It's well known that WW2 had a greatly positive impact on American economy. Up to the point of certain historians being sure that, if not for WW2, FDR would have had a major economic problems on his hands in early 40s.

Is there good information/analysis of what the economic impact of WW1 was on American economy?

  • 1
    Just a small note: Destruction is not positive for the economy. The economic benefits of WWII did not come from the war itself, but because it ended the "New deal", that kept the US economy from recovery, and because women entered the workforce, and many of the continued working after the war, effectively increasing the GDP/capita significantly. (However, the destruction of others things can help, as it did with the US after WWI and Sweden after both WWI WWII, who benefited from selling stuff to a devastated Europe). Nov 4, 2013 at 15:06
  • @LennartRegebro - destruction is not intrinscially good whether it is my stuff or your stuff Broken Window Theory. You've proposed an interesting variation involving trade; I think you're still wrong, but it would require a much longer argument to prove it. Destruction can act as a prime -the-pump short term economic stimulus, which is why WWII helped. But that is probably economics.stack exchange.
    – MCW
    Nov 4, 2013 at 15:10
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    @MarkC.Wallace: Seen as a whole it's definitely not good, no, nor in the long term. But supposedly it provided a big boost of Sweden's economy, since we stayed outside the war. See it like this: Germany's GDP/capita was 50% higher than Sweden's in 1914. After WWI they were the same. After WWII Germany didn't catch up until 1960, and didn't pass Sweden until 1972, and then only thanks to Sweden doing stupid socialist things (like making it illegal to raise prices. Yes, really.) But OK, this is all off-topic. We basically agree, I think. Nov 4, 2013 at 15:40
  • Don't forget the $9,806 million they earned. Nov 8, 2013 at 23:32
  • Those answers were very right but I still have some questions.
    – user4033
    Mar 13, 2014 at 16:13

1 Answer 1


The effect of WWI on the US economy was considerable. There are two effects that the war had on the US economy: short term, and long term.

For the short term effect the US economy grew in the buildup to the war and during its prosecution. From 1915 the US made tons of loans to the UK to help them in their war effort. It is not a stretch to say that WWI was the major factor in contributing to the "Roaring 20s" when the US economy boomed. After the peace the economy dropped temporarily and this is most likely attributable to the stopping of war material production. However, at that point in the timeline the US was the only country that had not been completely devastated by the effects of the war. US companies were able to expand their reach around the world, and domestic consumption in the US increased, hence the name "The Roaring 20s." So the short term effect (I am defining short term effect as within one decade) was that the US economy grew a large amount due to their involvement in WWI.

The long term effect was that US involvement in the war lead directly to the Great Depression and WWII. The Treaty of Versailles led to a system where the US was cashing in its wartime loans to the UK, which in turn was using the wartime reparations it received from Germany to pay off the US. This system collapsed when the Germany economy succumbed to hyperinflation and died. That paired with Black Tuesday, which was driven by rampant stock speculation from tons of US citizens flush with cash led to the Great Depression. Since the world was still reeling from the effects of WWI when Germany fell, everything else fell apart. This event was directly attributable to WWI.

So in short there was a huge effect on the US economy in the short term which lead to the Roaring 20s, but the growth was short lived as it was built upon the same conditions that brought about the Great Depression.

For further reading (and viewing) consult:

  • 1
    That's not completely correct. German hyperinflation occured during 1923-25 and was fixed by 1926. The US also forgave a sizeable amount of German loans. Your thesis would imply that the Great Depression should've occured in 1925 and not 1929. I think a more accurate statement would be that Black Tuesday triggered many US banks to demand the money it loaned to European governments be paid back in full, which of course they didn't have any, causing loss of credit. Jun 21, 2013 at 14:22
  • First half of the answer is interesting (WWI). I can't agree with you on WWII, or on WWI prosperity as a cause of WWII, and your links have succumbed to link rot so I can't follow enough of the argument.
    – MCW
    Nov 4, 2013 at 15:12

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