By EDWIN R. A. SELIGMAN
Professor of Political Economy and Finance in Columbia University
The cost of a war may mean several different things. It may mean, in the first place, the actual money cost, or expenditure in dollars and cents, directly involved in prosecuting the war. Or, secondly, it may mean the war cost, both direct and indirect, from the economic point of view. The real cost of a war from this latter point of view may mean either actual loss of lives and property or the diminution of the annual social production. The wealth of a country measured in its social income may be reduced either by the actual loss of territory, as in Germany; by the impairment of its natural resources like the coal mines and forests, as in France; by the reduction of labor power, due to the wounded workmen or the results of starvation or privation, as in many countries of Europe; or by the loss of economic efficiency due to a reduction of the standard of life or to a changed attitude toward habits of work. The real costs of war, although often incalculable, are none the less of profound significance.
The actual money costs or expenditures of government for war include not only the actual outlays for military and naval purposes, but also the whole range of expenditures incurred in industrial 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 modern times than they used to be. It is a far cry from the meeting of two savage tribes armed only with bows and arrows or javelins, to the modern 16-inch guns, the dreadnoughts, the airplanes, the submarines, the poison gas and the innumerable technical adjuncts of modern warfare. The consequence is that the money costs of the World War have far transcended those of all previous conflicts.
The attempt to present in figures the costs of the war meets with several difficulties. In the first place the question arises as to the period at which 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 the peace was declared—in this case a matter of many months additional. But even when peace was declared the war expenses were by no means over. The process of demobilization is a slow one: moreover it is necessary to continue for some time the policing of the conquered countries; and finally comes the question of the pensions to the wounded soldiers or to the families of the dead. It will be seen, therefore, how impossible it is to state with any accuracy at the present time the costs of the war, when those are still being incurred. Furthermore, the figures ordinarily given contain additional inaccuracies. The richer countries make loans to the poorer countries and these expenditures are consequently 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 the pension system, the nominal expenditures appear smaller than is really the case, because of the receipt of vast insurance premiums which will ultimately all be expended again. Finally the figures make no allowances for the change in the price level or the alteration in the value of money. In a great war like the present, prices have risen: in some countries they have doubled, in some countries they have more than tripled, for reasons which it is needless to discuss here. What appears, therefore, to be a great and increasing outlay from year to year may be in reality due in part, at least, to this cause.
After making all allowances for these difficulties we may proceed to state some of the facts as to the actual outlays of various countries.
THE COST OF THE WAR DAY BY DAY
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 Chancellor of the Exchequer, amounted to almost $10,000,000 in the opening months of the war and reached a maximum of almost $36,000,000 by 1918. These figures, however, are not exact because they include all of the expenditures. The real war expenditures may be arrived at by deducting in each case the amount of the expenditures in the last year of peace, ending March 31, 1914. Making these corrections, it appears that the average daily war expenditures in England rose from about $9,500,000 during the first eight months of the war to about $33,500,000 in 1918, then slowly receding in 1919. In France the average daily expenditures were naturally somewhat less, rising from about $8,500,000 during the first three months of the war to over $21,000,000 during 1917, the last full year of the war. In Germany the daily expenses were approximately the same as in Great Britain, rising from about $13,000,000 in the first nine months of the war to $34,500,000 during the last six months of 1918. In the case of both Germany and France, it is not known whether the figures comprise the total expenditures or only the pure war expenditures. In the former event the daily 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-Hungary the daily expenditures were naturally smaller, amounting at the maximum to about $10,500,000 and $20,000,000 respectively. In Russia the daily expenditures rose in 1916 to about $20,000,000 and in 1917, just prior to the October revolution, nominally to $47,000,000. But, owing to the great depreciation of the ruble, the actual expenditures were much less.