Arms and the Man: World War I and the Rise of the Welfare State

In: Kyklos: international review for social sciences, Volume 57, Issue 4, p. 475-504

Abstract

SUMMARYWhy did peacetime government shares of total spending double in a number of Western economies between 1910 and 1938? The widely separated dates for the introduction of universal manhood suffrage and the evidence of a rise in protection during the inter‐war period indicate that neither democracy nor globalization can explain this development. This paper reexamines two other explanations, namely, (1) a shift in the demand for public goods and (2) a war‐induced willingness to share with one's fellow citizens. By introducing into Schelling's (1978) Multi‐Person Dilemma a learning game whose payoffs change endogenously, we provide theoretical explanations for this transformation. We then test the resulting propositions with data on public spending as a share of GNP for the U.S., Canada, the U.K., Germany and Denmark, from the 1870s to the 1930s. In each case, we find no unit root but a break in trend, a result shown to favor explanation (2) over (1).