Costly cogs of war

The Economics of World War II

October 23, 1998

The year 1945 dawned with 44 million men under arms in the uniforms of the great powers. They had at their disposal at least 23,165,000 rifles, 324,100 highly expensive war planes and 6,226 major naval vessels, every item manufactured in the previous two years. Outlays for military purposes in 1943 were already close to half of the national income of the United States and Japan, more than a half of the United Kingdom and about two-thirds of Germany and the USSR. The world lived overwhelmingly for early 1942 from fighting and making things to fight with.

How was this organised, and what difference did it make at the time and afterwards? These are the questions that Mark Harrison collected seven scholars to answer, all of them experts in their field. The editor himself has devoted decades to exploring the Soviet war economy, and it is the determination with which he has done this that makes these international comparisons possible. Here is no commonplace collective volume, but a splendidly organised compendium of reference and interpretation for all readers interested in the war and an indispensable base for all further enquiry into it.

Harrison's indexes of Soviet armaments production and the comparative tables of output of specified armaments for all the six powers (Germany, Italy, Japan, the UK, the US and the USSR) appear for the first time in a book. Akira Hara's account uses the recent figures for Japan's wartime national income by Mizoguchi Toshiyuki and Nojima Noriyuki. Otherwise, there is not much new data in the book, from which it must be inferred that much of what we would like to know statistically will be very hard to discover or reconstruct.

Missing figures may ultimately be a lesser problem, however, than the way in which a world that lives by fighting gives a different meaning to many of the concepts under which we list economic information. When fighting is the main employment and the main market for industrial output, do the rises in national income that derive from it have the same meaning as in peacetime? Would they, for example, be sustainable?

One way to start to answer that Orwellian question is to turn it round and find out how much the "non-war sector", which the authors try to identify and count, shrank. This proves very hard, conceptually and statistically. In total war, what is non-war? The British government defined it by employment, and most of the book's contributors seem to agree that to be the best statistical procedure, although it is in several cases far from realisable. Is working to make the minimum of consumer goods necessary to keep other citizens zealous, however, truly a "non-war" activity?

Comparing the reductions in civilian consumption necessary to base an economy on fighting can be done only vaguely from existing data. That problem turns authors towards exploring the methods of government intervention to achieve so much fighting equipment. There, changing fashions in economic thought now make an appearance. For 40 years, anonymous government servants have been the heroes of the Allied war economies. With their administrative orders, rationing schemes and managerial abilities, they saw us through. Included in that were Stalin's managers too. Would the British war economy have performed better had more been left to markets and incentives, Stephen Broadberry and Peter Howlett ask.

They do not attempt an answer, but Hugh Rockoff in his excellent overview of the US war economy goes to the heart of that question. The success of the US depended, he shows, on drastic government controls to divert resources away from "non-war" purposes between 1941 and 1942. After that, the civilian sector was "put on hold" until the end of the war; it did what it could with the resources it could find on such markets as there were. Werner Abelshauser's thoughtful mixture of macroeconomics and historical detail offers the best overall judgement yet on the long-running dispute over the extent of German economic commitment to war before 1942. Its quality lies in that it recounts not only what bureaucrats decided, but also what then really happened as a result in markets and the labour force. This kind of analysis is badly needed on the subject of Britain's war economy, so far limited to national accounting and bureaucrats' decisions.

It is a sign of the times also that money and prices receive far more attention in this volume than they would have done ten years ago. The account of the British war economy starts there, implying that its title, "Victory at all costs", is ironical. Inflation, open or disguised, was both the gift and the curse of these production epics. Even the Soviet bureaucracy spent much effort on setting and adjusting prices in its determination to know what the war was costing, for many of the prices had little other purpose. Monetary and fiscal policies in wartime are seen here, rightly, in longer-term perspective. This effectively disposes of the idea that the money had to be found to implement the planning decisions of wartime bureaucrats, leaving only the mode of its provision to political judgement. The war now appears as an integral part of the monetary and fiscal history of our century.

What did it bequeath? To defeated Italy, it bequeathed the sources of dynamic peacetime economic expansion. To the heroically victorious USSR, it bequeathed an economic setback whose effects lasted until the mid-1970s, the death of 26.6 million citizens and almost half a century of rule by people who, like Brezhnev, had run its war industries. To the US, it bequeathed a new macroeconomic regime that, Rockoff writes, "reshaped monetary and fiscal policy and profoundly influenced employment and inflation for decades afterwards". Is that what it bequeathed to Britain, too?

Alan Milward is professor of contemporary history, European University Institute, Florence.

The Economics of World War II: Six Great Powers in International Comparison

Author - Mark Harrison
Editor - Mark Harrison
ISBN - 0 521 62046 5
Publisher - Cambridge University Press
Price - £35.00
Pages - 307

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