p Military-economic potential supplies the bulk of military resources, and methods for converting them into real military power change with historical progress. Slave-owning and feudal societies based on natural economy procured a large 76 share of their military resources by direct exaction: tax in kind, services, etc. As money developed into the basic medium of commodity exchange, however, it was increasingly used by governments, even in the feudal period, for the maintenance and armament of armies. Under capitalism, which is based on commodity production, money has become the exclusive legal tender in government procurement of military and civilian goods and services.
p Government revenue is mobilised mostly through the financial system of national income reapportionment. Capitalist finance is a powerful lever with which military-economic potential is turned into real military power and the economy is geared to war. There are conflicting views on its role in military work, its impact on the course and outcome of wars. This role was long considered decisive. As far back as the Renaissance, the Florentine statesman Niccolo Machiavelli wrote: "He wins the war who has an extra thaler in his pocket.” He is credited also with this pictorial metaphor: "Money is the sinew of war.” Statesmen of various countries and periods held similar views. The Russian tsar Peter I decreed: "Money shall be collected without fail as it is the artery of war.” The 17th-century Austrian general Raimund Montecuccoli would say: "Three things are necessary to win a war: first, money; second, more money; third, still more money.”
p The view of finance as the crucial factor of war prevailed in bourgeois publications on economic and military subjects for centuries. Bourgeois statesmen and ideologists gave close attention to military finance and accumulation of war emergency funds in peacetime. Before World War I, the finance of military work was studied with particular zeal in Germany. Many leading German economists (Wagner, Riesser, Zann, and others) were involved in comparative studies of the financial power of prospective belligerents.
p Before World War I and in its early period, the duration of a war was commonly believed to be limited by pecuniary resources. For example, in 1915 the British Chancellor of the Exchequer McKenna, the well-known British economist John Keynes and others supposed that financial difficulties created by the war might limit and even terminate the hostilities. The former British Prime Minister Lloyd George, 77 commenting in his memoirs on Keynes’ pessimistic view of Britain’s financial possibilities for a sustained war effort, wrote that in the Prime Minister’s opinion, "we would get through to the end of the financial year, i.e., the 31st of March, 1916, provided our liabilities were not increased by fresh orders... but after that, the Deluge—unless peace intervenes.” [77•1 Lloyd George himself shared this view at the time, as evidenced by his statement that the last milliard would win the war and herald peace.
p The financial experience of World War I disproved the theory of finance as the decisive factor in the progress and outcome of a war, and demonstrated that in the era of imperialism funds stored up in peacetime had lost their former importance and had a minor role to play in supplying the immensely increased war demand. In the meantime, the war revealed ,the ability of the belligerent powers to mobilise through finance enormous funds for a sustained war effort.
p This experience bred a new theory opposed to the former. The concept of finance as a merely technical means of mobilising material resources and having no essential bearing on the war effort, and the view that financial problems can be solved as a matter of routine became widely current in bourgeois writings on military-economic affairs.
p Both theories, evolved in different historical situations and conditioned by a definite level of development of the economy and financial system, reflect the outward aspects of capitalist finance.
p Before the advent of imperialism, the relatively small war demand was largely satisfied with material and pecuniary resources laid up in peacetime. Material resources for war, the bulk of which consisted of provisions, apparel and fodder, were easily available for money, so that it was unnecessary to switch the entire economy to war production. This led to exaggeration of the role of money in war and the wrong view of money having the decisive effect on its course and outcome.
p Under imperialism the situation changed radically. Spectacular advances in military technology and much greater 78 military demand for material resources pointed to material production as the main factor in war. At the same time, concentration of industries and increasingly centralised management, the development of transportation services, the closer links between government and industry, the growth of statemonopoly capitalism and, lastly, the emergence of a ramified financial and credit system enabled the government quickly to mobilise requisite funds in wartime, gearing that entire system to military work and war. This led to another delusion, namely, the view of finance playing a merely technical role in war.
p Both these theories are untenable, failing to show the true role of finance in war. The Marxist-Leninist theory of finance, however, clearly shows its place in the relationship between war and the economy. Finance cannot be lumped together with manpower resources, production capacities, raw materials and fuel reserves, etc., which make up economic potential. It is a derivative of production directly related to its volume and level of development. Nor is it a passive factor in relation to the economy, being actively involved in social reproduction. Financial policy, the use of financial levers by state-monopoly capitalism have a direct bearing on production, stimulating or hampering its development as the case may be, i.e., increasing or reducing the economic potential.
p The government uses finance as a lever with which to mobilise and use the military-economic potential. It is precisely from this aspect that we shall view finance as an indispensable element of military work and war.
p The following functions of finance express its role as a tool by which military-economic potential is converted to real military power.
p 1. Under capitalism, where means of production and hence its fruits are owned by private employers, and government ownership is unimportant, money is the sole legal tender in government procurement of goods and services and in military pay. Small wonder, therefore, that a capitalist state needs a lot of money for military work and war.
p This money is drawn from the gross national product and national income. Capitalist governments collect money by redistributing primary income (profit, ground rent, wages 79 and salaries) through the financial system by means of taxation, loans, emission of paper money, and otherwise. Leaning on its political power, the government uses the above methods to appropriate a share of primary income. Methods for mobilising funds determine the distribution of costs involved in military work and war between the different classes. The bulk of the expense of military work is shouldered by the working classes. As military technology develops and wars grow in scale and intensity, the share of national income the government spends for military work grows, too. This in turn results in a greater financial exploitation of the working masses.
p When mobilising funds the government runs into difficulties, the main of which are resistance of the masses to their intensified financial exploitation and the latter’s adverse effect on the nation’s economic welfare. These difficulties grow worse in wartime, when new sources of revenue have to be found to meet the colossal military disbursements. Nevertheless, as the experience of the two world wars indicates, capitalist governments, resorting to various, techniques, manage to store up huge funds for military work, largely because in wartime the economy becomes lop-sided, public capital circulates faster, and monetary capital grows more quickly than real capital. When a government mobilises the bulk of material resources for unproductive purposes (in 1943, the USA spent roughly two-thirds of its industrial output for war), the growing income of the capitalists and other population groups cannot be fully expended, as a rule, due to the rationing of many civilian goods. What is more, by taking various state-monopoly measures the government regulates the economy in the interests of war, limits private civilian construction, replacement of plant and equipment, etc. This results in accumulation of free capital seeking investment. In wartime, it does not reflect accumulation of real capital, and is the product of a specific war market situation available even with a dislocated economy. Hence the ability of belligerent powers to mobilise enormous funds for a sustained war effort.
p The military market situation helps accumulate free capital to be used for war by operating the flexible levers of military finance. The same situation, however, the inflationary methods of war finance in particular, leads to a rise in 80 commodity prices and inflation, reducing the efficiency of military spending, as governments have to spend more to get the same, and to the growing danger of economic dislocation with all its disastrous consequences. This makes it clear that the government’s possibilities for capital accumulation are limited, that finance is not a merely technical means of war but an important lever for converting existing military-economic potential to real military power with the degree of efficiency varying with the skill of handling military finance. An inefficient financial and credit system and wrong techniques of military finance may lead to government failures in using objective material possibilities for military work, of essential importance for the course and outcome of a war.
p We have discussed above the limits of military finance in wars demanding tremendous efforts from the belligerents. Needless to say, in other situations the use of military finance on a comparable scale is unthinkable.
p 2. The government spends accumulated funds to meet various military expenses, i.e., to finance specific militaryeconomic measures.
p Military work and war demand numerous types of spending, mostly for personnel and equipment supply and maintenance, research and development, construction, etc.
p The volume of military spending a nation can afford varies with its military-economic potential. Appropriations for individual types of military work are dictated by the advancement of military technology, the character and objectives of this work. All these are factors shaping a nation’s military strategy.
p 3. Finance is an important lever of organising, maintaining and developing military production in peacetime and of gearing the entire economy to military work in wartime. The attainment of these objectives is largely facilitated by the government’s direct regulation of the economy through legislation and administrative orders, prohibiting, for example, the production of many civilian goods (during World War II, the manufacture of cars for civilian uses, household refrigerators, electric appliances, trading equipment, office machines and many other goods was banned in the USA and Britain). The use of indirect, in particular, financial 81 levers is not less important in conditions of the capitalist economy.
p Alleging that in wartime profit loses its importance and that satisfaction of public needs becomes the main stimulus of economic activity, bourgeois ideologists seek to prove that a capitalist wartime economy is amenable to public control. Experience shows that such claims are unfounded and the main laws of capitalist production continue to operate in wartime despite the much widened sphere of state-monopoly capitalism and government regulation of industry. The capitalists organise war production not so much out of “patriotic” sentiments, which they may well have, as from their craving for profits and wealth. Of course, when the system of government and capitalist wealth are at stake they agree to “sacrifice” their interests temporarily to save the system as a whole. In wartime individual monopolies have sometimes to subordinate their private interests to the common class interests of all capitalists so as to get a compensation and multiply their wealth after the war.
p In wartime, in addition to legislative, administrative and political measures, the government has to make wide use of financial levers to ease adaptation of the economy to largescale war production at a high rate of monopoly profit. It grants subsidies and tax reliefs to private military industries, awards military contracts on favourable terms, gives them advance payments and low-interest credits, supplies them with scarce equipment and raw materials on a priority basis, etc.
p Since in wartime, the bulk of national income is collected and spent through the budget, the government has much greater possibilities to regulate the economy through finance. With its enormous pecuniary resources and control over the overwhelming share of solvent demand, the government is able to regulate the economy, using in addition such important state-monopoly measures as prices and wages control, distribution of manpower, raw materials and scarce materials, government capital investments, etc. By setting prices on military and civilian goods the government secures their increased or curtailed production to keep pace with the war demand. It also provides for relatively higher earnings in the military industries to secure an inflow of manpower from 82 civilian industries. Among the many methods of state- monopoly regulation of the military economy government capital investments and the privilege of accelerated amortisation of private capital outlays granted to the monopolies deserve special mention. All these financial measures stimulate larger military production and adaptation of the economy to the needs of war.
p In view of the growing relationship between war and the economy the role of finance in organising and stimulating war production becomes particularly great in the conditions of unplanned capitalist management. Today, the USA is widely using finance to prepare the economy for a war emergency, develop military technology, carry out various mobilisation measures to harness the economy to war within a brief space of time.
p 4. Finance, military finance in particular, is of great importance also for securing rational military spending. In the post-war period, finance and the efficiency of military spending have riveted the attention of American authors on military-economic subjects. It is emphasised in publications dealing with the economic aspects of military work that in view of the extremely increased military demand for material resources even a wealthy country like the USA is unable to meet it in full. Professor Bernard Brodie of the USA writes in Strategy in the Missile Age:
p “We do not have and probably never will have enough money to buy all the things we could effectively use for our defense. The choices we have to make would be difficult and painful even if our military budget were twice what it is today. The fact that we are dealing with a lesser sum only makes the choices harder and painful.” [82•1
p In view of the immenseness of military demand and the definite size of authorised military spending, the US Ad" ministration pays close attention to raising its efficiency. Since 1961, the Pentagon has taken effective steps to improve the system of military demand evaluation, methods used to draft the military budget and control its fulfilment.
p 5. Military finance is also used for military purposes 83 in dealing with world problems. Throughout its history the USA has been widely using graft and financial “aid” to attain its imperialist objectives. These methods have been used particularly often in the post-war years, when the socalled foreign aid has become an organic component of US policy.
p To seize and use enemy resources military currency is issued in occupied territory in wartime. For example, during World War II the USA issued military payment certificates in some North African countries, in Sicily, Southern Italy, Greece, etc.
The above-listed basic functions of finance in the broad range of military activities determine its contribution to military potential. Finance, of course, does not decide the course and outcome of wars nor is it a merely technical means of war. As military demand for material resources grows and the selection of an optimum variant in military spending becomes more and more difficult, the financial mechanism of military work and war becomes more intricate and the role of finance in military potential greater, since finance is increasingly turning into a major factor of efficient military-economic work.