How much does a war cost?

Paul Collier
Paul Collier

A previous post on this blog investigated how it was worth to Britain that it was no longer at risk of fighting a world war against Germany.  For all the attempts to quantify the benefits to the economy from EU membership in terms of larger markets and fewer customs forms, what about the benefits of not having our cities rained with bombs from the air or not having to conscript our 18 year olds to spend two years on compulsory military service?  Freedom from the threat of such a war is an under-appreciated benefit.

There is research that enables us to generalise this conclusion.  An existential struggle between the most powerful countries on the planet is mercifully rare, but more limited wars between middle-ranking and smaller countries are sadly more common.  What do they cost?  What would be the economic benefits of preventing them?

Paul Collier’s marvellous book Guns and Votes: Democracy in Dangerous Places reports on this work.  According to the Stockholm International Peace Research Institute, average arms expenditure in the period 1960 to 1999 was 3.4 per cent of GDP.  For those countries engaged in a civil war, this expenditure rose by 1 percentage point and for an international war against another country, the average increase was 1.5 percentage points.

But most of the cost of war is not incurred in fighting.  It arises from the fear of fighting.  After a war, a country’s military expenditure is typically higher by 1.8 percentage points.  Presumably this effect diminishes over time as memories of the war fade, but the data does not go back far enough for Paul Collier to find it.  Even after 40 years, a country can still have a military mindset.

If the question is asked why it is that Britain and France are more ready to despatch soldiers to combat than are other large European countries such as Spain, Italy and Poland, it is because that is what Britain and France have done in the past.  It is a habit that is hard to shake.

If the after-effects of war linger on, expensively, it is because of the difficulty of answering the question: how much military expenditure is enough?

During a war, you know who the enemy is and what the objectives are, and so the necessary means can, with some margin of error, be worked out.  But in peacetime, what means do you need?  Identifying the enemy is a matter of speculation, not an objectively observable fact.  Britain didn’t plan for war with Argentina over the Falklands in 1982, but found itself fighting there nevertheless and cobbling together an expeditionary force that was – just – powerful enough.

Paul Collier finds that, in peacetime, military spending increases more than proportionately with income.  In a sense, it is like health care: there is always more that can be done because you never know when you might need something.  In the health service, it is an extra scan just in case the first one didn’t pick something up; for the military, it’s another squadron of fighter jets.  Maybe you won’t need them, but how bad will it be if it turns you do, and you haven’t got them.

There is an argument that protecting the state is the government’s most important job – it is the fundamental purpose of the state to protect its citizens – and that therefore money should be no object.  The military should have whatever it needs.  The difficulty here is to distinguish between the military having enough and the military having too much, the cost of too much military equipment being borne by under-equipped hospitals and schoolrooms instead.

The way to make war less costly is to make it, reliably, less likely.  If there are steps that our neighbours can take to make them less threatening to us, we should encourage them to take them, and if that requires similar steps by us, we should take them ourselves.  The threat of war turns out to be so costly, even in the absence of any actual fighting, that mutual steps to reduce that threat are the way to keep costs down.

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