A Brief History Of Economic Warfare

A Brief History Of Economic Warfare

By Jamie Catherwood March 20, 2022

Today’s article was first published on the Stokes Family Office Blog, which I’d encourage every one to check out and monitor over the coming months. The Stokes team has assembled a great team of writers that will be publishing interesting content covering a range of topics.

 The ongoing Russia-Ukraine war and subsequent rounds of economic sanctions has highlighted the important role of money in conflicts.

Over the course of centuries, nations have utilized money as a means of control and geopolitical influence. Financial instruments and economic sanctions have been wielded like any another weapon.

In fact, President William Taft’s foreign policy became known as one of ‘Dollar Diplomacy’. President Taft explicitly referenced the interchangeability of traditional weapons and debt in his State of the Union Address in 1912, explaining that his foreign policy was to “substitute dollars for bullets”.

This article uses historical case studies across multiple centuries to demonstrate how money has been weaponized or used as a geopolitical tool in conflicts.

PILLAGING, PLUNDERING & SIEGES: THE IMPORTANCE OF MONEY IN CONFLICT

A state’s financial strength has always been an important factor in determining military outcomes, but this influence became more pronounced in 16th century Europe. Considering that 95% of the years between 1500-1599 in Europe experienced war, it is not surprising that this inflection point occurred in 16th century Europe.1

However, why did money and finance become more influential for military outcomes in this period specifically? The answer lies in a group of technological innovations known as the “Military Revolution”. In particular, the introduction of gunpowder dramatically altered how armies waged war. Historians Gennaioli and Voth explain:

“The spread of cannon after 1400 meant that medieval walls could be destroyed quickly. Fortresses that had withstood year-long sieges in the Middle Ages could fall within hours. In response, Italian military engineers devised a new type of fortification — the trace italienne. It consisted of earthen bulwarks, covered by bricks, which could withstand cannon fire.

These new fortifications were immensely costly to build. The existence of numerous strongpoints meant that wars often dragged on for long periods of time –  winning a battle was no longer enough to control a territory.”2

In short, gunpowder facilitated the rise of cannon-warfare, which led to the existing flimsy fortresses being replaced with stronger fortifications that could endure cannon fire. Building these fortifications was expensive. However, these stronger fortresses also made battles longer since destroying enemies’ strongholds became harder to conquer.

At a higher level, new technologies like gunpowder, cannons and firearms required training soldiers on how to operate them in battle. This operational necessity slowly led to the creation of standing armies, requiring further investment from the state. Consequently, the costs of organizing and maintaining a standing army were outrageously expensive before war even began.

As the costs of funding militaries rose, economically powerful countries obtained a meaningful advantage. The chart below shows how much of an advantage these richer countries possessed during war over time:3

COUNTERFEITING WARS

To continue reading, please go to the original article here:

https://investoramnesia.com/2022/03/20/brief-history-of-economic-warfare/