Defense Economy of War Test 1

gross resources

GPD, population, spending, total inflow of economic value from business activities

net resources

what a state can mobilize for external competition after spending

3 major costs for a state

production costs (generate economic output), welfare costs (sustain the population), security costs

how to measure net power

combine GDP (size) and GDP per capita (efficiency)

China and net power argument

China has large population and lower productivity, which imposes a lower net power and high internal costs, competition is not sustainable for them

Beckley main argument about gross and net power

gross power measurements inflate countries’ power predictions, while net power measurements are more accurate because they involve spending and what the country actually can use from surplus

GDP

measure of the size of a country’s economy, total production output of a country’s economy in one year. not the same as wealth, more like income (wealth is residual after spending)

Money

the ability to buy things, you can hold wealth as money or as stockpiles/inventory

breakdown of GDP

production (everything produced needs to go somewhere) and use

GDP formula

GDP= consumption + investment + government purchases + net exports (aka exports-imports)

high gdp

a country can make a lot of stuff/stuff with high value, comes from either lots of inputs/resources or high productivity

war according to Rockoff

economic phenomenon, forces societies to confront scarcity

3 methods to finance wars

1) taxes (visible costs to the public, economically honest) 2) borrowing (shifts burden to future taxpayers, common in major wars) 3) printing money (inflation)

wars and inflation

wars can cause inflation due to increased government spending, money printing, disrupted production

Guns vs. Butter Tradeoff

more military production means less civilian consumption

draft

acts like a tax on draftees, high economic costs with lost civilian wages and distorted labor allocation

costs of war

direct costs, indirect costs (civilian production lost, destruction of capital), opportunity costs (what a society could have produced instead)

short term effects of war

increased government power, expansion of federal taxation and bureacracy, technological innovation

long term effects of war

permanent changes to labor markets, state capacity, public expectations of government

U.S. economic way of war

heavy borrowing, industrial innovation, postwar veteran reintegration

“good outcome” for war

gain/protect wealth, achieving war aims, winning with minimal losses, achieve security and liberty. often after you achieve basic security, people begin to want material things “butter”

trade surplus

you have less to consume today, lending stuff to foreigners and hoping that they will give you the things you will need in the future

U.S. consumption statistics

peacetime U.S. experiences about 70% consumption, U.S. government is 30% expenditure, investment is 12%-15% of the economy, this totals to 105% so net exports cut is down about 5%. borrowed money is used to account for the high percentage of consumption

consumption during war

consumption shrinks and government spending increases, investment lowers as well

U.S. military spending

4.3% of GDP, creates fewest jobs per $1 billion. redirecting funds to education, health care, infrastructure can create more jobs and increase job quality

cost of war components

foregone consumption during the war, reduced future productive capacity, increased future productive capacity, destruction of infrastructure and worker death

misery index

unemployement + inflation rate, becomes more relevant when people feel they have high levels of national security

employment effects of government spending

direct effect: people who actually make the final product

Indirect effect: people who make components of the final product

Induced effect: people who make things that are purchased by the people who are directly and indirectly employed

Murray core argument

pre wwii germany was constrained by economic and material weakness despite rapid rearmament with a deep dependence on foreign raw materials and exchange, pushed them into war. Germany had to win quickly because they could not sustain attrition and prolonged war favored materially superior opponents

German rearmament

distorted economy, military production, corwded out consumer goods, reduced export competition, labor shortages from conscription and overmobilization

industrial capacity of germany

expansion of capital goods and lagging civilian economy

Nazi economic governance

overlapping agencies, poor coordination, political favoritism>efficiency, civilian and military planning conflicts, reactive strategic decisions, no central planning

Hitler and Germany economy

Hitler more focused on morale of german people, constantly redlining/maxxing out the economy, always running out of resources, exports are reliant on coal and final goods however they have to continuously export to continue to conquer

key features of a resource

efficiently produced, expendible, necessary for war effort, mass production possible, able to be exported if necessary, limited supply, adaptability, not easy to substitute for, supply is concentrated in a few sources

self-sufficiency strategy

invest to increase domestic production and reduce domestic consumption, expensive, not efficient to just produce more

indirect control strategy

cultivate friends who will supply you, allies may betray you and may not be able to protect transit routes

direct control strategy

conquer producers and trade routes, you might lose the wars or they might escalate out of control

allies and converting resources into military power

simple designs, emphasis on quantity and reliability, assembly line production, integration of civilian industry into the war effort, production systems favored speed and repairability

soviet contribution to war resources

rapid evacuation of factories eastward, brutal but effective labor mobilization, prioritized simplicity/durability/ease of use, outproduced Germany in tanks and artillery mid-war

German structural weaknesses

excessive weapons variety, poor coordination between military branches, competition among nazi bureaucracies, nazi ideology emphasize on racism and prestige

allied vs. axis politics

allied politics were more adaptable and coordinated, they balanced coercion and incentives and maintained legitimacy. axis powers relied too heavity on coercion which lowered productivity and increased inefficiency

Overy Main argument

“don’t be in the middle” German economy being in between Soviet Communism and U.S. capitalism meant it was very inefficient

economic warfare

state’s efforts to undermine an enemy’s war capacity by attacking its economu

strategic bombing

aimed to destroy industrial production, however Germany’s war production continued to rise until 1944, it was strategically inefficient at collapsing economies because allies lacked precise industry knowledge and accurate intelligence

economic warfare is effective only when

targets are precise, applied consistently, paired with battlefield success, works best as military supplement

challenges of strategic bombing

expensive delivery systems, industry can disperse and hide, targets are hard to damage, attackers make mistakes, unreliable damage assessment

modern blockade claim

a blockade could be viable/damaging to china but only in a strategic context (long war over vital interests with regional support)

chinese economic vulnerability

trade is 52% of china’s GDP and 90% of it is seaborne, war of exhaustion can erode national power, china heavily dependent on oil imports, success depends on whether the region blames china or the U.S. for the war

inner ring system solution

sink on sight deterrence, exclusion zone near China’s coast, enforced by subs/air power, neutralize shipping headed to china

outer ring blockade strategy

distant blockade, checkpoints at key chokepoints to inspect ships and sieze chinese cargo. use havicert system where ships are pre-approved and tracked

blockade

externally cut off trade for a country, disrupt maritime traffic ships, deny the adversary the authority to produce what it needs to fight, act of war

blockade lessons from wwii

land connections are hard to interdict, success depends on what neutral nations decide to do

advantages for modern blockage

trade is huge part of modern economy, U.S. has high quality navy, treaty alliances and partnerships are high in number, U.S. dislikes large mobilization efforts and on the ground fighting

autarky

economic system where you aren’t dependent on others, avoid importing weapons, importing key inputs, and exporting weapons to enemies, favored by domestic producers

cons of autarky

vulnerable to internal shock, reduces other countries’ friendly interest in you 3) small home market might increase cost, foregoes comparative advantage

autarky efficiency dilemma

greater autonomy can only be bought at the price of reduced efficiency in armaments production, national security depends on both autonomy and efficiency

economies of scale

large fixed costs, greater specialization of workers’ tasks as scale increases, generally exhausted when output is effectively at constant cost

sanction effectiveness depends on

1) sender concentration 2) target concentration 3) target elasticity (aka if alternatives exist, the target can adjust and reduce costs, weakening sanctions)

why do sanctions often fail

target states can find new suppliers, sub goods, reallocate trade, smuggle goods, invest in new productions

China Japan Rare Earths Dispute 2010

China allegedly restricted rare earth exports to Japan during a territorial dispute. However, Japan adapted quickly and diversified their supply and reduced dependence. Market structure matters more than raw trade volume.

supply side adjustments

stockpiling, sourced materials indirectly through third parties, smuggle and trade rerouting, recycling

demand side adjustments

reduce rare earths in manufacturing, developed substitutes, improved efficiency

semiconductors

foundational technology behind modern computing, military systems, and global economy. underpin weapons and advanced AI technologies

structure of global chip industry

high specialized and fragmented: U.S. dominates in key tools and design and Taiwan dominates manufacturing. however concentration creates vulnerability, disruption in Taiwan could halt global supply

US v China Chip War

China investing heavily to build domestic chip capacity and reduce dependence on foreign technology

U.S. wants edge through export controls, alliances, and domestic investment

U.S. semiconductor strategy

subsidize domestic manufacturing and research, coordinate allies, manage dependencies, invest in work/research/advanced manufacturing, limit chinese access to advanced chips and materials