Economics / History / Warfare

The July Crisis: Great War Inflation

Great War Economics Part 2

In my previous posting, I asked what is the deal with 1916, the year the Great War turned decidedly against Germany.  The reason is singular–a horrid winter.

Turnip Winters

Even in the 21st century, Germans still pity the unique hardships their forefathers suffered on their First World War home front…

Because many farmers had been drafted into military service, as soon as autumn 1914 there were considerable crop shortfalls and the first bottlenecks in food supplies. In particular basic food-stuffs, such as bread and potatoes, were soon in short supply.

A lot of food items were already rationed in 1914 and could only be obtained with food stamps. Many other non-rationed foodstuffs soon became so expensive that the poorer and low-earning sections of the population could no longer afford them.

The infamous “Turnip” or “Hunger Winter” represented a temporary peak in the shortage of food from 1916 to 1917.

…neglecting to notice that because their descriptions of 1916 portray Germany beset by truly awful weather and thus a poor harvest season…

A rainy autumn caused potatoes to rot, which reduced the harvest to about half of what it had been the previous year. An extremely cold winter led to a substantial coal shortage not only in private households, but also for the railway administrations, so that the transport of potatoes to consumers, mainly in the large cities, was impeded and many potatoes were spoiled in transit. In order to ensure that people at least survived, towns and parishes distributed turnips, which, for lack of any alternative, were prepared in every imaginable variation.

However, as there was an absolute lack of other foodstuffs, mainly oils and fats, items on the menu were very restricted.

 …blaming the blockade for the encroaching famine was myopic at best but much more likely a craven attempt to corrupt history considering harvest conditions were eerily similar in the Entente during 1916:

Aside from all the dead and wounded, the year 1916 ended for Britain with other annoyances. Reserves of grain were low, and potatoes and sugar were scarce. People had to stand in long lines to buy things. In Britain, feeding pigeons and throwing rice at weddings were prohibited. France had similar annoyances. Prices had risen forty percent, food was rationed, people were standing in long lines, and with a shortage of coal people were shivering in their homes.

Britain’s new Prime Minister, David Lloyd-George, believed that the will to continue fighting was fading, and he saw that Britain’s fiscal resources were fading. Britain had become deeply mortgaged to US creditors in order to purchase goods from the United States, and Lloyd-George believed that Britain could not hold out much longer.

This famine is beginning to look like a Europe-wide phenomenon.  I previously rolled out this BBC pictorial:

Starvation (especially postwar) was a sadly common phenomenon…

Hunger stalked the civilian populations of all the combatant nations. Agriculture and food distribution suffered from strains imposed by the war and naval blockades reduced food imports. Some countries met this threat more successfully than others.

The war took men and horses away from farm work. Imports of nitrate fertilizers were hit. Reduced agricultural output forced up prices and encouraged hoarding. Governments responded by putting price controls on staple foodstuffs. Food queues formed of women and children became a common sight in cities across Europe.

In Russia and Turkey the distribution of food broke down. The Russian revolution had its origins in urban food riots. In Turkey many starved. Austria-Hungary eventually succumbed to the same calamity.

…which led to k-brot in Germany…

This bread, known as K-Brot, was highly unpopular, as it increasingly contained such ingredients as dried potatoes, oats, barley and even pulverised straw.

…and worse after 1916:

Germany introduced numerous government controls on food production and sale, but these proved to be badly thought out and worsened the effects of the British naval blockade. Substitute foodstuffs were produced from a variety of unappetising ingredients, but their nutritional value was negligible and Germans became increasingly malnourished from 1916 onwards.

Germany’s campaign of unrestricted submarine warfare was intended to expose France, Italy and especially Britain to the same food crisis. These countries relied heavily upon imported grain and viewed the submarine campaign as a deadly threat. They attempted to increase their own food production, but their main success was in introducing successful systems of rationing. Britain introduced rationing in London early in 1918 and extended it nationwide by the summer. British civilians defied German expectations by accepting this state intrusion into their daily lives.

To be fair, the Germans weren’t terribly concerned about expectations.  They simply wanted revenge for tens of thousand dead civilians:

German workers were now putting in fourteen-hour days. And, according to official German counting, 121,114 Germans had starved to death in 1916, up from 88,232 in 1915 – deaths the Germans attributed to the British blockade. But it was also the result of a decline in Germany’s farm production because men and horses had been taken from farms for the war effort. During 1916, food riots had occurred in approximately thirty German cities. And premature frosts came that killed the potato harvest. The coming winter would be known as the Turnip Winter. And short of coal like the French, German civilians were shivering in their homes.

On the other hand, the plight of German civilians is well-known in history and Britain does not dispute the cold, hard dead facts of the 1910s.

The Central Powers’ crimes, however, are almost uniformly overlooked.

The Starvation Weapon

Germany managed in the 1920s to whitewash their plunder and starvation of Belgians and Luxembourgers as British propaganda, Austria-Hungary’s campaign of murder against Serbian civilians is largely forgotten, and the Ottoman actions against the Lebanese are obfuscated:

For over three months, the tiny but insatiable creatures devoured whatever had been left behind by the Ottoman authorities, who had prioritised food and grain reserves to feed their soldiers as part of the imperial war effort.

This marked the beginning of a period that is now often just a footnote in the history books: the Great Famine of 1915-18, which left an estimated 500,000 people dead. With a lack of accurate data, estimates range from 100,000 to 200,000 deaths in Mount Lebanon alone.

At this time, the population of Lebanon was estimated at about 400,000, meaning that half its people died. At 250,000, the American Red Cross estimated an even higher death toll.

It was the highest death toll by population of the First World War.

“The nights in Beirut were atrocious: You heard the whining and screaming of starved people: ‘Ju3an, Ju3an’ (hungry, hungry),” wrote the Turkish feminist author Halide Edib (1882-1964) in her memoirs.

In his book Al Raghif (The Bread), the Lebanese writer and diplomat Toufic Youssef Aouad – a child during the famine – wrote: “There was a woman lying on her back, covered with lice. A newborn with enormous eyes was at her breast. The child kept pressing the breast with his hands and lips and would then give up and cry and cry.”

There were reports of people eating cats, dogs and rats, even cannibalism. One account is by a priest who tells of a father who came to confess that he had eaten his own children.

Edward Nickoley, 1917, an employee with the Syrian Protestant College, later to become the American University of Beirut, wrote in his diary: “Starving people lying about everywhere; at any time children moaning and weeping, women and children clawing over rubbish piles and ravenous­ly eating anything that they can find. When the agonised cry of famishing people in the street becomes too bitter to bear, people get up and close the windows tight in the hope of shutting out the sound. Mere babies amuse themselves by imitating the cries that they hear in the streets or at the doors.”

This war crime is probably overlooked because the Central Powers blamed the Mediterranean blockade, historians ignoring the Ottoman counter-blockade which was directed against their own subjects:

The Great Famine was the devastating result of both political and environmental factors, the combination of a severe drought and locusts and a suffocating blockade. After the Ottoman forces joined Germany, the Allies enforced a blockade of the entire Eastern Mediterranean in an effort to cut the supplies to the Ottomans.

In return, a blockade was introduced by General Jamal Pasha, commander in chief of the Turkish forces in Greater Syria, where cereals and wheat were prevented from entering Mount Lebanon.

In a letter to Mary Haskell, dated May 26, 1916, Gibran Khalil Gibran wrote: “The famine in Mount Lebanon has been planned and instigated by the Turkish government. Already 80,000 have succumbed to starvation and thousands are dying every single day. The same process happened with the Christian Armenians and applied to the Christians in Mount Lebanon.”

Essentially, the entirety of Europe’s combatants was in famine from 1915 until the 1920s.  Though this understates reality:

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This newspaper clipping is from the Routt County (Colorado) Republican, dated 27 October 1916.  Recall the United States did not enter the war until 6 April 1917; the famine was less war-related than a Northern Hemisphere-wide phenomenon:

The United States had to supply not only its own food needs but those of Britain, France, and some of the other Allies as well.  The problem was compounded by bad weather in 1916 and 1917 which had an adverse effect on agriculture.  The Lever Act of 1917 gave the president broad control over the production, price, and distribution of food and fuel.  Herbert Hoover was appointed by Wilson to head a newly-created Food Administration.  Hoover fixed high prices to encourage the production of wheat, pork, and other products, an encouraged the conservation of food through such voluntary programs as “Wheatless Mondays” and “Meatless Tuesdays.”  Despite the bad harvests of 1916 and 1917, food exports by 1919 were almost triple those of the pre-war years, and real farm income was up almost 30 percent.

The First Inflation

The Lever Act, also known as the Food and Fuel Control Act was enacted on 10 August 1917–the same year the Consumer Price Index was invented:

The Consumer Price Index was initiated during World War I (which the U.S. joined in 1917) and was later estimated back to 1913. Due to the war  prices were rising rapidly as the government was pouring money into shipbuilding centers, this made it essential to have an index for calculating cost-of-living adjustments for wages.

Changes in CPI (inflation) were strange from the outset:

Inflation 1913 - 1919

Inflation for individual years during this period varied drastically. During the period from January 1913 through January 1914 i.e. the year of 1913  was low at only 2.04%.  The next year 1914 (from January 1914 through January 1915) inflation was even lower at 1%. Inflation in 1915 was 2.97% so it was really a big deal when inflation jumped up drastically during 1916 to  12.50%.  During 1917 inflation was horrendous at 19.66% and this stirred a panic which led to the creation of the consumer price index in 1917. Prior to this they knew inflation was high but didn’t really know how high. Once the index was created they used food price data to recreate the index for the previous years. Inflation in 1918 was 17.86%. And in 1919 the inflation rate fell slightly to 16.97%.  [(Emphasis added).]

Inflation was subdued during the first two years of the war, despite the U.S. pushing significant merchant trade to Europe from the outset.  Prices only picked up in February 1916, finally hitting 9.90% in September (corresponding with the harvest season) and climbing into the double digits until October 1920.  The pre-1917 numbers are estimates, but being based off of food prices leads to an inescapable conclusion–the Great War inflation was caused by crop failure.  Nor was this inflationary effect limited to the United States:

But the full story is a far more complicated, according to history professor Aaron Tylor Brand, at the American University of Beirut, whose dissertation on the famine is entitled: Lives Darkened by Calamity: Enduring the Famine of WWI in Lebanon and Western Syria.

“Previous interpretations of the famine as a deliberate product of Ottoman or Allied actions are too simplistic. Analysing monthly price lists and climatic statistics of the famine period and contextualising these within the history of famine in the region suggests that the high prices that drove the region towards famine in late 1915 were the product of environmental factors (poor rainfall, a climatic oscillation, and locust attack) and wartime mismanagement that conscripted too heavily in the countryside at a time when agricultural goods were needed for both the war and the population,” he says.

“The result was a crisis in the countryside that led to underproduction of agricultural goods, prompting speculation that increased the cost of living. This, combined with the loss of jobs due to the Allied blockade in Mount Lebanon and the coastal regions, created a situation where people, who were already growing poor due to the work stoppage, were then forced to buy expensive food to feed their families and keep themselves alive.

“State policies like price fixing, the introduction of paper money, the implementation of production and transportation controls of grain and taxation did little to help the situation,” he says. “In the end, it wasn’t that there was no food [in most towns], it was that it was too expensive to purchase, so people and families began to slowly starve.”

Aaron Tylor Brand’s research is spot-on in every respect except for scale:

Furthermore, it is important to note that, during the war, the Ottoman Empire
experienced serious problems in its agriculture sector.  Due to the special requirements
of the army, production was affected badly, driven by a lack of machinery.  Since
most of the pack animals used in agriculture were confiscated by the army, both the
number of farm animals and production capacity declined (ibid).
Combined with rates fueled by food scarcity that drove inflation to the highest levels in the empire’s history…
Not only because of this monetary expansion but also along with encountering problems in food supply, prices continuously soared.  According to the data from Duyun-i Umumiye, prices increased in excess of a factor of 20 from July 1914 to the end of 1918, and by over 18X in the last quarter of 1918.  The inflation rate was 300 percent and this rate has never been experienced before in Ottoman history (ibid).

…the 1910s weather-related crop failures extended to the Middle East and the hammer-headed Three Pashas junta that ran the Ottoman Empire into the ground during the First World War.  Unfortunately the Lebanese were victims of the adage ‘geopolitics trumps economics:’

“The mountainous terrain of Mount Lebanon could only feed its population four months out of the year,” said historian Issam Khalifeh.

The situation worsened when “Allied forces imposed a blockade” in the Mediterranean to cut off supplies to the Ottomans, he told AFP.

Familiar refrain, eh?  The naval blockade angle…

But it was the land blockade ordered by high Ottoman military ruler Djemal Pasha that truly choked off Mount Lebanon, populated mostly by Maronite Christians protected by France.

The Ottomans feared the Maronites would support the Allies in the war “so they had to starve them before they were armed”, said Khalifeh, a professor at the Lebanese University.

…which is total bull.  The Great Famine was part of a concentrated effort by the Three Pashas to slaughter as many of their Christian subjects as possible (to be continued…)

 

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