and its allies,
but they were now forced to buy them from the United States. More importantly, this surge in
demand was related to the high need for war-essential products such as steel and ammunition.
Britain, France, and their allies paid for these goods through several methods: by shipping gold,
borrowing from the U.S., and selling private securities that had been seized by their governments.
It was this last financing method that caused major concern for Britain. The private securities
owners were compensated by the British government, meaning they received British bonds in
exchange for foreign securities. The British government used the Morgan investment bank in
London to sell the seized securities to Morgan Bank in New York, while maintaining the official
pound-dollar exchange rate for these transactions. However, for Britain, the loss of these
securities was a significant blow. As the first industrialized nation, Britain had long maintained a
higher per capita income and savings than its competitors. A large portion of these savings had
been invested abroad, particularly in Argentina, Canada, the U.S., and Australia. Even as other
nations caught up with Britain industrially, Britain had been able to sustain its relatively high
standard of living largely due to these investments—much like a retired person who has wisely
saved for old age. However, the First and Second World Wars shattered these plans. Britain lost
its ability to maintain a higher standard of living than its rivals by relying on its accumulated
wealth from the glorious industrial era. At the beginning of the war, concerns over the mass sale
of securities owned by foreigners (both private and government-owned) in New York and the
subsequent repatriation of funds in gold caused a brief financial panic. The newly established
Federal Reserve System was not well-prepared to respond directly to this crisis. Fortunately, the
crisis was contained through the issuance of emergency currency—the Aldrich-Vreeland
currency—and the temporary closure of the New York Stock Exchange by the federal
government. However, it soon became clear that the long-term issue was not the outflow of gold
to Europe, but rather the influx of gold into the U.S. due to the export of war-essential military
materials. As a result, the increase in gold inflows into the U.S. led to a significant rise in the
money supply and caused serious inflation. Once the U.S. entered the war, it became clear that
mobilizing a vast army and restructuring the economy on a large scale was necessary. European
nations had already deployed massive armies, and if the U.S. wanted to change the course of the
war, it needed to do the same. Even before the U.S. declared war, Congress had taken some
measures to mobilize the economy. On August 29, 1916, the National Defense Council was
established to coordinate industrial activities. On September 7, the U.S. Shipping Board was
created, granting the Emergency Fleet Corporation a $50 million capital fund to build or lease
ships. After the war declaration, Congress acted swiftly. On April 14, 1917, the Committee on
Public Information was created to generate war propaganda. On April 24, the Liberty Loan Act
was passed, allowing the government to issue war bonds. On May 18, the Selective Service Act
was approved, introducing military conscription. On June 15, the Espionage Act was enacted to
suppress rebellious or treasonous activities. On July 28, the War Industries Board replaced the
National Defense Council, tasked with coordinating and increasing production. On August 10,
Congress passed the Lever Food and Fuel Act to control food and fuel prices and stabilize supply.
JOURNAL OF IQRO – ЖУРНАЛ ИҚРО – IQRO JURNALI – volume 14, issue 02, 2025
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ILMIY METODIK JURNAL
Future U.S. President Herbert Hoover was appointed as the Food Administrator, while Harry
Garfield, son of President James A. Garfield, was appointed as the Fuel Administrator. Taxation
became one of the most controversial issues, but as mentioned earlier, on October 3, Congress
passed the War Revenue Act. This law introduced a progressive surtax on income, excess profit
taxes on corporations and individuals, increased postal rates, and imposed higher taxes on
alcohol, tobacco, luxury goods, and other products. This legislative activity was extensive and
impactful. Such a high level of legislative action in the U.S. was only seen again during Franklin
Roosevelt's "100 Days" program.
Although by the end of October, the primary structure of the war economy had been established,
several important laws were later passed. On December 18, 1917, Congress approved the
Prohibition Amendment to the Constitution. Once ratified, this amendment would ban the
production and sale of alcoholic beverages. The temperance movement had already been gaining
strength—by 1917, 19 U.S. states had prohibited alcohol sales. The war further strengthened the
"dry" advocates while weakening the "wet" supporters. How could a nation allow factory
workers who produced weapons for frontline soldiers to be intoxicated? How could grain, which
was desperately needed by the Allies, be used for alcohol production during a food shortage? On
December 26, President Woodrow Wilson placed the nation's railroads under federal control due
to the severe winter and war-related disruptions in railway operations, which had led to a coal
crisis. His Secretary of the Treasury, William Gibbs McAdoo, was appointed to manage the
railways. Later, Congress passed a law to allocate compensation for the railroads and created the
U.S. Railroad Administration to oversee them. On April 5, 1918, Congress established the War
Finance Corporation. This corporation started with a $500 million capital fund and was
authorized to borrow an additional $3 billion. Its purpose was to support the financing of the war
industry. The final major economic law passed during the war was the creation of the National
War Labor Board on April 8, 1918. This board was responsible for resolving labor disputes.
Troop mobilization occurred at an unprecedented speed, and American military planners were
justifiably proud of their achievements. In January 1918, Secretary of War Newton Baker
announced the rapid expansion of the Armed Forces. In April 1917, the U.S. Army had 211,834
personnel, including 9,324 officers and 202,510 enlisted soldiers. By the end of December 1917,
this number had reached 1,539,485, with 110,835 officers and 1,428,650 enlisted soldiers.
General John J. Pershing, upon arriving in France, had already begun planning for a force of 2
million troops.
Beyond the army, the air force also expanded significantly. It had only been 14 years since the
Wright brothers’ first flight. In April 1917, the Aviation Section of the Signal Corps had just 65
officers and 1,120 enlisted personnel. By early 1918, this had grown to 3,000 officers and 82,120
enlisted personnel. These troops needed to be fed, clothed, armed, housed, trained, and
transported to the front lines. As a result, large contracts were issued by the army, navy, and
Emergency Fleet Corporation for food, clothing, ammunition, and transportation. For example,
the army purchased 19 million blankets, 21 million pairs of wool gloves, and 10 million pairs of
boots. While these were significant numbers, it is essential to consider the vast scale of the U.S.
economy. In 1914, the U.S. had produced 98 million pairs of men’s shoes and 80.9 million pairs
of women’s shoes. This means that the army purchased about 10% of the men’s shoe production.
Although this was a significant portion, meeting such demand was feasible, especially since
civilian demand slightly decreased due to military mobilization. On December 4, 1918, President
Woodrow Wilson departed for Paris to participate in negotiations determining Germany's fate.
Ultimately, the key decisions were made by the "Big Four": Wilson (U.S.), Georges Clemenceau
(France), David Lloyd George (Britain), and Vittorio Orlando (Italy). The primary economic
issues were straightforward: Britain (and other members of the British Empire), France, and Italy
demanded money, land, and resources from Germany. Wilson’s goals, however, were generally
described as more idealistic ...ending secret treaties, granting independence to ethnic minorities
JOURNAL OF IQRO – ЖУРНАЛ ИҚРО – IQRO JURNALI – volume 14, issue 02, 2025
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ILMIY METODIK JURNAL
in Central and Eastern Europe, and establishing the “League of Nations” to prevent future
conflicts. Punishing Germany and seizing its resources were not among his top priorities.
Perhaps Wilson’s attitude toward Germany reflected his views on the American Civil War.
Wilson was a historian and a Southerner, and he believed that the harsh measures taken against
the South after the war had been a grave mistake, leading to long-lasting resentment. In contrast,
during World War II, Franklin Roosevelt adopted the Northern perspective on the Civil War
regarding Germany: the correct policy was the one Lincoln had envisioned for the South—
forcing Germany into unconditional surrender and then implementing political reconstruction to
establish a strong democracy. For economists, the analysis of the Treaty of Versailles begins
with John Maynard Keynes. During the war, Keynes served in the British Treasury and later as
an advisor to the British delegation at the Paris Peace Conference. However, he left before the
conference concluded and returned to England to write his book The Economic Consequences of
the Peace. In this book, he harshly criticized the Treaty of Versailles, condemning it as a
“Carthaginian peace” that would lead to future unrest in Europe. While Keynes’ criticisms were
extensive, he emphasized two key points. First, the reparations imposed on Germany by the
Allies were excessively high. A large portion of these reparations included separation allowances
for soldiers, pensions for veterans, and compensation for veterans and their families. Germany
had agreed to the armistice based on Wilson’s promises, which stated that Germany would only
be responsible for compensating damages suffered by civilians, and that Allied military expenses
or punitive payments would not be imposed on Germany. According to Keynes, the suffering of
a soldier’s widow and a factory worker’s widow was equally tragic. However, based on the
promises previously given to Germany, separation allowances, pensions, and compensations for
widows should not have been included in the treaty’s obligations. Keynes acknowledged the
devastating economic impact on civilians. However, he argued that the destruction was largely
confined to the battlefield areas. Since trenches were dug and artillery bombardments took place
in relatively narrow zones, the agricultural lands and industrial facilities on either side of these
battlefields remained largely intact.
Conclusion
World War I drastically reshaped the U.S. economy and global financial dynamics. The war
accelerated industrial growth, led to unprecedented government intervention, and introduced new
financial policies that influenced future economic strategies. While taxation and war bonds
helped fund the war, inflation and economic instability remained major challenges. The study
concludes that U.S. mobilization strategies were effective in supporting the war effort, but the
long-term economic consequences—both domestically and internationally—were profound.
References
1. Keynes, J. M. (1919). The Economic Consequences of the Peace. Macmillan.
2. Link, A. S. (1954). Wilson: The Road to the White House. Princeton University Press.
3. Rockoff, H. (2012). America’s Economic Way of War: War and the U.S. Economy from the
Spanish-American War to the Persian Gulf War. Cambridge University Press.
4. Sprague, O. M. W. (1917). Loans and Taxes in War Finance. American Economic Review,
7(1, Supplement), 1–15.
5. U.S. Congress. (1917). War Revenue Act of 1917. Public Law 65-50.
6. Venzon, A. C. (1999). The United States in the First World War: An Encyclopedia. Garland
Publishing.
7. Wilson, W. (1918). Fourteen Points Speech. U.S. Government Printing Office
