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Putting aside the very real human cost, war has also serious economic costs – damage to infrastructure, a decline in the working population, inflation, shortages, uncertainty, a rise in debt and disruption to normal economic activity.
This paper assesses the macroeconomic impact of five war periods on the U.S. economy spanning the last seventy years. Seven macroeconomic indicators have been assessed to determine how they have changed during the conflict periods: • GDP • Public debt and levels of taxation • Consumption as a percent of GDP • Inflation
Russia’s invasion of Ukraine is an unmitigated catastrophe for global peace and particularly for peace in Europe. But the war also greatly compounds a number of preexisting adverse global economic trends, including rising inflation, extreme poverty, increasing food insecurity, deglobalization, and worsening environmental degradation.
Before Russia invaded Ukraine, projections estimated global economic growth in 2022 would be around 5 percent. The war in Ukraine was a “massive and historic energy shock” to the markets, according to a November 2022 report by the OECD.
The authors find that wars fought on a nation’s own territory result in significant GDP per-capita loss; civil wars have more persistent effects than interstate wars; and certain kinds of conventional research may have significantly understated the long-term economic scars of war.
War and other forms of armed conflict should be considered a major impediment to the economic development of low-income countries, many of which are beset by ethnic and religious strife.
The economic costs of armed conflict – in terms of lost income and reduced physical capital – are borne overwhelmingly by the countries in whose territory the fighting takes place. Yet, wars also impose costs on other countries, particularly those geographically closest to the war site.
An important macroeconomic impact of federal spending on the Iraq and Afghanistan wars has been to raise the nation’s indebtedness. The increased military spending following 9/11 was financed almost entirely by borrowing.
Effects of war also include mass destruction of cities and have long lasting effects on a country's economy. [6] Armed conflict has important indirect negative consequences on infrastructure, public health provision, and social order. [7]
Measuring the economic impact of a war is a daunting task. Common indicators like casualties, infrastructure damages, and gross domestic product effects provide useful benchmarks, but they fail to capture the complex welfare effects of wars.