How War Affects Economy?

The Effect of War on Economic Growth! Wars Aren’t so Great for the Economy Over Time
  1. Reducing unemployment

    Wars can lead to reduction of unemployment because new jobs will usually be created to support the war. The new jobs might not always directly be connected to military but can be related to food supplies for example.

  2. Increasing dept

    A war might increase a country’s dept. Countries usually borrow more during times of war and people become more motivated to buy war bonds due to patriotism.

  3. More money is needed to rebuild the country

    If the war is taking place inside a specific country then this country will need a lot of additional money to rebuild the roads and buildings that were destroyed by war. This can lead to economic problems.

  4. Increasing domestic demand

    In some cases war leads to increase in domestic demand as people tend to buy more goods. In such a case war can provide a boost to the economy. Some people believe that World War II helped the US out of the great depression.

  5. Money could have been spent otherwise

    Wars usually lead to an opportunity cost problem where the money that was spend on weapons could have been spend on other areas in the economy and lead to a bigger improvement.

  6. Increased inflation

    Wars can lead to increased inflation and weakness of the domestic currency. This would in turn affect the economy in a bad way if inflation was already high.  (See Why do countries devalue their currency?)

  7. Short term economic benefit

    Many economists believe that the economic benefits of war are short lived and that the bad effects are the ones that last. Those people use the argument that a country could have done much better if the effects of war was removed and if the money spent during the war was spent somewhere else.

  8. Difficulty attracting investment

    After the war ends it might become hard for countries that lied in the war zone to attract investors, tourists or foreign money. Investors remain cautious about such areas even after the war ends.

  9. Higher taxes

    Taxes usually increase during war times as countries involved in war would try to collect more money to support the war. (See Why Do You Have To Pay Taxes?)

  10. Bad long term consequences

    Most economists believe that even though wars can provide a short term benefit to the economy still the long term consequences affects the economy in a much worse way.

  11. Not all countries get affect the same way

    Not all countries get affected the same way by wars as the major industries in each country differ. War affects the different industries in different ways.

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