War Economy

A war economy is the set of contingencies undertaken by a modern state to mobilise its economy for war production. Philippe Le Billon describes a war economy as a "system of producing, mobilising and allocating resources to sustain the violence." Some measures taken include the increasing of tax rates as well as the introduction of resource allocation programs. Needless to say, every country approaches the reconfiguration of its economy in a different way.

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 purposes, such as the Women's Land Army and Bevin Boys in the United Kingdom in World War II.

Franklin D. Roosevelt said that if the Axis Powers win, then "we would have to convert ourselves permanently into a militaristic power on the basis of war economy."

In what is known as total war, these economies are often seen as targets by many militaries. The Union blockade during the American Civil War is regarded as one of the first examples of this.

Concerning the side of aggregate demand, this concept 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 that wars sometimes have the effect of accelerating progress of technology 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.