Wars: The Hole in a Country’s Pocket

What gives rise to wars? Well, conflicts are an inevitable part of the survival of the human race; especially when existence is heterogeneous in nature. When conflicts intersect with political ideals and ideologies, land rights, religious dominance, etc they have the potential to churn out a war. 

Time and time again, countries around the world have stepped down to avoid war but a few remain unlucky and suffer the aftermath. The cost of war is immeasurable for all the parties involved. No matter who wins the battle, the loss is suffered on all ends; and usually, it is equal in magnitude. Economics is well-stitched into a war, so much so that experts believe every war entails an economic motive irrespective of the reason presented to the public. This is probably why one will never come across two entities fighting for a barren land with no water sources, no mineral wealth and no means of attracting investment in any form. Even if the total area of such land can help the country expand its territorial boundaries, it is not worth a war! 

To lay the foundation it is important to understand the ‘war economy’. When a nation is in a state of war, the prioritisation principle witnesses a shift in expenditure. The production of goods and services that support war efforts and strengthen the defence front of the country assume importance. A country at war re-configures its budget and diverts all the taxes towards national security, the nation might also borrow to fund its requirements. One ramification of war is that it encourages innovation. War economies demonstrate more technological, industrial and medical advancements as they are in competition to create cheaper defence products along with the emergency medical units to be well prepared. This is an instance of infrastructural development. However, the focus is not the welfare of its citizens.

One might expect wealthy nations to be more violent as they have more to fight over. However, the econometric evidence is divided, most researches show that wealth reduces the probability of a civil war by manifolds. In addition, economic growth acts as a shield against violence, while recession increases the probability. The most common reason for this is that wealthier societies are able to better protect assets, thus making violence less attractive for would-be rebels. Another explanation, given by political scientist Thomas Homer-Dixon argues that poverty causes violence, and points to cases where scarcity leads to migrations that result in conflicts between identity groups over resources. The cost of physical capital destruction and human capital destruction remain inevitable.

 Do wars benefit anyone?

It will be paradoxical to state that war will benefit the country. A conflict that results in loss of human lives, destruction of property, trauma, leaving hundreds of people homeless, and the list goes on, cannot do good to anyone. However, economics rises a notch above human sentiments and reflects on the infrastructural developments and a shift in the demand-supply chain. A country that is in a state of war will accommodate its working population in order to work to the brim and achieve the fullest of its capacity, thus aiming at full employment across different sectors. 

Spike in employment, the surge in working capacity and inclusion of the latest technology to produce efficiently helps in boosting economic growth. The government invests in the latest technology in order to keep pace with the war which in turn boosts innovation in the territory and paves way for research and development (R&D). 

Another important side effect of war is the change in social outlook and attitudes. History is evidence of the fact that women have stepped out of their houses in order to be a part of the labour force contributing to the battle whenever a war breaks out. Healthcare, a major support system during wars, witnesses women participating in large numbers to save the lives of soldiers. Various industries that work to boost the supplies welcome women in order to elevate the production capacity while the men go out to the battlefield. Women have played an important role in all the wars that humanity has witnessed till now, so much so that they became aware of their rights after World War I and World War II and with a stride of independence they continued to voice their rights and soon the demand for ‘vote’ was raised by women across the world.

What is at stake for Israel-Palestine?

In May 2021, Israel and Pakistan counted 11 days of hostilities that resulted in the loss of life and physical capital on both ends. The housing ministry of Gaza stated that 16,800 housing units have been damaged. The electricity grids across Gaza remain dismantled with barely three-four hours of power supply in a day. The Hamas media office estimated the bombardments had caused $40 million in damage to factories and the strip’s industrial zone and other industrial facilities, in addition to $22 million in damage to the energy sector. In addition, the sanitation facilities have been damaged and the water supply remains disrupted with limited or no access to water.

The Israeli economy already contracted by 6.5% in the first quarter due to the pandemic.  The Central Bureau of Statistics predicts that the road to revival is likely to stay disrupted owing to the fight between Israel and Palestine. Israel’s manufacturers’ association reported a loss of $166 million as of 13 May 2021 because the south and centre of the country witnessed intense rocket fire from Gaza.

The economic relations between Israel and Palestine date back to 1967 when Israel occupied the West Bank and Gaza Strip and integrated their markets with its own. The Israeli economy was about ten times the size of its neighbour’s economy and the manufacturing sector’s GDP share was over four times larger. Thus the difference was between a large, rich and advanced economy and a small, poor and underdeveloped economy. 

Both theoretical analysis and empirical studies suggest that the dynamics of such a relationship always generates two opposing forces that disproportionately affect the smaller economy and shape its development. A favourable repercussion is an increased demand for the products of the small economy, diffusion of technology and knowledge. Unfavourable repercussions arise from the disappearance of many industries in the small economy, its confinement to producing low-skill goods, and the emigration of a sizable segment of its labour force to the neighbouring economy, as well as to other countries. This suppression of a powerful neighbour has resulted in numerous incidents of violence, time and again. The end consequence has been that the region of Palestine has seen practically no development and has remained war torn. 

Nevertheless, “who benefits from war?” remains unanswered.


Vanshika Sighroha

A woman with opinions and confidence to voice them out freely, I am currently pursuing my majors in Economics. With a love for food, books and movies, I also love to write and further expand my horizon. I find my solace in travelling and good music!

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