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.