In the world of economics and mathematics, strange and shocking figures often emerge. One such figure now surfaces: the combined costs of the California wildfires, the Israel-Hamas war, and the Russia-Ukraine war are estimated to range between $688 billion and $703 billion.
In contrast, India’s social sector allocation for 2024 is about Rs 39.4 trillion (approximately $480 billion or Rs 39.4 lakh crore), covering essential programmes such as PM Gati Shakti, Pradhan Mantri Awas Yojana (PMAY), Ayushman Bharat, and the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA). This means the cost of these three crises is almost 1.4 to 1.5 times higher than India’s entire annual budget for social welfare.
Breaking it down further, $486 billion is needed for Ukraine’s reconstruction, $135 billion to $150 billion for the California wildfires in 2024, and $67.57 billion for the Israel-Hamas war. This sharp contrast reveals how overwhelming global crises can dwarf even large-scale national investments in social programmes.
While India’s substantial $480 billion spending is significant, it falls short when compared to the extreme financial burdens these global events impose, leaving governments across the world struggling to cope with the aftermath.
California wildfires
In California, wildfires have become a recurrent threat with increasing severity leading to devastating losses in both human lives and property. As Governor Gavin Newsom remarked, the wildfires ravaging the state in 2024 could be the costliest disaster in US history.
As of the most recent estimates, these fires have already consumed over 22,000 acres, claiming at least 24 lives and causing widespread evacuations. The National Weather Service’s forecast of gusts between 50 and 70 mph threatened to exacerbate the situation, especially in densely populated areas like Mandeville Canyon and Brentwood.
The economic toll of these fires has been catastrophic.
According to analysts at AccuWeather, the financial damage could range between $135 billion and $150 billion, far exceeding previous disaster costs, such as Hurricane Helene’s $250 billion. This includes direct losses in real estate, agriculture, infrastructure and healthcare costs associated with the displaced population.
The economic impact is not only direct but also indirect as thousands of businesses, especially in agriculture and tourism, struggle to recover.
Federal responses, like President Joe Biden’s promise to cover 100 per cent of disaster costs, are very important. However, talks about funding often lead to political conflict as seen with President-elect Donald Trump’s criticism of how the state is being managed and his long-running disagreement with Governor Newsom.
This disaster also shows the growing financial strain on the US federal government, which needs to balance disaster relief with other urgent national issues.
Israel-Hamas war
Israel’s ongoing war against Hamas in Gaza has caused significant financial damage with costs expected to reach around $67.57 billion by the end of 2024. This amount includes direct military costs, civilian spending and lost revenue, though it doesn’t account for long-term economic impacts. According to reports from Israeli business newspaper Calcalist, the costs are also increasing due to the need to upgrade defence infrastructure such as expanding air defence systems like the Iron Dome and newly introduced laser systems.
As per figures calculated by the Bank of Israel, the war’s immediate effect on Israel’s economy is clear as military spending has soared with estimates predicting an additional 275 billion shekels ($74 billion) over the next decade. This surge in spending is linked to Israel’s “Never Again” policy, which prioritises national security at any cost.
However, this focus on defence has put a strain on the economy leading to higher taxes and austerity measures. For example, the government has raised VAT, frozen public-sector wages and increased property taxes.
According to Dionysis Partsinevelos in Invezz, the government expects a budget deficit of 4.5 per cent of GDP in 2025 and these fiscal pressures are already affecting Israeli households, especially the middle class, which faces higher living costs, mortgage payments and taxes.
Beyond the immediate costs, the war has hurt Israel’s economy by discouraging investment, particularly in tourism and business and by draining labour resources due to military call-ups. The impact on the broader region, especially the West Bank and Gaza, has been even worse, with economies there shrinking significantly due to the conflict. Israel’s long-term economic future is uncertain, especially if the war continues without a clear end.
Russia-Ukraine war
According to Reuters, the war between Russia and Ukraine, which marked 1,000 days in November, has caused massive economic losses. Direct war damage in Ukraine has reached approximately $152 billion by December 2023, as assessed by the World Bank, European Commission, United Nations and the Ukrainian government.
While Ukraine’s economy contracted by nearly one-third in 2022, it has shown some recovery but is still operating at only 78 per cent of its pre-war capacity. The World Bank and Ukrainian government estimate that the total cost of reconstruction and recovery will be around $486 billion—2.8 times higher than Ukraine’s GDP in 2023.
The economic fallout is not confined to Ukraine. Russia has also faced significant challenges including the effects of international sanctions and the large-scale diversion of resources to sustain its war effort.
Ukraine, a major global grain producer, has seen its agriculture sector suffer greatly, worsening the global food crisis. The war’s ripple effects have also disrupted energy markets, as Russian natural gas supplies have been significantly reduced leading to higher energy prices worldwide.
Ukraine spends about $140 million daily on the war, with much of this burden covered by Western financial aid, which has surpassed $100 billion.
Despite this support, Ukraine’s economy remains fragile, with much of its government revenue going toward defence spending. By 2025, an estimated 26 per cent of Ukraine’s GDP is expected to be allocated to defence, a sharp increase from pre-war levels.
Scale, scope and sustainability
The economic costs of the California wildfires, the Israel-Hamas war and the Russia-Ukraine war differ significantly in nature, but they share key similarities. Each crisis has driven governments to reprioritise spending, focussing heavily on defence, disaster management and recovery efforts. The long-term financial impacts—spanning reconstruction, rising public debt and societal strain—are poised to influence national policies for decades.
Among these, the California wildfires of 2024 stand out as potentially the costliest natural disaster in US history with estimated damages between $135 billion and $150 billion. These costs are fuelled by destruction to homes, infrastructure and environmental resources highlighting the challenges of climate-related disasters.
The wars in Ukraine and Israel, however, represent a different kind of fiscal burden. The Russia-Ukraine conflict has incurred the highest overall cost with reconstruction and recovery needs estimated at $486 billion as of December 2023.
This figure reflects extensive damage to housing, transportation, energy systems and agriculture alongside its global economic repercussions, particularly in energy and food markets.
The Israel-Hamas war, while more localised, has already cost around $67.57 billion by the end of 2024. The immediate focus has been on military expenses and civilian recovery, but the conflict’s persistence could escalate economic and social pressures significantly affecting Israel’s fiscal stability and burdening its citizens.
In all three cases, the staggering financial tolls underline a shared reality that these crises are not just immediate tragedies but long-term challenges reshaping economies and societies.
A future shaped by crisis
The financial impact of the California wildfires, the Israel-Hamas war and the Russia-Ukraine war showcases the complex challenges of modern crises whether natural or geopolitical. Each event has its own unique hurdles, but all highlight how disasters and wars place immense financial pressure on governments, economies and individuals.
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Wars and wildfires: Global crises cost 1.4 times India’s $480 bn welfare budget
