Effective GDP In World War I

Yesterday I reviewed The Economics of World War I.

Here, let me repeat 2 paragraphs on one of the ideas I got out of this:

There are GDP figures for all the countries involved. Russia and Germany were about the same size. France was a little over half that size, and adding her colonies brought that up to 2/3. Italy and Austria-Hungary were smaller still - each about 40% of the size of Russian and Germany. The U.K. was also about the same size as Russia and Germany, but including its colonies doubled that size. The sum was about the size of U.S. GDP.

An important distinction has to be made though about the size of the peasant class in each country. I did not know this before, but the continental countries had great difficulty raising  resources from their peasantry with command-and-control techniques. If you were living a hardscrabble existence, and your sons were called off to war, you were very unlikely to yield up further produce or labor at artificially low rates. The book doesn't provide these estimates, but I constructed some on my own.

Here is my construction. To do this, I needed to make an identifying assumption (see below). I assumed that, at the time, China was almost completely at the subsistence level, and the U.S. was almost completely beyond the subsistence level. I assumed that the subsistence income was $500 per capita (a tad less than the $550 per capita income in China at this point), and that the per capita income in a developed area was $5,500 (somewhat more than the $5,300 per capita income in the U.S. at that time).

Putting this together paints the following picture of economic capacity. I excluded colonies (which were probably close to subsistence), but included the British dominions of Canada, Australia, New Zealand, and South Africa.

Country	Real GDP (in billions of current dollars)	Population (in millions)	% Subsistence	Effective Real GDP
Germany	244	67	37	153
Austria-Hungary	101	51	70	30
U.K.	226	46	12	199
Dominions	78	20	32	53
France	139	40	41	83
Russia	258	173	80	51
Italy	91	36	59	37
U.S.	512	97	4	489

I think my effective real GDP numbers give a much better picture of 1) why Germany thought they could probably beat France and Russia if England stayed out of the fray, 2) how weak Austria-Hungary and Russia really were, and 3) why contributions from Canada, Australia and New Zealand were so prominent.

Footnote: an identifying assumption is economics jargon for an assumption that has to be made to separate one thing that is inseparable into two or more things. In this case, all I know for sure is the real GDP and population. But from that you can construct per capita real GDP. Then you make an educated guess about what per capita real GDP would be at subsistence and non-subsistence. The identifying assumption is that the population of a country is either at the subsistence level, or the non-subsistence level. It isn't the most concrete bit of research, but I think it is a move in the right direction.

Comments

[Shaun Harvey]

You have done a good job but I have a couple of queries with regards to your logic. The first being with regards to Austria Hungary's economy. The peasentry was large but it must be remembered that the poorest region in the Empire (Galicia) was also the main source of oil for the Central powers with the exception of its short time under Russian domination. Most of the workers in this industry did so to suplement their life as subsistence farmers so it is difficult to qualify a member of the popuation as specifically subsistence in their nature.

2. Do you have the figures for the Ottoman Empire?

[Dave Tufte]

1) Well, obviously, this is a back-of-the-envelope sort of calculation. I lifted the figures on GDP and percent at subsistence from the text. The text emphasized the inability of the developed parts of the economy to mobilize the potential in the subsistence part, but didn't do anything with the numbers - so I tried to fill in the blanks. Frankly, this is the first source I ever saw that discussed the idea that Germany was not as rich as it seemed.

Having said that, my method is pretty simple. So, if you wanted to make this sort of adjustment, you'd need some sense of how big the portion of population involved in this industry was, and how much the subsistence level should be adjusted for that portion. My guess is that the portion is small (Galicia has never been densely populated), and that the adjustment for unskilled workers in what was then a minor industry wouldn't be big either.

2) I have no data for the Ottoman Empire. The text I drew from has a summary chapter from which I drew this data. There is a more specific chapter on the Ottoman Empire though - which I didn't consult. I think it would start out as a smaller value than even Austria-Hungary, and then have to be marked down for an additional factor. The book emphasizes that the Ottoman Empire was not at all economically integrated: 1) there was no national rail net to allow the collection of resources, and 2) at the local level the terrain made the collection of resources at ports very limited beyond a short distance from the city. I'm speculating here, but my guess is that the Turks were only able to partially mobilize those parts of Thrace and the coastal areas of modern Turkey that were easily accessible.

Given the problem that the Austro-Hungarians had with Serbia (giving some sense of its effective GDP), the fact that collections of countries smaller than Serbia routinely beat up the Ottomans, and that the Italians manhandled them in 1911-2, my guesstimate is an effective Ottoman GDP in the 5-15 range.

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