Lessons for investors from the history of war finance - FT中文网
登录×
电子邮件/用户名
密码
记住我
请输入邮箱和密码进行绑定操作:
请输入手机号码,通过短信验证(目前仅支持中国大陆地区的手机号):
请您阅读我们的用户注册协议隐私权保护政策,点击下方按钮即视为您接受。
乌克兰战争

Lessons for investors from the history of war finance

Governments rarely tell voters the true cost of military adventures, or how they intend to pay for them

How did the word “capitalism” arise? If you ask most investors that question today, they might mutter about markets, commerce and Adam Smith — or Karl Marx. But according to Michael Sonenscher, a British historian, the term actually emerged first in 18th-century Europe in connection with war finance.

“‘Capitalism’ began as a French word (capitalisme) but was used initially to refer to several largely British problems,” Sonenscher notes. “The most salient was the [18th-century] system of war finance. In French, someone who lent money to a branch of the French royal government was called a capitalist (capitaliste).”

On one level, this is just an amusing quirk of history. But it should also prompt serious reflection today. In the decades after the cold war, the “peace dividend” was such that modern financiers — and voters — rarely pondered the question of how wars are paid for. This week, however, the Stockholm International Peace Research Institute reported that rising geopolitical conflict sparked a 7 per cent, inflation-adjusted, rise in defence spending last year, to a record $2.4tn, or 2.3 per cent of global economic output. 

That partly reflects the impact of Russia’s invasion of Ukraine. Not only has American, European and Ukrainian expenditure jumped, but Russian military outlays have risen above 6 per cent of gross domestic product. 

In fact, spending rose last year in all five geopolitical regions tracked by Sipri, for the first time. “States are prioritising military strength but they risk an action-reaction spiral in the increasingly volatile geopolitical and security landscape,” says Sipri researcher Nan Tian.

Rishi Sunak, UK prime minister, this week put Britain’s defence industry on a “war footing”, with expenditure slated to rise to 2.5 per cent of GDP by 2030, and Nato recently announced a $100bn spending plan. Then there are the $95bn worth of military aid bills for Ukraine, Taiwan and Israel that were just approved by the US Congress. The “action-reaction” spiral is under way.

Thankfully, this rate of increase is still lower than at various points in the 20th century — and it comes from a low base. Sixty years ago, before the peace dividend kicked in, the US and UK respectively spent 8 and 6 per cent of GDP on the military. But given that most modern investors built their careers when “capitalism” was defined in peaceful terms, there are at least three points they should note. 

First, history shows that governments almost never tell voters the true cost of war, or how they intend to pay for it. Exceptions exist. In 1940, for example, John Maynard Keynes published a clear-headed pamphlet entitled How to Pay for the War. And last year Denmark cancelled a national holiday to create additional revenue for defence outlays. In the US, political consultants are supposed to scrutinise congressional spending bills. But transparency is rare. As Sonenscher notes, the key reason why 18th-century European kings issued debt to pay for military adventures was to circumvent the scrutiny of legislatures.

And while the recent furore around the Ukraine bill in Congress creates a veneer of democratic oversight, “public access to budget information about . . . post-9/11 [military spending] is imperfect and incomplete”, according to a critical report from Brown University’s Watson Institute.

The second lesson is that, even if costs are eventually wiped out via tax increases, inflation or plunder, there is usually a surge in debt. The Watson Institute estimates that in the US there has been $8tn in military outlay since 2001, which was “paid for almost entirely by borrowing”. Absent early repayment via massive tax rises, miraculous growth and/or default, “interest payments could total over $6.5tn by the 2050s”.

It is hard to believe that things in Europe will be any different. Yes, Sunak claimed this week that his mooted boost to military spending would be “fully funded”, via departmental spending cuts. But that sounds like magical thinking.

Third, the shock of war not only encourages heavy state economic intervention, but financial and technological innovation, too. In 1694, for instance, the British government embraced the idea of central banking to fund war. In the 1940s, the launch of American “war bonds” helped to launch a retail market for treasuries. The second world war also led to the British and American governments developing financial repression policies. Today, experiments are being mooted to securitise the proceeds of seized Russian assets for Ukraine.

Meanwhile, the US is outsourcing swaths of military tech innovation to venture capitalists. And I am told that asset managers are testing digital customisation techniques that will allow them to swiftly exclude hostile nations or regions from portfolios, while governments are unveiling new ways to track offending asset flows and assets.

Will such innovation will continue? Probably. But what is already clear is that without huge tax rises debt issuance will keep expanding if threats of war grow. That might be defensible geopolitical “insurance” for those states fearing attack. But it will almost certainly put upward pressure on interest rates. Modern “capitalists” — aka bond holder — should take note.

gillian.tett@ft.com

版权声明:本文版权归FT中文网所有,未经允许任何单位或个人不得转载,复制或以任何其他方式使用本文全部或部分,侵权必究。

英国生物技术公司新药降低量身定制式癌症疗法副作用

Autolus用于治疗急性淋巴细胞白血病的新型Car-T细胞疗法在美国获批,该疗法与癌细胞结合所需时间更短,因此副作用更小。

前保守党财政大臣告诫工党现任勿看衰英国前景

杰里米•亨特表示,英国在关键增长领域表现强劲,应该停止贬低自己。

Lex专栏:游戏机制造商在低迷市场中表现强劲

虽然游戏机老化通常意味着游戏公司收入持续下降,但多年未推出新产品的索尼和任天堂等游戏公司仍表现强劲。

为年度展望报告辩护

巴克兰:定期回顾投资框架以及进行经济和市场展望是一项良好的做法。

企业长寿的奥秘为何对投资者很重要

长寿公司除了具有凝聚力、宽容度和财务保守等特征外,几乎没有什么共同点。
2天前

特朗普上台能否解决加拿大经济疲软问题?

经济学家表示,来自美国的冲击可能会使该国经济摆脱麻木状态。
设置字号×
最小
较小
默认
较大
最大
分享×