Economic warfare, or economic war, is defined by the Oxford English Dictionary as involving "an economic strategy based on the use of measures of which the primary effect is to weaken the economy of another state". In military operations, economic warfare may reflect economic policy followed as a part of open or covert operations, cyber operations, information operations during or preceding a war. Economic warfare aims to capture or otherwise to control the supply of critical economic resources so that the military and intelligence agencies can operate at full efficiency or deprive enemy forces of those resources so that they cannot function properly. The concept of economic warfare is most applicable to conflict between nation states, especially in times of total war, which involves not only the armed forces of an enemy nation, but also a mobilized war economy. In such a situation, damage to the enemy's economy is damage to its ability to fight a war. Policies and measures in economic warfare may include blockade, blacklisting, preclusive purchasing, rewards and the capturing or the control of enemy assets or supply lines. Other policies, such tariff discrimination, sanctions, the suspension of aid, the freezing of capital assets, the prohibition of investment and other capital flows, and expropriation, even if without war, may be referred to as economic warfare. Scorched earth policies have often been applied to deny resources to an enemy.
Union forces in the American Civil War had the challenge of occupying and controlling the 11 states of the Confederacy, a vast area larger than Western Europe. The Confederate economy proved surprisingly vulnerable. Union forces were faced with guerrilla warfare supported by a large fraction of the Confederate population that provided food, horses, and hiding places for official and unofficial Confederate units. Before the war, most passenger and freight traffic moved by water through the river system or coastal ports. Travel became much more difficult during the war. The Union Navy took control of much of the seacoast and the main rivers such as the Mississippi River and the Tennessee River, using the Mississippi River Squadron of powerful small gunboats. Land transportation was contested, as Confederate supporters tried to block shipments of munitions, reinforcements and supplies through West Virginia, Kentucky, and Tennessee to Union forces to the south. Bridges were burned, railroad tracks torn up, and telegraph lines were cut. Both sides did the same and effectively ruined the infrastructure of the Confederacy. The Confederacy in 1861 had 297 towns and cities with a total population of 835,000 people, 162 of which were at one point occupied by Union forces with a total population of 681,000 people. In practically every case, infrastructure was damaged, and trade and economic activity was disrupted for a while. Eleven cities were severely damaged by war action, including Atlanta, Charleston, Columbia, and Richmond. The rate of damage in smaller towns was much lower, with severe damage to 45 out of a total of 830. Farms were in disrepair, and the prewar stock of horses, mules, and cattle was much depleted; 40% of the South's livestock had been killed. The South's farms were not highly mechanized, but the value of farm implements and machinery in the 1860 census was $81 million and had been reduced by 40% by 1870. The transportation infrastructure lay in ruins, with little railroad or riverboat service available to move crops and animals to market. Railroad mileage was located mostly in rural areas and over two thirds of the South's rails, bridges, rail yards, repair shops, and rolling stock were in areas reached by Union armies, which systematically destroyed what they could. Even in untouched areas, the lack of maintenance and repair, the absence of new equipment, the heavy overuse, and the relocation of equipment by the Confederacy from remote areas to the war zone ensured the system would be ruined at war's end. The enormous cost of the Confederate war effort took a high toll on the South's economic infrastructure. The direct costs to the Confederacy in human capital, government expenditures, and physical destruction totaled perhaps $3.3 billion. By 1865, the Confederate dollar was worthless because if high inflation, and people in the South had to resort to bartering for goods or services to use scarce Union dollars. With the emancipation of the slaves, the entire economy of the South had to be rebuilt. Having lost their enormous investment in slaves, white planters had minimal capital to pay freedmen workers to bring in crops. As a result, a system of sharecropping was developed in which landowners broke up large plantations and rented small lots to the freedmen and their families. The main feature of the Southern economy changed from an elite minority of landed gentry slaveholders to a tenant farming agriculture system. The disruption of finance, trade, services, and transportation nodes severely disrupted the prewar agricultural system and forced Southerners to turn to barter, ersatz, and even spinning wheels. The entire region was impoverished for generations.
World War I
The British used their greatly-superior Royal Navy to cause a tight blockade of Germany and a close monitoring of shipments to neutral countries to prevent them from being transshipped to there. Germany could not find enough food since its younger farmers were all in the army, and the desperate Germans were eating turnips by the winter of 1916–17. US shipping was sometimes seized, and Washington protested. The British paid monetary compensation so that the American protests would not escalate into serious trouble.
Clear examples of economic warfare occurred during World War II when the Allied powers followed such policies to deprive the Axis economies of critical resources. The British Royal Navyagain blockaded Germany although with much more difficulty than in 1914. The US Navy, especially its submarines, cut off shipments of oil and food to Japan. In turn, Germany attempted to damage the Allied war effort via submarine warfare: the sinking of transport ships carrying supplies, raw materials, and essential war-related items such as food and oil. Neutral countries continue to trade with both sides. The allies made a special effort to cut off sales to Germany of critical minerals such as wolfram, a tungsten ore that is used to make steel armor, as well as mercury from Spain and Portugal. Germany wanted Spain to enter the war but rejected its terms, which included control of French colonies in Africa. It was essential to keep Germany and Spain apart and so Britain used a carrot-and-stick approach. Britain provided oil and closely monitored Spain's export trade. It outbid Germany for the wolfram, whose price soared, and by 1943, wolfram was Spain's biggest export-earner. Britain's cautious treatment of Spain brought it into conflict with the more aggressive American policy. Washington cut off oil supplies in 1944 but then agreed with London's requests to resume oil shipments. Portugal feared a German invasion, but when that became unlikely in 1944, it virtually joined the Allies.
Christian Harbulot, the director of the Economic Warfare School in Paris, provides an historical reconstruction of the economic balance of power between states. In his study, he demonstrates that the strategies that states put in place to increase their economic power and their impact on the international balance of power can be interpreted only by the concept of economic warfare.
The United States applies economic, trade, scientific and military sanctions against Iran. In 2019, the BBC reported that US sanctions against Iran "have led to a sharp downturn in Iran's economy, pushing the value of its currency to record lows, quadrupling its annual inflation rate, driving away foreign investors, and triggering protests."
The 2006 North Korean nuclear test attracted global attention and sanctions from the United Nations and many of its members, including the United States. The sanctions were meant to weaken the economy of North Korea and thus its efforts to develop nuclear weapons. The sanctions have weakened the economy of North Korea, but its development of nuclear weapons has continued.
