B M 07ft '^ftO 
 
FINANCES AND COSTS OF THE PRESENT 
 EUROPEAN WAR 
 
 PREPARED BY THE WAR COLLEGE DIVISION, GENERAL STAFF CORPS 
 
 AS A SUPPLEMENT TO THE STATEMENT OF A PROPER MILITARY 
 
 POLICY FOR THE UNITED STATES 
 
 WCD 9287-1 
 
 ARMY WAR COLLEGE : WASHINGTON 
 
 NOVEMBER, 1915 
 
 512 
 
 WASHINGTON 
 
 GOVERNMENT PRINTING OFFICE 
 
 1916 
 

 ^-/^'/( '"'■■" "•■•//" 
 
 War Department, 
 
 Document No. 512. 
 
 Office of the Chief of Staff. 
 

 
 SYNOPSIS. 
 
 Introduction. 
 
 Page. 
 
 1. Policy employed in financing the war 5 
 
 («) Great Britain 5 
 
 (b) France 5 
 
 (c) Russia 6 
 
 (d) Italy 6 
 
 (e) Belgium 6 
 
 (/) Serbia 6 
 
 (g) Japan 6 
 
 (h) Germany 6 
 
 (i) Austria-Hungary 8 
 
 (k) Turkey 8 
 
 2. Cost of the war (Tables 1 an(^) 9-10 
 
 (a) Great Britain 9 
 
 (b) France 9 
 
 (c) Russia 9 
 
 (d) Italy . . 9 
 
 (e) Belgium 9 
 
 (/) Serbia 9 
 
 (g) Japan 9 
 
 (h) Germany 10 
 
 (i) Austria-Hungaiy 10 
 
 (h) Turkey 10 
 
 3. Number and amount of domestic loans (Table 3) 10-11 
 
 (a) Great Britain 10 
 
 (b) France 10 
 
 (c) Russia 10 
 
 (d) Italy 10 
 
 (e) Belgium 10 
 
 (/) Serbia 10 
 
 (g) Japan 10 
 
 (h) Germany 11 
 
 (i) Austria-Hungarj^ 11 
 
 (k) Turkey 11 
 
 4. Number and amount of foreign loans (Table 4) 11 
 
 («) Great Britain 11 
 
 (b) France 11 
 
 (c) Russia 11 
 
 (d) Italy 11 
 
 (e) Belgium 11 
 
 (/) Serbia 11 
 
 (g) Japan 11 
 
 (h) Germany 11 
 
 (i) Austria-Hungary 11 
 
 (Jt) Turkey 11 
 
 5. Total and per capita national -wealth ; national debts 11 
 
 Table 5 11 
 
 30669°— No. 512 Ifi (3) 
 
FINANCES AND COSTS OF THE PRESENT EUROPEAN 
 
 WAR. 
 
 INTRODUCTION. 
 
 A careful search of the files of the War College has been made 
 for data covering the various points of the study. The results are 
 embodied in the following pages. As was to have been expected, 
 accurate data are almost wholly lacking, and such as have been 
 secured are of doubtful accuracy. The various w^arring nations are 
 naturally not publishing information on this subject at this time, 
 and the majority of the figures quoted in the following pages are 
 little better than estimates. 
 
 1. POLICY EMPLOYED IN FINANCING THE WAR. 
 
 (a) Great Britain. — Prior to the outbreak of hostilities Great 
 Britain had made no plans for putting the country upon a sound 
 financial basis for war. The Imperial Government was as unpre- 
 pared to meet the financial emergency caused by the war as it was 
 to oppose the trained armies of central Europe with an adequate 
 number of properly trained and equipped troops. Since the begin- 
 ning of hostilities England ha<s endeavored to meet the situation by 
 laying heavy taxes on imports, " war profits," incomes, spirits, tea, 
 etc., and in some cases the taxes on incomes have amounted to 33 per 
 cent. The increased income derived from these sources has, of course, 
 proven utterly inadequate to provide the huge sums necessary for the 
 maintenance of the Government and the prosecution of the war. 
 Great Britain has therefore been obliged to borrow extensively, and 
 according to the best available information the amount she has ob- 
 tained in this way at home since the beginning of the war is approxi- 
 mately $5,489,000,000. Her foreign war loans aggregate approxi- 
 mately $250,000,000. 
 
 England has joined Avith France and Russia in providing a fund 
 of $200,000,000 for meeting in part the war expenses of Belgium. 
 Japan, and Serbia, and in addition it is believed has loaned Belgium 
 $50,000,000 and Serbia $4,000,000 without interest until the end of 
 the war. 
 
 (h) France. — The outbreak of hostilities in August, 1914. found 
 France well prepared financially to enter the war. For some years 
 
 512 
 
 (5) 
 
prior thereto France, like Germany and Russia, had been building 
 up a war reserve which, when war came, enabled her to put her well- 
 trained and equipped armies into the field with the assurance that 
 for a time at least there was no fear of a lack of funds for the prose- 
 cution of the war. However, it soon became apparent that France, 
 like all other nations involved in the war, must resort to borrowing 
 to meet the enormous expenses of the situation. Since the war began 
 France has borrowed at home approximately $1,680,000,000. A por- 
 tion of this sum was obtained directly from the French people, who 
 subscribed liberally to what was known as National-Defense Bonds, 
 which ran for from 6 to 12 months and bore interest at 5 per cent. 
 A later domestic loan which made up the total sum borrowed at 
 home was floated through the Bank of France in the form of bonds 
 for a term of years and bearing interest at 5 per cent. Later, in 
 order to secure gold for purchases abroad, the Government called 
 upon the people to exchange bullion for paper currency and even to 
 turn into the treasury gold ornaments, jewelry, etc. The response 
 to these requests was most patriotic. 
 
 France has also joined with England in negotiating in the United 
 States a loan of $500,000,000 at 5 per cent, and has contributed to a 
 fund of $200,000,000 to meet in part the war expenses of Belgium, 
 Japan, and Serbia. Her other foreign- loans aggregate $148,000,000, 
 and are shown in more detail under (b) Table 4. 
 
 (c) Russia. — Russia had accumulated a large war reserve at the 
 outbreak of hostilities. Part of this reserve which was on deposit in 
 Berlin was withdrawn during the week preceding the war. The in- 
 creased expenses due to the war are being met by increasing the 
 rates of taxes already in force and by borrowing. So far as known, 
 Russia since the beginning of the w^ar has made three domestic 
 loans aggregating about $1,339,000,000. She has also joined with 
 England and France in providing a fund of $200,000,000 to meet 
 in part the war expenses of Belgium, Japan, and Serbia. 
 
 (d) Italy. — No data are available respecting the financial policy 
 of Italy or the measures so far adopted to meet war conditions. 
 She has borrowed about $425,000,000. 
 
 (e) BelgkiTn. — Nothing is known of the policy of Belgium with 
 respect to financing the war except that she has been aided by Great 
 Britain, France, and Russia, as already stated. She has, however, 
 been aided by Great Britain by a loan of $50,000,000 without interest. 
 
 (/) Serhia. — Same as for Belgium. Great Britain has loaned 
 Serbia $4,000,000 without interest. 
 
 {g) Japan. — No data available. 
 
 {h) Germany. — The following abstract of a description of the 
 German method of financing the present war, by Roland G. Usher, 
 512 
 
in the December, 1914, issue of the Atlantic Monthly, is given as 
 the best and clearest exposition of the subject yet available : 
 
 Great sums of ready money have invariably been needed in Anglo-Saxon 
 countries in order to begin a war, because those countries have invariably 
 been caught unprepared. The Government has lacked not only the necessary 
 materials, but the knowledge of their whereabouts, and has had to find them 
 by ordinary business methods, which meant buying them in open market 
 with money. England and the United States have always obtained in the 
 same way the supplies and munitions needed to prosecute war and have always 
 found an abundant supply of stable currency the indispensable nexus between 
 the Government and its citizens by whom the commodities were produced. 
 
 German statesmen and financiers have, however, arrived at an 
 entirely different solution of the question. The German system of 
 " financing " war depends upon the following : 
 
 The army requires matermi for its use and maintenance as does the 
 nation at large, and stei>s were taken in time of peace to insure the 
 supply of this material upon the outbreak and continuance of war. 
 
 Certain supplies Germany did not and could not produce and 
 those supplies were purchased and stored in quantity before the 
 outbreak of war. The vast supplies necessary at the outbreak of 
 war and before their manufacture could be increased were also 
 purchased and stored. 
 
 Certain other supplies Germany did not produce in normal times 
 or did not produce them in the quantity sufficient for prosecuting 
 Avar. These supplies could be produced, however, if adequate prepa- 
 ration were made therefor in advance. 
 
 Supplies of both the above classes would be necessary not only 
 for the use of the army, but for the nation at large as well. 
 
 In order to gather the class of supplies which she could not pro- 
 duce at any time, capital was necessary with which to purchase 
 them. Capital was also necessary for the purpose of subsidizing 
 manufactures for the supply of materials which would be needed 
 in increased quantities in time of war and which required special 
 machinery and skilled labor for their production. To secure this 
 capital Germany imposed before the outbreak of war a " war levy,'' 
 which was a direct tax, amounting to $250,000,000, Avhich, they ex- 
 plained, was necessary to render the army efficient. With the capital 
 thus obtained she "purchased in Germanv and abroad every con- 
 ceivable sort of supplies necessary to put the nation in position nec- 
 essary to make war." 
 
 As Germany employs the system of universal military service, she 
 can tell just what men will be called away from their usual pursuits 
 upon the outbreak of war. She knew in advance, therefore, just 
 what men would have to be replaced by individuals not to be called 
 to the colors in order to provide for the supply of commodities neces- 
 
 512 
 
8 
 
 sary during war. She therefore subsidized manufactures in order 
 to enable them to place in the factories the machinery which would 
 be required during war and to train enough additional labor for 
 operating the machinery — the additional laborers to consist of indi- 
 viduals who were not to be called to the colors. 
 
 In this manner Germany prepared in peace for the supplies she 
 Avould need in war. 
 
 Money in time of war, as at any other time, tlie Germans concluded, meant 
 currency, and currency meant some medium of excliange which would be 
 accepted- by the people at face value. So long as the public confidence in the 
 Government was unshaken and ultimate success was believed certain, a paper 
 currency would serve the purpose much better than specie. The banking sys- 
 tem, to be sure, collected gold as assiduously as it could during the months 
 preceding the war and is supposed to have vastly increased the German gold 
 reserve, which was to give stability to the paper currency and furnish a firm 
 basis for such international exchange as they might eventually find necessary. 
 The central banking system, however, * * * could absolutely control all 
 exchange, could accept as collatei*al for loans whatever the individual had to 
 offer and issue him paper credits. There would be plenty of real value because 
 there would be plenty of real work ; the Government would see to that. 
 
 The banks would make loans to the manufacturer and establish a checking 
 account on which they would pay him paper, which in time he would pay his 
 employees, who would pay it out for commodities. The dealers would pay it 
 back into the banks, when the whole transaction would, as usual, be canceled. 
 
 In this way Germany is attempting to avoid the necessity for 
 borrowing the vast sums from neutral countries which the other 
 w^arring nations are apparently going to have to do. 
 
 The bond issues which she has made are not concerned wdth the 
 war itself so much as with the necessary readjustments after the 
 war is over. 
 
 As observers we are not yet in a position to pass upon the ultimate validity 
 of these measures. We can only point out that they seem to conform accu- 
 rately to the experience of history and to be nothing more than the literal 
 application of the simple postulates of political economy. So far as we can 
 tell, if private letters ai"e any evidence of what conditions in Germany at pres- 
 ent are, every indication points toward the overwhelming success of German 
 finance. 
 
 (^) Austria-Hungary. — No data are available concerning the plans 
 of the Government of Austria-Hungary for financing the war. It 
 is known that she has borrowed money and that her first loan w^as 
 made quietly through the banks, but the amount so obtained and the 
 rate of interest paid are not definitely known. Her total domestic 
 loans amount to $1,181,000,000. No further data concerning the 
 financial transactions of Austria-Hungary are available. 
 
 {k) Turkey. — It is reported that Turkey has received material 
 financial aid from Germany in the form of a loan of $250,000,000. 
 No other data concerning the financial policy and transactions of 
 Turkey are available. 
 
 512 
 
2. COST OF THE WAR. 
 
 In so far us this can be ascertained, it is shown by Tables 1 and 2 
 appended, Table 1 giving what is known of the total cost to date 
 and Table 2 the daily cost at the periods stated. These figures are 
 only estimates, of course, and, as it is generally conceded that the 
 war is becoming increasingly costly, are probably far below the 
 actual amounts at this time. 
 
 3. NUMBER AND AMOUNT OF DOMESTIC LOANS. 
 
 The number and amount of domestic loans, in so far as they can 
 be ascertained, are shown in Table 3. It must be understood that 
 the information on this subject comes from various newspapers and 
 that its accuracy can not be vouched for. 
 
 4. NUMBER AND AMOUNT OF FOREIGN LOANS. 
 
 This information is contained in Table 4. "With the exception of 
 the Anglo-French loan made in the United States, the same remarks 
 as to the validity of the information applies here as in the case of 
 domestic loans. 
 
 5. A TABLE SHOWING TOTAL AND PER CAPITA NATIONAL WEALTH 
 OF VARIOUS NATIONS AT THE BEGINNING OF THE WAR; ALSO 
 NATIONAL DEBTS IN 1914 AND ESTIMATED AMOUNTS IN 1916. 
 
 Table 1. — Cost of the war. 
 
 («) Great Britain.— '^S, 525 ,000,000 for one year only. (Collier's 
 Weekly, Nov. 6-15, p. 11.) 
 
 Note. — To this amount slionld be added some portion of $200,000,000 furnished 
 to Belgium, Serbia, and Japan jointly by Great Britain, Russia, and France. 
 
 (5) France.— $1,750,000,000 for period April 1, 1915, to August 
 1, 1915. (Review of Reviews, April, 1915, p. 452.) 
 
 Note. — To this amount should be added some portion of $200,000,000 furnished 
 to Belgium, Serbia, and Japan by Great Britain, Russia, and France. 
 
 (c) Russia.— $2,000^0.000 for period April 1, 1015, to August 1, 
 1915. (Re\iew of Reviews, April, 1915, p. 452.) 
 
 NoTK. — To this amount should be added some portion of $200,000,000 furnished 
 to Belgium, Serbia, and Japan by Great Britain, Russia, and France. 
 
 (d) Italy.— $S00,000.000 for period April 1, 1915, to August 1, 
 1915. (Review of Reviews, April, 1915, p. 452.) 
 
 (e) Belgium. — No data. 
 (/) Serhia. — No data. 
 {g) Japan. — No data. 
 
10 
 
 (h) Germany. — $2,500,000,000 (includes Turkey's expenditures) 
 for period April 1, 1915, to August 1, 1915. (Keview of Reviews, 
 April, 1915, p. 452.) 
 
 {i) Aust7^'<i-Hungary.— $1,500,000,000 for period April 1, 1915, to 
 August 1, 1915. (Review of Reviews, April, 1915, p. 452.) 
 
 (/i) Turkey. — See Germany. 
 
 Table 2. — Daily cost of the toar. 
 
 (a) Great Britain.— $U,100,000 (Collier's Weekly, Nov. 6, 1915, 
 p. 11). Present time. 
 
 (5) /^ra^e.— $7,000,000 (Literary Digest, Dec. 5, 1914, p. 1151). 
 During August, September, and October, 1914. 
 
 (c) Russia. — No data. 
 
 (d) Italy. — No data. 
 
 (e) Belgium. — No data. 
 (/) Serhia. — No data. 
 {g) Ja,pan. — No data. 
 
 {h) Germany.— %5, 000, 000 to $7,000,000 (Literary Digest, Dec. 5, 
 1914, p. 1152). Prior to December, 1914. 
 {i) Austria-Hungary. — No data. 
 ih) Turkey. — No data. 
 
 Table 3. — Domestic loans. 
 
 [Except when otherwise noted, the figures for this table were taken from the Literary 
 Digest, Nov. 20, 1915, p. 1J.98, quoting New York Times Annalist.] 
 
 («) Great Britain. — 
 
 Bonds 3* per cent (10 to 13 years sold at 95) $1, 750, 000, 000 
 
 Bonds Al per cent 2, 925, 000, 000 
 
 Five-year exchequer 3s 239, 000,000 
 
 Treasury bills (21 per cent to 3| per cent), six months 
 
 (estimated as now outstanding) , 575, 000, 000 
 
 Note. — Wlien the 41 per cent loan was made the rate of interest on all preceding loans 
 was voluntarily raised to 4J per cent, with the promise that if further loans at higher 
 rates of interest became necessary all prior loans should bear such higher rates. 
 
 {h) France. — 
 
 Bonds, national defense, 5 per cent (6 to 12 months) $1, 230, 000, 000 
 
 Bonds, Treasury, 5 per cent (a term of years) 450,000,000 
 
 (<?) Russia. — 
 
 Bonds 5 per cent '- $515, 000, 000 
 
 Bonds 5* per cent 515, 000, 000 
 
 Bonds 4 per cent 309, 000, 000 
 
 Treasury bills at home and in England and France 1, 252, 000, 000 
 
 {d) Italy. — 
 
 Bonds 5i per cent $200,000,000 
 
 Bonds 4i per cent 200, 000, 000 
 
 (e) Belgium. — No data available. 
 (/) Serbia. — No data available. 
 {g) Japan. — No data available. 
 
 512 
 
11 
 
 {h) Germany. — 
 
 First war loan 5s $1, 115,000. 000 
 
 Second war loan 5"s 2,265,000,000 
 
 Third war loan 5's 8,025,000,000 
 
 {i) Austria- Hungary. — 
 
 Austrian bonds 54 per cent .$433, 000, 000 
 
 Hungarian bonds 6 per cent 237,000,000 
 
 War loans, credits, etc 1,161,000,000 
 
 {k) Twkey. — No data available. 
 
 Table 4. — Foreign loans. 
 
 [Except when otherwise noted, the figures for this table were taken from the Literary 
 Digest, Nov. 20, 1915, p. 1198, quoting New York Times Annalist.] 
 
 {a) Great Britain. — 
 
 One-half of Anglo-French credit in New York 5 per cent 
 
 bonds .$250, 000, 000 
 
 (b) France. — 
 
 One-year 5 per cent notes in London .$50, 000, 000 
 
 One-year 5 per cent notes in New York 25,000, 000 
 
 Credits and collateral loan in New York 73, 000, 000 
 
 One-half Anglo-French loan in New York 250,000,000 
 
 ((?) Russia. — See "Treasury bills,"' etc., under (c) Russia, table 3. 
 
 {d) Italy. — Loan now being placed in New York, $25,000,000. 
 
 {e) Belgiunfi. — $50,000,000 loaned by British Government during 
 the war without interest. 
 
 (/) Serbia. — $4,000,000 loaned by British Government during the 
 war without interest. 
 
 (g) Japan. — No data available. 
 
 (h) Germany. — 
 
 Notes in United States .$10,000,000 
 
 (^) Atostria-Hungiary. — No data available. 
 (k) Turkey. — 
 
 Loan in Germany $250,000,000 
 
 Table 5. 
 
 National 
 wealth at be- 
 ginning of war. 
 
 Per capita 
 wealth at be- 
 ginning of war. 
 
 (o) Oreat Britain. $85,000,000,000 
 
 (6) France. 
 
 (e) Russia. .. 
 (rf) Italy.... 
 
 (f) Belgium. 
 (/) Serbia... 
 
 50, 000, 000, 000 
 40, 000, 000, 000 
 20, 000, 000, 000 
 9,000,000,000 
 500,000,000 
 
 (?) 
 (?) 
 
 $1, 777 
 
 1,625 
 
 250 
 
 588 
 
 National 
 wealth at be- 
 ginning of war. 
 
 Per capita 
 wealth at be- 
 ginning of war. 
 
 ((?) Japan ' 
 
 Qi) Germany 
 
 (i) Austria- ilim- 
 
 gary 
 
 (fc) Turkey 
 
 $80, 000, 000, 000 
 
 25,000,000,000 
 3,000,000,000 
 
 (?) 
 
 ?92:} 
 ,500 
 
 NATIONAL DEBT. 
 
 ia) Great Britain. 
 {b) France 
 
 (c) Russia 
 
 (d) Italy 
 
 (f) Belgium 
 
 (/) Serbia 
 
 512 
 
 1914 
 
 1916 
 
 $3,485,000,000 
 6,345,000,000 
 4, 540, 000, 000 
 2, 850, 000, 000 
 825, 000, 000 
 125,000,000 
 
 $11,000,000,000 
 
 9, 500, 000, 000 
 
 6,500,000,000 
 
 3,000,000,000 
 
 825, 000, 000 
 
 125,000,000 
 
 (o) Japan > 
 
 (A) Germany..... $3,735,000,000 
 (i) Austria- Hun- ; 
 
 gary 1,050,000,000 
 
 (t) Turkey 675,000,000 
 
 1916 
 
 $9,985,000,000 
 
 2,000,000,000 
 675,000,000 
 
 1 No data available. 
 
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