does war stimulate the economy?

[Toho]

and by economy i mean create jobs for all sectors and improve the overall economic health of a country.

[Mortality]

Because World War One did wonders for the economic health of countries.

Or like how World War Two did wonders for the British economy.

[D.B. Cooper]

[Liamgamer55]

There's a huge problem with this.

What if instead of buying services, people instead spend their excess money on living in slightly bigger houses (or live slightly further away).

I'm also disliking the all taxation is bad vibe from that video. Yes people are going to buy less services if they are taxed, however there's more to the effects on the economy of infrastructure investment than that is willing to suggest.

[Dr. Croccer]

Not really applicable though (or anywhere else for that matter). The broken window fallacy concentrates on short-term immediate losses through destruction of wealth, whereas the more important supposed beneficial effects are more often longterm.

Absolute nonsense. It's the broken window fallacy. Taken to its logical conclusion, this argument would suggest that we would be better off if we destroyed civilization. If breaking a window stimulates the economy, imagine what dropping nuclear bombs on all of the world's cities would do.

The Broken Window Fallacy is just as irrelevant now as it was back in the 1850s.

[Enemy of the State]

What if instead of buying services, people instead spend their excess money on living in slightly bigger houses (or live slightly further away).

And this is good why?

[Nikitn]

Of course wars stimulate economies that have unemployment problems (which is quite a big problem). By increasing employment the number of consumers, and thus spenders, increase - the trick is to gradually decrease military spending after the war so that unemployment doesn't become an issue again. Oh and it of course sucks if the war destroys ones own infrastructure.

Completely and utterly irrelevant to the subject at hand. The author of the video forgot to mention that consumers/companies don't spend all the money they get their hands on as fast as possible. ESPECIALLY during recessions, which is what we were talking about here.

[MathiasOfAthens]

Not always. Plus after the war is over the economy has to switch from producing arms to civilian goods which is not easy.

[RTW Fan]

When unemployment is high, a small war can stimulate the economy, but in the general sense, no.

[MathiasOfAthens]

When unemployment is high, a small war can stimulate the economy, but in the general sense, no.

A small war would not stimulate the economy because the needs of the military in terms of ammunition, weapons, vehicles, etc are already being met by the private sector. It would take a war that mobilizes the entire country to stimulate the economy and employ a larger workforce. Its the transition back to a civilian economy though that really bites. After WW1 we entered a recession due to a high number of unemployed soldiers. After WW2 though the returning GIs were able to find jobs or go to school on the GI bill.

[Manuel I Komnenos]

A small war would not stimulate the economy because the needs of the military in terms of ammunition, weapons, vehicles, etc are already being met by the private sector. It would take a war that mobilizes the entire country to stimulate the economy and employ a larger workforce. Its the transition back to a civilian economy though that really bites. After WW1 we entered a recession due to a high number of unemployed soldiers. After WW2 though the returning GIs were able to find jobs or go to school on the GI bill.

The small war of Germany against Czechoslovakia is probably an example of a war that stimulated Germany's economy. Particularly because of its small cost and the fact that Czechoslovakia was full of mines and very advanced industries.

[Manuel I Komnenos]

Depends on the time frame we are talking about. Rome's economy was growing quickly as long as the state expanded. The Romans would capture the treasures of the enemy and loot each country completely. Today things are a bit different. Wars or crises stimulate the economies of third countries which supply those engaged with weapons. Needless to say, the American and German industries have feasted on the Greek-Turkish disputes in the Aegean Sea. Also, the Arabian and Israeli states have spent huge amounts of money in American weapons.

[ivan_the_terrible]

Depends on the time frame we are talking about. Rome's economy was growing quickly as long as the state expanded. The Romans would capture the treasures of the enemy and loot each country completely. Today things are a bit different. Wars or crises stimulate the economies of third countries which supply those engaged with weapons. Needless to say, the American and German industries have feasted on the Greek-Turkish disputes in the Aegean Sea. Also, the Arabian and Israeli states have spent huge amounts of money in American weapons.

The Roman economy was based more and more on huge plantations worked by slaves. The main way to increase production was to expand horizontally, that is acquire more slaves to work more land - not improve technology in agriculture (with slave labour giving very little incentive to invest in agricultural inventions etc. Which is also why ancient agriculture remained quite primitive, especially compared to the civic life).

So in that kind of system wars provide a constant stream of slaves, which translates to economic growth.

As you say, things are different now. Though the certain sectors can still benefit immensely from the country being at war, even if it's very, very expensive for the government (and therefore the taxpayer).

[Jedi1]

Only insomuch is that it prompts expansion of the money supply through loans of necessity to exploit that economic potential that already existed that would not normally be used due to lack of money.

[Claudius Gothicus]

As long as the war is happening somewhere else(this means your productive basis is not being threatened by destruction) and you are dealing with a previously underemployed population it does. But only for a short time, let us remember that the one replacing consumer demand in war-time is the State and when the State consumes all by itself it generates public debt which can't be unpayed forever.

[Balian76]

As long as the war is happening somewhere else(this means your productive basis is not being threatened by destruction) and you are dealing with a previously underemployed population it does. But only for a short time, let us remember that the one replacing consumer demand in war-time is the State and when the State consumes all by itself it generates public debt which can't be unpayed forever.

That's what happened to Australia in 1938 because our economy was still in depression. The broken window fallacy makes the assumption that the money was going to be spent in the community, the baker or tax payers might squirrel their money away in an overseas bank account for 20 years or spend it all on imported goods.

[YuriVII]

Who were the biggest industrial powers on the eve of WWII? I'd imagine Britain, France, Germany, and the United States with USSR going at an explosive pace. After WWII all these countries were in ruins or in Britain's case bankrupt. America suffered no bombing campaigns, no wholesale slaughter of her citizens, no invasion. You cant deny that the rest of the world being in ashes didn't help America out. So in this case war helped out America...but not for the reason you think.


+rep to the guy who posted the broken window fallacy.

[Enemy of the State]

Absolute nonsense. It's the broken window fallacy. Taken to its logical conclusion, this argument would suggest that we would be better off if we destroyed civilization. If breaking a window stimulates the economy, imagine what dropping nuclear bombs on all of the world's cities would do.

[Psychonaut]

Absolute nonsense. It's the broken window fallacy. Taken to its logical conclusion, this argument would suggest that we would be better off if we destroyed civilization. If breaking a window stimulates the economy, imagine what dropping nuclear bombs on all of the world's cities would do.

Did you by chance read this book? Haha because I just started reading it today and what you posted is exactly what the author was saying...

[Dr. Croccer]

Did you by chance read this book? Haha because I just started reading it today and what you posted is exactly what the author was saying...

That's because they're all copypasting Bastiat, back when it wasn't an analogy but it was an actual argument against the notion that was seriously considered by some of destroying huge parts of Paris. The irony is that when Paris was renovated several years after his death it was of great benefit to the city, improving infrastructure making it easier for trade to go in and out, as well as building aquaducts and reservoirs which brought fresh water to the city and prevented more outbreaks of disease, and generally just transforming it into the romantic city that still attracts millions of tourists to this day.