Whilst governments seek to increase their preparedness in an increasingly hostile international environment, they must balance defence needs with their various far-reaching legal, economic, political, environmental and social implications.
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The increasing complexity of modern threats is blurring the distinction between peacetime and wartime, putting pressure on legal and operational frameworks.
In order to be able to respond effectively to increasing threats, it may be necessary to scale up production for defence purposes and strengthen the security of supply even in peacetime. This helps the Netherlands strengthen its readiness and resilience, ensuring the country is better equipped to respond to potential military challenges.
To understand which preparations may be necessary and what their implications would be, lessons can be drawn from war economies. This term has been used in the past to describe economies at times of, and in preparation for, war. A war economy is, however, not a clearly defined concept, and there is no on/off switch. The term describes a series of diverse measures to make a society more resilient in an escalating security context.
A so-called war economy can enable rapid production adjustments and military technology development, allowing the Ministry of Defence and the wider government to respond decisively to threats. Benefits include avoiding lengthy budgetary approvals, stimulating the domestic defence industry and increasing strategic autonomy. However, implementation has significant legal, economic, political, environmental and social implications.
RAND Europe's research maps out the consequences of the various phases towards a war economy for the Dutch Ministry of Defence and society in general. Drawing on a combination of a literature review, interviews with stakeholders, an expert workshop and three case studies on international approaches, RAND Europe’s research team developed an analysis of the following four key questions:
In studying the concept of war economy, we identified the following phases:
Graphic by RAND Europe
Based on our research, we arrived at the following definition: A war economy is an economy in which the government systematically intervenes to increase societal resilience and military preparedness in pursuit of strategic goals during conflict.
Both the definition as well as the phases highlight the key issue of resilience. The report maps the political, economic, societal, technological, legal, environmental and military aspects and (policy) implications of preparedness measures across these phases. We found that a war economy would have far-reaching consequences across the domains, and thus requires careful consideration, coordination and buy-in in early phases.
Besides the mapping of implications across several domains, we also draw lessons from approaches to preparedness and wartime economies in several case study countries: the United Kingdom, Sweden and Ukraine. Based on our research, several challenges and recommended actions were identified.
The Dutch government can take various actions to ensure that it is better prepared for potential military conflict.
Social cohesion and integration between ministries is necessary for an effective war economy. Cultivating a national will to fight is essential for a society's ability to withstand military conflict. Adopting elements of total defence concepts used by Scandinavian countries can be useful here.
While companies have visibility of Tier 1 (major system suppliers), it is becoming increasingly difficult to track lower-tier suppliers. Furthermore, the supply chains for many critical raw materials needed for the European defence industrial base are located outside the EU. It is therefore essential to map critical supply chains at national, EU/NATO and international level now and to develop contingency strategies such as diversification, stockpiling and reshoring.
Coordination within the EU is essential for managing issues related to inflation, labour shortages, supply chain resilience (including stockpiling and diversification), procurement, financing, funding and coordination mechanisms for the Defence Technological and Industrial Base. For the latter, it may be necessary to find a balance with NATO.
There is some overlap between regular crisis law and constitutional mechanisms related to state emergency law. The new proposed legislation needs to be clearer about when which mechanisms are put in place.
Research points to the importance of structurally involving companies throughout the Dutch economy in decision making. Coordination must go beyond the defence or even broader high-tech industry.
