Pretty crappy strategy seeing as the rest of Europe is going into war economics mode …
Nope – Europe (the EU – that is) going in to “war economics” is the emptiest of empty talk..
A real war economy is completely incompatible with everything that is sacrosanct to the EU’s very existence, particularly all the neo-liberal dogmas, like fiscal stability, open markets with only modest government regulations, economic freedom – and – particularly – high corporate profits.
Further, you need an efficient and fast way of decision-making, which is one of the EU’s real weaknesses – so, to get there, you would need institutional reform first… (And you can’t get voluntary institutional reform as long as the institutions are as they are – so you would have to start a institutional revolution.. (As in a few core countries declaring that they joined in to a “more perfect union” – with new rules – and bulling everyone else to follow suit or quit (“take it or leave it..”) – some most likely would leave…
But even then, a successful war economy requires not only a lot of military spending – if you just spend a lot of money on new arms (ignoring all the rules about deficit spending), this will, in a market economy, not necessarily result in a fast increase of production – war arms manufacturers only produce for a limited set of customers (usually governments) – and the present situation is one of “high end products” sold for very high prices, but in low numbers.
So, just spending more only means that manufacturers might markup their prices (surcharge for priority delivery) and only if and when they have a high number of orders at exorbitant prices they might actually start to invest in increased capacity – and this would still – if left to the market – most likely take years to show significant results.
Thus, a war economy would mean a total reversal of market principles – fast increase in output quantity at minimal prices – so there would be a urgent need at direct government involvement, ordering (by law or decree) the exponential growth of capacities – delivering sufficient investment capital and infrastructure – and direct involvement in management.
And the strong resource allocation to armament – including running a large budget deficit – would tend to displace other businesses and trigger inflation – so the economic management would have to be expanded to basic consumer goods (food, medicine, clothing), to keep them affordable for the masses of the population – and to avoid shortages due to broken supply chains, you would have to strongly restrict free trade (products need to be home-sourced – they can only be exported if we have a surplus) and put a strong cap on profits, and this would further require restrictions on the movement of capital, and higher taxes, particularly for the wealthiest segment of the population. And yes, to make those things affordable, you would also have to suspend intellectual property rights – “we cant afford to pay large amounts to patent holders when we urgently need to increase supply” and curb free speech.. (critics of our necessary policy are just “aiding the enemy”.
So, many might actually argue that this kind of war economy actually is “communism”. And while not perfect, this comparison is not that far off the mark. Vladimir Lenin did mention the German War Economy management in World War I (Luddendorf) as a good example of state monopolist capitalism – according to him, you would just have to replace the people holding the reigns of management with the communist party, and you would have Communism. And of course, that was the model the USSR tried to build their economy on…
OTOH, a “war economy V2” with minimal government involvement in the economy would fail – if you just raise spending for armament without changing the rules, including trying to avoid an excessive budget deficit but also not raise taxes (on the rich) or limiting free trade or movement of capital – what would happen?
To (halfway) balance the budget, you would have to cut spending for infrastructure, healthcare, education and pensions (or at least NOT adjust them for still growing inflation). And – if you don’t want to tax the rich, you probably would have to rise consumer taxes (like VAT) or invent other forms of tax hikes that mostly hurt the lower classes. This – impoverishing the middle class – would not be wildly popular – so you would risk unrest and political radicalization, thus destabilizing the system.
So, while the big corporations could still make a lot of money due to high prices for armament and the possibility to export both capital and goods due to lack of domestic demand, it would achieve little to fight a conventional war against peer enemies (slow procurement at exorbitant prices). This “war economy” would mostly be a war against your own middle and lower classes, impoverishing and partially enslaving them. (And yes, for this you would have to throw out the semblance of democracy – to “stabilize” the system, this would require the end of most freedoms (free speech, strikes, movement of people). Such a regime would be outright fascism, although one were the enemy is only claimed to be external, while in reality, you will only fight domestic enemies…
And no, Putin has not yet gone to full war economy – Russia is still far off from full mobilization.
And neither has Ukraine – they still rely mostly on western aid, a large part of the work force has left the country, and the local economy is not really mobilized – this would both hurt interests of the oligarchs and it’s western sponsors…
So, to summarize, it’s more likely that the moon will crash on earth than that the EU goes to an efficient war economy – proclaiming something different is just fake news, deliberately distributed to disguise the own impotence…
What might happen is that some attempts to have a war on the own people (“war economy V2”) will be tried, and this will blow up the Union due to to much resistance… OR – if Putin finally manages to wipe Ukraine from the map – the fallout from “who is to blame” – will blow the EU up – with some countries really going for war economy..
