war finance

war finance

      the fiscal and monetary methods that are used in meeting the costs of war, including taxation, compulsory loans, voluntary domestic loans, foreign loans, and the creation of money. War finance is a branch of defense economics (q.v.).

      Government efforts to finance major wars have frequently led to major changes in the tax (taxation) system. In the United States, for example, the importance of the personal income tax as a revenue source increased significantly during World War II, when higher rates, lower exemptions, and a deduction-at-source system of collection were introduced. Great Britain and many other belligerents in World War II resorted to general sales taxes.

      Compulsory loans have been used as an alternative to taxation, but they have usually been perceived as taxes by the public. Voluntary loans, in which money is raised by selling government bonds, are of two types: those financed by the public from its savings and those financed by bankers and others from credit created by expansion of the monetary supply. The first type of loan is generally anti-inflationary in its effects because it eliminates excess purchasing power. The second type of loan, under wartime conditions, is likely to be as inflationary as would be the printing of the same amount of new paper currency.

      A popular fallacy about war finance is that government borrowing transfers the war costs to future generations. The real costs in goods and services underlying the monetary costs, however, are paid by the war generation when the government uses the real resources for war, bidding them away from other uses.

      The most dangerous form of war finance is the printing of new paper money, resorted to when no more taxes can be collected and the government's credit has broken down. Usually the printing is not done by the government directly but by the central bank, which then lends the printed money to the government through purchases of bonds.

      Major wars are usually financed to some extent by inflationary (inflation) measures. Inflation distributes the burden of war costs in an arbitrary manner, penalizing persons with fixed incomes. After a certain point, inflation may even lower production by placing a premium on the hoarding of raw materials and durable goods, as well as the holding of real estate and other fixed assets, thus shifting resources from productive to nonproductive uses.

* * *


Universalium. 2010.

Игры ⚽ Поможем написать реферат

Look at other dictionaries:

  • War finance — The term war finance, a branch of defense economics, denotes a number of measures including fiscal and monetary initiatives, to fund the expenditure of a war. Such measures, broadly classified in three categories, are levy of taxes, raising of… …   Wikipedia

  • War Finance Corporation — The War Finance Corporation was a government corporation in the United States created to give financial support to industries essential for World War I, and to banking institutions that aided such industries. It continued to give support to… …   Wikipedia

  • Confederate war finance — Front of Confederate notes (back was unprinted) Confederate war finance refers to the various means, fiscal and monetary, through which the Confederate States of America financed their war effort during the American Civil War. As the war lasted… …   Wikipedia

  • National War Finance Committee — Victory Bonds rally, 1943 The National War Finance Committee was set up in Canada in December 1941 by the Department of Finance. It was initially chaired by George Wilbur Spinney, president of the Bank of Montreal, and later by Graham Towers, the …   Wikipedia

  • War bond — United Kingdom national war bond advertisement War bonds are debt securities issued by a government for the purpose of financing military operations during times of war. War bonds generate capital for the government and make civilians feel… …   Wikipedia

  • War Industries Board — The War Industries Board (WIB) was a United States government agency established on July 28, 1917, during World War I, and reorganized in 1918 under the leadership of Bernard M. Baruch. The organization encouraged companies to use mass production …   Wikipedia

  • Finance palace — Finance palace, (Serbian Финансијска палата , Hungarian Pénzügyi Palota , German Finanz Palast ) is a two floored neo renaissance palace on the main square in Zrenjanin and one of the most beautiful buildings in the city. The National Museum of… …   Wikipedia

  • Finance capitalism — is a term in Marxian political economics defined as the subordination of processes of production to the accumulation of money profits in a financial system. [ Capitalism by John Scott and Gordon Marshall in A Dictionary of Sociology Oxford… …   Wikipedia

  • War of the Spanish Succession — Philip V of Spain and the Duke of Vendôme commanded the Franco Spanish charge at the Battle of Villaviciosa by Jean Alaux (1840) …   Wikipedia

  • War risk insurance — is a type of insurance which covers damage due to acts of war, including invasion, insurrection, rebellion and hijacking. Some policies also cover damage due to weapons of mass destruction. It is most commonly used in the shipping and aviation… …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”