Finance can be defined as the way goods or services are funded.
Finance can be defined as the way goods or services are funded. Historically, financing of war, which is an expensive activity, has been achieved in a number of ways in order to pay for the logistics and the personnel of military forces. Three major ways of financing war are taxation, borrowing, and money management. Today the study of war finance is usually included under the heading “defense economics.”
Since war is as old as humanity, the financing of war has varied through the ages. It is also an expensive activity: As
The method for financing war can contribute to the ultimate success of the combatants. The French Army under
Many revolutions, civil conflicts, and wars have been won because the victors had superior resources for sustaining war over a long period of time, enabling them to exhaust the vanquished. Ultimately this is how the West defeated the Soviet Union in the fifty-year
Probably the most basic way in which war has been financed has been through
Raids are temporary. The
Armies in ancient times supported themselves by capturing the supplies of other armies. The Greeks, after the
Capturing slaves was another method for financing war, used in both ancient and medieval times. Captured sites would yield not only valuable objects as booty but also soldiers and civilians who could be sold into
The Battle of Valmy was touted as the first step in the French Revolution and was used in this poster to encourage French citizens to buy war bonds “so that France will be victorious as at Valmy.”
Whenever governments have grown large enough to impose taxes, these taxes have on occasion been used to finance wars. High taxes that have been paid unwillingly in wars that have continued for a long period of time have often caused enough political instability to destroy governments.
Wars have also been financed by
Money management during the revolution also involved
On the high seas, another form of indirect funding was used until the
With the entry of the United States into
A poster by Winsor McCay exhorts Americans to support World War I; the American soldier is defended against the threats of “devastation,” “starvation,” “war,” “pestilence,” and “death” by the shield of liberty loans.
Bank loans were not enough, however, so campaigns to fund the war with
The method used by the United States to raise the more than $300 billion it spent fighting the Axis powers in World War II combined borrowing and
In modern times, defeated nations occasionally have been compelled to pay reparations, such as those imposed on Germany after World War I, thereby paying the victors’ war costs. This is another form of tribute–which can prove counterproductive in the long run, as demonstrated by German resentment after World War I, when the 1919 Treaty of Paris, which proved punitive to Germany, actually helped sow the seeds of World War II. A representative to the
During the Cold War, the use of
Gilbert, Charles. American Financing of World War I. Westport, Conn.: Greenwood, 1970. Looks at World War I finance as an example of government pursuing policies that are expedient in the short run rather than beneficial in the long run. Keynes, John Maynard. The Economic Consequences of the Peace. New York: Skyhorse, 2007. The foremost economist of the early twentieth century, Keynes takes the Western allies to task for their imposition of heavy reparations on Germany at the end of World War I, as counterproductive to the recovery and long-term peace of Europe. Murphy, Henry Clifford. The National Debt in War and Transition. New York: McGraw-Hill, 1950. Gives an analysis of the use of savings bonds to finance the war effort in the United States shortly before, during, and after World War II. Samuel, Lawrence R. Pledging Allegiance: American Identity and the Bond Drive of World War II. Washington, D.C.: Smithsonian Institution Press, 1997. Examines how different groups of Americans, defined by race and class, participated in the war effort through the purchasing of war bonds, and how that played into their racial, class, and national identities. Steil, Benn, and Robert E. Litan. Financial Statecraft: The Role of Financial Markets in American Foreign Policy. New Haven, Conn.: Yale University Press, 2006. Outlines, in a thorough and systematic way, how international capital has been and still is used by Western nations as a tool to implement foreign policy. Taylor, Leonard B. Financial Management of the Vietnam Conflict, 1962-1972. Washington, D.C.: Department of the Army, 1974. Lays out the various aspects of the financial management of Army operations during the Vietnam War.
Intelligence and Counterintelligence
International Arms Trade