CHAPTER XX

THE COST OF WAR

240. The Cost of War Presents a Variety of Aspects.
The Great War exhibited the most significant example of
a fiscal emergency that has ever confronted the nations of
the world, and it is to be hoped they will be called upon
to meet no such emergency in the future. Few have any
concept as to the burden that was entailed, and, indeed,
it is next to impossible to form any adequate concept,
because of the enormity of the demands which were made.
Figures can be compiled as to the monetary outlay, but
the amounts are so staggering as to be almost beyond the
possibility of comprehension. Statistics were omitted in
the previous chapter, with the idea that they would be
more significant and important when viewed as an at-
tempt to interpret war costs. Some of the statistical tables
will serve, nevertheless, as valuable illustrations of part of
the discussion which is found in the preceding chapter.

Citizens not only have a right to know, but should
know, the magnitude of this burden which has been in-
voluntarily thrust upon them. This is the more impor-
tant, too, in these days, when the demands upon the
functions of the state have become so extended as to make
the securing of funds for ordinary expenditures a real
problem. Many citizens, moreover, may now or in the
future be in positions of political power and influence,
and by having an adequate understanding of the conse-
quences of war, they should hesitate to thrust a country
into a state of hostilities without the maturist deliberation.

Money Costs. The first significant factor that appears
in the mention of the cost of war is that large sums of



THE COST OF WAR 485

money are demanded and expended. It has already been
noted that this aspect is but superficial, for in reality the
actual money is of no service except as it will command
ships, artillery, munitions, and supplies. A period of war,
in fact, is almost without exception marked by a per-
ceptible increase in the circulating medium. If the direct
money expenditures were the only cost of war, the calcu-
lation would be comparatively easy and the burden would
be materially lessened. War costs do not begin, however,
with the opening of hostilities, nor do they cease with
treaties of peace. The expense of maintaining the mili-
tary machine in Germany was an enormous burden, while
the maintenance of armies and navies in countries which
were considered as unprepared for war, has formed no
little proportion of their entire expenditures.

Other Costs. The direct money expenditures for war,
its preparation and aftermath, are not the only conse-
quences to which a fiscal importance can be attached.
The need for safeguarding the patrimony of the state has
already been emphasized, and the possible effects of war
upon the potential sources of revenue cannot be over-
emphasized. The decrease in productive capacity which
arises from the destruction of capital and man power is
an item which at once presents itself. The diversion of
industry from productive enterprises to those of produc-
ing for destruction; the disarrangement of trade and
commerce; the decreased productive capacity of those
left physically and morally deficient; the destruction of
the virile manhood which leaves a larger proportion of
the weaklings to propagate the race; the sums which
must be expended to take care of those left dependent or
partially dependent these all must be considered in the
invisible and visible costs of war. Because of these re-
sults, the state is handicapped in raising funds for prose-
cuting the many progressive enterprises which are con-
tinually calling for its support.

Returns from War. To endure such costs as indicated



486 OUTLINES OF PUBLIC FINANCE

above, the returns from war should be great. These re-
turns are often exaggerated. The claim of the militarists
has been that war makes for strength and manhood, and
unless military training be given, the male population
would degenerate into weaklings. The fallacy of such
reasoning was clearly demonstrated when the strength
and vitality of the peace-bred American soldier was pitted
against the one of militaristic breeding on the Western
front. War does, no doubt, stimulate progress, but it is
impossible to measure the amount of progress which has
been dependent upon war. Necessity is the mother of
invention in time of war, if at any time, and may bring
rapid advancement in scientific progress. The develop-
ment of the air craft, for example, received a remarkable
stimulus from the Great War, and it is impossible even
to estimate how many years of peace it would have taken
to have arrived at the same place. While some such bene-
fits may come, they sink into insignificance when com-
pared with the cost.

An attempt will be made to show briefly some of the
costs which have been found to accompany war, with the
general effects upon the citizenship. The figures which
will be found may be far from accurate, but they form a
valuable basis of comparison.

241. The United States Was Not Free from War Costs
During Its Early History. Few citizens, before the ad-
vent of the Great War, have stopped to consider that the
direct or indirect expenditures for war have placed a
larger burden, in the form of Federal expenditures, upon
the people of the United States, than the burden has been
for all other expenditures. A moment's reflection upon
this statement cannot but impress upon the reader the
cost of war, of its preparation and consequences, even in
a country that has enjoyed as many years of peace as has
the United States. Cost of Early Wars. The War of 1812 was, of course,
the first actual experience with warfare which can be
attributed to the United States. That does not mean
that the early citizens were free from the burden of war,
for fiscal reminders of the Revolution were ever present.
Expensive Indian wars also occurred. The attempt will
be made, so far as possible, to refrain from the use of
burdensome statistics, yet there is no better way to show
the weight of war costs during the first years of our gov-
ernment than to give a table of comparative expenditures
for some of the early years. To arrive at war burdens
the first three columns must be offset against the fourth,
or compared with the total. Even this does not quite
tell the story, for under the miscellaneous expenditures is
included the amount which was expended for pensions as
well as the civil expenditures.

The immense increase in expenditures which a war en-
tails is clearly illustrated from this table, even though
the percentage of expenditure for the weapons of war in
times of peace may be large. In the above tables it its
seen that in 1811, the last year before open hostilities, the
war costs were over 95 per cent of the entire expenditures.
The burdens, however, did not cease with the signing of
the treaty, but the outlays for war machines, the payment
of interest and pensions, continued.
While some
fluctuations occur in the expenditures of the War and
Navy Departments, the general trend of their expenditure
has been upward. The item for pensions has been an
ever-present one, as has also the interest charge. A part
of the interest charge has arisen from other causes than
war and the preparation for war, yet these factors have
been so largely responsible for creating public debts that
it would not be far wrong to consider the interest charge
as a war cost. Borrowing iisually would be found unnec-
essary if the army and navy expenditures did not exist.
For two or three years in the early ' thirties no interest
charge occurred. This table, again, illustrates the visible
increase of expenditure during the actual progress of war.
The years during the Mexican War show the increases in
the costs of the War Department, while the few succeed-
ing years reflect its effect on the interest charge. It is
interesting to note that, in the year during the period
covered by the table, when the proportion of expenditure
for pensions and the departments of War and Navy were
lowest, it represented about 60 per cent of the total
outlay.

242. The Civil War Augmented Our War Burden. It
has been seen that, through our years of peaceful develop-
ment, the outlay for the instruments of war gradually
increased. When the Civil War was precipitated upon
the nation, however, the costs leaped to sums which would
have been looked upon as impossible a few years before.
The expenditures for the war are given in the following
table. Pensions, an item of comparatively small impor-
tance at this time, are included in the miscellaneous
item.
The
enormity of the burden as the war proceeded, when com-
pared with that borne at the beginning, is evident. Yet
the fiscal burden as represented by the expenditures of
the Federal government is not the only one to be con-
sidered. The increased burdens which were imposed by
the minor political divisions must be added. Increased
fiscal burdens had to be borne, moreover, because of the
effects of currency inflation. The issue of greenbacks
furnishes an excellent example of the added sacrifice a
state may impose upon its subjects. That the issue of the
fiat money actually increased the fiscal burdens is evident
when consideration is given to the fact that the govern-
ment was a purchaser in the market at the prevailing
prices. The rapid advance in prices due to greenback
inflation caused an increase in Federal expenditure which
has been estimated at from $500,000,000 to $900,000,000.

The inflated prices, moreover, imposed a direct burden
upon the citizenship. Between 1860 and 1865 prices in-
creased something like 115 per cent, while wages were
increased less than 50 per cent. Many other incomes
were fixed, so that real hardship was felt because of the
falling off in purchasing power. Labor disturbances re-
sulted, the effects of which upon industry cannot be over-
looked. The payment of standing indebtedness in the
depreciated currency imposed a burden upon the creditor
class which was not insignificant. It need not be said
that the burden caused by the loss of life, the derange-
ment of industry, and the destruction of goods was also
great. While most of these aspects cannot be measured in
terms of money, yet the sacrifices which they caused were no
less real than if a money measure could be assigned to each.

Post-war Costs. The cost of the Civil War has not yet
been paid. This is evident to everyone who has heard an
"old soldier " speak of his pension, or who has seen or
visited a soldiers' home. While the immediate direct
costs were enormous, the costs for decades following, in
the form of interest and pensions, which can be directly
attributed to this war, have not been inconsiderable.
The maintenance and enlargement of the army and navy,
and the building of fortifications and defenses continued,
so that war has not ceased to claim the lion's share of the
expenditures of the Federal government.

While no proof is needed to convince the student that
the costs of a war as long ago as the Civil War are still
with us, yet a few figures will illustrate the part that the
demands of war have made upon our treasury. It will be
unnecessary to enter into such detail as in the preceding
period, because it has already been established that the
burden of war is a continuous one. Professor Bullock has
made some calculations which will serve our purposes as
well as any others which might be given. 1 These figures
more accurately portray the war costs than those given
above, because the river and harbor expenditures have been
deducted from the expenditures of the War Department.
United States. It would be superfluous, moreover, to
compile figures for the United States for the first years of
the present century. The results would simply show an
increasing proportion of expenditures for army and navy.
A great amount of interest will be found, however, in
noticing some of the burdens, directly or indirectly attrib-
utable to the recent conflict, which have been placed upon
the principal nations of the world.

243. The Cost of the Great War Eclipsed Any Previous
War Expenditures. A number of insurmountable diffi-
culties are at once encountered when an attempt is made
to arrive at the costs of a war so recent and of such magni-
tude as the Great War. A large number of the war ex-
penses continue to exist, and, as indicated in the above
discussion, will continue to exist for generations to come.
But many of the more immediate costs are not yet paid
and should still be considered. Demobilization has not
been completed, armies have not ceased to police the con-
quered territory, men are still in the hospitals or in voca-
tional training all these entail an expense which might
be said to arise from the more immediate aftermath of
the war, and should in reality be counted as a part of the
cost of the war period.

The actual expenditure during the war period is greater
than should be attributed to war costs, because states
would be making expenditures even if the war did not
exist. A part of the expenditures, as for food and cloth-
ing, and for the shelter of the soldiers, are but substituted
for those which would otherwise be made by individuals.
To arrive at an approximate war cost, consequently, the
amount of the expenditures for civil purposes should be
estimated and deducted from the aggregate expenditures.
The value of devastated land areas and of destroyed
capital can only be estimated, and from this should be
deducted the value of permanent additions to capital,
such as merchant marine, railroad equipment, and the
added stimulus to invention, as in the perfection of the



494 OUTLINES OF PUBLIC FINANCE

air craft. The rapid depreciation in the value of the
various monetary units must also be considered.

Because of all these problems, any figures which have
been computed are at best only approximations. Our
concern, however, is not to deal with actualities, but to
attempt to convey, in some measure, the magnitude of
the burden, and the total figures are so great that a few
million dollars either way would make little difference.

Since the signing of the armistice, November 11, 1918,
a number of writers have attempted to calculate the cost
of the war. 1 The figures deal most extensively with taxes
and borrowings, while in some cases attempts have been
made to estimate the burden of the indirect costs, such as
loss of life, property, etc. The aggregate figures of the
direct money costs are so appalling as to have no real
meaning. The estimates which have been made range
from a little more than $210,000,000,000 to about $240,-
000,000,000. Because of the incomprehensibleness of these
figures some detailed analysis must be undertaken hi
order to appreciate their significance.

Daily Costs. The effect of the war upon the indebted-
ness of the principal belligerents was discussed in the
chapter on Public Indebtedness. Reference should be
made to this in seeking to estimate the burden which the
debts have placed upon present and future generations
through the mortgaging of the social income. 2 Some idea
of the cost of the war while it was in progress may be
gained by a summary of the daily expenditures of the

1 The best treatments on the cost of the war to date (1921) are Direct
and Indirect Costs of the Great World War, by E. L. Bogart, published by
the Carnegie Endowment for International Peace; "The Cost of the War,
and How It Was Met," by Edwin R. A. Seligman, in The American Eco-
nomic Review, vol. ix, No. 4; and "Debts, Revenues, and Expenditures,
and Note Circulation of the Principal Belligerents," by Louis Ross Gott-
lieb, in The Quarterly Journal of Economics, vol. xxxiv, No. 1. The author
wishes to acknowledge his indebtedness to these publications for many
of the figures herewith presented. Some of the tables are given exactly as
presented by these authors, while others are modified to more nearly suit
the purpose in hand.