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“War & Domestic Conflicts – Economics & Costs”

War & Domestic Conflicts – Economics & Costs

Book-3: War, Conflicts, Security, and The Military -1.0


Understanding the costs of war & conflicts in all their facets – waging war economically – controlling the size of the Military yet keeping it effective – considering costs of development vs. cost of domestic conflicts.

Quotations for consideration:

  • “War is not a word, it’s an acronym for ‘ Wasting Another’s Resources’” – Ramman Kenoun .
  • “No matter what political reasons are given for war, the underlying reason is always economic.” – A. J. P. Taylor.
  • “Statism needs war; a free Country does not. Statism survives by looting; a free Country survives by producing.” – Ayn Rand .
  • “The opposite of war is not peace, it’s creation.” Jonathan Larson .
  • “Only the dead have seen the end of war. Make us poor and we war out of fury; make us rich and we war out of greed”. – George Santayana . (eg:- Pakistan & China respectively?)
  • “The value of a thing sometimes lies not in what one attains with it but in what one pays for it – what it costs us.” – Friedrich Nietzsche .
  • “The true wisdom of Sovereigns is to do good… A Sovereign pushed into war by his fiery ambition should be made to see all of the ghastly consequences for his subjects – the taxes which crush the people of a country, the levies which carry away its youth, the contagious diseases of which so many soldiers die miserably, the murderous sieges, the even more cruel battles, the maimed deprived of their sole means of subsistence, and the orphans… They sacrifice to their imperious passions the well being of an infinity of men whom they are duty bound to protect… the Princes who consider men their equals and in certain regards as their masters, are economists with their blood and misers with their lives.” – Frederick The Great (1752)

Key Concepts:

  • “Wars are not paid for in war time, the bill comes later.” – Benjamin Franklin .
  • “Probably no Nation is rich enough to pay for both war and civilization. We must make our choice; we cannot have both. – Abraham Flexner .
  • “Make wars unprofitable and you make them impossible.” – A. Phillip Randolph .

The costs of War include much more than the actual expenditure during the War. The additional cost of upgrading the Military prior to the War and the costs of the effects of the War on the Military and Civilians and the Economy will be longer lasting and have to be considered.

  1. Costs of War:

The concept of war goes way beyond the actual engagement of troops in Combat. It has economic, social, psychological and political aspects that at different times assume varying degrees of importance. It is the nature and reach of these aspects that require careful consideration. The costs of war start with the continuous cost of training and maintenance of the standing Military at the desirable minimum level of preparedness and capability, for Defense and

Deterrence, to an essential Offensive capability, and then goes on to include all the other costs, of the actual war and of its aftermath. Wars hence should not be undertaken lightly, without clearly defined, decisive, attainable, time bound objectives, a clear policy for disengagement thereafter, an appreciation of the likely human & economic costs and comprehensive plans to treat our troops and Ex-Servicemen / Veterans in the way they deserve.

Historically the costs of war were easily written off against the loot collected from the vanquished. This was given the more acceptable name of ‘War Reparations’ up to the Second World War and of ‘Contributions’ during the 1st Desert War, which actually ended up as a revenue earner for the USA. Of course the transfer of resources such as actual factories, technologies and scientific and other talent was really also such loot collected by the victors even up to World War -II. The marketing of oil and collection of re-construction costs there from, in the aftermath of the Iraq war is another example.

But in the cases that we can look at as prospective war scenarios, such returns will not be available to us and we would be required to bear all the costs by ourselves. One more reason why going to war needs to be a very considered decision and winning the war (achieving the planned for objective) within the SHORTEST possible TIME with the LEAST COST is essential.

One facet of war is the loss of trained Manpower, which in turn would result in the bringing in of less trained and disciplined troops as replacements and thus result in even greater casualties and so on in a repeating cycle of down grading the skills of the military and, after the war, – the pool of the skill sets of the Country’s manpower to run its economic businesses. There is another facet to the cost of war which one generally ignores till it hits us in our face- the costs of social upheaval as a corollary to the casualties, especially when the War is long drawn and the casualties are many. The massive call up of the women from within a closed chauvinistic / feudal society, into the ranks of the employed as replacement for the lost man power to keep the wheels of the economy and the war effort going after WW-I, and the social upheaval and change this brought about all across Europe was clearly evident in the after war years. This process of change was more rapid till the end of World War -II.

The 8 year war between Iraq & Iran in the 1980s and the tremendous loss of manpower in the age group 15 to 55 years, caused the Ayatollah of Iran to allow the practice of Nikah al Mut’ah / Contract marriage to avoid the disruptive effect of a growing number of incidents of adultery getting out of hand, though here it did not seem to have led to woman empowerment thereafter as

it was not really a democratic country. It is however arguable that the Country’s economy would have been better if it had. Therefore, as we can now see, the effects of war are far reaching, well beyond the limits of action and of the costs and time of the actual fighting war and have to be factored in, to economically and speedily attain the objectives one has, when going to war.

Given below are the major items under which the costs should be considered and as can be seen there from, some of the costs will be spread over years, if not decades. Thus, in effect, passing the bills on to the next generation.

Now conflicts are not only war between Nation States, they are also conflicts with Insurgents &Terrorists and the Security Forces involved, including the Police and Paramilitary, and thus we must include the costs on them too in our calculations.

The items to be included in the Costs of War. (As listed by Joseph Stiglitz, Economist)

  1. The toll on the Soldiers and the Equipment
    1. Training and Manpower replacements
    2. Cost of maintenance, replacement & replenishment of equipment and ammunition
  2. The less apparent Economic & Social burden and associated Future Costs.
  1. Treatment for Medical care and disability care for long periods as will be required.
  2. Death & Disability, Benefits and Pensions to both Service and Ex-Service personnel
  3. Cost of Staff and Personnel to run these Programs.
  4. Reconstruction of war damages.
  5. Inflation and Time value of money
  6. Costs to other departments of the Government – Energy Costs, lower tax revenues due to weaker economy, interest thereon etc.
  7. Cost of loss of productive capacity and economic contribution of family including those who have to leave wealth contributing jobs to take up social care work for the disabled etc. (Insurance valuation of the economic value of life lost called ‘Value of Statistical Life’ and also the ‘Value of any Disability’).
  8. The lost Economic costs of diverting the investments from productive work. eg: Infrastructure, Education, Research etc, to war related expenses. The drop in the future growth rate due to displacements of investments.
  9. Other Macro Economic Costs – Government trying to cover up the adverse effects by reducing interest rates and lending standards to increase consumption and create a false sense of well being. eg: Sub-prime crisis, caused by efforts to cover up the effect of Iraq / Afghan war, in the USA.
  1. The costs of Domestic Security – where lack of proper Politico – Economic, Military co-ordination can lead to alienation of local populations and even greater costs.
  2. The cost of Counter Insurgency and Anti- Terrorist operations involving the Security Forces such as Police, Paramilitary and Military are also similar and need to be factored into our calculations. Many times such costs will be greater than the costs of development and resettlement of the locals which may do away with the conflict itself. Hence such an option should always be preferred.


Lack of understanding of the many facets, that total up

to the costs of war / conflicts, leads to a jingoistic demand for military solutions. It would be wise to try to attain our aims and to invest in economic growth by other means while still being able to deter our enemies from military adventurism.

As Peter Thiel writes in ‘Zero to One’ – “Conflict seems inevitable only in retrospect… war is a costly business (and though) winning is better than losing,… everybody loses when the war isn’t one worth fighting. However, sometimes, you do have to be ready to fight for things that really matter. Where that is true, you have to fight and win. There is no middle ground.”


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