War’s Impact on Economies Summary

  • Last updated on November 11, 2022

Although most histories focus on the battles that accompany wars, few address the economic impact those conflicts have on the societies involved or the neutral parties connected to them.

Overview

Although most histories focus on the battles that accompany wars, few address the economic impact those conflicts have on the societies involved or the neutral parties connected to them. Land produced most human “wealth” before the twentieth century, but cities and towns have been the centers of commerce, grain stores, and treasury as well as political power. Destroying or consuming crops imposed hardship on a population, but sacking cities reduced a civilization’s financial reserves, all but eliminating its ability to recover. Disease, starvation, and the mass removal of population as slaves followed, intensifying the damage. Civil wars have proven particularly devastating for the loser.Warfare;economic impactCivilians;war’s impact onTrade and warfareWarfare;economic impactEconomics;impact of war onCivilians;war’s impact onTrade and warfare

Significance

A conflict’s impact on the participants’ economies often has lasting effects beyond the conflict itself. Wars that endured with no particular victor exhausted the participants, leaving them too weak to withstand an outside power–or the economic price and deprivation imposed on the population led to the destruction of the established political order, even in cases where no conquering army occupied the land. China’s and Europe’s dynastic collapses illustrate the political upheaval created by war’s economic and corresponding political impact, as does the post-World War II breakup of Europe’s colonial empires.

History of War’s Impact on EconomiesAncient World

In Plunderingancient times, war’s primary economic impact fell on the invaded territory. The Egyptian, Sumerian city-state, Hittite, Assyrian, and Persian armies plundered the areas they invaded, making exceptions when cities opened their gates without resistance. However, while marching through their own territories, these armies drew from imperial grain stores or, in the case of Egyptian troops, were supported by grain ships. Nonetheless, the armies’ supplies came at the expense of the civilian population.

In Food;supplies in warfareArmies;living off the landLiving off the landtheir wars against each other, Greek city-state armies lived off the land when they marched into hostile territory but rarely sacked cities except as punishment. Chinese armies also lived off the land, but the sacking of cities was rare after the Warring States period of the third to fourth centuries b.c.e. Most Chinese conquerors were as concerned with governing the territory they seized as they were with taking it in the first place. They deployed with a supply train that provided at least some of their food supplies, reducing their reliance on local resources. South Asian, Southeast Asian, and Japanese armies relied almost entirely on local food supplies as they marched. Although the extent of the economic damage varied according to army size and the duration of a campaign, few regions recovered quickly from the passage of any army, friendly or hostile, but the latter left a path of ruin from which it took years to recover.

The Rome;economyImperial Roman Army was the first European army to rely heavily on a military supply system, but early Roman armies followed the practices of other European militaries, living off the land most of the time. However, the development of a disciplined army quartermaster system limited the army’s reliance on local supplies, reducing frictions with potentially allied city-states. Before that, Rome’s wars on Carthage;economyCarthage first destroyed that commercial empire’s navy and merchant marine, severely disrupting its trade and financial power. The Punic War, Second (218-201 b.c.e.)Second Punic War (218-201 b.c.e.) devastated both Rome’s and Carthage’s economies, but Rome’s naval supremacy enabled it to continue its foreign commerce, denying Carthage the resources and ability to support Hannibal BarcaHannibal BarcaHannibal’s campaign on the Italian peninsula. Moreover, Rome’s superior diplomacy prevented Hannibal from drawing more than a handful of Italian city-states to his side. He eventually was forced to return home, but the devastation he inflicted on Rome’s economy drove the Senate to seek Carthage’s permanent removal as a threat. The resulting Punic War, Third (149-146 b.c.e.)Third Punic War (149-146 b.c.e.) ended with Rome salting the fields around Carthage, sacking the city, and thereby permanently destroying its capacity for trade and war.

Rome’s expansion after that came at the expense of conquered lands, as plunder and populations sold into slavery fed Rome’s coffers. Captured wealth peaked in the first century after Julius Caesar’s death, but as Rome’s borders stabilized and conquest gave way to consolidation, the absence of seized riches began to tell on the Roman treasury, a factor exacerbated by the empire’s numerous Civil wars;Romecivil wars, which disrupted internal trade and destroyed farmland. The Rome;fallRome;barbarian invasionsBarbarians;invasions of Romebarbarian invasions further decimated Rome’s agricultural and mineral production. The exact cost may never be calculated with certainty, but descriptions of the looting, destruction, and casualties suggest the barbarian incursions cost Rome more than 25 percent, and possibly as much as 40 percent, of its productive capacity between the third and fifth century c.e. The same can be said for the Eastern Roman Empire;economyEastern Empire, which survived Rome’s fall, leaving Byzantium in a constant state of constrained finances despite its later monopoly on the European silk trade.

Medieval World

While the Dark Ages;economy“Dark Ages” followed Rome’s demise at the end of the fifth century, Asia;tradeAsia saw extensive trade and wealth, with India;tradeIndia and China;tradeChina each producing roughly 23-25 percent of global economic activity into the twelfth century. The Islamic expansionIslamic armies’ sweep across North Africa and the Holy Land destroyed the traditional Afro-European trading patterns in the seventh and eighth centuries and that between Europe and the Middle East during the late eleventh century. The MongolsMongol and Muslim invasions also disrupted trade between Europe and Asia during that century, and the Mongols all but destroyed the trading empires of central Asia. They wiped out entire city populations and laid waste to the countryside around enemy cities as a terror tactic. Although the Crusades;economic impactCrusades initially were called to help the Eastern Roman Empire;CrusadesEastern Roman Empire retake the Holy Land from Islam, the Crusades;First (1095-1099)First Crusade’s looting and other excesses perpetrated on the march through Byzantine territory severely damaged Byzantium’s wealth and agricultural production, significantly reducing the empire’s economic base. The Eastern Empire never fully recovered from the seizure of the capital and looting of the treasury during the Fourth Crusade (1202-1204). Forced to grant tax concessions to Genoa and Venice and sell the rights to its silk monopoly, Byzantium, or Constantinople as it was known after the fifth century, was but an empty shell when the Ottoman Turks conquered the empire’s remnants in 1453. However, the Crusades also opened European eyes to the culture, trade, and knowledge of the East, and that renewed knowledge led to the Renaissance that ultimately drove Europe’s technological and industrial development in later centuries and, eventually, leadership over global affairs.

Modern World

The modern era began with the Thirty Years’ War (1618-1648);economic impactThirty Years’ War, which killed more than one-third of Germany’s population, all but eliminated central Europe’s commerce, and by some estimates consumed nearly half of northern Europe’s production between 1618 and 1648. The human and economic costs influenced European, especially German and Austrian, thinking well into the nineteenth century. The period was marked by limited wars in which armies depended on stored supplies, paid for the materials they acquired from local communities, and relied on maneuver, rather than highly destructive and expensive combat, for victory.

That period of European warfare lasted until Napoleon I (Bonaparte)[Napoleon 01];total warNapoleon reintroduced the concept of total war to Europe in the late eighteenth century. Napoleon’s use of mass conscript armies living off the land and employment of concentrated artillery devastated the countryside of his opponents. His methods proved his undoing in Russia;Napoleon inRussia, where the czarist armies employed Scorched-earth strategy[scorched earth strategy]scorched-earth tactics to deny Napoleon food supplies and shelter for his troops, but the Russian victory came at the expense of starving its own population. More than one million Russians may have died from hunger and disease following the French invasion, and Russian agricultural production did not return to prewar levels until five years later.

In China;economyAsia, European incursions and China’s Civil wars;Chinacivil wars destroyed what once was the world’s richest economy and empire. Most economists believe that China produced more than 25 percent of the world’s gross domestic product (GDP) in 1700. The depredations of the Opium Wars (1839-1842, 1856-1860)Opium Wars (1839-1842, 1856-1860), nine rebellions, and the Sino-Japanese War, First (1894-1895)[Sino Japanese War, First]First Sino-Japanese War (1894-1895) had reduced China’s economy and power to a fraction of its former self by the nineteenth century’s end. Those conflicts, along with Europe and America’s Industrial Revolution and domination of global trade, had reduced China’s proportion of global economic output to less than 10 percent of the total. China’s post-World War I civil war, World War II, and Maoist economic policies further decimated the country’s economy. Meanwhile, the West’s pursuit of weapons technology and national mobilization would set the stage for the most expensive conflicts in history.

America’s American Civil War (1861-1865);economic impactCivil War (1861-1865) served as a harbinger: Both sides mobilized and committed their manpower as best their economies and political structures could support. The Northern armies destroyed millions of acres of cropland, the South’s limited industrial capacity, and its transportation system, while the Union blockade all but terminated Southern trade with the outside world. The South’s agriculture-based economy collapsed months before its armies, and it took more than eighty years for the region to regain its prewar standards of living and economic production.

World World War I (1914-1918)[World War 01];economic impactWars I and II were industrial wars in which entire populations sacrificed to maintain their countries’ or empires’ war efforts. Those wars consumed more than 40 percent of the participating countries’ economies and destroyed most of Central Europe’s productive cropland. Food shortages swept across Europe throughout World War I and after the war, because farmhands were conscripted into service in the belief that larger armies would ensure a short war. Additionally, the destruction of Eastern Europe’s farmland and diversion of fertilizer nitrates to production of explosives cut agricultural production by 40 percent. The war’s cost drove all the participants into near bankruptcy. All of Europe’s major empires fell as their entire societies collapsed from the weight of supporting those war efforts, giving rise to several revolutionary movements across the globe. Japan;economic impact of warJapan and neutral America gained from the participants’ need for their loans, industrial production, and raw materials. Shielded by distance from joining the costly fighting in Europe, Japan acquired territories in China and the Western Pacific, gained further access to new military technologies, expanded its merchant marine to handle the escalating trade in war materials, and expanded its shipyards to meet French and British shipbuilding requirements. Although the United States;economic impact of warUnited States did not gain any territory, its neutrality in the war’s early years enabled it to transition from a debtor to a creditor nation. By the time America entered the war in 1917, France, Britain, and Russia owed the United States more than $16 billion, equal to about 15 percent of America’s gross domestic product.

World World War II (1939-1945)[World War 02];economic impactWar II Europe;economic impact of warproved even more expensive and destructive. The massive bombing of that war, Russia’s Scorched-earth strategy[scorched earth strategy]scorched-earth policies, and German looting of its occupied territories destroyed more than 70 percent of Europe’s total industrial capacity. Spared invasion and bombing, the United States was the only country to end the war with a larger industrial capacity than it had at war’s start. Germany and Japan lost more than 90 percent of their industrial capacity and Russia more than 50 percent. Britain’s economy shrank nearly 16 percent during the war, and its war debt approached 50 percent of GDP. By war’s end, France’s transportation networks were all but destroyed, particularly in the north, and would take a decade to rebuild. The same could be said for Germany’s, Japan’s, and Russia’s. Italy’s limited prewar industrial base suffered some damage but largely was spared by the country’s September, 1943, surrender, which came before the Allied bombing campaign reached fruition. In fact, more than half of the world’s total economic output was either destroyed or expended in World War II.

Except for civil wars, the conflicts that followed World War II have been more limited, but the growing cost of armaments has ensured that war’s cost remains high. More important, Developing nations;economic impact of warUndeveloped nations;economic impact of wartoday the world’s poorest nations (such as the Democratic Republic of the Congo, Eritrea, Somalia, and North Korea) are those that have been afflicted by conflict or have allocated excessive resources to readiness for war. The Israel;economic impact of warArab-Israeli wars;economic impactArab-Israeli wars have suppressed economic growth among all the participants, and only extensive foreign aid and other forms of outside funding have kept them from bankruptcy. High Oil;pricesoil prices have enabled the Arab nations to draw almost unlimited credit and provide funding to the so-called frontline states facing Israel. Coming at a time when the United States was addressing its social inequities, the Vietnam War (1961-1975);economic impactVietnam War (1961-1975) imposed an expanding deficit on the United States and destroyed South Vietnam’s economy. North Vietnam reportedly expended nearly 40 percent of its GDP on the war and sustained that effort only with support from the Soviet Union, Warsaw Pact nations, and China.

However, the costliest wars of the twentieth century’s second half were the incessant Civil wars;AfricaAfrica;economic impact of warcivil wars that plagued Africa. The nearly twenty years of fighting that afflicted Angola, the Democratic Republic of the Congo (DRC), the Côte d’Ivoire (Ivory Coast), Liberia, Rwanda, and Somalia have cost more than 5 million lives and may have deprived those countries of the equivalent of fifty years of GDP. Somalia remains a failed state. Angola’s oil revenues have funded the de-mining and reconstruction efforts that may enable it to recover by 2015, but of the others, only Rwanda and Liberia remain completely at peace and are making progress toward recovery.

Elsewhere, Afghanistan;economic impact of warAfghanistan’s and Iraq;economic impact of warIraq’s economies have been all but crippled by constant conflict since 1979, and only the latter’s potential for expanded oil production offers the promise of fully funded recovery before 2020.

All indications suggest that the incessant local conflicts across the globe will continue to drain global resources well into the 2010’s. The probability of massive nuclear war may have receded since the Cold War ended in 1991, but national and domestic rivalries and irredentist movements promise to sustain the world’s level of conflict into the foreseeable future. For example, Pakistan;economyPakistan’s economy remains severely depressed by its enduring conflicts with domestic extremist elements and the government’s concurrent and enduring focus on potential conflict with India. Pakistan will remain dependent on foreign aid and credit until both those issues are resolved. Afghanistan’s internal conflicts cost about $35 billion a year, and the country requires more than $70 billion in assistance to repair the damage inflicted by thirty years (and counting) of nearly constant warfare within its borders. India, the Philippines, and Thailand face continuing separatist movements, some religious-based and other ideological, costing them up to 25 percent of their defensive budgets or about 3 percent of their GDPs. Terrorism;economic impactTerrorism in all of its forms reportedly has forced governments and organizations around the world to spend more than $200 billion on security alone and up to another $100 billion in military and security operations against terrorist groups and movements. Barring a sudden and rapid end to those movements, the price and economic impact probably will continue to rise.Warfare;economic impactEconomics;impact of war onCivilians;war’s impact onTrade and warfare

Books and Articles
  • Barber, John, and Mark Harrison. The Soviet Home Front, 1941-45: A Social and Economic History of the USSR in World War II. New York: Longman, 1991. Investigates how the Soviet leadership during World War II withstood the stresses to its political and economic system while being invaded by Nazi Germany, to rally its people to defeat Adolf Hitler’s armies.
  • Broadberry, Stephen, and Mark Harrison. The Economics of World War I. New York: Cambridge University Press, 2005. A contextualized study that examines how European nations mobilized for war, how their economic strength impacted the war’s course, and how their wartime economies impacted postwar economic growth.
  • Campagna, Anthony. The Economic Consequences of the Vietnam War. New York: Praeger, 1991. Looks at events leading to the war from an economic standpoint, from the Eisenhower administration’s views on the French conflict in Indochina to the Nixon presidency.
  • Cohen, Jerome B. Japan’s Economy in War and Reconstruction. New York: Institute of Pacific Relations, 1949. Presents a history of Japan’s economic development from the last few years before World War II, through the war, and then into the “miracle” resurgence of the postwar years.
  • Finley, M. I. The Ancient Economy. Berkeley: University of California Press, 1973. Argues that the ancient Mediterranean powers lacked the economic structure to conduct warfare in the same way as modern nations.
  • Harrison, Mark, ed. The Economics of World War II: Six Great Powers in International Comparison. New York: Cambridge University Press, 1998. Presents chapters written by different economists on the impact of World War II on the economies of the United Kingdom, the United States, Germany, Italy, Japan, and the Soviet Union.
  • Singer, Clifford. Energy and International War: From Babylon to Baghdad and Beyond. Hackensack, N.J.: World Scientific, 2008. Examines the history of warfare involving energy resources, from ancient times to the present and into the future. Resources at the core of these conflicts have included slaves, gold, silver, iron, coal, oil, and other mineral resources. Challenges the notion that resource wars are endemic to industrial society.
  • Taylor, Alan M., and Reuven Glick. Collateral Damage: Trade Disruption and the Economic Impact of War. Working Paper W11565. Cambridge, Mass.: National Bureau of Economic Research, 2006. Looks at the effects of war on trade with other nations, beginning in 1870.
  • Weinstein, Jeremy, and Kosuke Imai. Measuring the Economic Impact of Civil War. CID Working Paper 51. Cambridge, Mass.: Harvard University Center for International Development, 2000. Seeks to examine civil wars empirically, particularly how they impact economic growth through negatively impacting investment.

Civilian Labor and Warfare

Counterinsurgency

Education, Textbooks, and War

Paramilitary Organizations

The Press and War

Propaganda

Revolt, Rebellion, and Insurgency

Women, Children, and War

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