War economy

thumb|An American poster from World War I explaining sugar rations. Sugar was being conserved to provide for allied countries in Europe and support the war effort.

A war economy or wartime economy is the set of preparations 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 interest rates as well as the introduction of resource allocation programs. Approaches to the reconfiguration of the economy differ from country to country.

Many states increase the degree of planning in their economies during wars. That in many cases extends to rationing and in some cases to conscription for civil defense. During total war situations, certain buildings and positions are often seen as important targets by combatants.

Concerning the side of aggregate demand, the concept of a war economy 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. On the supply side, it has been observed that wars sometimes have the effect of accelerating technological progress to such an extent that an economy is greatly strengthened after the war, especially if it has avoided the war-related destruction. Some economists such as Seymour Melman argue, however, that the wasteful nature of much of military spending eventually can hurt technological progress.

War is often used as a last-ditch effort to prevent deteriorating economic conditions or currency crises, particularly by expanding services and employment in the military and by simultaneously depopulating segments of the population to free up resources and restore the economic and social order. A temporary war economy can also be seen as a means to avoid the need for more permanent militarization.

United States

The United States has a very complex history with wartime economies. Many notable instances came during the 20th century during which the country's main conflicts were World War I, World War II, the Korean War, and the Vietnam War.

World War I

thumb|Poster issued during [[World War I by the educational division of the U.S. Food Administration]]

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. 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."

World War II

thumb|right|upright=1|[[Mass production of Consolidated B-32 Dominator airplanes at Consolidated Aircraft Plant No. 4, near Fort Worth, Texas, during World War II]]

In the case of World War II, the U.S. government took similar measures in increasing its control over the economy. The Fall of France and the Dunkirk evacuation across the English Channel before the Battle of Britain provided the sparks that were needed to begin the country's conversion to a wartime economy and the July 1940 passing of the Two-Ocean Navy Act. The 1941 Attack on Pearl Harbor prolonged and expanded those measures.

Washington felt that a greater bureaucracy was needed to help with mobilization. The government raised taxes which paid for half of the costs of the war and borrowed money in the form of war bonds to cover the rest of the bill. The country has an annual military budget that is larger than those of India, China, Russia, the United Kingdom, Germany, Saudi Arabia, and France combined.

Germany

World War I

Germany experienced economic devastation during both World Wars. That was not a result of faulty economic planning, but it is important to understand the ways that Germany approached reconstruction. During World War I, the German agricultural sector was hit hard by the demands of the war effort. Many of the workers conscripted, and much of the food itself was allocated for the troops, which led to a shortage. "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." However, while unemployment rates plummeted, "by 1939, government debt stood at over 40 billion Reichsmarks (equivalent to billion euros)." That is further supported when the authors 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 during 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 German occupation, Vichy France was forced to pay a "quartering" fee of twenty million Reichsmarks per day. Supposedly, the fee was payment for the Nazi occupation forces. In reality, the money was used to fuel the war economy. Besides mobilizing financial resources, Armenia also declared mobilization and concentrated human capital (volunteers, doctors, and soldiers).

United States

World War I

World War II

Germany

World War I

See also

References

Further reading