War Economics: Analogy Dizzy

The war in Ukraine and its consequences outside that country, in particular on energy prices in Europe, have led to the fact that the term “war economy” has reappeared in the media and political lexicon. This expression, which here characterizes countries not experiencing military conflict, has already been used frequently to refer to situations of confinement in response to the Covid-19 pandemic.

The analogy is doubly paradoxical in French and European contexts, since the actual military interventions of recent decades in Mali, Libya or Afghanistan for France, or in Iraq in the case of the United States, for example, have not prompted the use of such vocabulary.

This paradox reveals the difference between “war economy” and “war economy”. While the second concept characterizes the direct economic consequences of conflicts associated with destruction or military spending, the first is mainly used to describe the reorganization of the economy in support of war and in opposition to the normal situation of the world.

The term “war economy” is rarely mentioned in connection with the 17th century.as well as and XVIIIas well as centuries in Europe, when war was ubiquitous there. He remains primarily concerned with the organization of the economy during the two world wars of the 20th century.as well as century.

When we talk about the war economy today, it seems that we are talking about major changes in the role of the state and the construction of a defensive national discourse in response to rising oil and energy prices.

However, looking at the energy issue through the prism of a war economy, we run the risk of putting off thinking about the profound transformations needed to preserve the environment. Indeed, both the rhetoric and the theory of the war economy are essentially based on the perspective of exclusion and the goal of a quick return to the previous situation, which was considered “normal”.

Victims and scarcity

At the heart of the notion of the war economy is the idea of ​​economic sacrifices, reflecting death by weapons, that are imposed on the population in the face of an emergency.

Using the famous words of Keynes in his 1940 work How to finance a warwar returns us from an era of abundance to an era of scarcity ( in war we return from an age of abundance to an age of scarcity.”).

These sacrifices are considered necessary to win the war and are associated with the mobilization of the means of production (both capital and labor) in conditions of relative autarky. Citizens’ choices regarding employment, consumption and savings are shrinking.

The state is at the center of the organization of the economy, deciding more than usual which goods should be consumed in moderation and which sectors of the economy should be directed to jobs and capital.

Among the specific consequences of this organization, historical studies usually highlight three points: the measures necessary to legitimize the increased role of the state, the rationing and control of prices, and the increase in transfers from individuals to the state through taxation or forced savings.

The concept of “war economy” means that the population must bear economic losses by limiting their ordinary needs and transferring part of their resources to the state.

Thus, the concept of “war economy” means that the population must bear economic losses by limiting their ordinary needs and transferring part of their resources to the state. This cannot be done without communication or propaganda aimed at justifying the need for sacrifice and the superiority of the efficiency of the state in organizing production.

It is not only about propaganda, but often about a real redefinition of citizenship – as shown, in particular, by James Sparrow for the United States during World War II – which also plays on the expansion of rights, or, conversely, on certain minorities, exclusion in the name of strengthening national identity and revealing the enemy within.

The disruption of supply chains and the organization of production and consumption by the state implies that the price system plays a smaller role than usual (and certainly much less than in economists’ idealized models) in controlling consumption and investment; a situation that could lead to the development of black markets to circumvent government-imposed rationing.

Finally, the war has economic costs for the population not only through reduced consumption, but also through direct transfers to the state, either through taxation or through so-called “compulsory” savings. bank deposits or outright purchase of government debt at a negative real interest rate. The Great Wars coincided with tax increases, massive subscriptions to government debt, and inflation that reduced the reward for savings and real wages.

And the post-war period?

The three elements mentioned above are found today in Russia and Ukraine. But outside of these countries, where the economic cost to the population is enormous, the reference to the war economy is now more of a metaphor: we are not faced with a shortage requiring universal rationing, nor with the need for an immediate and massive increase in war production or the replacement of capital.

The notion of a war economy used in the media does not qualify helping Ukrainian refugees, sending equipment to the Ukrainian army, or reorienting defense and geopolitical policies, as this does not imply significant short-term sacrifices for our economies.

The reference to the war economy essentially refers to the issue of energy. It is rising energy prices that impose costs and sacrifices on consumers. There is certainly a situational factor here, and therefore measures of the same order should be taken, in particular to limit the impact of inflation on the people with the lowest incomes.

But we also know that rising fossil fuel prices are not just an ad hoc war issue. Rising fossil fuel prices and limiting energy costs are essential elements to prevent global warming and its associated environmental catastrophes.

Thus, the notion of a war economy seems very narrow to understand our current situation, because it only makes sense as a legitimization of a transitional situation: the importance of a return to post-war normality is necessary for the political legitimacy of this type of economy, as well as for its theorizing.

In his How to finance a war already cited—which undoubtedly remains one of the most explicit strands of war economics theory—Keynes envisions a series of measures designed to make the victims of war acceptable through the prospect of a resumption of post-war consumption.

All the propaganda aimed at financing the war by issuing public debt, justifying rationing and a special organization of labor, was based on the fact that these measures were temporary and promised a quick return to normal life.

The economic rhetoric of war and rebalancing is counterproductive because it amounts to denying the long-term temporality of energy problems.

The French government’s announced resilience plan to “remove the effects of the war in Ukraine on the lives of the French” is part of that rhetoric, as resilience is a return to pre-crisis equilibrium.

However, this plan is only a classic counter-cyclical policy aimed at mitigating a supply shock, and not a reorganization of the economy aimed at winning the war. These short-term measures are necessary, even if it is a pity that their financing is not discussed in more detail and that it is not associated with the exclusive contribution of the highest incomes and assets, to make this sustainability more equitable.

But the rhetoric of a war economy and rebalancing is counterproductive because it amounts to denying the long-term temporality of energy problems or the long-term transformation of the state and economy that is necessary to save the environment.

Analogy is a well-known rhetorical device to impress and win over, but substituting one word for another is also a process of distraction. The very real risk is that this analogy reduces sobriety and energy production to short-term issues. The ecological crisis is not resolvable in historical references.

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