War economy A war economy is the set of contingencies undertaken by a modern state to mobilize its economy for war production . Philippe Le Billon describes a war economy as a " system of producing , mobilizing and allocating resources to sustain the violence . " Some measures taken include the increasing of tax rates as well as the introduction of resource allocation programs . Needless to say , every country approaches the reconfiguration of its economy in a different way . Many states increase the degree of planning in their economies during wars ; in many cases this extends to rationing , and in some cases to conscription for civil purposes , such as the Women ' s Land Army and Bevin Boys in the United Kingdom in World War II . Franklin D . Roosevelt said that if the Axis Powers win , then " we would have to convert ourselves permanently into a militaristic power on the basis of war economy . " In what is known as total war , these economies are often seen as targets by many militaries . The Union blockade during the American Civil War is regarded as one of the first examples of this . Concerning the side of aggregate demand , this concept has been linked to the concept of " military Keynesianism " , in which the government ' s military budget stabilizes business cycle s and fluctuations and / or is used to fight recessions . On the supply side , it has been observed that wars sometimes have the effect of accelerating progress of technology to such an extent that an economy is greatly strengthened after the war , especially if it has avoided the war - related destruction . This was the case , for example , with the United States in World War I and World War II . Some economists ( such as Seymour Melman ) argue , however , that the wasteful nature of much of military spending eventually can hurt technological progress . United States . The United States alone has a very complex history with wartime economies . Many notable instances came during the twentieth century in which America ’ s main conflicts consisted of the World Wars , Korea , and Vietnam . World War I . In mobilizing for World War I , the United States expanded its governmental powers by creating institutions such as the War Industries Board ( WIB ) to help with military production . Others , such as the Fuel Administration , introduced daylight saving time in an effort to save coal and oil while the Food Administration encouraged higher grain production and “ mobilized a spirit of self - sacrifice rather than mandatory rationing . ” Propaganda also played a large part in garnering support for topics ranging from tax initiatives to food conservation . Speaking on Four Minute Men , volunteers who rallied the public through short speeches , investigative journalist George Creel stated that the idea was extremely popular and the program saw thousands of volunteers throughout the states . World War II . In the case of the Second World War , the U . S . government took similar measures in increasing its control over the economy . The Japanese attack on Pearl Harbor provided the spark needed to begin conversion to a wartime economy . With this attack , Washington felt that a greater bureaucracy was needed to help with mobilization . The government raised taxes which paid for half of the war ’ s costs and borrowed money in the form of war bonds to cover the rest of the bill . “ Commercial institutions like banks also bought billions of dollars of bonds and other treasury paper , holding more than $ 24 billion at the war ’ s end . " The creation of a handful of agencies helped funnel resources towards the war effort . One prominent agency was the War Productions board ( WPB ) , which “ awarded defense contracts , allocated scarce resources – such as rubber , copper , and oil – for military uses , and persuaded businesses to convert to military production . " Two - thirds of the American economy had been integrated into the war effort by the end of 1943 . Because of this massive cooperation between government and private entities , it could be argued that the economic measures enacted prior to and during the Second World War helped lead the Allies to victory . Germany . World War I . Germany has experienced economic devastation following both World Wars . While this was not a result of faulty economic planning , it is important to understand the ways that Germany approached reconstruction . In World War I , the German agricultural sector was hit hard by the demands of the war effort . Not only were many of the workers conscripted , but lots of the food itself was allocated for the troops leading to a shortage . “ German authorities were not able to solve the food scarcity [ problem ] , but implemented a food rationing system and several price ceilings to prevent speculation and profiteering . Unfortunately , these measures did not have the desired success . " World War II . Heading into the Second World War , the Nazis introduced new policies that not only caused the unemployment rate to drop , it created a competent war machine in clear violation of the Treaty of Versailles . The Third Reich implemented a draft and built factories to supply its quickly expanding military . Both of these actions created jobs for many Germans who had been struggling from the economic collapse following World War I . However , it is worth noting that while unemployment rates plummeted , “ by 1939 , government debt stood at over 40 billion Reichsmarks . " After World War II , Germany was discovered to have exploited the economies of the countries it invaded . The most important among these , according to historians Boldorf and Scherner , was France and “ her highly developed economy … [ being ] one of the biggest in Europe . ” This is further supported when they later reveal how the French economy provided for 11 percent of Germany ’ s national income ( during the occupation ) which covered five months of Germany ’ s total income for the war . Using extortion and forced labor , the Nazis siphoned off much of the France ' s economic output . For example , during the early months of the Nazi occupation , the French puppet government was forced to pay a " quartering " fee of twenty million Reichmarks per day . Supposedly , the fee was payment for the Nazi occupation forces . In reality , the money was used to fuel the Nazi war economy . " " Germany employed numerous methods to support its war effort . However , due to the Nazi ’ s surrender to the Allies , it is hard to tell what their economic policies would yield in the long term . Negative effects . As mentioned above with Germany and its struggle to effectively allocate resources during World War I , many countries have experienced the negative effects of converting to a war economy . The citizens of any nation going to war must realize that their standard of living will decrease in order to provide more materials for the troops .