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The Economy
Michael Baxas, Antony Blyakher
What is War?
There are many economic driving factors behind war and conflict
Source: https://tinyurl.com/y8wmj5wh
What is The Economy?
An economy includes the wealth and resources of a country or region,
especially in terms of the production and consumption of goods and services
and careful management of available resources.
A countries success is often measured by the state of its economy as well as its
growth over time and its diversity.
The economy often follows trends and economists analyze these trends to
help predict how the economy will be affected, war is one of the biggest
influencers.
How Does War Affect the Economy?
War can affect many different factors of
the economy including the following:
Debt
decrease in consumption
lack of investment
no jobs
high taxes
government deficits
Inflation
psychological costs
decrease in economic development. Source: https://tinyurl.com/yamphvcz
Does war spending help or hurt the economy?
This is a controversial topic that many economists do not always agree on. It
tends to be unclear on whether war helps or hurts national economic
prospects.
https://youtu.be/71tPBjrTeJU?t=31s
(This video shows an economist Tom Woods who has a strong opinion on how
military spending during World War II did not help the economy)
0:31 - 2:08
How is Production Affected?
During WWII the US was producing a record amount of war materials and
vehicles however, from February 1942 until later 1945, not a single american
car was manufactured to be bought by the public, a similar situation
happened in Japan as civilians began to starve and food rations were
prioritized to military personnel
Debt
Debt is one of the most common effects on the economy of a country
following a conflict. When a country incurs a large amount of wartime debt,
the economy is often put on hold and development is minimal and the
country will, in most cases, enter an economic depression.
An example of this happening is post war Germany after WWI, Germany was
forced to pay back the majority of the damage caused during the Weimar
Republic, and as a result the economy incurred heavy debt, severe over-
inflation, and other negative consequences of the debt owed. November
1923, the US dollar was worth 4.2 trillion German marks
Crowding-out Effect
A situation when increased interest rates lead to a reduction in private
investment to a point that it dampens the initial increase of total
investment spending is called crowding out effect. This effect can
often be an effect of war as the interest rates on many loans are
raised to help pay for the war but this has a very negative effect on
the private sector and households in general.
Psychological Costs of War
There are many economic costs of war such
as debt, inflation, gdp which can be
estimated in dollars and cents. Psychological
costs of war is a factor that can be difficult to
estimate because its costs are in the pain of
death, suffering, fear and disability.
https://www.youtube.com/watch?v=-Fc6_aTnRXQ
Though war has many effects on the economy that are measured in numbers
and figures there are often many things that have no way to measure that are
equally as impactful, damage to surrounding civilian life is often physical as
well as psychological, some of the best examples include conflicts in Africa as
they included a strong focus on some of the following: mutilation, severe drug
use, burning housing and infrastructure, as well as child soldiers.
Sources as they appear: 1. https://tinyurl.com/ycrs45n4, 2. https://tinyurl.com/y86ktq3b, 3. https://tinyurl.com/y8ffmjdb
Reviewing Economic Consequences
of War using Examples of United
States War History
World War II (1939 - 1945)
The Vietnam war was a Police action that took place in Vietnam during the
1960s which aimed to defeat the communist Vietcong and prevent the spread
of communism through something called The domino effect. The war was
widely unpopular, and often protested.
This period contained consistent increases in military spending paired with tax
cuts resulting in a significant budget deficit.
Taxes were being cut which resulted in both wars completely financed by
deficit spending.
Interest rates were kept low and banking regulations were relaxed to
stimulate the economy
Examples Summary
The purpose of reviewing these wars was to compare and contrast the
macroeconomic effects of war spending.
Its evident that every war is very different and for that reason, the
consequences of war can be very different.
Project Conclusion
War and conflict has one of the largest effects on a country's economy
compared to any other cause and that has been seen time and time again.