On this occasion, an economist was involved: John Maynard Keynes,
who had been recruited from Cambridge to serve as a Treasury official,
provided a brief on 23 August 1915 for the Chancellor, in which he
argued that, with the British economy at full employment, any diversion
of manpower to the army would be an alternative, and not additional, to
subsidies. He reckoned that the current level of subsidies to France
represented the output of 500,000 men, and those to Italy the output of
1 million men.
48
Keynes’ calculations were not flawless, as they made no
allowance for the possibilities of increasing productivity as output rose
and as restrictive practices were abandoned, or of releasing men from
industry by employing women. Nevertheless in broad terms he was
correct, in that Britain later became dependent financially upon the
United States. His arguments seem to have had little impact on min-
isters’ deliberations. A Committee on War Policy, chaired by Crewe,
took the view in September 1915 that it was unlikely that the British
government’s credit, and therefore its ability to borrow in America,
would collapse so completely as to force the country to withdraw from
the war. In February 1916, Asquith, Austen Chamberlain (the Unionist
secretary of state for India) and McKenna, forming the Cabinet Com-
mittee on the Co-ordination of Military and Financial Effort, concluded
that it would be possible to place an army of sixty-two divisions in the
field, with three months’ reserves, plus five divisions at home, without
reserves, but only at the cost of some disrupt ion of export trades and by
adopting financial expe dients that could only be sustained for a short
period. In agreeing to this scale of military effort, ministers were gam-
bling on early victory, and were also moving inexorably towards con-
scription, as only thereby could the ‘wastage’ (casualties) in such a large
force be replaced. The first Compulsory Service Act came into force on
2 March 1916.
49
The most pressing problem early in the war was the supply of shells.
The British, like the French and Germans, had not anticipated the rate
of consumption reached in the first two months of the war and in
subsequent battles. Historians long took Lloyd George at his own esti-
mation as the man who solved the problem by bringing businessmen
48
J. M. Keynes, ‘The alternatives’, 23 Aug. 1915, reprinted in Collected Writings of John
Maynard Keynes, 30 vols., ed. Elizabeth Johnson and Donald Moggridge (London:
Macmillan, and Cambridge University Press, 1971–82), vol. XVI, pp. 110–15.
49
‘War policy: report’, 6 Sep. 1915, CAB 27/2, and ‘Report of Cabinet Committee on the
Co-ordination of Military and Financial Effort’, 4 Feb. 1916, CAB 27/4, TNA. For
McKenna’s failure to persuade his Cabinet colleagues to relate strategy to what the
national finances would sustain in a long war, see Martin Farr, ‘A compelling case for
voluntarism: Britain’s alternative strategy, 1915–1916’, War in History, 9 (2002),
279–306.
Arms, economics and British strategy70