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Jul 9, 2024 · This article discusses the pre-war plans for financial mobilization, the fiscal and monetary policy at the beginning of the war (when the German government and military expected a rapid victory) and the policy changes during the war of attrition.
War finance, fiscal and monetary methods used in meeting the costs of war, including taxation, compulsory loans, voluntary domestic loans, foreign loans, and the creation of money. Major wars are usually financed to some extent by inflationary measures.
While war spending rose to more than half of GDP, the fiscal deficit was more than 40 per cent of national income in 1941 and still one third of national income in 1943 and 1944. Of the deficit, most was covered by borrowing; monetary finance accounted for little more than 5 per cent of the deficit. Another remarkable contrast to the first
Within national war efforts, one can distinguish between the fiscal, debt-related, and monetary aspects of war finance. Taxation was the most direct and traditional way to pay for increased expenditures on war. However, it played a subordinate role for almost every country involved.
A new approach to war finance came from several sources but notably from Keynes's private propaganda campaign, the "How to Pay for the War" articles which appeared in The Times beginning in November I939.
The successful use of a national income accounting framework in domestic war finance, and the commitment to maintaining a high level of employment after the war, pointed the way to the Treasury becoming more than ever the central department for economic policy.
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Mar 10, 2020 · Monetary policy, subordinated to war finance, had sought means to cover war expenses without destroying the belief in a return to the “normal” conditions of the prewar gold standard.
