Seven Crashes, page 12
“Dancing the Polonaise” became a euphemism for standing in line; and as people stood in queues, they exchanged complaints and grievances about the inadequacy of the bureaucracy. The queue became a prime site for social radicalization. As in Vienna, the logic of queues (Anstellen) became a flashpoint. Complaints about anarchy in the market for consumer goods flourished, and people demanded more and better plans to ensure a more just distribution.19 Black markets proliferated, and with them accusations of market manipulation and speculation. Riots broke out in Berlin-Lichtenberg in October 1915, in the center of Munich in June 1916. Vienna had disturbances in May 1916. By the spring of 1917, news of the Bolshevik Revolution threatened to inflame German cities. In June 1918, after a reduction in rations, large numbers of Vienna’s residents moved in an organized and confrontational style into the surrounding countryside to seize hoarded food.20
Food shortages had a long-term impact on Germans’ view of the world, and on the centrality of consumption.21 Everything revolved around food: the politics of revolution but also the politics of the household. The self-consciously patrician German novelist Thomas Mann noted how his breakfast was ruined by quarrels with his wife, Katia, over the amount of butter consumption. When his household was allocated one fig, he gave it to his favorite daughter, Erika, to eat, and explained to her siblings that here was an early lesson about how to get used to injustice.22
A historical consensus has seen the failures of food allocation during the war as a major cause of the disenchantment with politics, and a promoter of violence and extremist radicalism. Some authors try to push back against this and claim the administration worked reasonably well, and that there was something of a new egalitarian wartime social consensus built around the standardized soup ration, the Eintopf. It is also clear that, apart from brief periods of scarcity, Germans generally did not starve in the First World War. Historian Avner Offer provides detailed tables of average weights of middle-aged German males and females though 1917 and 1918, with no signs of decrease, and quotes letters from Germans explaining how it was no hardship to do without fatty foods and beer—“If I look thin, you must not think I am anything but perfectly well. I never felt better in my life.” He quotes an American physiologist, who helpfully concluded that “had the Germans been vegetarians, there would have been no problem.”23 Russell Henry Chittenden, a Yale professor supposed to be the father of modern biochemistry, and one of the members of the U.S. Advisory Committee on Food Utilization, recommended a low-protein diet as a healthier form of living, and argued that accepted dietary standards were too high. The war could be painted as an experiment in healthy living.
The young British economist Claude Guillebaud visited Berlin in 1919 and reported:
I was surprised by the good external appearance of the vast majority of the persons whom I met about the streets. There are very few fat people in Berlin to-day, but equally there is no obvious expression of hunger and exhaustion on the faces of the people. The bulk of the middle and upper classes looked in quite normal health, and their faces did not appear sunken or pinched. The poor certainly showed the influence of privation to a greater extent, but although lack of food and the depressing influence of defeat have taken the desire and the capacity to work hard from the majority of people, the bulk of adults are, in appearance at least, a long way from actual starvation. The food of the poor is monotonous and unpalatable to a high degree, but it is at least sufficient to maintain life for the healthy adult who is neither old nor constitutionally liable to disease.24
Starvation certainly occurred in hospitals, whose staff provided graphic accounts of how patients could not be let into the fresh air because they would seize unripe fruit, chestnuts, even grass and weeds, in order to attempt to satisfy an unbearable, impossible hunger. And there were health problems that followed from poor nutrition. Lung diseases increased, above all tuberculosis. Health deterioration came also from conditions of work. In heavy metallurgy but also in making explosives, many workers were poisoned with nitrate compounds, trinitrotoluene, trinitroanisole, dinitrobenzene, or picric acid and naphthalene and phenol compounds. The vulnerability to influenza in the waves of contagion that accompanied the end of the war and the first years of peace was heightened by the legacy of wartime conditions.
Nutrition changed world views. The lower middle classes and the middle classes lost precisely the elements that made their lifestyles distinct from the working class: the gut bürgerliche Küche (the hallmark of respectable working-class eateries) vanished with the peace. The first wartime survey of the War Committee for Consumer Interests reported a “grinding down of the Mittelstand [middle orders] and the rise of a ‘barbaric’ economy in which there are only ‘rich and poor.’”25 In order to anticipate future grain shortages, the pig population was drastically reduced in early 1915 in the so-called Schweinemord, with much of the resulting meat wasted because of inadequate conservation and canning techniques. The climate of shortages produced resentments against others. It was the “experts” who had recommended the pig slaughter. Later, it was easy to turn on the over two million POWs who needed to be fed alongside Germans. Xenophobia flourished along with hunger and disease, and prepared a mental map for the future.
Russia, with a large grain-supplying area, should not have experienced such grave shortages. Since Russia could not export so much of its cereal production, more should have been available for domestic production. When bottlenecks came, they were a consequence of bad logistics. Unlike in other belligerent countries, the number of animals increased, intensifying the pressure on grain. The census of 1916 recorded a 25 percent increase in cattle, and higher numbers of sheep and goats. The harvest remained relatively plentiful, with the 1917 harvest only 12 percent below the 1914 level. But supplies to the cities and industrial centers, whose populations shot up with the need to produce munitions, failed utterly. In December 1916, for instance, Petrograd received under 15 percent of the amount of grain that the planners believed it needed. The government blamed the situation on inadequate transport and on the unavailability of railroad trucks. There may have been enough trucks, but they were not in the right location—because of military demands, but also because of other disturbances. Shortages hit everything: thus one suggestion was that railroad workers did not show up because they did not have the shoes that they needed for their work. The consequence was that rats ate a great part of the Russian harvest.26 The story of urban food shortages, along with miserable accommodation, is a large part of the tale of the 1917 Revolution. The revolution against the tsar began on February 23 (March 8) with tens of thousands of women in Petrograd protesting under the slogans “Down with high prices” and “Down with hunger.” But that was just the culmination of years of “bazaar disorders,” “hunger riots,” “pogroms,” and “women’s riots” that had already appeared all over the empire in 1915.27
In unoccupied France and in Britain, there were no life-threatening shortages, but plenty of scarcity and popular protest. Paris only began to ration sugar in 1917 and bread in 1918, and Britain only introduced rationing in February 1918. But Britain had a greatly diminished agricultural sector and had made the strategic bet that it would always be able to supply itself through imports. A large part of its shipping capacity—17 percent by weight—handled grain.28 The war brought immediate dislocations: a shortage of shipping, then of stevedores, meaning that ships remained in port longer as the unloading took more time. By the beginning of 1915, the Board of Trade concluded that “the rise in prices of foodstuffs has been so great that the welfare of the masses of the people is seriously threatened.”29 Prices were rising, not least because the various allies were involved in a bidding war against each other to get grain. The result was not only a series of committees, on food prices, food supply, and so on, but also a quite fateful decision to extend the fighting to the east in order to ensure access to the large surpluses of Russian grain. Unless the straits of the Bosphorus were in friendly hands, Russian grain could not pass through the Black Sea to the Mediterranean. The result was the decision to launch the Dardanelles campaign against the Ottoman Empire—a move that nearly succeeded, but ended as a humiliating fiasco. As Prime Minister Herbert Asquith put it in a letter to his girlfriend, “There is no doubt that we are at last beginning to feel the pinch of war, mainly because all the German ships wh[ich] used to carry food are captured or interned, and the Admiralty has commandeered for transport &c over 1000 of our own. Further, the Australian crop has failed, & the Russian (wh[ich] is a very good one) is shut up, until we can get hold of Constantinople & open the Black Sea.”30
By 1916, the UK’s supplies were exhausted, and it became a key question of how to replace them. A meat shortage developed, caused in part by the belief that the army needed to be fed at a higher level than the civilian standard, as well as by the need to relieve meat shortages in France.31 There was also a substantial decline in the number of pigs, and a ploughing-up campaign to turn pasture into arable land. The alternative to rationing was to borrow abroad, to look for foreign relief, as a way of financing the trade deficit that resulted from large-scale imports that were needed not just to manage the war, but to sustain civilian morale. By 1917, the government launched a campaign for a “National Lent,” with announcements that King George V was eating a quarter less than normal. Lecturers fanned out over the country to promote dietary restraint. They were not effective. At the end of 1917, there were large-scale demonstrations and occasionally violent protests.32
The Cost of War
The cost of war—especially a long war—is too great to be borne at the time it is incurred. There was a widespread understanding that an expensive all-consuming war is best financed by a lien on the future: by borrowing. In one sense, however, the war has to be paid now: the shells are fired, the soldiers fed and paid, the field hospitals built. The nitrates that go into explosives cannot at the same time be used to fertilize arable land. The beef eaten by soldiers on the front cannot be fed to miners digging for the coal that is needed to push the economic war mobilization. In short, other nonmilitary consumption of goods competing with military requirements must be reduced. Bitter disputes occurred about how this should happen: in particular, what was the best mix of borrowing and taxation. The deprived consumer might simply be disciplined by having the means to consume taken away—by a tax or a levy. Or she might voluntarily defer consumption, by buying bonds or other instruments (even holding cash would do) that would entitle her to future goods (and hence diminish the goods available to other competing consumers). Is it better to have something taken away or to be given a promise of uncertain value and be filled with doubt as to whether the promise can be met?
Classical political economy in Britain had handled the question of war finance or funding in the aftermath of the wars of the French Revolution and Napoleon: expensive wars of long duration, but whose relative cost was less than that of twentieth-century total wars. Just to give a ballpark figure: average annual war expenditures in the French wars were 12 percent of GDP for the last year of the war; the equivalent figure is 32 percent for the First World War.33 The great economist David Ricardo regarded an immediate levy or a tax as the most prudent option. A perpetual tax to cover the future interest on war debt would diminish the “national capital.”
The greatest advantage that would attend war-taxes would be the little permanent derangement that they would cause to the industry of the country. The prices of our commodities would not be disturbed by taxation, or if they were, they would only be so during a period when every thing is disturbed by other causes during war. At the commencement of peace every thing would be at its natural price again, and no inducement would be afforded to us by the direct effect, and still less by the indirect effect of taxes on various commodities, to desert employments in which we have peculiar skill and facilities, and engage in others in which the same skill and facilities are wanting. . . . Let us meet our difficulties as they arise, and keep our estates free from permanent encumbrances, of the weight of which we are never truly sensible till we are involved in them past remedy.34
He also added a pragmatic argument:
There cannot be a greater security for the continuance of peace, than the imposing on ministers the necessity of applying to the people for taxes to support a war. Suffer this sinking fund to accumulate during peace to any considerable sum, and very little provocation would induce them to enter into a new contest. They would know that, by a little management, they could make the sinking fund available to the raising of a new supply, instead of being available to the payment of the debt. The argument is now common in the mouths of ministers, when they wish to lay on new taxes, for the purpose of creating a new sinking fund, in lieu of one which they have just spent, to say, “It will make foreign countries respect us; they will be afraid to insult or provoke us, when they know that we are possessed of so powerful a resource.”35
Ricardo’s argument might be stood on its head: a substantial debt, held by the people, would be a demonstration of national self-confidence and assertiveness. The First World War belligerents regarded their bond issues as important moments of propaganda; and they looked at the issues by their opponents carefully in order to study the state of morale and consequently the degree of commitment to all-out mobilization.
In Britain, Ricardo’s arguments were almost precisely echoed one century later by the Cambridge economist Arthur Pigou, who like Ricardo was not a militarist and viewed the extent of military mobilization with distrust. He added a set of considerations that concerned social justice: the war would be an opportunity to build a more equal society, and that could best be achieved through taxation, rather than through rewarding rich bondholders with large future shares of the national pie. “Of the money needed by the State the rich man must provide in one way or another more than the poor man, and the very rich man more than the moderately rich man; and the amount provided must increase, not merely proportionately, but progressively as wealth increases.”36 War finance involved a fundamental issue of social distribution: “the root principle, in accordance with which the Government should decide how far to finance the war by taxes and how far by loans, is the judgment that it forms concerning the right ultimate distribution of war costs between people of different grades of wealth.”37
In the twentieth century, as a result of the new domestic politics, the rise of the working class and of socialist parties, there was a new reality that needed to be taken into account and that involved a reduction in borrowing, since that borrowing favored the wealthy rentier. As Pigou put it: “In the present cataclysmic and exceptional war, the very rich and the rich ought to bear a proportion of the objective burden very much larger than that [in peacetime]. There is one way, and one way only, in which this result can be brought about. The ratio in which the war is financed with money borrowed from people with large incomes should be much diminished: and the ratio in which it is financed with money collected from them under some form of progressive taxation should be much increased.”38 The problem had existed before 1914. Government spending had increased, with more costly infrastructure and social outlays, and in 1892 the German economist Adolph Wagner had formulated his law of increasing state activity.39 He also called this the increasingly “communist character” of the economy in culturally advanced countries. By the early twentieth century, the growing arms race between the major powers added a further element of expenditure, and paying the bill became increasingly cantankerous politically.
Two principles or approaches to war finance clashed with each other: the one leaned to bond finance because that offered the best sign of financial strength; the other pushed for higher taxes in the name of social justice. The substantial resistance to the latter course was rarely framed as an opposition to more justice, a fairer society, or a proper recompense to those who had shed their blood, seen their families decimated, and borne the costs. Instead, the case rested on the notion that taxing would diminish incentives to participate in the war effort. Businesses would be less patriotic in converting to war production; workers would be demoralized by too large an element taken out of their pay packet, or too heavy an excise placed on their beer. The emphasis on borrowing was increased as a result of the debate about the importance of civilian morale. It was crucial not to lower morale by cutting off consumption unduly. That militated against tax increases.
There were substantial tax increases in Britain, with the income tax rising from 1s 2d to 6s in the pound, and an excess profits tax. From 1914 to 1918 the revenue from income and property taxes tripled, from 3.0 percent to 9.6 percent, but that was not nearly sufficient to pay for a war that was consuming at least 50 percent of GDP. So the bet or the mortgage on the future expanded: in 1914 the national debt amounted to £706 million at face value, and rose to £2,190 million by 1916, and £7,481 million by 1919.
The war loans issued on the London Stock Exchange were a major exercise in propaganda, with crafted propaganda appeals. “The British sovereign will win”: a play on words, since the sovereign was a British coin, and also the monarch, and at the same time the sovereign people. The first loan, announced in November 1914, was for £350 million, with a 3.5 percent nominal coupon. A second loan followed in June 1915, for £901 million, and carrying a coupon of 4.5 percent. In order to motivate buyers to be confident about the future, holders of the first bond were allowed to convert their securities; when the third loan came, in June 1917, at 5 percent, it included the same provision. Later, the practice attracted substantial criticism: had the bondholder been overpaid? The wartime prime minister, David Lloyd George, later admitted that the high yields on war bonds kept money dear “for all enterprises, industrial, commercial, and national.”40 The Scottish Independent Labour politician Tom Johnston, who in 1931 was briefly a cabinet minister and in the Second World War returned to office as secretary of state for Scotland, penned a coruscating indictment of the “financiers” in 1934. He quoted the exuberant headlines of the wartime financial press (“Money is at last coming into its own”) as an instance of the work of “the controllers of the Money Power, the men who cold-bloodedly raised their demands upon their fellow-countrymen with every German advance in the field and with every German U-boat campaign at sea; the men who organized the creation of hundreds of millions of unnecessary debt; the men who inflated rates of interest.”41 Johnston’s book carried a ringing endorsement from the veteran socialist Sidney Webb.
