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I think there are a few considerations, split between global and local
(a) on a global stage war is at its core similar to a broken window fallacy (war in itself isn’t productive):
- as the country being attacked, you spend resources to rebuild which could otherwise be used to improve productivity
- as the assailant country, if you increase defence spending but simply hire more foot soldiers, it’s not going to do any good to the economy - either create a surge in employment for non productive activities (inflationary) or you reduce employment in other important fields (also inflationary)
(b) to ensure war has benefits (for the combatants as well as the rest of the world), it needs to result in technologies or manufacturing capacity being developed, and it also requires that these technologies and manufacturing capacity can be useful in peace time, too (which I think is a plausible outcome- see next bullet)
- the more serious and global the war, the stronger the pressure will be on developing new technologies / capacity, which in general increases the chances that some of it will be useful in peace time, but of course the cost in human lives and suffering also increases, and it can take a long time to adapt technologies to civilian uses - so while people in the future may benefit from it, I doubt a reasonable person at any defined point in time would consider this an NPV>0 course of action (i.e., declaring war just for the sake of developing new technologies - war is declared to get more resources, or for ideological beliefs)
From a local perspective
(c) it’s possible that it may have some positive effects, assuming that the assailant goes to war to acquire existing resources from another country and assuming that the assailant’s military is so superior that it’s not going to incur heavy losses at all (after all, that’s what colonisation was), but in the modern world this is much less likely (given the multipolar world) and I would also be worried about the following
(d) loss of consumption, if the country being attacked is a large consumer of goods or services exported from the assailant country,
(e) the potential disruption in supply chains and or immigration flows, potentially resulting in strong inflationary effects
(f) as the country being attacked, there may be a modest “leapfrogging effect”, whereby you are able to rebuild better infrastructure to replace the one that was destroyed (assuming that you weren’t able to do so before because of political reasons), but I think this on the whole secondary
The above assumes that you can cleanly separate an assailant country and a country being attacked - but if you cannot, then considerations apply to all relevant countries
So - in brief, I’d say “it depends, but mostly no in the modern world”
Short-term: Yes
Long-term: No
Unless you have latent manufacturing capabilities and immediately shift to consumer products after.
However in the US the very short term impact is panic on the markets (which were already panicking), and the short/medium term economic boost is minimal unless/until the war drags on and stretches DoD budgets
Guns or butter
Wars…
Good = capital market
Bad = labor market
Source: human history 😆
Rising Star
Does AI investment count as war spending?
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Yes
Rising Star
Someone's gotta up their output on cruise missile.
Long term if Iran reverts to being a friend of the west it will be much better growth for the region and the world.
I don't know the answer to your question
But I do know that the highest quality debate on the most important issues always takes place on fishbowl
Thanks for the post.
We will know the answer soon
EY 1