Outbreak of the war
End of the war

War-related inflation in Austria

During the First World War, the interaction of public debt, increasing money in circulation and a considerable rise in demand for armaments, together with the shortage of food supplies, rapidly led to inflation.

The inflationary tendencies were first apparent in the field of armaments and food, but by the end of the 1914 inflation had spread to practically all sectors of the national economy as a result of wartime full employment and the increased exploitation of production capacity. Price increases were easier as a result of the relatively late introduction of price controls.

It is obvious that the rapid increase of the quantity of money necessarily led to inflation. However, that the phenomenon of war inflation cannot be explained by a mechanistic unilinear interpretation is shown by the comparison between the increase in money and price rises. In several periods, the rises in prices were greater than the expansion of the quantity of money. In others, for instance in the second half of 1917, it was precisely the reverse. (For the rate of inflation, use is made of the official price index excluding costs for housing, since this maps the price increases more accurately; the rents for small apartments were largely frozen in 1917 for the duration of the war.)

Overall, prices were only able to increase so much because the spending power that resulted from the increased quantity of money was converted into a genuine price increase as a result of the strong boost in demand combined with a simultaneous shortage of goods available. Inflation was higher in Austria than in most other countries at war. Between 1914 and 1918, wholesale prices doubled in the German Reich, in Great Britain and the USA; in France they rose by a factor of three, in Italy by a factor of four. For Austria (in the sense of Cisleithania), no reliable wholesale price index is available, but it can be assumed that the rate of increase was greater than in Italy.

The deeper causes of Austria's particular susceptibility to inflation are, alongside the lack of price controls, to be found in the low productivity in industry. A modern industrial war means considerable consumption of the economic substance by means of which the funds that in “normal” times would have been used for investments have to be used to finance the war, i.e. for an alternative form of consumption. Thus a considerable percentage of the national income was “frittered away”. The investments made were entirely in the armaments sector.

Translation: David Wright


März, Eduard: Österreichische Bankpolitik in der Zeit der großen Wende 1913–1923, Wien 1981

Suppanz, Christian: Die österreichische Inflation 1918–1922 (Forschungsbericht Nr. 111 des Instituts für Höhere Studien), Wien November 1976

Contents related to this chapter


Persons, Objects & Events

  • Object

    Mechanical warfare

    In the years and decades before the First World War there were many innovations in arms technology with the result that the entire war machinery and with it the strategic and tactical considerations had to be fundamentally rethought. The artillery, with its powerful arsenal of guns, mortars and howitzers, epitomised the dominance of “fire power”. It was the prototype of industrialised mechanical and mass warfare and responsible for a larger number of casualties than any other type of weapon.

  • Object

    Shortages and poverty

    When the population reacted to shortages of bread and flour in January 1915with panic buying, the Kriegs-Getreide-Vekehrsanstalt [Wartime Grain Trade Department] introduced ration cards. Individual quotas were determined and handed out on presentation of bread and flour ration cards. But even the allocated rations became more and more difficult to supply, and the cards became worthless.