The War That Changed the West

On this day in economic and business history...

World War I began and ended on June 28. It was on June 28, 1914 that the Archduke Franz Ferdinand fell to an assassin's bullet. Exactly five years later, on June 28, 1919, the Treaty of Versailles recorded Germany's final and humiliating capitulation, setting in motion the events that would shape the remainder of the 20th century. Between these two bookends of history, nearly 10 million men died in Europe's trenches, six million civilians lost their lives, and the world woke up to the realities of brutal machine-driven warfare.

It would be a month before World War I officially began following Ferdinand's assassination. During this time, the Austro-Hungarian Empire, Ferdinand's birthright, pressured Serbia to the point of oppression over the role of its nationalists in Ferdinand's death. A web of complex alliances quickly formed around old imperialist interests during this month, which led to a cascading chain of war declarations once Serbia refused to give in to Austria-Hungary's unreasonable demands.

Two days after Austria-Hungary declared war on Serbia, Germany mobilized for an assault on France, and American stock markets were shut down by government order. The four-month closure -- during which time the belligerent Europeans realized that new battlefield technologies (barbed wire, poison gas, and machine guns among them) made large-scale infantry charges little more than failed bloodbaths -- also marks the "modernization" of the Dow Jones Industrial Average (DJINDICES: ^DJI  ) . The index now retroactively updates its values based on component changes only as far back as the market's reopening at the end of 1914. During this four-month shutdown, many leading American industrial enterprises became "war brides" married to European armed forces and, as a result ,the Dow doubled in the two years following the resumption of trading.

Thousands of miles of trenches were dug into the bloody Western Front across Belgium and France, where millions would die on the war's major theater. However, it was indeed a "world" war -- fighting raged across much of Europe, but also extended into Africa, Asia, and the oceans, where Germany deployed submarines in battle for the first time. Germany's aggressive use of submarines, or U-boats, forced the United States into the war in 1917. American troops did not contribute greatly to the end of the war, but did participate in some key battles that led to Germany's capitulation on "the eleventh hour of the eleventh day of the eleventh month" -- 11 in the morning on November 11, 1918.

The Treaty of Versailles, signed exactly five years after World War I was set in motion, was the result of six months of contentious negotiation. It was denounced by famed economist John Maynard Keynes as a crushing "Carthaginian peace" that would devastate Germany's economy and create widespread unrest in the defeated nation. Its steep requirements -- which forced Germany to cede territory, accept military occupation, nearly demilitarize, and pay billions of dollars in reparations (initially set at a level equivalent to $440 billion in modern terms) -- did indeed stir up widespread anger in Germany, which would nurse a grudge against its conquerors for years.

However, historical views of the treaty have softened considerably in recent years as the totality of its consequences became apparent. Germany's restricted army saved it a tremendous amount of money before Hitler's rearmament in the '30s, and the shakeup of European powers -- Austria-Hungary was ruined, and Russia sank into revolution -- left Germany with no significant challengers to the east or south when it sought to reassert its continental hegemony two decades later. It might even be argued that the treaty was not harsh enough -- rather than crippling Germany and ending its threat, it only made the country's extreme nationalists more determined to rise again.

Billiton's beginnings
Tin was first discovered on the Sumatran island of Billiton (Belitung ) on June 28, 1851. Nine years later, a company of the same name was formed in the Netherlands to exploit the resource-rich island. For over a century, Billiton dominated the mining industry of the Indonesian archipelago, and eventually would expand its reach and business range throughout the world. Billiton merged with Australian metals leader BHP (Broken Hill Proprietary) in 2001 to form BHP Billiton (NYSE: BHP  ) (NYSE: BBL  ) , which is now the largest mining company in the world.

Won't you buy me a Mercedes-Benz?
One of the world's most iconic luxury vehicle nameplates was formed on June 28, 1926, when Benz & Cie and Daimler Motoren Gesellschaft finally merged after a two-year corporate partnership to create Daimler-Benz AG (NASDAQOTH: DDAIF  ) . The Benz name, despite a stronger automotive pedigree (Karl Benz did invent the modern automobile, after all), wound up secondary to Daimler's Mercedes brand. Daimler's three-pointed star logo also wound up on the new company's cars, further cementing its primacy in the ostensible merger of equals.

Daimler, despite its luxury appeal, has since become a widely diversified automaker, with a product lineup ranging from tiny Smart compact cars to lumbering Freightliner 18-wheelers. This diversity has helped the company become the world's third-largest automaker, with over $150 billion in annual sales.

With the American markets reaching new highs, investors and pundits alike are skeptical about future growth. They shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!


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