Géopolitique, Réseau, Énergie, Environnement, Nature
Economic Planning and War Economy in the Context of Ecological Crisis
War Ecology: A New Paradigm
Issue #2
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War Ecology: A New Paradigm Issue #2
Géopolitique, Réseau, Énergie, Environnement, Nature

Economic Planning and War Economy in the Context of Ecological Crisis

Eric Monnet

Economist

Issue

Issue #2

Auteurs

Eric Monnet

21x29,7cm - 91 pages Issue #2, September 2022

War Ecology: A New Paradigm

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The terms economic planning and war economy are familiar to historians. They describe practices and modes of government found in many countries during the 20th century. Between the 1930s and the 1970s, these terms were the subject of considerable intellectual debate — though often forgotten since — in an attempt to define them or to connect them. Today, they are being revisited in light of a dual interrogation. First, economic planning is being presented as a possible solution to the ecological crisis by reorganizing production and consumption to keep in line with the objectives of reducing carbon emissions and preserving biodiversity. The concept of the war economy is sometimes added (sometimes referred to as “ecological war”) to mean that, as in a war, the whole of the economy’s organization must be oriented towards a single objective: victory, the only guarantee of survival for the majority of the population 1 . War economy has been used in a second sense in relation to the environmental crisis to highlight the convergence of rising energy prices caused by the war in Ukraine and climate objectives to reduce carbon emissions. 

The policy of reducing energy consumption in the winter of 2022-2023 due to possible electricity shortages would provide an opportunity to change our behavior in keeping with the ecological imperative. In this way, war and ecology are converging because they are forcing us to rapidly move away from a resource on which we are still too dependent. 

Self-imposed constraints on energy consumption become a prerequisite for winning the war 2 . These two current uses of the war economy concept each especially underscore one of the meanings the concept has taken on throughout history (the two are not contradictory): the total mobilization of production towards a given objective in the first case, and the management of scarcity in the second.

If ecological planning is necessary to face the current environmental crisis, it seems preferable to me to rid it of the war economy vocabulary. The notion of war economy only makes sense as a short-term organization, unlike the ecological policy that is necessary today 3 . The politics of planning — thought of as an enterprise of coordinating interests with long-term objectives — has historically been constructed as independent of the war economy and not as a mere peacetime extension of it. On the contrary, in the name of economic liberalism, critics of planning sought to equate it with a state of war economy (or reconstruction). Presenting the ecological struggle as a war economy 4 therefore invites criticism that the normal state — the peacetime economy — would be one free of ecological concerns and state intervention.

If the war economy and planning historically had one thing in common, it was the goal of rapidly increasing production. Planning sought “modernization” or “transition”, in a sense that essentially consisted of increasing production in industry, trade, or agriculture 5 . Today planning is needed to coordinate the actions of households and businesses to achieve a common ecological goal. If references to past planning make sense to shed light on the present context, this could be the main justification for state intervention and long-term thinking. For the rest, it is especially necessary to stress the singularity of contemporary issues, both in terms of economic and ecological objectives and of democratic practices. What economic planning borrowed from the war economy in the past seems ineffectual today, unless one wishes to retain only the historical circumstances that brought them together.

The conflicting relationship between planning and the war economy

 The words of the Polish economist Oscar Lange — theorist of “market socialism” and a great detractor of Hayek in the 1930s — are often cited to associate planning and war economy. In a 1958 lecture in Belgrade published in the Indian Journal of Economics, Lange offered an apt description of the war economy that we can reproduce here in its entirety:

I think that essentially, it can be described as a sui generis war economy. Such methods of war economy are not particular to socialism because they are also used by capitalist countries in war time. They were developed during the first and second World War. In capitalist countries similar methods were used during the war, namely, concentration of all resources for one basic purpose, which is the production of war materials, and centralized disposal of resources in order to avoid leakage of resources to what was considered as non-essential uses (everything which was not connected with the prosecution of the war)Allocation of resources by administrative decisions according to administratively established priorities and a wide use of political incentives to maintain the productivity and discipline of labour through patriotic appeals were characteristic of war economy and resorted to in all capitalist countries during the war. […] The difficulties start when these methods of war economy are identified with the essence of socialism and considered as being essential to socialism 6 .

In addition to presenting the essential features of the war economy in a classical manner, this excerpt is interesting in multiple ways. It points to the historical link between economic planning and warfare that was forged in many countries, a link that contemporaries were aware of and that has been documented in retrospect by numerous academic works in history 7 . Finally, and most importantly, Lange ends with a warning not to confuse war economy methods with what would be true socialist planning, to not conflate transitory means of historical circumstance with the essence of a policy. In the remainder of his text, the author therefore attempts — contrary to what is often remembered — to imagine economic planning that would not be dependent on the war economy but would be fully socialist. Polish socialism was a political and economic failure — something that Lange did not foresee in 1958 — but it is interesting to underline that the debate on whether or not the war economy and planning were essentially linked ran through post-war intellectual and economic circles in both Soviet and capitalist countries. This text also testifies to the evolution of socialist thought on war — obviously linked to the end of the world conflicts — which gradually moved away from the idea held most notably by Otto Neurath during the First World War, according to which the war economy was an opportunity for socialism and planning because it would have acclimated citizens to a state-led economic organization 8 .

Proponents of planning in Western Europe also wanted to dissociate themselves from the experience of war, which was the only way to legitimize policies that needed to be associated with peace and to distinguish them from the practices of fascist or Soviet regimes 9 . On the other hand, critics of state intervention in the economy and defenders of a economic liberalism that borrowed from the 19th century, never ceased to criticize planning by pointing to its status as a war economy. Louis Baudin, who had a classic pedigree as a 20th century “neoliberal” intellectual (from his presence at the 1938 Walter Lippmann colloquium to his support for authoritarian regimes and his membership in the Mont Pèlerin Society), presented his strong opposition to post-war planning this way:

These tendencies towards socialization found favorable ground in France during the war and the occupation. […] It is curious to observe that such a system, which caused us so much suffering, can still be proposed as an ideal. We have known the economy of preparation for war (Wehrwirtschaft), that of wartime (Kriegswirtschaft), and now the economy of war in peacetime. And liberalism is denounced with utter thoughtlessness and ingratitude because the possibilities it holds and the benefits it has brought are overlooked 10 . 

By choosing to use the German words Wehrwirtschaft and Kriegswirtschaft, Baudin was referring to the theorizing of the war economy by German legal scholars and economists during the 1930s, who insisted primarily on organizing the economy to exploit production to the fullest for military purposes. These theories had considerable influence not only in Germany but also in the United States, France and the United Kingdom 11 . A key element of these debates was that of potential war production (“war potential” or “economic potential for war”), i.e., the maximum production that an economy could achieve if its entire organization was orientated towards war and all resources — capital as well as labor — were efficiently allocated to achieve this objective.

From this brief historical review, let us take note of the tensions that existed in the past between the notions of war economy and planning. Although history brought them together during the Second World War, it was necessary for defenders of state intervention and post-war planning to reject the notion of a war economy, which — apart from its association with political regimes that had been overthrown in some countries — could only be suited to short-term organization requiring sacrifice and not to the establishment of a new form of state and new economic policy objectives. It was partly to counter references to the war economy that planning in France crafted its own mystique, extolling public action and modernization grounded in science 12 . It was the product of the intersection of socialist ideals (promoted by politicians who had established a doctrine with the SFIO or the CGT during the interwar period) and an administrative conversion to a new form of state interventionism (driven by a belief in the rational nature of public action and the tools of economic analysis, sometimes in keeping with the administrative techniques developed under Vichy but breaking from that regime’s conservative corporatism) 15 . This concept broke with that of the war economy, which saw state intervention only as a wartime exception, as opposed to the normal state of the world, i.e., the peacetime economy based on the principles of economic liberalism. The analogy with war sometimes reappeared, but metaphorically, as in this text in favor of European planning by Etienne Hirsch: 

Just as a regiment of infantry must know from the beginning that at a given time it will be supported by tanks and aircraft, so must an industrialist who undertakes big investments be confident that he will be able to find the finance, the labour, the raw materials and the outlets for them 16 .

What to do?

The reference to post-World War II planning is today warranted by the recognition of a common economic and social objective that surpasses all others because it is, in a word, vital. In this sense, the analogy with the wartime economy, which was also geared to an overriding objective, may seem appropriate, but it can just as easily be made with the post-war economy geared to the rapid reconstruction of the country. Why not talk about ecological reconstruction rather than ecological war? Post-war reconstruction was considered the only way to lift society out of poverty and rationing, and modernization — FrenchPlan’s other objective — the only escape from what was perceived as the “Malthusian” collapse of inter-war civilization 17 . In 1946, Jean Monnet spoke in France of “the first vital stage of our recovery” and of creating “the modern economic tools without which neither power nor prosperity are possible” 18 . Just as today, there was a shared sense of absolute necessity and a recognition that — despite its imperfections — the state was the proper form of collective organization to guide society and avert catastrophe. The historian Tony Judt repeatedly emphasized this point in his masterful study of postwar Europe:

What planning was really about was faith in the state. In many countries this rel ected a well-founded awareness, enhanced by the experience of war, that in the absence of any other agency of regulation or distribution, only the state now stood between the individual and destitution. But contemporary enthusiasm for an interventionist state went beyond desperation or self-interest 19 .

Ecological planning today must therefore be based both on full awareness of the danger as well as on trust in public decision-making. This is why it can only be based on thorough administrative reform, just as occurred after the war, with the creation of technical ministries, the reappropriation of areas of authority by the public sector and the creation of cooperative bodies 20 . Post-war planning was based on vertical (within a sector) and horizontal (between sectors) coordination between the leaders of public and private enterprises, unions, financiers, and the administration 21 . Today, these cooperative structures must be reinvented. But we also know how the 1950s and 1960s, despite the development of these cooperative arrangements, can hardly be regarded as a democratic model for present-day European societies. The coordination of the 1960s remained very technocratic 22 . The current challenge lies in the need for greater citizen involvement in decision-making, both at the local and national levels. This involvement is especially essential in order to rapidly change agricultural production and consumption habits and make them compatible with the now well-known objectives of limiting CO2 emissions. 

If the post-World War II period was truly one of drastically limiting private capital flows to avoid financial destabilization, it was, on the contrary, a period of rebuilding industrial and commercial ties, particularly at the European level. The history of French planning cannot be written without the history of European construction, starting with the ECSC in 1951. Today, more than ever, we know that reflection at the national level is not enough when faced with the climate crisis. We also know that limiting mutual financial assistance to the Europe-United States axis today (in the 1950s, this was to compensate for the lack of private capital flows) without extending it to countries in the South is a non-starter. There can be no fight against global warming without unprecedented financial aid to the poorest countries.

At both the international and national levels, ecological planning therefore requires a reorientation of financial flows. History shows us that this is not a minor shift. It requires a major role for the State in developing the necessary financing for new investments by public development banks (such as the Caisse des Dépôts or the European Investment Bank), drastic regulation to prohibit the private sector from providing international financing for detrimental activities, and support from central banks for priority financing in the fight against climate change.

If the history of planning can offer us some guidance for today’s policies, we must also recognize how striking the differences with the past are. This is true not only of our relationship to democracy and international affairs, as mentioned above, but also of the very purpose of planning. The planning of the 1950s and 1960s completely failed when the focus shifted from the development of industrial and agricultural production to organizing deindustrialization from the 1970s on. Public funding was not geared towards an industrial transition, policies to fight unemployment and support employment were largely insufficient, and assets were sold off at low prices without a coherent vision of regional economic development. Today, the dismantling of certain polluting industrial activities can no longer be overlooked in planning but is instead one of its primary objectives. Research, cooperation, international vision and financing must therefore also be organized around the handling of what are called “stranded assets” in a prudish manner, while the human and social impacts of the closure of these activities are still too often glossed over. The financial cost of these dismantling operations is still uncertain, but we know that it will be substantial, and the public financial organization to manage them has not yet been established, despite its urgency. According to the Paris Agreement, 33% of oil resources, 49% of natural gas, and 82% of coal must never be exploited, in other words, they must be left in the ground. The recognition of the economic and financial consequences of this is not yet fully understood. The costs in terms of job change and decommissioning are still poorly estimated, but they are certain 23 . 

From an economic point of view, the three points raised above (international financial cooperation, financing of national investment and stranded assets) all raise a similar question: who should pay? On this point too, the situation is different from the war or even post-war economy, because today there is no lack of money. There is no longer a need for forced savings, as Keynes advocated in 1941, to finance the war, or to count on the miraculous reappearance of savings kept hidden during the war, as European governments hoped for after 1945 24 . More than any time in history, it is a question of distribution. This is true for both taxation 25 and finance 26 . We can today imagine a system where investment in the ecological transition could be financed by monetary creation by banks or through savings (in the form of deposits or bonds). The State has an important role to play in organizing this financing, but the investment does not have to be public investment in the sense of national accounting. It could, for example, be public development banks 27 . The role of the State is to ensure that these investments truly support non-carbon activities and that the financing of these activities is in the form of safe assets — the low risk being able to compensate for a low return. The central bank can guarantee the liquidity and reliability of this mode of financing, as it did after the war, possibly by guaranteeing preferential refinancing opportunities for environmental loans 28 . The questions that arise are those of coordination and the democratic nature of the choices made and, if the State guarantees private activities, those of the conditions to be demanded from these private institutions. The essential purpose of planning is to coordinate interests and to prevent private interests from clashing with public interests.

Conclusion

In this short text, I have turned to the history of planning and the war economy (as well as their turbulent relationship) to warn against the idea that reference to the war economy could create the possible conditions for an ecological planning that would be able to change our modes of production and our relationship to nature. If historically there was a link between the war economy and the increase in state intervention in the middle of the 20th century, post-war planning was created in an attempt to extricate itself from reference to the war economy, which was seen as a temporary and exceptional moment while awaiting the return to normality of the peacetime economy. If we want to consider ecological planning today, we must first fight against the still widespread idea (to which the war economy rhetoric contributes) that state intervention in the economy is only justifiable as a temporary and exceptional situation imposed by the enemy.

The energy crisis caused by the war in Ukraine coincides with a belated and insufficient awareness of the need to change our modes of energy production and consumption. Just as during the covid-19 pandemic, it can be an opportunity to make rationing policies that seemed unacceptable or unimaginable a few months earlier visible and tangible. But, in the same way that in the 20th century there was a mistaken belief that war planning would automatically lead to socialism, we must be skeptical of the idea that the current energy crisis can be transformed into a healthy awareness and long-term change of model. It is relatively easy to mobilize and unite interests in times of war, but the real political and intellectual struggle lies in the definition of peace as it is necessary to agree on the long-term and on normality.

Notes

  1. This argument, in various forms, is often used in the media by politicians, journalists or activists, without being clearly identified or precisely defined. A successful book in France has recently used the term “ecological war” in this sense: Clément H. (2021), Journal de guerre écologique. Fayard, 2020. In a completely different way, Bruno Latour and Nikolaj Schultz have given themselves the task of “explaining” the state of ecological war. Latour, B., & Schultz, N. (2022). Mémo sur la nouvelle classe écologique: Comment faire émerger une classe écologique consciente et fière d’elle-même. Empêcheurs de penser rond.
  2. Charbonnier P. , ” La naissance de l’écologie de guerre ” ; Grand Continent, 18 March 2022, https://legrandcontinent.eu/. Mike Davis made a somewhat similar argument to suggest that the constraints on consumption in the United States during World War II were instrumental in winning the war and could serve as a model for the ecological cause: Davis, M. (2008). “Ecology of War: When the United States was fighting against the waste of resources”. Movements, (2), 93-98.
  3. See also, in particularly regarding the link between the war economy and the short term, Monnet, E. (2022) ” Economie de guerre et écologie : les risques de l’analogie ” L’Economie politique n°95, août, p.94-102.
  4. See Monnet, E. (2022) ” Economie de guerre et écologie : les risques de l’analogie ” l’Economie politique n°95.
  5. This goal depended on the combination of rising output, political freedom, and geopolitical power and thus the economic growth paradigm. See Schmelzer, M. (2016). The hegemony of growth: the OECD and the making of the economic growth paradigm. Cambridge University Press. Bivar, V. (2018). Organic resistance: The struggle over industrial farming in postwar France. UNC Press Books. Charbonnier, P. (2020). Abondance et liberté: une histoire environnementale des idées politiques. La Découverte.
  6. Lange, O. (1958). “The Role of Planning in Socialist Economy”. Indian Economic Review, 4(2), 1–15.
  7. See among others, as an introduction to this literature, Milward, A. S. (1979). War, economy and society, 1939-1945. Univ of California Press; Harrison, M. (Ed.). (2000). The economics of World War II: six great powers in international comparison. Cambridge University Press. Patel, K.K, (2016), The New Deal: a global history, Princeton, NJ: Princeton University Press. Tooze, A., & Martin, J. (2015). “The economics of the war with Nazi Germany”. In The Cambridge History of the Second World War, 3, 27-55.
  8. Neurath, O. (1916). “War Economics”, in Cohen, R & Uebel,T. (eds), Otto Neurath: Economic Writings 1904-1945, Kluwer, p.153-199.
  9. See for example, in the case of France, Fourquet, F. Les Comptes de la Puissance. Encre Recherches, 1980.Rousso, H. (1985). Le Plan, objet d’histoire. Sociologie du travail, 239-250; Monnet, E. (2018). Controlling Credit: Central Banking and the Planned Economy in Postwar France, 1948 1973. Cambridge University Press, chp.1.
  10. Quoted in Badel, L. (1999). Un milieu libéral et européen: Le grand commerce français 1925-1948. Comité pour l’Histoire économique et financière, chp. IX §54 URL: https://books.openedition.org/igpde/2225. The original reference is Louis Baudin, “Servitude ou liberté économique”, Pour une économie libérée, Paris, 1946, p. 14-1.
  11. On these debates and their influence, see Oualid, W. ” Les débuts de l’économie de guerre en France.” Revue d’économie politique 54.2 (1940): 185-215; Spiegel, H. W. (1940). Wehrwirtschaft: Economics of the Military State. The American Economic Review 30(4): 713-723; Kaldor, N. (1945). The German war economy. The Review of Economic Studies, 13(1), 33-52. Thiveaud, J.-M. and Feltesse V., ” L’ère Des Tyrannies et l’économie de Guerre : Naissance d’une Théorie (1930-1940).” Revue d’économie Financière, no. 16, 1991. Abelshauser, W. (1999). Kriegswirtschaft und Wirtschaftswunder. Vierteljahrshefte für Zeitgeschichte, 47(4), 503-538. These few articles are an introduction to a literature consisting of dozens of works in several languages.
  12. Gaïti, B. (2002). Les modernisateurs dans l’administration d’après-guerre l’écriture d’une histoire héroïque. Revue française d’administration publique, no 102, p.295-306.
  15. Margairaz, M., (1991). L’État, les finances et l’économie. Histoire d’une conversion 1932-1952. 2 volumes. Committee for the Economic and Financial History of France. Margairaz, M. (2009). ” Les politiques économiques sous et de Vichy “. Histoire politique, (3), 93-109. 13 . 

    Socialist planners saw the post-war period as an opportunity to create a new form of collective organization that was distinct from the wartime vision — embodied in particular by nationalization and the creation of social security. In a different way, the separation of planning from the wartime economy was also made by administrative planners through the rejection of scarcity and the need for reconstruction through economic and scientific modernization. This is how long-term vision became an integral part of planning, and how the principle that the state could thereby serve as a guide for the rest of the economy gained acceptance, even among those who rejected socialist ideas 14 Hirsch, E. (1962). French planning and its European application. J. Common Mkt. Stud. 1, 117; Andersson, J. & Prat, P. (2015). ” Gouverner le “long terme”: La prospective et la production bureaucratique des futurs en France.” Gouvernement et action publique, OL4, 9-29.

  16. Hirsch, op.cit, p.122 Engineer, Resistance fighter and friend of the SFIO, Etienne Hirsch chaired the Commissariat Général au Plan from 1952 to 1959. He then chaired the European Atomic Energy Community (Euratom) until 1961.
  17. The criticism of pre-war economic and demographic Malthusianism was a continuation of Vichy policies. Cf Margairaz M. (2009) op.cit.
  18. “Première étape vitale de notre redressement”, in Le Monde, June 3, 1946.
  19. Judt, T. (2005)Postwar: A History of Europe Since 1945 , Penguin Press, p. 69.
  20. See the avenues developed in France Stratégie (2022) “Soutenabilités! Orchestrer et planifier l’action publique” Report. Durand C. and Keucheyan R. “aL’heure de la planification écologique “, le Monde Diplomatique, May 2020.
  21. Parts of the paragraphs that follow are taken from the following text: Monnet E., ” Planification écologique “, Le Monde, 27 May 2022.
  22. See, on the financial aspect of planning, Monnet E. (2018), op.cit.
  23. Bos, K., & Gupta, J. (2019). Stranded assets and stranded resources: Implications for climate change mitigation and global sustainable development. Energy Research & Social Science, 56, 101215. Caldecott, B. (Ed.). (2019). Stranded Assets: Developments in Finance and Investment. Routledge.
  24. Keynes, J.M. (2020 [1940]), Comment financer la guerre, Classiques Garnier.
  25. Chancel, L. (2022). Insoutenables inégalités-Pour une justice sociale et environnementale. Les petits matins.
  26. Offer, A. (2022). Understanding the Private–Public Divide: Markets, Governments, and Time Horizons. Cambridge University Press.
  27. This was the case after 1945, cf E.Monnet 2018, op. cit, chp.6
  28. Monnet, E. (2021). La Banque-providence: Démocratiser les banques centrales et la monnaie. Le Seuil.

Notes