12.1 Economic mobilization for World War I

World War I transformed the U.S. economy, pushing it into a new era of government involvement. The war effort required massive funding, achieved through Liberty Bonds, tax hikes, and new financial institutions like the War Finance Corporation.

The conflict reshaped American industry, agriculture, and labor. Government agencies coordinated production, while wartime demands spurred growth in manufacturing and farming. These changes had lasting impacts on the U.S. economy, setting the stage for post-war challenges and opportunities.

Government Financing and Economic Impact

Financing of U.S. war involvement

Top images from around the web for Financing of U.S. war involvement

• 

  File:"Fight or Buy Bonds. Third Liberty Loan." - NARA - 512621.jpg - Wikimedia Commons View original

  Is this image relevant?

• 

  War bond - Wikipedia View original

  Is this image relevant?

• 

  Liberty bond - Wikipedia View original

  Is this image relevant?

• 

  File:"Fight or Buy Bonds. Third Liberty Loan." - NARA - 512621.jpg - Wikimedia Commons View original

  Is this image relevant?

• 

  War bond - Wikipedia View original

  Is this image relevant?

1 of 3

Top images from around the web for Financing of U.S. war involvement

• 

  File:"Fight or Buy Bonds. Third Liberty Loan." - NARA - 512621.jpg - Wikimedia Commons View original

  Is this image relevant?

• 

  War bond - Wikipedia View original

  Is this image relevant?

• 

  Liberty bond - Wikipedia View original

  Is this image relevant?

• 

  File:"Fight or Buy Bonds. Third Liberty Loan." - NARA - 512621.jpg - Wikimedia Commons View original

  Is this image relevant?

• 

  War bond - Wikipedia View original

  Is this image relevant?

1 of 3

• Liberty Bonds raised funds from citizens through aggressive marketing campaigns (posters, celebrity endorsements)
• War Revenue Act of 1917 increased income tax rates and lowered exemptions boosting federal revenue
• Excess Profits Tax targeted businesses profiting from wartime production curbing war profiteering
• Federal Reserve System provided loans to banks and managed money supply ensuring liquidity
• War Finance Corporation provided loans to essential industries supporting war effort (steel, shipbuilding)

Economic impact across sectors

• Agriculture experienced increased demand for food exports led to rise in crop prices and expansion of cultivated land
• Manufacturing shifted to war-related production spurred rapid growth in industrial output and development of new industries (aircraft, chemicals)
• Labor shortage due to military conscription created increased employment opportunities for women and minorities
• Shipping and transportation saw expansion of merchant marine and government control of railroads improving logistics

Government coordination of production

• War Industries Board coordinated industrial production allocated raw materials and set priorities for manufacturing
• Food Administration managed food production and distribution implemented rationing and price controls
• Fuel Administration regulated fuel production and distribution ensuring steady supply
• War Labor Board mediated labor disputes and established labor standards improving working conditions
• United States Shipping Board managed shipbuilding and maritime transportation optimizing sea transport

Post-war economic consequences

• Inflation increased due to expanded money supply led to rising prices for goods and services eroding purchasing power
• U.S. shifted to creditor nation status through loans to Allied powers increased exports and accumulation of gold reserves
• Post-war recession occurred during adjustment to peacetime economy saw decline in government spending
• Technological advancements in mass production techniques and standardization of parts improved efficiency
• Changes in international trade disrupted European competition expanded U.S. export markets
• Government's expanded role in economy set precedent for future interventions sparked debate over economic involvement