DP13848 Funding the Great War and the beginning of the end for British hegemony

Author(s): Martin Ellison, Thomas J Sargent, Andrew Scott
Publication Date: July 2019
Keyword(s): British Hegemony, National Debt, World War I
JEL(s): N24, N44
Programme Areas: Economic History, Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13848

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.