War Economy

Written By
Paul Tracy
Updated November 4, 2020

What is a War Economy?

A war economy centers on producing goods and services that support war efforts.

How Does a War Economy Work?

For example, if Country X spends most of its tax dollars on defense and/or uses most of the proceeds from borrowing money for maintaining military and defense efforts, Country X may be a war economy compared with, say, Country Y, which spends most of its tax revenue and borrowed money on infrastructure and domestic programs.

Why Does a War Economy Matter?

War economies can exist out of necessity if a country feels threatened and must make national defense its priority. War economies can also exist for cultural reasons.

Regardless of the reason, war economies sometimes show more technological, medical and industrial progress because there is a race to create systems, products, services and ideas that protect and defend better and/or more cheaply. War economies sometimes exist at the expense of domestic development and production, however.

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