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What is an Economic War?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 23 August 2016
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An economic war is a strategy that involves attempting to defeat an enemy or competitor by utilizing different methods to undermine the financial and economic stability of that enemy. Economic warfare of this type may be directed toward another business or even involve activities that serve to limit the trade options of a given nation. Typically, the idea behind an economic war is to neutralize the effectiveness of the target by gradually diminishing the resources that can be used to defend or maintain the status quo of that targeted entity.

As the strategy is employed within the process of business, an economic war will involve attempting to undercut the reputation of a competitor using several different means. One approach is to pursue an aggressive pricing campaign that involves selling goods and services at unit prices below the costs incurred by the target in the manufacture of their own product lines. Another approach calls for incrementally tarnishing the reputation of the competitor so that consumers begin to turn to other providers as a way of meeting their needs. Both methods can be applied simultaneously, often with the effect of driving the competitor out of business altogether.

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In terms of the world economy, it is possible to engage in an economic war that is designed to cripple the economic stability of a targeted nation. This approach often involves the use of trade restrictions as a means of negatively impacting the target’s ability to import essential goods that are not produced within that nation, while also finding ways to reduce or eliminate the demand for the nation’s exported goods. To create this type of trade war, nations that wish to cripple an opponent’s economy will often adopt a series of trade policies that eventually plunge the opponent into a recession or possibly even an economic depression. The trade restrictions remain in place until the impact of that nation is neutralized and it capitulates to the demands of the nations who orchestrated the war.

Just as with any type of war, an economic war normally has a specific goal in mind. The processes employed for the duration of the war may change, depending on the chain of events that emerge as the war progresses. For example, should other parties choose to enter the economic combat by siding with the targeted entity, those who launched the war may have to refine certain methods in order to compensate for the additional support and still achieve the desired goal. Depending on the ability of the target to withstand the attacks and possibly launch some sort of counter-initiative, an economic war can go on for years before any type of resolution is reached.

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Laotionne
Post 3

When you look back at history, the side with the most money and resources usually wins the war. It may take a while when both countries are powerful, but the country that can hold out longer wins. Just look at what happened with the Cold War economics, and how the U.S. eventually won because the Soviet economy was falling apart.

Animandel
Post 2

Many people like to define The Civil War in the United States in black and white. Yes, the North was fighting to end slavery and the South was fighting to continue slavery, but this was because they saw the end of slavery as the end of their livelihood. This was the basis of Civil War economics.

The North knew the economic value of having the southern states remain in the union and the President wasn't about to let them leave. For the South, the North's insistence on ending slavery singled the end to the Southern economy as it was at the time.

Feryll
Post 1

When you look at the causes of any particular war there is a good chance you will find some issue related to money and economics. The wars fought among the European nations during the time of colonization were in many instances solely based on economics. European powers wanted to colonize other lands so they could benefit from the wealth or the natural resources of those places.

I think countries realize that they will be looked at negatively today if they say we're going to invade another country because we want control of their natural resources, so the more powerful countries have to try to find other less frowned upon reasons to go to war. In the end, it's still about the money.

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