What is the War Economy?

The War economy Is a series of economic principles that are applied in war conflicts. It is considered that the imposition of these measures has an impact on the state of war and on the commercial partners that suffer a"drag effect".

For example, during World War II Latin American countries suffered a drag effect due to the economic policy that the United States carried out in its war.

War economy setup

However, in the United States, there was an opposite phenomenon when it became the great"bank"in the world that provided resources to its allies to continue the war. Since then, and thanks to the Bretton Woods Agreements signed in 1944, the dollar became the great currency and the United States into one power.

In this sense, it is considered that thanks to the"drag effect"the countries of the periphery or economically weaker can reduce the development distances with the most advanced countries and become potential.

Characteristics of the war economy

Broadly speaking, to prevent the enemies of a war from carrying out commercial blockades and food shortages against the country they are fighting, the following measures are taken for the correct functioning of the economy:

Self-sufficiency or autarky

Due to possible economic blockades states must supply the operation of at least the first two sectors of the economy, ie the primary and the secondary to prevent their population from suffering from starvation and collapse state.

In these cases, the state's natural resources are exploited and domestic production of essential products is developed. Normally, consumption is discouraged or controlled to avoid scarcity.

Therefore, the principles of war economy do not focus so much on the tertiary sector of the economy or service sector which include communications, finance, tourism, leisure and culture, public administration and public services (health) and commerce. Only attention is paid to those that are necessary for the functioning of the State.

Control of monetary policy and private banking

During the war the state controls the banks, mainly the private ones, so that they do not take advantage of the situation and provoke a super inflation with bad policies. For example, during the war a country may revoke the activity permit of private banks and freeze their activities with foreign entities.


During the war, states usually adopt protectionist policies as their producers may have lost their trading partners. In this way, the way to protect the domestic producer is through the imposition of tariff barriers and export support measures. An example of such protectionist measures was the War communism From Russia.

To support exports, the State focuses on finding other markets and creating new agreements. An example would be the Loan and Lease Act whereby the United States supplied Britain, China, free France and the USSR with large amounts of war material between 1941 and 1945. In this case, some of these countries were new markets Exports to the United States, such as the USSR.

Saving of energy consumption and consumption of essential products

For example, during World War II one of the strategies of Nazi Germany was to destroy the English merchant ships in order to deplete the enemy nation. For this reason the Ministry of Food developed a rationing system where each person received a book with coupons that indicated the amount of food that the person could eat.

When going to the store, the person paid the sum of the product and delivered the coupon, in this way it avoided that the wealthy people agglutinate the products. In the United Kingdom, the rationing system was soon extended to other products, such as clothing or fuel.

Transformation of agricultural production and emphasis on war production

Usually the states transform agricultural production giving priority to the smaller cycle crops that give more. In addition, the caloric and nutritional contents are taken into account.

Another of the measures that are usually adopted is the conversion of unnecessary industries into war material industries. In this case, a textile industry can become a ballistic industry. For example, during World War II the USSR transformed many of its food factories into gun and bullet factories.

Encouraging cheap labor

Because men are struggling, in general women and children are employed in factories. In addition you can give work to immigrants or nationals of other countries that are not members of the national army.

As a peculiar fact, women during World War II began to wear their husband's or brother's pants when they worked in factories or went to their jobs.

Creation of a balance sheet system of the national economy

Many countries plan the quantity of products needed to supply the population. However, when this goal is met, the workers are engaged in producing other things. Therefore, the factories do not insist on having overproduction.

In this sense, a relation or balance of the quantity of arms produced, of wheat or other products is carried out and only more are produced if it is necessary.

The national budget is re-planned

The states usually devote more resources to the production of military equipment, to the health system to care for the sick, and to other areas that are primordial for war. While activities such as tourism, culture or education may be left without funding or be minimally funded.

Decrease in public spending in general

An example would be the cut of the salaries of public officials, the suspension of constructions and repairs of hospitals or roads and others.


  1. Nikolai A. Voznesensky L'Économie de Guerre de l'U.R.S.S.: 1941-1945. Paris: Medici, 1948, 180 p.
  2. Adams, Michael C.C. The Best War Ever: America and World War II. Baltimore: Johns Hopkins University Press, 1994.
  3. Harrison, Mark, editor. The Economics of World War II: Six Great Powers in International Comparison. Cambridge: Cambridge University Press, 1998.

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