The Hidden Winners of War: Who Truly Benefits from Conflict?

Wars have profound and multifaceted impacts on societies, economies, and geopolitical landscapes. While the devastating consequences for civilians and infrastructure are well-documented, it's equally important to examine the entities that derive significant benefits from conflicts. This report delves into the various beneficiaries of war, supported by data, examples, and case studies.

1. Arms Manufacturers & Defense Contractors

Defense contractors often experience substantial financial gains during periods of conflict due to increased demand for military equipment and services.

Case Study: Lockheed Martin

Lockheed Martin, a leading U.S. defense contractor, reported arms sales totaling $58.2 billion in 2020, accounting for nearly 90% of its total sales. This marked a 7.7% increase from the previous year, underscoring the company's significant role in supplying military hardware. (for more information ( search 24/7wallst.com)

Case Study: BAE Systems

BAE Systems, the UK's largest arms company, has seen remarkable financial performance amid global conflicts and geopolitical uncertainties. In 2024, the company reported a 14% increase in revenues, reaching £26.3 billion, and an underlying operating profit rise of £300 million. BAE's order book reached a record £77.8 billion, reflecting heightened demand for defense equipment. (search thetimes)

Case Study: Boeing

Boeing's defense, space, and security operations contributed $32.1 billion in arms sales in 2020, representing over half of the company's total sales. Despite challenges in its commercial aviation sector, Boeing remained a top military contractor, highlighting the resilience of defense divisions during turbulent times. ( search 24/7wallst.com)

Case Study: KBR, Inc.

KBR, formerly a subsidiary of Halliburton, secured over $16 billion in U.S. government contracts for work in Iraq and Afghanistan from 2004 to 2006, far surpassing other companies. These contracts included logistical support for U.S. Army operations, highlighting the significant profits defense contractors can achieve during wartime.

Case Study: Halliburton

Halliburton reported soaring revenues from its contracts to help rebuild Iraq, with third-quarter sales increasing by 39% to $4.1 billion. Its subsidiary, Kellogg Brown & Root, saw revenues grow by 80% to $2.3 billion, with $900 million attributed to Iraq-related work.

2. Politicians & Leaders

Political figures may leverage wartime conditions to consolidate power, rally nationalistic sentiments, or divert attention from domestic issues.

Example: Russia's "Deathonomics"

In Russia, the government has incentivized military enlistment amid heavy losses in Ukraine by offering high wages and substantial death compensations. This strategy, termed "deathonomics," has led to improved social standing for soldiers and economic revitalization in impoverished regions, thereby bolstering domestic support for the leadership.

Example: Wartime Leadership Popularity

Historically, political leaders often experience a surge in domestic support during wartime, known as the "rally 'round the flag" effect. This phenomenon can bolster a leader's approval ratings and consolidate power, as citizens unite against a common external threat.

3. War Profiteers & Black Market Dealers

Conflicts often create environments where illicit actors can thrive by exploiting the chaos for financial gain.

Case Study: Lafarge SA

The French cement company Lafarge SA paid millions to the Islamic State (IS) to continue operating its Syrian factory during the civil war in 2013-2014. This arrangement allowed Lafarge to maintain production and sales despite the ongoing conflict, leading to legal repercussions for providing material support to terrorists.

Case Study: The Wagner Group in Africa

The Wagner Group, a Russian paramilitary organization, expanded its influence in African nations like the Central African Republic and Mali by providing security services, engaging in mining operations, and disseminating propaganda. Their involvement often led to brutal tactics and mass atrocities, highlighting the complex interplay between war profiteering and geopolitical strategy.

4. Economies That Avoid Direct Conflict

Nations that remain neutral or are not directly involved in conflicts can benefit economically by supplying goods, services, or acting as intermediaries.

Example: U.S. Economic Growth During Early WWII

Before officially entering World War II, the United States supplied arms and goods to Allied nations through programs like Lend-Lease. This period saw significant economic growth, as U.S. industries expanded to meet the demands of warring nations, pulling the country out of the Great Depression.

Example: European Defense Companies

European defense firms such as Rheinmetall, Leonardo, and Thales have seen significant stock price increases, outperforming many U.S. counterparts. This surge is attributed to heightened defense spending across Europe, driven by geopolitical tensions and the need for military modernization.

5. Nations That Expand Influence

Some countries utilize conflicts to extend their geopolitical reach, often filling power vacuums or supporting proxy wars to establish favorable regimes.

Example: Post-WWII Superpowers

After World War II, the United States and the Soviet Union emerged as superpowers. The war had weakened European colonial powers, allowing the U.S. and USSR to expand their influence globally, leading to the geopolitical dynamics of the Cold War era.

Example: Russia's Influence in Africa

Through entities like the Wagner Group, Russia has strategically increased its presence in African nations by offering military support and securing economic interests, particularly in mining sectors. This approach has allowed Russia to gain footholds in regions previously influenced by Western powers.

6. Financial Institutions & Investors

Banks and investors often see opportunities in defense sectors during conflicts, leading to increased investments and profits.

Example: War-Time Financing

Financial institutions often provide loans to governments during wars, earning interest over time. Investors in defense industries can see substantial returns due to increased military spending. For instance, during the Iraq War, contractors reaped significant profits, with U.S. government contracts for work in Iraq and Afghanistan growing from $11 billion in 2004 to over $25 billion in 2006.

Example: Hedge Funds and European Defense Stocks

Hedge-fund managers have capitalized on the surge in European defense stocks, with companies like Rheinmetall, Leonardo, and Thales experiencing significant gains. Funds such as Sachem Head Capital Management and TCI Fund Management have profited by anticipating increased defense spending due to geopolitical shifts.

Who Usually Loses?

Civilians: They bear the brunt of conflicts, facing death, displacement, and the destruction of infrastructure.

Soldiers: Beyond the immediate risks to their lives, many soldiers endure long-term physical and psychological challenges post-conflict.

Weaker Nations: Countries embroiled in wars often experience economic collapse, political instability, and prolonged dependency on foreign aid.

In summary, while certain entities and individuals may profit from war, the broader consequences often entail significant human suffering and societal disruption.