An Economic Superpower
How the Great War Turned America Into an Economic Superpower
On the morning of July 3, 1915, an intruder holding two pistols barged into the Long Island mansion of America’s most powerful banker, J.P. Morgan, Jr. In the ensuing struggle, the attacker was subdued, but not until he wounded Morgan twice in the thigh.
The gunman turned out to be a former German teacher at Harvard, who had set off a bomb at the U.S. Capitol the day before. Although no direct link to the German government was proven, the attack on Morgan appeared to be part of a larger effort by Germany to stop American support for the Allied forces of Britain and France in the Great War.
The U.S. was not providing military support — not yet. In 1915, America was still politically neutral. It was not, however, economically neutral, having offered the Allies financial support since the earliest days of the war. As the conflict dragged on, the British and French had required larger and larger loans to keep themselves afloat. And no one was happier to provide it than Morgan. A committed anglophile, he would eventually secure a $500 million dollar line of credit for the French and British — the biggest foreign loan in Wall Street history.
“If you sympathized with Germany, then Morgan was your ultimate enemy,” says Christopher Capozzola, associate professor of history at MIT, in American Experience’s film The Great War. “And because he was so powerful as an individual, it was actually possible to believe that assassinating him could actually stop the war.”
But Morgan lived and the war continued, sustained by American dollars — and supplies. Morgan himself served as a purchasing agent, helping to procure the millions of pounds of food and armaments the Allies required every month.
Before the war, America had been stuck in a recession; World War I swiftly put an end to that. Even before the U.S. entered the conflict, its factories had switched from civilian to military production, and its farmers were growing food to feed armies. These events marked a momentous shift in global might. As economic historian Adam Tooze writes in his book The Deluge, for a century, the British Empire had been the largest economic power in the world; in 1916, its output was overtaken by that of the United States.
When the U.S. did enter the war on the side of the Allies in April of 1917, it had an economic interest in winning it. According to Tooze, “By the end of 1916, American investors had wagered $2 billion on an Entente victory” — a staggering sum in those days.
That bet paid off; by the time of the Washington Naval Conference in November of 1921, the governments of Britain, France, and Italy owed the American taxpayer a combined $9.8 billion. The war had turned the U.S. into a creditor, instead of a debtor, for the first time in its history.
Unlike its European counterparts, who suffered massive casualties, as well as economic and political hardship, America had emerged from World War I more powerful than ever before. “The American state was perhaps the only state that really won the First World War,” says Jay Winter, professor of history at Yale University, who appears in The Great War. “Everybody else lost, including the winners, because they lost so much.”
The world order had been fundamentally realigned, with a new superpower at its center. As Tooze writes, from 1916 “down to the beginning of the twenty-first century, American economic might would be the decisive factor in the shaping of the world order.”
Tooze, Adam, The Deluge: The Great War, America and the Remaking of the Global Order, 1916–1931 (New York, New York: Viking Penguin, 2014).