War: Effect on the Economy Essay

1430 Words Jun 2nd, 2013 6 Pages
Shomoi Francis
Mr. Joseph
English 12
26 November 2012
War: Effect on Economy
War has influenced economic history profoundly across time and space. Winners of wars have shaped economic institutions and trade patterns. Wars have influenced technological developments. Above all, recurring war has drained wealth, disrupted markets, and depressed economical growth.
Wars are expensive (in money and other resources), destructive (of capital and human capital), and disruptive (of trade, resource availability, labor management). Large wars make up severe shocks to the economies of participating countries. Despite some positive aspects of short-term stimulation and long-term destruction and rebuilding, war generally impedes economic
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A third way to fund war is to print more currency, which fuels inflation. Inflation thus often acts as an indirect tax on a national economy to finance war. Industrial warfare, and especially the two World Wars, created inflationary pressures across large economies. Increasingly, governments mobilized entire societies for war - conscripting labor, bidding up prices in markets for natural resources and industrial goods, and diverting capital and technology from civilian to military applications. World War I caused ruinous inflation as participants broke from the gold standard and issued currency freely. Inflation also accompanied the U.S. Civil War, World War II, and the Vietnam War, among others. War-induced inflation, although strongest in war zones, extends to distant belligerents, such as the United States in the World Wars, and, in major wars, even to neutral countries, owing to trade disruption and scarcities. Present-day wars continue to fuel inflation and drive currencies towards worthlessness. In Angola's civil war (1975-2002), for example, the government currency became so useless that an alternative "hard" currency - bottles of beer - came to replace it in many daily transactions.
In addition to draining money and resources from participants' economies, most wars create zones of intense destruction of capital such as farms, factories, and cities. These effects severely depress economic output. The famine and…