Warfare and Economic Growth in the Preindustrial World:

Some speculative thoughts

A consensus among most modern historians is that the frequency and prevalence of war was not an especially important cause of economic stagnation in the preindustrial world. This is evident in Peter Brown’s account of the decline of the Roman economy that I previously criticized. It is reflected in recent scholarly accounts of the Mongol invasions such as those which have influenced recent popular treatments such as The Silk Roads. I tend to think this is mistaken. But the reasons why it is mistaken are not obvious. Here are some admittedly speculative grounds for this skepticism.

The reasons why the economic costs of warfare are usually dismissed fall into a couple of categories:

1. Arguments like: the Romans destroyed Carthage in 146 BC yet by, say, 0 AD Carthage had recovered and was a major economic metropolis.

2. Arguments from analogy: Japan and Germany were devastated by WW2 yet they recovered rapidly and exceeded previous levels of living standards within a decade and a half.

3. Keynesian-style arguments: warfare was necessary to stimulate aggregate demand.

4. A binding technological ceiling on growth in preindustrial economies. Hence in the absence of warfare, growth was limited.

Argument (1) is widely used, but it exhibits Bastiat’s fallacy of the seen and unseen. The fact that Carthage eventually recovered from its destruction by the Romans does not shed light on how large or prosperous it might have become, had it not been destroyed.

Argument (2) is more credible. Everyone is aware of the miraculous recovery of the German and Japanese economies after WW2. The analogy is informative but anachronistic. The destruction of physical capital in modern economies is not necessarily harmful for long-run growth for several reasons: (i) in a world of rapid technological change, capital and infrastructure have to be overhauled and replaced every couple of decades. Therefore destruction in wartime accelerated process of capital replacement which would nevertheless have occurred anyway. This destruction was costly in the short-run but not in the long run.

(ii) In modern growth regimes, human capital matters as much or more than physical capital. Research by Fabian Waldinger shows that German science lost much more through the exodus of scientists than it did from the destruction of laboratories, universities, and physical infrastructure (here). In contrast, in the premodern world, human capital was not particularly relevant for growth and it was physical capital — irrigation, dams, olive and apple trees, cities, that mattered most. Finally (iii), and this is speculative, it is plausible that what matters is the ratio of the ability to destroy, relative to the ability to invest in capital. Total destruction, i.e. reducing the value of physical capital to zero, sets a lower bound. Thus total destruction might arguably be worse in an environment where technology is basic, people are close to subsistence, and the underlying rate of investment is low.

I won’t deal with argument (3) extensively here. I don’t think that the Keynesian model of a liquidity trap or post-Keynesian models of secular stagnation are applicable to the preindustrial world.

Argument (4) is perhaps the most compelling. Tony Wrigley argues in numerous books and papers that “organic economies” had a natural ceiling that limited growth (here, here, and here). This means that prior to the harnessing of fossil fuels, no economy, no matter how commercially developed, could experience sustained economic growth. In this case, there is an upper bound to how warfare could effect living standards.

One obvious drawback to this argument is that it could be that without the destruction associated with frequent warfare, the transition from an organic to a fossil-based economy might have come much sooner.

A second weakness is that evidence suggests that the constraints imposed by the limits of an organic economy were not binding. This is clear from estimates of agricultural productivity in medieval England and France. Average productivity was low. But some farms — those that employed best practice agricultural techniques and were located close to centers of demand such as London or Paris — could often achieve yields equivalent to those obtained by farmers in the 19th century (see the work of George Grantham here).