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Will President Elect
Barack Obama bring the wars in Afghanistan and Iraq to an end
following his inauguration as many of his enthusiastic
supporters hope? Early indicators are not exactly encouraging.
Justin Raimondo, editorial director of Antiwar.com,
writes, "Hillary the hawk at State, Bush's warlord Robert
Gates at Defense, and Gen. Jim Jones […] as national security
adviser to the president. Yes, antiwar voters took a chance on
Obama, reasoning that anything would be better than four more
years of Bushian belligerence, yet now they discover to their
chagrin that the dice are loaded." Peter Beinart,
writing for Time, has a different take: "It's
precisely because Obama intends to pursue a genuinely
progressive foreign policy that he's surrounding himself with
people who can guard his right flank at home. […] To give
himself cover for a withdrawal from Iraq and a diplomatic push
with Iran, he's surrounding himself with people like Gates,
Clinton and Jones, who can't be lampooned as doves."
With the economy tanking,
however, even if pulling out of Iraq and Afghanistan is indeed
what Obama intends, it will be harder for him to do so, and not
only because he will be distracted by ostensibly more pressing
problems. It will also be harder for him to bring the troops
home because of a perennially popular misconception: that war is
good for the economy.
It is undeniable that war provides employment for officers and
enlisted men, for Pentagon scientists and weapons manufacturers,
and for housing contractors and civil engineers who must rebuild
whatever is destroyed. The contention that war is good for the
economy as a whole, however, simply does not hold water. Whether
used as a cynical justification by hawks or a cynical
denunciation by doves, the notion that war is good for business
in general is one of the more bizarre illiberal beliefs out
there, so thoroughly is it demolished by a closer consideration
of the facts. It is not for nothing that actual businesspeople
overwhelmingly favour peace.
The first thing to notice
is that money spent by government is money that is not spent or
invested by consumers themselves. This applies to anything the
government spends money on, and it gives lie to the notion that
increased government spending of any kind can "stimulate" the
economy. Money spent to build bridges to nowhere is money that
is not spent by homeowners, say, to repair their roofs; or,
alternately, invested to earn interest and thus spent by some
other economic actor. Not only does government spending not
stimulate the economy; it can be counted upon to be a drag on
the economy, as government officials make their spending
decisions in disregard of market constraints, and so tend to
redirect capital and labour from more efficient to less
efficient uses. Some spending, for instance to maintain or
repair infrastructure (over which governments retain monopoly
control, but that's another story), may be justified by the
simple fact that said infrastructure is in need of maintenance.
But the added incentive of stimulating the economy is a canard
that should in no way influence the decision to spend or not to
spend.
What is true for spending
on infrastructure is equally true for military expenditures.
Money spent to build fighter jets and aircraft carriers is money
not spent by taxpayers themselves, on education or entertainment
or any number of other goods or services, or again, invested and
thus spent by someone else. As with infrastructure spending,
some amount of defence spending may be justified by the actual
need to defend against foreign aggression, but the supposed need
to stimulate the economy is a ruse meant to fleece taxpayers of
a greater percentage of their earnings and a greater share of
their freedoms.
Unnecessary war spending is actually worse for the economy than
other kinds of government spending, however. For one thing, war
disrupts trade. All of the benefits that normally accrue from
countries specializing based on comparative advantages are
diminished or lost when shipping and trade are threatened by the
vagaries of war. Exporting industries are especially hard hit,
but so are industries that import production inputs, and so are
consumers as a whole who must pay higher prices or go entirely
without.
In addition, war is
characterized by the deadweight loss of widespread destruction.
Buildings and bridges bombed during a war represent a pure loss
to the economy. Yes, rebuilding them in the aftermath of war
provides employment for labour and profits for capital, but this
employment and these profits are not created out of thin air;
they are merely diverted from other uses. Human needs and wants
are limitless, so there will always be something for labour and
capital to do as long as markets are allowed to function freely.
In the absence of war, labour and capital would have been used
for other purposes, and economic actors would have benefited
from other goods and services in addition to the still-intact
buildings and bridges that did not have to be rebuilt. In the
aftermath of war and reconstruction, on the other hand, we must
all forsake those other things in favour of rebuilding those
buildings and bridges. The notion that war is good for the
economy because of the rebuilding it requires is thus merely
Frédéric Bastiat's famous Broken Window fallacy writ large.
In spite of the above
line of reasoning, many continue to believe that war is good for
the economy because of the alleged fact that World War II pulled
the United States out of The Great Depression. In reality, WWII
did no such thing. David R. Henderson, research fellow with the
Hoover Institution and associate professor of economics in the
Graduate School of Business and Public Policy at the Naval
Postgraduate School, addresses this issue in his article "The
Myth of US Prosperity During World War II." Henderson writes
that US unemployment did indeed fall dramatically throughout the
war, from 9.9% in 1941 to a low of 1.2% by 1944. This reduction,
however, of around 7 million (given a labour force of
approximately 55 million) was achieved entirely through
conscription. In fact, "Of the 16 million people who were in
uniform at some time during World War II, fully 10 million were
conscripted." As Henderson points out, "One can hardly judge
people to be better off, based on their having jobs, if they
were forced into these jobs." In addition, "Despite various
policies of Franklin Roosevelt that extended the Great
Depression, the economy was coming out of the Depression in the
prewar years." When you factor in the reality that all of the
increased "production" of the war years was actually used for
purposes of destruction, it is easy to understand how hard times
continued right on through to the end of the war. As Henderson
concludes, "Whatever the value of U. S. participation in the war,
for Americans' standard of living, World War II was a bust."
And what of the human
casualties of war, the dead and wounded? Those killed in battle
clearly do not benefit from war-and neither does the general
economy benefit from the overall shrinkage of the population of
workers and consumers. Wounded war veterans, for their part,
require medical attention, which does provide work for doctors
and nurses, yes, but again, work paid for with dollars that
would have bought other things and thereby provided work for
other workers in the absence of war. (Maybe we could call this
the Broken Leg Fallacy?) The wounded themselves, in addition,
may be unable to work for the rest of their lives, consigned to
lives of dependence as reward for their service. The
psychological suffering of soldiers and the pain shared by their
families only further strengthens the case against seeking
employment through war.
And still, even people who should know better continue to
embrace the fallacy that war is good for the economy. As Martin
Masse pointed out in Le Blogue du QL
this past February, one of those people is Paul Krugman, who
has since been awarded the Nobel Prize in economics. Krugman
wrote,
in a blog of his own in January, 2008, "The fact is that war
is, in general, expansionary for the economy, at least in the
short run. World War II, remember, ended the Great Depression."
As Mr. Masse noted in his
blog, Lew Rockwell, president of the Ludwig von Mises Institute,
in an excellent interview with Scott Horton at Antiwar.com
Radio, put Krugman's statements in the proper perspective: "Paul
Krugman is a Keynesian who believes in all the Keynesian myths,
one of which is that mass murder and destruction of property and
transfer of wealth from working people to the merchants of death
in the military industrial complex is good for 'the economy.'
Well, of course, it's not good for the economy; it's good for
the government, it's good for the special interests that are
getting the dough, but it's tremendously destructive.
Destruction is not economically helpful." As for the notion that
WWII got us out of the Depression, Rockwell says, "We did not
get out of the Depression until after the war, until the
magnificent year of 1946 when the Federal budget fell by two
thirds and Keynesians warned at the time that there was going to
be a much deeper depression because all of the soldiers would be
coming back into the economy and there were no jobs for them."
But the US economy boomed, growing by 30% in the year 1946 alone.
"That was because of the shrinking of the government."
Recounting a comment by
1982 New York gubernatorial candidate Lew Lehrman, who must have
been channelling Bastiat himself at the time, Rockwell says that
if war is good for the economy, we could get the same good
results by having peacetime agreements with, say, the Japanese
to meet at regular intervals in the middle of the Pacific Ocean,
each with a fleet of the most modern battleships, and carefully
evacuate those ships before sinking them all to the bottom of
the sea. "Therefore we can have the economic benefits of war
without hurting anybody. Well it only takes a minute to realize,
'Wait a minute… This is not… How can this be helpful
economically?'"
A final argument for the
economic benefit of war is the scientific advances encouraged by
the urgency of warfare, advances which often have peacetime
applications. It cannot be denied that this does happen-the
development of air travel and nuclear power are two examples
that spring to mind-but the same qualification must be
reiterated here too: money spent by the government in research
and development is money not spent by someone else on some other
research or purchase or investment. What might have been
developed instead of, or in addition to, air travel and nuclear
power if private economic actors had kept all of that money? A
cure for cancer? The eradication of malaria? It is simply
impossible to say.
Despite what some will
continue to argue, while war may on rare occasions be necessary
to repel foreign invasion, it is always on the whole bad for the
economy. A few well-connected businesses may thrive in the short
term, but in the long term, war produces no winners and many
losers. If we could consign this fallacy to a watery grave, we
would do humanity a great service. |
