Wars make no economic sense yet they still happen
Ukraine confrontation raises some scary prospects
Vladimir Putin: No doubt it’s an oversimplification to say that the confrontation in Ukraine is all about shoring up an authoritarian regime that is stumbling on other fronts. But there’s surely some truth to that story.
A century has passed since the start of the first World War, which many people at the time declared was “the war to end all wars”.
Unfortunately wars just kept happening. And with the headlines from Ukraine getting scarier by the day, this seems like a good time to ask why.
In influential research sponsored by the World Bank, an Oxford economist, Paul Collier, has shown that the best predictor of civil war, which is all too common in poor countries, is the availability of lootable resources like diamonds.
Whatever other reasons rebels cite for their actions seem to be mainly after-the-fact rationalisations. War in the pre-industrial world was and still is more like a contest among crime families over who gets to control the rackets than a fight over principles.
If you’re a modern wealthy nation, however, war – even easy victorious war – doesn’t pay. And this has been true for a long time.
In his famous 1910 book The Great Illusion British journalist Norman Angell argued that “military power is socially and economically futile” .
As he pointed out, in an interdependent world (which already existed in the age of steamships, railroads and the telegraph), war would necessarily inflict severe economic harm even on the victor.
Sophisticated economiesFurthermore, it’s very hard to extract golden eggs from sophisticated economies without killing the goose in the process.
We might add that modern war is very, very expensive. For example, by any estimate the eventual costs (including things like veterans’ care) of the Iraq war will end up being well over $1 trillion, that is, many times Iraq’s entire GDP.
So the thesis of The Great Illusion was right: modern nations cannot enrich themselves by waging war.
Yet wars keep happening. Why?
One answer is that leaders may not understand the arithmetic.
Angell, by the way, often gets a bum rap from people who think that he was predicting an end to war.
Actually, the purpose of his book was to debunk atavistic notions of wealth through conquest, which were still widespread in his time.
And delusions of easy winnings still happen. It’s only a guess, but it seems likely that Vladimir Putin thought that he could overthrow Ukraine’s government, or at least seize a large chunk of its territory, on the cheap – a bit of deniable aid to the rebels and it would fall into his lap.