Vikings: Hidden Architects of European Economic Revival

After Christopher Columbus discovered the New World in 1492, Spain emerged as Europe's dominant power. Having conquered the Aztec and Inca empires, Spain amassed enormous wealth from silver imported from the Americas. At that time, the rising importance of gunpowder weapons was causing war costs to grow exponentially in Europe. Monarchs needed parliamentary approval to finance wars. However, Spanish King Philip II, flush with silver from the New World, was able to raise funds without parliamentary oversight and waged wars unilaterally. As a result, Spain declared national bankruptcy four times. In contrast, other European nations convened their parliaments more frequently to secure military funding, and this institutional development ultimately strengthened their national power over the long term.

The new book "The Invisible War and the History of Money" (by Duncan Weldon, published by Wilbook) examines the hidden dimensions of warfare through an economic lens that follows the flow of money. War, which claims countless lives and devastates economies and societies, is generally considered the most irrational choice. However, the author—an economist and correspondent for The Economist—reinterprets war through the economic concepts of "incentives" and "institutions." He focuses on the incentives that trigger wars and the political, social, and economic institutions that create those incentives. His analysis reveals a cyclical structure where the institutions of each era provoke wars, and wars in turn create new institutions.

Vikings from 1,000 years ago are remembered as raiders, but the author evaluates them as catalysts who elevated the European economy. From the 9th to 11th centuries, Western European rulers paid tribute called "Danegeld" to stop Viking raids. Surrendering wealth under threat appears to be an economic loss, but reality proved otherwise. Vikings used the tribute money to purchase European goods and services. Moreover, when monarchs collected higher taxes from peasants to pay the tribute, peasants were compelled to work longer hours, increasing surplus production. The tribute paid to Vikings stimulated the economy by expanding trade and production, the author argues.

The Russia-Ukraine war, which has caused over one million casualties, is examined through the framework of "information failure." Western nations, having overestimated Russia's military capabilities, predicted that any war would end in Russian victory within weeks at most. This explains Western reluctance to provide Ukraine with large-scale weapons and training before the war. However, after hostilities began, Russia's actual military strength proved far below Western estimates. The author diagnoses that incorrect information—or information inflated for certain purposes—led to flawed decision-making.

The book offers insights not only for readers interested in military affairs and warfare but also for leaders managing organizations. A prime example is Germany's counterproductive experience with an elaborate reward system for fighter pilots during World War II. Post-war research showed that immediately after a fellow pilot earned higher status by shooting down enemy aircraft, other pilots became more likely to die fighting recklessly. The German Air Force strengthened its reward system hoping pilots would fight their hardest, but this increased pilots' risk-taking tendencies, ultimately harming the organization. This created a "principal-agent problem" where the incentives driving the principal (German Air Force) and the agents (pilots) were misaligned.

The shadow of war shows no signs of lifting globally. Tensions in Europe are rising as U.S. President Donald Trump repeatedly signals his intent to annex Greenland, while Northeast Asian conflicts are deepening following Japanese Prime Minister Sanae Takaichi's remarks about exercising collective self-defense rights in the event of a Taiwan contingency. The Russia-Ukraine war continues into its fourth year. With North Korea persistently declaring its commitment to strengthening nuclear armament, South Korea is not immune to the threat of war either. In his concluding remarks, the author warns against hasty predictions that wars will cease as the global economy becomes interconnected and international norms are established.

"War is economically irrational by any measure. But as anyone who has studied history knows, the fact that something is economically irrational does not mean it will not happen."

360 pages, 24,800 won.