Economic Downfalls Of War

War, and the economic profits it creates, is essential for today's modern economy. This is a popular view that many people believe to be true. People think that war provides a way of stabilizing a national economy. The view is utilitarian; it is cold and based on the argument that more people are helped by the economic effects of war than are hurt (Austin). This view of war is wrong. The economic costs produced by war outweigh the economic benefits that war, as an institution, creates.

Contrary to what many people believe war is quite harmful to national economy. Some might argue that it allows for the further development of new technologies, thus further pushing the economy. This is not necessarily true. War is good for the development of new technologies used in the military. A large amount of military funds are put into the development of new technologies that help in times of war, possibly making fighting safer and less costly in terms of life. After all, as Gustave de Molinari said, "Ð''The direct losses of war are those of life and capital (Morgan).'" So should the creation of such technologies be supported? Only if it has to. If the economy is dependent upon the institution of war then a less war dependent form of economy should be developed.

Although war is beneficial to the development of new technologies it is not so kind to other industries. When war strikes there is a shift in various elements of commerce, ranging from the value of a dollar to how much an ounce of plastic costs. Despite what is affected, these changes cause unexpected fluctuations in commerce that must be dealt with. These fluctuations can greatly harm an economy, forcing companies to pay twice as much for raw materials or forcing transportation businesses to pay more for fuel. War causes the use of resources to be less efficient, causing a loss of capital. This negative aspect of war is a double slap to the face, because this period of fluctuations in commerce occurs twice, once at the outset of war and again at the establishment of peace. Economies have to grow accustomed to the fluctuations each time, causing a loss of capital twice (Morgan).

Another problem with the economics of war is that the actual execution of war hinders a state's ability to produce funds. This can be extremely harmful to a nation, especially during a time of war when money is needed. Often times, this loss of funds cause nations to take mainly three actions to survive, as outlined by Professor Joshua Goldstein. The first action a country can take to produce funds is to raise taxes. This often makes people dislike the government even more, and usually has negative effects as it reduces the spending of public consumers. The second action is to borrow money; this method can actually be quite profitable if you are the nation lending money. Switzerland lent money to several nations to finance wars, and in the regaining of its money, with the addition of interest, has developed quite a stable economy. However, when a government borrows money, it adds dramatically to a nation's debt and sometimes sends a nation into bankruptcy.

The third action is to simply make more money. When a nation prints more paper currency it supports inflation. Inflation is possibly the steadiest, most immediate effect that war has on a nation. The danger of inflation was well portrayed by an antediluvian Chinese strategist, Sun Tzu: "Ð''Where the army is, prices are high; when prices rise the wealth of the people is exhausted'" (Goldstein). It pushes prices higher and lowers the value of currency, making people have to pay more for their products. This can have negative effects on the national economy and even lower the standard of living (Goldstein).

War might even take a direct effect on the way people spend their money. It could change the way people buy goods or even the goods that are bought. It was discussed above how war benefits the development of new technologies. These technologies are often used by

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