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For centuries, the rulers of the elven and human kingdoms have conspired to keep their peoples in a constant state of war with the sole purpose of making both of them extremely wealthy.

Given, there are many ways for outsiders to make a profit from war. Mercenaries and industrialists thrive whenever a conflict is near.

But the same cannot be said for someone whose financial wellbeing is directly tied to the wellbeing of their nation.

So how would two rulers in such a situation profit from their peoples suffering?

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    $\begingroup$ How constant is "constant"? Is it the literal everyday there is conflict or there is battle every month or every non-harvest period we attack? (the last one is pretty much how it worked in Greece) $\endgroup$ – LinkBerest Sep 16 at 2:32
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    $\begingroup$ Avoid 20-th century style total war, go for a restrained campaign-style warfare in a limited (border) region. $\endgroup$ – Dohn Joe Sep 16 at 13:09
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    $\begingroup$ Take a look at the 100-year war. It may provide some insight into a prolonged, not modern style, conflict. $\endgroup$ – DwB Sep 16 at 15:49
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    $\begingroup$ "You see...hidden within the unconscious is an insatiable desire for conflict. So you're not fighting me...so much as you are the human condition. All I want is to own the bullets and the bandages. War, on an industrial scale, is inevitable. They'll do it themselves, within a few years. All I have to do...is wait" - professor Moriarty (Game of Shadows, 2011) $\endgroup$ – Stian Yttervik Sep 16 at 17:10
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    $\begingroup$ "We have always been at war with Elfasia." $\endgroup$ – Codes with Hammer Sep 17 at 16:25

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War is generally held to be bad for economies over the long term because war is inherently destructive and expensive. An army of (say) 10,000 people (I'll use this term loosely in the given context) still needs to eat, still has families to support, and still wants to live a long and useful life so as to continue to support themselves and their family. As such, you end up paying them a lot of coin (including hazard pay) to prosecute the war rather than to produce services and goods that can be consumed by your populace and build your economy. So, you're taking from your economy to support a cohort of people designed to destroy the economy of the enemy, and the enemy is doing the same to you.

No-one really wins from a war in the long term: the resentments that builds up against the enemy lasts longer than the conflict, and that reduces the desire to establish the good trade relations etc. that lead to a robust and stable economy in the long term.

BUT; in the short to medium term, there are some industries that benefit from war and the technological progress that war drives.

Technology
If your people are technologists, nothing increases investment in new technologies and research like warfare. Ultimately, you're looking for new weapons, medicines, etc. that not only make it easier to hurt your enemy but also make it easier to protect or heal your own people. If your wealthy people are highly invested in R&D, then war is going to increase the amount of public funding you get for your research, especially in the areas of novel engineering and medicine.

Mining
All those weapons, vehicles, etc. have to come from somewhere. If you already have a metallurgy technology, that means that the owners of mines are going to become very wealthy as production ramps up. The providers of raw materials will become quite rich if they can feed the war machine without becoming nationalised in the process.

Manufacturing
Factories go from building toasters to rifles, from cars to tanks and planes. And they only have to deal with one customer: their government. This means that the production increases to a point where the owners of the factories can make a lot of money building the weapons and machines of war instead of what they normally make.

The REAL Price
None of these industries benefit from war over the longer term however for a simple reason: they are funded by the government — in other words, the taxpayers. Ultimately that money runs out because people are not producing stuff that others consume. Instead, they're producing things for a government that has to tax people to get the funds to protect them in the first place. This results in rapidly diminishing returns as people have to cut back with rations and other shortage management approaches as the normal products they consume become even scarcer as production converts to goods needed to prosecute a war.

In the long term, you impoverish your people to the point where they can no longer support the war you're fighting, either with soldiers or equipment.

That said, there is a caveat: sometimes, you don't actually need a war to drive very specific wealth. All you need is the perception of war.

The British infatuation with the dreadnought class of battleships at the turn of the 20th century was largely driven by the possibility of going to war with elements of Europe, particularly Germany. Even now, American defense contractors provide equipment to the US and other nations to ensure their readiness for war. The people who built those battleships for Britain and other nations (including the US), companies like Thales and Lockheed Martin are very rich and profitable on the back of their ability to support combat ready equipment. Research and Development actually helps these companies as well because what a government buys today is obsolete in 5 years, meaning militaries have to buy new kit later to maintain readiness despite never having used what they have already.

In short, nations can't get rich from their people’s suffering over the long term because economies need all their citizens to be productive for their economy to be strong and to grow. But, individuals can benefit from supplying weapons for 'just in case' and this is no different to what happens in today's world.

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    $\begingroup$ +1. You've covered the gambit pretty thoroughly. The only thing I would add to your "possibility of war" point is this... Since the Elven and Human kings are cooperating with each other on this venture, the actually destructive portions of the conflict can be a complete fabrication. By each reporting to their people that the war is going well, they can explain away the need for newly drafted soldiers while still requesting that their subjects continue putting up with war rationing, long industrial work hours and a temporary suspension of human/elven rights. Very 1984-ish, but possible. $\endgroup$ – Henry Taylor Sep 16 at 2:05
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    $\begingroup$ Well I completely disagree with the fact that long war are too expensive and disruptive: it totally depends on how the war is waged. A WWII war would certainly wears out the countries fighting it. But if it's smalls, ponctuals skirmish: you keep being at war, while not using and loosing a lot of ressources. The fact that countries are at war don't mean there will be constant trench assault or massive attacks. I think a lot of medieval wars lasted long and had a few battles. I would say that you would just need enough war to keep tax payers to continue. $\endgroup$ – Asoub Sep 16 at 10:26
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    $\begingroup$ @Asoub If you can't protect your borders, you allow the enemy to penetrate deep into your territory and do whatever they want. The only way to prevent that is to either have extensive fortifications throughout the country (the European medieval approach), or extensive fortifications throughout the borders. Both mean tying up a huge amount of manpower and resources to support the ongoing war, even if there's no actual fighting. Just look at the Hundred Years War. Even in the best case, it means that you're putting lots of resources in bad investments - you would have gotten richer without. $\endgroup$ – Luaan Sep 16 at 11:46
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    $\begingroup$ @Mark Both sides are "on it" in the OP's case - it needs to be beneficial to rulers of both countries. But even without that, you're probably harming more than helping. You're disrupting your economy, investing in things that are essentially pointless waste of resources. The same happens with your enemy. You kill lots of potentially productive young men, destroying industry and agriculture, devastating trade. You'll probably use most of the plunder just to pay off the soldiers, leaving precious little for the bureaucrats and rulers. And the influx of gold will just cause massive inflation. $\endgroup$ – Luaan Sep 16 at 11:49
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    $\begingroup$ @Mark And then there's the question of what happens after. Medieval Europe had a set of rules that limited the kind of peace deals possible, and how war was supposed to be waged. This meant that for example, you couldn't just conquer another country and annex it willy nilly; you couldn't depose another monarch, or steal all their stuff, etc.; all of that (beyond normal plunder/"foraging") was part of the peace deal, which had to follow rules. You could claim reparations, but only to repay the expenses of the war and whatever caused the war (e.g. a failure to pay debt). $\endgroup$ – Luaan Sep 16 at 11:52
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The rulers do not have enough control over landowners and merchants to effectively tax them. Furthermore, the common people and slaves are not directly bound to the rulers, except inasmuch as the rulers are landowners. Instead, the common people and slaves interact with the landowners and merchants.

So how do the rulers manage to afford to maintain armies? By making war pay for war. After every battle, the winning side collects loot and slaves. If the battle is won in foreign territory, there is also the opportunity to steal from and enslave civilians. The loot and slaves are sold to fences, slave-dealers, and other merchants. The rulers organize this process, and take a large cut.

If both sides maintain fortified bases that are "tough nuts to crack" with little loot inside, then only a strategically gifted commander would make the sacrifice to actually defeat his opponent's bases. Instead, the "war" would consist of alternating raids against the "softer" territory between the bases. There would probably be battles in the "soft" territory to prevent attacks against important landowners, or to recapture loot from a successful raid.

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    $\begingroup$ That can work for winners. Hard to make it work for both sides. $\endgroup$ – Willk Sep 16 at 3:01
  • $\begingroup$ @Willk -- I added a paragraph to address how both sides can be successful raiders, without having one side wipe out the other. $\endgroup$ – Jasper Sep 16 at 3:12
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Nothing unites like a common enemy.

The rulers of both kingdoms have things set up so that they become very rich - they collect percentages of state run industries, a percentage of tariffs and levies, and people who want to do any sort of business need to make sure the rulers are happy (and paid) before they do it. Typical kleptocracy.

One would think the populace or certainly the rich people not directly benefitting would look for a change. But these rulers are also perceived by their people as the fiercest and most protective - the only ones capable of defending the populace against the enemy. The war keeps the power structure in place.

Neither side's leaders actually wants to tear things up. A lot of that stuff that gets torn up would belong to rich people - them! There is enough war to be an excuse for the government being the way it is. The less fighting that actually happens, the better.

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    $\begingroup$ +1 this comes straight out of George Orwell's 1984 and is a strategy used by politicians for as long as anyone can remember. $\endgroup$ – Level River St Sep 16 at 12:06
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    $\begingroup$ "We have always been at war with Orcasia." $\endgroup$ – Codes with Hammer Sep 17 at 16:26
  • $\begingroup$ "The less fighting that actually happens, the better." so basically Cold War is the ideal situation for military industrial complex, especially when it's run by the royal family $\endgroup$ – Milo Bem Sep 18 at 10:02
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Two ways I see:

The way of the Ancient Greek city-states

As they can only really attack during certain seasonal time frames, the Greek model can be used:

The Greek city-states did not have standing armies at first and would actually only really fight during times which did not effect the harvest (perfect timing = our harvest is fine but enemies is destroyed). The reason for this warfare was: to collect slaves, land, and plunder. If your leaders own the smelting, smithing, ship building, or just coal & other mines - they would also see this as a huge annual or bi-annual boon in production (as weapons, ships, & armor is called for) and the enemies loss of produce and goods would increase your trade in those areas as well.

Win or lose, every summer there would be the call for the materials they control and therefore profit. Further, if a side fully wins then why fight and therefore where is the profit? Adding a reason for the cooperation with these groups.

Lie to the people (fire up the propaganda machine) and enforce taxes

This only works because the higher ups are working together and assumes a certain level of technology (WWII level or earlier for limiting communications).

The Eleven Royalty and the Human Empire puts out reports of loses and great battles on a foreign front. They even setup minor skirmishes along the borders to build credibility. They constantly push messages of how the other side will destroy everything and everyone we hold dear and are "monsters" who will enslave you while we will treat you as free citizens.

Or follow the model of propaganda used in WWII which, to quote Robert Ensor1, created no limit on what could be done by propaganda creating a system whereby:

people will believe anything, provided they are told it often enough and emphatically enough, and that contradicters are either silenced or smothered in calumny.

The only trouble is, these battles are either much smaller than reported or are not even happening. Or there were conflicts over 30-ish years but major resistance/battles have long ended and the standing army is only perceived as being still involved in full armed conflict (people just hear the news and think "well, there is always fighting in <insert location here>").

After that its just building up story-based reasons that such a corrupt system came to be, that wages have not increased for the army in years (but pillaging makes up for it and everyone still calls them heroes so not effecting moral much), and that the majority of the standing-army's job is ensuring that people - including lower nobility - continue to pay their taxes on time.

This has the additional benefit of generating political power - which (if we remember 1984) is an end to itself.

1: Robert Ensor in David Thomson, ed., The New Cambridge Modern History: volume XII The Era of Violence 1890–1945 (1st edition 1960), p 84.

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  • $\begingroup$ The two halves of this answer could stand as separate answers. $\endgroup$ – Jasper Sep 16 at 3:16
  • $\begingroup$ @Jasper yes, but they are the two answers I thought of when considering the historical impact of propaganda so I see no reason to separate them (more points I guess but meh to that) $\endgroup$ – LinkBerest Sep 16 at 3:18
  • $\begingroup$ In combination the constant threat of destruction will justify high taxes and high profit if you have stakes in the arms industry. On the other hand plundering rich aristocrats of the enemy and taking slaves, are massively profitable in converting property and people into wealth for the crown. - In this way the war can be profitable over decades. $\endgroup$ – Falco Sep 18 at 13:02
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    $\begingroup$ @Falco its even better if you can setup the trusted advisor to each king but really working with each other trope (like OOTS did here) $\endgroup$ – LinkBerest Sep 18 at 15:40
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A ruler can become very rich in certain cases. Such as a democracy, where under normal circumstances there is much oversight when making decisions concerning money. Under martial law or during war time; democracies adopt a completely different set of laws removing much of this oversight. Often not making the ruling party answerable for quite a large chunk of the decision making until the crisis (war) is over. During a scenario like this it is conceivable for a ruler to line their pockets with money meant for war making purposes. They would have to do so at the cost of decreased military power.

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Since you're talking about kingdoms, through most of European history until the industrial age, wealth was measured in land rather than industrial output, control of the land is what you're after.

Kings didn't get to keep hold of land all that well, they kept having to give it to nobles along with titles as a reward for service, the trick is getting it back again without upsetting anyone. Kings didn't last all that long if they upset all their nobles.

War was mostly fought by nobles with accompanying peasantry hoping to get rich on loot. Nobles who did well would be rewarded by the king with land and titles.

The way to get rich off a war at a royal level is to expand the borders of the kingdom and take that land for yourself. The other way for a king to get richer is for a noble to die without heir and so have their estates default back to the crown. Since you're at conspiracy with the enemy level here, taking land off the enemy isn't the plan, your plan will need to be to take land off your own nobles by having it default to the crown on a technicality.

Send your people to war, take their lands when they die.

It's rather parasitic as a way to operate a country though, I wouldn't recommend it as a long term economic plan.

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The same way politicians do it in our days to make money during their mandate :

The kings have private (hidden) interests in weapon manufacturing (and other war industries).

This way, they transfer tax money to their own pockets without having to justify anything to their ministers and advisors. They could even reduce their official salary and appear nicer to the people.

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Being rich doesn't mean that you have a lot of propery and money in absolute values. It means you have much more then others alltogether. Richness is a relative thing.

Thus to become a rich King by war is very easy. Just do not let the war "touch" you personal belonings, and let it destory you people belonings instead. To garantee the effect there must be sort of "conspiracy of Kings" (not direct conspiracy - it might be just "rules of engagments" that dictates, that "never lay a siege of king's castle and city").

In this situation King will have hight tax income, good way to get rid of any opposition and great respect amoung his poor lieges (as the only Protector). The only thing that this King should care about is to keep balance between birth and death rates (or he would become the King of Nothing or would unfortunaly win the War). So this enternal war would have periodic stucture - some years of low intencity raids and some years of great bloody sensless battles for say, a border hill.

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By funneling conflict.

Backstory

Prior to The War, there were constant skirmishes and conflicts between the various Dukes and Counts.

Waging war on your own territory is costly:

  • Villages are razed, with their population killed, their crops burnt, etc... reducing the working population.
  • Bridges and roads are sabotaged, reducing the means of transportation, and thus commerce.
  • Industries (mills, etc...) are destroyed.

And therefore the strife between Dukes and Counts was just bleeding the kingdom from the inside.

The idea

Then came the idea of waging wars against the Elves. Not any war, mind, that would be dangerous. A secretly controlled war.

The advantages of controlling the war are huge:

  • Control of the lives lost.
  • Control of the damage: only peripheral villages, no industry, ...

The implementation

It started with skirmishes.

Due to the growing threat, and through political maneuvering, the King managed to seize power; somehow, the few who opposed him lost most of their armed forces in the conflict, finding themselves in the most contested spots.

Now having the largest army, the King moved inward. Gone were the days of skirmishes between his vassals; in a country at war, any aggression against a peer is an act of High Treason, met with a brutal end.

Nowadays

The War has always raged.

It extracts a cost: every second son is conscripted, taxes must be paid to outfit the combattants. That is a small price to pay to keep 9/10th of the kingdom in relative peace.

Rather than skirmishes against each others, the Dukes now compete via their achievements against those sneaky Elves. Their officers are in charge of implementing the Marshal's plans, after all, and win glory for their house. They vie to obtain the most promising spots in assaults, and distinguish themselves during the actual battle.

Best not aggrieve the King either, losing the King's favor means losing the Marshal's favor; a quick way to end up in the brunt of the battle, where only death awaits, and be kept apart from the juicy plans.

And there you have it. For a small price, the bulk of the kingdom has been living an unprecedented era of peace and prosperity: commerce thrives, industry strives, and no famine has been recorded in the last few generations.

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    $\begingroup$ If a Duke becomes too powerful/wealthy for the King's taste, send said Duke on an especially dangerous mission from which he shall never return. $\endgroup$ – Dohn Joe Sep 16 at 13:07
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    $\begingroup$ @DohnJoe: I doubt the Duke would go to the front, they would probably sit in their castle. It would be relatively easy, though, to coordinate things with the Elves so that whichever troops the Duke provided somehow end up in the wrong place at the wrong time. Tough Luck. $\endgroup$ – Matthieu M. Sep 16 at 13:18
  • $\begingroup$ Well written expansion on the idea of consolidating power, not EVERY noble is in on this, it's likely the King grabbing power from the nobles, or a group of nobles from each side banding together to ascend to power and wealth from other nobles. The tricky part is communication: coordinating and trusting each other through this plot is very iffy when your have to send runners or pigeons, and both of those could be intercepted and the plot could be revealed. It's dicey at best without a solution for that. $\endgroup$ – MacIsaac Sep 18 at 2:27
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Malthus

How prone to diseases are your people? How fertile are your lands? And how, ahem, fertile are the people?

Historically, most people died of diseases, one way or another. Even if the initial problem was something which could be life-threatening, like a stab wound, more people died of infections than died of the wound itself.

If you don't have much in the way of diseases, or if some friendly wizard has intervened to stop diseases, people aren't going to die in anything like the same numbers. If your elves and humans have normal human birthrates (or even faster) then you're going to have a lot of people born who keep living to a ripe old age.

That leads onto the question of how to feed all those people. If the answer is "we can't", that's a problem. Nothing unites people like suffering, and if you as the king can't do anything about it then you become the target. The biggest threat to a monarch isn't the next kingdom over, it's an angry mob outside the palace. The other monarch has to get lucky a whole bunch of times in battles, but an aggrieved citizen with a longbow only has to get lucky once.

So, you need some way to limit the population. War is pretty good for that. You do need to keep enough people back to run farms, of course, but as we've already seen, we have more people than we know what to do with.

If you actually want to win a war, that costs real money. But no-one said you had to equip your guys particularly well, especially if the other side are following the same strategy.

Note that this doesn't explicitly make the ruler rich. What it does do is keep them in power. As the Bush and Trump families are well aware, the best way to make money is to be the guy at the top setting policy. If you're an absolute monarch and taxes go directly into your pocket, even better.

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Simple: corruption. While at war, the rulers can impose rationing, (threaten to) take over industries or organizations, etc. But not all -- in fact, not even most -- of the resulting resources need to actually supply the armies.

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You need to define the term "profit" somewhat more exactly.

One technique to profit from prolonged conflict is to erode the basic principals of governance until you can establish autocracy. Once the autocracy is established, the rulers can manipulate the laws such that they and their supporters (perhaps, those who pay the best bribes) maintain control of society. This can be everything from "who supplies food for the army" to "where shall we attach this season".

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Consider Genesis 47. Joseph, having previously been made second-in-command of Egypt, shepherds the nation through a famine. He uses previously-collected taxes to set himself up as a merchant, selling the government's grain in exchange for people's land, and eventually their freedom. In this sort of monarchical scenario, the government's wealth is more or less equivalent to that of the ruler, or at least the ruler has great discretion to spend whatever he wants on himself! In this case, it is implied that the famine was not Joseph's fault, so in your scenario, you just need to make sure that it is. Have your ruler invest heavily into electronics, stocking a secure, shielded, underground warehouse full of various consumer goods (computers, phones, radios, etc.), before unleashing a massive Electro-Magnetic Pulse (EMP) on the populace and also on his nation's closest trading partners. With most people's devices wrecked, he can now sell them his for whatever price he wants.

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  • $\begingroup$ But this is just one side of the war. The question is asking how the rulers of both sides can make themselves rich. $\endgroup$ – jamesqf Sep 16 at 20:47
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Rulers do not get rich from wars, they get rich from WINNING wars. War is basically* a zero-sum game: you profit by taking what the other guy has. In the short term, a ruler can profit by increased taxes justified by the war (diverting some to his/her own use), but if the war is stalemated for long, that winds up crippling the economy, and lower overall tax income. (See e.g. Laffer curve: https://en.wikipedia.org/wiki/Laffer_curve*

*The one instance where wars can be profitable for both sides is when it spurs technical innovation, and the ultimate total victor rebuilds the former enemy, as happened in WWII. But that was a war of comparatively short duration: only about 12 years for the entire Nazi regime, less than 4 for active US participation.

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Our nations have standardized arrows using the standard MIL-SPEC-666-BANG and swords now meet MIL-SPEC-667-STABBY. Due to some odd coincidences, both Elven King George and Human King TheOtherGeorge own the patents to the components that go into these arrows and swords.

When our fearless human nation makes a sword with this excellent specification, somehow, 2 gold pieces ends up in my bank account over in Gnomeville.

When our most elegant elven nation makes arrows with, somehow, 1 gold piece per arrow ends up in my bank account over in Gnomeville.

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War is certainly not profitable as was mentioned earlier, not by itself and not even for the rulers involved. The reason a ruler or ruling class could still gain from it is not so obvious and has positive effects that may only be seen after several generations.

Nations that were involved into wars in the past and succeeded grow in size increasing their overall economic output but weakening their economic integrity. Over time, the economic shortcomings created by warfare are overcome and it starts to benefit from it.

This strategy does come with risks though. Other nations not affected by the war may gain superiority by doing nothing and even exploit the victor's weakness.

It is, however, more likely that the victor does not benefit from war in direct a way.

First of all, direct gains received from a war e.g. pillaging the losing side does not outweigh the disadvantages. If you get too much than you can swallow, you'll only end up with losing control over inflation. In other words, rulers might think they get richer while they actually don't.

The biggest effect wars have on the balance of power. Being King of the Hill is (or feels) better than being a minister of state. Individuals are often willing to give up real gains for having power over others. Wars change the balance or consolidate power.

Usually, that is not enough to start a war. A specific reason or an excuse is often required. This does have its roots in failed politics designed to sustain the balance of power internally or if necessary is created ad hoc as something like a false flag attack.

War is inevitable at this point mostly because the balance of power would shift in an undesirable fashion or direction if peace is sustained. Gains come in the form of preventing (more) losses often defined by a perceived and subjective reality.

The two rulers of opposing nations do not benefit from their subjects' suffering. However, by waging war against each other, they create an enemy and exert more control over their people. If the fate of the two nations is kept in perpetual conflict without actual catastrophic war, they would gain the most as they would lose nothing with minimal risk.

To end their peoples' suffering, they would have to spend more resources and thus lose, possibly creating even bigger problems by showing signs of weakness.

As mentioned before, it is the balance of power they wish to maintain. Actual gain is irrelevant and a full-blown war too risky. Peace is even more risky. After centuries of war, peace is the unknown, the Undiscovered Country, more dangerous even than war.

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The problem they face is overpopulation. They could feed a lot more people, but they'd need to work unproductive fields to do so (10 people working to feed 9 of them) therefore they assume more people would be a drag on economy.

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  • $\begingroup$ This doesn't mean they profit from it. $\endgroup$ – pipe Sep 18 at 18:43
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Just look at the Roman Empire

The Romans were some of the most profitable conquerors in the history of the world. While most nations wear themselves out with war, the Romans spent centuries profiting from one conflict after another.

Their expansion began with a number of alliances with weaker surrounding territories. They did not conquer these territories, but instead used their superior numbers and the threat from outside forces (Carthage) to force these smaller territories into giving up a lot of their autonomy in exchange for protection. Being the hegemon of the alliance, Romans had the authority to define who would fight where on the battlefield. Doing this, they made sure that their allies did most of the actual dying by putting their units against the enemy's elite warriors while Romans focused on the safer parts of the battlefield. This meant that they suffered very few loses in most battles while ensuring that their allies were kept weak enough to not become a threat to their power. In short, the allies did most of the dying, and the Romans did most of the plundering. Not only did this mean good profits for Rome, but it also solidified their political power to make sure neither ally nor enemy was strong enough to oppose them.

Rome continued this strategy as they expanded by looking for allies among their enemies first. The most famous example being when Julius Caesar entered Gaul with 4 legions, but grew his forces to 11 legions by the time he finished conquering them without any additional funding or troops from Rome.

Another key to Roman war profits was that they rarely expanded quickly. This meant they could allocate overwhelming forces against much smaller territories one at a time. In many cases, Rome showed up to smaller kingdoms with so many troops, that they would surrender or be force into an alliance without a fight. Instead of plundering, planting a flag, and moving on, they would take control of an area and occupy it until their rulership became stable before moving on. This way they could establish long-term tax income from these conquered provinces. After plundering a land for slaves and gold to pay for the cost of occupying it, Rome would reinvest some of that capital into building up the territory's economy with new roads, ports, and roman technology. After a few decades, these provinces were typically wealthier than they started making them both better cash cows and loyal contributors of additional troops to feed the size of Rome's Legions.

By following this model, Rome not only profited from the wars they won, but they had enough residuals that they could offset the costs of the wars they lost. When Rome finally did begin to fall it was not because there system was flawed, but because they stopped using this system to dictate strategy. During the Roman Republic, generals were appointees of the senate chosen for their merit and devotion to Rome. However, by the late Republic/Early Imperial age, politicians started wanted to become the war hero so that they could consolidate their power. This meant that instead of building up overwhelming and alliances of joint forces to ensure victory, Roman generals began doing the opposite by attacking before reinforcements could arrive so they could earn all the glory, leading civil wars over personal feuds, and invading countries without finding allies inside of them first.

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We're in fantasy territory, right? Let's add magic to the mix!

See, gold and gemstones are pretty hard to come by in these lands. No suitable mines nearby, the few that are have paltry yields, etc. Other neighboring nations are waaay richer and, frankly, have no interest in these backwater ends-of-nowhere. Sure, the agriculture is OK and iron mining is fine, but again - everyone else is doing way better.

So the rulers of the two nations have struck up a deal with the devil (or some powerful necromancer or what have you). They deliver souls, and in return they get riches. What they do with the souls is their business. Probably use for magical fuel to extract riches, eh?

Anyways, the war is very convenient for this, since the souls go to the delivery willingly, and can be harvested en masse in one place. If it's for the devil, bonus points that they're all nice and soiled with sin (killing other people). A necromancer also might prefer souls that died violently. Or perhaps it's important to the collector that they faced the battle ready to die. There's a lot of ways to spin this depending on where you want the story to take you.

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    $\begingroup$ Related to this would be having an enchanting system similar to the Elder Scrolls games - making an enchantment requires a filled soul gem, with humans having "larger" souls than mere animals. Simply killing off some of your people to fill soul gems would not be accepted, but sending them off to war and somehow make sure that when they die they'll fill a soul gem (such as by hiding one in the standard-issue armor) could easily be spun in an acceptable way. Then you have plenty of soul gems to make very valuable enchanted objects. $\endgroup$ – Rob Watts Sep 18 at 17:42
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    $\begingroup$ @RobWatts - That's one way. Or perhaps the Necromancer is using them to raise his army of undead which, in book 3, will try to take over the entire world (including our two stupid greedy little kingdoms). $\endgroup$ – Vilx- Sep 18 at 18:50
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The rulers own the weapons manufacturers

You're equating the ruler's own wealth with that of their country, but that is not necessarily the case. War gives them an excuse to declare a "state of emergency" where they get to decide that they wish to use money from the national budget to buy weapons and ammunition from their own companies. The emergency also motivates their workers to work longer, harder and for less money, out of patriotic duty.

During a peace-time, a closer eye might be kept on them, or perhaps the Minister for Finance / Chancellor of the Exchequer / whatever might have more power to over-rule them (or mightn't be so cooperative).

Doesn't necessarily have to be weapons manufacturers, any industry associated with war-time will do.

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