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The Postwar World
Economic Consequences of the
War
The fighting in Europe destroyed many of the communications
lines and factories of the Continent, but most of this physical damage
proved relatively easy to repair. By 1922 the production of materials
like coal, iron, and steel, the output of manufactures, and railroad
mileage were all higher than in 1912, and despite tariff barriers raised
by the new states intra-European commerce had also staged an almost
complete recovery. Many changes had, of course, taken place. Industries
were turning to mass production and, where possible, were using machines
in place of human labor. Partly as a result of this but even more as
a result of political changes, the work day was growing shorter. The
eight-hour day, which had once seemed an impossible dream, became a
reality. But neither mass production nor changes in working conditions
nor even changes in consumer interests, such as the general passion
in western Europe and the United States for new houses and motor cars,
can be attributed to the war. Insofar as economic changes are traceable
to that conflict, they lie rather in the realm of finance, for the war
had one clear result: it transferred the center of wealth from Europe
to North Amercia.
The European victors were left owing their former ally
an aggregate of $10 billion; when the exchanges were freed in 1919,
the British pound dropped by one fifth in value as compared with the
dollar, while the franc fell by 50 percent. The effort made particularly
by the French to wring reparations payments from Germany was due in
part to a desire to recover lost ground. The Germans, when pressed,
proved unable to pay. Inflation made the German mark worthless: it stood
at 4.6 million to the dollar in August 1923, and at 4.2 trillion to
the dollar in November. An international committee, headed by Charles
G. Dawes of the United States, recommended that a new financial system
be adopted by the Germans and that reparations claimed by the Allies
be scaled down, and this Dawes Plan was adopted in 1924. But the inflation
wiped out savings, worked great hardship on the German middle classes,
and helped to prepare the way for Adolf Hitler's seizure of power in
1933. And, to a lesser extent, financial disturbances worked hardships
on the middle classes all over Europe and thus strengthened the tendency
toward government of and for the masses.
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