Long-run Costs of War

Abstract

Counterfactual speculation is unavoidable because the long-term costs of civil war must be separated from other (and often far more significant) forces operating upon the growth of the economy. Yet there is certainly no mistaking the war’s immediate impact on growth rates for America’s national product and real per capita income from 1860–70. Both rates slumped markedly below trend values. They then accelerated over the following decade as recovery and regeneration carried the economy forward again [118,98; 87,188] No surprise will be occasioned by the discovery that the dislocation, disruption and destruction contingent upon civil war, and the reallocation of manpower and other resources back to normal employment after the termination of hostilities, reduced the capacity of the American economy to maintain steady growth in the production of goods and services. Neither is it particularly illuminating to point to the phase of rapid recovery after Lee’s surrender. Proceeding from an artificially depressed level and with a backlog of investment and innovations to undertake, economies have often recovered from war at a rapid pace [53, 173–80].