Large-scale warfare is not a thing of the past. Wars not only continue to cause human misery and destruction, but demand immense financial resources, to cover everything from defence expenditure to refugee relief, rehabilitation, and reconstruction. So how do war-time governments pay for it all?
The answer is that they tax the rich. Or at least, so they used to. Based on newly collected tax policy data covering war-affected low- and middle-income countries in the last six decades, Frizell shows that armed conflicts have typically led to an expansion of distinctly progressive taxes. After the fall of the Berlin Wall, however, war finance appears to have taken a different direction.
To get there, the analysis takes the history of the two World Wars as an empirical reference point, outlining how the resulting fiscal and social pressures provided the impetus for the introduction of innovative and sharply progressive taxes across the West. Frizell argues that today’s conflicts in fact give rise to very similar pressures.
Not only do contemporary conflicts generate tremendous costs and thus a need for more revenue, but they share another key feature with their historic predecessors: their inherent inequity. Some risk their life in the trenches, others stay safe far away from the front lines. Most will experience penury, many will lose everything, and a few will get rich. The result, then as now, is public anger and popular demand for fairness. But does it lead to fiscal policies reflecting these demands?
To answer this question, the thesis Making the rich pay for the war : the politics of fiscal fairness in contemporary conflict-affected states, makes use of a variety of methodological techniques, analysing data spanning some 60 war-affected countries across the world between 1960 and 2020. The results show that wars remained strongly associated with increased taxes on the very highest incomes until the end of the Cold War.
Relying on statistical as well as case-study evidence, Frizell further shows that the association was driven by the combination of fiscal pressure and fairness demands: governments desperate for revenue, and confronted with populations angered by the inequities of war, had little choice other than conspicuously tax the rich. The logic was the same, whether in conservative democracies or theocratic autocracies, and whether fighting civil or inter-state wars. But the generality of the phenomena merely renders the sudden break after the Cold War all the more striking. So what happened?
Based on a detailed case-studies of the wars in Croatia (1991-95) and Syria (2011-), Frizell proposes two complementary explanations. First, in line with the ascending neoliberal policy paradigm, key government actors had become convinced that progressive taxes were inadmissible to maintain. Second, the new global environment had made the state dependent on semi-private war entrepreneurs – a group which could now use their political influence to promote their own economic interests.
The extent to which this explanation travels to other cases remains a question for future research. But as argued throughout this thesis, and as the Syrian case highlights, if the solution of “making the rich pay for the war” has now largely fallen out of practice, the grave fiscal and socio-economic predicament to which it used to respond has hardly disappeared.
Read Jakob Frizell's thesis in CADMUS. Read his commentary on the EUI’s research blog, EUIdeas.
Jakob Frizell defended his thesis at the EUI in November 2021. During his PhD studies, he has been an active member of the PRIO Research school on peace and conflict. With research interests spanning the field of comparative political economy, his primary work focuses on fiscal and redistributive policies in conflict-affected countries. He currently works as a postdoctoral researcher at the Global Dynamics of Social Policy research center at Bremen University, Germany, where he studies the link between modern armed conflicts and the development of social policy. His research has most recently been published in an edited volume on Global Taxation (Oxford University Press).