War economy

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A German poster telling the public how to save soap and oil during wartime Spare seife aber wie.jpg
A German poster telling the public how to save soap and oil during wartime

A war economy or wartime economy is the set of contingencies undertaken by a modern state to mobilize its economy for war production. Philippe Le Billon describes a war economy as a "system of producing, mobilizing and allocating resources to sustain the violence." Some measures taken include the increasing of Taylor rates as well as the introduction of resource allocation programs. Needless to say, every country approaches the reconfiguration of its economy in a different way.

State (polity) organised community living under a system of government; either a sovereign state, constituent state, or federated state

A state is a political organization with a centralized government that maintains a monopoly by use of force within a certain geographical territory.

An economy is an area of the production, distribution, or trade, and consumption of goods and services by different agents. Understood in its broadest sense, 'The economy is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the production, use, and management of resources'. Economic agents can be individuals, businesses, organizations, or governments. Economic transactions occur when two parties agree to the value or price of the transacted good or service, commonly expressed in a certain currency. However, monetary transactions only account for a small part of the economic domain.

Philippe Le Billon is a geographer, author and Professor at the University of British Columbia, and a researcher at the Liu Institute for Global Issues. He earned an MBA at the Pantheon-Sorbonne University in Paris and a doctorate at the University of Oxford. He has authored or co-authored several books on the economy and politics of war, and the role of corruption in war.


Many states increase the degree of planning in their economies during wars; in many cases this extends to rationing, and in some cases to conscription for civil defenses, such as the Women's Land Army and Bevin Boys in the United Kingdom during World War II.

A planned economy is a type of economic system where investment and the allocation of capital goods take place according to economy-wide economic and production plans. A planned economy may use centralized, decentralized or participatory forms of economic planning. Planned economies contrast with unplanned economies, specifically market economies, where autonomous firms operating in markets make decisions about production, distribution, pricing and investment. Market economies that use indicative planning are sometimes referred to as "planned market economies".

Rationing controlled distribution of scarce resources, goods, or services

Rationing is the controlled distribution of scarce resources, goods, or services, or an artificial restriction of demand. Rationing controls the size of the ration, which is one's allowed portion of the resources being distributed on a particular day or at a particular time. There are many forms of rationing, and in western civilization people experience some of them in daily life without realizing it.

Conscription Compulsory enlistment into national or military service

Conscription, sometimes called the draft, is the compulsory enlistment of people in a national service, most often a military service. Conscription dates back to antiquity and continues in some countries to the present day under various names. The modern system of near-universal national conscription for young men dates to the French Revolution in the 1790s, where it became the basis of a very large and powerful military. Most European nations later copied the system in peacetime, so that men at a certain age would serve 1–8 years on active duty and then transfer to the reserve force.

President Franklin D. Roosevelt stated if the Axis powers won, then "we would have to convert ourselves permanently into a militaristic power on the basis of war economy." [1]

Franklin D. Roosevelt 32nd president of the United States

Franklin Delano Roosevelt, often referred to by his initials FDR, was an American statesman and political leader who served as the 32nd president of the United States from 1933 until his death in 1945. A Democrat, he won a record four presidential elections and became a central figure in world events during the first half of the 20th century. Roosevelt directed the federal government during most of the Great Depression, implementing his New Deal domestic agenda in response to the worst economic crisis in U.S. history. As a dominant leader of his party, he built the New Deal Coalition, which realigned American politics into the Fifth Party System and defined American liberalism throughout the middle third of the 20th century. His third and fourth terms were dominated by World War II. Roosevelt is widely considered to be one of the most important figures in American history, as well as among the most influential figures of the 20th century. Though he has also been subject to much criticism, he is generally rated by scholars as one of the three greatest U.S. presidents, along with George Washington and Abraham Lincoln.

Axis powers Alliance of countries defeated in World War II

The Axis powers, also known as "Rome–Berlin–Tokyo Axis", were the nations that fought in World War II against the Allies. The Axis powers agreed on their opposition to the Allies, but did not completely coordinate their activity.

Militarism belief of government that it should maintain a strong military and be prepared to use it

Militarism is the belief or the desire of a government or a people that a state should maintain a strong military capability and to use it aggressively to expand national interests and/or values. It may also imply the glorification of the military and of the ideals of a professional military class and the "predominance of the armed forces in the administration or policy of the state".

During total war situations, certain buildings and positions are often seen as important targets by combatants. The Union blockade, Union General William Tecumseh Sherman's March to the Sea during the American Civil War, and the strategic bombing of enemy cities and factories during World War II are all examples of total war. [2]

Total war conflict in which belligerents engage with all available resources

Total war is warfare that includes any and all civilian-associated resources and infrastructure as legitimate military targets, mobilizes all of the resources of society to fight the war, and gives priority to warfare over non-combatant needs. The Oxford Living Dictionaries defines "total war" as "A war that is unrestricted in terms of the weapons used, the territory or combatants involved, or the objectives pursued, especially one in which the laws of war are disregarded."

Combatant is the legal status of an individual who has the right to engage in hostilities during an international armed conflict. The legal definition of "combatant" is found at article 43 of Additional Protocol One to the Geneva Conventions of 1949 [AP1]. It states that "Members of the armed forces of a Party to a conflict are combatants, that is to say, they have the right to participate directly in hostilities."

Union blockade

The Union blockade in the American Civil War was a naval strategy by the United States to prevent the Confederacy from trading.

Concerning the side of aggregate demand, this concept has been linked to the concept of "military Keynesianism", in which the government's military budget stabilizes business cycles and fluctuations and/or is used to fight recessions.

In macroeconomics, aggregate demand (AD) or domestic final demand (DFD) is the total demand for final goods and services in an economy at a given time. It specifies the amounts of goods and services that will be purchased at all possible price levels. This is the demand for the gross domestic product of a country. It is often called effective demand, though at other times this term is distinguished.

Military Keynesianism is the position that government should raise military spending to boost economic growth. The term is often used pejoratively to refer to politicians who apparently reject Keynesian economics, but use Keynesian arguments in support of excessive military spending.

Military budget the amount of financial resources dedicated by a nation to raising and maintaining an armed forces

A military budget, also known as a defense budget, is the amount of financial resources dedicated by a state to raising and maintaining an armed forces or other methods essential for defense purposes.

On the supply side, it has been observed that wars sometimes have the effect of accelerating progress of technology to such an extent that an economy is greatly strengthened after the war, especially if it has avoided the war-related destruction. This was the case, for example, with the United States in World War I and World War II. Some economists (such as Seymour Melman) argue, however, that the wasteful nature of much of military spending eventually can hurt technological progress.

In economics, supply is the amount of something that firms, producers, labourers, providers of financial assets, or other economic agents are willing and able to provide to the marketplace. Supply is often plotted graphically with the quantity provided plotted horizontally and the price plotted vertically.

United States federal republic in North America

The United States of America (USA), commonly known as the United States or America, is a country composed of 50 states, a federal district, five major self-governing territories, and various possessions. At 3.8 million square miles, the United States is the world's third or fourth largest country by total area and is slightly smaller than the entire continent of Europe's 3.9 million square miles. With a population of over 327 million people, the U.S. is the third most populous country. The capital is Washington, D.C., and the largest city by population is New York City. Forty-eight states and the capital's federal district are contiguous in North America between Canada and Mexico. The State of Alaska is in the northwest corner of North America, bordered by Canada to the east and across the Bering Strait from Russia to the west. The State of Hawaii is an archipelago in the mid-Pacific Ocean. The U.S. territories are scattered about the Pacific Ocean and the Caribbean Sea, stretching across nine official time zones. The extremely diverse geography, climate, and wildlife of the United States make it one of the world's 17 megadiverse countries.

World War I 1914–1918 global war originating in Europe

World War I, also known as the First World War or the Great War, was a global war originating in Europe that lasted from 28 July 1914 to 11 November 1918. Contemporaneously described as "the war to end all wars", it led to the mobilisation of more than 70 million military personnel, including 60 million Europeans, making it one of the largest wars in history. It is also one of the deadliest conflicts in history, with an estimated nine million combatants and seven million civilian deaths as a direct result of the war, while resulting genocides and the 1918 influenza pandemic caused another 50 to 100 million deaths worldwide.

United States

The United States alone has a very complex history with wartime economies. Many notable instances came during the twentieth century in which America’s main conflicts consisted of the World Wars, Korea, and Vietnam.

World War I

U.S. Food Administration, educational division poster "Liberty Loan is the cash register of Patriotism. Has Uncle Sam Rung Up Your Bond Purchase Yet^ Banks will receive... - NARA - 512718.jpg
U.S. Food Administration, educational division poster

In mobilizing for World War I, the United States expanded its governmental powers by creating institutions such as the War Industries Board (WIB) to help with military production. [3] Others, such as the Fuel Administration, introduced daylight saving time in an effort to save coal and oil while the Food Administration encouraged higher grain production and “mobilized a spirit of self-sacrifice rather than mandatory rationing.” [3] Propaganda also played a large part in garnering support for topics ranging from tax initiatives to food conservation. Speaking on Four Minute Men, volunteers who rallied the public through short speeches, investigative journalist George Creel stated that the idea was extremely popular and the program saw thousands of volunteers throughout the states. [4]

World War II

In the case of the Second World War, the U.S. government took similar measures in increasing its control over the economy. The Japanese attack on Pearl Harbor provided the spark needed to begin conversion to a wartime economy. With this attack, Washington felt that a greater bureaucracy was needed to help with mobilization. [5] The government raised taxes which paid for half of the war’s costs and borrowed money in the form of war bonds to cover the rest of the bill. [3] “Commercial institutions like banks also bought billions of dollars of bonds and other treasury paper, holding more than $24 billion at the war’s end." [5] The creation of a handful of agencies helped funnel resources towards the war effort. One prominent agency was the War Production Board (WPB), which “awarded defense contracts, allocated scarce resources – such as rubber, copper, and oil – for military uses, and persuaded businesses to convert to military production." [3] Two-thirds of the American economy had been integrated into the war effort by the end of 1943. [3] Because of this massive cooperation between government and private entities, it could be argued that the economic measures enacted prior to and during the Second World War helped lead the Allies to victory.

Present Day

The United States has been involved in numerous military endevours within the Middle East and Latin America since the 60's. Having been in a continious state of war since the September 11 Attacks [6] and having a military budget over double of it's two largest military rivals, some consider the United States to be a war economy or at least a country with an economy largely backed by the Military Industrial Complex. [7]


World War I

Germany has experienced economic devastation following both World Wars. While this was not a result of faulty economic planning, it is important to understand the ways that Germany approached reconstruction. In World War I, the German agricultural sector was hit hard by the demands of the war effort. Not only were many of the workers conscripted, but lots of the food itself was allocated for the troops leading to a shortage. [8] “German authorities were not able to solve the food scarcity [problem], but implemented a food rationing system and several price ceilings to prevent speculation and profiteering. Unfortunately, these measures did not have the desired success." [8]

World War II

Heading into the Second World War, the Nazis introduced new policies that not only caused the unemployment rate to drop, it created a competent war machine in clear violation of the Treaty of Versailles. The Third Reich implemented a draft and built factories to supply its quickly expanding military. Both of these actions created jobs for many Germans who had been struggling from the economic collapse following World War I. [9] However, it is worth noting that while unemployment rates plummeted, “by 1939, government debt stood at over 40 billion Reichsmarks (equivalent to 151 billion 2009 euros)." [9] After World War II, Germany was discovered to have exploited the economies of the countries it invaded. The most important among these, according to historians Boldorf and Scherner, was France and “her highly developed economy… [being] one of the biggest in Europe.” [10] This is further supported when they later reveal how the French economy provided for 11 percent of Germany’s national income (during the occupation) which covered five months of Germany’s total income for the war. Using extortion and forced labor, the Nazis siphoned off much of France's economic output. For example, during the early months of the Nazi occupation, the French puppet government was forced to pay a "quartering" fee of twenty million Reichmarks per day. Supposedly, the fee was payment for the Nazi occupation forces. In reality, the money was used to fuel the Nazi war economy. [10] Germany employed numerous methods to support its war effort. However, due to the Nazi’s surrender to the Allies, it is hard to tell what their economic policies would have yielded in the long term.

See also

Further reading

Related Research Articles


  1. Roosevelt, Franklin Delano. "The Great Arsenal of Democracy".
  2. Durham, Robert B. (2015). Supplying the Enemy: The Modern Arms Industry & the Military–Industrial Complex. Lulu.com. p. 192. ISBN   978-1-329-06755-4.
  3. 1 2 3 4 5 Henretta, Edwards, Self, James A., Rebecca, Robert O. (2011). America's History. New York: Bedford/St. Martin's. pp. 672+.CS1 maint: Multiple names: authors list (link)
  4. Creel, George (1920). How We Advertised America: The First Telling of the Amazing Story of the Committee on Public Information That Carried the Gospel of Americanism to Every Corner of the Globe. New York: Harper and Bros. pp. 84–88, 90–92.
  5. 1 2 Tassava, Christopher. "The American Economy During World War II". EH.net. Retrieved 2012-04-04.
  6. https://www.nytimes.com/2017/10/22/opinion/americas-forever-wars.html
  7. https://en.wikipedia.org/wiki/Military%E2%80%93industrial_complex
  8. 1 2 Blum, Matthias (December 2011). "Government Decisions Before and During the First World War and the Living Standards in Germany During a Drastic Natural Experiment". Explorations in Economic History. 48 (4): 556–567. doi:10.1016/j.eeh.2011.07.003 . Retrieved 2012-03-27.
  9. 1 2 Trueman, Chris. "The Nazis and the German Economy". History Learning Site. HistoryLearningSite.co.uk. Retrieved 2012-04-18.
  10. 1 2 Boldorf, Marcel; Scherner, Jonas (April 2012). "France's Occupation Costs and the War in the East: The Contribution to the German War Economy, 1940-4". Journal of Contemporary History . 47 (2): 291–316. doi:10.1177/0022009411431711 . Retrieved 2012-04-25.