The US had been the main industrial power since the end of the 19th Century -- in 1913 its per-capita GDP was nearly 30 percent higher than that of Europe's richest country, Britain.
But thanks to American isolationism Europe remained the world's banker, with all the political power that went with that position.
On the eve of war, the combined foreign investments of Britain, France, and Germany were worth 10 times those of the US, according to French historian Antoine Prost.
Within just five years, the situation had been completely reversed. Europe's coffers had been bled dry by a conflict whose long duration it had not foreseen, and which had cost 50 times more than experts had predicted in 1914.
In ruining Europe, the conflict had "gone some way toward redefining the hierarchy of global economic powers -- with the US at the top -- along lines that remain largely unchanged today," said economic historian Olivier Feiertag.
French historian and economist Alain Plessis estimates the direct cost of the war for the six main belligerents at between 150 and 170 billion dollars, or between three and four times their GDP.
In addition, Europeans had to deal with the massive cost of reconstruction, of pensions for millions of war wounded, widows and orphans, and for industrial reconversion.
The war had also cost the European powers the bulk of their gold reserves. Much of this was lost to the US, which doubled its stock of the precious metal between 1913 and 1919.
When war broke out, it held 40 percent of world gold reserves; by 1923, that figure had swelled to 50 percent.
"There can be scarcely any doubt that World War I, by changing the division of metal reserves in a durable way, is the starting point for the international supremacy of the American currency that marked the whole of the 20th Century," said Feiertag.
Debt-based global economy
This new supremacy was reinforced by the fact that by the end of the war the US was the world's biggest lender, having supplanted its European allies who had borrowed more than 10 billion dollars to finance the conflict.
"Between 1914 and 1919 Europe went from net creditor to the rest of the world to the biggest debtor," said Feiertag.
Debt -- both foreign and domestic -- would in turn weigh down Europe's major economies. In 1931, 52 percent of the French state's budget went on servicing public debt taken on during and after the war and paying war pensions.
This, combined with a major increase in public spending, fed into inflation rates unheard of before the war.
Prices had doubled in France and Britain and quadrupled in Germany and Austria-Hungary during the war.
After it ended, they went sky-high, permanently weakening Europe's currencies -- with the notable exception of sterling.
Britain had invested heavily in North America before the war. Spared any direct action on its soil, it did not have reconstruction costs, and it had relied more than its neighbors on taxes to fund the fighting.
It therefore came out of the war in better financial shape than other nations in Europe. Even victorious France had lost the bulk of its foreign capital -- held in central Europe and Russia -- and had to deal with destruction on a massive scale.
The French franc was to lose two-thirds of its value between 1919 and 1928, while the German mark collapsed in a bout of hyperinflation that plunged the economy into crisis in 1922 and 1923.
Economic and monetary chaos proved just as lasting in most of the countries that succeeded Europe's defeated empires -- among them Bolshevik Russia, Hungary, Austria, Czechoslovakia, and Finland.
The conflict also laid the foundations for a debt-based global economy that persists to this day, according to Feiertag.
For the US, the war "marked its arrival on a global stage that not only would it not leave, but that it would come to lead," ending centuries of European dominance, said French historian Jean-Jacques Becker.
source: interaksyon.com
