Niall Ferguson on finance and the causes of the war

This article seeks to leave behind the somewhat sterile debate about internal-versus-external primacy by concentrating on the point where foreign and domestic policies most clearly intersect: fiscal policy. Its starting point is a question posed in an obscure leaflet published in 1912 by the Ostdeutsche Buchdruickerei und Verlagsanstalt: “Is Germany prevented by its financial situation from fully utilizing its entire national strength in  This, it will be suggested, was and is the right question to ask. The decisive factor in 1914 which pushed the German Reich over the brink into war was the conviction of both military and civilian leaders that Germany could not win the arms race against its continental neighbours. It is argued here that this conviction was justified in terms not only of the size and capability of Germany’s military forces, but more particularly in terms of the financial effort Germany was making towards her own defence. However, this steady decline in Germany’s security was not in any sense inevitable. Germany had the economic potential to muster a substantially stronger defence capability. Moreover there was no shortage of “militarist” sentiment in Germany, which ought to have made increased defence spending possible. The reason it was not lies in the fiscal structure of the Reich, and thus in the realm of domestic politics. By comparing the political economy of German security with that of her principal ally and principal antagonists, I suggest that Germany could and should have spent more on defence before 1914, but that domestic political factors prevented it, and in that sense can be seen as a root cause of the war. Niall Ferguson, Public Finance and National Security: The Domestic Origins of the First World War Revisited. Past and Present No. 142 (Feb., 1994), pp. 141-168

Behind this smokescreen, the German General Staff wished to launch a “preventive war” – or, to be precise, a pre-emptive “first-strike”. This was a strategy which had repeatedly been rejected in the past.19 However, during the summer of 1914, Moltke succeeded in convincing the Kaiser and the civilian politicians that, as a result of new armaments programmes in France and, above all, Russia, Germany would be at their mercy within a few years. Moltke put the case to Conrad at Carlsbad in May 1914. “To wait any longer meant a diminishing of our chances; as far as manpower is concerned we cannot enter into a competition with Russia”; and repeated it to Jagow a few weeks later: “Russia will have completed her armaments in two or three years. The military superiority of our enemies would be so great that he did not know how we might cope with them. In his view there was no alternative to waging a preventive war in order to defeat the enemy as long as we could still more or less pass the test”.20 On 21 June 1914, following a banquet in Hamburg, the German emperor Wilhelm II echoed this analysis in a conversation with the banker Max Warburg,21 and one can trace the spread of the idea in the diplomatic documents via Waldersee, Riezler, to Bethmann, to Jagow, to Lichnowsky, to Theodor Wolff: “The Russians . . . were not ready with their armaments, they would not strike; in two years’ time, if we let matters slide, the danger would be much greater than at present”.22 When Moltke returned to Berlin on 26 July, therefore, the ground had already been well prepared for his argument: “We shall never again strike as well as we do now, with France’s and Russia’s expansion of their armies incomplete”.23 More important than the diplomatic calculation, in other words, was the second, military calculation, that the Schlieffen Plan was the only remedy for otherwise inevitable military decline. Niall Ferguson, Public Finance and National Security: The Domestic Origins of the First World War Revisited. Past and Present No. 142 (Feb., 1994), pp. 141-168

In December 1912 the Kaiser had declared: “The German people [are] prepared to make any sacrifice . . . [The] people understand that unsuccessful war is much dearer than this or that tax”. He did not doubt “the willingness of the population to grant each and every thing [that was asked] for military purposes”.75 It is the fundamental paradox of the Wilhelmine period that, despite all the outward signs that Germany’s was a militaristic culture, he was wrong. True, by 1913 there were signs that the arguments for increased defence spending were weakening the anti-militarism of the Centre and Social Democrat parties. But the irony is that the groups which were the least open to persuasion on this point were the Prussian Conservative party and the defenders of “states’ rights” in the other federal states, who together imposed a ceiling on Reich revenue and hence on peacetime military expenditure. As a consequence, for all her economic strength, Germany in 1914 appeared to be a power in relative military decline. It therefore does seem legitimate to continue speaking of the war’s domestic origins (if not of the primacy of domestic politics) – even at the risk of drawing the paradoxical conclusion that increased military spending by Germany could have reduced the chances of war in 1914. Niall Ferguson, Public Finance and National Security: The Domestic Origins of the First World War Revisited. Past and Present No. 142 (Feb., 1994), pp. 141-168