Working Paper: CEPR ID: DP13848
Authors: Martin Ellison; Thomas J. Sargent; Andrew Scott
Abstract: Britain was the richest country in the world at the outbreak of the Great War, benefitting from all the resources of an industrialised country and a large empire. Funding the war contributed to the beginning of the end for British hegemony. Financiers in London extracted a high price for lending their money to the government to pay for the supplies and munitions needed to win the war. The US extracted a similarly high price for lending to Britain during the war. Russia never paid its war debts to Britain; France, Italy and Belgium got off lightly; but for a long time the US insisted on Britain repaying in full.
Keywords: World War I; National Debt; British Hegemony
JEL Codes: N44; N24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| UK's reliance on borrowing to finance military expenditures during the war (H56) | decline of British hegemony (F54) |
| increased national debt (H63) | strain on financial markets (E44) |
| strain on financial markets (E44) | economic stability challenges (F65) |
| high costs of war financing (H56) | undermining Britain's economic dominance (F69) |
| US's role as a major creditor (F34) | Britain's subordinate position in the global economy (F01) |