Wars and Wages: A Look at the Economic Influence of War  

By  Dixie Somers, Special for USDR

When we think of the effects of war, we often imagine riots, wounded soldiers, struggling countries, and serious international contention. However, one significant influence of war is the effect it has on an economy. War is an activity that costs more than just the price of equipment that gets used during battles. There’s a firm influence on economies when there is a war. The following examples show a few instances of how war effects an economy, and what it means for the countries involved.

Heightened Inflation

As early as 400 BCE, people recognized that waging war had a high price to pay. It forced the cost of everyday items to greatly increase, as Sun Tzu points out in The Art of War. Furthermore, the cost of war becomes increasingly heavier as time progresses. This comes from the need to continue funding an army while providing equipment and other supplies for a force that does little in terms of economic production.

Reduced Domestic Spending

A greater amount of taxation will decrease the amount of money that civilians have to spend on both themselves and businesses. This results in a net decrease in economic growth. Such was the case during the French Revolution when the government increased taxes to fund their armies. Thomas Paine argued that some wars were even started as a reason to increase the amount that a government can tax.

Depleted Capital Resources

One of the largest problems with war is not the immediate cost, but the long-term cost to production that persists even after a war ceases. Less workers are available due to casualties in war, and, depending upon where the war took place, other capital resources like machinery and factories may have been damaged beyond repair. This was the case during and after World War I in Germany. This, coupled with the heavy reparations that Germany was expected to repay as a result of the Treaty of Versailles, greatly diminished Germany’s capability to be self-sufficient and to recover after the war.

Lowered Supply of Products

As the demand for a product stays constant and the supply decreases, the price tends to raise. This results in fewer funds for citizens of countries to use, which in turn means that everyday pleasantries are less available. The best example of this was during World War II when a large portion of the United States was put into motion to make supplies for the war. This shifted limited an already strained workforce to create things that were less for domestic purposes, which in turn drove a global scarcity of certain goods.

The influence that war has on economies becomes more apparent as you look at how war has affected various countries and regions throughout history. While it can have some economic benefits, such as clearing out outdated capital infrastructure, the negatives tend to outweigh the positives according to historical evidence. The information for this article was provided by the professionals of Norwich University, who provide a masters in American   history.

Head Shot B&W (1)“This article was written by Dixie Somers, a freelance writer who loves to write for business, finance, women’s interests, and technology. She lives in Arizona with her husband and three beautiful daughters.”

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.