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WWI was won by the Allies mainly by the fact that the US, with its huge population and industrial capacity, entered the war.
Up until the US entered the war, the war had been a real stalemate. The Western Front, where most of the important fighting was going on, had not moved any significant distance in years. This showed that the Allies and the Germans were essentially deadlocked.
When the US entered the war, this all changed. The US had the potential to send millions of men and huge amounts of materiel into the war. This convinced Germany that it could not win.
The US entered the war due to its economic and political/social ties to England. The US conducted huge amounts of trade with the British and had deep historical ties to Britain. This, combined with the German submarine warfare, brought the US into the war.
So, the Allies won because they were able to get the US on their side. The economic and political/social ties between the US and Britain (and to some degree France) brought the US into the war, changing the strategic balance.
As previous posts have pointed out, one of the major reasons for the Allied victory was the U.S. entry into the war with the potential to bring to bear a huge population and a giant industrial base that could provide weapons and materials.
Another major reason was that the massive German offensive of 1917 had failed leaving them to continue fighting a war of attrition. Because there was little room for maneuver, the defensive side tended to have the advantage and made it very difficult for anyone to take the initiative. The failed offensive of 1917 was followed by the "second battle of the Marne" in which the German counter offensive was stopped and then they were pushed back to their previous lines in July and August of 1918.
As the German lines were being pressured by the French, British and American forces, some of Germany's allies capitulated (Bulgaria, Turkey and Austria-Hungary) leaving Germany further isolated. The German war machine was exhausted and, lacking the ability to produce new weapons or field fresh troops, Germany was forced to surrender.
The main factor that decided the outcome of World War I in favor of the Allied powers was the entry of the United States in support of the Allies. Until that point, the war was a stalemate and not much progress was being made by either side—the Allies or the Axis powers.
In order to protect its economic assets and global influence, the US entered the war (although very late). Until that time, the war had dragged on for years and all the combatants were tired and without much hope, having lost so many colleagues, family members—and not to mention the fact that a number of these countries had lost a large fraction of their youth. US forces, on the other hand, were fresh, young and had good equipment. The large supply of soldiers that the US could commit and its economic and industrial prowess simply meant that the Axis powers had no chance to withstand US involvement. This more than anything led to Allied powers' victory in WWI.
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