Skip to content
Backstage Politics

Militarism: War Economy


War economy. From time to time, we hear that expression. What does it mean? Is it a specific kind of economy? That’s what we’re going to see right here, right now.




Today, I want to speak to you about the war economy. It’s a concept that we don’t usually hear, but in specific situations, we use it. That happens especially during a crisis when the government adopts harsh economic measures, and people go through severe hardships. That is the ordinary usage of this term. Yet, in political science, and even in economics, it has a different meaning, and it’s more literal. In this case, we’re speaking about a crisis created by war. As a result, the government reorients the whole economy to support the war effort. Then, we talk about the war economy.

On this occasion, I want to focus on the war economy to set out its meaning. At the same time, I’m interested in addressing the relationship between it and militarism. That will allow us to see this particular phenomenon. I refer to the militarization of the economy. It isn’t anything new, but political scientists and even economists overlook it. In this way, I want to discuss how this phenomenon, associated with exceptional periods, has become more usual than we think.


Definition of war economy


What’s the war economy? It’s when the State adopts a set of measures to mobilize the economy for war production. That’s a short definition. Nevertheless, the matter itself is broader and includes multiple aspects.

Wars are expensive, and they require a huge amount of a wide range of resources. So, the war economy is the situation in which the economy produces, mobilizes, and allocates resources to sustain the violence. In brief, the whole economy is reoriented to afford the war effort. In this kind of situation, the economy becomes something different compared to what it is in peace times. The State arranges the economy in a very different way. The basic needs of society have harsh constraints, and production is aimed to supply the military. That explains why wars involve a situation in which people experience hardships, and there are shortages of staple goods. Warfare itself devours resources.

In general, a war economy develops substantial adjustments to its consumers’ to accommodate defense production needs. In this situation, the State has to choose how to allocate resources very carefully to support the army and achieve military victory. At the same time, there is a need for meeting vital domestic consumer demands. However, all wars involve hardships in this realm for common people due to the shortages of daily goods.

Insofar as war is the priority for political authorities, defense and national security spending have a critical role. They concentrate most resources of the nation. So, measures to ensure these expenses lead to rationing, in which the State controls the distribution of goods and services. For this reason, it’s very usual to witness a decline in standards of living in the population. That entails a high social and political cost in the domestic realm.


How war economy works


At this point, we can’t overlook several facts related to the war economy and also to the functioning of any State. I refer to the State’s activity. It carries out four different activities. I’ll mention the most relevant for the current discussion. They are war-making. That’s clear when we talk about international wars. And the other main activity is extraction, namely, the acquisition of the means to carry out war-making.

We shouldn’t forget the direct relation between war-making and the extraction of resources from society. That’s the result of an authoritative practice of allocating resources. In this regard, it’s essential to mention the relevance of the two monopolies that sustain these two core activities of the State. I refer to the monopoly of violence and the monopoly of taxation. At the same time, the State denies the free use of military weapons, and it also wields the single authority to tax the property or income of individuals. The financial wherewithal flows into the State, and it allows this institution to afford war. That shows us the crucial role of the economy because it’s the base for military activities. Therefore, the need for extracting resources from the economy has a strategic dimension in war. That makes necessary the strengthening of the State with its intervention in this realm.

When a State involves in war, it has to adjust all its economic means and resources to the new situation. That entails the change of the productive system to fulfill the defense and security demands. The economy is reoriented, and the State expands its intervention. At the same time, it grows. It’s a strengthening process of the State in military and economic terms. In this way, the militarization of the economy aims to produce goods to support the army, and also to reinforce the power of the State in the domestic and international realms.

State interventionism is critical in these situations. In these cases, we witness how the State transforms industries to produce different goods that are essential in war. For instance, chemical fertilizer factories become explosives and ammunition industries. Tractors’ factories start to assemble tanks. The process is the same for other industries. So, the militarization of the economy involves these changes in the productive apparatus. Nevertheless, these transformations have a multiplier effect in the whole economy, and these changes boost a chain of shifts to adjust the entire production to the needs of war.

The State not only changes what and how the economy produces. It also allocates resources and intervenes in the distribution of goods. All of this comes with State planning. Even if there may be some initial improvisation in the first steps of militarization, the process itself becomes the execution of military planning for these events. Chance has no room in the organization of the economy in wartime.

Furthermore, militarization also entails the mobilization of resources available in society. I refer not only to material resources, such as raw materials, but also human resources that constitute the workforce of the nation. While the State mobilizes them, it distributes them according to the military needs. In this way, the State organizes the space to support the war effort. In this situation, the war economy means a total mobilization of people who are relocated and the massive extraction of wealth from society.

Society and economy are inseparable, and the transformation of the economy includes profound changes in society. Besides the reorganization of the productive system, the State adjusts society to military needs in the economy and on the battlefield. That’s fundamental to understand the war economy insofar as many workers end up under the direction of the State. This process involves a new organization in the distribution of the population linked to this shift in the economy. The formation of new suburban areas around factories is clear evidence, as well as the redistribution of the workforce according to the war industry demands.

Another aspect of the war economy is how the State organizes new industries or reorganizes those that already exist. For instance, the State intervention in the economy goes as far as the nationalization of specific sectors that end up under its direct control. Moreover, it establishes a strong direction of the whole economy with subsidies, new and special laws, as well as the intervention in the management of companies. New monopolies emerge in critical industries for better coordination of the war effort in the economy. In some cases, the State resorts to expropriations of goods, factories, and other resources.

The expansion of the State leads to a wave of regulations and the consistent oversight of the economy. I’m talking not only about the management of industries, factories, and so on. I also refer to the workforce with disciplinary actions aimed to get its cooperation. That may involve its militarization, and the suppression or neutralization of unions, as well as other restrictions of labor rights such as strikes, picketing, demonstrations, and so forth.

The intervention of the State doesn’t stop there. It has a total impact on the whole economy. I have to mention the public investment in strategic industries, and the formation of new State-owned companies. In this situation, public spending becomes a decisive element for the war effort. That’s quite clear in the military budget, which always skyrockets. Aside from the foundation of new companies and monopolies, I have to stress the investment in infrastructures to facilitate the mobilization of resources, troops, officials, and the workforce. All of this is fundamental to increase State control of the economy and society, and primarily to underpin its military might.

The State’s tentacles reach to other fields too. That’s the case of the market, which ends up tightly regulated. In this regard, the free-market fades away, and the control of prices rules the distribution of goods. The State doesn’t become a merchant. However, it supervises transactions to reduce as much as possible the consumption. That strategy allows it to allocate resources in those sectors in which they are more necessary. Indeed, these restrictions in consumption usually involve the rationing of staple goods and other services.

The militarization of the economy includes important changes in the monetary policy. In this respect, I have to mention the role of the central bank. I’d need much more time to discuss it as it deserves, but I hope to do it on another occasion. Probably I’ll do it in the next video. If you don’t want to miss it, subscribe now.

The money creation is crucial in this process because it provides financial support for the military. So, the central bank is in charge of creating money insofar as it gathers the whole wealth of the nation. In advanced capitalist countries, the central bank encompasses all private banks, and they constitute the financial back of the government. They advance money with loans, and the State can spend faster.

Nevertheless, financial measures go further with the intervention of the treasury by issuing bonds. Public debt contributes to financing in the short term the economic war effort. Usually, the central bank buys it, and private banks distribute it in the market. In the long run, both debt and war spending require taxes. Even during wartime, the State resorts to heavy taxation on specific sectors to raise funds. Therefore, debt and taxes are the main instruments to afford war.


War economy nowadays: the US


I don’t want to finish this discussion without addressing the current situation in certain countries. I refer to the militarization of the economy in peacetime. So, the war economy is not only a phenomenon during wartime. I think the best example of this is the US, and for this reason, I’m going to make some remarks.

After 1945 the US had a militarized economy. There was a military-industrial complex. It was the result of facing the totalitarian threat in Europe, and the Japanese expansionism in the Pacific. At that time, the US was a global superpower with a wide world influence. That international position transformed and redefined its national interest. Besides this, the American economy reached high levels of productivity that made it the most buoyant in the world.

However, in this context, it would have been terrible in material and social terms to dismantle that economic model based on war. In any case, the decision to keep that war economy wasn’t based on an economic criterion but political reasons. The weight of the military in domestic politics and the leading role of the US, was decisive because there were many vested interests. Many powerful people wanted to maintain the war machinery and its economic support. The global stage was favorable insofar as the US was a superpower with interests in the whole globe. That explains why the US kept this economic model.

As a result of WWII, the US economy was since then on a war economy. The Pentagon has been the first consumer of the national economy, and that has boosted production and maintained this economic model. We’re before a country organized for war, and that means a consistent and robust demand that keeps working the war economy.


Question of the day


Question of the day! What are the war economy limits? Are they material resources, or society? Post your opinion in the comments section below, and I’ll check it out.

Bibliography used:

Strayer, Joseph, On the Medieval Origins of the Modern State

Strayer, Joseph, Medieval Statecraft and the Perspectives of History

Gilbert, Felix (ed.), The Historical Essays of Otto Hintze

Tilly, Charles, Coercion, Capital, and European States: AD 990-1992

Mann, Michael, The Sources of Social Power

Poggi, Gianfranco, The Development of the Modern State

Anderson, M. S., The Origins of the Modern European State System 1494-1618

Spruyt, Hendrik, The Sovereign State and its Competitors

Le Goff, Jacques, La Baja Edad Media

Giddens, Anthony, The Nation-State and violence

Disclosure: Some of these links are affiliate links where I’ll earn a small commission if you make a purchase at no additional cost to you. As an Amazon Associate I earn from qualifying purchases.