This is a question that has long been debated by economic, political, and historical analysts. It has divided these researchers into two groups, a group of analysts mostly American such as David Broder and Hugh Rockoff who believe that war leads to an increase in GDP and productivity and a decrease in unemployment, thus wars are good for the economy and ultimately lead to economic growth, and the other group of analysts like Linda Bilmes and Joseph Stiglitz who believe that peace is economically better than war and that people studying economics of war should take into account the concept of opportunity cost of wars and how many wars had devastating effects on the economy . Each of the two groups have concrete references, and use historical evidence, facts, ideas, and statistics to and show how GDP,inflation, unemployment, and the allocation of resources are effected by wars in order to prove how economies are better off with or without war.

There are analysts who believe that war is good for an economy and that sometimes an economy will not be able to overcome a depression or a big recession without engaging in a foreign war. They use history to prove that countries with economic prosperity are in fact countries that have fought in the biggest wars. Not only that, but they believe that the seeds of prosperity and growth were planted during times of war. These analysts are supporters of the Keynesian argument of war, a policy which explains how governments sometimes dedicate a large portion of their spending to military spending for the aim of economic growth. They show the economic effects of such a policy on different aspects of the economy such as the effect on demand, where the direct government spending induces spending by consumers by a multiplier effect, thus promoting industry. Another effect the supporters of Keynes use for war is the effect on the supply side, where the military spending during war on research and development leads to a big increase in productivity by achieving more advanced infrastructure and technology.

The American economy during WWII is the example that these economists use, to show the positive impacts of the engagement of the US in the war, on its economy facing a depression. “Military spending can also sometimes boost the civilian economy; the massive spending on WWII finally brought the Great Depression to an end” (“Understanding American Government” by Susan Welch). To add, spending on the war opened the way for the federal government to control the economy by controlling spending and consumption. Technological and scientific innovations which were the main reason of the success of allies in the war, rapidly increased during the war. In WWII, a nationwide complex of laboratories and plants to manufacture atomic fuel and to fabricate atomic weapons was built and was called Manhattan Project which by that time “had become a colossal economic endeavor, costing approximately $2 billion and employing more than 100,000” (Christopher J. Tassava in “The American Economy during World War II”), and Aerospace was the single largest sector of the war economy, costing $45 billion, employing a staggering two million workers, and most importantly, producing over 125,000 aircraft. And this continued to develop even after the war ended, to include fields other than weaponry and military hardware.