The Economics of the Second World War: Seventy-Five Years On
Debate Moderator(s): Stephen Broadberry, Mark Harrison
The economic history of the twentieth century is written largely in terms of peacetime. There are the periods before, between, and after the two World Wars, but this leaves out the war periods themselves as aberrations that are not amenable to normal economic analysis. To mark the centenary of the First World War, the CEPR Economic History Programme commissioned a number of VoxEU columns, which were collected in an eBook, The Economics of the Great War: A Centennial Perspective. The positive response encouraged us to propose a similar debate on the economics of the Second World War, to mark the eightieth anniversary of that even greater conflagration.
Just as for the First World War, there is a traditional literature on the economics of 1939-1945, largely organised on a national basis, with a wealth of administrative detail, but often light on analytical clarity. Meanwhile, economists and historians have shown fresh interest in conflicts among and within states, their roots, their management, and their long-term consequences for twenty-first century states and societies. Associated with this are novel findings on economic aspects of the Second World War which are, in varying degrees, international or comparative, contributing new data and original analytical insights.
Our aim is to present recent research on the economics of the Second World War across a range of topics:
• The preparations for war.
• The conduct of the war.
• The consequences of the war.
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Commentaries
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Matthew Powell, 27 January 2020
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Sara Torregrosa Hetland, 27 November 2019
This Debate's Commentaries
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Matthew Powell, 27 January 2020
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Sara Torregrosa Hetland, 27 November 2019
Lead Commentaries
Recovery and reconstruction: Europe after WWII
The year 1945 marked the end of the worst military conflict in history, which brought unprecedented destruction and loss of life. However, the quarter-century that followed is known as the most remarkable period of economic growth and social progress in Europe. This column, part of a Vox debate on WWII, lays out three factors that made this paradox possible: the strong foundations of economic recovery in Western Europe, vital support for the reconstruction of European trade and cooperation, and Allied support for the revival of the German economy. In contrast, Eastern Europe could barely recover due to the demographic disaster from the war.
Economic warfare: Insights from Mançur Olson
Economic warfare was widely used in WWII. When one country blockaded another’s supply of essential goods or bombed the industries producing them, why did the adversary’s economy fail to collapse? This column, part of the Vox debate on the economics of WWII, reviews Mançur Olson’s insights, which arose from the elementary economic concept of substitution. He concluded that there are no essential goods; there are only essential uses, which can generally be supplied in many ways.
Supplier networks as a key to wartime production in Japan
During World War II aircraft production in Japan increased sharply. This column, part of the Vox debate on the economics of WWII, examines the reasons for this ‘production miracle’, focusing on an aircraft manufacturing plant of Mitsubishi Heavy Industries Co., one of the two largest aircraft producers in Japan. The key to the production increase was the expansion of the supplier network. Mitsubishi Heavy Industries organized many suppliers to provide aircraft parts to its plants. However, in the final stage of the war, destruction of the supplier network by strategic bombing and an earthquake caused the collapse of the company’s aircraft production.
World War II in America: Spending, deficits, multipliers, and sacrifice
The US became the ‘arsenal of democracy’ by producing a massive amount of military goods that raised real GDP by 72% between 1940 and 1945. Yet, multiplier estimates for this expansion in government spending are less than one. Long-range studies at subnational levels show that military spending was associated with small effects on per capita activity. Military spending in the context of a quasi-command economy crowded out private consumption and investment and forced people into the military. In essence, Americans sacrificed heavily to win the war, while their Allies sacrificed even more.
The economics of neutrality in World War II
Neutrality has long been viewed as impartiality in war. This column, part of the Vox debate on World War II, asserts that neutral states in the war were realist in approaching their defence to ensure their survival. Neutrals such as Portugal, Spain, Sweden, and Switzerland maintained independence by offering economic concessions to the belligerents to make up for their relative military weakness. Economic concessions took the form of merchandise trade, services, labour, and capital flows. Depending on their position and the changing fortunes of war, neutral countries could also extract concessions from the belligerents, if their situation permitted.
Exploitation and destruction in Nazi-occupied Europe
Taken together, the economies of the Nazi-occupied countries were roughly twice the size of the German economy, but Berlin obtained less than 30% of its war expenditures from them. This column, part of a Vox debate on the economics of WWII, argues that in that sense exploitation failed, but the way Germany tried to exploit its empire had important consequences. In Western Europe, where productivity was higher and Berlin took a substantial share of production, mortality was limited and postwar recovery was rapid. In Poland and the USSR, where productivity was lower, continuous warfare and Nazi racism spread destruction and raised mortality, impeding recovery.
How WWII shaped political and social trust in the long run
How did WWII shape our views about the state, and about each other? This column, part of a Vox debate on the economics of WWII, uses individual-level data from more than 35,000 individuals in 35 countries to shed light on how wartime victimisation has shaped political and social preferences in the long run. Personal or family exposure to war violence has left a negative and enduring imprint on levels of political trust throughout Europe and Central Asia, regardless of the outcome or nature of the conflict. It also spurred collective action, but of a dark nature – one associated with further erosion of social and political trust.
The economic history of World War II
Marking the 80th anniversary of the outbreak of the Second World War, some of the authors involved in VoxEU's series, The Economics of the Second World War: Eighty Years On, talk to Tim Phillips about their research.
Economists at war
The World Wars precipitated unprecedented economic problems in all countries. This column, part of a Vox debate on the economics of WWII, describes how economists played a larger role in WWII than in any previous conflict. They advanced the methods of public finance and influenced the directions of the war effort. By the end of the war, economists were widely embedded in government and policymaking.
How the war was won
Allied victory in WWII is usually viewed through the lens of large land battles, from Stalingrad to Kursk to D-Day. However, battlefield losses of equipment in these ‘great’ land battles were relatively small and easily replaceable. This column demonstrates that the real effort of the major powers was put into the construction of air and sea weapons. The Allies used their air and sea power to destroy the Axis’s in a multi-layered campaign. This was the true battlefield of WWII: a massive air-sea super battlefield that stretched for thousands of miles. Victory in this super-battlefield led to victory in the war.
The famines of WWII
Of WWII’s warring powers only the Soviet Union suffered mass starvation, but as this column, part of a Vox debate on the economics of WWII, describes, it is a measure of the war’s global reach that 20 to 25 million civilians died of hunger or hunger-related diseases outside Europe. In Britain effective rationing ensured a ‘fair’ distribution of food supplies throughout the war and in Germany the famine conditions experienced in 1918-19 were not replicated, but Japan was facing semi-starvation at war’s end. In Europe, apart from Greece and the Soviet Union, famine mortality was modest, but 3-5% of the populations of faraway Bengal, Henan, and Java perished.
Inequality: Total war as a great leveller
World War II sharply reduced income and wealth inequality in many countries. This column, part of a Vox debate on the economics of WWII, describes how various factors converged to produce this outcome. Mass mobilisation raised demand for labour and reduced skill premiums, extremely high marginal tax rates cut into elite incomes and fortunes, aggressive government intervention curtailed corporate and investment profits and sought to protect workers, consumers, and renters. Returns of capital fell as international markets suffered interruptions and physical assets risked confiscation or destruction. Communist regimes expanded their reach. In market economies, the war experience promoted reforms regarding social welfare, unionisation and taxation that sustained several decades of greater equality.