The economics of global warfare

Summarising Robinson Erhardt’s interview with Steve Keen [1,2]

Prof Steve Keen argues that global warfare and geopolitical conflicts can trigger catastrophic economic shocks because traditional economic models completely ignore the fundamental role of energy and physical inputs in production. He emphasizes that modern capitalism relies on fragile, tightly interconnected supply chains rather than abstract market equilibrium.

Core Economic Arguments

a. Energy as the Driver: Keen famously states that “labour without energy is a corpse, while capital without energy is a sculpture.” Wars disrupting critical energy chokepoints — such as the Strait of Hormuz — paralyse the entire manufacturing and industrial out-put systems.

b. Blindness of Mainstream Economics: Neoclassical and main-stream economists treat energy and raw materials as trivial comp-onents, failing to see how a minor physical deficit triggers exponent-ial systemic collapse.

c. Critical Bottlenecks: Beyond oil, conflicts in vital regions threaten nonenergy essentials like global fertilizer supplies, helium, and sulphuric acid, risking widespread secondary crises like localized or global famines.

d. Systemic Fragility: Elaborated in his Substack analysis, Keen has warned that the global economic framework possesses an inner fragility that bravado and standard financial metrics mask until a sev-ere shock occurs.

1. Podcast: https://open.spotify.com/episode/1lFinV7tS48MH2JZXzxRqf

2. Video: https://www.youtube.com/watch?v=AQkAzbIgOqI

Keen: “Economics is not the Emperor of the social sciences, but the Humpty Dumpty”.

I am often asked what I would keep of Neoclassical economics in a new paradigm. My answer is that I would keep as much of Neoclassical economics as modern astronomy kept of Ptolemaic astronomy – which is to say, nothing at all. — Steve Keen

If you look at mainstream economics there are three things you will not find in a mainstream economic model – Banks, Debt and Money. How anybody can think they can analyse capital while leaving out Banks, Debt and Money is like an ornithologist trying to work out how a bird flies whilst ignoring that the bird has wings… —Steve Keen