Under duress: The effects of wartime economic isolation

  • Spring 2018
Under duress: The effects of wartime economic isolation

Erik Sand, a PhD student in international relations and security studies, discusses how economic isolation impacts wartime behavior. Banner image: iStock photo

SPRING 2018 : précis Student Piece
North Korea missiles and flag
Erik Sand

Erik Sand is a PhD Student in international relations and security studies. His research interests include grand strategy, deterrence, escalation control, and naval issues. He came to MIT after completing eight years of active duty in the US Navy as a Surface Warfare Officer. Photo: MIT Department of Political Science  

April 30, 2018

The potential for the United States to fight a war against an advanced military is rising. A conflict with North Korea looms largest. A strategy of economic isolation or blockade is likely to play an important role in any near future US conflict. The United States is already doing its best to economically isolate North Korea. How does economic isolation effect the wartime behavior of states it targets? The importance of this question extends beyond North Korea. China fears the US Navy could block the Strait of Malacca and disrupt its supply of oil. Japan fears China could use its reclaimed islands in the South China Sea similarly. While economic isolation does not ensure defeat, it constrains states’ strategic decision making. Economically isolated powers pursue riskier strategies, and often these strategies make it harder for them to achieve a favorable outcome. Economic isolation, however, can create risks for its implementer as well. Isolated states are frequently defeated because they expand their wars in response to economic isolation.

Economic isolation leads to risky strategies

Scholars have found that wartime economic isolation is generally ineffective at coercing states to surrender. Mancur Olson’s study of the submarine blockades of Britain finds that substitution and trade reorientation minimize the impact of leaky blockades.1 John Mearsheimer finds only one example of a blockade winning a war (the defeat of Japan), and asserts that blockades fail because they are difficult to implement, become porous, and because Great Powers adapt through substitution, stockpiling, and conquest.2These analyses assume that economic isolation acts directly through limiting available resources, but, empirically, resources alone are a poor predictor of war outcomes. Strategy proves an essential variable.3

Lack of economic access, however, affects state strategy. First, economically isolated states have fewer resources for their war effort, which may exclude strategic options otherwise available. Second, leaders need to adjust their strategy to deal with specific resource shortages, like insufficient oil. States may be forced to direct their economic production toward less efficient industries or to attempt additional offensives to secure new sources. For example, when the US embargoed oil after the Japanese occupied French Indochina in 1941, Japan seized oil fields in the Dutch East Indies.4

By limiting the time states have to fight, foreclosing options requiring more resources, or forcing states to seize new resources, economic isolation leaves states with riskier strategic options. Strategies can be risky in two ways. First, strategies with a low probability of success are inherently risky. Second, and easier to evaluate a priori, strategies are risky if only complete success leaves the initiator better off. Strategies that trade short term advantage for long term disadvantage are risky because they leave states worse off even with partial success. The German decision to invade the Soviet Union before defeating the Western allies illustrates how economic isolation can lead to riskier strategies.

Germany attempts self-sufficiency

Adolf Hitler believed that Germany needed to be self-sufficient in food and raw materials, which led to his obsession with lebensraum. In the 1930s, Germans blamed the Allied economic blockade during the First World War for the deaths of more than 424,000.5 As soon as he came to power, Hitler created a ministry to manage food supply and set food prices. By 1939, Germany had enough grain stockpiled to provide a year’s worth of bread.6 Germany, however, never reached self-sufficiency in fodder, fruit, eggs, or fats, importing 40% of the latter before the war began.7

Germany attempted, but failed, to achieve self-sufficiency in raw materials as well. By 1939, trade had fallen to 10% of Germany’s GDP, the lowest fraction since unification. German chemists developed advanced processes to produce synthetic oil and rubber, but these efforts created substantial inefficiencies. The 1939 industrial plan to increase German oil production required enough steel to build a fleet 3.5 times the size of the British Navy.8 Synthetic rubber cost seven times its natural equivalent.9 On the eve of the war, Germany imported 65% of its iron ore and oil, 90% of its bauxite and 80% of its textiles. Only half of its oil imports came from Europe, making the remainder susceptible to naval blockade.10

War and blockade bring crippling shortages

When war began with Britain and France in September 1939, the Western allies imposed an economic blockade.11 The conquest of Europe should have eased Germany’s food shortages, but instead Western Europe agriculture collapsed. Western European farms depended on the labor of millions of horses, oxen, and humans, many of which were redirected to the war. European agriculture also relied heavily on nitrate-based fertilizer, but nitrates were an essential ingredient in explosives. It was a literal guns-butter trade-off. As a result, grain yields fell dramatically across Denmark, Holland, France and Germany. The highly productive dairy farms of France, the Netherlands, and Denmark relied on imported fodder, which they could no longer access.12

Food shortages resulted across Europe. The Germans began the war with 8.8 million tons of grain in reserve, but by the fall of 1940 only 1.3 million tons remained.13 The Germans attempted to compensate by starving the people of Europe. In 1941, Poles received 938 calories a day while the French and Belgian rations dropped as low as 1,300 calories a day. Still, food remained in short supply.14

Raw material shortages also developed. In 1940, French coal production, the third highest in Europe, fell 18% and never recovered. In the spring of 1940, German-controlled Europe faced a 36.4-million-ton annual coal deficit.15 In the spring of 1941, the Wehrmacht discharged trained mine workers to head off criticism should another coal shortage materialize.16 Oil posed another problem for the Germans. Romanian and synthetic production provided only 5.5 million tons in 1940. In contrast, Britain imported 10.2 million tons in 1942, the darkest days of the Battle of the Atlantic.17

The Soviet Union as a solution to the blockade

These problems persisted despite one critical hole in the blockade: the Soviet Union. Under the 1940 Soviet-German commercial pact, the Soviet Union exported millions of tons of supplies to Germany. In 1940 alone, the Soviet Union provided Germany with almost 900,000 metric tons of grain, almost a million metric tons of timber protects, more than 650 thousand metric tons of oil, as well as textiles, metals, raw and finished materials of all types.18 These resources were so important to the German war effort that Germany continued to supply the Soviets with machine tools, of which there were a critical shortage in Russia, right up to the German invasion. Hitler even placed their production priority on par with the Wehrmacht’s needs to ensure continued Soviet supplies.19

For Hitler, this dependence created a problem. His ideology required eastward expansion, but he wanted to avoid repeating the mistake of a two-front war. The Molotov-Ribbentrop pact had demonstrated Hitler could accommodate the Soviets when needed. So why did Hitler choose to invade the Soviet Union in 1941 before finishing the fight in the West? The pressure of the blockade drove risky decisions. Considering the shortages in Europe and the industrial capacity of the Britain and the United States, Hitler could not be certain of victory in a long war. The German Army was the most powerful in the world, but he could not get it across the English Channel. The German Army could, however, invade the Soviet Union and seize its resources to feed his population and supply his war machine for the fight with the West.20 As Historian Adam Tooze put it, “the strongest arguments for rushing to conquer the Soviet Union in 1941 were precisely the growing shortage of grain and the need to knock Britain out of the war before it could pose a serious air threat.”21 In this situation, invading the Soviet Union appeared the best option. It proved Hitler’s fatal mistake.

Most likely risky strategy: Expand the war

Economic isolation constrains the wartime strategy of those isolated forecloses less risky options, and makes achieving a favorable outcome more difficult. Importantly, even Nazi Germany, a state which consciously sought self-sufficiency and had the resources of an entire continent at its disposal, still felt the pressure of economic isolation. This situation makes this case both a hard test for the argument and suggests that we should expect isolation to affect the wartime strategies of even poorly-integrated states like North Korea. Nonetheless, this finding does not mean economic isolation is always a wise strategy for states capable of imposing it. As the German case demonstrates, economically isolated states are frequently defeated because they expand their wars. When combined with long-range missiles, nuclear weapons allow states on the verge of conventional defeat to inflict severe damage on their adversaries. A nuclear state that perceives its government at risk because of the consequences of economic isolation might choose to risk nuclear use. States considering imposing economic isolation must weigh the costs of an expanded war along the path to potential victory before implementing such a strategy.

Consider cross-domain effects

More broadly, this analysis suggests strategists must consider multiple levels of effects. That states rarely appear to surrender due to the direct effects of wartime economic isolation does not mean those efforts do not play a critical part in determining the outcome of wars. The state with the strongest army will not have the strength it appears to have if strategic constraints imposed upon it by economic isolation require its employment in a poor or highly risky manner. Hitler was defeated on the Russian steppe, but the Allied blockade was a key reason he was there in the first place.

Strategists must integrate all aspects of national power in their analysis. While each state’s power is the combination of its power across various domains, power does not aggregate across them linearly. Cross-domain interactions occur in sometimes seemingly counterintuitive ways. One must consider how they affect what battles are fought as well as what happens in those battles. As technology proliferates and with the increased focus on space and the development of cyber weapons, these considerations will only become more important.

1 Mancur Olson, The Economics of the Wartime Shortage, a History of British Food Supplies in the Napoleonic War and in World Wars I and II (Durham, N.C: Duke University Press, 1963).

2 John J. Mearsheimer, The Tragedy of Great Power Politics, Updated edition, The Norton Series in World Politics (New York: W.W. Norton & Company, 2014).

3 John J. Mearsheimer, Conventional Deterrence, Cornell Studies in Security Affairs (Ithaca: Cornell University Press, 1983). Allan C. Stam, Win, Lose, or Draw: Domestic Politics and the Crucible of War (Ann Arbor: University of Michigan Press, 1996).

4 Scott D. Sagan, "The Origins of the Pacific War" The Journal of Interdisciplinary History 18, no. 4 (1988): 893–922, https://doi.org/10.2307/204828; Dale C. Copeland, “A Tragic Choice: Japanese Preventive Motivations and the Origins of the Pacific War,” International Interactions 37, no. 1 (March 14, 2011): 116–26, https://doi.org/10.1080/03050629.2011.546722.

5 Franz Bumm, ed., Deutschlands Gesundheitsverhältnisse unter dem Einfluss des Weltkrieges, Economic and social history of the World War. German series (Stuttgart, Berlin [etc.] New Haven: Deutsche Verlags-Anstalt; Yale University Press, 1928), 22–61.

6 J. Adam Tooze, The Wages of Destruction: The Making and Breaking of the Nazi Economy (London ; New York: Allen Lane, 2006), 193.

7 Karl Hardach, The Political Economy of Germany in the Twentieth Century (Berkeley: University of California Press, 1980), 77.

8 W. Victor Madej, German War Economy: The Motorization Myth, 1st ed. (Allentown, Pa.: Game PubCo, 1984), 17.

9 Gustav Stolper, Karl Häuser, and Knut Borchardt, The German Economy, 1870 to the Present (New York: Harcourt, Brace & World, 1967), 136.

10 Hardach, The Political Economy of Germany in the Twentieth Century, 77.

11 The blockade evolved over the course of the war. After the fall of France, the British began to focus on “Control at Source” rather than intercepting all ships bound for the continent. The threat of denying access to British marine shipping insurance, coal bunkering facilities, and repairs yards to all ships belonging to any company that had even one ship that failed to produce the proper pre-clearance documentation upon inspection was an important tool in convincing private shipping companies to comply. W. N.Medlicott, The Economic Blockade, History of the Second World War; United Kingdom Civil Series (London: H. M. Stationery Off, 1952), 422.

12 Tooze, The Wages of Destruction, 418.

13 Tooze, 419.

14 Tooze, 366.

15 John Gillingham, Industry and Politics in the Third Reich: Ruhr Coal, Hitler, and Europe (New York: Columbia University Press, 1985), 122.

16 Tooze, The Wages of Destruction, 418.

17 Tooze, 412.

18 W. N. Medlicott, The Economic Blockade, History of the Second World War; United Kingdom Civil Series (London: H. M. Stationery Off, 1952), I:668–69.

19 Tooze, The Wages of Destruction, 423.

20 Tooze, 425.

21 Tooze, 431.