ABSTRACT
This chapter explains how war-completely apart from its physical destructiveness-brings about the economic destruction of capital and a consequent decline in labor productivity, real income, and living standards. The analysis developed in the chapter owes much to the classic interwar discussion of inflationary war financing by Mises. The chapter concludes with a brief explanation of how inflation constitutes the first step on the road to the fascist economic planning that is typically foisted upon capitalist economies in the course of a large-scale war. However, when government operating through a central bank deliberately orchestrates a significant fiat money inflation to pay for a war or for any other purpose, matters are much different. The capital consumption that inflation brings about surreptitiously in the beginning, a repressive fascist State requires to sustain over the long run in the service of the war effort.
