War economy

A war economy or wartime economy is the set of preparations undertaken by a modern state to mobilize its economy for war production. Philippe Le Billon describes a war economy as a "system of producing, mobilizing and allocating resources to sustain the violence." Some measures taken include the increasing of interest rates as well as the introduction of resource allocation programs. Approaches to the reconfiguration of the economy differ from country to country.^[1]

Many states increase the degree of planning in their economies during wars; in many cases this extends to rationing, and in some cases to conscription for civil defenses, such as the Women's Land Army and Bevin Boys in the United Kingdom during World War II. During total war situations, certain buildings and positions are often seen as important targets by combatants. The Union blockade, Union General William Tecumseh Sherman's March to the Sea during the American Civil War, and the strategic bombing of enemy cities and factories during World War II are all examples of total war.^[2]

Concerning the side of aggregate demand, the concept of a war economy has been linked to the concept of "military Keynesianism", in which the government's military budget stabilizes business cycles and fluctuations and/or is used to fight recessions. On the supply side, it has been observed^{[by whom?]} that wars sometimes have the effect of accelerating technological progress to such an extent that an economy is greatly strengthened after the war, especially if it has avoided the war-related destruction. This was the case, for example, with the United States in World War I and World War II. Some economists (such as Seymour Melman) argue, however, that the wasteful nature of much of military spending eventually can hurt technological progress.

War is often used as a last ditch effort to prevent deteriorating economic conditions or currency crises, particularly by expanding services and employment in the military, and by simultaneously depopulating segments of the population to free up resources and restore the economic and social order. A temporary war economy can also be seen as a means to avoid the need for more permanent militarization. During World War II, U.S. President Franklin D. Roosevelt stated that if the Axis powers won, then "we would have to convert ourselves permanently into a militaristic power on the basis of war economy."^[3]