Experience of financing military expenditures during the First World War

Abstract

Continuation of the Russian-Ukrainian war increases the risks of growing financial and economic dependence of the country on the political will and economic capabilities of our allies, underscoring the importance of studying the experience in developing and implementing measures to transform the country's economic and financial policies in wartime conditions. The features of using emission, tax and credit instruments to ensure the financial capacity to cover the growing military needs of the Russian Empire and its allies during the First World War have been analyzed. The specifics of the financial policy of the imperial government during the initial years of the war, reflecting contemporary ideas about state intervention in economic life, are characterized. On the one hand, there was extensive issuance of credit notes to fund war needs, leading to the spread of inflationary processes. On the other hand, the authorities sought, through coercion, to curb price increases. It is argued that the absence of a long-term transformation program in the financial sphere after the onset of the war forced the government to resort to excessive expansion of the emission activities of the State Bank, gradually reducing the gold backing of the ruble, resulting in the proliferation of inflationary processes and negatively impacting economic development. The policy in the field of state credit, actively applied to finance war expenditures, is characterized. Three components of internal state credit are distinguished: obligations of the state treasury, essentially interest-bearing money; treasury notes that were essentially interest-bearing money; and bond loans that dominated in covering war expenditures.