War Economy

(1) In capitalist countries, a specific part of the national economy that is responsible for the financing of the preparation and conduct of war; in socialist countries, the part of the national economy that strengthens defensive capability.

(2) A branch of knowledge (military economic science) that studies the economic aspects of national defense and warfare.

The war economy as a part of the national economy includes the production of various types of military products, as well as the distribution, exchange, and consumption of the products. Proponents of mercantilism and later scholars of classical bourgeois political economy wrote of the existence of a close interrelationship between war and economics. It remained for the founders of Marxism, however, to provide a scientific substantiation of the dependence of war on economics and the influence of economic conditions on the change in modes of warfare. “Nothing is more dependent on economic prerequisites than precisely the army and the navy. Armament, composition, organization, tactics, and strategy depend above all on the stage reached at the time in production and on communications” (F. Engels, see K. Marx and F. Engels, Soch., 2nd ed., vol. 20, p. 171).

The history of war shows that military spending increases in absolute and relative terms with the development of the productive forces and with the improvement of the means of combat. Military spending reached its high point in the age of imperialism. The laws of development inherent in imperialism and the struggle for the redivision of the world have twice plunged mankind into bloody world wars and have caused numerous local wars. Two world wars have shown that success in war depends to a great degree on the quantity and quality of economic resources and on the effective mobilization and utilization of these resources. In the wars of the 19th century, the military spending of the warring nations accounted for between 8 and 14 percent of national income on the average, whereas in World War I this indicator was 24.2 percent in Austria-Hungary, 36.9 percent in Great Britain, 31.6 percent in Germany, 19.2 percent in Italy, 24.1 percent in Russia, 25.6 percent in France, and 15.5 percent in the USA. During World War II the corresponding figure was 43.4 percent in the USA, 55.7 percent in Great Britain, and 67.8 percent in Germany. In order to satisfy the enormous military requirements brought on by World War I and especially by World War II, it was necessary to place a significant part of the national economy of the warring nations on a military footing. Thus, according to some estimates, the share of military production in total US industrial production was 60.6 percent between 1941 and 1945.

With the worsening of the general crisis of capitalism, imperialist countries are increasingly resorting to the use of military force as an instrument of policy. Immediately after World War II, the imperialist countries—under the leadership of the USA—began preparing for a new world war by pursuing a “cold war” policy and forming aggressive military and political alliances directed against countries in the socialist community, the labor movement, the national liberation struggle of peoples, and other revolutionary forces of modern times. An arms race without precedent in history has come into being. The total annual sum of direct military spending throughout the world has increased from $120 billion in 1962 to more than $400 billion in 1977. While in the past the war economy developed appreciably immediately before and during wars, after World War II the prolonged and intensive arms race has led to the formation of a permanently active, ramified military sector of the economy.

The war economy is not separate from the civilian economy: a large number of branches and enterprises manufacture both civilian and military products or else produce items that can be used in the civilian and military sectors of the economy (footwear, fabrics, clothing, food, and the like). At the same time, there are certain features in the development of the war economy that stem from the character of military requirements, the purpose and specific properties of military products, and the existing mode of production. The state has a decisive influence on the development of the war economy. The state is the exclusive or principal purchaser and consumer of military products manufactured in the nation, and hence the scale and structure of the war economy are determined specifically by the demands of the state. “When capitalists work for defense, i.e., for the state, it is obviously no longer ’pure’ capitalism but a special form of national economy. Pure capitalism means commodity production. And commodity production means work for an unknown and free market. But the capitalist ’working’ for defense does not ’work’ for the market at all—he works on government orders, very often with money loaned by the state” (V. I. Lenin, Poln. sobr. soch., 5th ed., vol. 32, pp. 318–19).

The development of state-monopoly capitalism is most clearly manifested in the war economy. In addition to legislative, administrative, and political measures, bourgeois states make broad use of economic levers—in particular, all manner of financial incentives for military-industrial corporations—for the purpose of state-monopoly regulation of the war economy.

Data on the share of the gross national product (GNP) accounted for by the direct military expenditures of a country provide some idea of the relative size of the war economy, that is, the degree of militarization of the economy (see Table 1). However, this general indicator understates the actual level of military consumption, since officially published data on military expenditures do not include all types of military expenditures and data on the GNP may be considerably exaggerated if identical items are listed in two different reporting categories.

The boundaries of maximum development of the war economy are determined by the war economy potential of a country. The defense industry is a basic link in the war economy. Its nucleus is the armaments industry: the aerospace and nuclear industries, military shipbuilding, and the manufacture of military electronic products, armored equipment, ammunition, artillery, and small arms weaponry.

A dominant position in the war economy of modern capitalism is occupied by the USA, which produces approximately three-fourths of all the aircraft, missiles, artillery, and small arms and two-thirds of the warships (mid-1970’s) produced in all NATO (North Atlantic Treaty Organization) countries.

West European NATO countries constitute the second major center of the capitalist war economy. The ruling circles in these countries try to expand the coordination of the war economy and to make it more effective. Integrative processes encompass the development and production of armaments.

Both government and private enterprises participate in the manufacture of military products. In the USA and in West European countries, however, private capital occupies the major place in the war economy. The leading role is played by a few large corporations. In fiscal year 1974–75, 100 large American companies received 68.7 percent of government defense contracts; ten of the largest received 31.4 percent of the orders. Lockheed Aircraft Corporation occupied first place in total military contracts received ($2.1 billion), and the Boeing Airplane Company was second ($1.6 billion). Major suppliers of military products, which constitute the nucleus of the military-industrial complex, hinder détente and try to step up the arms race for the sake of higher profits.

The war economy in socialist countries is created for the purpose of protecting the interests of the working people and their revolutionary attainments. From its very inception, the first socialist country had to organize military production in order to defend itself against internal counterrevolution and military intervention.

After the Civil War of 1918–20, the Communist Party and the Soviet state—in addition to restoring the national economy and implementing a program of all-out socialist construction— devoted a good deal of attention to the development of the aircraft, tank, artillery, and other branches of the defense industry. The prewar creation of the war economy potential of the USSR served as the material basis for the accelerated development of the war economy and for the production of all types of armaments and combat matériel during the Great Patriotic War of 1941–45. Material, labor, and financial resources were mobilized to the utmost for the maximum possible satisfaction of the needs of the front. There was a sharp increase in absolute and relative military spending in the state budget of the USSR: the share of national income used for military purposes rose from 15 percent in 1940 to 55 percent in 1942. The selfless labor of the Soviet people, the major organizational effort of the Communist Party, and the advantages of socialist society and the socialist state system made it possible to increase the output of military products at a rapid rate, to surpass fascist Germany in all indicators of armaments production during the war years, and to outfit the army with sufficient quantities of highly effective types of weapons and combat matériel, all of which was of decisive importance in defeating the enemy.

In the face of the ever growing military economic preparations of imperialism and especially of NATO member nations in the postwar years, countries in the socialist community were compelled to develop and produce modern weapons and war matériel in order to strengthen their defensive capability. The USSR and other countries that are parties to the Warsaw Treaty of 1955 took measures to strengthen the defensive might of countries in the socialist community. The forms of military economic cooperation were expanded and improved among fraternal socialist countries that were compelled to spend considerable sums on military purposes in order to defend their attainments. Thus the defense spending of the USSR was 17.6 billion rubles in 1974 and 17.2 billion rubles in 1977 (the share of defense spending in the state budget of the USSR declined from 11.5 percent in 1970 to 7.2 percent in 1977). The CPSU and the Soviet state are concurrently engaged in a major effort to implement the program of the Twenty-fifth Congress of the CPSU (1976) on the further struggle for peace and international cooperation and for the freedom and independence of peoples. The USSR and other socialist countries are stepping up the struggle to halt the arms race, to reduce armaments and the armed forces, and to achieve genuine success in disarmament.

War economy as a branch of knowledge is a component of military science. It studies the interrelationships between war and the economy and the problem of evaluating and comparing the war economy potential of opposing countries and their coalitions. It defines the forms and methods for mobilizing the national economy and for placing it on a military footing in the case of necessity. It ensures the effectiveness of the system for the functioning of the war economy and the use of resources earmarked for military purposes. War economy theory is of a class nature.

Bourgeois military economic science was formed in the imperialist era. World War I and II exerted a significant influence on its development. The postwar arms race has promoted the further development of the war economy theory, especially in the USA. Works by bourgeois authors attempt to investigate economic preparations for modern war on the one hand and to justify and conceal the class and aggressive character of the unprecedented arms race and the development of militarism in capitalist countries on the other.

The military economic science of socialist countries investigates the patterns of development of the socialist military economy in the interests of warding off the menace of war and of frustrating imperialist aggression. It studies and substantiates ways and means of managing and strengthening the economic basis of national defense and the effective use of resources allocated for defense purposes, for the reliable protection of the attainments of socialism, and for the preservation of universal peace.