The United States After World War I: Society and Economy

Introduction: From Isolationism to World Power

World War I, also known as the Great War, officially came to an end in 1918 and reshaped the United States in a variety of ways. One of the most immediate changes was the way the world perceived the country. Before the war, most Americans and their leaders preferred an isolationist stance toward international conflict. In 1914, the U.S. had only a small army and a limited navy, yet as the war progressed many Americans began to disapprove of Germany's use of submarines to sink neutral ships—most famously illustrated by the sinking of the Lusitania (Hickman). It is interesting to note, however, that the Germans were actually correct in their assertion that the Lusitania was carrying military ammunition, as divers have recently uncovered from the wreckage, which did technically make the ship a legitimate military target (Greenhill).

Despite the country's humble military capabilities before the war, Americans were able to transform their national identity and military strength in a remarkably short period of time. The country already possessed the human capital and natural resources needed to become a military power, but had never utilized them while maintaining neutrality. After the war ended, both Americans and the rest of the world recognized the country's capabilities, and the United States came to be perceived as one of the world's great superpowers. Under President Wilson's leadership, the U.S. sent over two million men to Europe and began what later came to be known as the "American Century"—establishing itself as one of the world's foremost military powers. This transformation also had significant implications for the global balance of power and for how other nations responded to American demands.

Economic Consequences of the War

While the war generated a great deal of economic activity—as companies were busy producing war supplies—this activity came to a rather abrupt stop once the war was won. As a result, the U.S. entered a recession between 1918 and 1919, which was then followed by the Great Depression a few years later. Such post-war economic slumps are generally common; however, this represented the only war America fought in the twentieth century in which it actually had to endure such a pronounced downturn (Kaldor). The total cost of the war was estimated at approximately thirty-two billion dollars, representing roughly half of the total gross national product (GNP) in 1918 (Rockoff).

This economic burden had three long-term consequences. First, the federal government's finances and tax rates were permanently altered. Tax rates remained higher after the war than before it, in order to service the interest on the national debt and to fund items such as veterans' benefits. Second, whereas the United States had been a net debtor before the war, foreign investments after the war exceeded the amount owed to foreign entities by billions of dollars, making the U.S. a net creditor to the rest of the world. Most of this investment was comprised of private domestic lenders, and New York City emerged as the financial capital of the world.

The Role of Government in the Post-War Economy

Another significant result of the war's financial impact was the debate it sparked over what role the U.S. government should play in the economy. It became clear that many of the wartime agencies created by the federal government had a beneficial effect on overall economic health. Through government action, millions of people had gained employment in support of the war effort, and now citizens began to wonder what else the government could do to stimulate economic activity. This debate was never fully resolved, and many of the same questions were being asked again in the context of a weakened economy in later decades—reflecting how deeply questions of government economic intervention were shaped by the wartime experience.

Conclusion: A Nation Transformed

The period after the Great War has many interesting dynamics associated with it. Although the economy was one of the primary drivers of social discontent, there were many other sources of tension looming as well—especially among minority groups. Despite the domestic turmoil, the United States emerged from the war as a great industrialized nation and earned the respect of the international community for its ability to mobilize a military force and build a thriving wartime economy. The transformations set in motion by the Great War—military, economic, and social—would continue to shape American life for decades to come.

Works Cited

Arnesen, E. "'Red Summer: The Summer of 1919 and the Awakening of Black America' by Cameron McWhirter." Chicago Tribune, 18 November 2011. Web. 27 October 2012.

Greenhill, S. "Secret of the Lusitania: Arms Find Challenges Allied Claims It Was Solely a Passenger Ship." Mail Online, 19 December 2008. Web. 27 October 2012.

Hickman, K. "World War I: Sinking of the Lusitania." Military History. N.d. Web. 27 October 2012.

Kaldor, N. "Inflation and Recession in the World Economy." The Economic Journal (1976): 703–714. Web.

McWhirter, C. "U.S. History." Book TV, 27 December 2011. Web. 27 October 2012.

Rockoff, H. "U.S. Economy in World War I." EH.Net Encyclopedia, 10 February 2008. Web. 27 October 2012.