The Economics of Sacrifice

Lead Research Organisation: Queen Mary, University of London
Department Name: Geography

Abstract

Britain and its allies' ultimate success in World War I is largely attributed to the economic strength of the Triple Entente and the wider access to capital markets, particularly that based in London.
The project involves study of more than 1,300 volumes lodged at the Bank of England revealing the identities of those who purchased the securities that allowed Britain the financial resources to prosecute the war. Who were these people and why did they buy the bonds is one of the key questions I hope to answer.

Publications

10 25 50
 
Description Perhaps the single most important finding is the role capital played in the outcome of World War I and the techniques Britain used to coax it from those who had it. Britain had to undertake a series of measures first restricting the uses to which its own citizens could put their capital resources while barring foreign entities - even those of Allies - from access to British capital, and gradually ratchet up those restrictions in order to raise the needed funds. Even more important are the insights into where the capital came from. Overall, my completed research will show the profound economic and social changes brought about by war. In the years after the war, while Britain was torn between those wanting to roll back wartime taxation rates and those seeking a fairer society, the distribution of capital changed. The findings from the sampling of ledgers will fill out earlier research suggesting a narrowing of income inequality between the wealthiest Britons and those in the middle classes, with increasing participation in investment by educated professionals and skilled labourers. It will also point to what is likely an effective recycling of War Loan profits as investors increasingly came from the geographic parts of Britain where industrial production was intensified to meet war needs. The spillover effects of war-related demand translated both into higher wages for workers and higher profits for business. What the research allows us to see is the first-ever granular picture of how war re-distributed wealth.
Exploitation Route These findings raise questions about war finance generally and very specifically, British fiscal and monetary policy during and after World War II. To what extent were the lessons of World War I applied to the borrowings used for the Second World War? What did Ministers learn from the biter domestic debate about debt repayment? To what extent did these lessons echo in fiscal policy and what role, if any, did they play in creation of the welfare state? Also, it would be interesting to track the changes to Britain's industrial landscape brought about by war and to determine how long these lasted. Did war-related technological innovation find its way into post-war production? Did the changing role of women as investors have lasting effects? Second, this research - which suggests that an entirely new group of savers became investors in government securities - may be pointing us towards the transformation of British savings from one consisting mainly of retail investors to one dominated by institutions such as insurance companies and pension funds. As less sophisticated and less wealthy investors bought Government tradeable securities, did they become more, or less, confident about their ability to pick investments generally? It may have been that this group only felt confident when buying the safest instruments and chose to leave investment decisions to professionals. This was a particular policy challenge for successive governments hoping to turn Britain into a 'nation of shareholders', as Prime Minister Margaret Thatcher stated. Understanding how Britain went from a largely retail investor base in the late 19th Century to a largely institutional base in the 20th Century may have implications for those setting savings policy.
Sectors Education,Financial Services, and Management Consultancy,Government, Democracy and Justice,Culture, Heritage, Museums and Collections,Security and Diplomacy

URL https://voxeu.org/
 
Description The research constitutes a collaborative PhD from Queen Mary University of London and the Bank of England. It is the first such collaborative PhD sponsored by the BAnk. The Bank's contribution has been to provide access to files and the ledgers held in its archive of the subscribers to a successive series of loans used to finance Britain and its allies in World War I. In the first phase of my research, I discovered that contrary to widespread press reporting at the time, Britain's first-ever effort to raise capital to finance war was a massive failure, selling War Loans with a capital value of less than a third of its stated goal. I learned that this fact had been kept hidden from the public by a conspiracy between top level officials at the Treasury and the Bank. The Bank's own balance sheet was altered to hide the fact that it had to extend funds to Treasury from its own reserves. The Bank has a blog, available to the public, known as 'Bank Underground;. I published my initial research on this blog and to date, it has proved one of the top five most-accessed pieces of research. Reports of my research were also published in the Financial Times, the Times, the Independent, various regional newspapers around the country and taken up by National Public Radio in the U.S.. I also appeared on BBC Radio Wales, and highlighted the contribution by Emily Charlotte Talbot, heir to the Talbot fortune, builder of the docks and railway into Port Talbot and a significant early investor in War loan. I believe the research attracted so much attention first because financial journalists asked whether the cover-up constituted an early version of Quantitative Easing of monetary policy. (It did not; the Bank had existing reserves and did not need to create them). There is also much interest for two other reasons; first, among my early findings is that very little research has been done on World War I finance. While there is a body of research on World War II, financing the first international industrial war appears to have been overlooked. Second, we are nearing the centenary of the Armistice of 1918 and there is general public interest in the topic.
First Year Of Impact 2017
Sector Education,Financial Services, and Management Consultancy
Impact Types Cultural,Economic

 
Description Exhibit, Bank of England Museum 
Form Of Engagement Activity A press release, press conference or response to a media enquiry/interview
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Public/other audiences
Results and Impact I prepared a selection of individual investors from my sampled ledgers to be displayed at the Bank of England Museum for an exhibit highlighting the role of the Bank of England - and the need to access capital to wage, and win, World War I. The exhibit highlighted the role of the Bank as the agent for harnessing the capital. The individuals selected were a broad cross section of men and women, including some with great wealth. However, I also selected individuals with far more modest fortunes, such as a family of coal miners from Leicestershire who invested in War Loan.
I was asked to appear on two radio broadcasts to discuss the role of investors in War Loan and the ultimate outcome of World War I. The radio appearances were timed to coincide with the centenary of the November 1918 Armistice and with the opening of the exhibit at the Bank of England Museum. The first program was 'Awake to Money' on BBC Radio 4, a program which focuses on personal finance. The second was the BBC 'Today' program which I am told reaches a general audience of roughly 4 million daily listeners.
Year(s) Of Engagement Activity 2018
 
Description Presentation of a paper on my preliminary findings to the Economic History Society at its annual conference in April 2018 at Keele University 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Postgraduate students
Results and Impact I presented a summary of the findings of my research based on the sample of over 6,000 individual investors in War Loan during the years 1914-32. I concluded that the broad pool of investors widened out over the period, from a relatively narrow base of those with largely inherited wealth to those who had increased their wealth through their investment in war-related industries and businesses.
Year(s) Of Engagement Activity 2018
 
Description Presentsation of thesis entitled How Britain Paid for War: Bond Holders and the Financing of the Great War: 1914-32 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach Regional
Primary Audience Industry/Business
Results and Impact I deelivered a summary of research using ledgers stored at the Bank of England and which have never been opened before. For the first time, this research allows us to understand the sources of the capital that provided the arms, logistics and food that kept Britain and its allies alive and fighting during the First Word War. Because there has been very little scholarship in this area, there has been keen interest in this area. When I defended my thesis, the lead examiner, Professor Adrian Gregory of Oxford Universityconcluded not onbly that the research made a "significant contribution to sholarship" and added that the research might be the most significant contribution he has seen in 20 years of examining theses.
Year(s) Of Engagement Activity 2019
 
Description Re-publication of my research on the failure of Britain's first effort to raise capital for warfare in 1914 
Form Of Engagement Activity A magazine, newsletter or online publication
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact As a result of widespread renewed interest in World War I, the Vox EU wbsite in December 2018 re-published my research on the failure of the British government to raise funds for war in 1914. In January 2019, the Bank of England's Bank Underground blog re-posted the article, noting that it was the third best-read blog post it had ever published on the site. It also referred to the current Bank of England Museum exhibit which is scheduled to run until April 2019.
Year(s) Of Engagement Activity 2018
 
Description Re-publication of my research on the failure of Britain's first effort to raise capital for warfare in 1914 
Form Of Engagement Activity A magazine, newsletter or online publication
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact As a result of widespread renewed interest in World War I, the Vox EU wbsite in December 2018 re-published my research on the failure of the British government to raise funds for war in 1914. In January 2019, the Bank of England's Bank Underground blog re-posted the article, noting that it was the third best-read blog post it had ever published on the site. It also referred to the current Bank of England Museum exhibit which is scheduled to run until April 2019.
Year(s) Of Engagement Activity 2018