Economic Warfare

Dollars !
Creative Commons License photo: pfala

When I was in America I saw a television news chat show where some of the contributors were suggesting that the US was under “economic attack”. That is instead of using guns to fight back in the “War on Terror”, rogue states were deliberately increasing the prices of food and gas to cripple the US economy. It sounds a little ridiculous to me but the idea of fighting a war by attacking an economy isn’t a new idea.

In World War 2, there was a German plan called Operation Bernhard. The aim was to attack the British economy by flooding the country with forged British banknotes. The forged currency would have served two purposes. The British would sell goods (exports) in exchange for counterfeit currency which is obviously no use.

Secondly, an excessive amount of money would lead to inflation. For those who do not study economics, when there is more money chasing the same amount of goods, prices must rise. This is inflation. We only have to look at Zimbabwe to see an example of how much harm inflation can do to an economy. When inflation and uncertainty is high, businesses might not have the confidence to produce the products which people need and we can see why that’s a big problem. If they’re not producing the products, then unemployment goes up too.

The CIA believe that the North Koreans are printing counterfeit US currency (superdollars) to destabilise the US economy.

But it’s not just counterfeit currency: so much of the functioning of our economy relies on confidence.

Creative Commons License photo: Henry.

If people expect shares to fall, they sell them. By selling them, they cause them to fall. It’s a self-fulfilling prophecy.

If we think inflation will be 10% next year, we’ll all ask for a 10% pay rise so that our real take home pay doesn’t fall. But if we all ask for 10% pay rises, that’ll lead to 10% inflation. Another self-fulfilling prophecy.

Isn’t it concievable to think that by planting false information and priming people to believe negative things about the economy, someone could do some serious harm to our economy?

Perhaps it isn’t such a ridiculous suggestion after all. I don’t believe that the credit crunch and rising fuel & food costs are due to “economic terrorism”. But I wouldn’t be surprised if it became a major instrument of warfare alongside cyber warfare in the future.

Similarly, we must ask the same questions about economic warfare as we must ask about cyber warfare.

  • Does economic warfare or an economic attack count as a declaration of war?
  • Is a country allowed to respond to an economic attack through conventional means?

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