War as an Endogenous Mechanism of Growth in Capitalism: A Critical Perspective and Proposals for Alternative Models

Guido Donati* 02 Lug 2025



Table of contents:
• Part 1: The paradox of capitalism: infinite growth in a finite World 
• Part 2: War: a hidden "reset" for the capitalist economy?
• Part 3: Beyond the limit: the unsustainability of a destructive model
• Part 4: Towards a future of well-being: proposals for a paradigm of peace and sustainability

Part 2: War: a hidden "reset" for the capitalist economy?


Abstract:
War and capitalism: an economic restart mechanism?
In Part 1 of our essay, we explored the profound paradox of capitalism: a system that postulates unlimited growth on a planet with finite resources, fueling critiques rooted in Malthus, Marx, and ecological economics. This intrinsic tension raises a fundamental question: how does such a model sustain itself in a context of increasing limits? In this second part, we delve deeper into our central thesis, examining how war, far from being a mere incident, can operate as an endogenous mechanism for the restart and regeneration of the capitalist economy. We will analyze the mechanisms through which conflicts, while devastating, can generate economic stimuli, and the criticisms associated with the use of military spending as a driver of growth.

2. War as an economic stimulus: mechanisms and concealed justifications
The relationship between military spending, armed conflicts, and economic growth is a complex and multifaceted field of study. Although economic literature offers heterogeneous and often ambivalent results regarding a simple linear correlation, historical evidence from macro-periods supports the idea that, in certain circumstances, war and subsequent reconstruction can act as a powerful economic stimulus, functioning almost as a "reset" for the capitalist system. This perspective, while acknowledging the immense human tragedies and social costs of war, analyzes its sometimes hidden function in perpetuating the logic of continuous growth.


2.1 Destruction, reconstruction, and new demand One of the most evident mechanisms of post-war economic stimulus is the massive destruction of physical capital (infrastructure, factories, housing) that conflicts entail. This destruction, though devastating, generates an enormous and immediate demand for reconstruction.
• The post-World War II period. The period after 1945 is a paradigmatic example. Countries like West Germany (Wirtschaftswunder), Japan (Japanese Economic Miracle), France (Trente Glorieuses), and Italy (Italian Economic Miracle), despite the devastation, experienced extraordinary economic growth (Skidelsky, 2009 [42]; IMF, 2000 [18]). This boom was fueled by the need to reconstruct entire nations, which implied massive investments in construction, transport, and industry. The demand for construction materials, machinery, and consumer goods, previously limited by the war, exploded, reactivating production chains and creating millions of jobs.
• In the United States, which suffered less direct territorial damage, industrial production, inflated by the war effort, reoriented itself to meet domestic and foreign demand (also thanks to programs like the Marshall Plan, which acted as a flywheel for American exports and European recovery), maintaining high employment and sustaining GDP growth. US real GDP rose from approximately $1,475 billion in 1945 to $2,277 billion in 1955 (data in 2010 dollars), a significant increase in a post-war decade (U.S. Bureau of Economic Analysis [45]).
• General data. Some empirical studies (Ben-David, 2007 [3]) have found that, for many nations, periods following major economic shocks or wars have been succeeded by phases of sustained growth that surpassed pre-crisis rates. This suggests that a partial "reset" of capital can create opportunities for more efficient investments and new development trajectories. 2.2 Military spending multipliers and specific contexts The concept of the fiscal multiplier (Keynes, 1936 [26]) refers to the amplified effect that an initial change in government spending has on overall GDP. In the context of military spending, the existence and magnitude of such a multiplier are subject to debate and depend heavily on the context.
• Evidence of positive multipliers (in certain contexts). Some studies suggest that an increase in defense investments can act as a fiscal stimulus. Research such as that by Ramey and Zubairy
(2018) [39] indicates that, for the United States, a cumulative 1% increase in GDP in military spending can raise GDP by approximately 0.7%, a multiplier comparable to that of spending on infrastructure or education in certain periods. Furthermore, Antolin-Diaz and Surico (2022) [2] estimate that a temporary 1% increase in military spending relative to GDP can boost total factor productivity (TFP) by 0.3%, leaving a lasting legacy of industrial skills and know-how.
• Macroeconomic context and type of spending. The size of the multiplier varies significantly depending on the context. Studies indicate that multipliers are greater during recessions (when there is a greater unused productive capacity in the economy that military spending can reactivate, unlike periods of full employment where it would tend to generate only inflation) than during periods of expansion. They are also larger in closed economies and under fixed exchange rate regimes. An analysis by ABN AMRO (2024) [1] suggests that defense spending multipliers in Europe can vary between 0.6 and 1.0, or even higher in the long term if spillovers on productivity are considered.
• Different impact between developed and developing countries. It is crucial to note a distinction: while military spending can have positive effects on growth in developed countries (often through innovation and a sophisticated industrial base), it tends to have a negative impact in developing economies (d'Agostino et al., 2023 [7]; Dunne & Tian, 2013 [9]). This is often due to the diversion of resources from more productive sectors such as education, healthcare, or civilian infrastructure, as well as problems of corruption and dependence on arms imports. 2.3 Technological innovation and "spillovers" from the military sector


Military spending is a powerful engine for research and development (R&D) and technological innovation. In times of war or arms races, large public funds are allocated to the development of cutting-
edge technologies that, although born for military purposes, often subsequently find civilian applications (the so-called "spillovers" or technological spin-offs).

• Emblematic examples. The development of Internet/ARPANET (1960s), born as an attack- resistant communication network for the US Department of Defense, of GPS (Global Positioning System), initially conceived for military purposes, and of aerospace technologies, advanced materials, and modern computing, including artificial intelligence, has often received a decisive boost from investments in the defense sector before being adopted by civilian industry, revolutionizing entire economies.
• Disguised public investment. Military spending represents an enormous injection of public funds into the economy, acting as a significant fiscal stimulus. Unlike other forms of public spending
(e.g., welfare, civilian infrastructure), which may face political or ideological resistance, defense spending is often more easily justifiable and accepted in the name of national security, even in the absence of active conflict. This allows resources to be channeled towards industry, research, and employment in a way that other sectors might not achieve.


2.4 Resource control and geopolitical strategies

Beyond destruction and reconstruction, conflicts can also be tools to redefine access and control over natural resources and global trade routes, vital elements for the maintenance and expansion of the capitalist system.
• Conflicts for oil. Numerous conflicts in the Middle East have also been analyzed through the lens of the struggle for control of vast oil reserves, essential for global industry and transport. The rhetoric of "liberation" or "antiterrorism" can often mask economic and geostrategic interests deeply linked to dynamics of neo-colonialism or economic imperialism.
• Rare minerals and new technologies. The need for rare minerals, crucial for modern technologies (electronics, batteries, electric vehicles), is influencing geopolitical dynamics and can be an underlying factor in tensions or conflicts in regions rich in such resources.


2.5 Criticisms of "Military Keynesianism": long-term effectiveness and morality
The concept of "Military Keynesianism" suggests the use of defense spending as a deliberate tool to stimulate aggregate demand and maintain full employment. Although it has found historical application, especially in the United States during the Cold War, it is subject to severe criticisms regarding its long- term effectiveness and morality.

• Low labor efficiency. One of the most direct criticisms is that modern military production, though highly technological, is capital-intensive and relatively less labor-intensive. This means it creates fewer jobs per unit of spending compared to equivalent investments in civilian sectors such as healthcare, education, renewable energy, or infrastructure. Estimates indicate that a billion dollars spent on armaments generates significantly less employment than a similar investment in renewable energy or civilian infrastructure (IPS Journal, 2025 [21]). The IPS Journal (2025) emphasizes how the armaments industry has "low multipliers" compared to these sectors, contributing less to the overall productive capacity of the economy.
• "Crowding out" of productive investments. Instead of stimulating overall growth, high military spending can crowd out public and private investments in sectors more productive for social well-
being and long-term development. Financial resources, skilled engineers, scientists, and industrial capacities are diverted from the production of civilian goods and services towards military ones.
This can lead to a reduction in overall productivity and long-term competitiveness of an economy (IPS Journal, 2025 [21]).
• Resource consumption and environmental footprint. Modern armed forces are among the largest institutional consumers of fossil fuels and producers of pollution (IPS Journal, 2025 [21]). The global military sector accounts for a considerable share of total greenhouse gas emissions. The expansion of military capabilities implies a lock-in of demand for carbon-intensive technologies at a time when ecological transition is urgent, directly contradicting sustainability goals.


• Social costs and lost opportunities. Defense spending, especially if it is "the only budget without limits" (CADTM, 2025 [5]), can lead to cuts in welfare, healthcare, pensions, and essential public services. This worsens the quality of life for citizens, increases inequalities, and sacrifices human development in favor of the war machine, generating an incalculable social opportunity cost. As highlighted by Noam Chomsky (in various works) [6], governments may prefer military spending because it generates less public interest and participation compared to social spending, making its implementation easier without significant democratic control.
• Lack of "social good." Unlike investments in education or infrastructure, which generate widespread benefits for society, the primary purpose of arms production is destruction or the threat of it. It is argued that this type of spending, while potentially creating economic activity, does not generate comparable "social good" and can even perpetuate a cycle of violence and insecurity.

3. Historical examples supporting the thesis
Historical examples provide evidence to support this interpretation:
• The Ssecond post-war period (approx. 1945-1970). Western economies, particularly the United States, West Germany, Japan, France, and Italy, experienced a period of unprecedented economic growth, often dubbed the "economic miracle." This phase was largely fueled by the need to rebuild entire nations devastated by conflict, with massive infrastructural investments and enormous
domestic and foreign demand. The war had "reset" a portion of obsolete capital and stimulated military technological innovation that then found vast civilian applications (e.g., electronics, telecommunications, commercial aviation), opening new markets.
• The cold war and the arms race. Despite not being a large-scale "hot" conflict, the Cold War represented a period of enormous and continuous military spending, fueling a military-industrial complex (a term coined by President Eisenhower) that supported key sectors of the superpowers' economies. This constant "investment" in armaments and technology generated a continuous flow of innovation and employment, acting as an economic stabilizer and an impetus for scientific research.
• Modern conflicts for resources: Numerous conflicts from the late 20th century to today, particularly in the Middle East and some African regions, can be analyzed, among other causes, through the lens of the struggle for control of vital natural resources (oil, gas, rare minerals) or strategic trade routes. These conflicts, while masked by complex political or religious dynamics, often serve to ensure the supply of resources essential for maintaining the global productive apparatus.

 

Board Member, SRSN (Roman Society of Natural Science)

Bibliography

• [1] ABN AMRO. (2024). Can defence spending revitalise the eurozone economy? Macro Watch.

• [2] Antolin-Diaz, J., & Surico, P. (2022). The Macroeconomic Effects of Military Spending: A Century of Evidence. CEPR Discussion Paper DP17316.
• [3] Ben-David, D. (2007). Trade and the Rate of Income Convergence. Journal of International Economics, 71(1), 77-93. 
• [5] CADTM (Committee for the Abolition of Illegitimate Debt). (2025). From welfare to warfare: military Keynesianism. https://www.cadtm.org/Militarism?lang=en
• [6] Chomsky, N. (diverse opere, ad es. Profit Over People: Neoliberalism and Global Order.
• [7] d'Agostino, S., d'Agostino, F., & Scartozzi, F. (2023). Military expenditure and economic growth: a meta-analysis. Defence and Peace Economics, 34(5), 580-608.
• [9] Dunne, P., & Tian, N. (2013). Military expenditure and economic growth. In Handbook on the Economics of Conflict (pp. 58-75). Edward Elgar Publishing.
• [18] International Monetary Fund (IMF). (2000). World Economic Outlook: Focus on Transition Economies. IMF.

• [21] IPS Journal. (2025). Military Keynesianism is a dead end — both economically and politically.

• [26] Keynes, J. M. (1936). The General Theory of Employment, Interest and Money. Macmillan.

• [39] Ramey, V. A., & Zubairy, S. (2018). Government Spending Multipliers in Good Times and in Bad: Evidence from U.S. Historical Data. Journal of Political Economy, 126(2), 850-901.

• [42] Skidelsky, R. (2009). Keynes: The Return of the Master. PublicAffairs.

• [45] U.S. Bureau of Economic Analysis (BEA). National Income and Product Accounts (NIPA) Tables.

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