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Economics of History Activity netw rks

World War I and the Russian Revolution

Planned Economies
Economics Terms to Know
World War I confronted the governments and
citizens with the stringent requirements of total market economy a system of
war. A total war is one that involves the complete allocating resources based only on
mobilization of resources and people, affecting the the interaction of market forces,
lives of all citizens in the warring countries, even such as supply and demand
those removed from the battlefield.
planned economy an economic
In the United States, as well as in Europe, system directed by government
governments shifted to planned economies during agencies
World War I. Distinct from a market economy,
which operates according to market forces, a nationalize to remove a
planned economy is directed by government corporation or industry from
agencies. After the United States officially entered private ownership and place it in
the war in April 1917, a number of such agencies the hands of the government
were rapidly created. The War Industries Board
appeared in July 1917. The following month, the resource distribution the
Lever Food and Fuel Act created the Food allocation of land, water, minerals,
Administration and the Fuel Administration, which fuel, and food to various geographic
regulated the production of wheat and the use of regions or groups of people
coal, respectively. In December 1917, the federal
government nationalized the railroad industry.

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The purpose of all these actions was to mobilize sufficient resources to
ensure an Allied victory.

Most of these agencies were brief experiments and were disbanded soon
after the armistice of November 1918. However, the government’s actions
set an important precedent. In times of crisis, the government showed
that it could play an important positive role in the national economy by
regulating resource distribution to a substantial extent. The planned
economy in the United States during the period from 1917 to 1919
foreshadowed widespread government intervention in the economy 15 to
20 years later during the Great Depression of the 1930s.

Applying Economics to History

1. Contrasting What is the difference between a market economy and

a planned economy?

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NAME ______________________________________ DATE _______________ CLASS _________

Economics of History Activity Cont. netw rks

World War I and the Russian Revolution

2. Analyzing How did the requirements of total war favor the

development of planned economies in the United States during this
period?

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3. Drawing Conclusions Why did the brief experiment with a planned

economy in World War I set an important precedent in national life in
the United States?

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Copyright © The McGraw-Hill Companies, Inc. Permission is granted to reproduce for classroom use.