Economic Causes and Impacts of Wars

1. Economic causes of war

In plain words: Fights over resources and trade, and hard economic times, often help push countries into war.

Economic pressures often help start wars. Political causes and beliefs matter too.

• Competition for resources and markets. Before World War I, European empires competed for colonies, raw materials and trade. In the 1930s, Japan was short on oil, rubber and iron. So it expanded into China and Southeast Asia. In 1941 the United States cut off oil exports to Japan. Japanese leaders then decided to strike at Pearl Harbor and seize lands rich in oil.
• Economic crisis and extremism. Germany suffered three blows. First came the harsh terms of the Treaty of Versailles. Next came German hyperinflation (1923). Then came the Great Depression. Together they created despair that helped Hitler gain power.
• Trade and neutral rights. Attacks on shipping drew the United States into the War of 1812. It happened again in World War I. German submarines attacked ships carrying Americans and trade goods.
• Slavery and economic systems. The Civil War grew out of the conflict over slavery. Slavery was tied to the South's plantation economy and to its spread into western territories.

Example: A GED question might show this timeline:

• 1937: Japan invades China.
• 1940: The U.S. restricts exports.
• 1941: The U.S. places an oil embargo on Japan.
• December 1941: Pearl Harbor.

It might ask which factor most influenced Japan's decision. The answer would focus on access to resources such as oil.

2. Paying for war: taxes, borrowing and printing money

In plain words: A government can pay for a war in three ways. It can tax people, borrow from them, or print new money.

Each way has trade-offs:

Civil War (1861–1865):

• The Union created the first federal income tax (1861). It also sold bonds and printed paper money called "greenbacks."
• The Confederacy had little industry, and its cotton exports were blockaded. So it printed money heavily. Its prices rose roughly 9,000%. Union prices rose about 80%.

World War I (U.S. 1917–1918): The 16th Amendment (1913) had made a permanent income tax possible. During the war, tax rates rose sharply. The government also raised billions through Liberty Bond drives.

World War II (U.S. 1941–1945): This was the costliest war in U.S. history.

• Taxes paid a little less than half the cost.
• The Revenue Act of 1942 turned the income tax into a "mass tax" paid by most workers. Withholding began in 1943.
• The rest was borrowed through war bonds.
• The federal debt grew from about $51 billion (1940) to about $271 billion (1946). At its peak, the debt was larger than the economy's entire yearly output.

Example: Debt rises from $58 billion to $260 billion. The percent increase is (260 − 58) ÷ 58 × 100 ≈ 348%.

3. The home front: production, controls and rationing

In plain words: At home, factories made weapons instead of cars. The government limited prices and how much people could buy.

Wartime production.

• In World War I, the War Industries Board coordinated factories.
• In World War II, the War Production Board ordered conversion — switching factories to war goods. In 1942, automakers stopped making cars for the public. Instead they built tanks, jeeps and aircraft engines.

U.S. factories produced huge numbers of planes, ships and tanks. The country became the "arsenal of democracy" — a storehouse of weapons for its side. Unemployment was still about 15% in 1940. By 1944 it fell to about 1%.

Fighting inflation. Almost everyone had a job, but there were few consumer goods to buy. That meant "too much money chasing too few goods." This pushes prices up. The Office of Price Administration (OPA) answered with:

• price ceilings (legal top prices) on goods and rents;
• rationing — ration books and stamps for tires, gasoline, sugar, coffee, meat, butter, canned goods and shoes;
• urging people to buy war bonds instead of goods. This soaked up spending.

Citizens also planted victory gardens (home vegetable gardens). They ran scrap drives for metal and rubber.

Example: Rationing and price ceilings work together. A ceiling alone would create shortages, because people want more at the low price. Rationing decides who gets the limited supply. One side effect was black markets — illegal sales above ceiling prices.

4. War and the workforce

In plain words: When men left for war, factories needed new workers. Women and minority workers stepped in.

Wars pull millions of workers into the military. At the same time, factories need more labor.

• Women. In World War II, the number of women in the workforce rose from roughly 12 million to about 18 million. "Rosie the Riveter" was the symbol of women in shipyards and aircraft plants. They did jobs once closed to them. About 350,000 women served in uniform. After the war, many were laid off as veterans returned. But women's paid work never fell back to pre-war levels.
• Black Americans. In both world wars, war jobs sped up the Great Migration. This was the move from the rural South to cities in the North and West. In 1941, labor leader A. Philip Randolph threatened a march on Washington. Under this pressure, President Franklin Roosevelt issued Executive Order 8802. It banned racial discrimination in defense industries.
• Mexican Americans and the Bracero Program (1942). Mexican workers were recruited to fill shortages of farm and railroad workers.
• Unions grew during the war. Most agreed not to strike. In exchange, they got government support.

Example: A table shows women workers rising from 12 to 18 million. Percent increase = 6 ÷ 12 = 50%.

5. After the fighting: postwar economies

In plain words: After World War I, Europe struggled. After World War II, U.S. aid helped Europe rebuild, and the U.S. enjoyed a long boom.

After World War II, people had savings built up during the war. Veterans had the GI Bill. Together these fueled suburban home building, car buying and the baby boom (a big rise in births). Military spending stayed high during the Cold War.

Later, the government paid for the Vietnam War and new social programs at the same time. This was called "guns and butter." It added to inflation in the late 1960s.

Example: A question may ask why the U.S. funded the Marshall Plan. Look for answers about rebuilding trading partners and stopping the spread of communism. Do not pick answers about collecting reparations.