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New Report on Economic Consequences of War on the US Economy

The Institute for Economics and Peace has just released a new report, the  Economic Consequences of War on the US Economy,  that analyzes the macroeconomic effects of US government spending on wars and the military.

The report studies five periods – World War II, the Korean War, the Vietnam War, the Cold War, and the Afghanistan/Iraq wars – exposing the effect of war financing on debt, consumption, investment, jobs, taxes, government deficits, and inflation.

The findings of the report show devastating trends for US tax, debt, and deficit debates.

The key finding from the report is that the US has paid for its wars either through debt [World War II, Cold War, Afghanistan/Iraq], taxation [Korean War] or inflation [Vietnam]. In each case, taxpayers have been burdened, and private sector consumption and investment have been constrained as a result.

The report shows the following economic indicators experiencing negative effects either during or after the conflicts:

  • Public debt and levels of taxation increased during most conflicts
  • Consumption as a percent of GDP decreased during most conflicts
  • Investment as a percent of GDP decreased during most conflicts
  • Inflation increased during or as a direct consequence of these conflicts

The higher levels of government spending associated with war tends to generate some positive economic benefits in the short-term, specifically through increases in economic growth occurring during conflict spending booms. However, negative unintended consequences occur either concurrently with the war or develop as residual effects afterwards thereby harming the economy over the longer term.

You can read the full report here.

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Tags: GDP, debt, economy, inflation, investment, war


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Comment by Jeff Mowatt on February 26, 2012 at 5:47am

In our 2006 paper proposing a strategy for development in Ukraine, the primary focus was to place all children in family homes. The cost of this initiative at 1.5 billion dollars was weighed against the spending on occupation of Iraq over a single week.

In 2008 appealing again for support from USAID, we called for a shift of spending from ordnance to love and respect. 

Today, we call again with a petition to embrace an alternative to capitalism.

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