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Financial heroism: financing the First World War in Britain and Germany
Josephine Maltby, University of Sheffield
Janette Rutterford, Open University
Presented at 175 years of The Economist, University College London,
September 24-25, 2015
This is a draft paper: please do not quote without reference to the authors.
Introduction
The Economist had two editors during WW1, FW Hirst (FWH), from 1907-1916
followed by Hartley Withers (HW) from 1916 to 1921. FWH was replaced by HW as a
direct result of his views on the War as well as on its financing. There was thus a
change in editorial policy for the Economist mid-way through the War which we
highlight in this paper. We discuss how the Economist compared with other
mainstream publications, such as The Times and the Investors’ Review. We will also
see how the British and German press report on wartime finance and on each
other’s coverage of it.
We intend to look principally at coverage of War Loan and, in Britain, War Savings
Certificate (WL and WSC) marketing and performance. It is possible to make direct
comparisons because long term bonds were launched in the two countries at the
same time with the aim of financing the war. (See Table 1 for details). In Great
Britain there were three WL issues in 1914, 1915, and 1917. These were largely
aimed at traditional investors: the launch of WSC in 1916 was aimed at encouraging
working-class savings, by a small minimum value (77.5p). These strategies were
combined with borrowing short-term and overseas, and higher levels of taxation-
income tax, expenditure taxes, death duties and Excess Profits Duty. The British
Government that bond finance reduced the need to raise taxes. It would also soak
1
up spare cash and thus prevent inflation triggered by consumption spending by the
working class and middle class, many of whom were better off as a result of the War.
Germany had no equivalent to WSC: it made an issue of WL every 6 months from
1914– a total 9 issues in the course of the War. As in Britain, the aim of issuing long
term bonds was to reduce dependence on short term money market loans.
Germany also used WL as a means of collecting gold held by individuals, needed to
increase the money supply and pay for overseas purchases. Unable to raise income
taxes (which were imposed at Land level, not nationally) the federal government
introduced excess profits duty and also raised excise and death duties. German
fears about inflation were dealt with by food rationing and price controls.
Both countries produced massive promotional campaigns for their finance initiatives
How did the press in the two countries deal with financing and with the enemy
performance?
FWH was described in The Times Feb 23, 1953 obituary as ‘one of the last of the
school of Mill, Cobden, Bright and Gladstone, who, in season and out preached the
old Liberal doctrines of peace, economy and free trade’. The obituary went on to say
that it had been a ‘tragedy’ that his editorship was ended by the ‘shattering of the
stable, rational and peaceful world that Hirst took as his postulate.’ Ruth Edwards
(1993: 527) argues that, in his attitude to Germany before war broke out, he was
‘realistic but not unfriendly’. She calls him (op. cit. 530) ‘dominated by wishful
thinking’ in his claims that war could not happen, and (op. cit. 532) as showing
‘buoyant optimism’ in his claims that peace was assured. And when war broke out
Hirst ‘made no concessions to the pro-war fever…sweeping the country’ (op. cit.
539).
2
In the course of the war, he campaigned against conscription and DORA1 (Edwards
1993: 564), leading to his being accused by The Times of a ‘distressingly pacifist’
policy (op. cit. 567).By the summer of 1916 Hirst ‘became too much’ for the trustees
and was sacked, to be immediately replaced by HW
HW came to the Economist direct from the post of Director of Financial Inquiries at
the Treasury, which had followed a series of appointments as City Editor of the
Times and then of the Morning Post and with the merchant banker Seligman. He
was greeted by The Investor’s Review (IR) (1.7.16 6-7) as ‘one of the coolest and
shrewdest practical men of affairs of the day.’ According to Edwards (1993: 577) he
introduced a ‘much more orthodox…attitude to the War’.
The remainder of this paper will give an overview of the Economist’s coverage of
wartime finance in Britain, in the context of the press nationally in Germany on the
same themes. The issues we consider are the treatment of wartime loan finance, of
taxation and of national policy, and the ways in which the Economist did and did not
resemble the press more generally. In GB we will look in particular at the Economist
in comparison with the IR and its treatment of the same issues.
From the beginning of the war, the IR gave detailed and energetic accounts of its
impact on the City and on finance. The IR was founded in 1892 by AJ Wilson, a
financial journalist of long standing- he had experience going back to the 1870s of
working in the financial press. A contemporary described Wilson as ‘the knight
without fear or reproach’ among City editors (Kynaston 2012: 178). He was willing to
take on and campaign against scandals – see e.g. his attacks on Rhodes and the
1 DORA was the Defence of the Realm Act 1914 which gave wide powers to the British Government including severe censorship of the media.
3
South African Company and on Imperial treatment of Indian peasants (Porter 2007:
242 and Brass 2011: 242).
The outbreak of War
On 8.8.14, when Germany stopped payments in London, the IR called it ‘loathsome
and dastardly…a brutal and senseless crime’ by ‘the German “War God” and his
blood-thirsting minions. The IR took the line (19.9.14 339) that GB was one of the
‘creditor nations’ of the world, able to call on financial resources, but Germany was
not. Germans were ‘essentially a simple people, as becomes barbarians’. They
would not be able to raise credit (only Krupps was buying WL, it claimed, and that
was from the amount the Government owed them). It concluded that ‘Germany is
bankrupt and starving and must soon succumb’. By the end of 1914, the IR was
making detailed calculations of the amount of reparations Germany would be made
to pay.
The Economist’s lead article on 1 August 1914 immediately put it at odds with this
hatred of Germany. Hirst explained that his article was designed ‘to give our readers
some faint notion of the extent of the financial calamity which has suddenly
overtaken Europe and the world...the financial world has been staggering under a
series of blows such as the delicate system of international credit has never before
witnessed, or even imagined’. It argued that war rather than an attack by
‘barbarians’, was a threat to a harmonious European system. On 8 August when war
had been declared Hirst exclaimed that
‘Death, anguish, starvation and despair are written over western Europe...It is the
triumph of diplomacy over common sense, or force over reason, of brutality over
humanity.’
4
This was not just his editorial style, but also his tone in public speaking. The
Yorkshire Evening Post 9 Nov 1915 records a speech by FW Hirst to Leeds bankers
in which he attacked Government spending, calling the Exchequer ‘wholly
subordinated to the demands of the War Office and the hysterical cries of the Yellow
Press.’
Quoting comparisons of spending by Germany, GB and other combatants, he
claimed that the GB government was overspending: ‘If these figures were at all
accurate, political economy would end the war, otherwise the war would end political
economy.’
Where the IR predicted imminent downfall for the enemy, the Economist under Hirst
treated Germany as an economic competitor and was not afraid to give credit where
credit was due. In its reporting of the first German WL, in September 1914, it noted
that there had been a huge public response, which it took as evidence of the
attractiveness of the financial offer (a 5% interest rate guaranteed for at least 10
years) but also patriotism and, most notably, investment by the less affluent. It
reported that out of 1.15 million investors, 900,000 took amounts of less than £100,
including 200,000 taking amounts of between £5 and £10. (£5 equated to 100 marks,
the lowest value of WL available in Germany.) This emphasis on different investor
groups became a key measure of marketing success in both countries and
promotional efforts to sell WL were reported by the enemy press. For example,
throughout the first year of the War, the Economist quoted speeches by German
politicians promoting WL and praising WL’s financial security (e.g. 13.3.15 p520,
27.3.15 p619-20).
War Loan and War Savings
5
In contrast to the first German WL, the British WL of Autumn 1914 was ‘a fiasco …
the Treasury’s blackest secret’’ (Roberts 2012: 190), producing a sales shortfall of
£113m that had to be bought up by the Bank of England and the commercial banks.
Roberts blames the failure on the size of the offering, which was based on the
money wanted by the Government and not on market capacity, on its pricing ‘in a
vacuum’ (the Stock Exchange was closed), its complex structure and ‘avoidable
mistakes’ in presentation and timing.
Given its unpopularity with investors, WL enjoyed very positive treatment generally in
the media. The Daily Mail (20.11.14) greeted it as ‘the soundest and most attractive
loan ever offered by the British Government’. For the IR, 19.12.14 619-20 in a long
article ‘The WL as a money-box’, it was the perfect investment for the small investor.
It had previously insisted (28.11.14 552) that WL was ‘considerably over-subscribed’
Despite FWH’s anxiety, The Economist joined in the applause, though less warmly –
(5.12.14 p992). ‘Mr LG’s huge loan was designed to appeal to rich men and bankers:
and it is amazing proof of London’s resources that it should have been so subscribed
when the rate of interest was so unattractive.’
HW began his editorial career positive about WL. From January 1917, when the
Third WL was launched, there were regular items, called WL points about the market
for WL. In an important article, Withers called for ‘Financial Heroism’ in the form of
saving rather than spending, and investing in WL (6.10.17 p.487). He described the
terms of the third WL - a gross redemption yield of approximately 5⅜%, the certainty
of getting one’s money back - as looking to the average investor of 20 years ago like
‘an impossibly beautiful dream’ compared to the 2.5% they then received from
Trustee Securities.
6
From their 1916 launch WSC were promoted with great urgency and emphasis by
massive advertising campaigns, which reflected the Government claim that massive
popular saving (providing the nation with ‘silver bullets’) was essential in order to win
the War. This was the tone of claims such as the Daily Mail leaders describing WL
as ‘a magnificent investment…better than gold’. Other money-raising campaigns
such as Tank Weeks operated on a similar basis –marches, displays, speeches and
intensive press coverage. Local and national newspapers listed the amounts
invested by corporate lenders (e.g. The Times February 8, 1917).
Initially, the Economist paid little attention to the 1916 launch of WSC. Its major
theme, apart from the WL market, was British Government policy – and in particular
its effectiveness in marshalling resources for the war effort. This was about
government taxation and spending, and also about the promotion of private thrift in
the population at large. Although Edwards (1992: 578) describes HW’s ‘Financial
Heroism’ article 6.10.17 as one which Hirst ‘would have hated’, what started to
appear in The Economist was a growing dissatisfaction with national performance.
Where FWH had expressed this by attacking government waste, HW had a different
target in mind. As early as 3.3.17 pp 424-5 in ‘The Law and the Moral’, he
celebrated the amount raised by the latest WL issue, but warned about the need for
taxation to ‘check the extravagance of unpatriotic and thoughtless people whom no
other appeal will reach’ – he quoted the examples of lavish parties, and ‘the Asquith
wedding of 1915’. Withers was targeting those who set a bad example, making it
harder to promote thrift to the working classes. Taxation was needed as well as
borrowing to reduce personal consumption in wartime, in particular amongst the
better off.
7
On 29.9.17 p451 he continued on this theme, calling for the promotion of saving, not
amongst the workers, where the War Savings Committee was succeeding in
harnessing resources, but amongst ‘the well-to-do classes’ who were not doing
‘anything like their duty’ and wasting money on clothes, Stock Exchange speculation
and parties. Too much of the war, HW argued, was being funded by borrowing
abroad and ‘the machinery of credit’, not enough by saving.
As the war continued, there was a convergence of views between the Economist and
the IR that Government policy was not working. On 16.3.18, for instance, The
Economist reported (p 462) that the last week’s war bonds campaign had produced
£139m. But the Government should go for ‘real saving’ steadily, not ‘explosive
outbursts…injunctionary booming.’ The grand promotional campaigns resulted in a
response that was ’not saving at all’, just a sort of craze or panic. What HW wanted
to see was a change of morale brought about by policy, not by marketing.
The IR argued that the German economy was in a state of collapse (see e.g.
29.7.16) and buoyed up only by inflation, but it, too, was losing confidence in the
efficacy of WL. On 21.10.16 264-5 ‘Our borrowing muddlements’ attacked British
borrowing: WSC, though advertised ‘by all the devices known to the expert publicist’
were ‘only feebly popular’ and there was the danger of ‘a credit storm’ leading Britain
to ‘financial paralysis.’ For the IR, the problem was that Britain had started the war
unprepared for financial demands: ‘in this respect our treasury management
contrasts unfavourably with the German and still more the French.’ The British
should have prepared for war with long-term bonds (10-20 years) issued in bulk.
The difference between the journals was in the solution they promoted. For the IR, it
was crucial to promote mass saving, and this could not be achieved by WSC alone.
8
WSC was good for the small saver, and likely to promote post-war thrift, but it was
not enough to attract people who had not saved before, and who did not understand
financial products.
In a relentless campaign in favour of the introduction of premium bonds as an
alternative for the unsophisticated investor, it argued (5.10.17 365) that WSC income
was disappointing, and the WL would produce a divisive burden on workers post-
war. Britain would be laden with debts that would have to be paid to the affluent,
whilst German reparations would be inadequate. There was the danger of ‘class
divisions, jealousies, perhaps even revolts’. Premium bonds, on the other hand, were
cheap, easy to understand, and had the possibility of a rapid return – that would
make the working classes save. Otherwise the country would be divided by
selfishness, like that of the miners more interested in football and horses than in the
war as well as the woman who paid 10s to a ‘West End Store’ to buy ‘a pie for her
dog’s birthday’,. There was a working-class ‘spirit of profiteering’ the IR argued, as
well as an industrial one (27.10.17: 420).
The Economist did not join the IR campaign for premium bonds. HW’s argument was
that the middle classes and the rich needed to contribute more to the war effort as
had the working class with WSC. He praised the results of the War Savings
Committee, its ‘army’ of 15k ‘devoted and disinterested workers’ and the increase
from 345k to 16.75 million holders of Government securities (25.5.18 pp.912-3), but
above all he called for taxation of the wealthy and more saving from all strata of
society. (1.6.18 p938-9) ‘The Chancellor’s Appeal’ quotes from an interview with the
Chancellor of the Exchequer calling for people to live more simply, cut household
spend to a minimum and put surplus earnings and spare cash in the bank into War
9
bonds or WSC, and for businesses as well as individuals to buy WL. The Economist
reiterates its view that thrift is essential, and agrees with the Chancellor, but it notes
(939) that ‘he has certainly dealt tenderly in the matter of taxation with those who
own and handle wealth.’ By the end of the War, The Economist was invoking
(9.11.18 pp.646-7) ‘The Investor’s Duty’, as it criticised the outbreak of trading in
‘speculative or semi-speculative shares at very high prices’ and recommended
‘British Government bonds for 5¼%’
What developed in The Economist as the war progressed seems to have been a
growing impatience with government policy but also with the behaviour of some
investors- hence the calls for taxation and thrift among the affluent as well as the
masses in order to achieve financial stability and victory.
The German press
Altenhöner comments that the War had put an end to the ‘relative freedom of the
press’ that existed in pre-war Germany. Initially, censorship was designed to prevent
the spread of information about military matters but, as the war progressed, it was
also concerned with the management of the public mood. The key word was
Burgfriede, a national truce, which entailed an end to party disputes for the duration
of the hostilities. The key slogan was the Kaiser’s Ich kenne keine Parteien mehr, ich
kenne nur noch Deutsche. (I don’t recognise parties any more, only Germans’).
This veto on political controversy applied to the press treatment of everything to do
with the war, and so it affected the coverage given nationally to German WL. This
was accompanied by a massive propaganda campaign. Ther (2014) identifies the
promotional campaign for WL as an inspiration for propaganda more generally. It
was recognised at the time as exceptional and exceptionally successful (see e.g.
Fairchild (1922, 252). Part of the propaganda took the form of an advertising
10
campaign using poster and press advertising (see e.g. Bruendel 2010). But the press
itself was crucially involved.
Throughout the War, the Reichsbank (RsB) monitored press treatment of German
WL, inside and outside Germany, which included a vast number of regional
newspapers as well as the national press. The German press also gave a striking
amount of coverage of Allied financial performance. Some of this was in the form of
news reports. In 1915, for instance (1.8.15) Norddeutsche Allgemeine Zeitung
reported that GB was 'concerned about German finance'. It mocked reports in GB
press that Germany was in financial difficulties, claiming that in fact it was GB that
had problems, and needed the banks to buy up its WL issue due to lack of demand
from the public. (This had indeed been the case for the first British WL). A 10 .3.17
Berliner Tageblatt article compared GB and German WL and noted that GB had
needed to increase the interest rate to 5% in order to get lenders (again, a valid
point). German cartoons often treated British WL as a target- e.g. in a 1915 drawing
in Simplicissimus, Britannia stands next to a gloomy man slumped in an armchair.
She looks indignantly at him, saying, ‘The war has cost us £50 million. If only we’d
put it into German WL’
At the same time, the German press made extensive use of graphics- charts,
diagrams and cartoons- to illustrate the superiority of the German economy over
those of the Allies (see e.g. 1.4.17 from Deutsche Kriegswochenschau, with cartoon
drawings of the amount of the contribution of small lenders to WL). The campaign to
promote WL via the press was tailored to meet different reader groups’ interests. The
artistic magazine Des Kunstwarts titled itself Deutscher Wille (German Will) for the
length of the war, and carried articles like Avernarius’ 1917 piece on ‘WL and
11
intellectuals’, claiming that it was the cultural and moral duty of people who read the
magazine to lend, ‘Not solely as Germans, but as cultural workers for the good of
humanity, we will take out WL’
The Deutsche Kriegswochenschau was a weekly magazine covering all aspects of
the War: in 1917, it produced an edition devoted to WL, which carried articles aimed
at a variety of possible investors – workers, farmers, and women. Instead of a
sweeping invocation to support WL, each article was targeted at particular concerns
and values: the farmer was exhorted to ‘Sow Money and Harvest Victory’, the
housewife to do ‘the ancient womanly duty of supporting her menfolk’.
A long article in Die Grenzboten, a well-known current affairs magazine, in 1915 was
titled ‘Was the 2nd English WL a success?’ It was a detailed analysis of the terms of
the loan, quoting extensively from the British press –e.g. a letter from Financial News
24 June which said that the middle classes couldn't afford to buy WL because the
value of their investments had fallen, and a comment in the Times that the public had
not been given long enough to buy. The Grenzboten writer referred to the Economist
as criticising both the conduct of the war and the terms of the issue. The British
journal had noted the high levels of purchases by banks (implicitly contrasting these
with disappointing individual investment). The Grenzboten argued that ‘patriotic
feelings’ had deterred The Economist from saying more about the failed issue.
The Reichsbank’s collection of newspaper and magazine clippings from Germany
and from the Allied powers, and the foreign coverage by the media on both sides
point to the importance of the press in the campaigns to raise finance from WL. The
British press had more freedom and used it to criticise Government policies, in an
attempt to shape the way that the war was financed: the German media was directed
towards unconditional support for policy under the terms of the national truce. British
12
and German media were aware of and monitored each other. The deployment of
statistics, in particular by Germany, attacking the enemy’s financial stability and
praising the nation’s own were the adaptation of peace-time reporting and editing
skills to the needs of the war.
Conclusion
In Britain and Germany 1914-1918, governments used some similar strategies to
fund their war efforts, and the press was involved in the financial campaign. Both the
powers made an increasing effort to promote savings through advertising and the
media. In Germany, the Reichsbank oversaw a highly co-ordinated strategy that
used different newspapers and journals in ways aimed at their readership – direct
advertising, material for editorials, articles aimed at different social classes and
occupations. The British approach was less directed, and editors retained freedom to
criticise Government policy. The Economist’s wartime reporting is interesting
because it shows a range of viewpoints. Editorial tone altered from FWH’s dismay to
HW’s support for the war. But HW’s initial support was tempered more and more by
frustration that government was not imposing a regime of national long-term planning
and individual thrift and self-denial. ‘Financial heroism’ was a mission that had not
been fulfilled.
13
References
Altenhöner Florian (2014) Press/Journalism (Germany) http://encyclopedia.1914-
1918-online.net/home/
Avernarius Ferdinand (1917) Kriegsanleihe und Geistesarbeiter in Deutscher Wille:
des Kunstwarts vol 13 April 1-2
http://digi.ub.uni-heidelberg.de/diglit/deutscherwille30_3/0018
Berliner Tageblatt
Brass Tom (2011) Labour Regime Change in the Twenty-First Century: Unfreedom,
Capitalism and Primitive Accumulation Leiden: Brill
Bruendel, Steffen (2010) Vor-Bilder des Durchhaltens: Die deutsche Kriegsanleihe-
Werbung 1917/18. - In: Durchhalten! : Krieg und Gesellschaft im Vergleich, 1914 -
1918 Bauerkämper, Arnd. - Göttingen, 2010.
Daily Mail
Deutsche Kriegswochenschau 1917 No 44
The Economist
Edwards, R.D. (1993) The Pursuit of Reason; The Economist 1843-1993. Boston:
Harvard Business School Press
Fairchild, Fred Rogers (1922) German War Finance--A Review The American
Economic Review, Vol. 12, No. 2 (Jun.,), pp. 246-261
Gibson A. H (1921) British finance during and after the war, 1914-21being the result
of investigations and materials collected by a committee of Section F of the British
Association, co-ordinated and brought up to date for the committee London: Pitman
Die Grenzboten 1915 War die zweite englische Kriegsanleihe ein Erfolg? volume
74, pp161-172
14
The Investor’s Review
The World’s Largest Loan (1917) London: T Fisher Unwin
Kynaston, David (2012) City of London: The History London: Random House
National City Company. (1918). Internal war loans of belligerent countries: also
consolidation loan of Spain and mobilization loans of Switzerland and Holland. New
York: The National City Company.
Norddeutsche Allgemeine Zeitung
Porter, Bernard (2007) Critics of Empire: British Radicals and the Imperial Challenge
London: I.B.Tauris
Roberts, Richard (2013) Saving the City The great Financial Crisis of 1914 Oxford:
OUP
Simplicissimus (1915) Zu Spät! Vol. 20 ( 25) 289
Ther, Vanessa (2014) Propaganda at Home (Germany) http://encyclopedia.1914-
1918-online.net/home/
The Times
The Yorkshire Evening Post
The Yorkshire Post
15
Table 1 War Loan and War Savings
British War Loans were issued in 1914, 1915 and 1917
Amoun
t
£m
No of subscribers
000
1914 350 Not disclosed
1915 616 1100
1917 1000 5289
From World’s Largest Loan 1917 p3
War Savings Certificates were issued continuously from 1916
Y/e 31 March
Amount£m
1916 11917 731918 62From Gibson 1921 p135
German WL was issued every 6 months from September 1914.
1914 1915 1916 1917 1918
1 2 3 4 5 6 7 8 9
Total in
000m
4460 9060 12101 10712 10652 13122 12626 15001 10443
In £m 223 453 605 536 533 656 631 750 522
From Roesler 1967 p. 206, all converted at 20m =£1
16
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