In 2001, Galbraith published a paper titled “The meaning of a War Economy”, in which he sought to examine how the World Trade Center tragedy changed the outlook for the economy, and what the nation’s response should have been.
In 2022, the Russian Federation carried out a military aggression against Ukraine. Most countries determined that the aggression was unprovoked and unjustified and decided to take economic measures to respond to it. For example, on 28 February, the Council of European Union approved:
- a ban on transactions with the Russian Central Bank
- new sanctions on persons and entities, adding 26 persons and one entity to the list of persons, entities and bodies subject to restrictive measures. The new listings include oligarchs and businessmen active in the oil, banking and finance sector, as well as government members, and high level military personalities, and propagandists. Restrictive measures, which apply to a total of 680 individuals and 53 entities, include an asset freeze and a prohibition from making funds available to the listed individuals and entities.
According to Josep Borrell, High Representative for Foreign Affairs and Security Policy, “with these additional sanctions, we are targeting all who are having a significant economic role in supporting Putin’s regime, and benefit financially from the system. These sanctions will expose the wealth of Putin’s elite. Those who enable the invasion of Ukraine will pay a price for their action.”
Regarding the US side, February 24, US Treasury took action against Russia’s top financial institutions, including sanctioning by far Russia’s two largest banks and almost 90 financial institution subsidiaries around the world. Treasury also decided to sanction additional Russian elites and their family members and to impose additional new prohibitions related to new debt and equity of major Russian state-owned enterprises and large privately owned financial institutions. According to US Tresury, these sanctions are specifically designed to impose immediate costs and disrupt and degrade future economic activity, isolate Russia from international finance and commerce, and degrade the Kremlin’s future ability to project power.
“Treasury is taking serious and unprecedented action to deliver swift and severe consequences to the Kremlin and significantly impair their ability to use the Russian economy and financial system to further their malign activity,” said Secretary of the Treasury Janet L. Yellen. “Our actions, taken in coordination with partners and allies, will degrade Russia’s ability to project power and threaten the peace and stability of Europe. We are united in our efforts to hold Russia accountable for its further invasion of Ukraine while mitigating impacts to Americans and our partners. If necessary, we are prepared to impose further costs on Russia in response to its egregious actions.”
Galbraith underlines that “in a war economy, the public obligation is to do what is necessary: to support the military effort, to protect and defend the home territory, and especially to maintain the physical well-being, solidarity and morale of the people”.
A war economy can be defined as a set of contingencies undertaken by a state to mobilize its economu for war production. Le Billon describes a war economy as a “system of producing, mobilizing and allocating resources to sustain the violence”.
The development of the Ukraine crisis is higlightig the need to present a new definition of war economy, since many countries are already fighting a war without firing a single bullet. War economy should be reinterpreted as the “system of producing, mobilizing, allocating, banning and freezing resource to sustain or to stop violence”.
The above definition is better understtod if we connect it to the following one: globalization. In the most fundamental sense, the term refers to the “increasing interdependence of national economies throughtout the world”. It is characterized by rising world trade in goods and services, increasing flows of cross-national finance (including banking, stock market transactions, and corporate acquisitions), greater legal and illegal, cross-national labor migration, accelerated international transfers of advanced technologies, expansion of multinationals, and mounting influence of major global economic institutions such as the International Monetary Fund, the World Bank, and the World Trade Organizations. All of these changes enhance the interdependence of national economies.
In short, in today’s world, no nation exists in economic isolation. All aspects of a nation’s economy are linked to the economies of its trading partners.
If we accept the above definition and understand in depth the concept of globalization, we should also accept the idea that military planification cannot and should not be done in the old manner, but new perspectives should be added to it. We believe that all Field Manuals, and Planning Manuals, should be rewieved. In fact, in order to prepare for and conduct military operations it is necessary to develop operational plans, which address all relevant factors applicable to the efficient and successful conduct of an operation.
In genersal terms, the tools available to a nation to conduct a war, the so-called “Four Instruments of Power – MPEC”: Military, Political, Economic, Civil (MPEC).
- It refers to the application of military power, including the threat or use of lethal and non-lethal force, to coerce, deter, contain or defeat an adversary, including the disruption and destruction of its critical military and non-military capabilities.
- The political instrument refers to the use of political power, in particular in the diplomatic arena cooperating with various actors, to influence an adversary or to create advantageous conditions.
- The economic instrument generally refers to initiatives and sanctions designed to affect the flow of goods and services, as well as financial support to state and non-state actors involved in a crisis.
- The civil instrument refers to the use of powers contained within such areas as judiciary, constabulary, education, public information and civilian administration and support infrastructure, which can lead to access to medical care, food, power and water. It also includes the administrative capacities of international, governmental and non-governmental organizations (NGO). The civil instrument is controlled and exercised by sovereign nations, IO and NGOs.
Now, focusing on the instrument number 2: economic, the Ukrainian War has taught us about the importance of a common use of the economic instruments. As highlighted before, in the past three decades there has been unprecedent global economic integration. However, despite the gains derived from globalization, global economic integration means also that domestic economies are more vulnerable to disturbances intiated somewhere else. Focusing more in depth on instrument number 2,
What are the tools that can be used from the perspective of a new definition of War Economy?
In other words, what are the instruments that could be put in place to sustain the violence (in attack) or to stop in (in defence)?
