I know we’re all tired of hearing it. All the same, here’s an interview I did the other day on war’s effects on the economy.
Then, courtesy of the LRC blog, we learn that Martin Feldstein, my old professor, is telling everyone (according to the headline of his article) that “Defense Spending Would Be Great Stimulus.”
If you have a little more time, here’s a paper (.pdf) I wrote on this very subject: the economics of military spending.
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On the other hand, it was the two world wars that put the US in position to become the #1 economy and #1 political power for the last 50 years. Was that good or bad for the US and for the world?
Seems to me this is a system/boundary
problem comparable to the goofy ideas that religious creationists have about the application of thermodynamics to the problem of evolution.
Whether war is good or bad depends upon the geographic system in question. If the system is the entire world then war is bad for the economy. The sub systems consisting of individual nations are a different matter. For some, good. For others, bad.
Or consider the Cabrini-Green housing project in Chicago. By every standard the project was a failure and it probably cost millions to raze it. Say after the emptying and before the razing that it had been attacked in the manner of the Twin Towers. Would the economic effect of the attack have been good or bad for the US?
This is kind of off the subject but none the less is often a argument that leads to war being good for the economy. If we are not in the war and we’re selling to the countries that are fighting the war, war is good for the economy, right?
I think something that gets missed related to WW2 possibly getting us out of the Great Depression is: at first we were not in the war, so we were selling the countries in the war products, goods and services. That lead to a boom in war related exports, which had to have helped put people to work. Of course when we entered the war this would have changed. I do realize once the war was over there would be major reallocation of these industries. The bubble would bust and a recession should follow.
Food for thought. I’m off to read this .pdf and listen to the mp3. Thanks for posting. This is a subject that I often find myself attempting to explain to people that war doesn’t fix the economy; as long as we’re fighting in the war.
The growth of the US after WWI and WWII was not a result of these wars, unless you mean that the war destroyed the capital and lives for citizens in foreign nations, thus putting the US ahead of the world because our capital stock was not depleted as much. How does the destruction of lives and capital lead to prosperity? That’s nonsense on stilts. The US economy experienced growth after the wars when the federal government shrank and the conscripted soliders came home. That freed private business to produce and hire, thus leading to economic growth.
If is true that war and destruction leads to economic growth, perhaps we should bomb a couple of cities in the US so that we can get out of this depression.
Jebem ti mater u bicku smrdljivu sad ce te vi da imate tamo WAR pa ces da vidis kolko je dobar za ekonomiju.NACI.
Bill, you commit the “post hoc ergo propter hoc” fallacy in attributing America’s economic rise to intervention in the wars. America did after all have ideal conditions for economic growth, such as a relatively unhampered economy, natural resources, abundant land and immigration of talented people. It is just as plausibly to regard such economic growth as occuring in spite of the growth of its empire and not because of it.
On the other hand, it was the two world wars that put the US in position to become the #1 economy and #1 political power for the last 50 years.
That’s only because the previous economic powers destroyed themselves.
“War is good for the economy”, so is government when it stays out of the dynamics of free market. People will save and invest as needed and don’t need a war nor government interventions.
It is unbelievable that anyone believes war is good for the economy. Those killed in the war don’t believe it; those injured physically, mentally, or emotionally don’t believe it. Those who lose their property via the destruction don’t believe it.
Please don’t say that it is good for the economy because people are making bombs. As there is ALWAYS shortage of goods and unmet wants, these people would be doing something else. The WSJ joke today was absurd.
And please don’t say the destruction is good because jobs come with the rebuilding: if you believe this, imagine your wealth is the wheat field you planted in the spring, and the day before the harvest, someone torched it. Imagine your good fortune that you will get to be employed again growing the wheat to replace that which was burned. Imagine how thrilled your starving family is that you have more work! Better yet, imagine they are overjoyed because you were also killed in the fire.
Yes, war is good for the economy…
It’s true that war doesn’t create wealth but it does force reallocation of wealth. I wonder if the reason that it appears that the war is responsible is because when the war is over another reallocation occurs that wouldn’t have happened on such a scale if the war hadn’t happened. So the war time economy doesn’t do it, the reallocation to peace time is what does it.
Has not R. Higgs debunked this whole WW 2 myth?
There are an awful lot of misconceptions flying around in this article. First of all, the United States was the number one economic power well before WWII. With one of the largest unrestricted trade zones on earth, the US had been steadily picking off other economies for it’s entire history. The US certainly exited the period better than it entered, but it’s place as the economic superpower of the world was already cemented. Much of the world’s GDP stagnated during WWII, while the United States grew at a modest rate. There was very little “wealth transfer.” The effect was more of a disparity amplification.
Recent Criticism of American Idealism
Who are the great critics of American Idealism in contemporary thought?
Let us be frank, they are the losers of the war of ideas in the 20th century.
Marxists, Leninists, Existentialists, the old bag of Social Democrats and soviet apparachiks rage against American Idealism.
Today they have a new political forum, in the European Parliament.
What are the solutions to their pseudo-problem?
We’ve heart it all before folks: Planned economy, dictatorship of the proletariat, permanent revolution, nationalization of industry and production …
Let us speak its true name: Omnipotent government …
There is however a vast difference between nation and civilization. And the enemies of American Idealism are the adversaries of global free-market business enterprise.
Shall we abandon the freedoms of the marketplace for the follies of burocratic centrism and universal plannification?
I think not.
Shall we abandon our freedoms of speech and thought for soviet style mind-control?
I think not.
The enemies of American Idealism are living in a bye-gone age.
American civilization is the foundation of the global order, because American capital rules the earth, and the rulers of capital are the bringers of progress into the world.
Christopher Richard Wade Dettling
When is your war over?
I’m still paying for WW2 in that my house was built then and due to wartime shortages certain shortcuts were taken…
Where would the US be if it didn’t join WW2 and spent the effort on useful production (all of which is currently unseen)?
If war is so good for the economy, why is it that its always the one country who didn’t get invaded that comes out on top? In fact, the citizens of that one country would have had a better quality of life had the productive capacities of other countries remained intact, because there would have been more goods produced and more resources mined.
‘Much of the world’s GDP stagnated during WWII, while the United States grew at a modest rate. There was very little “wealth transfer.” The effect was more of a disparity amplification.’
Ah… British overseas investments in North and South America were largely liquidated at distress prices to pay for each war, during and between the wars, with the gains largely going to buyers in the USA. That’s wealth transfer (although the same thing happened to British and other European investments in the USA even earlier, through repudiation, abuse of bankruptcy, etc. – it has been estimated that that was even bigger than Marshall Aid later on).
“If war is so good for the economy, why is it that its always the one country who didn’t get invaded that comes out on top?”
Prussia in the Seven Years’ War is a counter-example, as is France in the Hundred Years’ War, Russia in the Napoleonic Wars and the Second World War and Canada in the British-American War (though that gain didn’t last, because of US mercantilism like the Erie Canal that diverted Great Lakes trade away from Canada into the USA).
PM Lawrence,
you completely missed the point. Sending a few soldiers to die in the Russian winter without destroying anything, isn’t my idea of an invasion. The point I was making was that it is the country least affected by the war that comes out on top. Therefore, war cannot be good for the economy because only the least affected benefit from it. Just like those least affected by disease are better off, means that diseases are bad. Obviously France is the one that lost in the Napoleonic war because it sacrificed an entire generation of labor for no gain.
I agree with Billwald. In producing military equipment that is subsequently sold overseas, the US has both a comparative and absolute economic advantage. Ricardo’s law, taken literally, would say that the US should produce and export military equipment and import everything else.
Also, the US (and International) banking system that funds wars, also benefits.
It is nice to see how openly people to this post feel free to proclaim their immorality. To speak of war — which involves death and destruction as it’s primary result — as “good” for anything makes clear the value system of those making such claims.
If you must continue to argue this on an economic basis rather than a moral one, consider that fifty million people died during WWII. That is fifty million people from whom a lifetime of production has been lost to the world. Countless property was destroyed — it took generations to create that wealth, and it took millions of manyears to replace it JUST TO GET BACK TO EVEN.
All this for a few million jobs that were “created” by the war effort and thise jobs lasted only a few years. What a pathetic trade on economic terms.
It is sad that even those who proudly boast of their immorality cannot even see the economic absurdity of their argument.
The moral is to the physical as three is to one. War rewards the martial virtues and punishes the weak and stupid. Yes, alas, it uses a very blunt instrument, but it is certainly possible that the purging of corruption and stupidity more than compensates for the destruction.
The Punic Wars improved Rome. Winning the Hundred Years war improved France. The Dutch had their Golden Age during the 80 years war. All this is confirmation of the greater importance of the moral to the physical.
All people die. Always. Not all people create golden ages.
cleanthesbrule:
“but it is certainly possible that the purging of corruption and stupidity more than compensates for the destruction.”
is this a line from “catch 22″?
to walt d:
to the extent that war necessarily stunts the international division of labour, even non-belligerent trading nations grow less than would otherwise be the case.
any gains through arms sales would tend to be offset by the upward pressure on prices of all manner of other goods. many of the arms “sales” turn out to be gifts, or the loans are unable to be recovered.
as inquistor says, higgs casts serious doubts on the statistics that cover the ww2 period, and makes the case that economic regression continued until the end of hostilities.
Alexandre, I knew the point you wanted to make, I was showing you that you didn’t appreciate it. You applied the wrong test – you, not me. You don’t get out of it by claiming that what Naploeon did wasn’t a real invasion.
Who cares if war is good for an economy?
If money is so important that war looks to be a good source of revenue, then a nation is not just in dour economic times, it is morally bankrupt.
The U.S. government is so infested by industry, that it has approx. 30,000 personnel working just for the weapons offset trade.
War is good for the economy?
Building tanks is better than building cars, trucks, and tractors?
Making guns is better than making tools?
Destroying infrastructure is better than increasing infrastructure?
Killing people is better than employing people?
I have heard is said that the resources used in World War II would have been enough to build schools and libraries for every person in the world. How can we say the world is a better place for having killed tens of millions of people instead of educating the entire population of the world?
I do not understand anyone who would say that war is good for anything.
I suggest we send those analysts to some remote place (Antarctica would probably nice. Give them guns and let them fight their wars. The sooner we get rid of them the better for the others….
>Those killed in the war don’t believe it; those injured physically, mentally, or emotionally don’t believe it. Those who lose their property via the destruction don’t believe it.
That is a moral argument, not an economic argument. The winners plain don’t care about the loss to the losers. The majority of wars are tribal wars in which the purpose of the war is for the people in the other tribe to be dead and their property to be destroyed so that the memory of them will disappear.
In the last year or so a million or so people in the congo have been killed in tribal warfare. The theoretically civilized nations, protected by MAD, have profited by selling arms to both sides. Want to stop wars? Supply every nation with baby nukes and cruise missiles.
Truth is, no one except a few sincere do-gooders (not sure about myself) living north or the equator cares if black people living in Africa kill black people living in Africa. Most black people in the US don’t care. A hundred people murdered in Ireland and there would be demonstrations in New York and Boston. A hundred thousand in Africa, “The Economist” might take note.
Second, humans are terrible at risk analysis. Every month drunk drivers in the US kill a “Twin Towers” equivalent but no one cares except MADD because drunk driving is our #1 national participatory sport.
Since the 1950′s the people who control the American population have made big profits keeping the population afraid . . . of something. Any foreign nation. Doesn’t matter. We are required to be afraid of Islam because it makes money for our owners. We must not be afraid of drunk drivers because they make money for our owners. We must be afraid of pot smokers, not drunk drivers.
All the two world wars did was lead America toward the present catastrophe. Like with any teenager with a new credit card, everything appears for a while like success through debt. Like with any teenager, the delusion never lasts.
Okay people … let’s recap and stay on topic.
We must all concede the point that the preparation for war stimulates the economy of a nation. We need to also concede that we are a predatory species. Chomsky explains quite clearly that powers love to insight fear and uncertainty in the masses and this fear is assuaged by a calling to arms. We have also deduced that war is a viable investment when it is not on the investors home soil. Ergo.
War is bad. Humans are bad. Economic collapse is bad. How then can we not conclude at least conditionally, that .. Offshore War is good and brings out many virtues in humans and economically … it is the hope of the human animal.
Dartek, I can’t tell if you’re joking. Forgive me if I’m responding seriously to something you intended in jest. But no one should “concede” that the preparation for war “stimulates” the economy. It “stimulates” one sector at the expense of all others. And it stimulates a sector that does not cater to consumer wants. Why would you consider this a healthy thing, exactly?
War forces technological changes, which is the important element for wealth creation. Unfortunately. And yes, war sucks.
i dont think war could ever be good. regardless of what arguments are made.
if you look at it from a economical stand point. look how many of our natural resources are used up.
resources that take life times to rebuild. then if you look at it again. look at how much money they spent on this war alone. money we could have used to bolster our country. to feed our hungry, to house our homeless. you can tell just by looking that we=us the people, didnt prosper from this war. we just lost lives and resources more precious than any job or money.
as a people we have to look after our resources and stop relying on faulty resources like oil. that when it runs out,(and it will, soon) (we use an estimated 80,000 barrels a day world wide) will lead to another war all together.
No, war is not good for the economy, ask Halliburton, Blackwater, Lockheed Martin, mines owners, or steel manufacture companies, just to name some of the industries which get great amounts of money during wars.
War activate mines and manufactures and then when everything is burned to the ground is the turn of the construction enterprises which receive large amounts of money to rebuild what their friends have destroyed, then IMF lends money to this new countries… well, is a fact that USA benefits from war, you just don’t see it because or your too good and innocent people to see how it works or because you don’t want to admit that your country’s supremacy have been built whith blood and bones of millions of people worldwide.
Rex, search “broken window fallacy” on this site and read the article. Or simply click on the link that the author of this post provided… the author is very well aware of the facts you mention and the title “war is good…” was ironic.
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