Isn’t the economy supposed to improve in time of war?

Question

I was under the impression that economies usually improved in times of war and slump shortly after the war’s end. Are we to expect an even greater slump in the economy once the Iraq war is over (whenever that may be)?

Answer 1

you know i was thinking the same thing also because i was thinking of the WWII. they had more job opportunities b/c they had alot of men away and needed to make supplies.  

Answer 2

I'm no economics major but why would the economy improve? We're shelling out money on the war instead of our own country's needs.

Maybe it has something to do with the advancement with technology. Less man power needed, therefore less jobs needed to fill now since WW2.

Answer 3

What happened in WWI and WWII was that countries borrowed and taxed heavily to pay for war production. The result was money started flowing in the economies again as jobs opened up, excess production and excess labour disappeared by destroying it on the battle field.

The majority of countries lost heavily in the wars and ended up far worse off economically.

USA prospered though, not only from war material sales during the wars but from interest on her loan payments to the Allies after the wars were over.

This war in the middle east was not about the economy in that way anyhow. It was about securing an energy supply that USA bases its economy on.

If USA really wanted to jump start its economy it could have done like Germany did before WWII. Tax heavily and build heavily on infrastructure and factories.

Money has to be flowing in an economy for it to do any work. Money is not wealth. Money flows in the opposite direction of real wealth, and is really more of a transportation device than anything.

Answer 4

I can imagine why you said hat. But the Keynes theory only works when the war only happens in a secluded environment. The world war I and II was an obvious war between oppression and democracy. So economy could still work between allies and the world price could be controlled as the enemy's distribution can be controlled as well. the bond between allied countries are also bigger during the world war because it is basically two ideals clashes.

Unfortunately, the war in Iraq are not considered a war that the Keynes theory represents. You can't distinguish Allies and Enemies so the bond between the countries involved are not strengthened because of the blurry reason on why America is in Iraq in the first place anyway.