Reprinted from the American Economic Review, Vol. IX, No. 4, Decemlser 1919, 
 published by the American Economic Association. Inquiries in regard to membership should 
 be made to Professor A. A. Young, Cornell University, Ithaca, N. Y. 
 
 635 
 
 S37 
 
 Copy 1 
 
 The Cost of the War and How 
 It Was Met 
 
 EDWIN R. A. SELIGMAN 
 
 Columbia University 
 
► 
 

 THE COST OF THE WAR AND HOW IT WAS MET 
 
 The time has not yet come for a final statement of the fiscal his- 
 tory of the war. For one thing, the figures are not yet completely 
 available ; and, in the next place, the expenses connected with the 
 war are not yet over. It is, however, not premature, one year after 
 the declaration of the armistice, to attempt to present in a sum- 
 mary fashion a preliminary survey and interpretation of the facts. 
 Various ad interim endeavors to present certain phases of the sub- 
 ject have already been made.^ 
 
 The problems to which it is desired here to call attention are as 
 follows. In the first place, what is meant by the cost of war? 
 Secondly, in considering actual governmental outlays, is it desir- 
 able to distinguish between the expenditures during the war and 
 war expenditures.^ And, if the answer be in the affirmative, how 
 are the latter facts to be ascertained? In the third place, from 
 what sources were the actual war outlays derived? This intro- 
 duces, of course, the question of taxes versus loans. The facts as 
 to taxation are first to be secured. Here it will be seen that there 
 is considerable confusion as to what is meant by war taxes, and 
 that, just as there has been a failure to distinguish between ex- 
 penditures of the war period and war expenditures, so the proper 
 line has not been drawn between taxation during the war and war 
 
 1 The most valuable presentation of facts for the earlier period of the war 
 will be found in the bulletins of the Copenhagen War Study Society and of 
 the SocUti de Banque Suisse. Some later figures will be found in L. P. Ayres, 
 The War -with Germany, published by the Statistics Branch of the General 
 Staff of Washington, 191&. Some computations as to the cost of the war will 
 be found in Edgar Crammond's Address on the Cost of the War before the 
 Institute of Bankers, London, March, 1919; as well as in Sir Edward Holden's 
 The Cost of the War and its Payment in his report to the London City and 
 Midland Bank, January, 1919. Facts as to public debts will be found in The 
 World's War Debt (Mechanics and Metals National Bank, New York, 1919); 
 in The Internal War Loans of Belligerent Countries (National City Company, 
 1918) ; and in the article by L. R. Gottlieb on the "Indebtedness of the Prin- 
 cipal Belligerents" in the Quarterly Journal of Economics for May, 1919. The 
 most valuable document for the earlier period of the war is the report, No. 
 4133, to the French Chamber of Deputies, by M. Louis Marin in 1917. By 
 aU odds the most complete and valuable studies on the subject are those by 
 Professor Gaston Jeze in almost every number of the Revue de Science et de 
 Legislation Financi^res. He has dealt particularly with England, France, 
 Italy, and Germany in three series of articles entitled respectively "Les Finan- 
 ces de Guerre," "Les M^hodes Financi^res," et "Les Emprunts de Guerre." 
 
740 Edwin R. A. Seligman [December 
 
 taxation. A correct interpretation of the facts will yield some 
 rather unexpected results. The fourth problem is that of the 
 relative weight attached by different countries to the various cate- 
 gories of taxation in raising the necessary revenues. Finally, we 
 have to consider the role played by public debts and the relative 
 importance attached to long-time and short-period borrowings. 
 
 In order to put the results in the most compact form, a series 
 of tables have been constructed. The figures throughout this arti- 
 cle have been taken from official sources ;^ and the foreign curren- 
 cies have been converted into dollars according to a scale which 
 represents their actual pre-war coin value.^ Owing to the depre- 
 ciation of the foreign currencies, this naturally gives a somewhat 
 exaggerated picture of the existing burdens. 
 
 I 
 
 The cost of the war may mean several different things. In the 
 narrower sense, it means the actual money outlay, or expenditure 
 
 2 The ofBcial sources that have been utilized are as follows: 
 
 Great Britain: The various speeches, as found in Hansard, of the chancel- 
 lors of the exchequer (Lloyd George, 1914-15; McKenna, 1915-16; Bonar Law, 
 1917-18; and Austen Chamberlain, 1919, — the last being his speeches of May 
 and June, 1919) and of the Prime Ministers (Asquith and Lloyd George) ; 
 the Animal Finance Accounts; the Reports of H. M. Inland Revenue; and the 
 Return relating to the National Debt from 1S73 on (cd. 8972, 1918). 
 
 France: The annual reports (Rapports G4n^raux) of the Budget Commis- 
 sion; the Expos4 des Motifs du Pro jet de Loi for each of the new revenue 
 laws ; and the speeches in the Chamber of Deputies of the Ministers of Finance 
 (Ribot, 1915-16; Klotz, 1917-19,— the last being the speech of May 27, 1919). 
 
 Italy: The reports (Relazioni) and speeches of the Ministers of the Treas- 
 ury (Carcano, 1916-17; Nitti, 1917-18; Stringher, 1919; Schanzer, 1919,— the 
 last being the speech of July, 1919) as well as the studies of Professors Flora, 
 Cabiati and Einaudi. 
 
 Oermany: The Reichstag speeches of the Ministers of Finance (Kuhn, 1914- 
 15; Helfferich, 1915-lG; von Roedern, 1916-18; Schiffer 1918-19; and Erz- 
 berger, 1919, — the last being his speech of October, 1919). 
 
 Russia: The reports of the Ministers of Finance, especially Bark, 1914-16; 
 Gukovski, 1916-17; and Tereschenko, 1917. 
 
 Austria-Hungary : The reports of the Budget Commissions. 
 
 Translation of some of these reports will be found in the Bulletin de Statis- 
 tique. Excerpts from some of the above reports as well as of the otBcial re- 
 ports of other countries will be found in the current numbers of The Econo- 
 mist and L'Economiste Europien. 
 
 3 1 £ = $4.87. 1 ruble = 51.5 cents. 
 
 1 franc — 19.3 cents. 1 crown =z 20.3 cents, 
 
 1 mark = 23.8 cents. 1 £ T = $4.40. 
 
1919] The Cost of the War and How It Was Met 74)1 
 
 in dollars and cents, directly involved in prosecuting the war. In 
 the wider sense it includes many items, both direct and indirect, 
 which are of significance from the economic point of view. The 
 real cost of the war in this sense may mean either the actual loss 
 of lives and of property or the diminution of the annual social out- 
 put. The direct loss of property is susceptible of fairly accurate 
 measure; the cost due to the loss of lives is more difficult to esti- 
 mate. Most of the calculations on the latter point have been en- 
 tirely arbitrary. So far as the wealth of a country is measured by 
 its social income it may be reduced by the actual loss of territory, 
 as in Germany and Austria ; by the impairment of its natural re- 
 sources such as coal mines and forests, as in France; by the re- 
 duction of labor power, due to the wounded workmen or the re- 
 sults of starvation on the civilian population, as in most of the 
 European countries ; or by the loss of economic efficiency due to a 
 lowering of the standard of life or to a change in the attitude 
 toward habits of work. The total costs of a war in this sense, al- 
 though they are for the most part incalculable, are none the less 
 of profound significance. 
 
 In this paper we shall attempt to deal only with the direct money 
 costs. These direct money costs or governmental expenditures for 
 war include not only the actual outlays for military and naval 
 purposes but also the whole range of expenditures incurred in in- 
 dustrial life to prepare the wherewithal for the army and navy; 
 and they also comprise the sums devoted to the maintenance of the 
 families of the soldiers. All these items are far greater in modem 
 times than they used to be. It is a far cry from the meeting of 
 two savage tribes armed with bows and arrows or javelins to the 
 modern sixteen inch guns, the dreadnoughts, the aeroplanes, the 
 submarines, the poison gas, and the innumerable technical adjuncts 
 of modern warfare. The consequence is that the money costs of 
 the great war have far transcended those of all previous conflicts. 
 
 The attempt to present in figures the cost of the war even in 
 this restricted sense meets with several difficulties. In the first 
 place, the question arises as to the period when we ought to stop. 
 In one sense the war ceased when the armistice was declared: in 
 another sense the war did not actually stop until peace was rati- 
 fied — in this case a matter of over a year more. But even when 
 peace is made, the war expenditures are by no means over. The 
 process of demobilization is a slow one; and in many countries 
 there have been considerable demobilization bonuses. Moreover, it 
 
742 Edwin R. A. Seligman [December 
 
 is necessary to continue for some time the policing of the con- 
 quered countries. Again, we must take account of the compensa- 
 tion to citizens for war damages; of the expenses of reconstruc- 
 tion; and of the loss on exchange of the depreciated currencies. 
 Finally comes the question of the pensions to the wounded soldiers 
 or to the families of the dead. It will be seen, therefore, how im- 
 possible it is to state with any accuracy at the present time the 
 costs of the war, while these are still being incurred. Furthermore, 
 the figures ordinarily given contain many inaccuracies. The richer 
 countries make advances to the poorer countries, and these ex- 
 penditures are sometimes counted twice in the total — a procedure 
 legitimate only on the assumption that the loans will not be repaid. 
 Again, in a country like the United States, which has substituted 
 an insurance system for pensions, the nominal expenditures appear 
 smaller than is really the case, because of the receipt of vast in- 
 surance premiums which will ultimately all be expended again. 
 Finally, the figures make no allowance for the changes in the 
 price level or the alteration in the value of money. In a great war 
 like the present, prices always rise; in some countries they have 
 doubled, in some they have more than trebled, for reasons which it 
 is needless to discuss here. What seems, therefore, to be an in- 
 creasing outlay from year to year may be in reality due, in part 
 at least, to this cause. 
 
 After making allowance for these difficulties, we may proceed 
 to state some of the facts as to the actual outlays of various coun- 
 tries. 
 
 The first point of interest is the average daily expenditure for 
 war purposes. In all the belligerent countries it naturally took 
 some time for them to get into their stride. This is especially true 
 of Great Britain. The figures of the average daily expenditures, 
 as given by the chancellors of the exchequer, amount to almost 
 ten million dollars for the opening months of the war and reached 
 the maximum of almost thirty-six millions by 1918. These stu- 
 pendous figures, however, are somewhat exaggerated, because no 
 distinction is made between expenditures in the war and expendi- 
 tures for the war. In order to ascertain the real war expenditures 
 in any country, it is obvious that we must deduct the amount of 
 ordinary or peace expenditures. This it is not always easy to do. 
 In the first place, peace expenditures themselves tend to gi'ow from 
 year to year. If, therefore, we take as a criterion the ordinary 
 expenditures for the year preceding the war, this sum ought, es- 
 
1919] The Cost of the War and How It Was Met 
 
 743 
 
 pecially in a long war, to be somewhat increased from year to year. 
 In the second place, the expenditures prior to the war may some- 
 times include preparations for an impending war and should there- 
 fore be reduced accordingly. Since, however, it is impracticable 
 to make these detailed corrections in every case, it will suffice to 
 deduct from the expenditures of each war year the amount of the 
 expenditures in the last year of peace, even though this tends 
 slightly to exaggerate the real money cost of the war. Making 
 these corrections, it appears from table A that the average daily 
 war expenditures in Great Britain grew from 9^/2 million dollars 
 during the first eight months of the war to 331/^ miUions m 1918 
 and then slowly receded. In France the average daily expendi- 
 tures, as was to be expected, were somewhat less, rising from about 
 81/^ million dollars during the first three months of war to over 
 21 millions during 1917, the last full year of war. In Germany 
 the daily expenditures were approximately the same as in Great 
 Britain, rising from about 13 million dollars in the first nine 
 months of the war to about 341/2 millions during the last half of 
 1918, In the case of both Germany and France, however, it is 
 not known whether the figures comprise the total expenditures or 
 only the purely war expenditures. In the former event, the daUy 
 expenditures of Germany would be a little less than those of Great 
 Britain ; in the latter, they would be a little more. In Italy and 
 Austria, the daily expenditures were naturally smaller, amount- 
 ing as a maximum to 10^ and 20 millions respectively. In Rus- 
 sia the daily expenditures rose in 1916 to 21 millions, and in 
 1917, just prior to the October revolution, nominally to 47 mil- 
 lions. Owing to the great depreciation of the ruble, however, the 
 actual expenditures were much less. The salient facts are given 
 in table A. 
 
 Table A. — Average Daily War Expenditures. 
 (In millions) 
 
 Great Britain 
 
 
 Average daily 
 
 Average daily 
 
 
 total expenditures 
 
 ■war expenditures! 
 
 
 £ 
 
 ^ 
 
 £ 
 
 ^ 
 
 Aug. 4, 1914— Mar. 30, 1915 
 
 2.05 
 
 9.98 
 
 1.98 
 
 9.46 
 
 Apr. 1, 1915— " 1916 
 
 4.27 
 
 20.79 
 
 3.73 
 
 18.16 
 
 1916— " 1917 
 
 6.02 
 
 29.33 
 
 5.48 
 
 26.69 
 
 1917— " 1918 
 
 7.39 
 
 35.97 
 
 6.85 
 
 33.36 
 
 1918— Nov. 9, 1918 
 
 7.44 ] 
 
 
 
 
 (Armistice) 
 
 i7.07 
 
 34.43 
 
 6.52 
 
 31.75 
 
 Nov. 10, 1918— Mar. 30, 1919 
 
 6.47 J 
 
 
 
 
744 
 
 Edtenn R. A. Seligman 
 
 FUAXCE 
 
 [December 
 
 
 Average 
 
 monthly 
 
 Average daily 
 
 
 war expenditures 
 
 war expenditures 
 
 
 fr. 
 
 ^ 
 
 $ 
 
 Aug. 3— Dec. 31, 1914 
 
 1,318 
 
 254 
 
 8.5 
 
 Jan. 1— Dec. 31, 1915 
 
 1,900 
 
 367 
 
 12.2 
 
 « — « 1916 
 
 2,743 
 
 529 
 
 17.6 
 
 « _ « 1917 
 
 3,360 
 
 648 
 
 32.4 
 
 Germany 
 
 
 
 
 Average monthly 
 
 Average daily 
 
 
 
 
 war expenditures 
 
 war expenditures 
 
 
 Mk. 
 
 MA;. $ 
 
 Aug. 1, 
 
 1914— June 30, 
 
 1915 
 
 1,675 
 
 55.8 13.3 
 
 July 1, 
 
 1915— 
 
 1916 
 
 2,008 
 
 66.9 15.9 
 
 " 
 
 1916— 
 
 1917 
 
 2,867 
 
 95.6 22.7 
 
 " 
 
 1917— 
 
 1918 
 
 3,908 
 
 130.3 31. 
 
 " 
 
 1918— Dec. 31, 
 
 1918 
 
 4,358 
 
 145.2 34.5 
 
 Italy 
 
 July 1, 1915— June 30, 1916 
 
 " 1916— " 1917 
 
 1917— " 1918 
 
 1918— Oct. 31, 1918 
 
 Annual expendituress 
 
 li. 
 
 3,351 
 14,132 
 19,734 
 
 9.726 
 
 1,612 
 
 2,727 
 3,808 
 1,977 
 
 Average daily 
 expenditures 
 
 9 
 
 4.4 
 
 7.5 
 
 10.4 
 
 6.5 
 
 
 Russia 
 
 
 
 
 Annual war 
 expenditures 
 
 Average daily 
 war expenditures 
 
 Aug. 1, 1914— Dec. 31, 1914 
 
 Jan. 1, — " 1915 
 
 — " 1916 
 
 —Oct. 30, 1917 
 
 ru. 
 
 1,703 
 
 9,194 
 
 15,372 
 
 25,231 
 
 $ 
 
 877 
 
 4,735 
 
 7,916 
 
 12,993 
 
 $ 
 
 5.8 
 12.9 
 21.6 
 47.0 
 
 AtrSTEIA3 
 
 
 
 Annua] 
 
 war 
 
 Average daily 
 
 
 
 expenditures 
 
 war 
 
 expenditures 
 
 
 Kr. 
 
 $ 
 
 
 9 
 
 July 28, 1914— June 30, 
 
 1915 
 
 10,706 
 
 2,174 
 
 
 6.4 
 
 July 1, 1915— 
 
 1916 
 
 15,726 
 
 3,192 
 
 
 8.7 
 
 1916— 
 
 1917 
 
 18,788 
 
 3,812 
 
 
 10.4 
 
 1917— 
 
 1918 
 
 22,170 
 
 4,500 
 
 
 12.3 
 
 1 Arrived at by deducting the expenditures for the year 1913-1914 (197 mil- 
 lions) from the total expenditures. 
 
 2 Not including payments abroad. 
 
 3 The figures for Hungary are not available; but as the total expenditures of 
 Hungary during the four years were about one third of those of Austria, it 
 is safe to add that proportion to the Austrian expenditures in order to ascer- 
 tain the average daily war expenditures of Austria-Hungary. 
 
1919] The Cost of the War and How It Was Met 745 
 
 When the United States entered the war, the scale of operations 
 became so gigantic that the daily war expenditures soon far ex- 
 ceeded those of any other belligerent. In the second month of the 
 war the average daily expenditures for war purposes reached 15 
 million dollars, and a little over a year later they had risen to al- 
 most 50 million. By the end of 1918, as appears from table B, the 
 daily average war expenditures attained the staggering sum of 
 64^2 million dollars, almost double those of Great Britain and far 
 exceeding those of any other belligerent. 
 
 We come next to the total cost of the war. In attempting to 
 present the comparative statistics on this point, we must be mind- 
 ful of the difficulties adverted to above. The figures are not quite 
 accurate and cannot be made entirely accurate for several reasons. 
 In the first place, the last date in the official return differs from 
 country to country. The dates are, however, all subsequent to 
 the armistice, with the exception of Russia, where we have no 
 trustworthy figures after the October revolution in 1917. In 
 the second place, we do not know, except in the case of the United 
 States and Great Britain, whether the figures comprise the total 
 expenditures or only the purely war expenditures. Even in the 
 case of the United States the official figures are not quite accurate, 
 as will be seen below.* Moreover, in the case of Japan as well as 
 some of the minor belligerents, no figures are included because the 
 war expenditures were either virtually non-existent or of an ex- 
 ceedingly insignificant amount. 
 
 Making allowance for these points, it will be seen from table C 
 that the total war expenditures amount to about 232 billion dol- 
 lars. From this sum, however, must be deducted the amounts 
 counted twice, because advanced to their allies by the United 
 States, Great Britain, France, and Germany, aggregating a little 
 over 21 billions. This would bring the actual net war expenses to 
 over 210 billion dollars.^ Inasmuch, however, as most of the 
 countries will continue, for some little time in the future, to have 
 expenditures attributable to the war, it is probable that the total 
 war expenditures will, by the end of 1920, amount to over 236 
 billions, or, deducting the advances to allies, to a little less than 
 
 i Infra, p. 753, note to table H. 
 
 5 For France we have taken the total five-year expenditures as stated by 
 Minister Klotz in 1919 (192 billion francs) and have deducted 23 billions, as 
 representing the peace expenditures for the four and a half year period, thus 
 leaving a remainder of 1G9 billion francs or 311/3 billion dollars. 
 
746 
 
 Edwin R. A. Seltgman 
 
 [December 
 
 Table B. — Exi'ExnrrrnEs of the United States. 
 (In millions) 
 
 
 Monthly expendi- 
 
 
 
 
 tures exclusive of 
 
 Monthly 
 
 Average 
 
 Period 
 
 the principal of 
 
 war 
 
 daily war 
 
 
 the public debt 
 and of postal 
 
 expenditures' 
 
 expenditures 
 
 
 expenditures 
 
 
 
 1917: Apr. G-30 
 
 $279 
 
 $219 • 
 
 .$8.0 
 
 May 
 
 527 
 
 467 
 
 15.0 
 
 June 
 
 410 
 
 350 
 
 11.7 
 
 Total, Apr. 6-June 30 
 
 $1,216 
 
 $1,156 
 
 
 July 
 
 QG2 
 
 602 
 
 19.4 
 
 August 
 
 757 
 
 697 
 
 22.5 
 
 September 
 
 746 
 
 686 
 
 22.9 
 
 October 
 
 944 
 
 884 
 
 29.5 
 
 November 
 
 986 
 
 926 
 
 30.9 
 
 December 
 
 1,105 
 
 1,045 
 
 33.7 
 
 1918: January 
 
 1,090 
 
 1,030 
 
 33.2 
 
 February 
 
 1,012 
 
 952 
 
 34.0 
 
 March 
 
 1,156 
 
 1,096 
 
 35.9 
 
 April 
 
 1,215 
 
 1,155 
 
 38.5 
 
 May 
 
 1,508 
 
 1,448 
 
 46.7 
 
 June 
 
 1,512 
 
 1,452 
 
 48.4 
 
 Total, fiscal year 1918 
 
 $12,697 
 
 $11,977 
 
 
 1918: July 
 
 1,608 
 
 1,548 
 
 49.9 
 
 August 
 
 1,805 
 
 1,745 
 
 56.8 
 
 September 
 
 1,557 
 
 1,497 
 
 49.9 
 
 October 
 
 1,665 
 
 1,605 
 
 51.8 
 
 November 
 
 1,935 
 
 1,875 
 
 62.5 
 
 December 
 
 2,061 
 
 2,001 
 
 64.5 
 
 1919: January 
 
 1,962 
 
 1,902 
 
 61.4 
 
 February 
 
 1,189 
 
 1,129 
 
 40.0 
 
 March 
 
 1,379 
 
 1,319 
 
 42.5 
 
 April 
 
 1,429 
 
 1,369 
 
 45.6 
 
 May 
 
 1,112 
 
 1,052 
 
 33.9 
 
 June 
 
 809 
 
 749 
 
 24.9 
 
 Total, fiscal year 1919 
 
 $18,505 
 
 $17,785 
 
 
 Total, Apr. 6, 1917- 
 
 
 
 June 30, 1919 
 
 $32,428 
 
 $30,918 
 
 
 1 Obtained by deducting one twelfth of the annual (peace) expenditures for 
 1915-1916 exclusive of postal expenditures: i.e., one twelfth of $1,008—287 mil- 
 lions = 60 millions. Secretary Glass in his Letter of Juhj 9, 1919, to the 
 Chairman on the Committee on TFay.f and Means excludes postal expenditures 
 in the first column, but fails to exclude them when making the deduction for 
 peace expenditures. He consequently arrives at the figure of $30,177 millions 
 as the cost of the war. The total of $30,918 millions given above does not, 
 however, represent accurately the war expenditures, as the figures are based 
 on the provisional daily treasury statements used by Secretary Glass. The 
 correct total, arrived at in another way, will be found in table H below. But 
 the above figui*es are the only ones available for calculating the monthly and 
 daily expenditures. 
 
1919] The Cost of the War and How It Was Met 747 
 
 215 billions. This may be accepted as a fairly accurate state- 
 ment of the real money cost of the war." 
 
 Table C. — Total War Expenditures 
 (In millions) 
 
 Great Britain Aug. 4, 1914 -Mar. 31, 1919 £8,601 $41,887 
 
 Australia " " " . " " " 291 i,46l 
 
 New Zealand " " " - « " " 7« 365 
 
 Canada " " " - Aug. " " 1,545 
 
 South Africa " " " - Mar. " " 33 243 
 
 India " " " - " " « 119 584 
 
 British Empire 
 
 France Aug. 3, 1914 -Mar. 31, 1919 fr. 
 
 Russia Aug. 1, 1914 -Oct. 31, 1917 ru. 
 
 Italy May 23, 1915 - May " 1919 11. 
 
 Belgium Aug. 2, 1914 -Oct. " 1918 fr. 
 
 Rumania " 27, 1916 - " " 
 
 Serbia July 28, 1914 - " " 
 
 United States .... April 5, 1917 -June 30, 1919 
 
 Entente Powers 156,050 
 
 Germany Aug. 1, 1914 - Oct. 31, 1919 mk. 204,268 48,616^ 
 
 Austria-Hungary.. July 28, " -July " " kr. 119,504 24,858=* 
 
 Turkey Nov. 3, " - Oct. " 1918 1,802 
 
 Bulgaria Oct. 4, 1915- " " " 732 
 
 
 $46,085 
 
 169,000 
 
 32,617 
 
 51,500 
 
 26,522 
 
 81,016 
 
 15,636^ 
 
 5,900 
 
 1,387 
 
 
 907 
 
 
 635 
 
 
 32,261 
 
 Central Powers 76,008 
 
 Total $232,058 
 
 Loans to Allies 
 
 Great Britain £1,739 $8,467 
 
 France fr. 6,700 1,293 
 
 Germany mk. 9,500 2,261 
 
 United States 9,102 
 
 Total 21,123 
 
 Total net war expenditures $210,935 
 
 iThe total expenditures were li. 91,016 millions. Deducting 10,000 millions 
 for four years of peace expenditures leaves 81,016. 
 
 2 Obtained by adding to the war debt as found in table R approximately 
 5 billion marks of war expenditures paid out of revenue. 
 
 3 Obtained by using the figures of war debt as found in table R. 
 
 II 
 
 The question now arises as to the steps taken by the various 
 countries to meet these stupendous outlays. Of the older expedi- 
 ents, such as war treasures or the sale of public property, there 
 was naturally no question. In Germany alone was there a war 
 
 6 These figures are considerably larger than those given by Ayres and other 
 writers. But none of these authors uses the latest, and much augmented, 
 oflScial figures for France, Italy, and especially Germany. 
 
748 Edwin R. A. Selignwn [December 
 
 treasure. But, as even this was so small as to be well nigh negligi- 
 ble, it follows that the only two available resources were taxation 
 and borrowing. 
 
 When we compare these two expedients we are struck not only 
 by the great difference in the theories of war finance followed by 
 the various countries, but also by the diversity in the economic 
 conditions which largely influenced the choice. In general, it may 
 be said that all countries were compelled to rply to an overwhelm- 
 ing extent on public loans, but that Great Britain and the United 
 States raised a greater share by taxation than did other coun- 
 tries. Italy, for instance, was able to secure by new taxation 
 only just about enough to pay the interest on the war loans; 
 Germany accomplished this only in part ; while France was not 
 in a position to defray any of her war expenses from taxation. 
 The same is true of the other belligerents, Avith the exception of 
 some of the British colonies. 
 
 Proceeding to consider this matter in detail, we shall first at- 
 tempt to set forth the facts as to war taxation. 
 
 Great Britain, as the wealthiest of the belligerents, adopted at 
 the outbreak of war the praiseworthy method of endeavoring to 
 raise as much as possible from taxation. From year to year, as 
 the expenses mounted up, continually more demands were made 
 upon the taxpayer. The war expenditures were, however, so 
 prodigious that it soon turned out to be impracticable to obtain 
 more than a comparatively small proportion of the total outlay 
 from taxation. The figures ordinarily advanced to illustrate this 
 point do not, however, give a true picture of the situation. The 
 statements made by the various chancellors of the exchequer, and 
 repeated by all commentators, are based on the proportion that 
 total taxes bear to total expenditures. This method of calcula- 
 tion, as will be seen from table D, shov/s that almost a quarter of 
 the total expenditures or, to be more exact, 24.9 per cent, was 
 derived from taxes. These figures, however, involve a double error. 
 In the first place, the really significant problem is to ascertain the 
 war expenditures, not simply the total expenditures. War ex- 
 penditures can best be obtained, as we have seen, by deducting 
 from the total annual expenditures the expenditures for the last 
 full year of peace. In the second place, what is significant is not 
 the total yield of all taxes, but the proceeds of war taxes, that is, 
 the proceeds of the additional taxes raised during the war. These 
 again can be obtained by deducting from the total tax revenue the 
 
1919] 
 
 Tlie Cost of the War and How It Was Met 
 
 749 
 
 yield of the taxes during the last full year of peace. If then we 
 endeavor to ascertain how much of the war expenditures were met 
 by war taxes — and this is really the important problem — we find 
 that, immense as were the burdens resting upon the British tax- 
 payer, the percentage of war expenditures raised by war taxes was 
 much smaller than is usually stated. As a matter of fact, as ap- 
 pears from table D, in the first year of war only a little over 7 
 per cent of the total war expenditures were raised from war taxes. 
 With every succeeding year, indeed, the percentage increased until 
 in the last year of war, 1918-1919, slightly over one quarter of the 
 war expenditures were met from war taxes. For the entire five 
 years, however, the proportion of war taxes to war expenditures 
 was about 17 per cent. In other words, only a little more than 
 one sixth of the war expenditures in Great Britain was derived 
 from war taxes. Even if we exclude from the war expenditures the 
 sums advanced to the Allies — and the Chancellor of the Exchequer, 
 
 Table D.- 
 
 -War Expenditures of Great Britain. 
 (In millions sterling) 
 
 
 Year ending March 30 
 
 Total for 
 
 the five 
 
 years 
 
 1915-1919 
 
 
 1915 
 
 1916 
 
 1917 
 
 1918 
 
 1919 
 
 Total expenditures 
 
 War expenditure^! 
 
 Loans to Allies and Do- 
 minions 
 
 Revenues other than loans 
 Tax revenues 
 
 £ 
 
 560 
 
 357 
 
 Q21 
 189 
 26 
 
 P.c. 
 
 40.5 
 33.7 
 
 7.3 
 
 £ 
 1,559 
 1,363 
 
 337 
 290 
 127 
 
 P.c. 
 
 21.6 
 18.6 
 
 9.3 
 
 £ 
 
 2,198 
 2,001 
 
 573 
 514 
 351 
 
 P.c. 
 
 25.1 
 
 22.4 
 
 17.5 
 
 £ 
 2,696 
 2,499 
 
 707 
 613 
 450 
 
 P.c. 
 
 26.2 
 22.7 
 
 18.0 
 
 £ 
 2,579 
 
 2,382 
 
 889 
 784 
 621 
 
 P.c. 
 
 34.1 
 30.4 
 
 26.0 
 
 £ 
 9,592 
 
 8,601 
 
 1,739 
 2,733 
 2,390 
 1,475 
 
 P.c. 
 
 28.1 
 24.9 
 
 17.1 
 
 War tax revenuess 
 
 Proportion of total ex- 
 penditures from non- 
 loan revenues 
 
 Proportion of total ex- 
 penditures from taxes 
 
 Proportion of war ex- 
 penditures from war 
 
 Proportion of net war 
 expenditures (less 
 loans to Allies and 
 
 . Dominions) from war 
 taxes 
 
 21.2 
 
 1 Obtained by deducting from the total expenditures each year the peace ex- 
 penditures for 1914, amounting to 197 millions. 
 
 2 Obtained by deducting from the tax revenues the 1914 tax revenue, amount- 
 ing to 163 millions. 
 
750 
 
 Edwin R. A. Seligmn-n 
 
 [December 
 
 Mr. Chamberlain, thinks it safe to allow for only half of this 
 amount — the proportion would be a little over 21 per cent or 
 slightly more than one fifth. These figures are much less than is 
 ordinarily stated. But even this proportion of revenue derived 
 from taxation Avas sufficient to maintain the credit of Great 
 Britain. 
 
 In the other belligerent countries, the showing was by no means 
 so good. France struggled under a double difficulty. In the first 
 place, France was invaded at the outset of the war ; and the terri- 
 tory occupied, although relatively small in extent, represented the 
 richest and the most industrially developed part of the country. 
 This operated largely to reduce the ordinary revenue. In the 
 second place, the resultant economic confusion, as well as the gen- 
 eral political situation, rendered it difficult to impose any new 
 taxes at all. The consequence, as will be seen from table E, was 
 that for the first three years of the war the tax revenues of France 
 were actually smaller than before the war and that as a result they 
 did not suffice even to defray the ordinary peace expenditures, not 
 to speak of making any contribution to war expenditures. 
 
 Table E. — Revenues of France. 
 (In million francs) 
 
 
 1913 
 
 1914 
 
 1915 
 
 1916 
 
 1917 
 
 1918 
 
 Direct taxes 
 
 Tax on war profits 
 
 Tax on intangibles 
 
 Stamps 
 
 634 
 
 138 
 
 1,086 
 
 903 
 
 754 
 
 1,035 
 
 539 
 
 5,089 
 
 496 
 
 153 
 117 
 745 
 577 
 
 '931 
 
 290 
 3,983 
 
 437 
 
 '158 
 612 
 714 
 764 
 
 '844 
 
 370 
 
 8,801 
 
 893 
 
 'isi 
 
 683 
 
 520 
 
 1,556 
 
 943 
 
 240 
 4,818 
 
 1,017 
 193 
 242 
 895 
 693 
 
 1,785 
 
 i',io8 
 
 354 
 6,306 
 
 727 
 714 
 252 
 1,143 
 734 
 
 Import duties 
 
 Tax on sales 
 
 1,814 
 
 210 
 
 1,154 
 
 Miscellaneous 
 
 Total 
 
 285 
 6,533 
 
 After a while, indeed, France found it possible to levy some war 
 taxes ; but, as appears from table E, these were exceedingly slight 
 compared with what had been accomplished in Great Britain. The 
 consequence is that the new war taxes of France were only just 
 about sufficient to make up the deficit in the ordinary peace bud- 
 get — a deficit caused chiefly by the devastation of the occupied 
 territory. In France, therefore, we may conclude that no part of 
 the war expenditures was met by war taxes. A share of the re- 
 sponsibility for this fact must, however, be laid at the doors of the 
 
1919] The Cost of the War and How It Was Met 751 
 
 government, which disclosed an unwarrantable timidity in levying 
 taxes. The natural results of the adoption of the loan policy in 
 the fiscal conduct of the war are seen in the exaggerated rise of 
 prices, the depreciation of the franc, and the serious condition of 
 finances in France today. 
 
 In Italy the situation was a little better. Italy had not been 
 invaded, and its financial situation was not so desperate as that 
 of France. Moreover, Italy entered the war somewhat later and 
 was not compelled to endure the strain for so long a time. Italy 
 consequently proceeded as soon as possible to levy new war taxes ; 
 but, as she had always been relatively overtaxed as compared with 
 Great Britain, it was not feasible to do as much. As a result, the 
 war taxes levied by Italy were just about sufficient to pay the in- 
 terest on the war loans. While Italy, therefore, did better than 
 France, she also was not able to defray any of the war expendi- 
 tures proper out of war taxation. 
 
 The condition of Russia soon became worse than that of France 
 and Italy ; and even before the October revolution in 1917 Russia 
 was able to put very little reliance upon revenue from war taxa- 
 tion. 
 
 Among the Central Powers the situation was much the same, but 
 for a different reason. Germany at the outset of the war, had so 
 confidently counted upon victory, with resultant huge indemnities, 
 that it resolved to follow the loan policy, at all events so far as 
 the imperial government was concerned. For it must be remem- 
 bered, that in Germany a not insignificant part of the war ex- 
 penses was met by the separate states ; and in the states a con- 
 siderable increase of taxation was provided for at once. As the 
 war proceeded, however, and the hopes of a speedy and complete 
 victory gradually faded away, Germany began to change her policy 
 and now decided, especially from 1916 on, to impose more and 
 more taxes. The result was that by the end of the war, Germany 
 had done a little better than France although a little less well 
 than Italy. The figures for the chief continental belligerents are 
 given in table F. 
 
 If the latest figures as represented by Minister Erzberger are 
 used, the showing is not appreciably more favorable. According 
 to these figures, of the total war expenditures to October, 1919, 
 of about 204 billion marks, about 5 billions were derived from other 
 sources than loans. 
 
 We come, finally, to the experience of the United States. When 
 
752 Edwin R. A. Seligman [December 
 
 Table F. — Revenues and Loans: Fr.\nce, Italy, Germany. 
 (In millions) 
 Fuance 
 Expenditures Income 
 
 fr. fr. 
 
 Aug. 1, 191 1-M<ar. 31, 1919 174,500 Loans 159,400 
 
 Advances to Allies 6,700 Other revenues . . 22,500 
 
 181,200 181,900 
 
 Foreign debts and other minor items.. 11,000 
 
 Total 192,200 
 
 Annual revenues before the war 5,000 
 
 Total peace revenues during the war jjcriod 34,000 
 
 Hence the total non-loan revenues during the war did not quite equal the 
 peace revenues calculated on the pre-war basis. 
 
 Italy 
 
 Expenditures Income 
 
 li. U. 
 
 May, 1915-June 30, 1918 87,516 Loans 64,132 
 
 Still due 3,500 Other revenues . . 26,034 
 
 Total 91,016 Total 90,166 
 
 Annual peace revenues 2,687 
 
 Total peace revenues during the war period 13,435 
 
 Deducting 13,435 from 26,034 leaves as war revenue 12,599 
 
 Hence the war revenues barely sufficed to pay the interest on the war loans. 
 
 Gekmany 
 Expenditures Income 
 
 mk. mk. 
 
 Aug. 1, 1914-Dec. 31, 1918 170,300 Loans 153,000 
 
 Other revenues . . 17,000 
 
 Total 170,000 
 
 Annual peace revenues (1913) 3,200 
 
 Total peace revenues for 41/0 years of war 14,400 
 
 Deducting 14,400 from 17,000* leaves as war revenue 2,600 
 
 the United States entered the war, it was confronted by the two 
 rival theories of pubHc finance. One was to the effect that the 
 war expenses should be defrayed entirely by loans, as had been 
 the case in the early years of the Civil War and which was true, as 
 we have just seen, of many of the belligerents during this war. 
 The other theory, advanced especially in the famous iNIinnesota 
 memorandum, was that the war expenditures ought to be defrayed 
 entirely out of war taxes. This theory was equally as extreme 
 and as perilous as the loan policy and labored under the addi- 
 tional disadvantage of being impossible of achievement. The 
 President went so far as to proclaim the fifty-fifty per cent theory, 
 namely that one half of the war expenditures ought to be defrayed 
 from war taxation. But even this turned out, as was to have been 
 
1919] The Cost of the War and How It Was Met 753 
 
 expected and as was pointed out by the present writer among 
 others, to be far more than was possible. 
 
 The prodigious profits made during tlie opening years of the 
 European war and the resulting prosperity throughout the coun- 
 try enabled Congress to levy taxes far higher than had ever be- 
 fore been attempted in our history. Even with an immense addi- 
 tion to taxation, however, the proportion derived from war taxes 
 was relatively small, and in fact considerably smaller than is ordi- 
 narily stated. Here, again, we must observe the same caution as 
 in the case of the British figures. We must not compare the total 
 expenditures of the war period with the total taxes of the war 
 period, but war expenditures with war taxes — which is something 
 very different. In tables G and H an attempt is made, on the basis 
 of certain official figures, to arrive at correct results. The ex- 
 planation of the methods of calculation is found in the notes ap- 
 pended to the tables ; and the reasons for the difference between 
 the results here given and the statements of the secretaries of the 
 treasury are presented in the general note below. ^ 
 
 7 The figures contained in tables G and H, unless otherwise stated or calcu- 
 lated from preceding figures, are taken from the annual Report of the Secre- 
 tary of the Treasury on the Finances for the year 1918. For 1919 where the 
 annual report is not yet available we have taken the figures as presented by 
 Secretary Glass in his Letter of July 9, 1919 to the Chairman of the Commit- 
 tee of Ways and Means. The figures for postal revenues and expenditures are 
 the estimates of the department. 
 
 The figures as presented in the tables, do not, however, always agree with the 
 official statements. In the first place it is difficult to know what are the offi- 
 cial figures, as they frequently differ among themselves. For instance, the 
 figure? found in the tables of the Annual Report for 1918, pages 480 et seq. 
 (hereinafter called A), do not tally with those in the text of Secretary Mc- 
 Adoo's conuTients in the Annual Report, pages 3-5 (hereinafter called B), nor 
 with the figures of Secretary Glass in his Letter of July 9 (hereinafter called 
 C). In some cases the discrepancies are serious. 
 
 Thus in A the receipts for 1917 are given (including postal receipts of 
 330 millions) as 3,845 millions; in B, as 3,553 (excluding postal). For 1918 
 again, the receipts are given in A as 21,490 millions (including postal receipts 
 of 344 millions); in B, as 21,155 millions (excluding postal). In A the dis- 
 bursements for 1917 are given as 3,046 millions (including postal disburse- 
 ments of 330 millions) ; in B, as 2,704 (excluding postal). For 1918 the re- 
 spective discrepancies are: A, 21,813; B, 20,903. Even in minor details there 
 are no agreements. Thus public debt receipts are given for 1917 in A as 
 2,391 millions; in B, as 2,428 millions. For 1918 the figures are respectively: 
 A, 16,965; B, 16,975. Public debt disbursements are given for 1917 in A as 
 637; in B, as 678 millions. For 1918 tliey are given in A as 7,685; in B, as 
 7,707 millions. If there is any significance in the fact that A gives tables of 
 
754! Edwin R. A. Seligma-n [December 
 
 As a result of the calculations found in tables G and H it ap- 
 pears that during the first quarter year of war, ending June 
 30, 1917, the proportion of war expenditures derived from war 
 
 "Receipts and Disbursements" while B gives tables of "Receipts and Ex- 
 penditures," it is not apparent from tlie report itself. 
 
 The discrepancies between A and C are more glaring. But as Secretary 
 Glass is able to present only preliminary figures for the respective periods, 
 on the basis of the daily treasury statements, these discrepancies may be over- 
 looked. 
 
 In the second place, considerable confusion results from the absurd system 
 still followed in the United States, whereby postal revenues and expenditures 
 go through the post office accounts and only the surplus or deficiency passes 
 through the treasury accounts. Several years ago the present writer succeeded 
 in inducing the Treasury Department to bring about a change to this extent 
 that the annual treasury statements are now made up in both ways, viz., as 
 revenues and expenditures inclusive and exclusive of postal revenues and ex- 
 penditures respectively. Yet these differences are often overlooked. For in- 
 stance, when Secretary Glass discusses in his Letter of July 9, 1919, the cost 
 of the war, he employs the daily treasury statements which do not include the 
 postal figures. As a consequence, his statement of total revenues and expendi- 
 tures are quite different from those of Secretary McAdoo in the latter's dis- 
 cussion of the cost of the war. 
 
 In the third place, neither Secretary McAdoo nor Secretary Glass, in cal- 
 culating the proportion borne by loans and taxes in meeting the war ex- 
 penses, attempts to ascertain the really significant fact — viz., the proportion 
 of war expenditures met from war taxes. None of the official figures are of 
 any help here. 
 
 The present writer has therefore been compelled to make his own calcula- 
 tions. Whenever possible, the figures have been taken from the statements in 
 the detailed tables published in the Annual Report of the Secretary of the 
 Treasury. The combinations, however, as found in this article are not pre- 
 sented anywhere in the official statements. 
 
 Some of the results reached in this article which differ materially from the 
 official statements, are as follows: 
 
 The total cost of the war to June 30, 1919, is given by Secretary Glass as 
 $30,117 millions, whereas the more accurate computation results in a total 
 cost of $32,361 millions. Secretary Glass's figures involve a double error. In 
 the first place, they are based on the preliminary daily treasury statements 
 which are confessedly not final ; and, as explained in the note to table B 
 (p. 746 supra), he fails to allow for postal expenditures. Again, Secretary 
 McAdoo states that in 1917 55 per cent of the expenditures were paid from 
 revenue receipts, and in 1918 31.6 per cent; whereas the correct figures are 
 60.4 jier cent and 33.8 per cent respectively, and the really significant figures 
 (the proportion of war expenditures from war taxes) are 30 and 24.8 per 
 cent respectively. In the same way, Secretary Glass states that 29 per cent of 
 the expenditures for the war period were met from tax receipts and other 
 revenue, whereas the correct figures are 33.2 per cent, and the really signifi- 
 cant figure is 23.3 per cent. 
 
1919] The Cost of the War and How It Was Met 755 
 
 taxes was less than one third or, more exactly, 30 per cent. If 
 we exclude from the expenditures the loans to the Allies, on the 
 assumption that they will all be repaid some day, the showing in 
 the first three months is, of course, much better, as two thirds of 
 the expenditures of that period consisted of such loans. How- 
 ever, as soon as we struck our full gait, the situation was far less 
 satisfactory. During the year 1917-1918 the proportion of war 
 expenditures derived from war taxes was less than a quarter or, 
 more exactly, only 24.8 per cent; and even if we again exclude 
 loans to Allies, which now constituted about one third of the whole, 
 only 30 per cent of the expenditures were derived from war taxes. 
 In the final year of the war the showing was still less favorable, 
 the figures being respectively 21.7 per cent and 27 per cent, i.e., a 
 little over one fifth or one fourth respectively. For the entire 
 period of our participation in the war it appears that less than 
 one fourth (or exactly 23.3 per cent) of the war expenditures 
 were paid out of war taxes. And if the loans to Allies are again 
 excluded, the proportion is still under one third or, more exactly, 
 32.5 per cent. 
 
 These figures disclose two significant facts. In the first place, 
 the relative revenue derived from war taxes became smaller, in- 
 stead of larger, as the war proceeded. This unusual and unex- 
 pected result is, of course, due to the stupendous growth of war 
 expenditures which rapidly overtook even the largely increased 
 revenues from war taxes. It was impossible, even by stretching 
 the tax revenues to the utmost, to begin to keep pace with the 
 huge growth in the war outlays. In the second place, we are 
 struck by the great disparity between the actual facts and the 
 fifty-fifty per cent program originally suggested by Secretary 
 McAdoo and adopted in the recommendation of President Wilson 
 — not to speak of the 100 per cent program of the Minnesota 
 memorialists. 
 
 Ill 
 
 The next point of interest is the character of the war taxes im- 
 posed by the various countries. Here again we notice great vari- 
 ations. Although the policy of taking a substantial share of war 
 profits by taxation was almost everywhere adopted as a matter of 
 principle, it was applied very differently in various countries. As 
 a matter of fact, in almost all of the continental countries, about 
 as much additional revenue was raised from indirect as from direct 
 
756 
 
 Edwin R. A. Seligma-n 
 
 [Decemher 
 
 Table G. — Receipts and Disbursements of the United States, 1915-1919. 
 (In millions) 
 
 
 Year ending June 30 
 
 Receipts 
 
 1915 
 
 1916 
 
 1917 
 
 1918 
 
 1919 
 
 Customs 
 
 $211 
 
 $213 
 
 $226 
 
 $183 
 
 $184^ 
 
 Internal revenue 
 
 416 
 
 513 
 
 809 
 
 3,696 
 
 4,316^ 
 
 Miscellaneous 
 
 71 
 698 
 
 52 
 
 780 
 
 81 
 1,119 
 
 293 
 4,174 
 
 646' 
 
 Total ordinary receijits 
 
 5,152' 
 
 Panama canal 
 
 
 
 6 
 
 6 
 
 6' 
 
 Excess of deposits to re- 
 
 
 
 
 
 
 tire national banknotes 
 
 4 
 
 32 
 
 
 .... 
 
 
 
 Postal receipts 
 
 287 
 
 312 
 
 330 
 
 344 
 
 354* 
 
 Total (exclusive of prin- 
 
 
 
 
 
 
 cipal of public debt)^ 
 
 989 
 
 1,126 
 
 1,455 
 
 4,795 
 
 5,506 
 
 Public debt receipts . . . 
 
 1 
 
 2 
 
 2,391 
 
 16,695 
 
 29,300'* 
 
 Total 
 
 990 
 
 1,128 
 
 3,845 
 
 21,490 
 
 34,806" 
 
 
 
 
 
 
 
 Disbursements 
 
 
 
 
 
 
 Ordinary (exclusive of 
 
 
 
 
 
 
 postal) 
 
 $725 
 
 $719 
 
 $2,067 
 
 $13,769' 
 
 $18,515"' 
 
 Including loans to Allies 
 
 
 
 (885)^ 
 
 (4,738)^ 
 
 (3,479)' 
 
 Panama 
 
 29 
 
 18 
 
 19 
 
 21 
 
 
 Postal 
 
 294 
 
 312 
 
 320 
 
 327 
 
 354" 
 
 Excess of national bank- 
 
 
 
 
 
 
 notes retired over de- 
 
 
 
 
 
 
 posits 
 
 .... 
 
 
 3 
 
 11 
 
 
 Total (exclusive of prin- 
 
 
 
 
 
 
 cipal of public debt) 
 
 1,048» 
 
 1,048' 
 
 2,409» 
 
 14,127' 
 
 18,869" 
 
 Public debt disburse- 
 
 
 
 
 
 
 ments 
 
 0.05 
 
 0.04 
 
 637 
 
 7,686 
 
 15,860" 
 
 Total 
 
 $1,048 
 
 $1,048 
 
 $3,046 
 
 $21,813 
 
 $34,729" 
 
 
 
 1 From the Letter of Secretary Glass to the Chairman of the Committee of 
 Ways and Means, July 9, 1919. 
 
 2 Obtained by deducting from the "total of all receipts" in the Report of 
 the Secretary of the Treasury, 1918, p. 484, the "total public debt receipts," 
 ibid. 
 
 3 Includes the 6 millions Panama receipts. 
 
 4 Estimated, by the Secretary of the Treasury {Annual Report, 1918, p. 145). 
 
 5 Obtained by deducting from the "public debt receipts, Apr. 6, 1917-June 
 30, 1919," as given by Secretary Glass in his Letter of July 9, 1919 (48,386 
 millions) the public debt receipts as stated in table above for 1917 and 1918. 
 
 6 Obtained by adding the various items specified. 
 
 7 As stated by Secretary Glass in his Letter of July 9, 1919, p. 4. 
 
 8 Obtained by deducting from total the public debt iiisbursements. 
 
 9 As stated in the Annual Report on the Finances. Secretary Glass {op. 
 cit., p. 4) gives total disbursements other than principal of public debt as 
 12,697 millions. 
 
 10 As stated by Secretary Glass, op. cit., p. 4. 
 
 11 As estimated by Secretary McAdoo in the Annual Report for 1918. 
 
 12 Obtained by adding the two items above. 
 
 13 Obtained by deducting from the public debt disbursements, Apr. 5, 1917- 
 June 30, 1919, as stated by Secretary Glass, op. cit. ($24,183) the public debt 
 disbursements for 1917 and 1918, as given above in the table. 
 
 11 Obtained by adding the two items above. 
 
1919] 
 
 The Cost of the War and How It Was Met 
 
 757 
 
 Table H. — Receipts and Expenditures of the United States, April 5, 1917- 
 
 JuNE 30, 1919. 
 
 (In millions) 
 
 
 1917 
 
 1918 
 
 1919 
 
 Total for 
 
 period Apr. 5, 
 
 1917-June 30, 
 
 1919 
 
 Total disbursements^ 
 
 Total expenditures, exclusive of 
 
 principal of the public debt^ 
 
 War expenditures^ 
 
 $3,046 
 
 2,409 
 1,361 
 
 $21,813 
 
 14,127 
 13,079 
 
 $34,729 
 
 18,869 
 17,821 
 
 $59,588' 
 
 35,405* 
 33,261 
 
 Loans to Allies^ 
 
 War expenditures exclusive of 
 
 885 
 
 476 
 1,455 
 1,035 
 
 409 
 
 P.c. 
 60.4 
 42.9 
 30. 
 
 85.7 
 
 4,738 
 
 8,341 
 4,795 
 3,879 
 3,253 
 
 P.c. 
 
 33.8 
 
 27.4 
 
 24.8 
 
 39. 
 
 3,479 
 
 14,342 
 5,506 
 4,500 
 3,874 
 
 P.c. 
 29.1 
 
 23.8 
 21.7 
 
 27. 
 
 9,102 
 23,159 
 
 Revenue exclusive of public debt^ 
 Tax revenues^ 
 
 11,756 
 9,414 
 
 
 7,536 
 
 Proportion of total expenditures 
 from non-loan revenues 
 
 Proportion of total expenditures 
 from taxes 
 
 Proportion of war expenditures 
 from war taxes 
 
 Proportion of war expenditures 
 exclusive of loans to Allies 
 from war taxes 
 
 P.c. 
 33.2 
 26.5 
 23.3 
 
 32.5 
 
 1 From table G. 
 
 2 Obtained by deducting from total expenditures the (peace) expenditures 
 of 1915 ($1,048). 
 
 3 Obtained by adding the customs and the internal revenue. 
 
 4 Obtained by deducting from the tax revenues the tax revenues for 1915 
 (626 millions). 
 
 5 Total for the three fiscal years 1917, 1918, 1919. 
 
 taxation. Indeed, in France considerably more revenue was de- 
 signed to be raised from indirect taxes, including taxes on con- 
 sumption, than from direct taxation or taxes on wealth. The re- 
 spective figures, as appears from table I, are about 60 per cent 
 for indirect and 40 per cent for direct taxes. In actual result, 
 the increase due to indirect taxation was not so great as had 
 been expected, due partly to the fact that the war profits tax 
 yielded much more than had been anticipated (907 million 
 francs instead of 540 millions), but above all because the tax on 
 sales produced in the first year far less than had been hoped for 
 (210 instead of 800 million francs). As a consequence, the pro- 
 portions derived from direct and indirect taxes Avere actually just 
 the reverse of those mentioned above, namely about 60 per 
 cent from direct and about 40 per cent from indirect taxes. 
 
758 
 
 Edmn R, A. Seligma'n 
 
 [December 
 
 Table I. 
 
 -Revenue Expected from Increased Taxes in France, 1914-1918, 
 (In million francs) 
 
 Direct 
 
 War profits tax 540 
 
 Military war tax 12.5 
 
 Income tax 250 
 
 "Assimilated taxes" . . 24. 
 
 Inheritance tax 148 
 
 Intangibles 38 
 
 Land tax 30 
 
 1,042.5 
 
 Additions of Jime, 1918: 
 Income tax | 
 Inheritance tax j ' ' ' 
 
 56 
 
 1,098.5 
 or 39.3 per cent 
 
 Indirect 
 
 Alcoholic drinks 
 
 Non-alcoholic drinks. 
 Druggists specialties. 
 
 Sugar 
 
 Colonial products .... 
 
 Tobacco 
 
 Postage ^ . . 
 
 Theatres 
 
 Sales 
 
 75 
 85 
 12 
 90 
 70 
 80 
 58.5 
 10 
 800 
 
 1,280.5 
 Additions of June, 1918: 
 
 Stamp taxes 76 
 
 Other indirect taxes 333 
 
 1,689.5 
 or 60.7 per cent 
 
 In Italy, where the new war taxes were imposed at once in 1915, 
 it was expected that the war profits tax (at the rate of from 8 to 
 20 per cent) would yield about 55 million lire, and the augmented 
 taxes on incomes and business about 220 millions, or a total of 275 
 millions from direct taxes compared with an estimated revenue of 
 110 millions from various increases in indirect taxes. 
 
 In 1916, however, while the rate of the war profits tax was in- 
 creased so as to vary from 20 to 60 per cent and that of the in- 
 come tax to about 16 per cent, the stamp taxes were raised and 
 the number of state monopolies was increased. The same policy 
 was followed during the next year so that by the end of the war, 
 in addition to the old government monopolies on tobacco, salt, 
 matches, lotteries, and cards, we now find monopolies on coffee, 
 paraffine, and mineral oils, quinine, and various minor objects. 
 The result was that in 1918 just about as much additional revenue 
 was derived from the new indirect taxes as from the new direct 
 taxes. The exact figures are as follows : the direct taxes, techni- 
 cally so called, yielded 1500 million lire and the business taxes 560 
 millions, or a total of 2,060 milhons. On the other hand, the in- 
 creased revenue from monopolies amounted to 1,060 millions and 
 that from the new consumption taxes 950 millions, or a total of 
 2,010 millions. In Italy, therefore, the balance was kept just 
 about even between the two great categories of taxation. 
 
 In Germany when the government finally decided to resort to 
 taxation in 1915, no effort was made to impose any new taxes on 
 
1919] The Cost of the War and How It Was Met 759 
 
 incomes or inheritances. For the feeling was still very strong 
 that income and property taxes ought to be left to the separate 
 states, which had in the meantime considerably increased their 
 revenue from such sources. A federal tax on war profits was, 
 however, imposed. On the other hand, the tax on tobacco was 
 largely increased, a high tax was levied on bills of lading, and a 
 considerable augmentation was made in postal, telegraph, and 
 telephone rates. From all these sources an additional revenue of 
 about 500 million marks was expected. When the bill passed 
 through the Reichstag, a tax on sales was added, estimated to 
 yield about 130 millions. In the next year, 1917, the war profits 
 tax was considerably increased, so as to produce about 400 mil- 
 lion marks additional; but, on the other hand, a high tax on coal 
 was now imposed, designed to yield 500 million marks and pro- 
 vision was made for a tax 'on railroad transportation to yield 
 310 millions. Finally, in 1918, the government recognized the 
 necessity for very much greater revenues from taxation and a 
 law provided for additional receipts estimated at 3 billions of 
 marks, on the one hand, from an increased tax on Avar profits 
 and, on the other, from taxes on sales, luxuries, and higher rates 
 on drinks and postal communication. The exact figures as to the 
 proportion between the two categories of taxation are not yet 
 available; but it is quite safe to say that in the federal govern- 
 ment, at leasi, the revenue from indirect taxes considerably ex- 
 ceeded that from direct taxes. In the separate commonwealths 
 the situation was the reverse, without, however, materially chang- 
 ing the general result. 
 
 In contrast to all the continental countries, England pursued 
 from the outset a different path. It is true that a considerable in- 
 crease of revenue was derived from indirect taxes like customs and 
 excises. From 1914 to 1919, for instance, the customs revenues 
 were actually trebled and the yield of the excise taxes increased 
 about 50 per cent. But the chief reliance for meeting the war 
 expenditures was placed on a new war profits tax and an aug- 
 mented income tax. The rate of the war profits tax was raised 
 gradually from 50 to 60, and finally to 80 per cent; and the in- 
 come tax rates were progressively increased until from a quarter 
 to a third of very moderate incomes and over a half of larger in- 
 comes were taken for the state. In the last year of the war, as ap- 
 pears from table K, over three quarters of the tax revenue was 
 derived from direct taxes on wealth. This is a great contrast 
 to the fiscal history of previous wars. 
 
760 
 
 Edwin R. A. Seligman 
 
 [December 
 
 Table K. — Sources of Revenue in Great Britain, 1914-1919. 
 (In millions) 
 
 
 Year ending March 30 
 
 
 1914 
 
 1915 
 
 1916 
 
 1917 1 1918 
 
 1919 
 
 Customs 
 
 35 
 
 40 
 27 
 10 
 
 .7 
 
 3 
 47 
 
 .7 
 
 P.c. 
 
 17.8 
 
 20 
 
 13.8 
 
 5 
 
 0.4 
 
 1 
 23.8 
 
 0.4 
 
 £ 
 39 
 42 
 
 28 
 
 6 
 
 .7 
 
 2 
 
 69 
 
 .4 
 
 P.c. 
 6.9 
 
 7.5 
 5 
 
 1.3 
 0.1 
 0.3 
 12.4 
 
 0.1 
 
 £ 
 
 60 
 
 61 
 
 31 
 7 
 .7 
 2 
 128 
 .1 
 .4 
 
 P.c. 
 4 
 
 4 
 
 2 
 
 0.4 
 
 0.04 
 
 0.1 
 
 9 
 
 0.01 
 
 0.03 
 
 £ 
 71 
 56 
 31 
 8 
 .6 
 2 
 205 
 140 
 .5 
 
 P.c. 
 3 
 
 2.2 
 1.4 
 0.3 
 
 £ 
 71 
 39 
 32 
 
 8 
 
 P.c. 
 3.3 
 1.4 
 1.2 
 
 0.3 
 
 0.04 
 
 0.09 
 
 8.9 
 
 7.3 
 
 0.03 
 
 £ 
 103 
 59 
 30 
 13 
 .6 
 2 
 291 
 285 
 .7 
 
 P.c. 
 
 4 
 
 Excise 
 
 2,2 
 
 Estate duties 
 
 1.1 
 0.5 
 
 Land tax 
 
 House duty 
 
 Income tax 
 
 Excess profits tax. 
 Land values tax.. 
 
 0.03 
 
 0.09 
 
 9 
 
 6 
 
 0.03 
 
 .7 
 
 2 
 240 
 220 
 
 0.0 
 0.7 
 
 11.2 
 
 11 
 0.0 
 
 Total tax reve- 
 
 163 
 
 82.2 
 
 189 
 
 33.6 
 
 290 
 
 19.17 
 
 514 
 
 22. 27 
 
 613 
 
 22.5G 
 
 784 
 
 30 7 
 
 
 
 Postal, Telg., Tel.. 
 
 Crown lands 
 
 Suez Canal shares. 
 Miscellaneous 
 
 31 
 .5 
 
 2 
 
 15.5 
 0.3 
 
 1 
 1 
 
 30 
 .5 
 
 1 
 6 
 
 5.3 
 0.1 
 0.3 
 1 
 
 34 
 .5 
 
 2 
 10 
 
 3.1 
 
 0.03 
 
 1 
 
 0.7 
 
 34 
 
 .6 
 
 8 
 17 
 
 1.4 
 0.03 
 0.2 
 0.5 
 
 35 
 
 .7 
 6 
 52 
 
 1.4 
 
 0.04 
 0.3 
 
 40 
 
 .8 
 12 
 52 
 
 1.6 
 0.0 
 0.4 
 
 2 
 
 Non-tax revenues 
 
 35 
 
 17.8 
 
 37 
 
 6.8 
 
 47 
 
 3.83 
 
 59 
 
 2.13 
 
 94 
 
 3.74 
 
 105 
 
 4.0 
 
 Total tax and non- 
 tax revenues 
 
 198 
 3 
 
 202 
 
 197 
 24 
 
 100 
 
 237 
 407 
 
 40.4 
 59.6 
 
 337 
 1,165 
 
 23 
 
 77 
 
 573 
 1,626 
 
 24.4 
 75.6 
 
 707 
 1,983 
 
 26.3 
 73.7 
 
 889 
 1,683 
 
 34.8 
 65 2 
 
 
 
 Total revenues . . 
 Total expendi- 
 tures 
 
 Interest on debt. 
 
 633 
 
 560 
 23 
 
 100 
 
 1,501 
 
 1,559 
 60 
 
 100 
 
 2,199 
 
 2,198 
 127 
 
 100 
 
 2,691 
 
 3,696 
 190 
 
 100 
 
 2,571 
 
 3,579 
 270 
 
 100 
 
 In the United States, also, we find the democratic movement so 
 strong that the overwhelming proportion of the new tax revenue 
 was derived from direct taxation on wealth rather than from in- 
 direct taxes on consumption or transactions. Although the ex- 
 cess profits tax was not at first levied at rates as high as in Great 
 Britain, the remarkable prosperity of the country resulted in large 
 revenues from this source. And while the income tax did not 
 reach in the lower stages so high a level as the British, the rates 
 in the upper schedules were made considerably higher, finally at- 
 taining the unheard of figures of 77 per cent. As a result of the 
 revenue act of 1917 over 79 per cent of the tax revenue came from 
 direct taxation, principally the income tax and the excess profits 
 tax. As a consequence of the second great revenue act of 1918, 
 the proportions were still more favorable, the amount ascribable 
 to direct taxation in 1919 being, as appears from table L, in re- 
 ality almost 81 per cent although the introduction of the system 
 of pa3^ment by instalments somewhat obscures this result. 
 
1919] The Cost of the War and How It Was Met 
 
 761 
 
 Table L. — Internal Revenue 
 
 Receipts of thi 
 (In millions) 
 
 United States, 1918, 1919. 
 
 
 Year ending June 30 
 
 
 1918 
 
 1919 
 
 Income and profits taxes. 
 
 Munition manufacturers 
 
 tax 
 
 $3,839 
 
 13 
 
 47 
 
 25 
 
 2,924 or 
 
 .$771 or 
 3,695 
 
 79.1 per 
 20.9 per 
 
 cent 
 cent 
 
 $2,5961 
 
 Estate tax 
 
 Corporate capital stock 
 tax 
 
 82 
 29 
 
 
 
 Total taxes on wealth. . 
 Distilled spirits 
 
 318 
 
 126 
 
 158 
 
 19 
 
 71 
 
 G 
 
 37 
 
 2 
 
 26 
 
 8 
 
 2,707 or 70.5 per cent 
 365 
 
 Fermented liquors 
 
 Tobacco 
 
 118 
 
 306 
 
 
 37 
 
 
 234 
 
 Insurance 
 
 15 
 
 
 78 
 
 Soft drinks 
 
 7 
 
 Admissions 
 
 51 
 
 
 22 
 
 
 
 Total taxes on consump- 
 tion, transactions, and 
 commodities 
 
 $ 
 
 $1,183 or 29.5 per cent 
 $3,840 
 
 Total 
 
 
 1 As the new taxes are payable in instalments, about 2 billions of the 1919 
 tax will not be received until the fiscal year 1920. Making allowance for this, 
 the proportion of taxes on wealth really ascribable to the year 1919 rises to 
 80.6 per cent. 
 
 It thus appears that the United States succeeded even better 
 than Great Britain in carrying through a democratic fiscal pro- 
 gram in the war; and that the Anglo-Saxon countries disclose a 
 very decided contrast to all the other belligerents. The conse- 
 quences are apparent in the relatively more favorable situation 
 in which Great Britain and the United States find themselves 
 when confronting the problems of post-bellum finance. 
 
 IV 
 
 With the impossibility of securing more than a comparatively 
 small proportion of the war expenditures from taxation, it became 
 necessary everywhere to resort to borrowing. This was conse- 
 quently done by all countries on a gigantic scale; although here 
 again the fiscal and economic conditions in the various countries 
 varied so widely that they employed quite diverse expedients. 
 
762 Edwin R. A. Seltgman [December 
 
 Great Britain provided at the outset of the war for immediate 
 needs by selling short-time securities, principally treasury bills. 
 Before long, however, these had accumulated to such an extent 
 that it became imperative to issue long-time bonds. Accordingly, 
 subscriptions were invited to the first war loan which was issued 
 in March, 1915, followed in June of the same year by a second war 
 loan. These bore interest at the rate of 31/2 P^r cent and 4I/2 
 per cent respectively and the amount issued was 332 and 592 mil- 
 lions sterling or 1,703 and 2,883 million dollars respectively. On 
 February, 1916, an issue of war savings certificates was inaugu- 
 rated. In April, 1917, the third war loan was issued at 4.5 per 
 cent, yielding 941 millions sterling, or 4,403 million dollars, fol- 
 lowed in June of the same year by an issue of 5 per cent exchequer 
 bonds. 
 
 Beginning in October, 1917, a continuous issue of 4 per cent and 
 5 per cent national war bonds was made, the difference in the rate 
 of interest being due to the tax exemption. The temporary and 
 short-time paper was now gradually funded into these bonds. In 
 the meantime the Anglo-French loan of 500 million dollars, of 
 which England had one half, had been contracted in the United 
 States ; and with the entrance of the United States into the war, 
 continually larger sums were borrowed from the American gov- 
 ernment. By the end of 1918, as will be seen from table M, 
 almost 4 billions sterling, or considerably more than one half of 
 the new debt, was in the form of relatively long-time domestic se- 
 curities. ;f 
 
 France was in a less favorable situation than Great Britain at 
 the outbreak of the war. The total debt of France at the close 
 of 1913 amounted to 32,594 million francs or 6,291 million dol- 
 lars, and the ordinary budget had closed with a large deficit, so 
 that it had been necessary to issue a loan during the spring and 
 summer of 1914. When the war broke out, precipitating an eco- 
 nomic and financial crash, it became practically impossible io issue 
 another loan. The government was therefore compelled to rely 
 upon advances from the Banque de France which was permitted 
 correspondingly to increase its note issue. It was not until No- 
 vember, 1915, that France saw her way to invite subscriptions to 
 her first war loan, which, although bearing interest at the rate of 
 5 per cent was issued at the low price of 871/4. This was fol- 
 lowed in August, 1916, by the second war loan, also of 5 per cent 
 bonds. In December, 1917, the third war loan was contracted and 
 
1919] The Cost of the War and How It Was Met 763 
 
 in 1918 the fourth war loan. In these two latter cases France 
 reverted to her old policy of discount bonds so that the issues 
 fetched the price of only about 70. The nominal subscriptions to 
 the loans were therefore quite different from the actual receipts in 
 cash. Even the nominal sums yielded by these four loans, how- 
 ever, amounted to less than 70 billions of francs, so that the chief 
 reliance of France had to be placed on floating debts like advances 
 from the bank of France, on the so-called national defense bonds, 
 which were issued continuously from February, 1915, and, finally, 
 on the foreign loans contracted in England, United States, and 
 Japan. The internal loans as a consequence constitute only about 
 40 per cent of the war debt, a result which is now proving a serious 
 embarrassment in the French program of fiscal reconstruction. 
 
 Russia was the first of the Entente Powers to contract public 
 loans. In September, 1914, Russia began with a 5 per cent issue 
 at 94, followed at regular intervals up to the revolution of 1917 
 by six more loans. At that time about 6 billion dollars had been 
 raised by relatively long-time securities, constituting, however, 
 only a very small part of the entire debt. 
 
 Somewhat similar difficulties were experienced by Italy. The 
 pre-war debt of Italy amounted to 13,636 million lire or 2,621 
 million dollars. Italy started in 1915 with the so-called mobiliza- 
 tion loan followed by the first war loan in July, 1915, and by 
 further war loans in January of each of the following years. 
 Every successive loan showed an increase of the interest rate and 
 a decrease of the issue price, thus disclosing the growing fiscal 
 difficulties. The total proceeds of the internal war loans, as ap- 
 pears from table M, were only about 15 million lire. Italy, there- 
 fore, had also to depend primarily upon short-time securities, like 
 treasury bonds and exchequer bills, upon advances from the banks, 
 and upon loans from the Allies. As a matter of fact, less than 
 30 per cent of the new war debt consists of long-time internal 
 war bonds. 
 
 Of the Central Powers, Germany followed a different plan from 
 the outset. She decided to rely at once upon comparatively long- 
 time bonds rather than upon temporary or short-time securities, 
 and for several years prided herself upon her superiority in this 
 respect over Great Britain and France. In October, 1914, a large 
 war loan was issued at 5 per cent. There followed in regular suc- 
 cession eight more war loans bearing 4^/0 per cent and 5 per cent 
 respectively. During the earlier years of the war, accordingly, 
 
764 Edwin R. A. Seligmcvn [December 
 
 the loan situation of Germany must be pronounced to have been 
 more favorable than that of the other belligerents. Toward the 
 end, however, as the difficulties increased, the internal loans did 
 not suffice and Germany, like France and Italy, was now com- 
 pelled to depend more and more upon a makeshift policy. Never- 
 theless, by the end of 1918, 98 billion marks out of a total war 
 debt of 153 billions or about 6-i per cent of the whole, was in the 
 form of long-time internal bonds. This was a better showing than 
 that of any of the other countries. 
 
 When the United States entered the war it depended for the 
 time being on temporary war certificates. It was, however, soon 
 decided to make a bold appeal to the public, and in June, 1917, 
 subscriptions were invited to the first liberty loan, which was is- 
 sued at par bearing interest at the rate of 3^ per cent. Al- 
 though the immense sum of 2 billion dollars was raised by the first 
 loan, still greater efforts were made in the succeeding loans. In 
 November, 1917, the second liberty loan was issued and, despite 
 the original objections of Secretary McAdoo, it was found neces- 
 sary to raise the rate of interest to 4 per cent. The loan A'ielded 
 almost 4 billion dollars. In May, 1918, the third liberty loan was 
 issued at 4^4 per cent interest, yielding over 4 billions. The 
 greatest effort was, however, made in January, 1918, when sub- 
 scriptions were invited to the fourth liberty loan, bearing 4^4 
 per cent interest, with a result that the unheard of sum of almost 
 7 billion dollars was subscribed. The last, or victory loan, was 
 issued in April, 1919, bearing 4% per cent interest, and yielding 
 about 514 billions. The consequence is that almost the entire war 
 debt of the United States consists of relatively long-time and 
 easily manageable domestic securities. In table M will be found 
 the relevant facts as to the successive war loans of the chief bel- 
 ligerents. 
 
 Passing from the problem of long-time versus temporary loans, 
 the final question is that of the total indebtedness of the various 
 belligerents. 
 
 In Great Britain it still seems to be a question as to whether 
 and to what extent the loans to the Allies are to be included in the 
 war debt. The Chancellor of the Exchequer, as stated above, 
 thinks it prudent to include one half of the amount. The result 
 is, as shown in table N, that the British debt which amounted to 
 650 millions sterling, or 3,115 millions of dollars, just before the 
 war, rose by the close of the fiscal year in 1919 to a total of 7,643 
 
Table M. — War I-oans. 
 (In millions) 
 
 
 Date 
 
 Rate 
 
 Issue price 
 
 Amount 
 subscribed 
 
 Great Britain 
 
 
 
 
 £ 
 
 First war loan 
 
 Mar., 1915 
 
 3 V2 
 
 95 
 
 332 
 
 Second " " .... 
 
 June " 
 
 4 i/o 
 
 100 
 
 592 
 
 Third " " .... 
 
 Apr., 1917 
 
 4-5 
 
 95 - 100 
 
 941 
 
 Exchequer bonds.. 
 
 Mar., 1915 
 
 3 
 
 " 
 
 48 
 
 " " .. 
 
 Dec, 1915 -Apr., 1917 
 
 5 
 
 100 
 
 516 
 
 " " . . 
 
 Oct., 1916 
 
 6 
 
 " 
 
 161 
 
 National war bonds 
 
 Oct., 1917 -Oct., 1918 
 
 4-5 
 
 100-100 Va 
 
 372 
 
 Total 
 
 3,962 
 fr. 
 
 France 
 
 
 
 
 First war loan 
 
 Nov., 1915 
 
 5 
 
 87 1/4 
 
 15,2051 
 
 Second " " .... 
 
 Aug., 1916 
 
 " 
 
 88 % 
 
 11,5141 
 
 Third " " .... 
 
 Dec, 1917 
 
 4 
 
 68.6 
 
 14,8031 
 
 Fourth " " .... 
 
 1918 
 
 
 70.8 
 
 27,8531 
 
 Total 
 
 69,3751 
 li. 
 
 Italy 
 
 
 
 
 Mobilization loan. . 
 
 Jan., 1915 
 
 t '^^ 
 
 97 
 
 1,000 
 
 First war loan .... 
 
 July " 
 
 
 93-95 
 
 1,146 
 
 Second " " .... 
 
 Jan., 1916 
 
 5 
 
 97 1/2 
 
 3,014 
 
 Third « " .... 
 
 " 1917 
 
 « 
 
 90 
 
 3,985 
 
 Fourth " " 
 
 1918 
 
 " 
 
 86 1/3 
 
 6,120 
 
 Total 
 
 
 
 
 15,266 
 ru. 
 
 Russia 
 
 
 
 
 First war loan 
 
 Sept., 1914 
 
 5 
 
 94 
 
 500 
 
 Second " " .... 
 
 Mar., 1915 
 
 " 
 
 " 
 
 500 
 
 Third « " .... 
 
 May " 
 
 5-5 1/ 
 
 99 
 
 1,000 
 
 Fourth " " 
 
 Nov. " 
 
 5 Vz ' 
 
 95 
 
 1,000 
 
 Fifth " « .... 
 
 Feb., 1916 
 
 
 " 
 
 2,000 
 
 Sixth " " .... 
 
 Oct. " 
 
 " 
 
 a 
 
 3,000 
 
 Seventh" " 
 
 Mar., 1917 
 
 5 
 
 85 
 
 2,500 
 
 Total 
 
 10,500 
 Mk. 
 
 Germany 
 
 
 
 
 First war loan 
 
 Sept., 1914 
 
 5 
 
 97 % 
 
 4,480 
 
 Second " " .... 
 
 Mar., 1915 
 
 " 
 
 98 1/. 
 
 9,106 
 
 Third " " .... 
 
 Sept. " 
 
 " 
 
 99 
 
 12,162 
 
 Fourth " " .... 
 
 Mar., 1916 
 
 4 Vo-S 
 
 95-98 1/, 
 
 10,767 
 
 Fifth « « .... 
 
 Sept. " 
 
 
 95-98 
 
 10,699 
 
 Sixth " " 
 
 Mar., 1917 
 
 " " 
 
 98 
 
 12,979 
 
 Seventh" " .... 
 
 Sept. " 
 
 « " 
 
 " 
 
 12,626 
 
 Eighth « « .... 
 
 Mar., 1918 
 
 " " 
 
 " 
 
 14,789 
 
 Ninth " " .... 
 
 Sept. " 
 
 
 
 10,434 
 
 Total 
 
 98,052 
 
 United States 
 
 
 
 
 First liberty loan.. 
 
 June, 1917 
 
 3 1/3 
 
 100 
 
 2,000 
 
 Second " " . . 
 
 Nov. " 
 
 4 
 
 " 
 
 3,908 
 
 Tliird " « .. 
 
 May, 1918 
 
 4^^1/4 
 
 « 
 
 4,177 
 
 Fourth " " .. 
 
 Sept. " 
 
 
 " 
 
 6,989 
 
 Victory loan 
 
 Apr., 1919 
 
 4 % 
 
 
 5,250 
 
 Total 
 
 22,225 
 
 
 1 Nominal subscription. 
 
766 
 
 Edwin R. A, Seligman 
 
 [December 
 
 millions sterling or $37,221 millions of dollars. Inasmuch, how- 
 ever, as the Chancellor of the Exchequer asserted in his financial 
 statement of April 30, 1919, that he expected to borrow about 
 250 millions sterling, or 1,217 millions of dollars, during the year 
 1919-1920, the debt of Great Britain at the end of 1920 will 
 amount to almost 8 billions sterling or about 39 billion dollars. 
 The war debt proper, therefore, at the end of that period may be 
 expected to amount to 7^/4 billions sterling or 35, billion dollars. 
 
 Table N. — Public Debt of Great Britaix. 
 (In millions) 
 
 
 Year ending March 31 
 
 
 1914 
 
 1915 
 
 1916 
 
 1917 
 
 1918 
 
 1919 
 
 'Piinrlprl rlpVit 
 
 £ 
 
 587 
 
 30 
 
 li 
 
 20 
 
 650 
 
 £ 
 583 
 28 
 349 
 
 77 
 67 
 
 1,104 
 
 £ 
 
 318 
 26 
 63 
 
 900 
 
 567 
 177 
 
 1 
 
 9 
 
 51 
 
 2,133 
 
 £ 
 318 
 24 
 63 
 20 
 2,119 
 
 464 
 
 320 
 
 74 
 
 24 
 
 317 
 
 51 
 
 4,011 
 
 £ 
 
 318 
 
 22 
 
 63 
 
 16 
 
 2,090 
 
 649 
 
 473 
 
 392 
 
 138 
 
 23 
 
 944 
 
 51 
 
 5,872 
 
 £ 
 318 
 
 Terminable annuities 
 
 3 i/o per cent bonds 
 
 4 1/2 per cent bonds 
 
 4 and 5 per cent bonds... 
 
 National war bonds 
 
 Treasury bills 
 
 22 
 
 63 
 
 16 
 
 2,090 
 
 1,716 
 
 947 
 
 Exchequer bonds 
 
 "War savings certificates . . . 
 War expenditure certifi- 
 cates 
 
 "Other debts" . ... 
 
 393 
 
 227 
 
 1,345 
 
 
 51 
 
 Total 
 
 7,643* 
 
 
 
 1 This includes £207 millions of sinlving fund premiums, which when deducted 
 would bring the net debt to 7,435 millions. 
 
 This total includes the loans to the Allies and Dominions: 
 (In millions) 
 
 Russia £568 
 
 France 434 
 
 Italy 413 
 
 Belgium 87 
 
 Serbia 19 
 
 Other Allies 48 
 
 Total Allies £1,568 
 
 Dominions 171 
 
 Total £1,739 
 
 In France, where the pre-war debt was 32,594 millions of francs 
 or 6,291 millions of dollars, the total debt at the end of 1918 
 amounted to 167,469 millions or 32,322 millions of dollars, con- 
 stituting a relatively more crushing burden than that of Great 
 Britain. The war debt proper as will be seen in table O, amounted 
 to 134,875 millions of francs or 26,031 millions of dollars. In- 
 
1919] The Cost of the War and How It Was Met 767 
 
 asmuch, however, as it is virtually certain that a considerable sum 
 
 will still have to be borrowed during 1919, the total war debt of 
 
 France, will, in all probability amount to 27 or 28 billions of 
 
 dollars. 
 
 Table O. — Public Debt of France, December 31, 1918. 
 (In million francs) 
 
 Domestic debt 136,874 
 
 Funded debt 67,739 
 
 including: 3 per cent rentes 19,746 
 
 5 " " " 25,853 
 
 4 " " " 12,850 
 
 4 " " " of 1918 30,000 
 
 3 and 3 Vs redeemable 3,118 
 
 Floating debt 49,136 
 
 including: national defense bonds 29,463 
 
 advances from Banque de France 18,000 
 
 Foreign debt 30,595 
 
 Funded debt 15,127 
 
 including: advances from U. S. government 12,001 
 
 Anglo-French loan in U. S 1,376 
 
 other loans from U. S 1,602 
 
 Japanese loan 147 
 
 Floating debt 15,471 
 
 Total 167,469=$32,322 
 
 Pre-war debt in 1913 32,594= $6,291 
 
 War debt 134,875=$26,031 
 
 In Italy the pre-war debt was 13,636 millions of lire. At the 
 
 end of October, 1918, as will be seen from table P, the total debt 
 
 amounted to over 63 billions of lire or somewhat more than 12 
 
 billions of dollars, making the war debt proper, about 50 billions 
 
 of lire or 10 billions of dollars. By the end of May, 1919, the 
 
 debt had grown to over 77 billions of lire or 15 billions of dollars, 
 
 and the end is not yet. This represents a very disproportionate 
 
 burden as compared with the British figures. 
 
 Table P. — Public Debt of Italy, August 31, 1918. 
 (In million lire) 
 
 Pre-war debt 13,636 
 
 War loans 14,737 
 
 Treasury bonds 3,052 
 
 Exchequer bills 9,240 
 
 Foreign advances from England and the United States 13,850 
 
 Advances from banks 6,536 
 
 Notes issued by the government 2,041 
 
 Total 63,093 = $12,177 
 
 By May 31, 1919, the total debt had increased to.... 77,768 = $15,069 
 
 For Germany, where the pre-war debt amounted to 4,732 mil- 
 lion marks, the figures are not yet entirely complete. Minister 
 Schiffer stated in February, 1919, that the debt had grown by the 
 end of 1918 to 157,700 million marks. But Minister Erzberger 
 
768 Edwin R. A. Seligma-n [December 
 
 stated in his Reichstag speech of October 31, 1919, that the total 
 debt now amounted to 204 billions of marks, which would make 
 the war debt over 199 billions of marks or 47,726 millions of dol- 
 lars — the largest debt of all the belligerents. It must be remem- 
 bered, however, that the great depreciation of the mark during the 
 period when most of the debt was contracted reduces the actual 
 American equivalent considerably. 
 
 In Austria-Hungary, the pre-war debt was , 18,354 million 
 crowns or 3,726 million dollars. In August, 1919, the new Aus- 
 tria which by treaty assumed 70 per cent of the total war debt 
 of the old empire had a war debt composed as follows : war loans, 
 35 billion crowns; other war debt, 11^2 billions; bank notes, 50 
 billions, or a total of 96^2 billions. At the rate of 70 per cent 
 this would make the total war debt of the old empire now divided 
 among various states, 137,858 million crowns or 28,584 million 
 dollars. But the same caution as to the depreciation of the cur- 
 rency must be observed here. 
 
 In the United States the total net debt just before the entrance 
 into the war, in April, 1917, was $1,190 millions. This had in- 
 creased by June 30, 1919, to $24,232 millions, making a war 
 debt of $23,042 millions. The debt, as appears from table Q, is 
 composed almost wholly of war bonds, together with a relatively 
 small amount of outstanding treasury certificates. Inasmuch, 
 however, as somewhat over a billion dollars from the victory loan 
 
 Table Q. — Public Debt of the United States. 
 (In millions) 
 
 Debt less Annual 
 Date cash in interest 
 
 Treasury charge 
 
 Apr. 15, 1917 $1,189 $23 
 
 June 30, 1917 1,909 84 
 
 " " 1918 10,924 466 
 
 " " 1919: Bonds: 
 
 Pre-war bonds 833 
 
 First liberty loan $1,985 
 
 Second " " 3,566 
 
 Third " " 3,959 
 
 Fourth " " 6,795 
 
 Victory loan (notes) 3,468 
 
 20,455 
 
 Treasury certificates 3,634 
 
 Old debt on which interest increased 3 
 
 Non-interest-bearing debt 236 
 
 Total gross debt 25,485 
 
 Cash on hand 1,252 
 
 Net debt $24,233 $619 
 
1919] The Cost of the War and How It Was 31 et 
 
 769 
 
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 oo^coocDot-e>©( 
 
 jl II II II 
 
 CO «0 O «5 
 
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 ■* o to CO 
 
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 I «5 •* to -* 
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 be > 4J 
 
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770 Edwin R. A. Seligman [December 
 
 will be paid in the course of the current fiscal year, the total war 
 debt of the United States by the end of 1920 will amount to over 
 SJ* billions of dollars, or, deducting the loans to Allies, to about 
 15 billions. 
 
 The other countries need not be treated separately, especially 
 as in a number of cases the details are not yet available. In table 
 R an attempt is made to present a summary picture of the public 
 debts of all the belligerents. From this table it appears that the 
 total pre-war debt amounted to almost 28 billion dollars. On the 
 other hand, the debt at the close of the war, including that of 
 Japan (whose debt was increased only by a part of the funds raised 
 to lend to Great Britain and France), but not including the debt 
 contracted largely for internal and non-war purposes by the Bol- 
 shevist government in Russia, amounted to over 224 billions of 
 dollars. This would make the net debt of the world ascribable to 
 the war about 196 billions. 
 
 When we compare these figures with the total cost of the war, 
 which, as we have seen, amounts to over 210 billion dollars, it ap- 
 pears that well nigh the entire cost of the Avar will have been de- 
 frayed from loans. The difference of some 15 billions derived from 
 taxation is due almost wholly to the efforts of Great Britain and 
 the United States, the former raising about 7 and the latter 
 about 714 billions from taxation — Great Britain in a little over 
 four and a half years, the United States in a little over two years. 
 While a few billions additional were raised, as we have learned, by 
 Italy and Germany from taxation, their contributions to the ex- 
 penditures are more than offset by the budget deficits in those 
 states as well as in France. It remains true, therefore, that the 
 war was conducted almost entirely on credit. The outstanding 
 problem now confronting every country, victorious and conquered 
 alike, is how to secure the funds needed to defray the interest and 
 to provide for the amortization of these gigantic debts, which 
 offset a not insignificant part of the entire wealth of the Avorld. 
 
 Edwin R. A. Seligman. 
 
 Columbia University, 
 
LIBRARY OF ^°^9,^,nSl • 
 
 021 394 575