We often hear that WWII is what lifted the US out of the Great Depression; that the “War Economy” is a good thing.
But how true is this as a general principle? Historically, does the economies of countries at war (not on their home soil) improve? Are we economically better off now because of the current war? What do economists have to say about this? 
War can stimulate the economy in the short term but it’s all about deficit spending and sooner or later you have to pay for the war.
It’s akin to buring down your house. Sure, rebuilding your house will stimulate the economy but net net it’s a loss
I figured that the recovery from the destruction meant new jobs, the reduction of men afterward meant more work available for less people, and the technology that was developed for war led to new innovation.
Not that it’s worth it.
Good OP. But I think this one can be better explored in Great Debates, so let’s go there.
samclem GQ moderator
WWII is the exception and it really only applied to the US. The reason it worked for us was the extremely unusual circumstance of the Great Depression where industrial output was way below capacity and the fact that the US didn’t suffer any destruction of real consequence. It also helped that all of our industrial competitors were completely crippled by the results of the war so there was a huge global demand for industrial goods with few producers capable of meeting that demand. Sweden also benefited from this in a big way since they also didn’t suffer as much wartime destruction and were able to capitalize on the lack of industrial competitors for a time after the war.
You figured wrong. You are falling into the common economics fallacy that there is a fixed amount of work that needs to be done.
War also destroys capital and infrastructure needed for jobs as well as killing off skilled workers. Workers may have jobs and production might increase, but it is production geared for building war machines and supplies, not products and services that improve standard of living. In fact, living standards generally decline during major wars as more and more resources go towards fighting the war.
War can be a catalyst for technological innovation. Radar, jets, rockets, nuclear energy were all a byproduct of WWII.
I thought we were talking about after the war.
Even after the war.
Europe was, as Winston Churchill described it, a “charnel house”. For a half century afterwards, the eastern half was condemned to being ruled by communist dictators who left crippled economies and, in some cases, crippled societies behind as well. In Asia, Mao used the postwar chaos to rise to power and introduce such innovations as mass famine and mass repression on a truly industrial scale.
Me, I can live without this kind of thing. The fallacy was best described by Bastiat’s allegory of the broken window:
Complete explanation here.
Pantom: That elegantly explains what I was going to say. I was going to talk about Military oil consumption in Iraq in an attempt to corner the market on the remaining oil supplies in the world, meanwhile the military is burning oil by the millions of gallons, and their are oil fields burning geysers of flame into the sky burning off the precious limited resource we are trying to secure.
In America we have the military industrial complex woven intrinsically into the economy so war is neither good nor bad for the economy but the expense must be justified somehow, so we go to war once in a while. However, a lot of what we have built is destroyed in an investment that isn’t really recoupable, whereas if there were no war, we’d be spending the money on other things that would also be stimulating the economy, while not destroying resources needlessly.
As was pointed out what stimulated the American economy was the utter destruction of the economy of Europe and Asia, and we rushed to fill a vacuum, but the economy of the entire system was hurt.
Erek
Ferengi Rule of Acquisition #34: War is good for business.
Ferengi Rule of Acquisition #35: Peace is good for business.
It’s easy to get them confused . . .
You are starting to digress into the realm of fantasy now. We don’t go to war because of some “use it or lose it” policy. We periodically go to war because that’s what nations do from time to time. But it does hurt our economy. Every National Guardsman off in Iraq is one not working a civilian job.
In fact, even the constant preparation for war hurts the economy because money being spent on cruise missiles and bombers (regardless if they are used or not) is money not being spent on schools and medical care).
I think “use it or lose” it does, sometimes, play a role in decisions to go to war. The defense industry does, after all, have some political influence in its own right. And every general advising the president can see the value of getting the troops some combat experience when the opportunity – a situation where we have the choice to engage in war or avoid it – arises, just so they’ll be better prepared to fight if a truly inevitable conflict comes later on.