An investigation into the motivation behind, and results of, economic warfare during World War One
While soldiers fought on the front lines, both Germany and Britain were setting out strategies to distort each others economies. This post analyses the motivation behind these strategies and evaluates the effect that they had on the outcome of WW1.
Following Germany’s loss in World War 1, German elites promoted the idea that their nation had not been beaten militarily but had, instead, been beaten on the home front due to severely constrained trade (Harrison, 2016: 148). This post will investigate economic warfare in the First World War, focusing on the actions of Britain and Germany. I will analyse Britain’s attempts to win the war quickly by distorting the global financial system. I will then analyse the naval blockades enforced by both Germany and Britain, evaluating the strategic effects achieved, and responses made, by both nations. I then evaluate the contribution that economic warfare made to the outcome of WW1. I argue that the contribution made by the British blockade in the defeat of Germany has been overestimated; the blockade acted as one of many factors which served to starve Germany and win the war for the allies.
British Economic Warfare against Germany
Economic Warfare, the attacking of enemy resources such as food and raw material supplies in order to disable enemy war efforts, played a significant role in the strategic considerations made by Britain prior to WW1. The Naval Intelligence Department acknowledged that Britain had great naval and merchant strength, whilst also controlling a large portion of the world’s global finance infrastructure (Lambert, 2012: 4). As a result, in the event of war, Britain would be able to block Germany’s access to international trade and credit which would cripple the German economy. The economic crisis created in Germany would prevent the nation from being able to mobilise an effective war effort (Lambert, 2012: 1), ensuring a quick victory for the allies. However, by restricting trade and credit that might benefit Germany, Britain caused substantial collateral damage with domestic trade, as well as neutral nations such as the United States, suffering negative economic shocks due to the disruptive measures in place (Stout, 2015: 928). The diplomatic fallout, as well as the domestic political tensions that resulted from this form of economic warfare, meant that the strategy was soon abandoned; the British hopes for a quick victory were not realised.
Instead, Britain turned towards using a naval blockade which would specifically target Germany by restricting the nation’s imports of key resources such as food and raw materials. The British predicted that such a blockade would inflict huge damage on Germany because the nation had become increasingly dependent on merchant shipping for its food and raw materials, with imports rising by 85 percent between 1900 and 1913 (Davis & Engerman, 2006: 161-162). The blockade, coupled with pressure on neutral nations such as the Netherlands to cease exporting contraband to Germany (Kruzinga, 2014), would restrict Germany’s access to strategic commodities, including fuel and food, thus draining the nation’s energy and wartime capacity (Vickers, 1943:15).
In the early years of the war, the effects of the blockade would have appeared disappointing as Germany were able to increase their imports of foodstuffs from neighbouring neutral countries such as Denmark and Norway (Ritschl, 2005: 58), offsetting the negative effects of the blockade. Further still, the German economy showed great resolve in its ability to overcome supply shocks to key commodities. This included the manufacturing of artificial nitrates to overcome the large decreases in nitrate imports; these artificial nitrates were used in ammunition manufacturing and helped to prolong the German war effort substantially (Paull, 2009: 18).
However, following the United States entry to the war in 1917, the application of the blockade intensified (Offer, 2000: 173), further constraining the German economy. The increased application of the blockade put significant strain on German food supplies, with the imports of key foodstuffs (including Grain, Cattle and Butter) falling substantially between 1916 and 1918, as shown in table 1.
Table 1: German Imports of foodstuffs, 1916-1918, metric tons (monthly averages)
Source: Skalweit (1927) in Ritschl (2005: 58)
This huge fall in imports of food put the German economy under immense pressure and the nation failed to manage the situation. Domestic production was severely constrained due to a lack of feed, fertilizer and workers (Blum, 2013: 1064). Further still, attempts to impose a maximum price on farmers output, accompanied with a ration system to guarantee citizens subsistence whilst prioritising soldiers and heavy workers, fell apart, adding more strain to the food situation (Offer, 2000: 178). This was because the prices offered to farmers did not provide enough of an incentive to produce the output required, with agricultural producers either consuming their foodstuffs themselves, or selling the goods on the black market. This resulted in a situation where a vast majority of the German population were living on a survival ration, leading to famine, protests and discontent on the home front as well as deteriorating morale and nutrition on the front line (Shuttlewood, 1918). By 1918, the food situation had resulted in the death of approximately 750,000 German people (Maltz, 2015: 392); the allied blockade led Germany to starvation and exhaustion, forcing the nation to surrender (Janicki, 2014).
German Economic Warfare against Britain
Germany had attempted economic warfare in the early years of the war in an attempt to starve Britain of its imported foodstuffs and materials, with Kaiser Wilhelm II under the assurance that an unrestricted U-Boat blockade would cause Britain to surrender in six weeks (Davis & Engerman, 2006: 165). However, the U-boat campaign was met with considerable protests from the United States and other neutral trading nations which intensified after the sinking of the Lusitania; this resulted in heavy restrictions on the U-boat operations (Lundeberg, 1963: 109). The strategic considerations changed in 1916 however when, due to crop failure, Britain was forced to source goods such as wheat from further afield, thus substantially reducing their available shipping capacity (Steffen, 2004: 216). This provided an opportunity for Germany to restrict Britain’s imports of strategic and crucial commodities. A decision was therefore taken in January 1917 that Germany would operate an unrestricted U-boat campaign again in order to cripple Britain and win the war. The focus was to reduce Britain’s available shipping tonnage by 40%, with the assumption that such a loss would significantly reduce Britain’s imports of grain, wood and iron ore, forcing Britain’s war economy to collapse within five months before the United States could provide aid (Herwig, 1998).
Initially, the unrestricted U-boat campaign of 1917 exceeded Germany's expectations in terms of the volume of merchant shipping tonnage destroyed and, by April 1917, allied leaders foresaw that if the campaign continued they would be defeated in a few months (Olson, 1963: 84). However, Germany were to be left disappointed as Britain managed to carry on with its war efforts, overcoming the German blockade and the heavy loss of merchant ships in numerous ways. Firstly, the Germans significantly underestimated the flexibility of the British economy, failing to understand that no goods are strategic in themselves but that there are simply strategic uses of goods (Olson, 1963: 9). This means that the German strategy failed to understand that Britain would be able to respond to supply shocks by substituting commodities and productive resources away from non-essential uses to strategic ends that would serve to maintain the war effort. For example, Germany predicted that by severing imports of wood from Scandinavia, the British coal industry would fall apart, thus disabling Britain’s industry and war effort. However, the British were able to respond to the blockade by delaying the construction of houses in order to divert more wood to the mines (Herwig, 1998). Similarly, Britain was able to divert workers towards ports and enforce tight controls on what was imported and exported in order to improve port efficiency and ensure the most strategic use of the available merchant ships (Olson, 1963: 93).
Britain was also able to respond to food shortages in a number of ways, reinforcing the idea that the British economy was very flexible and was able to substitute between different goods and different uses of goods. For example, Britain was able to adjust to the lack of wheat supply by adapting bread production so as to incorporate different types of flour, saving vast amounts of supplies (Herwig, 1998). Britain also innovated by creating a central Food Controller and Food Production Department; these institutions helped to maintain food prices, ensure sufficient labour for farms and provide incentives to farmers to boost production (Davis & Engerman, 2006: 184). This frustrated the German strategy because the U-boat campaign, despite destroying a large amount of British merchant shipping tonnage, failed to starve the British economy. In fact, by the end of the war, Britain had not only maintained the energy intake of the British people’s diet, it had also provided skilled and unskilled workers with higher nutritional diets than they had had before the war (Gazeley & Newall, 2013: 79-84).
The result was that, despite the U-boat campaign, Britain was not defeated in a matter of months, causing great disappointment for Germany. The fact that Britain was not starved into submission also meant that there was time to adjust to the U-boat campaign, by developing the convoy system. This convoy system helped the allies to significantly reduce the amount of merchant shipping tonnage destroyed by the U-boats, with losses falling from 860,000 tonnes in April 1917 to 354,000 in October 1917 (Curtis, 2005: 12). Further still, the implementation of the U-boat campaign, along with the survival of the British economy, gave the United States both the incentive and the time to join the war. The involvement of the United States would further weaken the German economy relative to the allied economies, with the United States prohibiting exports to Germany and providing food and finance to the allies, whilst also significantly boosting the availability of merchant shipping tonnage (Davis & Engerman, 2005: 196-198).
Contributions to the outcome of WWI:
The preceding analysis shows that whilst both Britain and Germany attempted to use economic warfare in order to starve and disable their enemy, the British blockade of Germany appeared highly effective whereas the German blockade appeared to fail or even produce counterproductive results. In this sense, the British blockade had starved Germany into submission by reducing the nation’s imports by approximately 39% (Davis & Engerman, 2006: 201) and making a large contribution to a 50% reduction in German access to food (Maltz, 2015: 394). Viewed in this way, the British blockade played a substantial role in forcing Germany to surrender (Hardach, 1977: 31).
The role of the British blockade in the outcome of World War One is undermined, however, if we consider other factors that contributed to the food problem in Germany. Firstly, Germany had chosen to go to war with many of its main trade partners, including Britain. These trading partners alone accounted for 46% of Germany’s pre-war total imports (Davis & Engerman, 2006: 201). This shows that a large portion of Germany’s lack of imports was caused not by the blockade, but rather the loss of trade with enemies. Further still, the food situation in Germany was exacerbated by the effects of war mobilisation. This was due to the fact that mobilisation had stripped Germany of many of its workers and horses, as well as nitrates which had been diverted towards producing explosives. This meant that, despite acquiring additional labour from the occupied areas, agricultural production in 1918 had decreased to just 60% of 1913 figures (Ritschl, 2005: 46). Taking these two factors into account shows that the British blockade had a much lower impact on German food supplies than many had given credit.
The economic warfare imposed by Britain did not starve the German economy into submission, nor did it play a significant role in the outcome of the war in comparison to conventional warfare strategies. The British blockade served to increase the strain on Germany’s food supplies, adding to the fact that Germany had lost trade with enemies and had seen a sharp fall in domestic production; this reduced the health and morale of the German people both on the front line and at home. Therefore, whilst many believed that the blockade had starved Germany into submission, it is the case that the blockade was part of an integrated package, along with land warfare, propaganda and support for allies, which served to defeat Germany (Strachan, 2010: 47).
In conclusion, whilst both Germany and Britain enforced economic warfare strategies in order to starve and disable their enemy, only the British blockade was productive. This is because the British economy showed great flexibility in substituting resources towards strategic ends, whilst also enforcing food production and allocation policies to overcome the decrease in imports. The German economy showed less flexibility; the British blockade contributed to a deteriorating food situation in Germany which reduced the health and morale of their people. Economic warfare did not, however, replace conventional warfare; it was simply one of many factors which contributed to allied victory.
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