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How does a war affect the economy?


Throughout history, various civilizations and nations have pitted themselves against each other and engaged in war. The human cost of war can be truly devastating and can result in a huge loss of life – in World War I, for example, an estimated 16 million people were killed, and in World War II, anywhere between 50 to 85 million people lost their lives. Aside from the tragic human loss, war also greatly affects a nation’s economy. This article looks at what this entails and how war can both positively and negatively impact the economy of a whole country:

Negative consequences

For the most part, war results in a negative impact on a countries economy but this depends largely on the type and scale of the war in question. Full-scale war or “total war” as was seen in WW2 has the greatest impact on a countries economy whereas lesser conflicts such as the Gulf War do not put as much strain on the home nation. The following are some of the main negative consequences to an economy that war presents:

Reduced working population

When war is declared, countries often increase the size of their military and may even introduce conscription. This can, in turn, reduce the actual working population of a country – citizens instead of working in industry to support the war will head off for training and onto the frontlines.

Damage to buildings and infrastructure

During WW2, the damage and destruction of many magnificent European cities was unimaginable. Whole cities were leveled and precious buildings obliterated. In modern wars, we have seen much the same happen – in Syria, Iraq, and Afghanistan for example much infrastructure has been damaged by air attacks and open warfare. This damage takes a great time (and cost) to repair and some cities may never recover.

Increased national debt and inflation

Again depending on the severity of the war, a country may have to push all their resources into the production of arms and equipment and increase spending vastly. This can lead to untold amounts of national debt that a country has to pay off for decades to come. Furthermore, if a country has to print money, or increase spending, it can result in hyperinflation with even basic items such as bread and milk costing way above the usual price.

Positive consequences

Although war is indeed detrimental to an economy, for the most part, there are several positives that can arise from such a situation:

Increased employment opportunity

Firstly, war often creates greater employment opportunities. Despite the fact that more people may be drafted into military service, the remaining population will have a wider range of jobs to occupy. Furthermore, industry and manufacturing jobs will often arise due to the increase in military expenditure.

Creation of new innovations and technology

War always invites the creation of new technology. Opposing nations will develop new technologies to help their war effort and in turn, once the war has subsided, these technologies can be put to better use. Military developments can often have a practical use such as modes of transport, power sources, and improved manufacturing techniques.

As you can see, war really does have a huge effect on a countries economy both for better and for worse. It is important to understand that how great the effect is, depends entirely on the scale of the war.

How does Economics affect our daily lives?

When we hear the term economics, many of us automatically think of something that university students study before heading off into the fantastic world of business. Did you know that economics actually play a huge role in our daily lives and actually affect many of the things we do on a day to day basis? This article explores how economics impacts the average person as they go about their business:

Supply and cost of everyday products

Business and retail work on a premise of supply and demand – this is also a basic principle of economics. For example, 50 people want to purchase X item, therefore retailer B sells it at Y price – this price fluctuates depending on the demand and other economic factors. What we actually pay for everyday goods such as food, clothes and even petrol is determined by economic factors revolving around supply and demand. These factors could include regulations, business tax, government mandates or even competition.

Debt and disposable income

The state of a nation’s economy can have a huge impact on how much disposable income we have, and how likely we are to fall into debt. During times of prosperity for example and economic growth, the working population often has more disposable income and can afford to purchase luxury goods. Alternatively, if a country is experiencing economic regression, the average person will have less to spend, and governments could tighten up on lending.

Consumer Confidence

If you feel that the economy is unstable and that your job may be at risk, you may have low consumer confidence and are therefore less likely to spend on “luxury” items such as dining out or going bowling for example. This, in turn, can have a negative impact on those luxury industries as they will receive less customer and make less revenue. This is a vicious economic cycle that can affect whole industries.

Savings and interest rates

Interest rates are dictated by the economy and are set by governmental and financial institutes. In short, economics can have a huge effect on your ability to save, and other financial processes such as a mortgage, car finance, and personal loans. When interest rates are high for example, you can earn more from savings accounts, but on the flip side, mortgage repayments will cost much more.

Taxation

Most citizens pay tax – this tax is dictated by economics and the current economic climate of a country and government. During times of need, a government may increase taxes for example in order to raise funds – this, in turn, will mean that the average family will have less disposable income and may even struggle to pay bills. On the flip side, the money you contribute in the form of tax will help fund hospitals, the military and law enforcement forces for example.

As you can see, the world of economics is actually hugely important to our daily lives. The economy of a country has far-reaching consequences and can have a great effect on our quality of life.

How to Start a Business in the UK?

Starting a business from scratch can be a very daunting task for most as you imagine there are too many aspects to even think about. In the UK, however, the process for setting up a business is fairly cheap, quick and easy. In most cases, if everything runs smoothly it is possible to set up a business in a day. Once you have done all of the research and spent endless hours brainstorming about the industry you want the business to be based in and how you are going to be profitable then you are more than ready. This short guide will guide you in how to get your brand new business up and running in seven easy steps.

Get Your Tax Sorted!

The very first employee of your company is you, which technically makes you self-employed as you are employing yourself. This can be easily done online using HMRC’s online website or by ringing the HMRC contact telephone number. They also offer a very handy online training tool, which can guide you through the practical elements of record-keeping, filling in your yearly tax return and the process involving employing other members of staff.

Get Your Insurance in Place

Insurance is a legal requirement in the UK and it protects you and your company from having to payout extreme amounts of money for things like accidents, sicknesses, legal fees and thefts. The level of cover your company will require will completely depend on the nature of your business. AXA offers a very handy business insurance wizard that allows you to fill in questions and produce an insurance package tailored to your business. You can then shop around different insurance suppliers or speak to a specialist broker to find the best deal for what you need.

Choose a business name

This is the fun, but the hard bit. You can spend hours and hours trying to find the best name only to find that somebody else already registers it. Use the companies’ house directory to check if your required name is available and then check website domains to make sure that you can purchase a relevant domain address if you wish to create a website.

Set-up a business bank account

Now that you have a chosen business name, you can head down to your local bank and open a business account under your new business name. This means that all finances are separated from your personal funds and protects you as the company director. This is not a legal requirement for sole traders however, we still recommend this.

Get compliant

This is one of the most important steps; make sure that you brush up and have made your business compliable with all of the UK health and safety, data protection and licensing laws. If you fail to meet the stated requirements then you could face heavy fines and even prison sentences in extreme circumstances. Head over to Gov.uk to find all of the information that you require.

Hopefully, this guide will help you through the stressful process associated with starting a business and make taking that first step a little easier!