Phases of the Business Cycle and the Outbreak of War

Abstract

In 1938, Macfie contended that nervous optimism, which characterizes the latter portion of a country's business cycle upswing, creates a psychological atmosphere that is particularly conducive to the outbreak of war. More recently, this finding has been used (Blainey, 1973) to support the idea that the state of the economy is an important consideration in decision makers' assessments of national capabilities available for war purposes. However, Macfie's analysis is dependent upon a number of debatable assumptions, just as his business cycle data set important limitations on the extent to which the war outbreak hypothesis can actually be tested. Utilizing more specific information on 1792–1973 British, American, French and German business cycle phases and several types of war initiations, no systematic support for the above hypotheses is forthcoming. While the N size of the present study is restricting, the identity of the four states examined and the nature of the statistical outcome suggest a general absence of a significant relationship between phases of the business cycle and the timing of war outbreaks.