*Post written by Mona Meyer, Archives and Special Collections Metadata Librarian.

That quote is attributed to Civil War General William Tecumseh Sherman, but it surely applies to every other war, as does the comment about the cost. Declaring war, assuming you have the political will and the necessary votes, is one thing—funding it is another.

The United States entered World War I late in the conflict. The war began in 1914, but the U.S., due to the isolationist leanings of President Woodrow Wilson and much of the American public, vowed to remain neutral. This façade wavered a bit in 1915 with the bombing of the Lusitania and the loss of some 2,00 lives, 128 of them American, but it did not crack. It took the threat of an alliance between Germany and Mexico for Congress to declare war on April 6, 1917.

“Generally speaking, the secretary of the Treasury proposes a funding plan for war financing and works with Congress to enact the necessary legislation, while the Federal Reserve operates with considerable independence from both the executive and legislative branches of government. But World War I was different. The Treasury and the Fed, united under one leader, worked together in both the creation of the financial war plan and its execution.” The Federal Reserve System was new to the country, only established in 1914. During the political debates over its very establishment, it became clear that there was strong opposition to even the concept of a central coordinating board.  President Wilson, however, was adamant that there be “a public agency with supervisory powers over the banks.” A compromise was reached that established a Federal Reserve Board of 7 members, headquartered in Washington, D.C., with the Secretary of the Treasury ex-officio chair. The author of this compromise was none other than Wilson’s Treasury secretary, William Gibbs McAdoo, who thus found himself with huge responsibilities 3 years later when war was declared.

Funding America’s entry into World War I wasn’t going to be cheap, even if it was for a relatively short period of time—not, of course, was there any idea of the actual duration of the war at the time. The options available for raising the necessary funds were taxation, borrowing, printing money, or some combination thereof. McAdoo was strongly opposed to printing money, based in part on Civil War experience that issuing “greenbacks” promoted inflation. He also believed that this would lower morale, damage the reputation of currency, and hide the true cost of war. “Any great war must necessarily be a popular movement,” he thought, “… a kind of crusade.” McAdoo opted for both taxation and borrowing. “Taxation would work directly and transparently to reduce consumption. Taxes are compulsory, and those who must pay are left with less purchasing power. Their expenditures will fall, freeing productive resources (labor, machines, factories, and raw materials) to be employed in support of the war.” Although there was a faction that supported taxation as the sole basis of war funding, the eventual compromise was 1/3 from taxes and 2/3 from borrowing.

From whom was the government going to borrow? It would borrow from the American people through the sale of war bonds.  The public would hopefully lower consumption and purchase bonds, further adding to the freeing of productive resources. “It was at this point that McAdoo conceived of the Liberty Loan plan. It had three elements. First, the public would be educated about bonds, the causes and objectives of the war, and the financial power of the country. McAdoo chose to call the securities “Liberty Bonds” as part of this educational effort. Second, the government would appeal to patriotism and ask everyone – from schoolchildren to millionaires — to do their part by reducing consumption and purchasing bonds. Third, the entire effort would rely upon volunteer labor, thereby avoiding the money market, brokerage commissions, or a paid sales force. The Federal Reserve Banks would coordinate and manage sales, while the bonds could be purchased at any bank that was a member of the Federal Reserve System.”

The successful sale of war bonds depended upon two key factors, the first of which was financial. Although the lowest denomination available was $50 (2 weeks of wages for the average worker), an installment plan was offered. War Thrift Stamps cost only $.25. “The Treasury Department called them “little baby bonds,” and like the Liberty Bonds, they earned interest. The stamps were pasted on a card until sixteen had been collected, at which point they were exchanged for a $5 stamp called a “War Savings Stamp.” These were affixed to a “War-Savings Certificate” which also earned interest. When ten $5 stamps were collected, the certificate could be exchanged for a $50 Liberty Bond.”

The second aspect of selling war bonds, and perhaps the most important one, was the battle waged in the court of public opinion. To add to the cachet of owning a bond, they were sold only in 5 brief, heavily publicized campaigns. To this end, the Committee on Public Information was created and staffed with psychologists, journalists, artists, advertising experts, etc. One of the experts in mass psychology was Edward Bernays … who was Sigmund Freud’s nephew! The very name “Liberty Loan” or “Liberty Bond” was an appeal to patriotism; the final issue of bonds, sold after the armistice, were called “Victory Loans/Bonds.” Within the Committee on Public Information was Division of Pictorial Publicity, producer of colorful, emotional, and sometimes lurid posters.  Famous artists such as N.C. Wyeth (you might better recognize the work of his son Andrew and grandson Jamie) and Norman Rockwell signed on to lend their talents to the cause.  The Division was headed by Charles Dana Gibson, who had made the “Gibson Girl” an iconic figure. (These artists also created other posters in support of the war effort beyond those to sell Liberty Bonds, but we’re going to focus on the Bond posters.) War Bond posters were not subtle in their appeal, instead invoking motives of family, guilt, social image, revenge, fear, competitiveness, the American spirit, etc.

The Statue of Liberty even got involved!

Although this poster doesn’t specifically say anything about buying bonds, the idea is clear from the dollar signs.

An even more dire threat to Lady Liberty shows her under attack and headless, although realistically, a direct attack on the United States in World War I was not likely.

This play to patriotism, drawing on another iconic American figure, is an appeal to purchase savings stamps. The imagery here says that the American eagle is safe due to the protection of biplanes, thanks to the purchase of War Savings Stamps.

Other posters play to anti-German sentiment and focus on the horrors of war, sometimes with pejorative language.  This one has a bloody handprint “to represent atrocities committed by an uncivilized enemy.” (The Great War: U.S. Army Art, p. 131)

This poster references what was called The Rape of Belgium—the German invasion and occupation of Belgium (a direct violation of Belgium’s neutrality) and mistreatment of civilians. This image is from the 4^th Liberty Loan campaign, which strictly emphasized German “bestiality.”

Immigrants were targeted as a reminder that their loyalty was now due to the United States and not to any European power who might be an enemy in the war.

Here Joan of Arc is presented as a model for American women. If Joan could lose her life in order to save France, surely American women could make the paltry financial sacrifice necessary to buy war savings stamps!

The Boy Scouts joined forces with Lady Liberty, called into service by President Wilson.  “In the five loan drives the Scouts sold 2,328,308 bond subscriptions amounting to $354,859,262.  Over two million War Saving Stamps were sold totaling $43,043,698.”

Everyone was involved in war bond drives. “Civic and religious organizations were recruited by Liberty Loan committees to assist in bond sales. … A separate women’s-only organization, the National Women’s Liberty Loan Committee, was created and chaired by Secretary McAdoo’s wife Eleanor (who was also the daughter of President Wilson). The Women’s Committee worked primarily through existing women’s groups and fraternal organizations: the Ancient Order of the Hiberians Ladies’ Auxiliary, the Daughters of the American Revolution, the National Grange, the Woman’s Christian Temperance Union, the Women’s Suffrage Association, the Young Women’s Christian Association, and countless others. Under the aegis of the committee, the women of America became a formidable salesforce numbering in the hundreds of thousands, and they were frequently able to outraise their male counterparts (National Women’s Liberty Loan Committee 1920). On Liberty Loan Sundays, America’s clergy took their pulpits to preach the virtues of bond buying, and model sermons were distributed widely.” College campuses were not immune. “At the University of Michigan, “bond hysteria” dominated the headlines of The Michigan Daily and the wallets of students. Headlines and bond ads encouraged students to “buy until it hurts” and that “patriotism is now spelled sacrifice.” The University of Michigan was given a quota of $200,000 for the second Liberty Loan by the Ann Arbor Loan Committee, translating to a rate of almost one bond for every student enrolled. Faculty and boosters participating in a 24-hour bond drive adopted the slogan “A bond for every student.” … Even when Michigan students were buying massive amounts of bonds, some faculty members feared that the University would fail to meet its quota, with one headline in the student newspaper speculating that the University was doomed to fail. However, the University proceeded to oversubscribe its quota by $42,000 only ten days later.” Celebrities like Charlie Chaplin, Mary Pickford, Al Jolson, and Douglas Fairbanks went across the country rallying loyal Americans to buy liberty bonds. Douglas Fairbanks came to Evansville on April 15, 1918, here standing on the steps of the Hotel McCurdy, looking at a newspaper.

The Committee on Public Information (CPI) “organized a volunteer speakers bureau known as the Four Minute Men (FMM), “the most unique and one of the most effective agencies developed during the war for the stimulation of public opinion and the promotion of unity.” Supplied with material by the CPI, the volunteers wrote their own speeches and presented them during intermission at movie theaters. The speeches were calibrated to last no longer than the time it took the projectionist to change reels during a movie, and speakers were instructed to deliver them without notes. Soon the work of the FMM expanded to include forums at churches, fraternal lodges, labor unions, and other gathering places. The FMM were issued talking points for each of the four Liberty Loan drives by the CPI. In addition to reminding their audiences of the principles for which the allies were fighting, the FMM were asked to provide information on the particulars of the issue, explain basic principles of investing, and exhort the virtues of savings and thrift. … Seventy-five thousand volunteered for service as FMM across more than five thousand communities giving more than seven million speeches. Four Minute Men were found on 153 college campuses, and a junior division was created to sell War Savings Stamps.”

Posters and pins were everywhere.

And then, suddenly and abruptly, it all stopped.  According to the chair of the CPI,  “Within twenty-four hours from the signing of the armistice orders were issued for the immediate cessation of every domestic activity of the Committee on Public Information.”  The Committee on Public Information, moreover, was not an outlier. Virtually the entire government apparatus that had been assembled to run the war economy was scrapped the moment the war ended, reflecting the public’s desire to get the whole experience over with.” Those after-the-armistice Victory Bonds were sold, just not under the aegis of the CPI.

“By war’s end, after four drives, twenty million individuals had bought bonds. That is pretty impressive given that there were only twenty-four million households at the time. More than $17 billion had been raised. In addition, the taxes collected amounted to $8.8 billion. Almost exactly two-thirds of the war funds came from bonds and one-third from taxes. This was a time when $17 billion was an almost unthinkably large number. An equal share of gross domestic product today would amount to $6.3 trillion. Most of McAdoo’s bonds were purchased by the public, 62 percent of the value sold by one estimate. A government survey of almost 13,000 urban wage-earners conducted in 1918 and 1919 indicated that 68 percent owned Liberty Bonds. It seems undeniable that the emotional advertising campaign effectively produced a broad and strong desire to do one’s part for the war effort by participating in this way. After the war, McAdoo’s assistant in fiscal matters, Assistant Secretary Russell Leffingwell, described the loan campaigns “as the most magnificent economic achievement of any people. … the actual achievement of 100,000,000 united people inspired by the finest and purest patriotism.””  Most of the bonds were retired (i.e., paid off) between 1921-1927. When the 4^th was called in 1934, the Treasury refused to pay off in gold as had been promised when they were sold. (Click here to see the rationale.) Due to the increased price of gold since the 1918 sale, bondholders stood to lose a potential $2.9 billion and took this default as far as the Supreme Court, but never received compensation.

The Liberty Loan Acts that authorized the sales of these bonds have never been repealed, and this type of bond has been issued occasionally since World War I. The latest issuance helped rebuild/restore parts of New York after the 9/11 bombings. While it’s highly unlikely that there was a publicity campaign on the World War I scale in this latest instance, war is still hell, and it’s still expensive.

Resources Consulted:

Brown, Judi. “What Were Liberty Bonds in World War 1?” Owlcation website, March 4, 2013.

The Great War. U.S. Army Art.  Washington, D.C.: Center of Military History, United States Army, 2018. Special Collections: D522 .G66 2018

The Great War. U.S. Army Artifacts.  Washington, D.C.: Center of Military History, United States Army, 2018. Special Collections: D503 .G74 2018

Hilt, Eric and Wendy M. Rahn. “Turning Citizens into Investors: Promoting Savings with Liberty Bonds During World War I.” RSF: The Russell Sage Foundation Journal of the Social Sciences: v. 2, no. 6, October 2016, p. 86-108.

Kang, Sung Won and Hugh Rockoff.  “Capitalizing Patriotism: The Liberty Loans of World War I. NBER Working Papers no. 11919, National Bureau of Economic Research, January 2006.

McDermott, T.P. “USA’s Boy Scouts and World War I Liberty Bonds.” SISSI Journal, May/June 2002, p. 68-73.

Natanson, Barbara Orbach.  “The Bonds of Liberty: a World War I Liberty Loan Poster.”  Picture This Library of Congress blog, February 22, 2017.

Patton, James.  “The Liberty Bonds.” Kansas World War I Centennial Committee website, January 26, 2019.

Schuffman, Lawrence D.  “The Liberty Bond: 2007 Marks the 90^th Anniversary of the First War Bond of the 20^th Century.” Financial History, Spring 2007.

“The Statue of Liberty in Recruitment and War Bonds Posters.” Statue of Liberty National Monument, National Park Service, August 18, 2017.

Sutch, Richard.  “Liberty Bonds April 1917–September 1918.” Federal Reserve History.

“The University of Michigan and The Great War.”  Public history exhibit is presented by the History Department and the Eisenberg Institute for Historical Studies at the University of Michigan, Ann Arbor.

World War I Posters: Liberty Bound or Liberty Bond? U.S. National Archives and Records Administration.