What are the relationships between war and economic activity? When do either public or private economic requirements cause war? Are warlike conflicts rational from an economic point of view? What is the best strategy to wage them? What are the economic consequences of war ? How much do wars really cost? Who really gains from them? Can war or forceful rearmament contribute to resolving economic crises?
Between the two far apart historical poles of mercantilism and mathematical economists of Game theory, separated by 450 years, different schools and individual students have taken into consideration various aspects of waging war and the reasons for it, following the stimuli offered by the problems cropping up over time that came to the forefront with greater urgency. The list includes: aggressive versus pacific foreign trade , the need for lasting peace in order to establish and sustain industrial development, the need for war to conclude processes of political and economic unification, rearmament and colonialization in order to overcome economic crises and stagnation, imperialism, the costs of world wars and the way to cover them, wartime financing, the strategies to be applied when there is the possibility of devastating nuclear conflicts and the role of deterrence in favouring peace .
Let us look briefly at the historical panorama: between the late 1500s and the 1600s, the mercantilists sought to define the links between economic logic and war. The power and enrichment of the state were then considered as the central problem of the economy , so, seeing that it was difficult to produce new wealth, it appeared easier to attempt to seize that of other countries. Consequently, wars were the indispensable and normal instrument to reach the goals of the economy itself, and turned out to be a zero-sum game as what one contender gained, the other lost.
Later on, in the period between the late 1700s and the early 1800s, the rise of the process of industrialization, which made it possible to raise production significantly, the English and French free-traders made individual well-being the object of economic strength. This well-being was realized with productive competition in a state of free trade and international peace . Since the wealth of the state was nothing else than the sum of the wealth of the citizens, individual well-being coincided with that of the state. This explains why the free traders paid little attention to the causes and the effects of warlike phenomena, which, as they saw it, were destined to disappear with progress in economic development . In the immediate future, the only war that could be envisaged was one of defence, and the state had to deal with this. Peace had to be sought after actively: indeed certain French and English free traders in the late 1800s and early 1900s maintained that peace was the cardinal point of the economy and applied themselves, even personally speaking, to support peace initiatives.
War again became, not welcome, but in some cases necessary, in the analysis of Friedrich List in the first half of the 1800s when he faced up to the economic reality of the German states and their need to achieve political unity and reach economic take-off. In this, he criticized the cosmopolite economics of Smith and free traders in general, who wished to substitute the presumed universal laws of trade for national and popular sovereignty of politics.1
The heterodox free trader Hobson , writing at the beginning of the 1900s during the Second Anglo-Boer War , accused the monopolistic and imperialist tendencies of various entrepreneurial groups supported by the state which favoured war to the detriment of the community. Marxists , as is well known, attributed to capitalism, in its monopolistic and imperialist version, the permanence of armed conflict. The neoclassical , marginalist economists instead took the path of theoretical analysis, setting aside the phenomena that upset the search for a general economic equilibrium . They judged defence to be a problem for the political sphere, independently of all the economic implications that war always fostered.
Some economists and many historians in the interwar period attempted to quantify the material costs of conflict and devastation and to define the particular characteristics of the state economy that had been tried out during the war.
In the period after the Second World War , economists with a mathematical training applied Game theory to the study of military and economic strategy , even if they paid no interest to the causes leading to war, nor in its consequences, thereby making war a new object for study in theoretical economics. They considered war to be a rational activity, albeit part of an exclusively theoretical and mathematical-logical argumentation that could be applied indifferently to the Punic Wars, the World Wars or that against terrorism. They calculated the strategic moves and suggested that deterrence was the fundamental factor in avoiding new devastating conflicts.
The economists of Public Choice too held that the choice of war could be economically rational and thought that it would be opportune to entrust the defence of the state to private bodies, if only for reasons of economic efficiency.
The unexpected proliferation of wars in the closing decades of the 1900s led many politologists, geographers and sociologists, but only a few economists, to take up again the ideas of geopolitics. Some sociologists and economists reread the realism of Hans Morgenthau and Raymond Aron in a neorealist or structural realist fashion. These currents believed they could find the causes of contemporary wars in political factors, which, for geopolitics, were to be sought in questions of territory, while for neorealism the reasons could be found in the situation of chaos reigning in the international relationships between states.
Economic historians, but also some economists, analysed the positive fallout from technological innovation made in the armaments sector on peaceful industry and evaluated the overall economic benefits that derived from war expenditure . Some economists and many pacifists have, on the other hand, calculated the opportunity costs of wars and have denounced the corruption and web of interests that have grown up in all countries between arms-producing companies, the military high command and politicians. In the specific case of the United States during the years of the Cold War , various authors spoke of a military-industrial complex and state capitalism, âPentagon Capitalismâ, which dominated the economy and politics of the country. However, generally, it was not professional economists, but politologists, sociologists and historians who formed the body of students which tried to calculate the profits made by the armaments multinationals and contractors.
With the new historical proposal of particular economic circumstances (crisis , market contraction , protectionist policies, etc.), theories which were previously elaborated under analogous circumstances in the past (liberalism-neoliberalism , realism-neorealism) are sometimes adopted again, updated or confuted. Nevertheless, the impression is that economists have paid less interest than other social scientists to the themes raised by warlike conflict over recent decades. The fact remains that the neoclassical , marginalist and monetarist economists , still forming the mainstream in the discipline, at least at an academic level, consider theoretical situations that exclude the hypothesis of war. Exception can be made for the mathematical economists of Game theory and the minority current of Public Choice.
Meanwhile, there are still many wars underway in the world and new conflicts break out in areas limited to a greater or lesser extent, and the news all too frequently reports them. In the period between the end of the Second World War and 2008, according to Monty G. Marshall , Director of the Center of Systemic Peace , 371 armed conflicts have been recorded that have led to an estimated 25,638,850 deaths (cfr. Lemennicier 2010).2
More than economists , between the end of the 1800s and the beginning of the 1900s, it has been literary figures and philosophers who have shown greater foresight over the themes of war and peace , even in connection with the economy . They adopted a decidedly pessimistic tone: Burckhardt , Spengler and Nietzsche all predicted that the 1900s would have been a period of great wars because âthe spread of western civilization would offer the powers in the field an enormous reward: world dominationâ. The âSpengleriansâ opposed the free trade economists when they held that in contemporary society industry was first and foremost at the service of war. Spengler, in particular, on the eve of the First World War , wrote that industrial society was about to unleash one of the greatest wars in history because the concentration of the urban masses, the power of money and the domination of plutocrats and demagogues made a clash inevitable between will...